NATURE OF MOTION

[1] Stacey Geldart claims a right to share in the proceeds of the sale of a home that she once shared with her sister, Nicole Geldart, and their parents. She says that the family agreed that her ex-husband was entitled to a 1/3 share in the property, which he then transferred to her. Nicole denies the existence of the agreement.

[2] After Stacey’s lawyer obtained an order, on the eve of trial, removing himself as Stacey’s solicitor of record, Stacey was unable to secure a new lawyer in time for the trial. At the pre-trial conference, the judge predicted that at trial she would either be denied an adjournment or would be required to pay costs too great for her to pay. Following this, Stacey failed to attend on the appointed trial date and the trial judge granted judgment in Nicole’s favour.

[3] Stacey explains her failure to attend the trial by the fact that she suffers from generalized anxiety disorder and was overwhelmed by her lawyer’s departure and the pre-trial conference judge’s prediction that her motion to adjourn the trial would fail, or, if successful, would entail costs that she would be unable to pay.

[4] Stacey now moves to set aside the default judgment that Nicole obtained from Trimble J. at the uncontested trial on April 16, 2016. The Court must determine whether she satisfies the test for setting aside a default judgment.

BACKGROUND FACTS

[5] Nicole and Stacey Geldart are sisters. Nicole applied for distribution of the proceeds of the sale of a home. Stacey asserted a right to share in the proceeds of the sale, pursuant to what she alleged was an oral family agreement. Nicole denied the existence of the agreement and asserted a sole entitlement to the proceeds.

[6] Stacey says that in 1999, Nicole bought a property at 7 Wenonah Drive in Mississauga (“the Wenonah Drive Property” or “the Property”) with Stacey’s ex-husband, Gordon. Three families occupied the Property, each occupying a separate floor of the house:

a) Nicole’s family;

b) Stacey’s family;

c) Nicole and Stacey’s mother and father.

[7] Stacey alleges that Nicole fraudulently transferred the Property to her own name alone in 2003, using a transfer deed drafted by Gordon to be used in the event of his death. Nicole was confronted, Stacy says, and a new oral agreement was made by the family (the “New Agreement”), whereby Nicole would hold Gordon’s interest in trust.

[8] In 2007, Gordon and Stacey separated. Stacey says that pursuant to a separation agreement they entered into at the time, Gordon transferred his interest in the Property to Stacey. Nicole denies Stacey’s entitlement to an interest in the Property.

[9] Nicole sold the Property in September 2013. Pursuant to an agreement between Nicole and Stacey’s lawyers, $100,000 of the proceeds of sale was held in trust pending court order or agreement of the parties.

[10] Nicole began the present action by issuing her Statement of Claim in November 2013 under the Simplified Rules. Nicole claimed distribution of the funds paid into trust to her, and costs.

[11] Stacey delivered her Statement of Defence and Counterclaim on January 10, 2014. She claimed payment from Nicole in the amount of $125,833.33.

[12] Nicole delivered a Reply and Defence to Counterclaim on February 14, 2014. Examinations for Discovery were conducted in March 2015.

[13] In April 2015, Nicole served a motion for summary judgment. In response to the motion, Stacey delivered an Affidavit sworn by her on July 19, 2015, an affidavit sworn by Joan Geldart on July 19, 2015, and an affidavit sworn by Gordon Lindsay on July 20, 2015.

[14] On July 27, 2015, Nicole’s motion for summary judgment was adjourned and, shortly afterward, Nicole agreed to withdraw the motion and to pay $2,000 in costs.

[15] On September 14, 2015, the action was set down for trial for the week of April 18, 2016, and the motion for summary judgment was vacated.

[16] In the first week of March 2016, Stacey’s then-lawyer, Simerjot Chahal, of Mand Rai LLP, informed her that they would not represent her at the trial. They told her to execute a Notice of Intention to Act in Person, removing them from the record as her lawyers. She replied that she had to go home and think about it.

[17] On March 3, 2015, Mr. Chahal sent Stacey a motion record with a motion for an order removing Mand Rai LLP as her solicitors of record, for hearing March 15, 2016. In cross-examination, Stacey stated that there was a contingency agreement and that the reason her lawyer terminated their retainer was financial. In the lawyers’ motion record, which forms part of Stacey’s motion record, the lawyers say that there were other issues. In any event, when her lawyers served her with their motion record for a hearing on March 15, 2015, with the trial imminent, Stacey concluded that an order would inevitably be made removing the lawyers from the record, and she signed, on March 4, and served, on March 8, a Notice of Intention to act in person.

[18] Stacey tried to secure a new lawyer before her trial, but was unsuccessful. Exhibit K to her motion record, pp. 170-171, lists the lawyers she contacted from March 4 to 18, trying to secure alternative counsel to represent her at the imminent trial.

[19] On March 22, 2015, Stacey wrote to Nicole’s counsel and requested an adjournment. He refused the request, alleging that Stacey had “fired” her lawyers for tactical reasons.

[20] Because of her generalized anxiety disorder, she believed she was incapable of representing herself at trial.

[21] The parties attended a pre-trial conference before Justice Ricchetti on April 18, 2016, the day before the trial was scheduled to begin. Stacey attended with her mother, Joan Geldart. She tendered a letter from her physician, Dr. Noori, which stated that she was unable to conduct the trial herself and required a lawyer. She made a request to Justice Ricchetti for an adjournment of the trial.

[22] Justice Ricchetti refused the request and advised Stacey that she would have to make her request to the trial judge. He advised her that such relief would be extremely unlikely at such a late date and that, if granted, it would come at a heavy cost.

[23] Stacey says she left the pre-trial devastated and did not believe she would get a fair hearing on the merits. She did not attend the trial the next day. At the trial, Justice Trimble struck Stacey’s defence and counterclaim, and awarded judgment and costs to Nicole.

ISSUES

[24] The sole issue is whether the default judgment should be set aside.

POSITIONS OF THE PARTIES

Stacey’s Position

[25] Stacey submits that the judgment should be set aside. She relies on Rule 1.04, which provides that every proceeding should be determined on its merits. That did not happen in this case. She notes that the Court exercises discretion as to whether a judgment should be set aside based on the particular circumstances of the case.

