Court File and Parties

RELEASED: 2019/02/04

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Halimat Sualim v. Gevoni Thomas, Amplify Masonry Ltd. et al.

BEFORE: Master Graham HEARD: January 30, 2019

COUNSEL: D. McGhee for the plaintiff M. Bélanger for the defendants Thomas and Amplify Masonry (moving parties)

REASONS FOR DECISION

(Defendants’ motion to set aside noting of default)

[1] The defendants Gevoni Thomas (“Thomas”) and Amplify Masonry Ltd. (“Amplify”) move to set aside the noting of default against them. For these reasons, I have ordered that the noting of default be set aside.

[2] The history of the action prior to and following the noting of default is as follows:

September 27, 2017: Statement of claim issued.

October 16, 2017 and November 6, 2017: Statement of claim served on Thomas and Amplify respectively.

December 7, 2017: Plaintiff noted Thomas in default.

December 11, 2017: Thomas and Amplify, as well as the defendants William Nopper and Aztech Masonry Inc., retained Miller Thomson LLP to defend them.

December 14, 2017: Plaintiff noted Amplify in default.

December 14, 2017: Lawyer Pietro Palleschi of Miller Thomson first wrote to plaintiff’s counsel to advise of his involvement on behalf of Thomson, Amplify, Nopper and Aztech and to seek an indulgence until January 31, 2018 with respect to delivery of a statement of defence. The moving parties accept that the plaintiff’s requisition to note Thomas and Amplify in default was submitted to the court before plaintiff’s counsel received this letter.

January 4, 2018: Plaintiff’s counsel wrote to counsel at Miller Thomson to provide affidavits of service on Thomas and Amplify, to advise that they were noted in default, and to request that the statement of defence of the other defendants be provided by January 31, 2018. Plaintiff’s counsel acknowledges that this letter was mistakenly sent to another lawyer with a name similar to Mr. Palleschi and that Mr. Palleschi never received it.

January 29, 2018: Lawyer Stephanie De Caria of Miller Thomson wrote to plaintiff’s counsel to state the defendants’ position with respect to issues arising out of the bankruptcy of the defendant Aztech Masonry. Ms. De Caria stated the defendants’ position that the plaintiff’s action should be discontinued as against Aztech and Amplify and should be stayed as against Thomas and Nopper, concluding with a request to plaintiff’s counsel to “Please provide us with written confirmation in this regard”. Plaintiff’s counsel did not respond to this letter.

May 30, 2018: Plaintiff’s counsel appeared before Master Muir to seek an order for substituted service of the statement of claim on the defendants William Nopper and Unna Fuller-Fletcher. Master Muir required that the motion with respect to Nopper be brought on notice to Miller Thomson because the motion record contained Ms. De Caria’s January 29, 2018 letter.

May 30, 2018: Plaintiff’s counsel served the motion record (for a motion returnable on June 27, 2018) on Miller Thomson by mailing it to Ms. De Caria. The motion record contained plaintiff’s counsel’s letter of January 4, 2018 informing Miller Thomson that the defendants Thomas and Amplify had been noted in default. This was the first occasion on which this letter was provided to Miller Thomson.

June 25, 2018: Lawyer Stephanie Garraway of Miller Thomson informed plaintiff’s counsel by email that she had only recently been assigned carriage of the matter and that she was prepared to consent to the substituted service order with respect to Nopper. However, on June 26, 2018, Ms. Garraway informed plaintiff’s counsel that it had come to her attention that Miller Thomson did not represent Nopper so they could not consent to any order or to accept service on his behalf. The crucial point with respect this evidence is that Ms. Garraway on behalf of Thomas and Amplify knew or ought to have known that Thomas and Amplify had been noted in default when she reviewed the plaintiff’s motion record on or shortly before June 25, 2018.

July 23, 2018: Ms. Garraway obtained a case history from the court that confirmed the noting of default of Thomas on December 7, 2017 and of Amplify on December 14, 2017.

July 26, 2018: Mr. Thomas personally sent an email to plaintiff’s counsel stating that he had been made aware that there is “a default judgment” [sic] against him and requesting a copy of the judgment. Plaintiff’s counsel did not reply.

August 7, 2018: Ms. Garraway wrote to plaintiff’s counsel to state that she had recently been advised by some of the defendants that Thomas and Amplify had been noted in default and she requested copies of any documents filed with the court. She also stated that “I would like to discuss having the noting in default voluntarily set aside forthwith” and that “as you know, if forced to proceed on a motion, costs will be unnecessarily increased in this matter”. Plaintiff’s counsel did not reply to this letter.

Late August, 2018: Miller Thomson reported the matter to LawPRO, which appointed counsel to investigate the matter.

September 5, 2018: Miller Thomson ended its representation of the defendants.

