Citation: Etas Administrator Inc. v. Bell, 2016 ONSC 1597
COURT FILE NO.: CV-15-533683
DATE: 20160314
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ETAS ADMINISTRATOR INC.
Plaintiff
– and –
THOMAS ALBERT BOTLY BELL
Defendant
Philip Cho, for the Plaintiff
David Levangie and Stephanie De Caria, for the Defendant
HEARD: February 26, 2016
G. DOW, J
REASONS FOR JUDGMENT
[1] The defendant seeks to set aside the default judgment obtained by the plaintiff September 29, 2015. The plaintiff opposes the motion claiming the circumstances failed to meet the requisite elements set out by the Court of Appeal in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194.
Facts
[2] The defendant is a cosmetic plastic surgeon who requires anesthesiologists to perform most of his procedures. Over the 25-year relationship, the plaintiff corporation allowed the defendant to become indebted to it, being a collection of anesthesiologists, in excess of $400,000. By 2012, the defendant’s circumstances had reached a state where bankruptcy was contemplated and a trustee in bankruptcy retained. This would require creditors of the defendant not be paid in full. The defendant filed a proposal under the Bankruptcy and Insolvency Act on February 21, 2012. He did not list the plaintiff as a creditor as, from his discussions with the representatives of the plaintiff, they were threatening to withdraw their services which the defendant alleged would deprive him of his livelihood.
[3] In July, 2012 the plaintiff and defendant negotiated an agreement whereby the defendant agreed to begin making monthly $11,111.11 payments towards the outstanding debt. That agreement notes the defendant “signed it of my own free will and without any form of duress being exerted upon me by ETAS Administrator Inc. or anyone acting on their behalf”.
[4] This agreement continued and payments were made until March, 2014 by which time the trustee had counsel and this arrangement became known. On March 27, 2014 counsel for the plaintiff wrote counsel for the trustee advising “Without the anesthesiology services, the Bankrupt could not conduct his surgery practice”.
[5] On April 2, 2014, counsel for the trustee wrote counsel for the plaintiff advising “It is the Trustee’s position that entering into the Agreement was in effect made at a time when the Bankrupt was under duress and in any event constitutes a preference pursuant to the provisions of the BIA and as such the transaction does not protect it under section 97.” Further, the counsel advised it was the intention of the trustee to demand that the bankrupt cease making any further payments to the plaintiff.
[6] A second agreement is negotiated reducing the amount to be paid to $5,555.55 per month and that the plaintiff would provide anesthesia services to the defendant provided the payment for such services is “delivered to ETAS in full, on or before the date intended for the services.”
[7] Despite same, the defendant failed to make the requisite payments and payment of what was allegedly owed was demanded by registered letter July 2, 2015 in the amount of $130,952.40. The defendant deposes an incident in June, 2015 where an ETAS anesthesiologist refused to perform services when not pre-paid leaving patients waiting for surgery in various stages of pre-surgical preparation.
[8] The Statement of Claim was issued August 4, 2015. The defendant admits he was served on September 3, 2015 but failed to respond because he was in negotiation with representatives of the plaintiff, that is Dr. Lam and Dr. Lee and points to his email to Dr. Kapoor (another anesthesiologist working with the plaintiff) of November 2, 2015. This email responds to a Notice of Garnishment dated October 26, 2015 served on the Toronto Clinic for Advanced Care and Laser Therapy Inc. The plaintiff acknowledges this email was forwarded to Dr. Lam and Dr. Lee as well as to plaintiff’s counsel. This is also when the defendant claims to have become aware of the default judgment signed by the Registrar September 29, 2015 in the amount of $131,530.03 plus $750 for costs.
[9] Defence counsel is retained and a request is made November 30, 2015 for a consent order setting aside the default judgment. Consent is not forthcoming and on December 8, 2015 the defendant serves its Notice of Motion returnable February 26, 2016 which proceeded before me.
Analysis
[10] The legal test to be applied was summarized in the Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 decision and sets out five factors to consider as part of determining whether the interests of justice favours granting the order:
whether the motion was brought promptly after the defendant learned of the default judgment;
whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
whether the facts establish that the defendant has an arguable defence on the merits;
the potential prejudice to the moving party should the motion be dismissed and the potential prejudice to the plaintiff should the motion be allowed; and
the effect of any order the Court might make on the overall integrity of the administration of justice.
