Court File and Parties

Court File No.: CV-23-0295-00 Date: 2024-09-18 Ontario Superior Court of Justice

Between: Thomas McIlwain, Plaintiff – and – Len’s Cove Marina Ltd., Defendant

Counsel: R. Larson, for the Plaintiff C. Shelley, for the Defendant

Heard: Thursday June 27, 2024, Thunder Bay, Ontario

Before: The Honourable Mr. Justice S. J. Wojciechowski

Reasons on Motion to Set Aside Default Judgment

Introduction

[1] The plaintiff, Thomas McIlwain (“McIlwain”), resides in Thunder Bay, Ontario. On January 24, 2022, he purchased a new 2021 Nautic Star Model 231 HS boat (“the Boat”) and trailer from the defendant, Len’s Cove Marina Ltd. (“the Marina”), for $119,395.85.

[2] McIlwain used the Boat during the 2022 summer season. Following that season, while the Boat was in storage, McIlwain noted structural issues, including cracks and pitting.

[3] Discussions between McIlwain and the Marina on how to resolve the structural issues were unsuccessful, and McIlwain commenced an action by issuing a Statement of Claim against the Marina on August 1, 2023.

[4] The Statement of Claim was served upon the Marina. No Statement of Defence was filed. McIlwain obtained a default judgment against the Marina on December 21, 2023, for $138,852.26 (“the Default Judgment”). The Marina learned of the Default Judgment on January 18, 2024, and brought this motion dated May 1, 2024, to set aside the Default Judgment.

[5] After reviewing the materials filed by the parties and hearing submissions on June 27, 2024, it is my decision that the Default Judgment shall not be set aside.

Background

[6] After purchasing the Boat in January 2022, McIlwain made arrangements with SteppingStone Transport to ship the Boat from Portland, Ontario to Thunder Bay, Ontario at a cost of $2,000.00. McIlwain used the Boat approximately three or four times per week during the summer of 2022, and was satisfied with its performance.

[7] After the 2022 boating season, the Boat was winterized and stored on the trailer which was also purchased from the Marina. No defects in the Boat were noted at that time. However, by February 2023, McIlwain had found some cracks in the exterior rear of the Boat, which were immediately reported to the Marina.

[8] Additional structural issues became apparent over the next few months, and by May 2023 the following defects were identified:

• cracks on the rear portside transom;
• cracks on the rear stringer;
• cracks on the rear portside stringer around the drain pipe under the seat;
• cracks on the rear portside stringer under the seat where the floor meets the support beam;
• cracks on the outside portside cap;
• cracks on the outside starboard side cap;
• cracking on the starboard side stringer under the back seat by the motor;
• cracking and pitting in the gelcoat by the motor;
• major gelcoat pitting on the underside of the Boat;
• cracks in the gelcoat at the rear;
• cracking in the gelcoat at the rear of the starboard side;
• cracks in the gelcoat near the rear drain hole;
• cracking and deep pitting of the gelcoat beneath the Boat by the motor;
• cracking the pitting to the gelcoat allowing external water seepage at the rear of the boat;
• cracking where the ladder’s handle meets the Boat; and
• significant crack to the table in the interior of the Boat.

[9] After presenting these structural defects to the Marina, the Marina consulted with Nautic Star, the manufacturer of the Boat, who was of the opinion that the defects were cosmetic and not structural. In May 2023, the Marina instructed McIlwain to make inquiries locally – in Thunder Bay, Ontario – to see if the “cosmetic” issues could be repaired, and at what cost.

[10] McIlwain engaged three Thunder Bay companies to inspect the Boat and provide an opinion on how to approach the repairs. All three companies – FRP Systems Ltd., Norm’s Boating Centre Inc., and Shanadoh’s Mobile Fibreglass Repair Service – advised McIlwain that the issues were not cosmetic. Instead, the issues were identified as significant, possibly rendering the Boat beyond repair.

[11] Upon advising the Marina of the outcome of the consultations on May 22, 2023, McIlwain was told that he would have to return the Boat to the Marina so that the manufacturer could perform its own inspection and analysis. Due to the costs of transporting the Boat back to the Marina, which McIlwain was advised he would have to pay, McIlwain told the Marina that he was dissatisfied with the proposal. In June 2023, the Marina responded with three options to McIlwain to address the defects in the Boat.

[12] The first option was to return the Boat to the Marina so that repairs could be undertaken in accordance with the terms of the applicable warranty provided by Nautic Star.

