420-450 Britannia Road East Ltd. v. Kennedy Transportation Network Ltd., 2015 ONSC 1791

COURT FILE NO.: CV-11-426366

DATE: 20150319

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

420 – 450 BRITANNIA ROAD EAST LTD.

Plaintiff

– and –

KENNEDY TRANSPORTATION NETWORK LTD., ABTECH EQUIPMENT & SERVICES LTD., JOHN ST. GELAIS (ALSO KNOWN AS JEAN ST. GELAIS) and EVA ST. GELAIS

Defendants

Antony Niksich for the Plaintiff

Amandeep Sidhu for the Defendants John St. Gelais (also known as Jean St. Gelais) and Eva St. Gelais

HEARD: March 17, 2015

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] After Master Haberman ordered the Defendants John St. Gelais (also known as Jean St. Gelais) and Eva St. Gelais to deliver an affidavit of documents and after Master Short struck out their Statement of Defence and Counterclaim and noted them in default for failing to comply with Master Haberman’s Order, Justice Himel granted the Plaintiff 420-450 Britannia Road East Ltd. (“Britannia”) a Default Judgment for $216,756.

[2] The St. Gelais now bring a motion to set aside the Order of Master Short dated March 4, 2014 and the Default Judgment dated June 24, 2014 granted by Justice Himel.

[3] For the reasons that follow, I dismiss the motion.

B. FACTUAL AND PROCEDURAL BACKGROUND

[4] On May 12, 2011, Britannia, the landlord of premises at 6010 Edwards Boulevard, Mississauga, commenced an action against Kennedy Transportation Network Ltd., Abtech Equipment & Services Ltd., and the St. Gelais with respect to the leasing of those premises. The claim against the St. Gelais included a claim for inducing breach of contract.

[5] The Defendants initially did not defend, and they were noted in default, but on June 20, 2011, their recently retained lawyers, Pallett Valo LLP, asked that the noting in default be set aside, and Britannia agreed.

[6] The Defendants subsequently served a Notice of Intent to Defend, but they did not file it, with the result that the Registrar administratively dismissed Britannia’s action.

[7] On January 30, 2012, Britannia obtained an order setting aside the administrative dismissal.

[8] In March 2012, Britannia agreed to discontinue the inducing breach of contract claim against the St. Gelais on condition that the corporate Defendants continued to carry on business.

[9] On April 25, 2012, the Defendants delivered (that is, served and filed) a Notice of Intent to Defend.

[10] On May 4, 2012, Britannia filed an Amended Statement of Claim.

[11] In July 2012, Britannia delivered a Notice of Discontinuance as had been agreed.

[12] On August 14, 2012, the Defendants delivered a Statement of Defence and Counterclaim.

[13] On October 18, 2012, Britannia delivered its Reply and Defence to Counterclaim.

[14] The pleadings having closed, Britannia waited for the delivery of the Defendants’ affidavit of documents, but the Defendants failed to deliver one and on May 2, 2013, on Britannia’s motion, Master Haberman made an Order compelling the Defendants to deliver their affidavit of documents by September 30, 2013 and to pay substantial indemnity costs of $2,074.78 within 30 days.

[15] Master Haberman directed the Defendants’ lawyer to provide a copy of her endorsement to the Defendants, with "an indication of what will occur in the event of a breach" of the Order; i.e., that the Defendants were at risk of having their pleading struck.

[16] The Defendants did not pay costs as ordered by Master Haberman, and they never delivered an affidavit of documents.

[17] On May 15, 2013, Master Peterson granted Pallett Valo’s motion to be removed as the Defendants’ lawyer of record. Master Peterson’s Order required the St. Gelais, within 30 days after service of a copy of the Order, to appoint a new solicitor of record by serving a notice under subrule 15.03 (2) or serve a notice of intention to act in person under subrule 15.03 (3).

[18] The Order further provided that in default of compliance with the Order, the court may dismiss the proceeding or strike out a defence.

[19] The St. Gelais did not deliver a notice under subrule 15.03 within 30 days; they did not retain new lawyers until July 2014, as described below.

[20] On June 6, 2013, Britannia’s lawyers mailed a copy of Master Haberman's Order to the Defendants at the address for service identified in Master Peterson’s Order; namely 6010 Edwards Boulevard, Mississauga, Ontario. In the letter, Britannia’s lawyers demanded payment of the outstanding costs.

[21] In July 2013, Britannia determined that the Defendants had vacated the premises at 6010 Edwards Boulevard and that the residential address for the St. Gelais was 3589 Kariya Drive, Townhouse 5, Mississauga, Ontario.

[22] With the Defendants no longer operating at 6010 Edwards Boulevard in Mississauga, Britannia brought a motion to set aside its Notice of Discontinuance and to amend its claim to add an oppression remedy claim against Mr. St. Gelais. The motion was scheduled for October 18, 2013.

[23] Britannia’s process server tried to serve the Motion Record for the motion to set aside the discontinuance personally on the St. Gelais at their Kariya Drive home, but no one would answer the door, and the St. Gelais did not respond to cards posted by the process server. On October 2, 2013, the process server left copies of the Motion Record at the Kariya Drive property.

