1994 S.H. No. 111838 IN THE SUPREME COURT OF NOVA SCOTIA BETWEEN: PICK O'SEA FISHERIES LIMITED and NATIONAL UTILITY SERVICE (CANADA) LIMITED DEFENDANT HEARD: at Halifax, Nova Scotia, before the Honourable Justice Jamie W. S. Saunders in Special Chambers, April 4, 1995 DECISION: April 5, 1995 (Orally) RELEASE OF ORAL: April 28, 1995 COUNSEL: Jonathan C.K. Stobie, Esq., for the Plaintiff D. Kevin Latimer, Esq., for the Defendant SAUNDERS, J. (Orally): Were time available, my preference would have been to give written reasons which would have been more elaborate than these. However, would not have had time to do that this month and it is in the best interests of the parties that they know the outcome and my basis for arriving at the following conclusions. In that way, should the unsuccessful party wish to appeal my decision or should transcript of these proceedings be required for any ancillary matters in Ontario, that could be arranged in short order. glean the following summary of the facts from the pleadings. The plaintiff is the successor corporation of an amalgamation which included Sweeney Limited, Yarmouth, Nova Scotia based company involved in catching, processing and marketing of fish and fish products. The defendant corporation has offices in Ontario and Quebec and held itself out as an energy efficiency consultant. The parties entered into so‑called Letter Arrangement whereby the defendant would conduct detailed energy performance evaluations of the plaintiff's operations and make recommendations for improvements and reductions in costs. The plaintiff paid the defendant what the plaintiff terms deposit and what the defendant calls service fee of Eight Thousand Dollars ($8,000.00) and agreed to pay Fifty Percent (50%) of every energy savings enjoyed for period of sixty months, provided such savings were the result of whatever of the defendant's recommendations were approved by and implemented by the plaintiff. The plaintiff complains that the defendant failed to conduct the detailed analysis it undertook and that any recommendations were superficial and of no help to the plaintiff. The plaintiff has rejected the defendant's efforts to claim substantial payments alleged by the defendant to represent its share of the plaintiff's energy savings, the plaintiff taking the position that such savings were entirely unrelated to any advice from the defendant and were, instead, the result of price reductions offered by its own suppliers of fuel. The plaintiff has claimed, first, return of its Eight Thousand Dollar ($8,000.00) "deposit"; second, declaration that the Letter Arrangement does not constitute an enforceable contract; third, if it does, that the plaintiff is not liable under the contract to the defendant, and fourth, if the plaintiff is liable, then only to the extent of liability determined by this court. On the hearing yesterday, had the benefit of lengthy arguments from Messrs. Latimer for the defendant, and Stobie for the plaintiff. typed statement confirming two agreements reached by counsel was filed. also gave leave to Mr. Stobie to tender an Affidavit sworn by Mr. Weld, March 8, 1995. Mr. Latimer confirmed that he did not oppose such tender by Mr. Stobie. The Statement of Claim was issued December 7, 1994. The defendant was served in Ontario on December 9, 1994. The Prothonotary issued default judgment on December 23, 1994 for the sum of Eight Thousand Dollars ($8,000.00), plus Two Thousand, Eight Hundred and Eighty Dollars ($2,880.00) in interest, plus Four Hundred and Four Dollars and Forty Two Cents ($404.42) in costs, for total of Eleven Thousand, Two Hundred and Eighty Four Dollars and Forty Two Cents ($11,284.42). By Interlocutory Notice filed March 2, 1995, the defendant applied, pursuant to Civil Procedure Rule 12.06, to set aside the default judgment. The matter was originally set down for Regular Chambers to be heard on March 9, 1995. asked that it be assigned to Special Chambers before me on April 4, 1995. The defendant makes three arguments in support of its application to set aside the default judgment. The first two arguments are procedural, going to the substance of the relief obtained, in that the plaintiff, it is said, did not meet the requirements for obtaining a default order from the Prothonotary and that, therefore, such order should be set aside for irregularity as of right. In the alternative, the defendant argues the merits relying upon Affidavit evidence, including that Affidavit deposed to by Ms. Lois Roberts, one of its counsel in Ontario. The defendant says that there are legitimate triable issues between the parties and that there is a reasonable excuse to explain its failure to file a defence. There were attempts to resolve this matter. The defendant offered to pay One Hundred Dollars ($100.00) as throw‑away costs, provided the plaintiff consented to setting aside its default judgment. That was unacceptable to the plaintiff which was loath to relinquish its default judgment without first securing promise from the defendant that it would either forthwith file defence, or if so advised, apply for stay of the plaintiff's action based on the doctrine of forum non conveniens. It is obvious to me that the question of trying this case in Nova Scotia or in Ontario and the tactical advantages or disadvantages to each party, has been an underlying consideration driving the positions adopted by this plaintiff and by this defendant. The defendant does not want strings attached to it securing setting aside of the default judgment. The plaintiff does not relish giving up its present leverage in way that would allow the defendant to pursue the litigation in Ontario at considerable cost and inconvenience to the plaintiff, who is without any presence there. Were the default judgment to be set aside, then the plaintiff asks for directions pursuant to Civil Procedure Rule 25.01, to ensure that this underlying issue, that is, whether Nova Scotia or Ontario is the