[26] Under the test applied for Rule 37.14, a party who explains its failure to appear, who moves with “reasonable promptitude” after becoming aware of the default, and who shows an “arguable defence” on the merits, is entitled to an order setting an order aside. The same test should be applied in this case under Rule 52.01(3).

[27] In this case, Stacey moved promptly to set aside the judgment. She obtained a copy of the judgment on April 27, 2016, after it was made on April 19, 2016. She immediately retained counsel and in mid-May, obtained the earliest possible date for the hearing of her motion. Even if Stacey did not move promptly, mere delay does not bar an application to set aside default judgment unless irreparable injury will be done to the judgment holder.

[28] Stacey submits that her failure to attend at the trial is adequately explained by her medical condition, and by the comments made by the pre-trial judge. Stacey has generalized anxiety disorder. When she attended the pre-trial, the day before the trial date, she and her mother, who also attended, left convinced that:

a) The pre-trial judge wanted the action to be over with, and for Nicole to win;

b) There was no way that Stacey would be granted an adjournment of the trial; and

c) If Stacey was granted an adjournment, the terms would be so onerous that she would be unable to satisfy them.

[29] Stacey argues that she has an arguable defence on the merits. This is the key factor for the Court to consider in a motion to set aside default judgment. All of the family members who were part of the oral agreement support Stacey’s position. Nicole stands alone. Nicole previously performed the agreement, in part, when she provided funds to her parents in 2009. Given that Nicole brought, and then withdrew, a motion for summary judgment, it is apparent that Nicole believed there to be genuine issues for trial.

Nicole’s Position

[30] Nicole submits that the motion should be dismissed with full indemnity or substantial indemnity costs. Alternatively, if the motion is granted, Stacey should be ordered to pay Nicole’s costs thrown away.

[31] Stacey deliberately decided not to attend at trial. She has provided an explanation as to why she did not attend, but her decision has to be understood in context:

a) The trial date was scheduled 7 months earlier, when Nicole withdrew her motion for summary judgment, following Stacey’s late filing of a response to the motion;

b) Stacey signed a notice to act in person 6 weeks before the trial date;

c) On March 22, 2016, Stacey wrote to Nicole’s lawyer asking for an adjournment, which was refused.

d) Stacey attended a pre-trial conference, where the pre-trial judge told her to seek an adjournment from the trial judge “tomorrow”;

e) Stacey failed to attend trial;

f) After Nicole said she intended to collect on the judgment, Stacey retained a lawyer within two weeks.

[32] Where a party deliberately chooses not to attend trial, the judgment should not be set aside. In cross-examination on her affidavit, Stacey admits that she decided not to attend the trial. The comments of pre-trial judge were correct. Because of the lateness of the adjournment request, Stacey’s adjournment would likely come on terms of costs thrown away.

[33] Nicole argues that Stacey’s claims of bias in relation to the pre-trial judge are not founded. The pre-trial judge is not a decision maker. The only medical evidence Stacey offers of her condition are two doctor’s notes. This is not an appropriate way to put medical opinion evidence before the Court.

[34] Nicole notes that Stacey has to show she has a prima facie case to succeed on the motion. She says that Stacey has not done so; the evidence does not support Stacey’s claim to a beneficial interest in the property.

[35] Stacey has alleged fraud against Nicole. The allegation is that the improper transfer was in 2003. Nicole argues that any claim in relation to this transfer is statute barred by the Limitations Act, 2002, and that the Court should not exercise its discretion in favour of a party making serious allegations of fraud that are unfounded.

[36] Finally, Nicole argues that it would be a dangerous precedent to set aside a judgment in circumstances where litigants do not attend trial after receiving an unfavorable opinion from a pre-trial judge.

ANALYSIS AND EVIDENCE

The legislative framework

[37] The jurisprudence applying Rule 37.14, discussed below, dictates that a party who explains its failure to appear, who moves with “reasonable promptitude” after becoming aware of the default, and who shows an “arguable defence” on the merits, is entitled to an order setting an order aside. Stacey argues that the same test should be applied in this case under Rule 52.01(3).

[38] Rule 37.14 provides:

37.14(1) A party or other person who,

(a) is affected by an order obtained on motion without notice;

(b) fails to appear on a motion through accident, mistake or insufficient notice; or

may move to set aside or vary the order, by a notice of motion that is served may move to set aside or vary the order, by a notice of motion hat is served may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of available hearing date that is at least three days after service of the notice of motion.

[39] Rule 52.01 provides:

52.01(1) Where an action is called for trial and all the parties fail to attend, the trial judge may strike the action off the trial list.

(2) Where an action is called for trial and a party fails to attend, the trial judge may,

(a) proceed with the trial in the absence of the party;

(b) where the plaintiff attends and the defendant fails to attend, dismiss the counterclaim, if any, and allow the plaintiff to prove the claim;

(c) where the defendant and the plaintiff fails to attend, dismiss the action and allow the defendant to prove the counter-claim, if any; or

(d) make such other order as is just.

(3) A judge may set aside or vary, on such terms as are just, a judgment obtained against a party who failed to attend at the trial.

[40] Rule 1.04(1) governs the interpretation of the rules of civil procedure. It provides:

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. [Emphasis added]

The jurisprudence

[41] In Klein v. Schile, in 1921, Lamont J.A., on behalf of the Saskatchewan Court of Appeal, stated:

The circumstances under which a Court will exercise its discretion to set aside a judgment regularly signed are pretty well settled. The application should be made as soon as possible after the judgment comes to the knowledge of the defendant, but mere delay will not bar the application, unless an irreparable injury will be done to the plaintiff or the delay has been wilful. Tomlinson v. Kiddo (1914), 1914 139 (SK CA), 20 D.L.R. 182, 7 S.L.R. 132; Mills v. Harris (1915), 1915 161 (SK CA), 21 D.L.R. 230, 8 S.L.R. 113. The application should be supported by an affidavit setting out the circumstances under which the default arose and disclosing a defence on the merits. Chitty's Forms, 13th ed., p. 83.

