M.T. MEGAW QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2018 SKQB 217 Date: 2018 07 31 Docket: QBG 202 of 2018 Judicial Centre: Saskatoon BETWEEN: DOUGLAS SOLLOWS ARCHITECT INC. and THE KEY FIRST NATION Counsel: Jeffrey M. Lee, Q.C., and Katelyn J. Jones for the plaintiff Nathan Phillips for the defendant FIAT ROTHERY J. July 31, 2018 [1] On March 15, 2018, the plaintiff, Douglas Sollows Architect Inc. [Sollows], obtained default judgment against the defendant, The Key First Nation [Key], totalling $102,703.62 plus costs assessed at $1,598.50. Sollows had sued Key for monies owed pursuant to an agreement to provide professional architectural services. [2] Pursuant to Rule 10-13 of The Queen’s Bench Rules, Key’s counsel now applies to set aside that default judgment and seeks leave to file defence in the form of the draft filed with the court July 19, 2018. Because the Sheriff holds funds seized under the enforcement proceedings following the entering of the default judgment, Sollows’ counsel undertakes to request the Sheriff to continue to hold those funds pending further order of the court. [3] Counsel for Key submits that the default judgment should be set aside because Sollows has entered judgment that is greater than the amount due. Counsel refers to Beaver Lumber Company Hopfauf, 1932 CanLII 192 (SK CA), [1932] WWR 357 (WL) (Sask CA) at para 11, in support of this principle: 11 It is clear from number of authorities that it is on the allegations in the pleadings that default judgment must be signed: McCoy v. Laberge, 1929 CanLII 134 (SK CA), [1929] W.W.R. 154, 23 Sask. L.R. 544; Wagar v. Little (No. 2) 1923 CanLII 672 (AB CA), [1924] W.W.R. 112; Ellam v. Acadia Trust Co. Ltd. (1914) W.W.R. 1083; Ewing v. Latimer (1903) Terr. L.R. 499. The judgment having been signed for too much, it should be set aside ex debito justitiae: McCoy v. Laberge, supra; Fawell v. Andrew, [1917] W.W.R. 4001, 10 Sask. L.R. 162; Wagar v. Little, supra; Anlaby v. Praetorius (1888) 20 Q.B.D. 764, 57 L.J. Q.B. 287; Hughes v. Justin, [1894] Q.B. 667, 63 L.J.Q.B. 417. [4] find no merit in the submissions of Key’s counsel that Sollows has calculated interest too high because of “rounding error”. Per diem rates ought to be stated in dollars and cents. However, Key’s counsel is entirely correct that Sollows has calculated two extra days of interest on one of the invoices. The time frame from March 22, 2016 to March 15, 2018 is total of 723 days, not 725 days. Thus, two extra days of interest at per diem of $8.54 amounts to an overcharge of $17.08. As a matter of right, Key is entitled to have the default judgment set aside. [5] In exercising my judicial discretion under Rule 10-13, I must also conclude that Key is entitled to have the default judgment set aside on its merits. [6] The applicable principles in considering Rule 10-13 are the same as the former Rule 346. As stated by Caldwell J.A. in Ballentyne Benard, 2012 SKCA 23 (CanLII) at paras 11-13, 385 Sask 280, the court’s exercise of judicial discretion is based upon the following factors: [11] The reference to “wilful blindness” may have its source in Klein v. Schile (1921), 1921 CanLII 107 (SK CA), 59 D.L.R. 102, an earlier decision of this Court, where Lamont J.A., setting out the circumstances in which judicial discretion will be exercised in favour of an applicant under what is now Rule 346, suggested that the delay in setting aside the default judgment should not be “wilful” (at p. 103): The circumstances under which court will exercise its discretion to set aside judgment regularly signed are pretty well settled. The application should be made as soon as possible after the judgment comes to the knowledge of the defendant, but mere delay will not bar the application, unless an irreparable injury will be done to the plaintiff or the delay has been wilful. Tomlinson v. Kiddo, 1914 CanLII 139 (SK CA), Sask. L.R. 132, W.W.R. 93, 29 W.L.R. 325; Mills v. Harris, Sask. L.R. 114. The application should be supported by an affidavit setting out the circumstances under which the default arose and disclosing defence on the merits. Chitty’s Forms, 13th ed., p. 83. It is not sufficient to merely state that the defendant has good defence upon the merits. The affidavits must show the nature of the defence and set forth facts which will enable the Court or Judge to decide whether or not there was matter which would afford defence to the action. Stewart v. McMahon, Sask. L.R. 209, W.L.R. 643. If the application is not made immediately after the defendant has become aware that judgment has been signed against him, the affidavits should also explain the delay in making the application; and, if