October 19, 2018 – November 28, 2018: Counsel for the defendants on this motion, retained by LawPRO, and plaintiff’s counsel exchanged correspondence with respect to the circumstances leading to the noting of default, setting out the events summarized above, and stating their respective views on the applicable law with respect to setting aside the noting of default.

November 29, 2018: The moving defendants Thomas and Amplify served their motion record for this motion to set aside the noting of default.

Applicable rule and case law

[3] The defendants move under rule 19.03(1):

19.03(1) The noting of default may be set aside by the court on such terms as are just.

[4] The law with respect to when the court should set aside the noting in default of a defendant is summarized in Intact Insurance Company v. Kisel, 2015 ONCA 205 (para. 13):

13 When exercising its discretion to set aside a noting of default, a court should assess “the context and factual situation” of the case: Metropolitan Toronto Condominium Corporation No. 706 v. Bardmore Developments Ltd. (1991), 3 O.R. (3d) 274 (C.A.) 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 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.

[5] The court in Intact v. Kisel also states (at para. 9):

9 . . . [T]he test for setting aside a default judgment and the test for setting aside a noting of default differ.

[6] This passage is essentially a reference to the fact that the test for setting aside a default judgment includes a consideration of whether the defendant has an arguable defence on the merits, which is not typically required on a motion to set aside a noting of default. As stated at the end of para. 13 of Intact v. Kisel, on a motion to set aside a noting of default, an arguable defence on the merits would only be required “in extreme circumstances”.

[7] In Bardmore, supra., McKinlay J. A. cited with approval this statement by Granger J. in Hart v. Kowall, 1990 CanLII 6700 (ON SC), 75 O.R. (2d) 306 (at p. 308):

. . .[A] defendant within the prescribed time for filing a statement of defence can always serve and file a statement of defence regardless of the merits of his defence. In my view if the omission to file a statement of defence within the required time can be explained, the defendant should not be in a different position than a defendant who serves and files a statement of defence within the prescribed time. The plaintiff’s proper course of action if there is a lack of merit in the statement of defence is to move for summary judgment. . . .

[8] With respect to motions to set aside noting of default generally, the Court of Appeal in Nobosoft, supra (at para. 7) cited with approval the following passage from the decision of Molloy J. in McNeill Electronics Ltd. v. American Sensors Electronics Inc. (1996), 5 C.P.C. (4th) 266 (Ont. Gen. Div.)(at para. 2):

Motions to extend the time for delivery of pleadings and to relieve against defaults are frequently made and are typically granted on an almost routine basis. Usually opposing counsel will consent to such relief as a matter of professional courtesy. Where there is opposition to a motion of this kind, it is usually related to additional terms which are sought as a condition to the indulgence being granted or to issues of costs. . . . It is not in the interests of justice to strike pleadings or grant judgments based solely on technical defaults. Rather, the Court will always strive to see that issues between litigants are resolved on their merits whenever that can be done with fairness to the parties.

[9] On the issue of how the court should consider the errors or omissions of a lawyer that has in some way compromised a party’s position, the following passage from Schmidt v. Yacoub, 2017 ONSC 6305 (at para. 50) is applicable:

50 . . . Courts are generally cautious about visiting the sins of a solicitor upon a client in situations where an indulgence is requested to avoid a default.

[10] In Finlay v. Van Paassen, 2010 ONCA 294 (at para. 33), the Court of Appeal addressed the same issue:

33 In my view, on a motion to set aside a dismissal order, the court should be concerned primarily with the rights of litigants, not with the conduct of counsel. As Sharpe J.A. noted in Marché D’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd., 2007 ONCA 695, [2007] O.J. No. 3872 (C.A.), “The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor”.

[11] The court in Finlay was considering the setting aside of a registrar’s dismissal order, rather than the setting aside of a noting of default. However, the common issue is whether an error or delay by a lawyer should deprive the party itself of an adjudication of an action on the merits.

Application of the law

[12] Based on Intact v. Kisel, supra, the factors to be considered on this motion are as follows:

1. The conduct of the parties.

2. The length of the delay and reasons for the delay.

3. The complexity and value of the claim.

4. Whether setting aside the noting in default would prejudice the plaintiff.

[13] The conduct of the parties: Consideration of this factor is directed primarily to whether the defendants consistently displayed an intention to defend the action but also to whether the plaintiff contributed to any delay.

[14] Based on the dates of service of the statement of claim set out above, the time for delivery of Thomas’ and Amplify’s statements of defence expired on November 5, 2017 and November 26, 2017 respectively. Although they did not retain counsel until December 11, 2017, they did so during the same week in which they were noted in default and before they were aware of the fact. Their counsel’s letter of December 14, 2017 demonstrates a clear intention to defend the action.