It is not sufficient to merely state that the defendant has a good defence upon the merits. The affidavits must shew the nature of the defence and set forth facts which will enable the Court or Judge to decide whether or not there was matter which would afford a defence to the action. Stewart v. McMahon (1908), 1 S.L.R. 209.[^1] [Emphasis added]

[42] Urquhart J. of the Ontario High Court of Justice, in Nelligan v. Lindsay, in 1945, adopted the above three-part test, requiring the moving party to explain his/her default, to move promptly to set aside the judgment, and to disclose a prima facie claim or defence.[^2] In that case, the defendant had failed to appear at the trial, rather than at a motion.

[43] In General Leaseholds v. Moore, in 1995, the Ontario Court of Justice (General Division) followed Nelligan in setting aside a default judgment obtained when the defendant failed to appear at trial.[^3] In General Leaseholds, following the removal of their lawyers of record, the defendants failed to attend the pre-trial, assignment court, and the trial itself. However, Walters J. found that, due to service issues, the failure to attend the trial was not wilful, and there was a valid defence raised.

[44] In Re Roberts Estate, in 1996, Killeen J. dealt with a motion by a bankrupt’s spouse to set aside an order made by a motions judge in bankruptcy court, setting aside a transfer of property from the bankrupt to the spouse as a fraudulent preference. Killeen J. found that the wife’s failure to attend the hearing of the motion resulted from the fact that her lawyer had obtained an order removing him as her solicitor of record and had failed to notify her of the pending hearing of the motion. Killeen J. stated:

As I have said, Mrs. Roberts has explained why she failed to appear and has moved with reasonable promptitude after she became aware of her default. The question, then, is whether she has shown an arguable defence on the merits. There would simply be no point in setting aside the order of Jenkins J. if she did not show an arguable case.[^4]

[45] In Lochner v. Callanan, in 2016, Dunphy J. summarized the test for setting aside a default judgment obtained as a result of a party’s failure to attend trial:

The leading authority on the grounds for setting aside a judgment obtained against a party that failed to attend at trial is the Divisional Court decision in Waite v. Gershuny [2005 CarswellOnt 640 (Ont. Div. Ct.)], 2005 4101. The test for setting aside a judgment obtained against a party who has failed to attend at trial is analogous to the test applied in setting aside an order granted against a party who has failed to appear at a motion under Rule 37.14(1)(b) of the Rules of Civil Procedure. The three part test to set aside such an order or judgment requires (i) that the application to set aside be made as soon as reasonably possible; (ii) that it be supported by evidence setting forth a reasonable explanation for the failure to attend; and (iii) that it also be supported with evidence of a defence (or claim) on the merits at least on a prima facie consideration, setting forth the facts which will enable the court to decide whether or not there was a matter that would have afforded a defence (or a claim): Waite at para. 9-10 and authorities cited therein.[^5] [Emphasis added]

[46] There have been a number of cases in which it was held that an intentional default will preclude an order setting aside default judgment. In Toronto-Dominion Bank v. 718699 Ontario Inc., in 1993, Adams J., speaking for the Ontario Divisional Court, refused to set aside default judgment against the individual guarantor of the company's debt. The guarantor did not respond to the statement of claim as he expected to declare bankruptcy in the near future. A few months later, his financial circumstances changed and he retained counsel and sought to defend the action. The court held that "these are not circumstances that should provoke a court to intervene".[^6] As later courts have noted, Adams J. took some comfort in the fact that the respondents had not demonstrated a triable defence on the merits.

[47] In Allen v. 398827 Ontario Ltd., in 1985, Hollingworth J., of the Ontario High Court of Justice, found that the "defendant chose deliberately not to contest this case" and for this reason, the motion to set aside default judgment was denied, notwithstanding that the amount of the judgment might have been different if the action had proceeded to trial.[^7]

[48] In Krushnisky v. Clitherow, in 1986, Senior Master Roger found that the plaintiff’s default in attending at trial had not resulted from inadvertence by them or their solicitors but rather, was a deliberate decision to take a calculated risk. The plaintiffs gave evidence that they had not met to decide what to do about the action as they hoped that the matter would resolve itself. They stated, “We were not in a position to put up the required funds for counsel and rather negligently did not give them any instructions.” [^8] The deponent stated, in cross-examination, that for some of the plaintiffs, there was an actual inability to provide funds, while for others, it was a matter of choice. The Senior Master concluded:

From the foregoing evidence, it seems clear that the default of the moving parties was neither inadvertence on the part of either the plaintiffs themselves or their solicitors, but rather a deliberate decision to take a calculated risk. In my view, that is not the kind of default which the court ought to condone or relieve against where, as here, there is no evidence of any impropriety on the part of either the responding parties or their solicitors in noting the moving parties in default or in obtaining default judgment against them.[^9] [Emphasis added]

[49] An intentional failure to respond to a claim or attend trial is not always fatal to a motion to set aside a default judgment. Courts in several cases have found circumstances that justified or mitigated the default, and have set aside the default judgment, despite a party’s intentional failure to respond to the proceeding or attend the hearing or trial.

[50] In Dealer’s Supply v. Tweed Farm et al., in 1987, the plaintiff sued by specially endorsed writ of summons, in which it claimed an amount owing on a written guarantee of the defendant company’s debts. The personal defendant delivered an affidavit of merits in which he denied signing the guarantee. He failed to attend for cross-examination and the plaintiff obtained an order requiring him to attend, but the personal defendant still failed to do so. The plaintiff obtained an order striking out the appearance and affidavit of merits and proceeded to trial, where it obtained default judgment. When the plaintiff sought to enforce its judgment, the personal defendant moved to set aside the default judgment, asserting that when the action was commenced, he could not afford a lawyer. He further asserted that after he delivered his affidavit of merits, the corporate defendant was insolvent and on the verge of receivership and he believed that the claim against him personally was no longer being pursued.

