Court File and Parties
COURT FILE NO.: CV-15-5088-00 DATE: 2016 07 25
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
FAIRFAX PARTNERS CORP. Plaintiff
Henry Juroviesky, for the Plaintiff
- and -
QUALITY PERFORATING INC. Defendant
Christine Gmitrowski, for the Defendant
HEARD: June 30, 2016
REASONS FOR JUDGMENT
Justice Thomas A. Bielby
[1] The defendant has before the court a motion to set aside the default judgment in this matter.
[2] The statement of claim was issued in Brampton, on November 13, 2015, and served on November 20, 2015.
[3] The defendant is located in the State of Pennsylvania.
[4] When a claim is served in the United States, a defendant has 40 days to serve and file a statement of defence.
[5] Pursuant to Rule 17.02, leave to serve the claim outside of Ontario was not sought. The defendant submits leave was required. The plaintiff submits otherwise and argues that the claim is in regard to a tort committed in Ontario and therefore leave is not required.
[6] The plaintiff argues the claim is 5% breach of contract case and 95% a defamation action. In that regard, I note in paragraph 1, of the claim, damages of $250,000 are sought but are not broken down between the causes of action.
[7] If leave was required but was not obtained, in my opinion, it is an irregularity, easily corrected. Motions for leave are made ex parte. The fact is the defendant was served and turned the claim over to his insurers, who then hired Harrison Pensa, Barristers and Solicitors to represent its interests. I will return to the “leave issue” later in this ruling.
[8] On December 11, 2015, Mr. Steve Atkinson, a lawyer with Harrison Pensa, emailed counsel for the plaintiff. He inquired as to whether or not leave was obtained to serve the defendant in Pennsylvania.
[9] Counsel for the plaintiff did not respond and Mr. Atkinson, on December 21, 2015, sent a letter to plaintiff’s counsel advising he had been consulted by the defendant, which intended to dispute the claim. He indicated they had insufficient material to determine if the defendant should attorn to the jurisisdiction and requested a 30 day waiver of defence.
[10] With respect to “jurisdiction”, the defendant argues that pursuant to the terms set out in the invoice, the law governing the contract is that of the Commonwealth of Pennsylvania (Affidavit of Farber, sworn, June 24, 2016, Exhibit D). Therefore, it is argued this action ought to have been brought in Pennsylvania because the court in Ontario lacks jurisdiction.
[11] The invoice is silent as to where any court proceedings are to be brought.
[12] Returning to the chain of correspondence, on December 30, 2015, counsel for the plaintiff emailed defence counsel and advised that he was already dealing with the defendant’s insurers. He did not respond to the request for the 30 day waiver.
[13] On January 7, 2016, defence counsel emailed the plaintiff’s counsel advising that he had been retained by the defendant and referenced again the issue of venue (jurisdiction).
[14] Plaintiff’s counsel responded, asking, “who do you represent”, and asked defence counsel to file a Form 15B (and thereby go on the record).
[15] Mr. Atkinson responded on January 13, 2016, stating that because of the jurisdictional issue, he could not file a form 15B but invited plaintiff’s counsel to speak to him.
[16] It should be noted that counsel for the plaintiff takes issue with the fact that the defendant has filed, as exhibits, communications that are marked, “without prejudice”, submitting such communications are privileged. This argument carries little weight. Assuming such communications are privileged, the defendant can waive privilege with respect to their own communications. Further, these communications are relevant to the issue of “delay”.
[17] Counsel for the plaintiff did not reply to the January 13th communication, nor did he reply to the letters/emails sent to him by defence counsel on February 5th, March 4th and May 16th, 2016.
[18] On June 2, 2016, counsel for the defendant authorized an agent to conduct a court file search and on June 8, 2016, learned that default judgment had been signed on February 23, 2016.
[19] Defence counsel then wrote to plaintiff’s counsel on June 8th and June 10th asking him to consent to the setting aside of the default judgment. Consent was not forthcoming, resulting in this motion.
[20] Interestingly, on January 8, 2016, counsel for the plaintiff advised the defendant’s insurance adjuster that the defendant had been noted in default. For whatever reason, having been advised that defence counsel was retained, he choose to proceed without further notice (this fact also begs the question as to why the adjuster did not advise counsel for the insurance company of the noting in default).
[21] Counsel for the defendant submits that the actions of plaintiff’s counsel represents, sharp practice. Counsel for the plaintiff failed to respond to multiple communications and, as noted, did not respond to the request for the 30 day waiver.