that delay be of long standing, the defence on the merits must be clearly established. Sandhoff v. Metzer, W.L.R. 18. [12] review of the jurisprudence indicates this Court has consistently followed Klein v. Schile, see: Hamel v. Chelle (1964), 1964 CanLII 384 (SK CA), 48 W.W.R. 115 (Sask. C.A.); Warner Construction Co. v. Wood River (Rural Municipality) (1979), 1979 CanLII 2230 (SK CA), 105 D.L.R. (3d) 370 (C.A.); Bank of Montreal v. Pauls (1984), 1984 CanLII 2419 (SK CA), 35 Sask. R. 204 (C.A.); Wicks v. Wicks (1990), 1990 CanLII 7728 (SK CA), 87 Sask. R. 139 (C.A.); and Rimmer v. Adshead [2002 SKCA 12]. These cases interpret Klein v. Schile as having established the four requirements subsequently referred to in Strange v. Saskatchewan [2008 SKQB 481], including the requirement to provide “satisfactory explanation” for failure to respond to the claim. However, in Rimmer v. Adshead, at para. 60, Cameron J.A. added that “the merit of the matter is the dominant consideration provided the delay not be accompanied by irreparable harm.” Of these cases, only Warner Construction Co. v. Wood River (Rural Municipality) made any reference to the idea of “wilful delay” as reason, in itself, to deny the application. [13] While one might imagine circumstances in which “wilful” failure to defend an action might constitute sufficient reason to deny an application to set aside default judgment, as noted, the fundamental principle relevant to the exercise of judicial discretion in these cases is that it is necessary to ensure that the application of the Court’s rules and principles does not violate the principles of fundamental justice and equity. As Cameron J.A. pointed out in Rimmer v. Adshead, the applicable principle requires consideration of all the circumstances and strong reason to deny defendant his or her day in court when he or she can demonstrate an arguable defence to the claim and the delay has not caused the plaintiff irreparable harm. [Emphasis added] [7] Sollows’ counsel submits that Key is not entitled to have the default judgment set aside because of the “wilful” failure of its chief and one band councillor to defend the action, even though they had been warned of the consequences of not responding to the action. Sollows’ counsel also argues that there is no defence upon the merits. However, Sollows’ counsel concedes that Sollows will not suffer irreparable harm if the default judgment is set aside and it must pursue its claim against Key. [8] The facts surrounding the response to this Statement of Claim are unique. Sollows’ counsel wrote letter to Chief Rodney Brass on December 18, 2017, demanding payment for the architectural services. Additional information of the debt was provided to Chief Brass by correspondence of December 19, 2017 and January 11, 2018. Sollows’ process server properly served Angela Desjarlais, one of Key’s band councillors, with the Statement of Claim on February 15, 2018. [9] After service of the Claim on Angela Desjarlais on February 15, 2018, and following telephone conversation between Chief Brass and Sollows’ counsel on February 20, 2018, Sollows’ counsel provided further particulars to Chief Brass on February 21, 2018 and warned of the pending deadline to defend the action. [10] Sollows’ counsel noted the action for default on March 14, 2018, and took out default judgment on March 15, 2018. On March 21, 2018, Sollows’ counsel received letter from Maurice Law Firm advising they had been retained to represent Key and requesting that the action not be noted for default without reasonable notice. Sollows’ counsel sent Maurice Law Firm correspondence dated March 22, 2018, advising they were unable to grant that undertaking because default judgment had already been entered against Key. [11] The unique aspect of this action is what happened on March 21, 2018. Some members of Key had brought an application before the Federal Court of Canada on November 16, 2017, seeking an order setting aside the election of the chief and band councillors conducted on October 1, 2016. Two of the respondents elected on October 1, 2016 were Chief Rodney Brass and band councillor Angela Desjarlais. Barnes J. rendered decision on March 21, 2018 (cited as 2018 FC 325 (CanLII)) annulling the election and ordering that new election be conducted. Barnes J. specifically referred to the misconduct of Rodney Brass and Angela Desjarlais (among others) that sufficiently corrupted the October 1, 2016 election. [12] Thus, between March 21, 2018 and June 12, 2018, Key was without chief and band councillors. In the election conducted June 12, 2018, Clarence Papequash was elected chief and Clinton Key and David Darrell Cote were