COURT FILE NO.: CV-19-2291-00
DATE: 2021 07 28
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Dentons Canada LLP, Plaintiff
AND:
Nik Irfan Khan, Defendant
BEFORE: Doi J.
COUNSEL: Nik Irfan Khan, self-represented moving Defendant Matthew Bradley, for the responding Plaintiff
HEARD: May 18, 2021
ENDORSEMENT
Overview
[1] This is a motion by the Defendant, Nik Irfan Khan, to set aside the default judgment and noting in default obtained by the Plaintiff, Dentons Canada LLP.
[2] The underlying action is a claim for unpaid legal fees. The Defendant claims that he is not liable for these fees and that the Plaintiff excessively billed him for its legal services.
[3] For the reasons that follow, I am satisfied that it would be in the interests of justice to set aside the default judgment and noting in default and permit the Defendant to deliver his statement of defence and counterclaim.
Background
[4] On May 30, 2019, the Plaintiff issued its statement of claim. Later that day, it served the statement of claim on the Defendant.
[5] Upon receiving service, the Defendant neglected to record the date when the statement of claim was served. The following weekend, he incorrectly recorded the date of service as being June 4, 2019, due to inadvertence. At the time, he believed that this service date was correct.
[6] Without prior notice or communication, the Plaintiff filed a requisition on June 20, 2019, for the Defendant to be noted in default due to his failure to file a statement of defence within the time required by Rule 18.01 of the Rules of Civil Procedure. The Defendant was noted in default on June 21, 2019.
[7] On June 24, 2019, the Defendant served a notice of intent to defend. However, when he tried to file it with the court, he learned that he had been noted in default. Later that day, he emailed the Plaintiff to advise that he could not file his notice of intent to defend as he was noted in default. He stated his belief that he had been served with the claim on June 4, 2019 which gave him until June 24, 2019 to file his defence. He asked the Plaintiff to confirm when it had served the claim, and also asked for its consent to file his defence pursuant to Rule 19.02(1)(b). The Plaintiff advised that it served the claim on May 30, 2019 and asked why the service date would be June 4, 2019.
[8] On June 25, 2019, the Defendant advised the Plaintiff that he had recorded the service date as June 4, 2019 but could not recall when he did so. He also explained that he had prepared his defence and requested the Plaintiff’s consent to file it. Through its counsel, who was not the same counsel that appeared on this motion, the Plaintiff advised that it would consider his request after reviewing his motion materials to set aside the noting in default. The Plaintiff also asked to canvass prospective motion dates.
[9] On July 4, 2019, the Defendant undertook to deliver his motion materials by July 8, 2019 and asked the Plaintiff for its availability to argue the motion. The Plaintiff advised that it expected to cross-examine on his affidavit for the motion, offered to obtain available motion dates from the court, and indicated that it would propose a timetable for returning the motion. The Defendant did not deliver his motion materials by July 8, 2019 and the Plaintiff did not propose a timetable or motion return dates.
[10] On July 16, 2019, the Defendant arranged for his motion to set aside the noting in default to be heard on July 30, 2019. He delivered his motion materials on July 18, 2019.
[11] The Plaintiff cross-examined the Defendant on his affidavit on July 25, 2019 and served the transcript of his examination on July 29, 2019.
[12] On July 29, 2019, the Plaintiff advised the Defendant that his motion had been struck from the July 30, 2019 motions list because his confirmation was filed late. The Plaintiff also opposed his motion being heard due to the outstanding undertakings from his cross-examination.
[13] On October 24, 2019, the Plaintiff returned an undertakings and refusals motion from its cross-examination. After hearing the motion, LeMay J. ordered the Defendant to answer his undertakings. In the course of answering his undertakings, the Defendant served the Plaintiff with his statement of defence and counterclaim on or about January 23, 2020.
[14] In mid-March 2020, court operations at the Superior Court of Justice were disrupted by the global COVID-19 pandemic. Thereafter, the court heard only urgent matters until July 6, 2020.