[13] The second and third solutions involved the return of the Boat to the Marina, which could then be traded in for a 2023 or 2024 Nautic Star vessel. The trade in option would include a depreciation factor of approximately 28% being applied to the value of the Boat. McIlwain would then have to make up the differences in purchase prices which would require him to pay amounts in excess of $80,000.

[14] Since the advice to McIlwain from the three companies indicated that it was likely the Boat could not be repaired and instead should be replaced, he was not prepared to transport the Boat to Portland, Ontario at his cost for warranty work which could not address the defects. In addition, McIlwain did not find the suggestion that he pay a sum in excess of $80,000 to replace the brand new Boat he bought from the Marina to be a viable option.

[15] Without an agreed upon solution or approach to resolving the defects, McIlwain issued a Statement of Claim dated August 1, 2023.

The Litigation

[16] After the Statement of Claim was issued, it was served upon the Marina on August 5, 2023. There is no issue raised with respect to the service of the claim, as it was personally served upon Sean Horsfall, the owner of the Marina, who was well aware of the background behind McIlwain’s claim.

[17] In response to the claim, Sean Horsfall did not file a Notice of Intent to Defend, nor did he file a Statement of Defence. Sean Horsfall also did not contact McIlwain nor attempt to communicate with McIlwain with respect to the claim being advanced. Instead, Sean Horsfall contacted Nautic Star and thereafter says he understood – incorrectly – that Nautic Star would be addressing McIlwain’s issues directly with McIlwain.

[18] After no one contacted McIlwain, and no one acknowledged the Statement of Claim which had been served, McIlwain filed documents to note the Marina in default on September 8, 2023.

[19] Approximately three months later on December 12, 2023, McIlwain filed motion materials seeking judgment. The motion was heard on December 21, 2023, with the Default Judgment being issued in the amount of $138,852.86, inclusive of damages, costs, disbursements, HST, and interest.

[20] The Default Judgment was formally issued by the Thunder Bay Superior Court of Justice on January 11, 2024. On January 17, 2024, a copy of the Default Judgment was served upon the Marina.

[21] After being served with the Default Judgment, the Marina did not reach out or communicate to McIlwain. Accordingly, McIlwain prepared and filed a Writ of Seizure and Sale on March 6, 2024, and directed the sheriff with jurisdiction in Portland, Ontario to seize and sell the property of the Marina in order to satisfy the Default Judgment.

[22] On March 22, 2024, the Marina retained legal counsel to address the Default Judgment.

[23] On April 15, 2024, counsel representing McIlwain reached out to Sean Horsfall in order to make arrangements to set up an Examination in Aid of Execution so that McIlwain could execute upon the Default Judgment. At that time, in response to an email sent to the Marina, the law office of Cunningham, Swan, Carty, Little and Bonham LLP advised that it had been retained to act on behalf of the Marina, directing all future correspondence be sent to David Adams.

[24] Counsel for McIlwain then confirmed that all future correspondence would be sent to the office of David Adams and requested a suitable date to undertake the examination of Sean Horsfall.

[25] No one from Cunningham, Swan, Carty, Little and Bonham LLP responded to the request for suitable dates in which to perform the Examination in Aid of Execution. Instead, two weeks later on May 1, 2024, the Motion Record of the Marina was served upon counsel for McIlwain seeking an order setting aside the Default Judgment.

Marina’s Explanation for the Delay

[26] In the motion materials prepared by the Marina, the affidavit of Sean Horsfall sworn April 30, 2024, provides the explanation why the Marina did not respond to the Statement of Claim until May 1, 2024.

[27] Sean Horsfall acknowledges receiving a copy of the Statement of Claim in early August 2023. He did not, however, pay any attention to the claim until the middle of September 2023 for the following reasons: (a) August is typically the busiest month for business at the Marina; (b) at that time, the Marina was in the process of renovating and expanding its restaurant; (c) in or around the time Sean Horsfall read the Statement of Claim for the first time, there was a death in the family which required his attention; (d) after the death in the family occurred, Sean Horsfall’s son experienced a “terrible accident at work” which involved a compound fracture and a stressful visit to the hospital; (e) a longstanding customer of the Marina died in an accident on the lake around the same time as Sean Horsfall’s son’s workplace injury occurred and this required a full rescue operation involving many of the staff of the Marina; and (f) at the end of August 2023, Sean Horsfall traveled to England to attend a wedding.

