COURT FILE NO.: CV-20-00036-000
DATE: 2021 06 22
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FS PARTNERSHIP/UPI ENERGY, DIVISIONS OF GROWMARK INC.
Plaintiff
- and -
MR. REFUEL INC., ROY NIRWAL and AMANDEEP KAUR
Defendants
Matthew McMahon for the Plaintiff, Responding Party
David Pomer, for the Defendants, Moving Party
HEARD March 23, 2021
REASONS FOR JUDGMENT
Fowler Byrne J.
[1] The Defendants have brought a motion seeking to set aside the Judgment of Justice G.D. Lemon, dated July 22, 2020 as against all Defendants. The Defendants rely on r.19.08 of the Ontario Rules of Civil Procedure.
I. Background
[2] On January 27, 2020, the Plaintiff FS Partnership/UPI Energy, DIVISIONS OF GROWMARK INC. ("Growmark") commenced a claim as against the Defendants for breach of contract. In particular, it was alleged that the Defendants entered into a contract on February 5, 2018 whereby Growmark would supply and deliver fuel pursuant to a credit agreement. The credit limited requested was $1,500. The personal Defendants Roy Nirwal ("Nirwal") and Amandeep Kaur ("Kaur") deny personal liability under the credit agreement. It is further alleged that the Defendants continued to take delivery of fuel, but stopped paying the invoices rendered by Growmark. As of January 20, 2020, the sum of $1,065,713.32 was allegedly owed.
[3] Affidavits of service show that on February 19, 2020, the corporate Defendant Mr. Refuel Inc. ("Mr. Refuel") and Kaur were served personally with the Statement of Claim. Nirwal was served by alternative to personal service, namely, by personal service on an adult member of his household, following which the process server mailed another copy directly to Nirwal the next day. The Defendants admit to not defending, as they believed the courts were closed due to the COVID-19 pandemic.
[4] Having received no Notice of Intent to Defend or Statement of Defence from the Defendants, on or about March 13, 2020, Growmark filed a requisition with the court asking that the Defendants be noted in default, which was done.
[5] On March 15, 2020, the Chief Justice of the Superior Court of Justice for Ontario issued a Notice to the Profession, Public and Media, in which he suspended all court operations effective March 17, 2020, except in limited circumstances. In this Notice it stated, inter alia:
In the event courthouses become closed or are inaccessible due to safety concerns, and to preserve limitation periods under the Limitations Act, parties should file Claims or Statements of Claims through the Small Claims Court online filing service, or the Civil Claims Online Portal for Superior Court civil matters. Limited family proceedings can also be filed electronically through the Ministry of the Attorney General's website for filing divorce applications.
[6] On March 20, 2020, the Ontario government, under section 7.1(2) the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9, passed regulation 73/20 which stated, inter alia,
- Any provision of any statute, regulation, rule, by-law or order of the Government of Ontario establishing any period of time within which any step must be taken in any proceeding in Ontario, including any intended proceeding, shall, subject to the discretion of the court, tribunal or other decision-maker responsible for the proceeding, be suspended for the duration of the emergency, and the suspension shall be retroactive to Monday, March 16, 2020.
[7] On May 13, 2020, the Chief Justice issued a province-wide Consolidated Notice to the Profession, Litigants, Accused Persons, Public and the Media, which was to be effective on May 19, 2020. Electronic filings were permitted, as long as they did not exceed 35 MB. By virtue of the Central West Region's Notice to the Profession dated May 13, 2020, and effective May 19, 2020, consent motions could be filed electronically. It appears that ex parte motions were also being accepted for consideration.
[8] In or about July 2020, Growmark brought a motion in writing before a Judge for default judgment as against the Defendants. Judgment was granted on July 22, 2021. In particular, Judgment was granted as against all the Defendants for $1,013,420.60 in damages, plus $87,849.54 in interest, pre-judgment and post-judgment interest at an annual rate of 24 percent compounded annually (being 26.82 percent per annum) and costs in the sum of $6,250.43. The actual motion and the evidence filed in support was not included in either party's motion materials.
[9] On August 12, 2020, counsel for Growmark sent a copy of the Judgment to the Defendants. I note that the letter to Kaur containing the Judgment was sent to the same address where personal service of the Statement of Claim was effected. The letter to Nirwal with the Judgment was sent to the same address where alternative to personal service was effected.