[15] On July 15, 2020, the Plaintiff wrote to the Defendant to advise that the court had begun to hear non-urgent matters and to inquire about his plans for setting aside the noting in default. The Defendant did not respond.
[16] On August 17, 2020, the Plaintiff again wrote to the Defendant to ask about his intentions for the case. It advised him of the need to bring a motion to file his pleading and reiterated that the court was hearing non-urgent matters. Again, the Defendant did not respond.
[17] On January 19, 2021, the Plaintiff served the Defendant by email with a motion in writing for default judgment.
[18] On January 28, 2021, the Defendant responded by email to advise the Plaintiff that he had fortuitously found its January 19, 2021 motion materials in his spam file. He also advised that he opposed the motion in writing for default judgment and would be serving a notice of intention to make oral argument. In addition, he served an incomplete notice of examination to cross-examine the Plaintiff’s affiant on the motion. The Plaintiff replied that the Defendant was not entitled to respond to the motion or conduct examinations as he had been noted in default. In light of the Defendant’s prior failure to contact the Plaintiff to discuss the case, the Plaintiff expressed its view that his email message was a misguided attempt to delay a just resolution of this litigation.
[19] On January 29, 2021, Shaw J. granted default judgment to the Plaintiff.
[20] On March 16, 2021, the Defendant advised the Plaintiff that he would be moving to set aside the default judgment. His motion to set aside returned on May 18, 2021.
Legal Principles
[21] Rules 19.08(1) and (3) of the Rules of Civil Procedure provide the authority to set aside a default judgment and the noting in default, respectively, 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.
(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the notice of default under rule 19.03.
[22] On a motion to set aside a default judgment, the court considers five (5) major factors:
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.
Ultimately, the court must decide, in the particular circumstances of the case, whether it is just to relieve a defendant from the consequences of default: Intact v. Kisel, 2015 ONCA 205 at para 14; Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at paras 48-50. These factors are not rigid rules, and each factor need not be satisfied: Mountain View at para 50; 2545890 Ontario Ltd.
v. Cambium Inc., 2021 ONSC 4813 at para 17.
[23] The following passage adopted by the Court of Appeal in Nobosoft Corporation v. No Borders, Inc., 2007 ONCA 444 at para 7 provides helpful guidance for this motion:
[7] We agree with the observations of Molloy J. of the Superior Court of Justice at para. 2 of McNeill Electronics Ltd. v. American Sensors Electronics Inc. (1996), 5 C.P.C. (4th) 266 (Ont. Gen. Div.), reversed on other grounds (1998), 1998 CanLII 17693 (ON CA), 108 O.A.C. 257 (C.A.):
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.
Analysis
[24] For the reasons that follow, I am satisfied that the default judgment and noting in default should be set aside.
The Motion was Brought Promptly
[25] Both parties agree that the Defendant brought this motion without delay after learning of the default judgment granted by Shaw J. on January 29, 2021. The Defendant’s motion to set aside returned on May 18, 2021. In light of this, I accept that he moved promptly.
Plausible Excuse or Explanation
[26] I am satisfied that the Defendant has provided a plausible excuse or explanation for most of the underlying default which led to the default judgment against him. Through inadvertence, the Defendant mistakenly believed that his statement of defence or notice of intent to defend was due by June 24, 2019 when, in fact, the due date formally expired just several days earlier. Upon learning that he could not file his notice of intent to defend (i.e., after being noted in default without any prior notice), the Defendant promptly contacted the Plaintiff to explain his situation, to confirm when the claim was served, and to seek the Plaintiff’s consent for a late filing of his statement of
defence under Rule 19.02(1)(b). After the Plaintiff indicated that it would first need to review his motion to set aside the noting in default before it would consider consenting to a late filing of his defence, the Defendant promptly brought a motion to set aside. Unfortunately, given his lack of familiarity with court procedures, his confirmation was delivered late which led his motion to be struck from the list. The Plaintiff then moved for answers to undertakings and refusals that resulted in an order for the Defendant to answer his undertakings, which he satisfied by January 23, 2020. Thereafter, from mid-March 2020 to July 6, 2020, the COVID-19 pandemic prevented the court from hearing non-urgent matters. In light of this, I find that the Defendant has given a satisfactory explanation for his default until July 6, 2020.
