COURT FILE NO.: CV-17-107-00 DATE: 20200714
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PAUL’S TRANSPORT INC.
Plaintiff
M. Gordon Hearn, for the Plaintiff
- and -
IMMEDIATE LOGISTICS LIMITED, WILLIAM “BILL” O’CONNOR, and CATHERINE ANN O’CONNOR
Defendants
James MacDonald, for the Defendants
HEARD: July 8, 2020 via video conference
REASONS FOR JUDGMENT
MANDHANE J.
INTRODUCTION
[1] The defendants bought a motion to set aside default judgment and noting in default. The plaintiff opposes the motion.
[2] For reasons that follow, I set aside the default judgments dated July 7, 2017 and August 10, 2017, but decline to set aside the noting in default.
FACTS
[3] While the salient facts in this matter remain in dispute, it is neither necessary nor desirable to resolve the factual issues at this stage. I have set out only those facts that are relevant to my disposition.
[4] The plaintiff, Paul’s Transport Inc. (“Paul’s Transport”) is a common carrier for hire providing truck transportation services in the Greater Toronto Area.
[5] Until 2015, the corporate defendant, Immediate Logistics Limited (“Immediate”), was a common carrier and logistics services provider based out of Brampton.
[6] The personal defendants, William O’Connor and Catherine Ann O’Connor (together “the O’Connors”), are the sole directors and/or officers of Immediate. The parties agree that Catherine O’Connor did not play any role whatsoever in the management or operation of Immediate Logistics.
[7] In February 2015, the parties reached a verbal agreement whereby Paul’s Transport would ship goods for Immediate’s clients.
[8] While the specific terms of the verbal agreement are unclear, both parties agree that, broadly speaking, the agreement established a “freight brokerage” arrangement, whereby:
- Immediate was the “freight broker” and would schedule delivery of goods for its existing clients (“shippers”);
- Immediate would dispatch Paul’s Transport to transport the goods and confirm delivery;
- Paul’s Transport would invoice Immediate for carrier services;
- Immediate would then invoice the shippers and receive payment directly; and
- Immediate would then remit payment to Paul’s Transport for carrier services rendered.
[9] There is conflicting evidence as to when the freight brokerage agreement ended (or changed) such that Immediate stopped being responsible for invoicing shippers for carriage services and remitting payment to Paul’s Transport.
[10] Paul’s Transport claims that, sometime after August 2015, Immediate fell into arrears and effectively “disappeared.” It pursued payment from the shippers directly by reissuing Immediate’s unpaid invoices in the shipper’s name. According to Paul’s Transport, this “rebilling” approach resulted in a number of shippers stating that they had already been invoiced by and paid Immediate and would not “pay twice.”
[11] In a Statement of Claim issued on January 11, 2017, Paul’s Transport claimed $100,000 in compensatory damages for unpaid invoices, breach of contract, breach of statutory trust obligation, unjust enrichment, and/or quantum meruit.
[12] Paragraphs 7-11 of the Statement of Claim outline the factual basis for the claim as follows:
The plaintiff, Immediate and Mr. O’Connor entered into a verbal agreement on or about February 15, which was later re-stated in writing on May 1, 2015 and amended on July 17, 2015 (“the Agreement”), whereby Immediate retained the plaintiff to carry various shipments of good for Immediate’s customers within the Greater Toronto Area (“the services”).
The plaintiff provided the Services and fulfilled its contractual mandate to Immediate and/or its customers.
On or about February 2015 to September 2015, the plaintiff performed the Services for a variety of Immediate’s customers but was never paid by Immediate or Mr. O’Connor for the Services.
In an attempt to mitigate its damages, the plaintiff issued invoices directly to Immediate’s customers for freight charges respecting the Services (the “Invoices”). The plaintiff has confirmation from Immediate’s customers that they have already paid Immediate for the Services which are the subject of the Invoices. Although Immediate has been paid by its customers for the Services, it has refused to pay the plaintiff. The outstanding Invoices, which are now seriously past due, are listed in Schedule “A” and amount to $104,135.00.
The plaintiff has made demands of the Defendants for payment of the Invoice.
[13] Schedule “A” includes a table that lists invoices and amounts claimed by Paul’s Transport. Under the heading “Immediate Customer,” the table lists outstanding invoices allegedly issued by Paul’s Transport to the shippers between May and November 2015, totalling $104,135. Paul’s Transport claims damages based on this amount, plus interest at a rate of 2% per month.