[24] On October 9, 2013, a copy of the Record was mailed to the St. Gelais by regular mail. There is an affidavit proving service. The mail was not returned to sender.

[25] On October 18, 2013, no one appeared to oppose the motion to set aside the discontinuance, and the motion was granted by Justice Corbett. His Order permitted Britannia to file an amended Statement of Claim. In his endorsement, Justice Corbett noted the Defendants’ “constant avoidance of legal process is worthy of sanction.” He ordered that the Defendants pay costs in the amount of $2,200 within 30 days.

[26] Significantly, Justice Corbett also ordered that the address for service of the Defendants shall be 3589 Kariya Drive, Mississauga, Ontario, L5B 3J2.

[27] On October 24, 2013, Britannia filed an Amended Amended Statement of Claim.

[28] On November 19, 2013, Britannia served the Defendants by regular mail with a copy of the Orders of Justice Corbett, and a copy of their Amended Amended Statement of Claim. There is an affidavit proving service. The mail was not returned to sender.

[29] The Defendants have not paid the costs award of $2,200 directed by Justice Corbett.

[30] They Defendants did not serve an amended defence after receiving Britannia’s amended claim.

[31] In December 2013, Britannia brought a motion to have the Defendants’ Statement of Defence and Counterclaim struck out. The motion was made returnable on March 4, 2014. On December 24, 2013, Britannia served a copy of their Notice of Motion on the Defendants by regular mail. There is an affidavit proving service. The mail was not returned to sender.

[32] On February 12, 2014, Britannia served a copy of its motion record on the Defendants by regular mail. There is an affidavit proving service. The mail was not returned to sender.

[33] The St. Gelais deny being served with the motion to have their Statement of Defence and Counterclaim struck.

[34] On March 4, 2014, Master Short heard Britannia’s motion. No one appeared at the motion, and Master Short struck the Statement of Defence and Counterclaim. He noted the Defendants in default and ordered that they pay costs in the amount of $1,500.

[35] Master Short’s Costs Order has never been paid.

[36] On March 11, 2014, Britannia served a copy of Master Short’s Order on the Defendants by regular mail. There is an affidavit proving service. The mail was not returned to sender.

[37] The Defendants having been noted in default, Britannia brought a motion for a default judgment, which motion was granted on June 24, 2014 by Justice Himel.

[38] On July 7, 2014, Britannia served a copy of the default judgment on the Defendants by regular mail. There is an affidavit proving service. The mail was not returned to sender.

[39] About four months then passed during which it appears that Britannia did nothing to enforce its judgment. However, during this period the St. Gelais retained lawyers, who on October 23, 2014 contacted Britannia’s lawyers to advise that the St. Gelais would be bringing the motion now before the court. At the time of this communication, the St. Gelais’ new lawyers were still investigating the matter of the outstanding judgment because they had not received the litigation file from the former lawyers of record, who were refusing to provide it.

[40] The new lawyers did not receive the litigation file, and another month passed and on November 27, 2014, their process server was sent to make copies of the court file, which it seems did not have a copy of the March 4, 2014 motion material that had been before Master Short but did have the rest of the court filings.

[41] In any event, after reviewing the file, the Defendants served their notice of motion to set aside the Order of Master Short and the Default Judgment of Justice Himel.

C. DISCUSSION AND ANALYSIS

[42] I begin my analysis by noting that this is not the type of case where there is a default judgment because a defendant has been noted in default for failing to deliver a defence. In the case at bar, the St. Gelais filed a defence, but the pleading was struck out, and then they were noted in default. The $216,756 Default Judgment then followed.

[43] The question is should the court in the circumstances of this case set aside the Order of Master Short and the Default Judgment granted by Justice Himel. To persuade the court to do so, the St. Gelais rely on rules 37.14 (1) and (2), and 59.06 (2) and during their argument, they alluded to the rule 19.08 jurisprudence. These rules state:

SETTING ASIDE DEFAULT JUDGMENT

19.08 (1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just.

(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge on such terms as are just.

(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the noting of default under rule 19.03.

37.14 (1) A party or other person who,

(a) is affected by an order obtained on motion without notice;

(b) fails to appear on a motion through accident, mistake or insufficient notice; or

(c) is affected by an order of a registrar,

may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion.

(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.

59.06 (2) A party who seeks to,

(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;

(b) suspend the operation of an order;

(c) carry an order into operation; or

(d) obtain other relief than that originally awarded,

may make a motion in the proceeding for the relief claimed

[44] I can immediately say that there is no basis to set aside Master Short’s Order or Justice Himel’s Default Judgment based on rules 37.14 (1) or 59.06 (2).

[45] I do not believe the St. Gelais’ evidence that they did not receive notice of the motion leading to Master Short’s Order. Having been noted in default, they were not entitled to notice of the default judgment hearing. There is no evidence of fraud and there are no facts arising or discovered after the Order and the Default Judgment. There is no evidence of a failure to appear on a motion through accident, mistake or insufficient notice.

