Court File and Parties
Court File No.: CV 57912/18 Date: 20200615 Superior Court of Justice - Ontario
Re: 942268 ONTARIO LIMITED cob SAM VISCA ELECTRIC, Plaintiff And: MANSIONS OF FOREST GLEN INC., FEDERICO PROCOPIO, and ALBERTO VARAJAO, Defendants
Before: The Honourable Justice Robert B. Reid
Counsel: P. Mahoney, Counsel, for the Plaintiff S. Rosen, Counsel, for the Defendants Mansions and Varajao No one appearing for the defendant Procopio
Heard: June 12, 2020
Decision on Motion
[1] The defendant, Mansions of Forest Glen Inc. (“Forest Glen”), was noted in default. It moves to set aside the noting in default and for time to file a statement of defence. The defendant Alberto Varajao (“Varajao”) has filed a statement of defence and takes no position on the motion. The defendant Federico Procopio has been noted in default and did not appear on the motion. The plaintiff, 942268 Ontario Limited, cob Sam Visca Electric (“Visca”) opposes the relief claimed.
[2] By way of brief background, Visca provided electrical services to Forest Glen and alleges that there is an outstanding unpaid account. Forest Glen is a development company, in which Varajao and Procopio were each 50 percent shareholders.
[3] The claim was commenced on February 8, 2018 and Varajao filed a notice of intent to defend on March 2, 2018. Visca’s counsel was advised that Forest Glen was deadlocked as a result of a shareholder dispute and that its principals were involved in arbitration to resolve the matter. A waiver of defence was given by Visca under the circumstances. Procopio and Varajao had counsel who communicated with counsel for Visca. Forest Glen had no counsel.
[4] Counsel for Visca wrote to counsel for Procopio requiring a statement of defence in July 2018. Counsel for Procopio replied that neither principal of Forest Glen had authority to act for it, and that Visca’s counsel was to proceed as he wished. Both letters were copied to counsel for Varajao. Procopio and Forest Glen were noted in default on September 26, 2018.
[5] No steps have been taken by Visca further to the noting in default.
[6] Pursuant to rule 19.03(1) of the Rules of Civil Procedure, the court has the discretion to set aside a noting in default on such terms as are just.
[7] The court should look at the full context and factual matrix of the case [^1], including (but not limited to) such factors as:
(i) the length of the delay by the defendant; (ii) the reasons for the delay; (iii) the behaviour of the plaintiff and defendant; (iv) the complexity and value of the claim, and (v) prejudice to the plaintiff.
[8] The intention of the defendant to defend at the relevant time is also part of the factual matrix, as is the matter of whether the defendant moved with reasonable dispatch to bring the motion.
[9] Although both counsel made submissions about the strength of the defence available to Forest Glen, I do not find that to be a significant factor in this decision. Forest Glen appears at minimum to have an arguable limitations defence and it is not the role of the court on this motion to act as trier of fact on that issue.
[10] The claim by Visca is for about $200,000 for services rendered, as well as additional damages for breach of trust and punitive damages. As such, the claim is of some financial consequence to the parties.
[11] Michael Varajao, the son of the defendant Varajao, was the affiant on behalf of Forest Glen. He deposed that the company always intended to defend the proceeding. There was no cross-examination on the affidavit. The failure to defend appears to have related to the inability of Forest Glen to appoint counsel which was explained, as Visca was advised prior to the noting in default, by the deadlock of the shareholders. In those circumstances, the lack of an expressed corporate intention to defend at the time is not surprising nor is it indicative of the absence of such intention.
[12] Although 16 months elapsed from the noting in default to the giving of notice to bring this motion, the relevant period begins with the time when the default came to the attention of Forest Glen. On that subject, there is a disagreement as between Visca and Forest Glen.
[13] Visca asserts that Forest Glen should have been aware of its default from the date the noting of pleadings closed occurred on September 26, 2018, since counsel for Mr. Varajao (who is now also counsel for Forest Glen) was copied on the letters to and from counsel for Procopio in July 2018 when a defence was demanded from Procopio and to which Procopio’s counsel responded that he did not represent Forest Glen and that Visca could proceed as he wished.
[14] Forest Glen submits that it received no communications about the need for a defence. There was no correspondence directed to it. Correspondence to counsel for Varajao from Visca in late January 2019 advised only of the noting of Procopio in default, with no refence to Forest Glen. It was not until counsel for Visca wrote to counsel for Varajao on January 16, 2020 that reference was made to the noting in default of Forest Glen. Following that notice, Forest Glen acted expeditiously to move to set aside the noting of default.
[15] While it may be that counsel for Varajao, who became counsel for Forest Glen, should have known that default proceedings were impending after being copied on letters to and from counsel for Procopio in July 2018, there was no specific notice to Forest Glen. Visca assumed that Forest Glen was indirectly advised about the impending default though Procopio, on the assumption that noting in default of the latter would be accompanied by noting in default of the former.
[16] In any event, there was no communication to Forest Glen advising that it had been noted in default. I conclude that the request to set aside the noting in default has been made in a timely way, or, put another way, that the period of delay was minimal and reasonable.
[17] The general principle underlying the Rules as set out in rule 1.04 is that the rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. In this case, the plaintiff has not sought a default judgment or taken any other proceedings against Forest Glen since noting it in default. The action has not proceeded beyond the filing of the statement of defence by Varajao. There will be no prejudice to the plaintiff that cannot be compensated by costs if Forest Glen is allowed to defend.
[18] Based on the lack of prejudice to Visca, the lack of direct notice of the noting in default to Forest Glen, the stated continuing intention of Forest Glen to defend, and its timely response once notice of the default was given, the motion is granted. The noting in default is set aside and Forest Glen will have 30 days from this date to file a statement of defence or such other pleadings as it deems advisable.
[19] The parties requested an opportunity to make written costs submissions. I encourage them to resolve the issue of costs of the motion consensually. In the event that they are not able to do so, I am prepared to receive written submissions according to the following timetable:
- Forest Glen is to serve the plaintiff with written costs submissions, maximum three pages, and a bill of costs on or before June 29, 2020.
- The plaintiff is to serve Forest Glen with written costs submissions, maximum three pages, and a bill of costs on or before July 13, 2020.
- Forest Glen is to serve the plaintiff with any responding submissions on or before July 20, 2020.
[20] All submissions are to be filed with the court no later than July 24, 2020. If submissions are not received by that date, or by any agreed extension, the matter of costs will be deemed settled.
Reid J. Date: June 15, 2020