[10] By way of Ontario Regulation 106/20, also under the Emergency Management and Civil Protection Act, it was declared that the last day of the suspension of time periods under the Rules was September 11, 2020.
[11] On September 15, 2020, Growmark wrote again to Mr. Refuel, at the address listed on their corporate profile registered with the federal government, and served a Notice of Garnishment. This is the same address where Nirwal was served with the Statement of Claim and where a copy of the Judgment was sent on August 12, 2020.
[12] The Defendants state in their affidavit, filed in support of this motion, that they were not aware of the Judgment until which time they were served with a Notice of Examination in Aid of Execution dated November 12, 2020, which required their attendance on December 11, 2020. In their reply affidavit, neither Kaur nor Nirwal addressed the notifications of Judgment in August and September 2020.
[13] Kaur and Nirwal state that upon being served with the Notice of Examination, they immediately retained Mr. Pomer. On or about November 13, 2020, Mr. Pomer contacted counsel for Growmark, and then a few days later sent an email requesting further documentation and indicating that they may be bringing a motion to set aside the Judgment. Counsel for Growmark followed up regarding the upcoming Examination in Aid of Execution, but heard nothing further until the Defendants' counsel contacted counsel for Growmark on December 10, 2020, indicating that his clients would not attend the Examination in Aid of Execution. On or about January 14, 2021, the Plaintiff was served with this motion.
[14] The Defendants have provided a copy of the Statement of Defence they wish to serve and file in the event that the Judgment is set aside. It pleads the following defences:
a) Only Mr. Refuel was to be liable under the credit application, and not Kaur or Nirwal;
b) The credit application was to be for no more than $1,500;
c) They did not agree to 24% per annum or 26.82% compounded monthly, as an interest rate; and
d) They did not initial the second page of the credit application and thus are not bound by its terms.
[15] Of note is that the Defendants have not denied receiving the fuel for which they were charged. The last paragraph of the Statement of Defence only requests that the action against Kaur and Nirwal be dismissed.
II. Analysis
[16] I will first dispose of the Judgment as against Nirwal.
[17] As indicated, Nirwal was served by alternative to personal service under r.16.03(5). In accordance with this rule, service is not effective until the fifth day after the document was mailed. Where the Rules refer to an amount of time that is seven days or less, holidays are not counted: r.3.01(b). "Holiday" is defined to include Saturday and Sunday: r.1.03(1). Accordingly, service on Nirwal was not effective until February 27, 2020.
[18] Nirwal had twenty days in which to serve a Statement of Defence or Notice of Intent to Defend: r.18.02. Disregarding the suspension of regular court operations for now, Nirwal had until March 18, 2020 to serve and file his Defence. As we all know though, by virtue of O.Reg. 73/20, time limitations under the Rules were suspended as of March 16, 2020 and did not resume "counting" until after September 11, 2020. Accordingly, on the day judgment was signed as against Nirwal, the time for serving his Statement of Defence had not yet expired. He should not have been noted in default and judgment should not have been signed as against him. A party is entitled to have a judgment obtained as against them set aside when it was irregularly obtained or when certain procedures were not followed even without establishing a defence: Royal Trust Corp of Canada v. Dunn (1991), 1991 CanLII 7227 (ON SC), 6 O.R. (3d) 468, at para. 19 (Ont. S.C.).
[19] This is not the case with Kaur and Mr. Refuel. Their time to file a Statement of Defence or Notice of Intent to Defend expired on March 10, 2021. The courts were not yet closed. No announcement had been made that the courts would be closed. There had been no announcement that limitation periods or time limits would be suspended or extended. I do not consider it reasonable for Kaur and Mr. Refuel to assume that they did not have to respond to this lawsuit because of a belief or speculation, not supported by any evidence, that the courts were closed on or before March 10, 2021.
[20] In order to set aside a judgment obtained in default, in Intact Insurance Company v. Kisel, 2015 ONSC 205, 2015 ONCS 205, the Court of Appeal for Ontario has stated:
[14] On a motion to set aside a default judgment….the court considers five major factors, one of which is whether the defendant has an arguable defence on the merits. The five factors are:
(a) whether the motion was brought promptly after the defendant learned of the default judgment;
(b) whether the defendant has a plausible excuse or explanation for the default;
(c) whether the defendant has an arguable defence on the merits;
(d) the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff 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.
