CITATION: Focus Graphite Inc. v. Ted Douglas, 2016 ONSC 622
COURT FILE NO.: 13-57438
DATE: 20160129
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FOCUS GRAPHITE INC. and GARY ECONOMO
Charles Gibson, Counsel for the Plaintiffs
Plaintiffs
- and -
TED DOUGLAS, a.k.a. OGOPOGO007, a.k.a. Drill_Deep,_Find_oil,_stay_calm
Defendant
James Anderson, Counsel for the Defendant
HEARD: January 21, 2016 (Ottawa)
mcnamara R.S.J.
DECISION
[1] On this motion the defendant seeks to set aside the noting in default dated December 4, 2013 and the default judgment signed by Justice Beaudoin on February 20, 2015 together with certain incidental relief should the motion be granted.
Background
[2] On April 24, 2013 the plaintiffs issued the Statement of Claim in this matter which was served on the defendant on August 12th of that year.
[3] On September 9, 2013 the defendant purported to serve a Form 18A, Statement of Defence, on the plaintiffs’ counsel by fax. The Statement of Defence was admittedly not entirely compliant with the Rules, however it provided notice that the defendant intended to defend the action.
[4] On September 16, 2013 the defendant, who to this point was self-represented, faxed a more detailed Statement of Defence to plaintiffs’ counsel.
[5] On September 30, 2013 the plaintiffs’ counsel faxed an Amended Statement of Claim to the defendant.
[6] On October 18, 2013 the defendant faxed a Form 18B-Notice of Intent to Defend to the plaintiffs’ counsel.
[7] On October 31, 2013, the defendant faxed a new Form 18B to plaintiffs’ counsel indicating he was in discussions with a lawyer who would be contacting them soon.
[8] On November 4, 2013, plaintiffs’ counsel sent a letter to the defendant advising him to retain a lawyer and that he was not entitled to serve a “Notice of Intent to Defend” in response to an Amended Statement of Claim. Plaintiffs’ counsel also reminded the defendant that his forms did not respect the requirements applicable to pleadings prescribed under the Rules.
[9] On or about November 6, 2013 the defendant retained counsel to defend the action. That counsel engaged in discussions with plaintiffs’ counsel, however due to a breakdown in their relationship the defendant’s counsel withdrew on November 27, 2013.
[10] On that same day plaintiffs’ counsel sent a letter to the defendant by fax, giving the defendant until November 29, 2013 to serve and file a Notice of Intent or Statement of Defence.
[11] On November 29, 2013 the defendant retained a process server to file a Notice of Intent to Defend with the Ottawa Superior Court, and pre-paid him for his services. Also on November 29, 2013, the defendant served his Notice of Intent to Defend on the plaintiffs’ counsel by fax.
[12] The process server billed the defendant for “Court Filing re: Court File #13-57438” including a premium charge for delivery of documents within 24 hours.
[13] On December 2, 2013 at 2:06 p.m. plaintiffs’ counsel sent a letter to the defendant by fax stating that the defendant’s documents still did not comply with the Rules, that nothing had been filed with the Court, and gave the defendant until the next day to serve and file a proper Notice of Intent to Defend or Statement of Defence.
[14] On receiving this letter the defendant immediately e-mailed the process server to confirm he had taken the Form 18B to the Court. The process server replied later that afternoon with a copy of the document he had received from the Court which indicated the matter was scheduled to be administratively dismissed on December 17, 2013.
[15] A copy of the material received from the Court through the process server was faxed to plaintiffs’ counsel on December 2nd just before 6:00 p.m.
[16] Plaintiffs’ counsel noted the defendant in default on December 4, 2013.
The Law
[17] Rules 19.03 (1) and 19.08 (1) of the Ontario Rules of Civil Procedure provide the basis for setting aside the noting of default and default judgment. Both Rules give the Court the discretion to set aside the default on such terms as are just.