[51] In allowing the defendant’s motion to set aside the judgment, Justice Misener stated:

There is, I believe, good authority for the proposition that, in determining whether or not these requirements have been met, the Judge ought to lean in favour of an affirmative answer, simply because, prima facie, no one should suffer judgment against him except after a full hearing and after a careful determination on the merits. At the same time, I think the cases make it clear as well that the satisfaction of these requirements does not automatically dictate success to the applicant. There is still the broad obligation to look at all the circumstances, and to be satisfied that no injustice is done to the innocent party – the respondent to the motion – in any order that is finally made.[^10] [Emphasis added]

[52] Similarly, in Nu-Fish Import Export Ltd. v. Sunsea Import Export Ltd., in 1997, Wilkins J. allowed a motion by the personal defendant to set aside default judgment signed by the Registrar for a liquidated amount of damages, even though the defendant acknowledged having received the claim. The personal defendant deposed that he had taken no action in response to the claim as he had believed the action was only against his company, Sunsea, which was by then defunct, and not against him personally. Justice Wilkins noted the previous cases in which the court had refused to set aside default judgments obtained after an intentional failure to respond, but allowed the motion on the basis that “[t]here was a very real possibility in this case that the plaintiff in obtaining default judgment failed to report many thousands of dollars of partial payments. If this were true, it would amount to a grave abuse of the court's process, bordering on fraud.”[^11]

[53] Justice Wilkins noted that Adams J., on behalf of the Divisional Court, in Toronto-Dominion Bank, adopted the language of “calculated risk”, used in Krushnisky, when refusing to set aside default judgment against the individual guarantor of the company's debt who did not respond to the statement of claim as he expected to declare bankruptcy in the near future. Justice Wilkins noted, however, that both Senior Master Roger, in Krushnisky, and Adams J., in Toronto-Dominion Bank, characterized the moving parties' defence on the merits as "weak", implying that this fact may have been determinative in their exercise of discretion.

[54] Justice Wilkins, in allowing the motion, stated:

In order to set aside a default judgment it is well established that the moving party must (1) bring the motion to set aside without undue delay, (2) explain the circumstances which led to the default, and (3) present a triable defence on the merits. These three requirements are usually traced to the decision of Urquhart J. in Nelligan v. Lindsay, [1945] O.W.N. 295 (H.C.J.). The requirements are not to be viewed as rigid rules, but rather factors to be considered in the overall exercise of judicial discretion: Chitel v. Rothbart (1988), 29 C.P.C. (2d) 136 (Ont. C.A.).[^12] [Emphasis added]

[55] In Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., in 2007, the Ontario Court of Appeal set aside a motion judge’s dismissal of a motion to set aside default judgment, where the motion judge had found that the failure to defend had resulted from miscommunication between the defendant and its counsel, but concluded that the defendant had not set out a triable defence with sufficient particularity. The Court of Appeal, in setting aside the default judgment, stated:

On a motion to set aside a default judgment, the motion judge will be guided by the principles identified in the authorities. The motion judge must, however, ultimately determine whether the interests of justice favour an order setting aside the default judgment. In doing so, the motion judge will have regard to the potential prejudice to the moving party should the motion be dismissed, the potential prejudice to the respondent should the motion be allowed, and the effect of any order the motion judge may make on the overall integrity of the administration of justice.[^13] [Emphasis added]

[56] This formulation of the principle is consistent with Wilkins J.’s observation, in Nu-Fish, referred to above, that, “The requirements are not to be viewed as rigid rules, but rather factors to be considered in the overall exercise of judicial discretion.”[^14]

[57] The Court of Appeal’s reasons in Peterbilt offer guidance as to how exacting the court should be in scrutinizing the merits of a potential defence when hearing a motion to set aside default judgment, and how much emphasis to give to the goal of determining the issues on the merits. The Court stated:

We think the affidavit of the appellants, while perhaps deficient, was sufficient to put the detailed defence set out in the statement of defence "in play" on the motion to set aside the default judgment. We cannot agree that there was nothing before the motion judge suggesting that the appellants had an arguable defence. The statement of defence had been served and filed in a timely fashion and contained detailed and full defences to the claims. The motion judge erred in these circumstances in discounting entirely the defence alleged in the statement of defence.

The motion judge also failed to consider the potential prejudice to the parties. There was no prejudice to the respondent that could not be compensated for by appropriate terms had the motion judge allowed the motion and set aside the default judgment. The prejudice to the appellants flowing from refusing the motion is obvious. They were denied any opportunity to present a defence on the merits.[^15] [Emphasis added]

[58] In Waite v. Gershuny, in 2005, the Divisional Court allowed an appeal from a decision of Herman J. refusing to set aside a decision on a motion by the plaintiff without notice to the defendant, which restored an action to the trial list, five years after the dismissal of the action. Herman J. had deferred to the motion judge’s acceptance of the plaintiff’s explanation that he had failed to attend the trial because he had not received the communications from the trial coordinator as to when the trial would begin. The Divisional Court stated:

In our view, the learned motion judge erred in principle in failing to consider whether the action she was asked to restore to the trial list had some indication of merit, and in deferring to Dyson J. on the issue of whether the failure of the moving party to appear at the trial had been satisfactorily explained. Dyson J. was not in a better position than the motion judge to determine this important issue. It was she and not Dyson J. who had evidence on the point. He had only the unsworn ex parte statement of the plaintiff as to his failure to appear, and Dyson J.’s decision was expressly based on the assumption that the statement was correct, not on any finding that it was. [^16] [Emphasis added]

[59] In Watkins v. Sosnowski, in 2012, Justice Perell dismissed a motion to set aside a default judgment for the plaintiff, principally because he found that the defendant had failed to show a defence on the merits. In doing so, he referred to the three-part test derived from Nelligan, which the Court of Appeal had later applied in Morgan v. Toronto (Municipality) Police Services Board, in 2003, and in Sinnadurai v. Laredo Construction Inc., in 2005. Justice Perell concluded:

The factors, however, are not treated as rigid rules, and 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: Morgan v. Toronto (Municipality) Police Services Board, supra; Chitel v. Rothbart, [1988] O.J. No. 1197, 29 C.P.C. (2d) 136 (Ont. C.A.), leave to appeal refused (1989), [1988] S.C.C.A. No. 427, 98 N.R. 132 (note) (S.C.C.). The motions judge or master must ultimately determine whether the interests of justice favour setting aside the default judgment: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. (2007), 2007 ONCA 333, 87 O.R. (3d) 479 (Ont. C.A.)