[28] In the middle of September 2023, Sean Horsfall states he reached out to Nautic Star in order to further review and discuss the issues raised in the Statement of Claim. At that time, neither Sean Horsfall nor his staff were in communication with McIlwain, and at no time before May 1, 2024 did Sean Horsfall or the Marina reach out to McIlwain.

[29] Thereafter, throughout the months of September, October, November, and December 2023, Sean Horsfall’s evidence is that he had frequent communications with Nautic Star regarding issues with the Boat. As a result of these communications, Sean Horsfall formed the impression that a solution was forthcoming and that he did not need to submit a defence to the Statement of Claim.

[30] In his affidavit sworn April 30, 2024, Sean Horsfall states that because of the events of the Fall of 2023 - including his discussions with Nautic Star - he was “shocked” when he discovered the Judgment had been granted in favor of McIlwain in December 2023.

The Law

[31] Rule 19.08 provides the basis for setting aside a default judgment:

(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. (2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge 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 noting of default under rule 19.03.

[32] In the case of Intact Insurance v. Kisel, 2015 ONCA 205, 125 O.R. (3d) 365, the Court of Appeal discussed, at para. 14, the five factors which should be considered when determining whether a judgment should be set aside:

(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), 119 O.R. (3d) 561, [2014] O.J. No. 1197, 2014 ONCA 194, 372 D.L.R. (4th) 526, at paras. 48-50.

[33] The fact that a moving party may have a defence on the merits is not a consideration which effectively trumps the other relevant factors. Issues of delay are just as significant, as was discussed in Sinnadurai v. Laredo Construction Inc. (2005), 78 O.R. (3d) 321, at paras. 25-27:

[25] This court has stated that the factors governing the setting aside of a default judgment are not to be applied rigidly. See Chitel v. Rothbart, [1988] O.J. No. 1197, 29 C.P.C. (2d) 136 (C.A.). There have been cases where the explanation for the default has been given less weight because the defence had merit. See: 441612 Ontario Ltd. v. Albert, [1995] O.J. No. 271, 36 C.P.C. (3d) 198 (Gen. Div.), at para. 48 and D.R. McKay Financial Group, Inc. v. Klad Enterprises Ltd., [2004] O.J. No. 4288, 193 O.A.C. 281 (S.C.J.). However, this does not mean that the second part of the test is to be ignored because of an arguable defence. Otherwise, why have it? [26] It is interesting to note, on this issue, the recent decision in Janssen-Ortho Inc. v. Novopharm Ltd., 2005 SCC 33, [2005] 1 S.C.R. 776, [2005] S.C.J. No. 64, where LeBel J. refused an application to extend the time of an application for leave to appeal to the Supreme Court of Canada. He stated at p. 778 S.C.R., para. 4: Time limits should mean something. Valid reasons should be given to explain the delay. Our Court must be flexible and fair. Fairness is owed not only to applicants but also to respondents who may very well be significantly inconvenienced by undue or unexplained delays. [27] On the facts of this case, I see no error by the motions judge in giving serious consideration to the second part of the test, which requires that the moving party explain the circumstances which led to the default.

[34] A review of the law suggests that, in determining whether to set aside a default judgment, all factors are to be given equal consideration and weight, without one being more decisive than the others. Whether to relieve a party from the consequences of a default judgment is a decision in which all relevant circumstances must be considered.

[35] I will now address the five factors referenced in Intact Insurance v. Kisel.

Was the Motion Brought Promptly?

[36] The Marina was aware of the Default Judgment on January 17, 2024, and three and a half months later brought its motion to set aside the Default Judgment on May 1, 2024.

[37] Three and a half months is arguably not an unreasonable amount of time in the context of a civil litigation environment which far too often takes years to process claims. However, the Marina’s evidence is that counsel was not retained until March 22, 2024, which is approximately nine weeks after the Default Judgment was served. Unlike the rationale for initially ignoring the Statement of Claim, there is no explanation provided for why it took over two months to get legal advice on how to respond to the Default Judgment. It then took approximately five weeks following the retainer of legal counsel to file this motion, again without any explanation as to why such a further delay was necessary.

[38] There may, of course, be sufficient reasons for these delays. However, no explanation has been provided by the Marina. No evidence is set out in the affidavit of Sean Horsfall explaining why it took nine weeks to retain David Adams, and none of the evidence provided explains the five week delay in delivering this motion.