[27] That said, I find that the Defendant has not given a satisfactory explanation for why he did not seek to return his motion to set aside the noting in default after July 6, 2020. By that time, the court was hearing non-urgent motions. The Plaintiff wrote to him on July 15, 2020 and August 17, 2020, in correspondence sent by email and courier, to advise that his motion could proceed and to inquire about his intentions. The Defendant claims that he did not receive the Plaintiff’s letters by email. However, I am satisfied that he received the couriered letters and chose not to respond.
[28] On January 28, 2021, the Defendant found the Plaintiff’s January 19, 2021 email with its motion materials for default judgment in his spam box. The Plaintiff did not serve the Defendant with a paper copy of its default judgment motion. Although the Defendant immediately contacted the Plaintiff to advise of his intention to oppose the motion, Shaw J. granted default judgment on January 29, 2021. The Defendant then promptly moved to set aside the default judgment.
[29] Based on the foregoing, I accept that the Defendant has satisfactorily explained most of his default in this litigation. In my view, the Defendant has demonstrated his intention to defend and pursue his interests in this case as evidenced by the various steps he took to progress this matter. In addition, I am satisfied that much of his default may be attributed to a combination of inadvertence and his unfamiliarity with court procedures.
The Defendant has an Arguable Defence
[30] I find that the Defendant has established that he has arguable defences to advance at trial. From the Defendant’s record on this motion, which included his proposed statement of defence and counterclaim, I am satisfied that he has arguable defences as to when he retained the Plaintiff
law firm, whether its legal work was authorized by and conformed to the Defendant’s instructions, and whether its work product was satisfactory and properly grounds its claim for damages.
[31] Based on the Defendant’s record for this motion, I find that his defence and counterclaim are not frivolous and that he has adduced sufficient evidence to meet the relatively low threshold of showing that his pleadings have an air of reality: Zeifman Partners v. Aiello, 2020 ONCA 33 at paras 30-32; Mountain View at para 51. Despite being somewhat limited in nature, I accept that the Defendant’s record on this motion adequately establishes that he intended to defend this case from the outset and that his pleadings are not devoid of a factual or legal foundation.
Potential Prejudice
[32] From the record on this motion, I find no real prejudice to the Plaintiff’s right to a fair trial arising from the delay in this case, other than inconvenience and costs associated with the delay. To argue this motion, both parties filed evidence to establish what they will rely upon in the action and there is no indication that relevant evidence will be unavailable at trial. In contrast, it is clear that the Defendant will suffer prejudice if he cannot advance his intended defences and interests. On balance, I am satisfied that the public interest would be best served by a more generous rather than an overly strict approach. In my view, the Defendant should be given an indulgence to have a fair opportunity to have his day in court and make his case for a decision on the merits: Graham
v. Vandersloot, 2012 ONCA 60 at para 12.
Integrity of the Administration of Justice
[33] The Plaintiff obtained default judgment for $210,802.40, which is a substantial amount. Allowing a sizeable judgment to stand due to oversights or inadvertent missteps would not serve the interests of justice: 2545890 Ontario Ltd. v. Cambium Inc., 2021 ONSC 4813 at para 22; Zeifman at paras 47-48. In my view, granting the Defendant’s motion to set aside the default judgment is consistent with promoting the overall integrity of the administration of justice.
[34] As set out earlier, the Plaintiff did not notify the Defendant before requisitioning him to be noted in default on June 20, 2019. In light of this, I find that principles of professionalism and advocacy should inform my decision in factoring the integrity of the administration of justice on this motion.