In circumstances where the plaintiff has obtained a default judgment, the factor of showing a defence on the merits is particularly important because it 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: Chitel v. Rothbart, supra; Morgan v. Toronto (Municipality) Police Services Board, supra…[^17] [Emphasis added]

Applying the test to the present case

a) Explanation for failing to attend the trial

[60] Stacey asserts that her generalized anxiety disorder impaired her judgment in deciding whether to attend the trial, and that she felt overwhelmed by the imminent trial and Ricchetti J.’s statement to her that her request for an adjournment was likely to be refused and, if allowed, would entail costs which she knew she would be unable to pay. I find that, in these unusual circumstances, Stacey’s explanation for her failure to attend the trial is reasonable. It cannot be regarded as a deliberate disregard of her procedural obligations, undertaken as a “calculated risk” of the sort that Senior Master Roger referred to in Krushnisky.

[61] In Mosher v. Ontario, in 2001, Kozak J. set aside an order dismissing an action on the ground of the unrepresented plaintiff’s non-attendance at trial.[^18] The plaintiff brought a motion five days before the trial to adjourn the trial on the ground that he had appealed from an order denying leave to amend his statement of claim and on the further ground that his wife’s health did not permit her to travel to Kenora to testify. The motion was adjourned to the day the trial was to begin, and it was suggested to the plaintiff that he provide medical evidence as to his wife’s condition or have her present in court to testify as to her condition. On the first day of the trial, the trial judge dismissed the plaintiff’s motion to adjourn the trial but, owing to the plaintiff’s wife’s inability to travel to Kenora, the judge indicated that he would adjourn the continuation of the trial to a special sitting in Sioux Lookout to hear the wife’s testimony. After court recessed at 11:12 a.m. for the trial to begin at 11:45 a.m., the plaintiff informed Crown counsel that he was not staying for the trial as he intended to appeal the denial of the adjournment. When court resumed at 12:10 p.m., the Crown asked for an order dismissing the action, but the trial judge adjourned the trial for two days later in Kenora, to give the plaintiff a further opportunity to attend. When the plaintiff did not attend, the judge dismissed the action.

[62] In setting aside the order dismissing the action, Justice Kozack stated, “As to why he left the courtroom on June 25, 2011, and did not see fit to appear for his trial, the plaintiff explained that the ruling of [the trial judge] to deny the adjournment left him in a state of mind where he felt so overcome with prejudice, so downtrodden that he felt compelled to leave.” Justice Kozack then continued:

Once the plaintiff left the Court House and the court saw fit to adjourn the trial to July 28, 2001, in the absence of the plaintiff, it can be seen that an element of confusion could possibly arise because of the proposed intention of the court to relocate the trial to Sioux Lookout on Wednesday July 27, 2001, to facilitate the taking of the evidence of Mrs. Mosher. Although the more logical conclusion would have been to assume that the trial on July 27, 2001, was scheduled for Kenora, the reference to Sioux Lookout on that date satisfies me that there is sufficient reasonableness to Mr. Mosher’s explanation to cause me to set aside the judgement of [the trial judge] dated June 27, 2001. Given the circumstances of this case, it would truly be a draconian measure to dismiss this action because of the plaintiff’s conduct in that the plaintiff has devoted the past 23 years in the cultivation of the lands and has established a genuine issue for trial.[^19] [Emphasis added]

[63] In Mosher, the motion judge’s decision to set aside the dismissal of the action was based in large part on the over-arching desirability of trying the action on its merits and, in part, on an accommodation of the plaintiff as a self-represented litigant who was less able to comprehend the court’s procedures and his own procedural options. This exercise of discretion conforms to Wilkins J.’s observation, discussed above, that the “requirements” should not be treated rigidly, but rather as “factors to be considered in the overall exercise of judicial discretion,” as well as the Court of Appeal’s reasoning in Peterbilt, above.

[64] Stacey attests to the fact that, to her sister’s knowledge, she has suffered from anxiety disorder for many years. She tendered a note dated June 13, 2016, from Dr. Mehir Noor, M.D., C.C.F.D., of the Oak Village Medical Clinic, confirming that she was diagnosed by the Clinic, in February 2016, with generalized anxiety disorder and has been on Seroquel and Clonazepam for her condition and is seeing the Psychiatry Department regularly for it. I find the note to be admissible pursuant to the Evidence Amendment Act, 1966, c. 51, s. 2 and 50a, and to be reliable and admissible at common law.[^20]

[65] While not binding upon this Court, the decision of the Social Benefits Tribunal of Ontario in 1205-05585 (Re), in 2013, provides insight into the circumstances of this case. The Social Benefits Tribunal of Ontario excused an appellant’s failure to attend the hearing of her appeal on the ground that she suffered from generalized anxiety disorder. The appellant had appealed from the decision of the Director of the Ontario Disability Support Program, who had held that she was not substantially disabled, and therefore not entitled to benefits under the program.[^21] In hearing her appeal, notwithstanding her failure to attend, the Tribunal applied section 29 of The Ontario Disability Support Program Act, 1997. That section provides:

(1) An appeal to the tribunal shall be denied if,

(b) in the case of a hearing held in person, the person appealing fails, without reasonable cause, to attend the hearing at the time and place fixed for it. [Emphasis added][^22]

[66] The Appellant had been diagnosed with extreme social phobia and generalized anxiety disorder. The Tribunal found that her diagnosis was a “reasonable cause” for not attending the hearing, as contemplated by Section 29(1) (b) of the Act.