[18] As recently restated by the Ontario Court of Appeal in Intact Insurance Co. v. Kisel et al 2015 ONCA 205 the tests under these Rules are not identical. At paragraphs 13 and 14 of that Decision the Court stated as follows:
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.
Analysis
[19] I start with whether there is a basis for setting aside the noting of default pursuant to Rule 19.03 (1).
[20] That, as indicated above, requires an assessment of the context and factual situation of the case. In considering the various factors to be taken into account, the evidence establishes a number of things.
[21] First the plaintiffs concede in their Factum and in argument that on the evidence before the Court, the defendant brought the motion promptly once he was made aware of the judgment through the Notice of Garnishment.
[22] A very significant issue in this matter, however, and the one on which counsel spent the majority of time during their submissions, revolves around whether the plaintiff has a plausible excuse or explanation for the default, which is always an important factor in these cases.
[23] The applicant defendant argues that the defendant has demonstrated through the evidence a consistent intention to defend the allegations, that he attempted on several occasions to provide the necessary paperwork but owing to his lack of legal knowledge he was technically unsuccessful, that he took additional steps via retaining a process server to assist him in getting his materials to the Court and that process server let him down, and that on December 2nd, shortly before he was noted in default, he advised plaintiffs’ counsel fully of what he had learned from the Court office but heard nothing further from plaintiffs’ counsel.
[24] The plaintiffs argue the evidence discloses no plausible excuse or explanation for the default, that the evidence, in their submission, fails to show a consistent intent to defend the action, and on the contrary they submit the evidence discloses the plaintiff was “gaming the system” in hopes of the plaintiffs’ action being administratively dismissed.
[25] In deciding this issue it is particularly important to have a close look at the events in and around November and early December 2013.
[26] The defendant did have counsel most of that month who it is conceded was discussing the case and its future with counsel for the plaintiff. It would also seem clear that immediately after the breakdown of the solicitor/client relationship between the defendant and his then lawyer, that led directly to the letter from plaintiffs’ counsel to the defendant dated November 27, 2013 in which he gave the defendant, who of course was now again self-represented, until November 29th to correct the defects in his materials and get them filed. As it was put in that correspondence “a pleading had to be completed that respects the requirements prescribed by the Rules”, failing which the defendant would be noted in default. The defendant, in Stratford Ontario, reacts to this by retaining a process server in the hopes this will ensure that the filing of his document will take place, and he provides a copy of that document, by fax, to the plaintiffs.
[27] I accept that on the evidence it would seem the defendant thought that at this point matters were now in order. He then receives the correspondence from plaintiffs’ counsel on December 2nd that informs him that the Court office is maintaining no documentation has been filed with the Court, and providing the defendant until the next day to remedy the situation failing which he will be noted in default. For the first time he is advised that part of the filing process requires payment of a fee and an affidavit of service. This correspondence arrives a little after two o’clock in the afternoon.
[28] The evidence establishes that the defendant e-mails the process server at 2:23 p.m. asking that this individual confirm that his Notice of Intent was taken to the Court office. The process server responds at 4:23 p.m. and provides the defendant with a photocopy of his Form 18B upon which someone has written “Case will be administratively dismissed on 17 Dec. 2013.”
[29] At 5:51 p.m. on December 2nd the defendant faxes that document to plaintiffs’ counsel with a handwritten note on the bottom:
This is the reply my process server got when he tried to serve the above last Fri, Supreme Court in Ottawa Court File 13-57438. You were served by fax same day. Clerk told him nothing filed by plaintiff, case will be dismissed on 17 Dec. 2013.
[30] He hears nothing further from the plaintiffs’ counsel in response to all of this but rather is noted in default on December 4th.
[31] Plaintiffs’ counsel submitted during argument that certain of the answers given by the defendant when cross-examined on his affidavit establish the defendant knew by the end of the day on December 2nd that his pleading had not been filed with the Court, and because he received the additional news about the case being administratively dismissed he was no longer going to concern himself about the matter. To that suggestion made to him during his cross-examination the defendant replied “That was pretty much my thoughts that this is not going any further.”