Again, these factors are not rigid rules. The court has to decide whether, in the particular circumstances of the case, it is just to relieve a defendant from the consequences of default: Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 372 D.L.R. (4th) 526, at paras. 48-50.
[21] With respect to the judgment as against Mr. Refuel, I see no reason to set aside that judgment. In fact, the Statement of Defence to be filed on behalf of all Defendants does not even request that judgment as against Mr. Refuel be set aside. There is no plausible or reasonable explanation for not responding in time and they have alleged no arguable defence on the merits, save and except that they only asked for $1,500 in credit. There is no explanation for why they continued to take fuel from Growmark, approaching $1,000,000 in value, and not make any arrangements to pay.
[22] With respect to Kaur, as already indicated, she has not given a satisfactory explanation as to why she did not defend. With respect to a prompt response, that is less clear. Certainly upon retaining counsel, Mr. Pomer acted swiftly. While it took approximately two months before his motion to set aside the judgment to be served, he indicated his intention to do so almost immediately upon being retained.
[23] What is puzzling is Kaur's failure to take any action when a copy of the Judgment was sent to her in August. It was sent to the address she provided on her credit application with Growmark and the address where she was served with the Statement of Claim. While the Notice of Garnishment was served at Nirwal's address, it is difficult to understand why she would not have been alerted when Growmark tried to garnish Mr. Refuel's bank account. Her only response is that she acted promptly when served with the Notice of Examination. She does not address in any way, the other letters sent to her prior to then. She does not say she was out of the country, or not collecting mail, or that she was ill – nothing. While it is difficult to make a finding of fact on this issue on affidavit evidence alone, I do not find her evidence about when she first received notice of the Judgment to be satisfactory.
[24] With respect to the merits of her defence, she claims that at no time did she accept personal liability with respect to the credit extended to Mr. Refuel, and was not bound by the fine print on the reverse side of the application because it was not initialed.
[25] In support of this position, a defendant must put forward evidence of an arguable defence: CIBC Mortgages Inc. v. Kwaw, 2012 ONCA 602, at para.2. The Defendant is not required to show that the defence will inevitably succeed, but that it has an air of realty: Mountain View Farms Limited v. McQueen, 2014 ONCA 194, at para. 51.
[26] A number of credit applications were presented by the parties in this motion. In the first account application, the name of the applicant was Roy Nirwal and the name of the co-applicant was Amandeep Kaur. The bank account information was for Mr. Refuel, but Nirwal signed the account application as the applicant and Kaur signed the application as the co-applicant on February 5, 2018 ("the First Application"). Just above their signature were the words:
I/We, the undersigned, certify that I/we have read, understood and agree with and accept the "TERMS, CONDITIONS, ACKNOWLEDGEMENTS and AUTHORIZATIONS" presented on the reverse side of this Application and Credit Agreement.
[27] On the reverse side, where the terms, conditions, acknowledgements and authorizations were set out, there was a place for the parties' initials, but no initials were inserted. One of the clauses on the reverse side states:
- The Applicant, by applying for or accepting credit from the Creditor, hereby:
(xvi) recognizes that if more than one person signed the Application, each is jointly and severally responsible for all indebtedness under this Agreement regardless or which applicant takes delivery of the goods and/or services, and regardless of initial credit requirement or limit.
[28] Kaur also produced a second account application, where Nirwal crossed off his name as the applicant, and wrote in "Mr. Refuel Inc.". He also crossed off his date of birth and his social insurance number. He also crossed off Kaur's name and address ("the Second Application"). Nothing else was changed, including the date of February 5, 2018. The Defendants argue that the Second Application is the binding contract executed by Growmark and the Defendants.
[29] Growmark provided a more detailed explanation of why there were two credit applications. Growmark agrees that the First Application was completed and signed by Kaur and Nirwal. Upon doing the appropriate credit checks, Kaur and Nirwal were approved for credit and an account was opened in their names. The first few invoices were sent to Kaur and Nirwal.