[39] While it may not be possible in each and every case to do so, upon being notified of a judgment, a defendant should be able to retain counsel and deliver a notice of motion seeking to set aside the judgment within a relatively short period of time. In doing so, a plaintiff would at least be made aware that something had happened causing the defendant not to respond to the claim, and that steps were being taken to cure the default judgment. Furthermore, once made aware, the plaintiff would know that it was not necessary to take any other steps in furtherance of the default judgment, such as the preparation and filing of a writ of seizure and sale.

[40] Of course, in some circumstances, three and a half months could be considered to fall within the range of “promptly”. To some extent, this would make sense if a defendant or its counsel made efforts to contact the plaintiff and/or its counsel to discuss the situation and agree upon time frames to sort out the issues arising from the default judgment. But in the absence of any communication whatsoever – in this case, essentially nothing from January 17, 2024 to May 1, 2024, and virtually nothing from August 5, 2023 to May 1, 2024 – and based on the fact that no evidence is provided in which to consider the context of the fourteen weeks it took to bring this motion, I do not find that the motion of the Marina was brought promptly.

Plausible Excuse or Explanation for the Default

[41] Again, the relevant time frame is as follows: The Statement of Claim in this matter was issued on August 1, 2023, and the Marina was served with the claim on August 5, 2023. The Marina was noted in default on September 8, 2023. Default Judgment was obtained against the Marina pursuant to a motion which was heard on December 21, 2023. The Marina was served with the Default Judgment on January 17, 2024.

[42] The affidavit evidence filed by the Marina was provided by Sean Horsfall. No cross examination was undertaken with respect to the Marina’s evidence, and as such this is the only evidence available to explain the basis for the delay in responding to the Statement of Claim.

[43] My consideration of plausible reasons for not responding to the Statement of Claim examines the time period between August 5, 2023 and January 17, 2024. I have already addressed the additional delay between January 17, 2024 and May 1, 2024, and the fact that the evidence filed failed to satisfy me that any action taken by the Marina could be considered “prompt” during those fourteen weeks.

[44] I am similarly dissatisfied with the Marina’s evidence explaining why it failed to respond to McIlwain’s Statement of Claim.

[45] Sean Horsfall’s evidence provides some basis for his failure to respond to the Statement of Claim, which he received in early August 2023, but this evidence only focusses on the period between August and early September 2023. His explanation of why the Marina failed to respond to the Statement of Claim during those six weeks is simply that he was too busy and preoccupied with other matters, including a busy retail season and an overseas wedding.

[46] With respect to his son’s “terrible accident at work”, it involved a compound fracture and a stressful visit to the hospital. No doubt this accident drew Sean Horsfall’s attention away from the business of the Marina, but no evidence is provided regarding the specific nature of the accident, nor the amount of Sean Horsfall’s time it consumed.

[47] The other event in August, or early September, was an accident causing the death of a longstanding customer of the Marina, which required a full rescue operation involving many of the staff of the Marina. Again, there is no indication as to what extent Sean Horsfall was involved in this full rescue operation, nor how much of Sean Horsfall’s time and attention it diverted during the relevant five or six week period.

[48] The Marina’s evidence only addresses the time from early August 2023 to the middle of September 2023. Absent is specific evidence relevant to the remainder of the calendar year 2023.

[49] Sean Horsfall claims that he was shocked to learn of the Default Judgment granted in December 2023. However, there is no feasible explanation provided as to why he would have been shocked, given the clear language found within the first two pages of the Statement of Claim directing the Marina on what was expected in the form of a response and/or defence.

[50] On the first page of the Statement of Claim is the following, in all uppercase letters: IF YOU FAIL TO DEFEND THIS PROCEEDING, JUDGMENT MAY BE GIVEN AGAINST YOU IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. This standard wording clearly explains what will happen if a defendant ignores and fails to respond to a Statement of Claim.

[51] This document was issued on August 1, 2023, and served upon Sean Horsfall on August 5, 2023. It would have been shocking if nothing had occurred in response to the Marina’s failure to even acknowledge, never mind respond to, McIlwain’s claim.

[52] Sean Horsfall states he was told by Nautic Star that they would take care of the claim and that they would be contacting McIlwain to discuss the issues surrounding the Boat, However, minimal evidence is provided in support of this statement.

[53] The evidence filed indicates that, between September and December 2023, frequent communications occurred between Sean Horsfall and Nautic Star. Because of these discussions, Sean Horsfall states he was under the impression that a solution was forthcoming, and that he did not need to defend the Statement of Claim.