[32] I am not persuaded that that evidence or any of the evidence on the motion demonstrates the defendant was “gaming the system”. It is equally plausible, in my view, that he felt, as a lay person, that while he was indeed in default in filing his material, that was of little consequence as the plaintiffs were also in default and their case was going to be dismissed administratively in consequence. In those circumstances it is quite reasonable to expect that he would conclude the matter was “not going any further” and there was no need for him to worry any further about it. He had informed plaintiffs’ counsel of what he had been told by the Court, and why would he do that if he was “hiding in the weeds” waiting for a dismissal. It is also significant that when he sent along the note at the end of the day December 2nd to plaintiffs’ counsel where he indicated the clerk had told the process server that nothing had been filed by the plaintiffs and the case would be dismissed, that wasn’t challenged or clarified in any way by plaintiffs’ counsel. Clearly confusion was reigning supreme, and while it was not strictly required, in my view it would have been prudent for plaintiffs’ counsel to provide some clarification what this was all about.
[33] In summary, then, I am persuaded on the evidence as a whole that the defendant has provided a plausible excuse or explanation for the default.
[34] Turning briefly to the issue of prejudice, while certainly there will be some prejudice to the plaintiffs in setting aside the noting in default, on the facts of this case the greater prejudice would be on the defendant as in the confusing circumstances of this matter, he would be denied any opportunity to present a defence on the merits. Prejudice to the plaintiffs can be compensated for by way of costs thrown away, and while there will be a further delay in terms of ascertaining the outcome of this matter, that can in all likelihood be shortened owing to such things as some of the findings made by Beaudoin J. during the default hearing, the fact that an extensive cross-examination of the defendant has already taken place, etc.
[35] In terms of the impact the order may have on the overall integrity of the administration of justice, again, on the facts of this matter, I have found the defendant has a plausible excuse for the default and in my view, in the entirety of the circumstances of this matter, it would offend the overall integrity of the administration of justice if the defendant were not given the opportunity to participate in the litigation simply because of a technical issue that arose with the filing of a pleading.
[36] In all of the circumstances I am satisfied there should be an order setting aside the noting in default pursuant to Rule 19.08 (3).
[37] Having made that determination, in my view it is not strictly necessary that I complete the analysis as to whether or not the factors have been satisfied that would justify an order setting aside the default judgment.
[38] Having said that, however, the only other factor to analyze to deal with that issue is whether or not the defendant has an arguable defence on the merits. Based on my review of the evidence as a whole it is my view that it establishes a factual basis that some of the defences raised may be in play. The fact that the defence has an air of reality to it is all that is required not that the defence will inevitably succeed. In at least two places in his Decision written subsequent to the default hearing Beaudoin J. of this Court indicated that he was making findings based, in part, on the deemed admissions by the defendant brought about by his having been noted in default.
[39] In addition to the order setting aside the noting in default there will also be an order setting aside and staying the notice of garnishment. In addition there will be an order granting leave to file a Statement of Defence within 10 days of the release of this Decision.
[40] If any monies have been received by the plaintiffs to date by way of garnishment they will be held in trust by the plaintiffs’ lawyer in his trust account until this matter has been decided. They can be applied towards costs thrown away by the plaintiffs and any overage will then be retained.
[41] In terms of costs thrown away, in reviewing this matter in its entirety I am satisfied that in all the circumstances the costs awarded and assessed by Beaudoin J. are to be paid in full forthwith.
[42] Costs of this motion will be in the cause.
Mr. Justice James E. McNamara
Released: January 29, 2016
CITATION: Focus Graphite Inc. v. Ted Douglas, 2016 ONSC 622
COURT FILE NO.: 13-57438
DATE: 20160129
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FOCUS GRAPHITE INC. and GARY ECONOMO
Plaintiffs
- and -
TED DOUGLAS, a.k.a. OGOPOGO007, a.k.a. Drill_Deep,_Find_oil,_stay_calm
Defendant
DECISION
McNAMARA R.S.J.
Released: January 29, 2016