Court File and Parties

Peterborough Court File No.: DC-18-0001 Date: 20180911 Ontario Superior Court of Justice

Between: Debra Hiley (doing business as Stagecoach House Woodsmiths”) Plaintiff by Defendant’s Claim (Respondent) – and – Pamela Jean Hill (A.K.A. Pam Hill) and Thomas Hill (A.K.A. Tom Hill) Defendants by Defendant’s Claim (Appellants)

Counsel: Russell Wm. Palin for the Respondent Michael W. Gunsolus for the Appellants

Heard: July 17, 2018

Reasons for Decision

de SA J.:

Summary of Facts

[1] On July 21, 2017, the Appellants filed a Plaintiff’s Claim against the Respondent seeking damages with respect to a kitchen that was installed at their home. Essentially, the Appellants’ position was the Respondent’s workmanship was deficient and that the Respondent had overbilled for their services based on the agreed upon price.

[2] On or about August 10, 2017, the Respondent filed a defence to the Plaintiff’s Claim and commenced a Defendant’s Claim for the amount owing for the installation of the kitchen at the Appellants’ home.

[3] On October 6, 2017 the Appellants and the Respondent attended a settlement conference. The parties were unable to settle their dispute.

[4] The Appellants were self-represented at the time the original pleadings were filed. Believing its original Claim sufficiently responded to the issues raised in the Defendant’s Claim, the Appellants filed no additional Defence to the Defendant’s Claim. On October 17, 2017, the Respondent noted the Appellants in default with respect to the Defendant’s Claim. Thereafter, the Respondent obtained default judgment against the Appellants with respect to the Defendant’s claim.

[5] On November 2, 2017, the Appellants first met with legal counsel to discuss the Plaintiff’s Claim and the Defendant’s Claim. On November 21, 2017, the Appellants retained counsel to defend the Defendant’s Claim.

[6] On January 23, 2018, the Appellants served a Defence to the Defendant’s Claim, along with an Amended Plaintiff’s Claim, by mail on the Respondent. Upon attempting to file the defence to the Defendant’s Claim with the Court, however, the Appellants learned that default judgment had been obtained against them with respect to the Defendant’s Claim.

[7] On January 24, 2018, the Appellants served and filed a motion to set aside the default judgment. The Appellants were under the mistaken belief that they were not required to file a defence to the Defendant’s Claim given that the Plaintiff’s Claim already dealt with the issues raised in the Defendant’s Claim (i.e. that the Respondent’s had overbilled for their services and had provided deficient work).

Motion to Set Aside Default Judgment

[8] The motion to set aside the default judgment was scheduled to be heard February 16, 2018. On February 16, 2018, the motion’s judge refused to set aside the default judgment. In her ruling, she explained:

Okay, so I now see the defence, the draft defence, which I hadn’t had a chance to look at but I’m still not satisfied about the reasonable explanation for the default…

What I think I’m going to do is, I am going to stay the…I am not going to grant the setting aside of the default judgment but I am going to stay any enforcement of that judgment until a further order of this Court and the Hill’s will just have to get their act together and go forward on the main action and the Deputy Judge who hears that will have to deal with the fact that there’s this default judgment out here on the defendant’s claim. And, what I would urge you to do, both parties, is to talk with each other and since Mrs. Hill is here today and Mr. Peddle is here today and you’re both here today, it might be worth your while to have a little chat by way of another attempt at settlement.

Mrs. Hiley may bring a motion for enforcement if the main action is not set down for trial in 30 days.

Analysis

General Principles

[9] Rule 11.06 of the Rules of the Small Claims Court codifies the common law test for setting aside a default judgment. The moving defendant must provide a meritorious defence, satisfactorily explain the failure to defend within the prescribed time and make the motion as soon as is reasonable possible in all the circumstances.

[10] As the jurisprudence explains, the rules governing the setting aside of default judgments are not to be applied rigidly. The tests are a guide and that the governing principle is whether the interests of justice favour or do not favour setting aside the default judgment. The court must look at the potential prejudice not only to the defendant but also to the plaintiff and the impact of an order on the integrity of the administration of justice. Chitel v. Rothbart, 1988 CarswellOnt 451 (Ont. C.A.).

[11] In the majority of cases, the most important factor on a typical motion will be the requirement to establish that the moving defendant has “a meritorious defence”. Morgan v. Toronto (Municipality) Police Services Board, 2003 CarswellOnt 1105 (Ont. C.A.) at paras. 25-26. If the record makes clear that the defendant has no defence, there is little point in setting aside the default judgment as the net effect of doing so may simply be to increase the defendant’s liability by exposing him or her to the risk of a representation fee at trial. However, if there is a meritorious defence, the system favours a determination on the merits so both parties have a full opportunity to present their respective sides of the story.

[12] A “meritorious defence” means an arguable defence. It does not require the moving defendant to establish that the defence is likely to succeed at trial. (Coombs v. Curran, 2010 ONSC 1312 (Ont. Div. Ct.))

Application to the Facts of this Case

[13] In this case, I agree with the Appellants that the motion judge failed to consider the net effect of refusing to set aside the default, and whether that decision was in the interests of justice.

[14] The impact of the motion judge’s Order now leaves the Appellants in the position where their original claim for overbilling and deficiencies has been rejected. The default judgment on the Defendant’s Claim is tantamount to an acceptance that the Respondent did not overbill for the work. Clearly, this is the very substance of the matters in dispute in the original Claim. To leave the default judgment in place would arguably foreclose the Plaintiffs’/Appellants’ ability to advance its original Claim at all.

[15] In light of the above, I will set aside the default judgment of Justice Kowalishin dated January 12, 2018 as against the Appellants, and permit the Appellants to file a defence to the Defendant’s Claim.

[16] In the circumstances, I will not order costs in favour of the Appellants. It is the Appellants’ error that led to the default. While the Respondent could have consented to the appeal, I can understand their reluctance to do so.

[17] No costs are ordered on the appeal.

Justice C.F. de Sa

Released: September 11, 2018

Ontario Superior Court of Justice

Between: Debra Hiley (doing business as “Stagecoach House Woodsmiths”) Plaintiff by Defendant’s Claim (Respondent) – and – Pamela Jean Hill (A.K.A. Pam Hill) and Thomas Hill (A.K.A. Tom Hill) Defendants by Defendant’s Claim (Appellants)

Reasons for Decision Justice C.F. de Sa

Released: September 11, 2018