[54] However, aside from a brief email exchange in August 2023, no particulars of any discussions with Nautic Star are provided for the months of September, October, November, or December 2023, neither verbal accounts nor copies of letters or emails. It is incumbent upon the Marina to explain its reasons for ignoring McIlwain’s claim, and without details of what transpired over that period of four months, I do not find the reasons or excuses provided by the Marina to be plausible.

[55] While the affidavit evidence of Sean Horsfall suggests that he was preoccupied with other matters following service of the Statement of Claim on August 5, 2023 to the middle of September 2023, there was no reason provided as to why he thought he could simply ignore the Statement of Claim for the remainder of 2023.

[56] His evidence, found in paragraph 37 of his affidavit, confirms his impression that McIlwain and Nautic Star’s warranty representative were working towards a solution when McIlwain commenced legal action in early August 2023. Email exchanges dated before August 2023 have been filed in support of discussions between McIlwain and the Marina, as well as discussions between the Marina and Nautic Star.

[57] The only correspondence post-dating the delivery of the Statement of Claim is found in Exhibit “E” to the affidavit of Sean Horsfall, which is an email chain between him and a representative of Nautic Star, Jack Kowalczyk. These emails were exchanged between August 17, 2023 and August 18, 2023.

[58] The email of August 17, 2023 is from Sean Horsfall to Jack Kowalczyk, and attaches something for review by Nautic Star. No evidence is provided to identify the attachment, but the response of Jack Kowalczyk, dated August 18, 2023, is that Nautic Star will develop a plan of action to settle “this” outside of court. So perhaps the attachment is the Statement of Claim which Sean Horsfall maintains he had no time until the latter part of September 2023 to address.

[59] On the same day, August 18, 2023, Nautic Star indicates its willingness to replace the Boat’s damaged hull by returning it to the factory. Sean Horsfall responds by asking if Jack Kowalczyk is going to let McIlwain know. Jack Kowalczyk agrees to do so, and Sean Horsfall provides contact information for McIlwain.

[60] This is the only documentary evidence provided of communications between the Marina and Nautic Star outlining a possible resolution to address the Boat’s deficiencies. Aside from what is baldly stated in Sean Horsfall’s affidavit, there is no evidence to suggest that further communications with Nautic Star continued after August 18, 2023.

[61] Sean Horsfall states that, by the middle of September 2023, he was able to put some attention towards the Statement of Claim and had ongoing communications with Nautic Star addressing McIlwain’s issues, and this is why he thought he did not have to respond to the Statement of Claim. However, there is no evidence that he followed up on his emails with Nautic Star dated August 18, 2023, nor that he confirmed that Nautic Star was actually dealing directly with McIlwain. And, while the Marina was sued by McIlwain, at no time after receiving the Statement of Claim did Sean Horsfall call, email, text or otherwise communicate with McIlwain. McIlwain’s evidence supports the assertion that no one reached out to him after the Statement of Claim was served.

[62] Absent evidence to the contrary, and without any details of ongoing communications between Sean Horsfall and Nautic Star which could lead Sean Horsfall to a reasonable conclusion that McIlwain’s issues with the Boat were being addressed in such a fashion that the Statement of Claim could be ignored, I find that it is probable that these communications did not occur.

[63] Absent evidence adequately explaining the Marina’s inattentiveness to the Statement of Claim throughout the entire period of time from August 5, 2023 to January 17, 2024 - and specifically between September 15, 2023 to January 17, 2024 - I am unable to find that a plausible explanation or reason has been provided.

Arguable Defence on the Merits

[64] The Marina’s defence relies primarily upon two arguments.

[65] First, there are no defects or deficiencies in the Boat.

[66] Second, if there are deficiencies, there is a manufacturer’s warranty available to address the deficiencies and as such there is no cause of action against the Marina.

[67] It may be arguable that there are no defects or deficiencies in the Boat, and that the issues identified by McIlwain are cosmetic as originally suggested by the Marina. However, this is contradicted by McIlwain’s evidence, which provides a laundry list of alleged defects, as well as hearsay evidence of three Thunder Bay companies as to the nature of the defects.

[68] In addition, the evidence filed supports the apparent decision of Nautic Star to replace the hull. Exhibit “E” to the affidavit of Sean Horsfall contains an email chain between Sean Horsfall and Jack Kowalczyk from Nautic Star. No information is provided identifying Jack Kowalczyk’s position within Nautic Star, but on August 18, 2023, Jack Kowalczyk emailed Sean Horsfall and advised that Nautic Star was prepared to take the Boat back to the factory and replace the damaged hull, as early as January 22, 2024. Presumably, the entire hull of a boat would not be replaced due to purely cosmetic deficiencies. Therefore, based on this email, it appears that much more serious issues were identified as needing repair.