[35] In my view, the Plaintiff’s failure to give the Defendant prior notice of its noting in default and its failure to consent to a late filing of his pleading are inconsonant with the guidance in the Rules of Professional Conduct of the Law Society of Ontario (“RPC”) and the Principles of Civility and Professionalism published by the Advocates’ Society (“Principles”). Subsection 7.2-2 of the RPC requires a lawyer to not take advantage of slips, irregularities or mistakes without fair warning,[^1] and Rule 56 of the Principles states that advocates should not cause a default or dismissal to be entered without notice: Swanson v. Vogrin, 2017 ONSC 1413 at paras 16-22.[^2] In addition, ss. 7.2-1.1 of the RPC directs lawyers to agree to reasonable requests to waive procedural formalities.[^3] Interestingly, the Defendant claims that the Plaintiff, while acting as his counsel of record in the original action, willingly and voluntarily consented to extend time for the defendants in that case to file their pleadings despite now denying him the same courtesy.
[36] Instead of noting the Defendant in default, the far better practice would have been for the Plaintiff to follow up with the Defendant to demand a defence and timetable a discovery plan: Elli- Fin Construction Ltd. v. ARCA Canada Inc., 2021 ONSC 2130 at para 23.
[37] Accordingly, I conclude that the default judgment and noting in default should be set aside.
The Counterclaim
[38] Although the Plaintiff submits that the Defendant’s counterclaim is long past its limitation deadline, I am not persuaded by this submission on the limited record before me.
[39] The Plaintiff claims that the Defendant’s counterclaim is barred by the 2-year limitation period in the Limitations Act, 2002. However, this action remains in an early, pre-discovery stage with only limited evidence filed on this motion.
[40] The counterclaim raises several disputed facts that will continue to evolve and materialize with documentary production, examinations for discovery and other evidence from witnesses. However, from the record on this motion, there seems to be a discoverability issue associated with the Plaintiff’s anticipated limitations defence to the Defendant’s counterclaim, which was served on January 23, 2020. In my view, the discoverability issue appears to require further evidence and potential findings of credibility as to when the Defendant obtained a second opinion about his case,
what the opinion revealed about the Plaintiff’s carriage of his case, and what the Defendant did to resolve his claim. To arrive at the conclusion that the Defendant’s counterclaim is time-barred, as urged by the Plaintiff, the court would need to make findings based on a more complete record and submissions more characteristic of a motion for summary judgment. In my view, these findings cannot and should not be made on the limited record before the court at this early stage in the proceedings.
Outcome
[41] Accordingly, the motion is granted. The default judgment and noting in default shall be set aside, and the Defendant may deliver his statement of defence and counterclaim within 30 days.
[42] If the parties are unable to resolve the issue of costs for this motion, the Defendant may deliver written costs submissions of up to 2 pages (excluding any costs outline or offer to settle) within 15 days, and the Plaintiff may deliver its responding submissions on the same terms within a further 15 days. Reply submissions shall not be delivered without leave.
Doi J.
Date: July 28, 2021
COURT FILE NO.: CV-19-2291-00
DATE: 2021 07 28
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Dentons Canada LLP, Plaintiff
AND:
Nik Irfan Khan, Defendant
BEFORE: DOI J.
COUNSEL: Matthew Bradley, for the Plaintiff
Nik Irfan Khan, self-represented Defendant
ENDORSEMENT
Doi J.
DATE: July 28, 2021
[^1]: The Law Society of Ontario has set out a lawyer’s responsibility to others in s. 7.2-2 of the Rules of Professional Conduct, which provides as follows:
7.2-2 A lawyer shall avoid sharp practice and shall not take advantage of or act without fair warning upon slips, irregularities, or mistakes on the part of other legal practitioners not going to the merits or involving the sacrifice of a client's rights. [Emphasis added]
[^2]: Moreover, Rules 56 of the Principles of Civility and Professionalism for Advocates published by the Advocates’ Society provide:
- Subject to the applicable rules of practice, advocates should not cause any default or dismissal to be entered without first notifying opposing counsel, if the identity of opposing counsel is known. [Emphasis added]
- 2 -
[^3]: Section 7.2-1.1 of the Rules of Professional Conduct states:
7.2-1.1 A lawyer shall agree to reasonable requests concerning trial dates, adjournments, the waiver of procedural formalities, and similar matters that do not prejudice the rights of the client. [Emphasis added]