[67] The Tribunal relied on the Divisional Court’s decision in Director, Ontario Disability Support Program v. Miller, in 2005.[^23] In that case, the Tribunal Member proceeded with the Appellant’s hearing in his absence, and allowed the appeal. In upholding the Tribunal’s decision not to dismiss the appeal, the Divisional Court stated:

In our view, in these circumstances, the Tribunal Member would have been acting unreasonably if he had simply dismissed the appeal. It would have been open to him to adjourn the matter in order to give Mr. Miller an opportunity to provide an explanation for his absence or a further opportunity to attend. However, given the time that had already passed and the fact that Mr. Miller’s attendance was entirely unnecessary for a proper determination of the appeal, there was no positive obligation on the Tribunal Member to take such a step. It was open to him to simply determine the appeal on its merits, and he did not exceed his jurisdiction in doing so. [Emphasis added]

[68] In the circumstances of the present case, the Court must interpret Rule 52.01(2) and (3) of the Rules of Civil Procedure in a manner consistent with Canada’s international human rights obligations, which require equal access to justice. Article 13(1) of the United Nations Convention on the Rights of People with Disabilities (“Convention”), which has been ratified by Canada, provides:

Article 13

Access to justice

States Parties shall ensure effective access to justice for persons with disabilities on an equal basis with others, including through the provision of procedural and age-appropriate accommodations, in order to facilitate their effective role as direct and indirect participants, including as witnesses, in all legal proceedings, including at investigative and other preliminary stages. [Emphasis added]

[69] The Supreme Court held, in Baker v. Canada (Minister of Citizenship and Immigration), in 1999, “the values reflected in international human rights law may help inform the contextual approach to statutory interpretation and judicial review”.[^24]

[70] In the circumstances of the present case, preserving Stacey’s access to justice requires the court to apply Rule 52.01(2) as a mechanism that permits a person with a recognized disability to proceed to a trial of the action on the merits, with legal representation, where her initial failure to attend is reasonably attributable to her heightened emotional response to her lawyer’s removal from the case on the eve of trial, and the pronouncements of the pre-trial conference judge, amplified by her psychological disorder.

b) Timeliness of the motion to set aside the dismissal order

[71] Stacey received Justice Trimble’s judgment dated April 19, 2016, striking her Statement of Defence and Counterclaim and granting judgment in favour of Nicole, on April 23, 2016. She quickly secured new counsel and on May 16, 2016, her counsel scheduled the first possible hearing date for her motion to set aside the judgment.

[72] It cannot reasonably be argued, in these circumstances, that the motion to set aside the judgment was not brought in a timely manner.

c) Merits of Stacey’s claim

[73] Nicole brought the present action for distribution of the proceeds of sale of the Property. Stacey counterclaims for a share of the proceeds pursuant to an oral family agreement.

[74] Stacey has offered convincing evidence of an oral agreement. In the course of the proceeding, Nicole brought a motion for summary judgment. She withdrew the motion after Stacey delivered her responding material, including affidavits by Stacey, her mother, Joan Geldart, and Stacey’s ex-husband, Gordon Lindsay, all of whom assert the existence of the family agreement which only Nicole denies.

[75] Stacey’s evidence is as follows. Stacey’s then-husband, Gordon Lindsay, and Nicole, acquired the Wenonah Drive Property in December 1999. Gordon and Nicole were the registered owners of the Property, but held a one third interest in trust for Stacey and Nicole’s parents, Robert and Joan Geldart, who provided the down payment of approximately $80,000.

[76] When the Wenonah Drive Property was purchased, Nicole and Stacey, Joan and Robert Geldart, and Gordon Lindsay orally agreed that:

a) Gordon would be the beneficial owner of one third of the Property, and Gordon and Stacey would reside in the main floor unit of the Property;

b) Nicole would be the beneficial owner of one third of the Property and would reside in the second floor unit;

c) Robert and Joan would be the beneficial owners of the remaining one third of the Property, and would reside in the basement unit.

d) Robert and Joan Geldart would not pay any costs or expenses associated with the Property.

e) Gordon and Nicole would share all the expenses of the Property equally. (“the Agreement”)

[77] Gordon Lindsay is a professional contractor and, from 1999 to 2003, made several improvements and renovations to the Property.

[78] In November 2000, Gordon, Stacey, and their daughter went on a vacation. They were concerned because Gordon did not have a will. In order to avoid the risk that his interest in the Property would flow through his estate, which would compromise the interests of Nicole, Stacey, and their parents, Stacey drafted a Transfer Deed, which Gordon signed on November 13, 2000, whereby he transferred his interest in the Property to Nicole. Gordon addressed the deed to Joan Geldart, and told Nicole and Joan that the deed was only to be registered if Gordon did not safely return from the family vacation.

[79] When Gordon and Stacey returned from their vacation, Joan and Nicole told them that the Transfer Deed had been destroyed. However, unbeknownst to Gordon and Stacey, Joan had retained the Transfer Deed and, in early 2003, she gave it to Nicole, asking her to remove Gordon’s name from the title to the Property and substitute Joan’s name. Unbeknownst to Stacey and Gordon and to Joan and Robert Geldart, Nicole caused the Transfer Deed to be registered, thereby transferring title to the Property to herself alone.

[80] When Gordon discovered that Nicole had registered the Transfer Deed without his authorization or consent, he confronted Nicole and demanded that she reverse the unauthorized transfer, failing which he would bring criminal and civil proceedings against her. In early 2003, Stacey and Gordon, Joan and Robert, and Nicole (collectively, “the Family”) held a meeting where they made the oral New Agreement with the following terms:

a) Gordon would not take legal proceedings against Nicole.

b) Nicole would hold Gordon’s one third interest in trust.

c) Nicole would continue to hold Robert’s and Joan’s one third interest in trust.

d) Nicole, Robert and Joan would continue to live at the Wenonah Drive Property.

e) Gordon and Stacey would move out of the Wenonah Property and would be released from any further liabilities relating to the Property.

f) Nicole would assume sole liability for the mortgage and would release Gordon from liability.

g) Nicole would pay Gordon the value of his one third interest in the Wenonah Drive Property, excluding the down payment made by Robert and Joan Geldart, based on the value of the Property when Nicole registered the Transfer Deed.

h) Nicole would pay Gordon $35,000 for the renovations he completed on the Property between 1999 and 2003.

i) Nicole would additionally pay Robert and Joan Geldart one half of any increase in the value of the Wenonah Drive Property from the time Nicole registered the Transfer Deed until the earlier of when Robert and Joan moved from the Property or when Nicole sold the Property.

