BRACEBRIDGE COURT FILE NO.: CV-19-118-00
DATE: 20191025
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Gerald Terence Black, Plaintiff (Responding Party)
AND:
Robert Todd Xavier Hutton aka Todd Hutton, Iris Rosanne Hutton, Mark Andrew Hutton, 1337878 Ontario Inc., 1637737 Ontario Inc., Kelly Lawless and Freedom Realty Inc., Defendants (Moving Parties – excluding Lawless and Freedom Realty)
BEFORE: Justice V. Christie
COUNSEL: D. Spiller, Counsel, for the Plaintiff (Responding Party)
C. Valiquette, Counsel, for the Defendants Robert Todd Xavier Hutton aka Todd Hutton, Iris Rosanne Hutton, Mark Andrew Hutton, 1337878 Ontario Inc., 1637737 Ontario Inc. (Moving Parties)
HEARD: October 22, 2019
ENDORSEMENT
[1] This action arises as a result of the plaintiff’s purchase of a vacant building lot in March 2018. The plaintiff claims, in relation to this purchase, that there was intentional fraudulent misrepresentation and bad faith.
[2] The moving party defendants, the Hutton defendants, 1337878 Ontario Inc., and 1637737 Ontario Inc., move to set aside a noting in default and default judgment which occurred on September 4, 2019 and September 9, 2019 respectively.
Brief History
[3] On August 14, 2019, the plaintiff served the moving party defendants with the Statement of Claim that was issued on the same day.
[4] On August 27, 2019, a document entitled “Notice of Intent to Defend” was faxed to counsel for the plaintiff at approximately 11:10 a.m. (according to the transmission report). Several things are noted about the document:
The style of cause did not include 1637737 Ontario Inc.;
The defendant, Freedom Realty, was misspelled as “Freedon Realty”.
The parties were incorrectly identified as “applicant” and “respondents” instead of “plaintiff” and “defendants”;
The notice was incorrectly addressed to counsel’s Toronto office instead of the Barrie office as indicated on the statement of claim.
[5] On September 4, 2019, the plaintiff attended the court office and was advised that the moving party defendants, the Hutton defendants and corporations, had not filed either a statement of defence or notice of intention to defend.
[6] The plaintiff requisitioned to note the moving party defendants in default, which was done on September 4, 2019. With respect to the other defendants, Kelly Lawless and Freedom Realty Inc., a notice of intent to defend was filed and stamped with the court on September 3, 2019. Therefore, no enforcement proceedings were taken with respect to those defendants.
[7] On the same day, September 4, 2019, the plaintiff submitted a requisition for default judgment. However, due to some lack of clarity regarding whether this judgment was for liquidated amounts, the matter was to be referred to a judge.
[8] On September 5, 2019, counsel for the moving party defendants sent a fax to counsel for the plaintiff at 4:38 p.m., which stated as follows:
I request an indulgence to file my client’s defence late so that I may have adequate time to investigate your client’s claims and prepare a response. As the facts involved go back 38 years, it will take some time for me to review the details involved in the claim, and I am away in mid-September. I anticipate we should have a defence prepared in October.
By that time, the moving party defendants had been noted in default, however, they would have been unaware of that fact.
[9] On September 6, 2019, a law clerk employed by Falls Group, the law firm representing the moving party defendants, attended the court office to file the Notice of Intent to Defend, and the Affidavit of Service. The clerk had forgotten to file it earlier that week as instructed. The filing of the notice was not accepted.
[10] Also on September 6, 2019, the plaintiff resubmitted a clean copy of the request for default judgment against the moving party defendants.
[11] In response to the September 5, 2019 letter from counsel for the moving party defendants, on September 6, 2019, counsel for the plaintiff wrote:
In regards to your letter dated September 5, 2019, we are instructed not to grant any extensions in this matter based upon the urgencies which are set out in the statement of claim.
The plaintiff reserves all rights to proceed under the rules in respect of default proceedings.
We trust your clients will be governed accordingly.
[12] Counsel for the moving party defendants responded on the same day, again insisting that she needed until October to file a defence and that she did not believe the matter was urgent. The letter stated:
In response to your letter of today’s date, there are no urgent issues at stake in this case, which appears to be a frivolous matter concerning a delayed building permit, an issue which was resolved prior to your client filing his claim.
As advised previously, we expect that we will require until October to fully investigate and respond to the facts in your client’s claim, which stretch back 38 years and involve numerous parties.
Should you take any steps to note my clients in default, we will move to have the default immediately set aside with costs.