two of the five councillors elected. [13] Chief Papequash and councillor Clinton Key swore affidavits in this application stating that they first learned of this default judgment on June 22, 2018. Chief Papequash states that he immediately sought legal counsel. Key’s present counsel sent correspondence to Sollows’ counsel on June 27, 2018, explaining that the positions of chief and band councillors had been vacant between March 21, 2018 and June 12, 2018. The default judgment had just come to the attention of the new band council on June 22, 2018. [14] Because Sollows’ counsel refused to set aside the default judgment, Key’s counsel brought this application on July 19, 2018. [15] Sollows’ counsel concedes that Key’s electoral turmoil may be an explanation for Key’s delay in defending the case between March 21, 2018, and June 12, 2018. But, that does not explain what should be characterized as wilful failure to defend in the time frame between February 15, 2018 and March 14, 2018. Key was warned of the deadline that was looming. [16] I cannot accept that a time frame of 28 days is sufficiently long for the court to prevent Key from defending the action. That is only seven days past the date Sollows was permitted to note the action for default. Given that Key’s then counsel responded to the action soon after default judgment was entered, this delay in defending the action is insufficient to deny Key its day in court. [17] Sollows’ counsel also argues that Key has not demonstrated an arguable defence to the claim. Sollows filed affidavit evidence to show that there had been contract for professional services with Key. However, band councillor Cote swears that no contract was ever made with Sollows in the time frame he was chief, from December 2014 to October 1, 2016. Councillor Key and Chief Papequash swear that they had been band councillors since the October 1, 2016, election. But, they were regularly excluded from band council meetings. [18] This evidence forms the foundation for an arguable defence. In paragraph of the draft Statement of Defence, Key pleads: 5. In the alternative, THE KEY FIRST NATION pleads and relies upon the Indian Act in general, and in particular section 2(3)(b). At no point in time was the purported contract alleged by the Plaintiff authorized or executed at duly called and convened meeting of the Band Council of THE KEY FIRST NATION, or was anyone authorized to enter into same on its behalf. Pursuant to section 2(3)(b) of the Indian Act, any such purported contract alleged by the Plaintiff is deemed to not bind THE KEY FIRST NATION. [19] The basis of this defence is outlined in W. Downer Holdings Ltd. Red Pheasant First Nation, 2012 SKQB 468 (CanLII) at paras 25-26, 34-36 and 42-43, 408 Sask 110, where Scherman J. stated: 25 Section 2(3) of the Indian Act provides as follows: 2(3) Unless the context otherwise requires or this Act otherwise provides, (a) power conferred on band shall be deemed not to be exercised unless it is exercised pursuant to majority of the electors of the band; and (b) power conferred on the council of band shall be deemed not to be exercised unless it is exercised pursuant to the consent of majority of the councillors of the band present at meeting of the council duly convened. 26 Counsel for Red Pheasant argues that the signatures of six councillors on the settlement agreement do not bind the Band because, under s. 2(3) of the Act, powers conferred on Council are deemed not to be exercised unless done pursuant to the consent of the majority of the councillors present at meeting of the Band Council duly convened. In support of this interpretation of the legislation, they rely on the decisions in Heron Seismic Services Ltd. v. Peepeekisis Indian Band (1990), 1990 CanLII 7500 (SK QB), 87 Sask. R. 66, [1990] S.J. No. 495 (QL) (Q.B.), upheld on appeal at (1991), 1991 CanLII 7963 (SK CA), 86 D.L.R. (4th) 767, [1991] S.J. No. 553 (QL) (C.A.); and Brass v. Peepeekisis Cree Nation No. 81, 2002 SKQB 194 (CanLII), 221 Sask.R. 4, upheld on appeal at 2004 SKCA 40 (CanLII), 254 Sask. R. 3. 34 At no Red Pheasant Band Council meeting was anyone authorized to negotiate and conclude the settlement agreement in question. Accordingly, whether apply the law as stated by the Saskatchewan Courts (as am bound to do) or accept the logic of Moir J. [Maloney Eskasoni Indian Band, 2009 NSSC 177 (CanLII)], in which find significant merit, the result is the same. Even under the Moir J. approach to the interpretation of s. 2(3)(b), the power of Council was not exercised “pursuant to the consent of majority of the councillors present at meeting”. Therefore, the settlement agreement is unenforceable because no one was authorized, by consent of majority of the councillors present at Band Council meeting, to enter into such an agreement on behalf of the Band. 35 The fact that majority of the councillors signed the settlement agreement does not salvage the issue for the plaintiffs since the language of the statute expressly requires the power of Council to be exercised “pursuant to the consent of majority of the councillors present at meeting”. There was no meeting as required by the legislation. 