Endorsement

Court File No.: CV-14-506158

Motion Heard: July 20, 2015

Counsel:
Robert M. Isles for the defendants
Maurizio P. Artale for the plaintiff

Master R. A. Muir –

[1]. This is a motion brought by the defendants Kingsview Iron Ore Limited (“Kingsview”) and Randsburg International Gold Corp. (“Randsburg”) pursuant to Rule 19.03. The moving defendants seek an order setting aside their noting of default along with leave to deliver a statement of defence. The plaintiff is opposed to the relief sought.

[2]. The plaintiff is a firm of chartered accountants. It alleges that it provided accounting services to the defendants and that the defendants have failed to pay the amounts owing to the plaintiff for those services.

[3]. The test on a motion such as this can be found in the decision of the Court of Appeal in Intact Insurance Company v. Kisel, 2015 ONCA 205. The court states as follows at paragraphs 12 to 14 of that decision:

12 Rules 19.03(1) and 19.08(1) provide the basis for setting aside a noting of default and a default judgment, respectively. Both rules give the court discretion to set aside the default "on such terms as are just." This court has held that the tests to be met under these rules are not identical. See Metropolitan Toronto Condominium Corp. No. 706 v. Bardmore Developments Ltd. (1991), 1991 7095 (ON CA), 3 O.R. (3d) 278 (Ont. C.A.), at pp. 284-85.

13 When exercising its discretion to set aside a noting of default, a court should assess "the context and factual situation" of the case: Bardmore, at p. 285. It should particularly consider such factors as the behaviour of the plaintiff and the defendant; the length of the defendant's delay; the reasons for the delay; and the complexity and value of the claim. These factors are not exhaustive. See Nobosoft Corp. v. No Borders Inc., 2007 ONCA 444, 225 O.A.C. 36, at para. 3; Flintoff v. von Anhalt, 2010 ONCA 786, [2010] O.J. No. 4963, at para. 7. Some decisions have also considered whether setting aside the noting of default would prejudice a party relying on it: see e.g. Enbridge Gas Distribution Inc. v. 135 Marlee Holdings Inc., [2005] O.J. No. 4327, at para. 8. Only in extreme circumstances, however, should the court require a defendant who has been noted in default to demonstrate an arguable defence on the merits: Bardmore, at p. 285.

14 On a motion to set aside a default judgment, on the other hand, the court considers five major factors, one of which is whether the defendant has an arguable defence on the merits. The five factors are:

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

(b) whether the defendant has a plausible excuse or explanation for the default;

(c) whether the defendant has an arguable defence on the merits;

(d) the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff 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.

Again, these factors are not rigid rules. The court has to decide whether, in the particular circumstances of the case, it is just to relieve a defendant from the consequences of default: Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 372 D.L.R. (4th) 526, at paras. 48-50.

[4]. These are the factors and principles I have considered and applied in determining the issues on this motion. In my view, it is in the interest of justice that the noting of default be set aside.

[5]. The statement of claim was issued on June 11, 2014. Shortly thereafter the plaintiff purported to serve the corporate defendants pursuant to Rule 16.03 (6). That rule allows a corporation to be served with an originating process by mail when the corporation cannot be found at its registered address.

[6]. Much argument was devoted to the question of whether the corporate defendants were properly served pursuant to Rule 16.03. In my view, it simply does not matter. There is no indication in the evidence before me on this motion that the corporate defendants had actual knowledge of the existence of this action prior to being noted in default. The defendant Michael Opara is the principal of the defendant corporations. Mr. Opara’s sworn evidence is that the corporate defendants never received the statement of claim when it was served pursuant to Rule 16.03(6). This evidence is supported by the fact that Mr. Opara moved promptly to defend this action on his own behalf when he received a copy of the statement of claim pursuant to Master Glustein’s substituted service order. I am satisfied that the corporate defendants failed to defend this action because they were not aware of the claim.

[7]. In my view, this evidence provides a plausible explanation for not defending and demonstrates an obvious intention to defend once the claim came to the attention of the corporate defendants and their directing individual.

[8]. I am also satisfied that this motion was brought promptly in the circumstances of this action. The corporate defendants learned of the default in February 2015 and booked an initial return date of May 20, 2015. The moving parties’ motion record was served on April 20, 2015. This motion had to be rescheduled on two occasions due to an oversight on the part of the moving parties’ lawyer but the evidence nevertheless shows a clear intention to have this motion heard promptly.

[9]. In addition, I see nothing exceptional about this proceeding that would require an assessment of the merits of the corporate defendants’ proposed defence. Only in extreme circumstances should a defendant who has been noted in default be required to demonstrate an arguable defence on the merits. See Intact Insurance at paragraph 13.

[10]. Finally, there is no evidence of any prejudice to the plaintiff if the noting of default is set aside. A draft defence has been prepared and the corporate defendants are in a position to deliver that defence forthwith.

[11]. For these reasons, I have concluded that it is just in the circumstance of this action that the noting of default be set aside.

[12]. I therefore order as follows:

(a) the noting of default of Kingsview dated February 4, 2015 is hereby set aside;

(b) the noting of default of Randsburg dated February 19, 2015 is hereby set aside;

(c) Kingsview and Randsburg shall deliver their statement of defence by August 14, 2015; and,

(d) if the parties are unable to agree on the issue of costs, they shall provide the court with brief submissions in writing by no later than August 14, 2015.

July 21, 2015

Master R. A. Muir