By this point, the moving party defendants had already been noted in default and the plaintiff had sought default judgment, however, the moving party defendants were not advised or aware of that fact.
[13] Default judgment was granted on September 9, 2019. It was ordered that the moving party defendants pay to the plaintiff the sum of $94,577.42 and the sum of $3296.00 plus applicable HST for the costs of the action.
[14] On September 11, 2019, the moving party defendants, still unaware that they had been noted in default or that default judgment had been obtained, forwarded a Statement of Defence to counsel for the plaintiff. When they attempted to file that Statement of Defence, they were not permitted to do so, as by this point they had been noted in default and default judgment had been obtained.
[15] After attempting to file the Statement of Defence, and then aware of the noting in default, on the same day, counsel for the moving party defendants wrote to counsel for the plaintiff. The letter stated as follows:
Although he received my client’s Notice of Intent to Defend and other ongoing correspondence, your client has noted my clients in default so that I am unable to file their defence, which has been completed earlier than 30 days and served to all. Please provide your consent to set aside the noting in default so that my client may file. Should you not consent, my motion to set aside will be with costs.
There was no indication in the letter that counsel for the moving party defendants was aware of the default judgment.
[16] The writ of seizure was filed with the sheriff’s office on September 12, 2019 and was effective on September 13, 2019.
[17] On September 13, 2019, counsel for the moving party defendants attempted to reach counsel for the plaintiff by telephone without success. On that same day, counsel for the plaintiff wrote to counsel for the moving party defendants and stated in part as follows:
Please be advised that our client Gerald Black has instructed that consent will not be granted unless reasonable terms are agreed upon. Unless and until that occurs, the Plaintiff will continue to pursue all enforcement procedures available to him under the rules.
We enclose for reference a copy of Judgment dated September 9, 2019 and Writ of Seizure and Sale dated September 12, 2019.
[18] After learning that the plaintiff would not consent to setting aside the noting in default, on that same day, the moving party defendants served the plaintiff a motion returnable October 7, 2019, requesting that the noting in default be set aside. The moving party defendants claimed that while awaiting the motion date, on September 27, 2019, they discovered that the plaintiff had moved for judgment against them. However, this should have been clear to them from the correspondence dated September 13, 2019 that attached the judgment and writ of seizure.
[19] On September 27, 2019, counsel for the moving party defendants wrote to counsel for the plaintiff outlining the timeline that had occurred and requested that the execution be rescinded. The letter stated in part as follows:
It has come to my attention today that your client has obtained an execution against mine in this matter. I will extend you until 2 pm today to make arrangements to rescind the execution which is affecting a current agreement of purchase and sale, failing which I will file a motion to be heard on October 7 seeking substantial costs against your client.
[20] On that same day, September 27, 2019, the moving party defendants served and filed a new motion, also returnable October 7, 2019, requesting to set aside both the noting in default, as well as the default judgment.
[21] On September 28, 2019, counsel for the plaintiff wrote to counsel for the moving party defendants, taking issue with many of the things stated in the letter of September 27, 2019.
Analysis
[22] In my view, given the facts of this case, it is only fair and just to consolidate the motions brought by the moving party defendants.
[23] At the time they brought the original motion to set aside the noting in default, the defendants claim that they were unaware of the default judgment. Based on the correspondence on September 13, 2019, they should have been aware as the judgment and writ were attached. Regardless of this, there is nothing to suggest any malice or bad faith on the part of the moving party defendants in serving and filing two motions.
[24] The Rules encourage against multiplicity of motions or motions that delay or add to the cost of the proceedings. See Rule 37.16.
[25] Multiple actions or applications can be tried together under the right circumstances. Rule 6.01 states:
(1) Where two or more proceedings are pending in the court and it appears to the court that,
a. They have a question of law or fact in common;
b. The relief claimed in them arises out of the same transaction or occurrence or series of transactions of occurrences; or
c. For any other reason an order ought to be made under this rule,
the court may order that,
d. The proceedings be consolidated, or heard at the same time or one immediately after the other; or
e. Any of the proceedings be,
i. Stayed until after the determination of any other of them, or
ii. Asserted by way of counterclaim in any other of them
[26] Further, section 138 of the Courts of Justice Act states:
As far as possible, multiplicity of legal proceedings shall be
avoided.
[27] There is no question that the two motions in this case, one being a motion to set aside noting in default, the other to set aside the noting in default and the default judgment, must be heard together. Having these two motions heard separately would unduly delay these proceedings and add to the cost for all parties. While the legal test on each motion is different, the factual background is the same. The relief claimed in the two motions arise out of the same transaction. As a matter of fairness for all parties, these motions must be heard together.