[46] As I view this matter it is not believable that the St. Gelais were not aware of the motion eventually heard by Master Short that led to the default judgment subsequently granted. The motion material was served in accordance with the direction of Justice Corbett. The St. Gelais’ evidence is inconsistent with the evidence proffered by Britannia, and the St. Gelais’ evidence is implausible. For whatever reason, the St. Gelais have been irresponsible in defending and in advancing their own counterclaim.

[47] On a motion to set aside a default judgment, the court will consider the following five factors: (1) whether the motion to set aside the judgment was brought promptly; (2) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; (3) whether the facts establish at least an arguable defence; (4) the competing potential prejudice to the parties of granting or refusing to set aside the default judgment; and (5) the effect of any order on the overall integrity of the administration of justice. The factors, however, are not treated as rigid rules, and the court must consider the particular circumstances of each case to decide whether it is just to relieve the defendant from the consequences of his or her default. See: Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194; Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333; HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., 2008 ONCA 894.

[48] In the case at bar, I accept that the motion to set aside the judgment was promptly brought, and I accept for the purposes of this motion that the St. Gelais have shown a possible defence to Britannia’s action and a plausible counterclaim.

[49] Although one may wonder if it is such a good defence and counterclaim, why the St. Gelais have been so reticent to have it tested on its merits and been so persistent in not complying with the Rules of Civil Procedure and the Orders of the Court, I accept for the purposes of this motion that they may have a potentially meritorious defence and counterclaim.

[50] I, however, do not accept that there is a plausible excuse or explanation for the St. Gelais’ default in complying with the Rules of Civil Procedure.

[51] I find that the competing potential prejudice to the parties of granting or refusing to set aside the default judgment is about equal. A significant judgment has been taken out against the St. Gelais, but their delay and irresponsibility in advancing their defence has compromised Britannia’s ability to prove its case because witnesses can no longer be located.

[52] I find that setting aside the judgment would have an adverse effect on the overall integrity of the administration of justice.

[53] In their factum, the St. Gelais rely on several cases where judgments have been set aside because the party proved that they had never been served or did not have notice of the prospect of an adverse order. See: Children's Aid Society of Halton Region v. C.J.R., 2005 ONCJ 514; Finlay v. Van Paassen, 2010 ONCA 204; Darlind Construction, Inc. v. Rooflifters, LLC, 2010 ONSC 734, [2009] O.J. No. 1263 (S.C.J.). These cases are distinguishable, because in the case at bar, the St. Gelais were served, they had notice, and they have only themselves to blame for what has occurred.

[54] It is factum, Britannia relied on a line of cases that have developed the principle that in cases where a defendant does not deliver a statement of defence and is noted in default, if the defendant made an advertent decision or calculated risk not to defend, then the default judgment will not be set aside regardless of the merits of the defendant’s defence. See: Schill & Beninger Plumbing & Heating Ltd. v. Gallagher Estate, 2001 CanLII 24134 (ON CA), [2001] O.J. No. 260 (C.A.); Luciano v. Spadafora, [2004] O.J. No. 4311 (S.C.J.); De Morales v. Lafontaine-Rish Medical Group Ltd., [2008] O.J. No. 2640 (S.C.J.), aff’d 2009 ONCA 87; Sunlife Assurance Co. of Canada v. Premier Financial Group Inc. (c.o.b.) Premier Financial, 2013 ONCA 151; Canadian Imperial Bank of Commerce v. Petten, [2010] O.J. No. 5236 (S.C.J.).

[55] It is somewhat awkward to apply the principle from Schill & Beninger Plumbing & Heating Ltd. in circumstances where a defendant makes an advertent decision to defend and then is irresponsible in advancing his or her defence, which is what occurred in the case at bar. Nevertheless, the sentiment or spirit of the Schill & Beninger Plumbing & Heating Ltd. line of cases is that regardless of the merits of his or her defence, a defendant will not be relieved of being noted in default if he or she was irresponsible and non-compliant with the Rules of Civil Procedure.

[56] In the case at bar, the St. Gelais were given notice and an opportunity to defend and there is no basis to set aside Master Short’s Order, which Order never would have occurred if the St. Gelais had delivered an affidavit of documents and got on with their defence and counterclaim. In my opinion, the case at bar is not an appropriate case to set aside the default judgment.

D. CONCLUSION

[57] For the above reasons, I dismiss the St. Gelais’ motion.

[58] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Britannia’s submissions within 20 days of the release of these Reasons for Decision followed by the St. Gelais’ submissions within a further 20 days.

Perell, J.

Released: March 19, 2015

CITATION: 420-450 Britannia Road East Ltd. v. Kennedy Transportation Network Ltd., 2015 ONSC 1791

COURT FILE NO.: CV-11-426366

DATE: 20150319

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

420 – 450 BRITANNIA ROAD EAST LTD.

Plaintiff

– and –

KENNEDY TRANSPORTATION NETWORK LTD., ABTECH EQUIPMENT & SERVICES LTD., JOHN ST. GELAIS (ALSO KNOWN AS JEAN ST. GELAIS) and EVA ST. GELAIS

Defendants

REASONS FOR DECISION

PERELL J.

Released: March 19, 2015