[81] If Stacey is successful in proving acts of part performance, she will be entitled to lead evidence as to the existence of an oral agreement. Duff J., speaking for the Supreme Court of Canada in McNeil v. Corbett, in 1903, writes:

… a plaintiff who relies upon acts of part performance to excuse the non-production of a note or memorandum under the Statute of Frauds, should first prove the acts relied upon; it is only after such acts unequivocally referable in their own nature to some dealing with the land which is alleged to have been the subject of the agreement sued upon have been proved that evidence of the oral agreement becomes admissible for the purpose of explaining those acts.[^25]

[82] Cartwright J., for the Supreme Court, quoted the above passage from McNeil v. Corbett with approval in Deglman v. Guaranty Trust, in 1954.[^26]

[83] In The Law of Vendor and Purchaser, 3rd ed., V. Di Castri writes:

There must be clear and satisfactory evidence of the existence of the contract, and the proper order for the marshaling of this evidence, oral or otherwise, is first to prove the acts of part performance in order to let in the evidence of the contract which is sought to be enforced.[^27]

[84] There is ample authority as to what constitutes part performance. Shortly after the Statute of Frauds was enacted in 1667, the Court of Chancery began to develop the doctrine of part performance. In Starlite Variety Stores Ltd. v. Cloverlawn Investments Ltd., in 1978, Stark J., for the High Court of Justice listed the essential elements, which can be paraphrased as follows:

(1) The acts of part performance must be such as not only to be referable to a contract such as that alleged, but to be referable to no other obligation;

(2) They must be such as to render it a fraud to allow the defendant to take advantage of the contract not being in writing;

(3) The contract to which they refer must be one that is enforceable by the Court; and,

(4) There must be proper parole evidence of the contract which is let in by the acts of part performance.[^28]

[85] Stacey has proffered evidence of part performance of the New Agreement. Gordon Lindsay did not take criminal or civil proceedings against Nicole, and Nicole made most of the payment required to Joan and Robert Geldart.

[86] In April 2003, pursuant to the New Agreement, Gordon, Stacey and their daughter moved out of the Wenonah Drive Property.

[87] On April 14, 2007, Gordon and Stacey separated. Pursuant to their separation agreement dated November 11, 2008, Gordon transferred his interest in the Wenonah Drive Property (“the Assigned Interest”) to Stacey. Nicole, Joan and Robert Geldart were made aware of the assignment.

[88] In July 2009, Robert and Joan Geldart moved out of the Wenonah Drive Property and, in further part performance of the New Agreement, Nicole paid them approximately $270,000. Although this was not the full amount of their one third interest in the Property, Nicole agreed to pay them the balance when she sold the Property.

[89] Stacey asked Nicole several times to give her the Assigned Interest in the Wenonah Drive Property. Nicole assured her that she would receive the Assigned Interest once the Property was refinanced or sold. Stacey accepted her assurance and took no proceedings against Nicole at the time because Nicole had performed part of her obligations under the New Agreement by making most of the payment required to be made to Robert and Joan.

[90] In August 2013, Stacey learned that Nicole was selling the Wenonah Drive Property for $1,000,000. Nicole then refused to acknowledge the New Agreement, or that any money was owing to Stacey. On September 6, 2013, in order to permit the sale to proceed and to preserve the rights of the parties, $100,000 of the proceeds of sales of the property was placed in Nicole’s lawyer’s trust account subject to further court order or agreement of the parties.

[91] Stacey calculates that her share of the proceeds of sale of the Wenonah Drive Property, pursuant to the New Agreement, is $125,833.33.

[92] If Stacey is successful in establishing the facts she alleges, she will satisfy these elements. Gordon’s forbearance of taking action against Nicole for the value of the renovations he performed, and the payment of $270,000 to Joan and Robert are referable only to the oral agreement. It would amount to fraud for Nicole to take advantage of the agreement not being in writing. The agreement was specific as to the consideration, and the term requiring payment of a 1/3 interest to Gordon, or, pursuant to the Assigned Interest, to Stacey, would be enforceable by the Court. The part performance would permit the parole evidence of the oral agreement to be given by Joan, Gordon, and Stacey.

[93] In Steadman v. Steadman, in 1974, which has been widely accepted and applied in Canada, Lord Reid best summed up the doctrine of part performance as follows:

A plaintiff alleges an oral agreement. If the defendant does not plead the Statute, the plaintiff may prove the agreement by any relevant evidence, including oral testimony but if the defendant does plead the statute the plaintiff is barred unless he can establish that the defendant’s plea of the statute should not be admitted because its maintenance would be unconscionable. To do this the plaintiff has to prove that:

(i) on the balance of probability he acted to his detriment;

(ii) it was more probable than not that he so acted because he was contractually obliged to the defendant to do so;

(iii) such actions were consistent with the oral agreement which he alleges.[^29]

[94] Forbearance from taking legal action can satisfy the requirement for part performance.[^30] Therefore, Gordon’s forbearance from commencing criminal or civil proceedings against Nicole could satisfy this requirement and as it is a continuing consideration, would be a sufficient answer to a defence based on the Statute of Limitations.

[95] If Stacey’s cause of action arose on Feb 25, 2003, when she faced a decision as to whether she was going to sue, the limitation period expired on Feb 25, 2009. If the cause of action arose later, because the parties put together a new agreement, to govern what they would do instead of suing, which is supported by affidavits from Stacey, Gordon, and Joan, then Stacey would not have known until the summer of 2013 that the agreement was being breached. An agreement to sell the Property was entered into in September 2013, and an agreement was made on September 6, 2013, that $100,000 of the proceeds would be held in trust. The limitation therefore began to run when Stacey learned in the summer of 2013 that the New Agreement would not be honoured. She commenced her action in November 2013, which was well within the limitation period.

d) Prejudice

[96] As noted above, the Court of Appeal, in Peterbilt, laid particular emphasis on the importance of prejudice in the determination of whether it would be just to set aside a default judgment. It stated:

The motion judge must, however, ultimately determine whether the interests of justice favour an order setting aside the default judgment. In doing so, the motion judge will have regard to the potential prejudice to the moving party should the motion be dismissed, the potential prejudice to the respondent should the motion be allowed, and the effect of any order the motion judge may make on the overall integrity of the administration of justice.[^31] [Emphasis added]

[97] Nicole would suffer no prejudice if the default judgment is set aside. She has already received the $100,000 that was held in trust. The prejudice is Stacey’s, given that the funds are no longer held in trust. The prejudice that would result to Stacey from failing to set the default judgment aside would be substantial, as it would deprive her of a determination of her claim on its merits.

