COURT FILE NO.: CV-17-0132-SR
DATE: 2018-12-14
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Wendy Horner
W. Mouck, for the Plaintiff
Plaintiff
- and -
897469 Ontario Inc. o/a Superior Coatings
C. Hacio, for the Defendant
Defendant
HEARD: September 14, 2018, at Thunder Bay, Ontario
Madam Justice T. J. Nieckarz
Decision On Motion
Overview:
[1] The Defendant, 897469 Ontario Inc. o/a Superior Coatings, moves to set aside the Default Order of the Honourable Mr. Justice B. Fitzpatrick dated May 23, 2017 (the “Default Order”) and the Default Judgment of the Honourable Mr. Justice W.D. Newton dated January 5, 2018 (the “Default Judgment”). If the Default Order and Default Judgment are set aside, the Defendant seeks 20 days within which to serve and file its Statement of Defence in this Action. There was additional relief sought in the Defendant’s notice of motion to preserve any money that may have been received by the Plaintiff on account of the Default Judgment, but the parties have resolved this issue to their mutual satisfaction.
[2] The basis for the Defendant’s request is that their lawyer (who is not the same as their lawyer on this motion) failed to adequately represent them and defend the action as instructed. The Defendant claims that, but for the negligence of its solicitor, it had a valid defence to the Plaintiff’s action.
[3] The Plaintiff opposes the relief sought and takes the position that the Default Order and the Default Judgment should stand. The Plaintiff states that the factors relevant to a motion to set aside a default judgment militate against doing so and particularly, the Defendant’s defence to the action simply has no air of reality to it.
The Facts:
The Plaintiff’s Employment and Termination:
[4] The Defendant is a locally owned and operated home, automotive and marine paint and décor business. The Defendant sells paint, wallpaper and window coverings, and offers interior design services to assist customers with their choices.
[5] The Plaintiff is an interior decorator. She was hired by the Defendant on August 22, 2014 to provide interior design services to the Defendant’s customers. The Defendant states that the Plaintiff’s job description required her to assist customers with in-store, in-home and office consultations, offer exemplary customer service to the Defendant’s clients and to sell the Defendant’s products.
[6] The Defendant terminated the Plaintiff’s employment alleging cause. The termination letter was dated December 22, 2016 but was not provided to the Plaintiff by Brent Dubinsky, co-owner/operator of the Defendant until December 28, 2016.
[7] The letter followed incidents that occurred at the Defendant’s store on December 22. The evidence of the parties offers different versions of the events that culminated in the Plaintiff’s termination.
[8] The Defendant claims that the Plaintiff approached Mr. Dubinsky early in the day and asked that he lay her off temporarily. The request was refused and the Plaintiff became visibly upset. She is then alleged to have been rude and confrontational to another senior employee, in the presence of customers. The situation is alleged to have escalated to the point that other coworkers felt the need to intervene, but this caused the Plaintiff to become more irate in the presence of customers. Mr. Dubinsky alleges that when the Plaintiff was confronted about her behaviour she indicated that she could no longer work for the Defendant. Mr. Dubinsky suggested that she leave and take some time off over the Christmas holidays. Mr. Dubinsky further alleges that the Plaintiff’s husband subsequently attended at the Defendant’s premises to collect and remove all of her personal belongings. Mr. Dubinsky states that he assumed the Plaintiff was resigning.
[9] The Defendant further alleges that following this incident Mr. Dubinsky questioned other employees about what had transpired. After discussing this incident and taking into consideration previous incidents, the Defendant decided that termination of the Plaintiff’s employment was warranted. While Mr. Dubinsky states he believed the Plaintiff to have already resigned, he has given evidence that the Plaintiff had left the premises on three separate prior occasions threatening resignation but then subsequently returned. The Defendant provided the termination letter to ensure that there was no misunderstanding that the Plaintiff was not to return.