[28] The courts have repeatedly stated that the tests to be met to set aside a noting in default and to set aside a default judgment are different. See: Intact Insurance company v. Kisel, 2015 ONCA 205, para. 12.
[29] With respect to setting aside the noting in default, Rule 19.03 provides as follows:
(1) The noting of default may be set aside by the court on such terms as are just.
[30] The court in Intact Insurance stated as follows:
[13] When exercising its discretion to set aside a noting in default, a court should assess “the context and factual situation” of the case: Bardmore, at p. 285. It should particularly consider such factors as the behaviour of the plaintiff and the defendant; the length of the defendant’s delay; the reasons for the delay; and the complexity and value of the claim. These factors are not exhaustive. See Nobosoft Corp. v. No Borders Inc., 2007 ONCA 444, 225 O.A.C. 36, at para. 3; Flintoff v. von Anhalt, 2010 ONCA 786, [2010] O.J. No. 4963, at para. 7. Some decisions have also considered whether setting aside the noting of default would prejudice a party relying on it: see e.g. Enbridge Gas Distribution Inc. v. 135 Marlee Holdings Inc., [2005] O.J. No. 4327, at para. 8. Only in extreme circumstances, however, should the court require a defendant who has been noted in default to demonstrate an arguable defence on the merits: Bardmore, at p. 285.
[31] First, this court considers the behaviour of the plaintiff and the defendant. While the notice of intent to defend was less than perfect, a notice was sent to the plaintiff on August 27, 2019, 13 days after receiving the statement of claim. This was well within the timelines under the rules. The plaintiff did not contact counsel with respect to any of the errors that they noted, even though the cover letter that accompanied the notice stated, “Should you have any questions, please contact our office.” As a matter of professional courtesy, counsel should have put opposing counsel on notice that these errors existed and that they were taking the position that this did not amount to proper notice at all. There was an attempt to file the notice of intent to defend, however, it was three days late – this was day 23 after receiving the statement of claim. The clerk for the law office, in her affidavit explained that this was an error on her part. However, by this point, without any notice to the moving party defendants, the plaintiff had successfully moved to note them in default. Given that the imperfect notice of intent to defend had been served on the plaintiff by this point, in my view, it was unreasonable to move to note them in default without notice to them.
[32] As to the length of the defendant’s delay, in my view, there has been no real delay. Even the statement of defence has been served on the plaintiff within the 30 days.
[33] With respect to complexity, it would appear that the matter will turn on what the defendants knew at the time the plaintiff purchased the vacant lot and whether they attempted to mislead him in order to make the deal. This litigation will include a consideration of documents that date back 38 years, in order to fully appreciate was known or intended at the time of this transaction in 2018.
[34] As for prejudice, clearly, the moving party defendants will suffer irreparable prejudice, as the matter will be at an end with no opportunity to defend this case. Certainly, the plaintiff is also prejudiced by having to now litigate these matters.
[35] Considering the circumstances of this case and the factors set out above, the noting in default must be set aside.
[36] With respect to the request to set aside the default judgment, Rule 19.08 of the Rules of Civil Procedure provides as follows:
(1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just.
(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge on such terms as are just.
(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the noting of default under rule 19.03.
[37] In Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, [2014] O.J. No. 1197 (C.A.), the Court of Appeal articulated a five-part test:
a. Whether the motion was brought promptly after the defendant learned of the default judgment;
b. Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
c. Whether the facts establish that the defendant has an arguable defence on the merits;
d. 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
e. The effect of any order the court might make on the overall integrity of the administration of justice.
[38] Further, in Mountain View Farms, the court stated at paras. 50 and 51:
[50] These factors are not to be treated as rigid rules; 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.
[51] For instance, the presence of an arguable defence on the merits 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. In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.
[39] There is no question that the motion was brought promptly after the moving party defendants learned of the default judgment. By September 13, 2019, the moving party defendants should have been aware of the default judgment and writ of seizure, given the correspondence from counsel for the plaintiff. On that day, the moving party defendants served a motion to set aside the noting in default. Therefore, less than 30 days after receiving the statement of claim, the first motion was served. By September 16, 2019, that motion was filed. Further, by September 27, 2019, they had also moved to set aside the default judgment. Both motions were returnable October 7, 2019.