[15] It is common ground that the defendants’ counsel did not receive plaintiff’s counsel’s letter of January 4, 2018 so no lack of intention to defend can be inferred from a failure to respond. The defendants’ intention to defend the action was reiterated in Ms. De Caria’s letter of January 29, 2018, in which she set out the defendants’ position and asked for confirmation that the plaintiff would not require a defence at that time. This letter warranted a reply, particularly given that defendants’ counsel was clearly not aware that Thomas and Amplify were noted in default, but plaintiffs’ counsel did not respond to it nor does he explain his failure to do so.

[16] Neither counsel took any steps in the action until May 30, 2018 when plaintiff’s counsel brought the substituted service motion before Master Muir and then served the motion on Miller Thomson. The fact that Ms. Garraway of Miller Thomson responded to the motion indicates that that firm was still involved in the matter on behalf of the defendants.

[17] I accept that the fact that the motion record for the substituted service motion contained plaintiff’s counsel’s January 4, 2018 letter stating that Thomas and Amplify had been noted in default should have been sufficient to notify the defendants’ lawyers of the fact. Given that Ms. Garraway stated in correspondence of June 25, 2018 that she was recently assigned carriage of the matter and had reviewed the motion record, I accept that she knew or ought to have known of the noting in default as of the date of that correspondence. Although she did not take immediate action, on July 23, 2018, less than a month later, she did see fit to obtain a case history which suggests that at that point, she knew of the noting in default.

[18] The first indication that either Thomas or Amplify were aware of the noting in default was Thomas’ email to plaintiff’s counsel on July 26, 2018, stating that he had become aware of a “default judgment” against him and asking for a copy. This request is consistent with Thomas taking an interest in the defence of the action. I disagree with the contention of plaintiff’s counsel that this communication did not warrant a response. At the very least, plaintiff’s counsel should have corresponded with Ms. Garraway to advise that he had been contact directly by Thomas (who until that point had been represented by Miller Thomson), and informed her of the content of Thomas’ email.

[19] Shortly after July 26, 2018, on August 7, 2018, Ms. Garraway contacted plaintiff’s counsel on behalf of Thomas and Amplify, requesting confirmation that they had been noted in default, and seeking his consent to set it aside. This communication is a further indication of the moving defendants’ ongoing intention to defend the action. It also indicates that Thomas’ July 26, 2018 email to plaintiff’s counsel was consistent with an intention to defend. Once again, although this correspondence sought a reply from plaintiff’s counsel and Ms. Garraway concluded it with the words “I look forward to hearing from you”, plaintiff’s counsel did not reply.

[20] The next communication on behalf of the moving defendants was from their counsel on this motion, who asked the plaintiff’s consent to set aside the noting of default.

[21] Although the defendants Thomas and Amplify did not retain counsel until shortly after their statements of defence were due, any delay in this respect was not lengthy and their counsel’s initial letter of December 14, 2017 unequivocally expressed an intention to defend the action. The second letter from Miller Thomson on January 29, 2018 reiterated this intention. After the defendants’ counsel finally did learn that they had been noted in default, in late June, 2018, the defendant Thomas wrote to plaintiff’s counsel, which is again consistent with an intention to defend. Finally, the defendants’ counsel’s letter of August 7, 2018 seeking plaintiff’s counsel’s consent to set aside the noting of default is further evidence of an ongoing intention to defend the action.

[22] I do not find any conduct on the part of the defendants, who have essentially displayed an intention to defend the action throughout, to be sufficient to deprive them of the ability to defend the action. Plaintiff’s counsel submits that the court’s review of the behaviour of the parties should include their behaviour in relation to the events giving rise to the litigation, but any such behaviour would go to the merits of the action, on which I have commented below.

[23] The most significant aspect of the plaintiff’s conduct with respect to the motion is her counsel’s failure to reply to defendant’s counsel’s letter of January 29, 2018, to Mr. Thomas’ email of July 26, 2018, and to Ms. Garraway’s email of August 7, 2018. All of this correspondence warranted a response. I will address this further in considering the length of the delay and the reasons for the delay.

[24] The length of the delay and the reasons for the delay. The delay between when the moving defendants’ statements of defence were due and the first correspondence from their counsel is about 5.5 weeks in the case of Thomas and less than three weeks in the case of Amplify. There was some further delay between Ms. De Caria’s letter of January 29, 2018 and service of the plaintiff’s substituted service motion on May 30, 2018, but much of this delay can be attributed to plaintiff’s counsel’s failure to respond to that letter. There is a delay of another month between when Ms. Garraway likely reviewed the motion record with plaintiff’s counsel’s letter of January 4, 2018 and the emails from Mr. Thomas (July 26, 2018) and Ms. Garraway (August 7, 2018) but first, this is not a lengthy delay and second, the defendants’ right to defend should not be compromised by a delay for which their lawyers were responsible (See Finlay, supra).