[10] The Plaintiff describes the breakdown of her employment relationship with the Defendant very differently. She states that she was the victim of ongoing bullying, ridicule and harassment from another senior employee at the Defendant’s store. She alleges that this behaviour escalated after disclosed her ongoing struggles with depression to another employee. Despite this, she performed her duties appropriately and even received recognition for her excellent job performance. She denies ever having lost her temper or yelled in front of customers. She alleges she was never reprimanded for any such behaviour as the Defendant alleges, and that all that she ever did was stand up for herself when being bullied. She further alleges that despite having been made aware of the bullying behaviour of other employees, the Defendant did nothing to correct the situation.
[11] The Plaintiff suggests that the events of December 22, 2016 were the “straw that broke the camel’s back.” She had been subjected to bullying behaviour in the days and weeks leading up to December 22 and was extremely unhappy with her work environment. After a difficult exchange with another employee that the Plaintiff describes as “embarrassing and unprofessional”, she approached Mr. Dubinsky and asked him to lay her off. She described herself as being distressed when she approached Mr. Dubinsky and he suggested she take the rest of the day off and enjoy the holiday break. She denies that her Husband stopped in on December 24, 2016 to collect all of her belongings, but rather to collect a few needed items and to drop off a Christmas gift to another employee. The next thing she knew, she received the termination letter on December 28, 2016 and was shocked.
This Proceeding:
[12] A demand letter was sent to the Defendant by counsel for the Plaintiff in or about January 2017. After having received no response, this action was commenced on March 7, 2017 and served on the Defendant on March 10, 2017.
[13] The Defendant acknowledges having received the demand letter in January 2017 and having been served with the Statement of Claim in March 2017. Upon receipt of the demand letter Mr. Dubinsky states that he immediately called the Defendant’s lawyer, Mr. David Dubinsky (the “lawyer”) to deal with the matter on its behalf. Mr. David Dubinsky is related to Mr. Brent Dubinsky and had handled the corporation’s affairs successfully in the past. Mr. Brent Dubinsky indicates that he had discussions with the lawyer, including options for an amicable resolution. He believed that the lawyer was acting on those instructions to pursue a resolution. He was subsequently served with the Statement of Claim.
[14] Mr. Dubinsky indicates that he immediately provided the Statement of Claim to the lawyer. He also provided the information necessary to respond to the claim. He was assured by the lawyer that the matter would be handled and had no reason to believe otherwise given his past dealings with the lawyer. He heard nothing further for a few months. He sent follow-up phone, email and text messages to the lawyer and stopped in his office but still heard nothing. Given the past relationship, he was not concerned. He heard nothing until May 30, 2018, when he received a call from the Defendant’s bank account manager who advised that a Notice of Garnishment had been received in the amount of $36,528.84.
[15] In the meantime, on February 13, 2018, there was a hearing of the Social Security Tribunal (the “Tribunal”) with respect to the Plaintiff’s denial of employment insurance benefits. She was originally denied benefits on the basis that she had been terminated for cause. The Defendant had indicated on the Plaintiff’s record of employment that she was dismissed. While the Defendant did not seek to be added as a party to the tribunal proceeding, it did provided some information to the Canada Employment Insurance Commission for the purpose of its original decision to deny benefits. In a decision released on March 8, 2018 the Tribunal concluded that the Plaintiff did not disqualify herself from receipt of benefits by committing misconduct within the meaning of the Employment Insurance Act.
[16] Upon learning of the garnishment the Defendant immediately retained new counsel to investigate the matter. The inaction and failure of the lawyer to represent the Defendant’s interests was then discovered. Immediate steps were taken by the Defendant’s current counsel to obtain the Defendant’s file from the lawyer and to notify the Plaintiff of the intention to bring a motion to set aside the default judgment. The motion was brought, originally returnable June 28, 2018.
Issues:
Whether the Defendant is entitled to an Order setting aside the Default Order and the Default Judgment, as well as the noting in default filed by the Plaintiff?
If so, what conditions, if any, should be imposed?
The Law:
[17] Rule 19.08 of the Rules of Civil Procedure permits the setting aside or variation by the Court of a judgment obtained against a Defendant who has been noted in default.