[69] As such, the evidence does not support the absence of defects or deficiencies in the Boat which is the first prong of the Marina’s defence. Of course, a full evidentiary record is required before this issue can actually be determined. Arguably, this defence is viable and can be advanced by the Marina notwithstanding the evidence to the contrary which was filed in support of this motion.

[70] The defence based upon the manufacturer’s warranty is more problematic. The action is brought against the Marina on the basis of a Sale of Goods Act argument, which alleges that the original bargain between McIlwain and the Marina was unfulfilled. McIlwain is not advancing a claim on the basis of a rejected warranty claim by the manufacturer, but instead is seeking a return of the monies he paid for a Boat which was materially deficient.

[71] Reliance on a warranty which the Marina did not provide to McIlwain as not a viable defence. The Marina is not a party to the warranty, nor is it bound by the terms of the warranty. While recourse under that warranty may be an option for McIlwain, Nautic Star was not made a party defendant to the claim, and as such the relief sought by McIlwain is not against the warranty. The claim is against the Marina for selling McIlwain an unmerchantable product.

[72] The availability of a warranty from Nautic Star, who has not been made a party by McIlwain and who is not proposed to be a party by the Marina, does not provide the Marina with a defence.

[73] As well, the warranty relied upon by the Marina throughout this motion was not the warranty provided to McIlwain. McIlwain provided a copy of the warranty he was given, and this document is markedly different from the document which the Marina relies upon as a defence. While some of the terms of the two documents are identical, the fact that the Marina does not know which warranty document was provided to McIlwain makes its reliance on this document as part of its defence less tenable.

[74] The Marina’s only defence having potential merit is the allegation that there are no defects or deficiencies in the Boat, which is not supported by the evidence filed in this motion. Accordingly, I do not find an arguable defence on the merits to exist.

Potential Prejudice

[75] In considering the prejudice that could arise to the parties should the Judgment be set aside, the Marina submits that it would suffer significant prejudice, and that it would be unjust if the Marina were not permitted to defend McIlwain’s claim on its merits.

[76] In addressing the lack of prejudice to McIlwain if the Judgment was set aside, paragraph 58 of the Marina’s Factum states the following:

The Plaintiff will not be prejudiced if the motion is allowed. The only harm the Plaintiff will suffer is a minor delay. However, this was caused by the Plaintiff unfairly taking advantage of the Defendant’s accidental slip in failing to file a Statement of Defence and by unfairly taking advantage of the Defendant’s belief that this matter had been resolved.

[77] The Marina asserts in the first instance that, if the motion is allowed, McIlwain will only suffer a minor delay. While not relevant to the specific question of prejudice, the fact is that McIlwain has been without the Boat or any similar vessel since the 2022 boating season. The defects discovered by McIlwain in early 2023 meant that the Boat was not available for use during that year. Litigation was commenced in early August 2023, and it was not until May 2024 that the Marina did anything to formally address McIlwain’s action. The motion was then argued at the end of June 2024, and this decision will be released on a date which effectively means yet another loss of a boating season for McIlwain.

[78] While it is true that civil litigation matters in Ontario courts can sometimes last for years on end, that is not sufficient reason to suggest that ignoring a litigation process for almost nine months - from August 5, 2023 to May 1, 2024 - is equivalent to a minor delay. At no point during these nine months did the Marina reach out to McIlwain to discuss either the issues raised in the claim or the legal process available to the parties to address the allegations in the Statement of Claim.

[79] Had the Marina reached out to McIlwain, either personally or through counsel, then perhaps the intervening nine months between service of the claim and the filing of this motion could be characterized as minor. The necessary steps within a litigation process take time to complete, and the filing of a defence, preparation of affidavits of documents, and completion of discoveries would typically take at least nine months to complete. But to suggest that McIlwain should be expected to add the wasted nine months to whatever time might now be required to pursue the litigation if this motion was granted, cannot be legitimately described as a minor delay.

[80] To then further suggest, as the Marina does, that McIlwain somehow acted unfairly in taking advantage of the Marina, because McIlwain did not recognize the failure to file a defence was “an accidental slip”, defies logic.