[25] The delay between August 7, 2018 and service of the motion record on November 29, 2018 was a consequence of Miller Thomson referring the matter to LawPRO and the subsequent exchange of correspondence between counsel for the defendants on the motion and plaintiff’s counsel.

[26] Although there was initially some relatively brief delay on the part of the defendants in retaining counsel, a greater amount of delay resulted from plaintiff’s counsel’s admittedly innocent error in sending his January 4, 2018 letter to the wrong email address, but more significantly, in failing to respond to Ms. De Caria’s letter of January 29, 2018. Plaintiff’s counsel should have responded to Ms. De Caria’s letter of January 29, 2018 with at least a succinct “I disagree with your position, please defend the action forthwith and by the way, as I told you before, Thomas and Amplify have been noted in default.” If he had done so, the defendants would have known that they had to bring their motion in February, 2018 rather than in June or July. His failure to respond to Ms. Garraway’s August 7, 2018 letter compounded this delay.

[27] In summary, the delay for which the defendants are responsible is not lengthy, and certainly not sufficient to deprive them of their right to an adjudication on the merits. This is particularly the case where the delay arising from plaintiff’s counsel’s unexplained failure to respond to correspondence is longer than that for which the defendants are responsible.

[28] The complexity and value of the claim. I do not consider this to be a significant factor on this motion. If the conduct of the defendants in relation to the defence of the action, and the length of and reasons for the delay, warrant the setting aside of the noting of default, then it should be set aside regardless of the nature of the action.

[29] Prejudice to the plaintiff. The issue is not whether the plaintiff would be prejudiced by the defendants being able to defend the action, but whether as a consequence of the defendants’ failure to defend before being noted in default, or moving more promptly, she took a step to her detriment. In the absence of any evidence of any such prejudice, I can only conclude that there is none.

[30] Finally, it is significant that it was not until June 27, 2018 that the plaintiff obtained her order for substituted service on the defendant Nopper. The fact that the plaintiff was still taking steps to serve Nopper in May and June, 2018 means that she was not in a position to proceed against Thomas and Amplify before then, so she cannot say that she was prejudiced by any delay.

[31] The merits. In addition to the factors considered above, plaintiff’s counsel submitted that the court should consider the defendants’ conduct leading to the commencement of the action and whether they have demonstrated an arguable defence on the merits. I disagree. The Court of Appeal in both Intact v. Kisel and Bardmore Developments, supra stated that “only in extreme circumstances should the court require a defendant who has been noted in default to demonstrate an arguable defence on the merits” [emphasis added]. I accept the comments of Granger J. in Hart v. Kowall, supra, cited with approval in Bardmore, that if the defendants can explain their failure to file a statement of defence within the required time, they should not be in a different position than a defendant who serves and files a statement of defence within the prescribed time.

[32] The “extreme circumstances” contemplated by the Court of Appeal would apply where a defendant is unable to satisfy the other factors but has a defence on the merits that might justify allowing it to defend. Otherwise, if the plaintiff whose noting in default is challenged on procedural grounds seeks a summary disposition of the action on the merits, the appropriate course of action is a summary judgment motion.

[33] In summary, based on my review of the factors identified by the Court of Appeal in Intact v. Kisel, the defendants Thomas and Amplify have shown a sufficiently timely and consistent intention to defend the action, and no prejudice to the plaintiff’s ability to proceed with the action has occurred as a result of any delay. Accordingly, the noting in default of the defendants Gevoni Thomas and Amplify Masonry Ltd. is hereby set aside. They shall deliver a statement of defence by February 28, 2019.

[34] Costs. Counsel have filed costs outlines. As I informed counsel at the conclusion of the hearing, it may be helpful to them to know my preliminary view on costs. Their respective costs outlines include total partial indemnity costs of $3,359.01 for the moving defendants and $17,497.02 for the plaintiff. The defendants were successful on the motion and their proposed costs are so much lower than the plaintiff’s that the plaintiff can hardly suggest that those costs are unreasonable. However, if the plaintiff is ultimately successful on the merits of the action, the defendants should not recover the costs of a motion on a procedural issue. I suggest that a fair disposition of costs would be an award of $3,359.01 payable by the plaintiff to the moving defendants in the cause, i.e. only if the defendants are ultimately successful in achieving a dismissal of the action.

[35] If the parties cannot agree on the disposition of the costs of the motion, they may make written submissions, not to exceed three pages (not including the costs outlines), the moving defendants within 30 days and the plaintiff within 20 days thereafter. I will retain the file for 45 days pending receipt of the defendants’ costs submissions or notification from the parties that they have resolved the issue of costs.

February 4, 2019 MASTER GRAHAM