[14] At the hearing, the parties agreed that the claim for damages relates exclusively to services rendered by Paul’s Transport pursuant to the February 2015 verbal agreement.
[15] In January 2017, Paul’s Transport properly served Immediate with its Statement of Claim by mailing a copy to its corporate address on record. The O’Connors’ position is that they never received it because they had vacated the premises.
[16] Between January and June 2017, Paul’s Transport attempted to serve the O’Connors approximately 13 times. Paul’s Transport ultimately obtained an order for substituted service by regular mail on June 8, 2017. Shortly thereafter Paul’s Transport properly served the O’Connors by mailing the Statement of Claim to their known addresses, including their two cottages where they spent considerable portions of the year. Despite these efforts, the O’Connors deny receiving the claim.
[17] During the same time period and based on the same facts, Paul’s Transport also filed 7 Small Claims Court actions against the defendants. Plaintiff’s counsel estimates that, all told, Paul’s Trucking attempted to serve the O’Connors over forty times in relation to these matters. This included two occasions where a claim was sent by registered mail and signed for by an individual identified in postal records as one of the O’Connors. The O’Connors deny signing for the mail.
[18] On July 7, 2017, Paul’s Transport sought and the local registrar granted default judgment against Immediate for the sum of $141,482, including interest and plus costs.
[19] On August 10, 2017, Paul’s Transport sought and the local registrar granted default judgment against the O’Connors for the sum of $148,089, including interest and plus costs.
[20] After receiving a Notice of Sale in relation to one of their cottages, the defendants promptly retained counsel and brought this motion.
[21] Paul’s Transport opposes the motion and relies on the affidavits of two employees to establish that:
- The invoices listed in Schedule “A” of the Statement of Claim were in fact first issued to Immediate pursuant to the verbal freight-brokerage agreement; and
- Immediate was paid at least a portion of the outstanding amounts (estimated at $88,949.25).
[22] The affidavits filed by Paul’s Transport were not subject to cross-examination.
POSITIONS OF THE PARTIES
[23] The defendants rely on three grounds to support their motion, namely that:
- The defendants were not aware of the judgments or the proceeding until they received a Notice of Sale of their home form the Sheriff of the District of Parry Sound on April 22, 2019.
- The default judgments were irregularly obtained by the plaintiff and are for sums that are not liquidated.
- The defendants have a triable defence on the merits; they acted within days of discovering the proceeding to retain a lawyer; and it is in the interests of justice that the judgments be set side.
[24] In opposing the motion, Paul’s Transport argues that the defendants have not satisfied the well-established test for setting aside default judgment and noting in default insofar as they have not provided a plausible excuse for failing to comply with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They also argue that the defendants do not have an arguable defence on the merits.
LEGAL FRAMEWORK
[25] Rule 19 governs default proceedings. Once a defendant is noted in default under Rule 19.01, a plaintiff has two avenues to obtain judgment.
[26] Under Rule 19.05, the plaintiff can “move before a judge for judgment against the defendant on the statement of claim in respect of any claim for which default judgment has not been signed.”
[27] Alternatively, and as was the case here, under Rule 19.04(1)(a), “the plaintiff may require the registrar to sign judgment against the defendant in respect of a claim for a debt or liquidated demand in money, including interest if claimed in the statement of claim” (emphasis added).
[28] There are two situations in which a default judgment can be set aside. The first is where the defendant can establish that correct procedures have not been followed in obtaining the judgment. In Redabe Holdings Inc. v I.C.I. Construction Corporation, 2017 ONCA 808, at para. 7, the Court of Appeal for Ontario held that:
If a default judgment is irregularly obtained, as a general rule, a defendant is entitled to an order, as of right, setting it aside, without the requirement of establishing a defence to the plaintiff's claim, and without the imposition of terms, other than possibly costs: Tomazio v. Rutale, (1995), 26 O.R. (3d) 191, [1995] O.J. No. 3032 (Gen. Div.), at paras. 9 and 10; Royal Trust Corp. of Canada v. Dunn (1991), 6 O.R. (3d) 468 (Gen. Div.), at para. 19.
[29] The second is where the default judgment has been obtained regularly, but the defendant asks the court to exercise its discretion to set it aside based on the factors from Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 48-49.