[22] Counsel for the defendant submits that pursuant to the Advocates’ Society Principles of Civility, section 19, an advocate should not cause any default without first notifying opposing counsel.
[23] As well, the defendant relies on the Law Society of Upper Canada’s, Rules of Conduct in regards to reasonable requests for waiver (7.2-1.1) and the need to avoid sharp practice and the need to avoid taking advantage of slips, irregularities, etc.
[24] In response, counsel for the plaintiff submits he invited defence counsel to go on record which invitation was declined. He submits therefore that at the time, in respect to this litigation, his duty was to deal with the defendant directly as there was no solicitor of record.
[25] On this issue I agree with defence counsel. While not a legal obligation, counsel for the plaintiff should have notified defence counsel of his intention. He also should have responded to the request for a 30 day waiver. While plaintiff’s counsel argues that for more than six months the defendant took no steps whatsoever suggesting the intent is to delay and frustrate this litigation, advising defence counsel of his intent to proceed, in default, would have forced defence counsel’s hand.
[26] I do accept that there is some fault on the part of defence counsel. No steps were taken in regards the filing of a jurisdictional motion or statement of defence. When not receiving any response to their communications, particularly, the failure to respond to the request for a 30 day waiver, the prudent thing for defence counsel to do would be to move to protect the client’s legal interests.
[27] Rule 21.01(3) governs jurisdictional issues. Motions challenging the court’s jurisdiction are to be brought “promptly” and the failure to do so may be taken into account in awarding costs. The defendant did not move promptly on this issue. However, what the Rule does not say is that the failure to move promptly is fatal. It is an issue for costs.
[28] The Ontario Court of Appeal in Intact Insurance Co. v. Kisel, 2015 ONCA 2015 sets out the five principles to be considered on a motion to set aside default judgment and they are as follows:
- Whether the motion was brought promptly after learning of the default judgment;
- Whether the defendant has a plausible explanation for the default;
- Whether the defence has an arguable defence on its merits;
- The potential prejudice suffered by the respective parties should the motion be allowed or dismissed; and
- The effect of any order the court may make on the integrity of the administration of justice.
[29] In my opinion, counsel for the defence has satisfied the first two principles. Certainly this motion was brought promptly after learning of the default judgment. There was no argument to the contrary. Further, while counsel for the defendant could have done more to protect the defendant, the explanation, on the facts of this case, are plausible.
[30] I also find that in regards to the third principle, the defendant has an arguable defence which is referred to in the Faber affidavit. The defamation claim is denied, arguing the person who may be responsible was not an employee of theirs. In regards to the failure to return the deposit monies, the defendant argues that the deposit was non-refundable as it is a set-off against costs already incurred. Costs were incurred in ordering the material which could not be returned. Further, engineering costs were incurred.
[31] With respect to the last two principles to be considered in determining whether or not a default judgment is to be set aside, this is a $250,000 lawsuit. While there will be obvious prejudice to the plaintiff if the judgment is set aside, the prejudice to the defendant if the motion is dismissed is much greater. Further, if the motion is granted the plaintiff will still be able to proceed with its case on the merits.
[32] Granting the motion will not adversely affect the integrity of the administration of justice. It is in the interests of the administration of justice to have cases tried on their merits.
[33] Returning to the issue of requiring leave to serve the claim, counsel for the defendant submitted that in setting aside a default judgment where there is a procedural irregularity, a defendant is not required to establish an arguable defence. Since I have determined there is an arguable defence, this point is moot.
[34] I order,
- The default judgment is set aside.
- Within 21 days of the release of this endorsement the defendant shall serve and file a statement of defence. If the defendant wishes to argue the issue of jurisdiction the argument can be pleaded in the statement of defence.
- The filing of the statement of defence, if the jurisdictional issue is pleaded, shall not be considered attorning to the jurisdiction of the Ontario courts.
- The defendant, at the same time, if the issue of jurisdiction is pleaded, shall serve and file a motion to challenge the Ontario court’s jurisdiction.
- In the event the defendant fails to comply with this order, the plaintiff may move, ex parte, to reinstate the default judgment.
- The parties may make written submission as to costs, of no more than three pages, plus a bill of costs. The submissions must be made within 21 days of the release of this endorsement.
Justice Thomas A. Bielby Released: July 25, 2016