SUPERIOR COURT OF JUSTICE - ONTARIO

CITATION: BALL v. BRADON TECHNOLOGIES LTD., 2015 ONSC 2884

COURT FILE NO.: CV-11-437726

MOTION HEARD: MAY 1, 2015

RE: Peter Ball et. al. v. Bradon Technologies Ltd. et. al.

BEFORE: MASTER R.A. MUIR

COUNSEL: Pathik Baxi for the defendants Bradon Technologies Ltd. and Joseph Compta

James B. Camp for the plaintiffs other than Lawrence Bell, Evelyne Raison, Jacquie Raison, Ted Smith and Jo-Anne Smith

Lawrence Bell in person

REASONS FOR DECISION

[1] The defendants Bradon Technologies Ltd. (“Bradon”) and Joseph Compta (“Compta”) bring this motion pursuant to Rule 19.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) for an order setting aside their noting in default and the default judgment signed against them by the registrar on October 24, 2013.

[2] This action arises out of certain investments made by the plaintiffs in shares of Bradon. The plaintiffs allege that they were misled as to the true nature and extent of Bradon’s business and seek the return of their investments, among other relief.

[3] The test governing a motion to set aside a default judgment is well settled. It is concisely set out in the recent decision of the Court of Appeal in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194. The court states as follows beginning at paragraph 47 of Mountain View:

[47] The court’s ultimate task on a motion to set aside a default judgment is to determine whether the interests of justice favour granting the order. The approach to be taken to this determination has been considered numerous times by this court. The following draws heavily on the summary of the principles in those cases by Perell J. in Watkins v. Sosnowski, 2012 ONSC 3836, at paras. 19-20 and 23-24.

[48] The court must consider the following three factors:

(a) whether the motion was brought promptly after the defendant learned of the default judgment;

(b) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; and

(c) whether the facts establish that the defendant has an arguable defence on the merits.

[49] To this list, I would add the following two factors the court should have regard to, as set out in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. 2007 ONCA 333, 87 O.R. (3d) 479 (C.A.), at para. 2:

(d) the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and

(e) the effect of any order the court might make on the overall integrity of the administration of justice.

[50] These factors are not to be treated as rigid rules; 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.

[51] For instance, the presence of an arguable defence on the merits may justify the court exercising its discretion to set aside the default judgment, even if the other factors are unsatisfied in whole or in part. In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.

[4] These are the factors and principles I have applied and considered in determining the issues on this motion. My analysis leads me to the conclusion that it is not in the interest of justice to set aside the noting in default and the default judgment.

[5] This action was commenced in October 2011. It was not served until March 2012 after certain amendments had been made to the statement of claim. Bradon and Compta served their notice of intent to defend on April 18, 2012. The plaintiffs’ lawyer at the time made it very clear to Bradon and Compta that a defence was required within a relatively short period of time. After responding to a demand for particulars, the plaintiffs’ lawyer set a final deadline of June 5, 2012 for the service of a statement of defence. Bradon and Compta did not comply with this deadline or seek an extension of time. They were noted in default on July 9, 2012.

[6] On June 14, 2012, the defendant Tim German (“German”) served his statement of defence. In his statement of defence German concedes that the plaintiffs are entitled to the return of funds advanced and that he would enter into a negotiated settlement with the plaintiffs. In fact, on August 28, 2012, German appears to have entered into a form of settlement agreement with the plaintiffs.

[7] Bradon and Compta point to German’s offer to settle and the settlement agreement as explaining their decision not to defend this action. I have considerable difficulty accepting this argument. First, the deadline for the service of a statement of defence had expired before German served his statement of defence. Moreover, Bradon and Compta did nothing to confirm an indulgence with the plaintiffs’ lawyer or later follow-up with German or the plaintiffs to ensure that the settlement terms had been complied with.

[8] Second, Bradon and Compta became aware of their noting in default in October 2012. They did not immediately seek to set aside the noting in default and again did not follow up with the plaintiffs’ lawyer.

[9] Third, Bradon and Compta were also aware that on November 6, 2012, Justice Corbett had made an order restraining German from paying any amounts to the plaintiffs in this action pending certain events in a similar action commenced by Wyman Chu (“Chu”). After learning this, Bradon and Compta still did nothing to address the noting in default or seek the plaintiffs’ consent to filing a defence.