[18] In deciding a motion to set aside a default judgment, the Court is tasked with considering the individual circumstances of each case in determining whether the interests of justice favour the granting of the order. In making this determination, the following factors should be considered:
Whether the motion was brought promptly after the defendant learned of the default judgment;
Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
Whether facts establish that the defendant has an arguable defence on the merits;
The potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and
The effect of any order the court might make on the overall integrity of the administration of justice.
Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at paras. 47-50.
Analysis:
[19] The positions of the parties may be summarized as follows:
- The Defendant:
The Defendant takes the position that it satisfies the applicable legal and statutory test to be entitled to relief. It argues that it has an arguable defence on the merits and should not be placed in jeopardy because of the neglect and inaction of its previous lawyer. It has acted expeditiously since learning of this inaction and there is no prejudice to the Plaintiff in granting the relief sought.
- The Plaintiff:
The Plaintiff takes the position that the Defendant does not satisfy the applicable test. While it is acknowledged that the Defendant acted expeditiously upon learning of the default, the Plaintiff argues:
a. there is no meritorious defence;
b. there is no reasonable explanation for the default;
c. there is prejudice to the Plaintiff; and
d. there will be a negative impact on the administration of justice if the relief is granted.
[20] Turning to the disputed factors:
a. Whether there is a meritorious defence?
[21] The Plaintiff takes the position that even if all of the evidence in Mr. Dubinsky’s affidavit were accepted as true, the Defendant has failed to adduce sufficient evidence to demonstrate an arguable case for just cause. The Plaintiff argues that even though Mr. Dubinsky now claims that there were serious issues with the Plaintiff’s conduct, there is no evidence of any written warning issued and in fact, on the date of her termination, Mr. Dubinsky had told the Plaintiff that she had opportunities to grow. Moreover, the Defendant has not put its best foot forward by obtaining evidence from other employees who were alleged to have been involved in disputes with the Plaintiff; instead, it relies largely on hearsay evidence.
[22] The Defendant, on the other hand, asserts that there are arguable issues as to the following:
Whether in fact the Plaintiff resigned; and
If the Plaintiff did not resign, whether there was just cause given that the Plaintiff’s conduct was inconsistent with the express or implied conditions of service in that the employer could no longer trust the employee to act in an appropriate manner.
[23] In determining this issue the Court is to take a “good hard look at the merits” of the case and assess whether the Defendant has established an arguable defence. The Court is not to make assessments of credibility or adjudicate the merits but rather consider whether there is sufficient evidence to establish that there is a triable issue. HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp. 2008 ONCA 894, 2008 CarswellOnt 7956 at para. 28.
[24] I agree with the Plaintiff that there are some concerns with respect to the Defendant’s evidence. I disagree with the Defendant’s assertion that the Plaintiff had a responsibility to elicit further and better evidence from the Defendant through cross-examination or otherwise if she felt that the evidence was deficient. A moving party bears the onus of putting forward sufficient evidence to demonstrate the merits of its defence. The hurdle is not particularly high. However, as Dunphy J. stated in Marina Bay Sands Ptd. Ltd. v. Tu, 2015 ONSC 5011 at para. 4, hearsay statements and carefully limited statements will not cut it. That is the nature of much of the Defendant’s evidence with respect to the issue of just cause.
[25] The Defendant’s evidence is that there were ongoing issues with respect to the Plaintiff’s conduct towards other employees in the presence of customers and otherwise and that the events of December 22 were simply the final straw. The Defendant further takes the position that the Plaintiff was often insubordinate, absent from work without explanation, disruptive to the work environment and that she was warned on many occasions but did not correct her behaviour. The Defendant denies that the Plaintiff made prior complaints related to workplace harassment other than two minor issues that she discussed with Mr. Dubinsky.
[26] The Defendant relies exclusively on the evidence of Mr. Dubinsky. It is not always clear in Mr. Dubinsky’s affidavit as to what he observed himself and what became known to him through information from other employees. More significantly, there are no details as to the dates or other particulars of the Plaintiff’s alleged misconduct leading up to the termination of her employment. There are no dates or other particulars of the alleged warnings that were given to the Plaintiff, even if they were merely oral warnings.