[40] The plausible excuse or explanation is that a clerk in the law firm made errors in the notice of intent to defend and in the filing of that notice. The moving party defendants clearly had an intention to defend these proceedings from the outset, however, these errors led to a deadline for filing being missed. Having said that, these errors have not resulted in any delay in these proceedings. The statement of defence has still been served on the plaintiff within the 30-day time frame.
[41] There would appear to be an arguable defence on the merits. In my view, there is nothing improper about this court considering the statement of defence that was filed as part of the motion record attached to an affidavit. This provides some evidence that gives some air of reality to the defence. This is a fairly low bar to meet. Further, the plaintiff’s own affidavit refers to the statement of defence, which provides further evidence to this court as to the air of reality to the defence in this case. The plaintiff argued that he purchased the lot on the understanding and promise that he would be able to build his dream home on this property, as was stated in the listing. The plaintiff takes the position that the defendant had known for many years that the subdivision agreement had never been registered. He claims fraudulent misrepresentation and bad faith. The moving party defendants claim in their statement of defence that this is simply a matter of a delay in building permits. They take the position that, in 2017, while selling Phase 2, it was discovered by them that the Town had failed to register a subdivision agreement, however, by early June 2019, building permits were able to be issued for the Phase 2 lots in the Whispering Pines subdivision where the plaintiff’s lot is located. The defendant takes the position that the lots were sold to various purchasers for future home building without any warrantee on the part of the seller regarding building permit availability, and that agreements of purchase and sale included explicit acknowledgements and conditions with respect to it being the buyer’s responsibility to communicate with the Town about the status of the development and to waive conditions if and when satisfied. There are certainly triable issues in this case.
[42] The prejudice has already been addressed above.
[43] As to the effect of any order the court might make on the overall integrity of the administration of justice, it would seem completely unreasonable not to set aside the noting in default and default judgment in this case for the following summarized reasons:
a. The notice of intent to defend was provided to the plaintiff within the timelines under the rules.
b. The defendants attempted to file the notice to defend on the 23rd day following the service of the statement of claim.
c. Despite communication amongst counsel, the plaintiff attended, without warning, and noted the defendants in default, knowing that a defence would be filed imminently.
d. The plaintiff refused to extend any additional time for the defendants to file their defence, despite the complexities in this case.
e. Even though they were already noted in default, the moving party defendants served their defence on the plaintiff within the 30-day timeline provided under the rules.
f. The defendants were unable to file their defence due to the fact that they had already been noted in default and a default judgement had been obtained.
g. A motion was served on September 13 and filed on September 16, less than one month after the statement of claim was served on the defendants. The motion was returnable October 7, 2019.
[44] In my view, fairness dictates that the default judgment be set aside.
[45] As for the writ of seizure, the moving party defendants have not moved to set this aside, however, their notice of motion does allow for “any further and other Order this Honourable Court deems just.” In the circumstances of this case, it would be completely unreasonable for the court to set aside the noting in default and the default judgement without also setting aside the writ of seizure.
[46] Considering the totality of the circumstances, the moving party defendants demonstrated an intention to defend this claim at a very early stage in the proceedings, within 13 days of receiving the statement of claim. While the notice of intent to defend is less than perfect, it would appear that it did serve its purpose, such that it put the plaintiff on notice that they intended to defend. This is exactly what the notice is meant to do. The plaintiff was served with a statement of defence on September 11, 2019, only 28 days after receiving the statement of claim, after being told by counsel for the plaintiff on September 6, 2019 that no extensions would be given. I note that by this point, the moving party defendants had been noted in default, however, there was no mention of this in the letter from counsel for the plaintiff.
[47] While the rules are meant to be followed and there are timelines in place for a reason, at times, some flexibility in the rules is warranted. Rule 1.04 states:
These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
The court has jurisdiction under this rule and rule 2.03 to relieve against strict compliance with the rules where trial fairness so demands. See: Brandiferri v. Wawanesa Mutual Insurance Co. (2011), 2011 ONSC 3200, 16 C.P.C. (7th) 169, 1 C.C.L.I. (5th) 298 (S.C.J.), additional reasons (2011), 16 C.PC. (7th) 187, 1 C.C.L.I. (5th) 316 (S.C.J.)
[48] As a matter of fairness and justness, this motion is granted, and the noting in default, default judgment and writ of seizure are set aside.
[49] If the parties are unable to agree as to costs of this motion, the court will accept written submissions on costs, which shall be no more than three pages in length, excluding supporting documentation, and which shall be provided to the court office in hard copy or by email no later than November 1, 2019.
Justice V. Christie
Date: October 25, 2019