CITATION: Invoice Payment System Co. v. AFI Construction Inc., 2017 ONSC 4841
COURT FILE NO.: CV-17-843
DATE: 20170810
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: INVOICE PAYMENT SYSTEM CORPORATION, Plaintiff
AND:
AFI CONSTRUCTION INC. carrying on business as SHORERIDGE CONTRACTING, CHRISTOPHER IKENNA DEROSE also known as CHRISTOPHER IKENNA OKPARA and as IKENNA CHRISTOPHER OKPARA, and CITY OF OTTAWA, Defendants
BEFORE: Shaw J.
COUNSEL: Spencer Toole, counsel for the Plaintiff
Christopher Derose, present
HEARD: August 4, 2017
ENDORSEMENT
Issue
[1] The plaintiff moves for default judgment in connection with an action commenced by way of a Statement of Claim issued on February 22, 2017. In the action, the plaintiff seeks damages in connection with the alleged breach of contract by the defendants AFI Construction Inc. carrying on business as Shoreridge Contracting (hereinafter referred to as “Shoreridge”) and Christopher Ikenna Derose also known as Christopher Ikenna Okpara and as Ikenna Christopher Okpara (hereinafter referred to as “Derose”). The said defendants were noted in default on June 5, 2017. The City of Ottawa is also a named defendant but the plaintiff is not moving for judgment against it as it is not noted in default.
Background
[2] Derose is the owner of Shoreridge. Shoreridge is a business that provides landscaping and tree services. In September 2014, Shoreridge entered into a contract with the plaintiff (the “contract”). The contract is known as a factoring agreement. According to the terms and conditions of the contract, Shoreridge agreed to assign invoices to the plaintiff who would then have the right to collect the amounts owing on the invoices. Shoreridge would be paid 90% of the invoice up front and the plaintiff would then collect the full amount of the invoice from the party owing the money to Shoreridge.
[3] Derose also signed a personal guarantee dated September 29, 2014 in which he agreed to unconditionally guarantee Shoreridge’s indebtedness to the plaintiff as a result of the factoring agreement.
[4] Shoreridge presented to the plaintiff an invoice for factoring in connection with work done for the City of Ottawa. That invoice, dated August 27, 2015, was for the sum of $81,840.25. As noted on the stamp on the invoice, the City of Ottawa was directed to pay that amount to the plaintiff. Based on the agreement, Shoreridge was paid 90% of the invoice or $73,645.23. The plaintiff was then to collect the full amount of the invoice from the City of Ottawa.
[5] In this instance, the City of Ottawa refused to pay the invoice. As a result, pursuant to the terms of the contract, the plaintiff is seeking to recover from Shoreridge the full amount of the invoice plus factoring fees, as defined in the contract, of $50,724.80. The plaintiff is also seeking to recover all fees and expenses incurred in collecting these amounts which would include legal fees. As of May 31, 2017, the plaintiff claims that the sum of $123,565.05 is owed by the defendants.
[6] A Notice of Intent to Defend was delivered by the defendants on March 21, 2017. Plaintiff’s counsel informed the court that he did not make any attempt to contact the defendants after he received the Notice. He did not contact the defendants and request a Statement of Defence. He did not contact the defendants to inform them that the plaintiff would note them in default if a Statement of Defence was not served and then move for default judgment.
[7] Although the defendants had been noted in default, they were served with the motion for default judgment on July 14, 2017. After being served with the motion, on August 2, 2017 Derose delivered to plaintiff’s counsel a two paragraph Statement of Defence. Derose then appeared at the motion on August 4, 2017.
[8] Derose had no explanation with respect to why he had not filed a Statement of Defence sooner.
[9] The plaintiff raised an issue about the matter being delayed as this could have an impact on its ability to collect from the defendants should it be successful in this action.
Analysis
[10] I am concerned that no attempt was made to contact the defendants after a Notice of Intent to Defend was delivered on March 21, 2017. The Notice of Intent to Defend indicates that the defendants were responding and intended to participate in the litigation. Before they were noted in default, the defendants should have been contacted and, at the very least, requested to deliver a Statement of Defence. Noting a party in default and then moving to default judgment is a major step in a proceeding and can have a significant impact on the defendant. I am of the view that at the very least, the defendants ought to have been informed that such a step was going to be taken.
[11] The Ontario Court of Appeal considered this issue in Mail v. Business Solutions Group 2013 CarswellOnt 7657, 2013 ONCA 382, 115 O.R. (3d) 359, 259 A.C.W.S. (3d) 71. At para. 18 the court found:
Second, in our view, in the circumstances of this case, it was unreasonable for counsel for the respondent to have noted the appellant’s in default and to have pursued default judgment without notice to appellant’s counsel, with whom he was actively engaged, when he knew that the appellants were defending.
[12] In para. 19 of that decision, the Court of Appeal also made reference to the Advocates’ Society publication entitled The Principles of Civility for Advocates. Section 19 of that document states:
Subject to the Rules of Practice, advocates should not cause any default or dismissal to be entered without first notifying opposing counsel, assuming the identity of opposing counsel is known.
[13] While the defendants were not represented by counsel, in a situation where there are self-represented litigants, as in this case, it should be expected that the party be contacted before any steps are taken to note that party in default and seek default judgment after the party has filed a Notice of Intent to Defend.
[14] Although the plaintiff’s position is that the defendants have no viable defence, that is not the issue which governs whether or not default judgment should be granted in these circumstances. If that is the position of the plaintiff, it has other mechanisms open to it such as a Rule 20 summary judgment motion or a Rule 21 motion for a determination of an issue before trial.
[15] At the same time, the defendants cannot ignore this matter. I will therefore set a timetable to be followed by the parties as follows:
i. The noting in default shall be set aside;
ii. Pursuant to Rule 15.01, Shoreridge must retain counsel to represent it by September 15, 2017;
iii. A Statement of Defence must be served and filed by the defendants by October 14, 2017;
iv. The parties are to exchange affidavit of documents by November 14, 2017;
v. Examinations for Discovery must be scheduled by December 15, 2017 and conducted by no later than January 15, 2018.
[16] This timetable does not preclude the plaintiff from taking whatever steps it considers appropriate pursuant to the Rules to seek a final determination of the matter once a Statement of Defence is served and filed.
[17] If the defendants fail to comply with any of the steps set out above, the plaintiff may move for judgment based on non-compliance with a court order.
[18] The defendants ought to have served and filed a Statement of Defence once it filed its Notice of Intent to Defend. The plaintiff ought to have contacted the defendants once it was served with the Notice of Intent to Defend and before it noted the defendant in default and moved for default judgment. Given those circumstances, costs of this motion are reserved to the judge who may hear this matter on a final basis.
Shaw J.
Date: August 10, 2017
CITATION: Invoice Payment System Co. v. AFI Construction Inc., 2017 ONSC 4841
COURT FILE NO.: CV-17-843
DATE: 20170810
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
INVOICE PAYMENT SYSTEM CORPORATION
AND:
AFI CONSTRUCTION INC. carrying on business as SHORERIDGE CONTRACTING, CHRISTOPHER IKENNA DEROSE also known as CHRISTOPHER IKENNA OKPARA and as IKENNA CHRISTOPHER OKPARA, and CITY OF OTTAWA
ENDORSEMENT
Shaw J.
Released: August 10, 2017