[30] Here, the defendant argues that the default judgment was “irregular” because the claim was for unliquidated damages. In Holden Day Wilson v. Ashton (1993), 14 O.R. (3d) 306 (Div. Ct.), White J. held that a court should consider the following factors when determining whether a claim is a liquidated demand:
- Is it ascertainable by calculation or by referring to a fixed scale of charges?
- Can the calculation be made by reference to the agreement between the parties itself, or at least implied by the agreement?
- Was the price or method of calculation of the price agreed upon by the parties?
- Has the defendant obliged themselves to pay a specific sum of money?
- Was a reasonable estimated cost established by the parties?
[31] In short, if the court finds that additional evidence is required to fix the amount owing, beyond that which is pleaded in the Statement of Claim, the demand is not liquidated and the default judgement must be set aside as of right.
[32] That said, the court retains its discretion as to whether to set aside the noting in default. Some of the factors the court should consider in deciding whether to exercise its discretion are outlined by the Court of Appeal for Ontario in Kisel v. Intact Insurance Co., 2015 ONCA 205, 125 OR (3d) 365 and include: the behaviour of the parties, the length of the defendant's delay, the reasons for delay, and the complexity and value of the claim.
ANALYSIS
[33] In this case, Paul’s Transport's claim is for unliquidated damages because the registrar was not in a position to ascertain the monies owed by the defendants based on the facts pleaded in the Statement of Claim.
[34] Paul’s Transport did not set out the terms of the verbal agreement that is at the heart of their argument for liability. For example, they did not set out the specific dollar amounts that Immediate allegedly received from shippers who were serviced by Paul’s Transport. And they did not set out any entitlement to interest on amounts past due.
[35] The Court of Appeal for Ontario addressed a similar situation in Ken Jackson Construction Ltd. v. Macklin, 2017 ONCA 324, 64 C.L.R. (4th) 1. In that case, the Court of Appeal found that a default judgment signed by a registrar against individual defendants for amounts owing under invoices billed to a corporate defendant was granted without jurisdiction. There was no basis pleaded that would make the individual appellants liable for invoices billed to the corporation. The Court further noted that the Registrar had no jurisdiction to grant judgment against the individual appellants on the claim against them for breach of trust and conversion, as was also not for “a debt or liquidated demand in money.”
[36] In this case, I find that the Statement of Claim did not plead the facts necessary for the registrar to sign default judgment. As in Ken Jackson Construction, there was no factual basis upon which the registrar could find: (1) Immediate liable for invoices billed to the shippers, (2) fix the amount owing, or (3) determine whether interest was payable. The claim against the O’Connors relies the court applying the common law about breach of trust, unjust enrichment and quantum meruit. These are clearly unliquidated demands.
[37] As Paul’s Transport obtained the default judgements irregularly, they must be set aside. I have no residual discretion to order otherwise.
[38] Turning now to the issue of whether I should set aside the noting in default. Considering the factors set out in Kisel v. Intact Insurance Co., I decline to do so.
[39] The O’Connors bear significant responsibility for the delay in this matter and the eventual noting in default. I simply do not accept that they had absolutely no knowledge whatsoever about the multiple proceedings against them until they received a Sheriff’s notice about the sale of their cottage. There was ample evidence before me about the plaintiff’s dogged efforts to ensure the O’Connors were aware of these proceedings.
[40] The more plausible explanation is that the O’Connors decided to adopt a “wait and see” approach. Having actively chosen to ignore this litigation for so long, the O’Connors cannot reasonably expect the court to now grant them the opportunity to defend it. Moreover, I do not find that the matter so complex or for such a high value as to necessitate a contested trial.
CONCLUSION
[41] Based on the reasons above, the motion is granted in part.
[42] The default judgments dated July 7, 2017 and August 10, 2017 are set aside, together with any and all enforcements proceedings taken pursuant to the default judgments, including but not limited to the sale of the at 26 Museum Road, RR#2, Parry Sound, Ontario.
[43] I decline to set aside the noting in default of Immediate or the O’Connors. The plaintiff shall bring a motion for default judgement before a judge pursuant to Rule 19.05 within 30 days of the release of these decisions.
[44] While counsel submitted Bills of Cost at the conclusion of the motion, given the divided success, I decline to order costs against either party.