[30] Growmark concedes that shortly thereafter, Nirwal wrote an email to Growmark and said that he noticed the invoices were made out to him personally, and "can you correct this to reflect the correct company name; Mr. Refuel Inc.".
[31] Shortly thereafter, Nirwal sent them the Second Application where he made the aforementioned changes. Growmark took this as a name change only. In their records, they kept the same account number, indicated that Mr. Refuel was the applicant name and wrote on the top of this record "name change, existing 3003920", referring the account number assigned to Kaur and Nirwal.
[32] Growmark concedes that subsequently, all invoices and statements were sent to Mr. Refuel. No new credit application was completed and no new account was opened. When payments were missed, a demand letter was sent to Mr. Refuel only. Growmark threatens recovery from Mr. Refuel only.
[33] Based on the foregoing, I find that Kaur has raised a defence with an air of reality. While the intention of Growmark was clear when they changed the name of the account, it is possible that a trier or fact may find that Kaur and Nirwal had a different understanding of their liability after the "name change."
[34] In light of this finding, I will not address whether the remaining defences have an air of reality.
[35] With respect to the prejudice to both parties, clearly there would be prejudice to Kaur if the default judgment is left in place as she will have not opportunity to present her defence. With respect to Growmark, in the event that their Judgment against Kaur is set aside, it will not be restricted in any way in pursuing their claim and their claim for prejudgement interest remains. It appears that all witnesses are still available, and the key documents have been produced. The only prejudice to Growmark is their time and cost wasted, for which it should be compensated: Akagi v Synergy Group (2000) Inc., 2011 ONCA 201, at para. 2.
[36] Growmark has provided a Bill of Costs wherein they seek full indemnity costs of $16,007.85, partial indemnity costs of $14,407.07 or partial indemnity costs of $9,604.71. The Bill of Costs include the lawyer's time from the date they obtained the Judgment up to the finalization of Growmark's materials for this motion. For the purposes of cost thrown away, it is appropriate that Growmark be compensated up to the time they received and reviewed the Defendants' materials (being the entry for January 14, 2021). The Defendants made the error and are required to bring the motion. Any time thereafter is part of the costs of this motion and should be considered after hearing the submissions of all parties on this issue and reviewing any offers to settle that were exchanged.
[37] In the case of Peterbilt of Ontario Inc. v 1565627 Ontario Ltd., 2007 ONCA 333, the court determined that the plaintiff should have its full costs thrown way as a result of the defendants' default: at para. 6. While it is acknowledged that the circumstances surrounding Nirwal's judgment are through no fault of his own, the fault of Kaur is clear.
[38] After considering all the factors herein, and the overall integrity of the administration of justice, I find it is just that default judgment be set aside with respect to Kaur. That being said, Growmark should be compensated fully for their costs thrown away.
III. Conclusion
[39] Accordingly, for the foregoing reasons, I make the following orders:
a) The judgment of Lemon J., of July 22, 2020, as against Nirwal and Kaur only, is set aside;
b) Within thirty days, Kaur shall pay to Growmark its costs thrown away, on a full indemnity basis, fixed in the sum of $9,566.85, inclusive of fees, taxes and disbursements. If the sum is not paid within that time, the judgment of Lemon J. shall remain in full forth and effect as against Kaur, and the Plaintiff may take all steps in order to enforce same;
c) Within 14 days of confirmation of this sum being received by Growmark, Kaur and Nirwal shall serve and file their Statement of Defence on behalf of Kaur and Nirwal only;
d) The parties are encouraged to resolve the issue of costs for this motion themselves. If they are unable, the Defendants are to serve and file their written costs submissions, limited to two pages, double spaced and single sided, exclusive of Costs Outline, no later than July 9, 2021; the Plaintiff shall serve and file its responding submissions, with the same space limits, on or before July 23, 2021; any reply submissions must be served and filed by July 29, 2021.
Fowler Byrne J.
Released: June 22, 2021
COURT FILE NO.: CV-20-00036-000
DATE: 2021 06 22
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FS PARTNERSHIP/UPI ENERGY, DIVISIONS OF GROWMARK INC.
Plaintiff
- and -
MR. REFUEL INC., ROY NIRWAL and AMANDEEP KAUR
Defendants
REASONS FOR JUDGMENT
Fowler Byrne J.
Released: June 22, 2021