[81] The facts I have set out within this decision clearly support the conclusion that the Marina’s failure to file a defence was not a mistake, but was rather based upon a clear intention to ignore the claim and hope that it would be handled by Nautic Star. This assumption, of course, has not been supported by any credible evidence filed by the Marina. It is unreasonable to suggest that the Marina believed McIlwain’s issues had been resolved, and that McIlwain unfairly took advantage of this belief.

[82] The more compelling prejudice advanced by the Marina is the argument that the judgement will stand in an amount which unjustly enriches McIlwain.

[83] The Marina maintains that if it is unable to defend the claim, then McIlwain will receive more in damages than was originally paid to the Marina for the Boat and trailer which McIlwain purchased.

[84] While this may be so, I am not persuaded that this constitutes unjust enrichment. McIlwain had to present his claim to a judge and provide evidence in support of the damages he claimed. The headings of damages had to be reviewed and considered by the judge hearing the motion, and the judge would not have quantified damages without corresponding evidence to support the figures. I recognize that the Marina has issues with McIlwain’s damages as reflected in the Default Judgment. But if the Marina would have made arguments in response to the quantum of damages sought, this does not mean the court would have accepted those arguments.

[85] I find that the issue of prejudice to the parties favours supporting the Default Judgment rather than setting it aside.

Overall Integrity of the Administration of Justice

[86] Our justice system works best when parties to a dispute are permitted to fully advance their issues within our adversarial system, subject to the rules of court, the laws of evidence, and relevant legal principles. However, it is clear that this is no longer possible in all cases, given the pressures which are currently impacting the judicial system.

[87] The case of Canadian Imperial Bank of Commerce v. Petting, 2010 ONSC 6726, 6 C.P.C. (7th) 429, at paras. 7-10, provides a starting point to consider when a default judgment should be set aside:

[7] Civil litigation is slow. The Rules of Civil Procedure are the framework within which a plaintiff may bring its action and move that action forward to eventual judgment. This process is an essential feature of an ordered society under the Rule of Law. Those fundamental principles are compromised if the process for obtaining judgment is too slow and too costly. And those fundamental principles are compromised if defendants may defy the process for months or years, thereby delaying a just resolution, on the merits. [8] Thus it is that a default judgment resulting from a defendant “gaming the system” or taking a “calculated risk” in not defending will not be set aside: While debtors have rights, so too do creditors. It is not open to an alleged debtor to turn his back deliberately on a claim initiated against him and then, when it suits his purposes (and his pocket book) seek to do that which he should have done a good year before. Such conduct, in my view, is simply an attempt by a debtor to game the system and no interest of justice is served by rewarding such conduct. [9] Certainly where the court can conclude that there is an oblique motive by a defendant in failing to defend a claim, then a motion to set aside a default is unlikely to succeed. But there does not have to be an oblique motive. Indeed, the court may pile insult on top of misery in making such a finding where, as is often the case, debtors fail to defend because of stress and anxiety. There is an objective standard of reasonableness to be applied to the totality of circumstances giving rise to the default, and any delay in moving to set the default aside. Where a defendant has not acted reasonably, the court should not set aside the default, even if the court cannot determine why the defendant has proceeded as he did. [10] In the case before me, I conclude that the defendants cannot satisfy the first two branches of the three-part test. They have a very weak case on the merits. And in these circumstances, I conclude that it would permit the defendants to “game” the system to set aside the default judgment. On the record before me, I am satisfied that this is what they are doing. But even if I could not go quite so far as to impute this oblique motive to the defendants, their conduct is not reasonable, and, to “preserve the overall integrity of the administration of justice”, the default judgment should stand.

[88] I do not find that the Marina’s decision to ignore the Statement of Claim, and its current attempt to participate in the litigation commenced by McIlwain, was it trying to “game the system”. However, the Marina’s conduct was unreasonable based on my findings, and to further delay the process by setting aside the Default Judgment would do nothing to preserve the overall integrity of the administration of justice. There are many cases in which a decision to set aside a judgment would serve the interests of justice, but the specific circumstances of this case do not convince me to do so.