[27] Fortunately there is some additional evidence in the Tribunal decision that is included in the Plaintiff’s motion record of the facts giving rise to the Defendant’s defence of resignation and just cause. In this decision, at paragraph 16, the Plaintiff acknowledges having had a discussion with her manager about the possibility of her being terminated for yelling after an incident she had in which she had run out of gas. She acknowledged that her behaviour was unprofessional. When it was put to her that there were alleged to have been multiple incidents of her yelling at co-workers the Plaintiff replied that “her co-workers had yelled at her first”. She further confirmed that on December 22, 2016 she yelled at her co-worker but only after he threatened her.
[28] With respect to the issue of resignation, it is noted that the Tribunal decision references the Plaintiff having been dismissed. This is how the Defendant completed the Record of Employment and not on the basis of resignation. Overall, based on the evidence currently before me, the Defendant’s claim of just cause and that the Plaintiff resigned are dubious. Having said this, I cannot say that there is not an arguable case with respect to the issue of cause.
[29] I also find that the Defendant does have an arguable case on the merits with respect to damages. Particularly in relation to the claim for punitive damages, the Defendant’s evidence does establish sufficient evidence to conclude that there is an arguable case with respect to whether or not the Plaintiff was harassed in the workplace and therefore whether there was malicious, oppressive or high-handed conduct that must be deterred through the award of punitive damages.
[30] Similarly, it could be said that there is an arguable case with respect to the award of $20,000.00 for aggravated damages for the manner in which the Defendant terminated the Plaintiff’s employment. While based on the affidavit evidence currently before me, I have expressed doubt as to the Defendant’s ability to establish that the Plaintiff resigned from her employment, the discussion that took place between the Plaintiff and Mr. Dubinsky on December 22, 2016 and the having the Defendant’s evidence as to the Plaintiff’s husband’s subsequent attendance at the workplace could impact the award of aggravated damages.
[31] I therefore find that the Defendant has a meritorious defence.
b. Whether there is a plausible excuse or explanation for the defendant’s default?
[32] The explanation of the Defendant is simple; it relied upon the lawyer to take all reasonable and necessary steps to try to resolve the matter and to protect the Defendant’s interests in the litigation. The Defendant had a long-term, dependable relationship with the lawyer and also was not sophisticated in litigation matters.
[33] The Plaintiff does not accept this explanation. The Plaintiff alleges that it is neither reasonable nor plausible that Mr. Dubinsky would take no action whatsoever when his calls, email and text messages and attempts to speak with the lawyer in person were disregarded. With respect, I disagree. While normally one would think that a lawyer’s failure to respond to a client’s inquiries would be sufficient cause for concern for the client to take further action, in this case, the relationship between the Defendant and the lawyer was not only a long standing one in which considerable trust had been built, it was also a family relationship. It is plausible that the nature of the relationship between the Defendant and the lawyer, combined with the Defendant’s lack of sophistication in litigation matters contributed to Mr. Dubinsky’s belief that the lawyer was taking all necessary steps to protect its interests despite his failure to respond to Mr. Dubinsky’s inquiries.
c. Potential prejudice to each party and overall effect on the integrity of the administration of justice.
[34] The parties dealt with these two factors jointly in their submissions, and I will similarly do so here in my reasons.
[35] The Defendant argues that there is no prejudice to the Plaintiff that cannot be overcome with an aggressive litigation schedule. The Defendant submits that at this point the parties probably would have been lucky to have had affidavits of documents delivered and perhaps discoveries scheduled; the action was only commenced in April 2017. There is no delay that has resulted in prejudice by virtue of the length of the delay in disposing with the matter or deterioration of the Plaintiff’s position that may be caused by circumstances such as witnesses that are no longer available.
[36] On the contrary, the Defendant submits that the Plaintiff is in a better position than she may have otherwise been in had the action been defended in the normal course. Specifically the Defendant states that the Plaintiff has gathered her medical and other evidence in support of liability and damages, which was presented before Justice Newton at the undefended trial that occurred on November 17 and 20, 2017. The Plaintiff submits that an aggressive litigation schedule can overcome any concerns with respect to delay in proceeding with the litigation.