CONCLUSION AND ORDER

[98] For the foregoing reasons, it is ordered that:

The judgment of Justice Trimble, dated April 16, 2016, is set aside.
If the parties are unable to agree on costs, they may submit written argument, not exceeding four pages, and a Costs Outline, by November 30, 2016.

Price J.

Released: November 17, 2016

CITATION: Geldart v. Geldart, 2016 ONSC 7150

COURT FILE NO.: CV-13-5124 SR

DATE: 2016-11-17

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

NICOLE GELDART

Plaintiff/responding party

and –

STACEY GELDART

Defendant/moving party

REASONS FOR ORDER

Price J.

Released: November 17, 2016

[^1]: Klein v. Schile, (1921), 1921 107 (SK CA), 59 D.L.R. 102 (Sask C.A.) ., at paras. 2-3..

[^2]: Nelligan v. Lindsay, [1945] O.W.N. 295 (H.C.).

[^3]: General Leaseholds v. Moore, [1995] O.J. No. 2188 (Ct. J. (Gen. Div.)).

[^4]: Re Bankruptcy of the Estate of Kenneth Gordon Roberts, (1996), 1996 8264 (ON SC), 41 C.B.R. (3d) 185 (Ct.J. (Gen. Div.)), at para. 22.

[^5]: Lochner v. Callahan, 2016 ONSC 413 (), at para. 31.

[^6]: Toronto-Dominion Bank v. 718699 Ontario Inc., (1993), 62 O.A.C. 158 (Div. Ct.) at para. 4.

[^7]: Allen v. 398827 Ontario Ltd., (1985), 5 C.P.C. (2d) 294 (Ont. H.C.J.), at para. 8.

[^8]: Krushnisky v. Clitherow, (1986), 9 C.P.C. (2d) 155 (Ont. S.C.), at para. 6.

[^9]: Krushnisky, at para. 7.

[^10]: Dealers Supply (Agriculture) Ltd. v. Tweed Farms & Garden Supplies Ltd. et al., (1987),22 C.P.C. (2d) 257 (Dist. Ct.), at para. 13.

[^11]: Nu-Fish Import Export Ltd. v. Sunsea Import Export Ltd., (1997), 1997 12270 (ON SC), 35 O.R. (3d) 153 (Ct. J. (Gen. Div.)) at para. 17.

[^12]: Nu-Fish, at para. 7.

[^13]: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, 87 O.R. (3d) 479, at para. 2.

[^14]: Nu-Fish, at para. 7.

[^15]: Peterbilt, at paras. 4-5.

[^16]: Waite v. Gershuny, (2005), 194 O.A.C. 326 (Sup. Ct. (Div. Ct.)), at para. 11.

[^17]: Watkins v. Sosnowski, 2012 ONSC 3836, at paras. 20, 23.

[^18]: Mosher v. Ontario, [2001] O.J. No. 3312.

[^19]: Mosher, at para. 25.

[^20]: R. v. Robinson, 2007 5369 (ON SC), at para. 45; Anderson v Lamontagne, 2015 ONSC 5962, at para. 12; Hilhorst v. Amaral, 2009 55375 (ON SCDC), at para. 27; Her Majesty the Queen v Bemister, 2016 ONSC 6374, at para. 29; R. v. West, 2001 28424 (ON SC), at paras. 55, 70; Ceho v Ceho, 2015 ONSC 5285, at paras. 47-56.

[^21]: 1205-05585 (Re), 2013 ONSBT 13.

[^22]: 1205-05585, at para. 18.

[^23]: Director, Ontario Disability Support Program v. Miller, Divisional Court File No. 02/054, January 28, 2005, Killeen, Stayshyn, Molloy, JJ.

[^24]: Baker v.Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, at para. 70.

[^25]: McNeil v. Corbett, (1903), 1907 45 (SCC), 39 Can. S.C.R. 608 at para. 5..

[^26]: Deglman v. Guaranty Trust, 1954 2 (SCC), [1954] S.C.R. 725, at p. 793.

[^27]: V. Di Castri, The Law of Vendor and Purchaser, 3rd ed., (Toronto: Carswell, 1988) Vol. I, at pp. 4-13.

[^28]: Starlite Variety Stores Ltd. v. Cloverlawn Investments Ltd. (1978), 1978 2173 (ON SC), 92 D.L.R (3d) 270 (H. Ct. J.), at para. 19.

[^29]: Steadman v. Steadman, (1974), 2 All E.R. 97, at p. 1002.

[^30]: Van Kruistum v. Dool, 1997 12284 (ON SC), citing Francis v. Allan, (1918), 1918 502 (SCC), 57 S.C.R. 373, 44 D.L.R. 501, and Stott v. Merit Investment Corp., (1988), 1988 192 (ON CA), 63 O.R. (2d) 545 (Ont. C.A.). As well, willingness to enter into a "compromise" agreement may satisfy the requirement for consideration: see British Columbia (Attorney General) v. Deeks Sand & Gravel Co., [1956] S.C.R. 356.

[^31]: Peterbilt, at para. 2..

Geldart v. Geldart, 2016 ONSC 7150

Case Summary

NATURE OF MOTION

ANALYSIS AND EVIDENCE

a) Explanation for failing to attend the trial

b) Timeliness of the motion to set aside the dismissal order

c) Merits of Stacey’s claim

d) Prejudice

CONCLUSION AND ORDER

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 3

Legal Tests 2