[89] The case of Unrau v. National Dental Examining Board, 2019 ABQB 283, 94 Alta. L.R. (6th) 1, at paras. 29-30, 31-32, provides insightful observations on the challenges facing our litigation system:

[29] Understanding the appropriate approach to managing problematic litigants requires looking outside that specific subject and to a broader overview of the state of civil litigation in Canada. Succinctly, there are very big problems. [30] First, it is commonly recognized that many Canadian courts are struggling to discharge their statutory and constitutional obligations. If there ever was a point where there were plentiful resources to accommodate the needs of all court users, that time has long since past. I agree with Justice Stratas, who recently in Fabrikant v Canada, 2018 FCA 224 at para 25 observed: Most certainly there is a resource issue, even at the best of times ... And the best of times is not now. The legal complement of the Court has fallen behind Canada’s population growth. Sprawling, multifarious cases with complexity as great as this Court has ever seen now vie for space in an already full, difficult docket. ... the resource issue remains pressing, impairing litigants’ access to timely justice. [32] In the case of criminal litigation, prosecutions of serious criminal offenses are being struck out because these matters take too long to reach and complete trial. Limited court and judicial resources are one factor that has contributed to these failures of the justice apparatus: R v Jordan, 2016 SCC 27 at paras 40-41, 116-117, [2016] 1 SCR 631 [Jordan]. [33] Another measure of inadequate and stressed court resources is how long a person must wait for a trial or hearing. The delays to access a judge of this Court are troubling. For example, as of November 2018, in this Court, parties who are fully ready to immediately proceed to a trial of over five days must wait three years, four months to have their matter heard in Calgary, and two years, ten months in Edmonton. “Justice delayed is justice denied” should not be just a trite slogan, but a true measure of the harm which results when legal disputes remain unresolved and fester. These delays injure not only the involved parties, but public confidence in the court apparatus as a whole.

[90] The experience in Alberta is no different than that of other provinces, and judicial resources are being stretched to their limits to keep up with the demands imposed upon the court system by litigants and legal requirements to process matters within strict time limits.

[91] This matter has already demanded the use of judicial resources which were not available to address other matters, including the court’s time to process the Statement of Claim and to determine the issues reflected in the Default Judgment, as well as significant time and legal costs associated with McIlwain’s efforts to date. Given my findings on the unreasonableness of the Marina’s response to McIlwain’s claim, it would not serve the integrity of the justice system to allow this matter to start again, from scratch, by setting aside the Default Judgment.

[92] I agree with the sentiment of Justice Emery, expressed at para. 27 of Westcott v. Khan, 2021 ONSC 1396, that an important consideration is the principle that courts prefer to have civil disputes resolved on their merits. However, this does not mean that each and every dispute must have access to a full litigation process in order to ensure justice is done. With the ever increasing demands on the current court system leaving less and less time for parties to pursue an adjudication of every issue raised in every matter filed, and given the manner in which the Marina ignored its opportunity to defend this matter, I am compelled to find in favour of McIlwain.

Conclusion

[93] Referring to the case of Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, it is clear that a court has the discretion to decide whether, in the particular circumstances of the case, it is just to relieve a defendant from the consequences of default.

[94] Considering all five factors enumerated in the Intact case, and weighing each factor equally, it is not reasonable in the circumstances of this case to set aside the Default Judgment.

[95] The motion of the defendant, Len’s Cove Marina Ltd., is accordingly dismissed.

Costs

[96] The parties provided their positions on costs at the end of their submissions on the motion. Given my decision, it follows that costs are to be awarded to McIlwain.

[97] In reviewing the Bill of Costs filed by McIlwain, as well as the Bill of Costs filed by the Marina, I am persuaded that McIlwain shall have his costs on this motion on a partial indemnity basis.

[98] In this regard, the Marina submitted that, if successful, partial indemnity costs should be awarded in an amount of $7,081.03, based upon the actual amounts shown in its bill of costs totaling almost $12,000.

[99] McIlwain proposed that its costs should be quantified in the amount of $7,918.89. It is unclear whether this represents a partial indemnity or a substantial indemnity assessment, but in argument of McIlwain’s counsel, this figure was compared to the quantum of substantial indemnity costs set out in the Marina’s bill of costs. Accordingly, I assume that McIlwain’s submission of just under $8,000 relates to a substantial indemnity costs’ calculation.

[100] McIlwain is entitled to its partial indemnity costs. I am not prepared to award substantial indemnity costs for this motion. Considering the effort put forth by McIlwain responding to this motion was less than the Marina’s effort which had to address the entire circumstances of the events behind the Default Judgment, I assess the costs of McIlwain to be in the amount of $3,500, inclusive of fees, disbursements, and HST.

“Original signed by” ___

The Hon. Justice S.J. Wojciechowski

Released: September 18, 2024