36 This is not distinction of little significance. For band councils and host of other decision-making bodies including municipal councils, decisions cannot be made without the matter being brought before meeting of the body. This permits all members of council who might disagree the opportunity to voice their opposition and reasons for their opposition. The required meeting and debate might well change the views of those who came prepared to approve. One of the strengths of the democratic process is the opportunity to debate matters to be decided and to convince others. The requirement for matters to be dealt with and approved at meeting of the body, ensures public transparency relating to the decisions of governing bodies. In each of the cases relied upon by the plaintiff, the band or the band council had the opportunity to debate the matter and made decision to authorize its chief to proceed. 42 The legislation provides that Council may only exercise its power “pursuant to the consent of majority of the councillors present at meeting”. The logic and the law relating to ostensible authority cannot supplant this clear statutory direction as to how and when band councillors are entitled to make decisions. To permit majority of Council to bind the Band on the principle of ostensible authority when they have made decision outside of Council meeting would be permitting common law principle of contract law to supplant the express direction of Parliament. 43 It should be noted that the fact of being member of collective decision-making body, means no one councillor can be viewed as having the ostensible authority to bind the whole of council. Councillors can only act collectively and thus one or several counsellors do not have ostensible authority to make decision. chief or band manager by virtue of their position may, in commercial matters, have the ostensible authority to bind. All councillors (which includes the chief) may arguably have ostensible authority to bind. But individual councillors or collection of councillors less than all do not. In reaching these conclusions, acknowledge the logic and merit of Moir J.’s reasoning, but cannot adopt because of the existing precedent in this jurisdiction and for the additional reasons have outlined. [20] Thus, non-compliance with s. 2(3)(b) of the Indian Act, RSC 1985, c I‑5, may well be an arguable defence in this case. Whether there has actually been non-compliance is matter for the trial judge to decide. That is exactly one of the issues the judge had to decide by way of trial in All-Fab Building Components Inc. Montreal Lake No. 354, 2015 SKQB 407 (CanLII). [21] In short, I find that the delay has not caused Sollows irreparable harm, and Key has demonstrated an arguable defence to Sollows’ claim. This is an appropriate situation to exercise the judicial discretion provided by Rule 10-13 and set aside Sollows’ default judgment. Key is granted leave to serve and file its Statement of Defence, in the form of the draft filed July 19, 2018. [22] Counsel for Key seeks costs of this application in any event of the cause, on the basis that the default judgment was set aside ex debito justitiae. While costs are often granted in such case, upon considering the entire set of circumstances that led to this application, Sollows should not have costs awarded against it for what was actually result of electoral turmoil within Key’s own governance. [23] The application is granted. Costs shall follow the cause. J. A.R. ROTHERY
HELD: The application was granted. The judgment was set aside and the defendant given leave to file its statement of defence. The court found that the judgment should be set aside as a matter of right because it was in excess of the amount due. The judgment was also set aside on the merits. It found that the time between service of the statement of claim and the default judgment was not sufficiently long to prevent the defendant from defending the action. As well, the defendant had provided an arguable defence to the claim in that it pled in its proposed defence of non-compliance with s. 2(3)(b) of the Indian Act. The delay had not caused the plaintiff irreparable harm.