[37] Furthermore, the Defendant claims that the Plaintiff has the benefit of having security for her claim in that a notice of garnishment has resulted in the judgment amount being collected and is currently held in trust by the Plaintiff’s lawyer. The parties have agreed that the full amount collected may remain in trust pending a final resolution of the action. The Defendant argues that very few Plaintiffs have the benefit of having any potential judgment secured in this method and that this is in fact an advantage to the Plaintiff arising out of the unfortunate circumstances of this case.
[38] On the other hand, the Defendant claims that it will be severely prejudiced if the requested relief is not granted. Specifically, the Defendant alleges that it will be deprived of the ability to properly put forward its legitimate defence to the claim through no fault of its own, but solely as a result of the negligence of its lawyer. The Defendant takes the position that this will negatively impact the overall integrity of the administration of justice.
[39] The Plaintiff argues that she will suffer prejudice in that she will be forced to “begin the proceedings from scratch” and relive the ordeal of her termination as she proceeds with the litigation. The Plaintiff alleges that the Defendant’s actions in terminating her employment exacerbated her depression that she struggled to overcome; reliving those circumstances through the litigation process will only continue to exacerbate her condition.
[40] I am sympathetic to Plaintiff’s plight. As will be discussed in greater detail below, the Plaintiff and her counsel have conducted themselves appropriately throughout this litigation. She obtained a judgment that resolved the action after having already given viva voce evidence at an uncontested trial, which for most people is a stressful experience in of itself. Pursuant to a Notice of Garnishment her lawyers hold in trust the funds necessary to satisfy her judgment. She felt that this chapter could be closed.
[41] The Plaintiff relies on Marché D’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Limited, 2007 ONCA 695 for the principle that when the lawyer’s conduct amounts to negligence and exposes the lawyer to liability to the client, refusing an indulgence such as setting aside a default judgment will not deny the client a legal remedy. On the other hand, granting the indulgence could give the impression of the legal system “protecting its own” and bring the administration of justice into disrepute.
[42] The Defendant relies on Halton Community Credit Union Ltd. v. ICL Computers Ltd. (1985), 1 C.P.C. (2d) 24 (O.C.A.) for the proposition that a client should not be placed in jeopardy by reason of the neglect or inattention of its solicitor if appropriate relief may be given to their innocent adversary [pg. 2]. The position of the Defendant emphasizes the rights of litigants to have issues determined on the merits.
[43] In Finlay v. Paassen, 2010 ONCA 204, Laskin, J.A. commented:
[31] Finally, although not necessary to my decision, I wish to comment on two other considerations relied on by the motion judge to deny Finlay relief. The motion judge rested his decision principally on the two-year delay in moving against the registrar’s order, but he also referred to the possibility of a negligence claim against Finlay’s law firm and the “expiration of the limitation period”. Neither consideration, in my view, is germane. The motion judge said:
I also think that the Plaintiff is not necessarily out any remedy and LPIC may, indeed, become involved, although I express no opinion, and certainly no opinion as to whose negligence would be involved as I do not know exactly what took place between Mr. Morris and Mr. Ferro.
In sum, two years of delay took place after the expiration of the limitation period. Taking that into account and also the fact that the Defendants have some entitlement to rely on the finality of the registrar’s order, I think the motion cannot succeed.
[32] A judge who refuses to set aside a dismissal order will naturally be concerned that the effect of the refusal will be to deprive an innocent party of its day in court. To protect the claim of the innocent party, the judge will often raise the possibility of a negligence action against the party’s own lawyer. Although perhaps understandable, I do not find this helpful. Speculation about whether a party has a lawsuit against its own lawyer, or the potential success of that lawsuit, should not inform the court’s analysis of whether the registrar’s dismissal order ought to be set aside.
[44] One of the overriding concerns of the Court in Marché was the finality principle, meaning that at some point the interest of finality must trump the opposite party’s request for an indulgence, particularly when there is another remedy available to the requesting party. In Marché there had been a significant delay not only prior to the dismissal order of the Registrar pursuant to Rule 48.14 of the Rules of Civil Procedure but also following the dismissal. It was approximately six years post dismissal before the matter was back before the Court. In those circumstances, the Court found that excusing a delay of this magnitude, when the requesting party still had a remedy as against their lawyer, would undermine public confidence in the administration of justice. The courts have been clear that the entitlement to finality grows stronger as time passes.