[11] Justice Gillese on behalf of the Court of Appeal goes on to indicate these factors are not to be treated as rigid rules which I infer to mean no one factor is more or less important than another and that, in considering the particular circumstances of each case, one factor can overwhelm the rest. I propose to consider each factor in turn.
Issue – Promptness
[12] The plaintiff conceded the defendant moved promptly. As a result, this factor is in favour of the defendant.
Issue – Plausible Excuse or Explanation
[13] Dr. Bell claims he ignored responding to the Statement of Claim because he was in negotiation with representatives of the plaintiff, that is Dr. Lam and Dr. Lee. That evidence was not specific and may apparently have consisted only of telephone conversations. There is the email of November 2, 2015 to support this contention. The lack of specifics and reliance on an email two months after service leads me to conclude this is equivocal and were it the sole factor to consider, I would have great difficulty granting the relief sought.
Issue – Arguable Defence or Issue
[14] Much of the argument in submissions of the parties focused on this issue. The defendant maintains, at this stage, that the plaintiff held and exercised an unusual power over him, that is as stated in the letter from plaintiff’s counsel March 27, 2014 “Without the anesthesiology services, the Bankrupt could not conduct his surgery practice”. While the plaintiff notes the defendant had alternatives (and has in fact since exercised same moving to a clinic which does not use the plaintiff’s group of anesthesiologists), it would seem that at this time of financial distress, the longstanding relationship between the parties was likely a first and best choice for the defendant to make an arrangement and continue to earn income to support himself, his family and respond to his creditors.
[15] While plaintiff’s counsel submitted this was not the situation and he would be inclined to move for summary judgment, that is not the test to be applied before me. Overall, were this the sole factor to consider, I would conclude same in favour of the defendant.
Issue – Prejudice
[16] The prejudice to both parties must be considered. The plaintiff points to, at a minimum, the legal costs thrown away which was submitted as a separate Costs Outline and, aside from the amount awarded in the default judgment of $750 is actually $1,586.89 on a substantial indemnity basis. As a result, that factor is not strongly in favour of the plaintiff.
[17] This is not a situation where the defendant has ignored other Court direction or orders (aside from responding to the Statement of Claim within the time required or obtaining an extension of time, verified in writing). The defendant has raised not only duress as a defence but also that the plaintiff agreements may be contrary to BIA sections as well as a possible Limitation Act argument.
[18] It is also noteworthy that the outstanding debt of the defendant to the plaintiff has been reduced from over $400,000 in February, 2012 to the $131,530.03 plus costs of $750 noted in the September 29, 2015 judgment.
[19] In all the circumstances, this factor favours the defendant.
Issue – Effect of Order
[20] This matter does not require me to undo the consideration of other judicial officers aside from Local Registrar Van Tassel who granted default judgment. The defendant, as part of its materials provided a draft Statement of Defence and appears ready and capable of moving this matter forward. In my view, it is preferable to have actions defended on the merits and to allow each litigant an opportunity to have its claim or defence advanced.
[21] As a result, this factor also favours the defendant.
Conclusion
[22] Guided by the factors detailed above, the overall interests of justice favours setting aside of the judgment September 29, 2015 plus any steps taken to enforce or collect on the judgment and same is ordered.
Costs
[23] The defendant provided a Costs Outline seeking $6,819.17 inclusive of fees, HST and disbursements in the event it was successful. Counsel for the plaintiff submitted its Costs Outline in the event it was successful in the amount of $6,411.14. The parties agreed the quantum sought by each side was reasonable. Counsel for the plaintiff submitted that in the event the defendant was successful, there should be an order of no costs given it was not unreasonable to oppose the defendant’s motion.
[24] I disagree. The defendant’s timely action and grounds to be argued were ones that, in my view, should have been seen as likely to be successful. To that extent, I am prepared to award the defendants its costs of this motion on a partial indemnity basis reduced by the plaintiff’s costs thrown away of obtaining the default judgment ($6,819.17 minus $1,586.89) or $5,232.28 inclusive of fees, HST and disbursements.
[25] I wish to thank counsel for the high quality of their submissions.
Mr. Justice G. Dow
Released: March 14, 2016
CITATION: Etas Administrator Inc. v. Bell, 2016 ONSC 1597
COURT FILE NO.: CV-15-533683
DATE: 20160314
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ETAS ADMINISTRATOR INC.
Plaintiff
– and –
THOMAS ALBERT BOTLY BELL
Defendant
REASONS FOR JUDGMENT
Mr. Justice G. Dow
Released: March 14, 2016