[10] Finally, at the same time, Bradon and Compta were dealing with the Chu action and had defended that claim. When asked on cross-examination about not defending this action, Compta candidly admitted that he chose not to defend this action. He preferred to let sleeping dogs lie. The Court of Appeal has held that “a conscious decision not to participate in [a] proceeding bars consideration of a defence for the merits, even if one exists”. See Sunlife Assurance Company of Canada v. Premier Financial Group Incorporated (Premier Financial), 2013 ONCA 151 at paragraph 1.

[11] In my view, Bradon and Compta made a conscious decision not to participate in this proceeding. They did so out of what appears to have been a misplaced reliance on German and a strategic decision to let a sleeping dog lie. They preferred to focus on other legal proceedings and not make this claim a priority. They must now live with the consequences of their decisions.

[12] For these reasons, I am not satisfied that Bradon and Compta have provided a plausible excuse or explanation for not defending this action.

[13] I am also not satisfied with Bradon and Compta’s explanation for their delay in bringing this motion. Bradon and Compta knew they had been noted in default as early as October 2012. They did not serve a notice of motion seeking to set aside their noting in default (and the related default judgment signed October 24, 2013) until August 2014. Such a time period cannot be described as prompt under any circumstances. By way of explanation for this delay, Bradon and Compta have put forward vague and general suggestions of poor health and a lack of funds. Their evidence in this respect is lacking in specifics and supporting documentation. Bradon and Compta were dealing with other legal proceedings at the same time including the Chu action and certain proceedings before the Ontario Securities Commission (“OSC”). They simply chose not make this matter a priority. Bradon and Compta point to the plaintiffs’ delay in pursuing this claim. I agree that there has been some delay on the part of the plaintiffs that pre-dates Mr. Camp’s involvement. However, the focus on a motion of this nature is the defendants’ delay, not any delay by the plaintiffs. There is certainly no suggestion that Bradon and Compta were lulled into complacency by any actions of the plaintiffs or their lawyers. This element of the test has not been met.

[14] Bradon and Compta have failed to put forward any evidence in support of the allegations in their draft statement of defence. Compta has not sworn to the truth of the allegations in the draft statement of defence. He has merely made the bald assertion in his affidavit that he and Bradon have a meritorious defence. This is not sufficient. A pleading is not evidence. The moving party must at the very least file some evidence that gives some air of reality to the defence. See Justice Brown’s decision in Bayview Financial, L.P. v. Spartan Collision Corporation, 2007 14304 (ON SC) at paragraphs 31 to 36. Bradon and Compta have not filed any such evidence. This element of the test has not been met.

[15] Finally, it is my view that the prejudice analysis favours the plaintiffs. Bradon and Compta have been in default since July 2012. Other potential creditors are pursing Bradon and Compta including Chu and the OSC. Compta has admitted that he has insufficient assets to pay the amounts Chu is seeking, let alone any penalties that may be imposed by the OSC. Pushing the plaintiffs back to the starting line under these circumstances would be highly prejudicial to the plaintiffs.

[16] I agree that the court must balance the two competing values of timely justice and the right to a hearing on the merits. Our system of civil justice favours the determination of disputes on their merits. However, there are circumstances where the integrity of the administration of justice is best served by denying such a determination. In my view, this is such a case. Bradon and Compta made a conscious decision to ignore this proceeding. They made a conscious decision to let a sleeping dog lie and not to move in a timely way to set aside their noting in default and the default judgment. They failed to file any evidence on this motion to support their defence. In my view, the integrity of the administration of justice is best promoted in these circumstances by denying Bradon and Compta the right to defend this action.

[17] For these reasons, I have concluded that it is in the interest of justice that the noting in default and the default judgment not be set aside. The motion is dismissed.

[18] The plaintiffs seek their partial indemnity costs in the amount of $12,886.82. Bradon and Compta argue that this amount is excessive. I agree. This motion was not complex from a factual or legal perspective, although I do acknowledge its importance to the plaintiffs. I also note that counsel were present in court until 2:30 p.m. In my view, it is fair and reasonable for Bradon and Compta to pay the costs of those plaintiffs represented by Mr. Camp on a partial indemnity basis fixed in the amount of $8,000.00, inclusive of taxes and disbursements.

Master R.A. Muir

DATE: May 1, 2015