[45] I do not accept Marché for the proposition that in situations in which either a dismissal order, or as here, a default judgment are sought to be set aside that a requesting party should be denied relief simply because they may have a claim against their lawyer. Justice Laskin in Finlay was clear on this point. The potential for a claim for negligence against a lawyer is but one consideration in the analysis of prejudice to be balanced against all other factors including finality; it should not form the analysis.
[46] In the case at hand the action was commenced in March 2017 and the Defendant was noted in default on April 18, 2017. This motion was brought approximately 14 months later in June of 2018 and immediately upon the Defendant learning of the default. While I am sympathetic to the Plaintiff’s desire to have this matter concluded, the delay is not inordinate and has not resulted in any prejudice to the Plaintiff that cannot be compensated for by an aggressive litigation timetable that ensures this matter is dealt with expeditiously and without further delay. On the other hand, I find that the Defendant will be prejudiced if it is not permitted to advance its defence, particularly with respect to the issue of damages.
[47] The Plaintiff has, however, been prejudiced in this matter by the expenditure of costs to follow up with the lawyer when a Statement of Defence was not delivered, on the motion for the Default Order and to obtain the Default Judgment. The Plaintiff would not have been put to those costs but for the Defendant’s failure to defend the action. The Defendant must compensate the Plaintiff for these costs to remedy this prejudice. If the parties cannot agree as to this amount, they may make schedule a further appointment before me.
[48] On a final note, the Defendant has also suggested that the Plaintiff took advantage of the inaction of the lawyer and that the interests of justice require this situation to be remedied. The Defendant makes a number of allegations suggesting that the Plaintiff’s counsel did not do enough to follow-up with the lawyer, did not give him enough chances to spur him into action before obtaining the Default Judgment, and did not advise Justice Newton of the lawyer’s involvement. I disagree. I find that there was no inappropriate conduct on the part of the Plaintiff’s lawyer. In moving forward with the litigation the Plaintiff or her counsel was not impatient or sharp in any way. The evidence supports the Plaintiff’s position that it made a number of attempts to follow-up with the lawyer to obtain a response to correspondence and the litigation. The lawyer was notified of the intention to note the Defendant in default but still took no action. The lawyer was provided with a copy of the Order of Justice Fitzpatrick, warned that the Plaintiff would be proceeding to claim additional damages and still took no action. The Plaintiff’s lawyer confirmed in submissions that both Justice Fitzpatrick and Justice Newton were made aware of the lawyer’s involvement and inaction. The Plaintiff and her lawyer at all times acted appropriately in the circumstances.
Order:
[49] For the aforementioned reasons it is hereby ordered that:
The Noting of Default, the Default Order of the Honourable Justice B. Fitzpatrick dated May 23, 2017 and the Default Judgment of the Honourable Justice W.D. Newton dated January 5, 2018 are hereby set aside.
The Defendant shall serve and file its Statement of Defence in this action on or before January 21, 2019. This is greater than the 20 days requested to account for the holiday break this month. If the parties are unable to agree as to an appropriate litigation timetable for all other steps in the proceeding, they shall schedule an appointment before me.
The Defendant shall pay the Plaintiff’s substantial indemnity costs associated following up with the lawyer when a Statement of Defence was not delivered, on the motion for the Default Order and to obtain the Default Judgment as agreed on fixed by the Court.
If the parties are unable to agree as to an appropriate amount of costs payable pursuant to paragraph 3 herein and/or costs of this motion, they shall schedule an appointment before me.
“Original signed by” The Honourable Madam Justice T.J. Nieckarz
Released: December 14, 2018
COURT FILE NO.: CV-17-0132-SR
DATE: 2018-12-14
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Wendy Horner
Plaintiff
- and -
897469 Ontario Inc. o/a Superior Coatings
Defendant
DECISION ON MOTION
Nieckarz J.
Released: December 14, 2018
/lvp