appropriate forum, is addressed. It should be noted that on December 23, 1994, the defendant commenced its own action against the plaintiff which arises from the same events which form the subject of the plaintiff's Nova Scotia action. In Ontario, the defendant claims damages from the plaintiff for Three Hundred and Ninety Five Thousand Dollars ($395,000.00) plus associated relief. The plaintiff herein has engaged Ontario counsel to apply for judgment in that Province, based on the default judgment in these proceedings here and for an Order dismissing the Ontario action on grounds of res judicata or abuse of process or, in the alternative, for an Order staying the Ontario proceedings on the grounds of forum non conveniens. The defendant\'s application to set aside the default judgment is dismissed for the following reasons: agree with Mr. Stobie that any irregularities which may have prompted the issuance of the Prothonotary's default judgment are not such as to cause me to find that the Order is nullity. Although technically, the plaintiff ought to have sought the court\'s leave to take default under Civil Procedure Rule 12.03 (1), because the statement of claim had combined a request for declaratory relief with a claim for what I consider to be liquidated damages, such a procedural omission did not, in my view, in the circumstances of this case, materially affect the defendant. It is difficult to see how the defendant was possibly prejudiced as it had already made it clear to the plaintiff that it was not going to file a defence in this jurisdiction. think the cases relied upon by the defendant to support its principal arguments are distinguishable and will now turn to some of those cases. First, Anlaby v. Praetorius (1888), 20 Q.B. Div. 764 and also the case of Baker v. Abunnadi (1980), 12 C.P.C. 1. In those cases, the plaintiff had made premature filing of default judgment before the time of delivery of defence had expired. In such cases, it is obvious to me that the defendant would be prejudiced. It is to be remembered, as highlighted by Mr. Stobie in his pre‑hearing memorandum, that the decision in Baker was criticized in an accompanying annotation which made the point that the right to set aside the judgment was qualified by the British Columbia Rule 2(4) which required the application to be made within reasonable time. have considered the remarks by Cameron, J. as she then was, in Saunders v. Lewis (1990), 1990 CanLII 7221 (NL SC), 83 Nfld. and P.E.I. Reports 1, where she wrote at page "Generally, judgment obtained on the basis of an error of substance will be set aside. Irregularities will not automatically result in the default judgment being considered nullity, nor with (sic) judgment be set aside for technical imperfections in the procedure used." (underlining mine). also note in the case of Szczesniak v. Farocan Inc. (1992), 1992 CanLII 4533 (NS SC), 115 N.S.R. (2d) 292, the following remarks of Justice MacAdam in paragraph 38 "In the absence of any authority indicating that, in exercising my discretion under Civil Procedure Rule 12.06, am unable to vary the default judgment so as to give effect to those claims that were liquidated and to set aside the judgment in respect to those claims that were unliquidated, am not prepared to order that the totality of the default judgment is to be set aside on account of irregularity nor that the defendant is entitled to any costs." Mr. Latimer has argued that the plaintiff's failure to obtain default judgment in compliance with Civil Procedure Rule 12.03, was to use the language of some of the cases, breach of procedural requirement which goes to the root of our conceptions of the proper procedure in litigation, thereby entitling his client to have the default judgment set aside as of right ex debito justitiae without terms imposed by the court. He placed considerable reliance on the 1888 Court of Appeal decision in Anlaby. My attention was drawn to that portion of Lord Justice Fry's speech at page 768 and Lord Justice Lopes' at page 270. must say was initially attracted to the defendant's submission. However, on further analysis, do not think they are applicable here. In that case, the plaintiff's judgment was irregular because he did not have right to such judgment in the first place. It was premature. It was obtained before the time limit for making an appearance had expired. In word, the plaintiff had no right to his judgment. In such circumstances, do not doubt but that the defendant's remedy was automatic ex debito justitiae. That is not the case here. This plaintiff had the right to obtain default judgment the moment this defendant failed to defend by the latest possible date, that being December 22, 1994. The plaintiff filed its default, as forewarned, the next day, December 23, 1994. There are other important differences between the cases. The English Rule, excusing non‑compliance, which drew comments from Lords Fry and Lopes and upon which Mr. Latimer relies, provides "non‑compliance with any of these rules, or with any rule of practice for the time being in force, shall not render any proceedings void unless the Court or judge shall so direct..." In England, this non‑compliance with any rule of practice would not avoid proceedings, unless the court otherwise directed. think our own Civil Procedure Rule 2.01 goes further than that. It states that any failure to comply is to be treated as simple irregularity which will not nullify any of the proceedings, unless otherwise ordered. do not think the difference is mere semantics. The result is presumed unless or until the court determines otherwise. The other provisions of Civil Procedure Rule 2.01(1) give clear indication of the court's supervisory and remedial powers. Further, Rule 2.02 places responsibility on the applying party to take certain actions and avoid certain other actions if it intends to seriously impugn the irregularity. Finally, in Praetorius the court held that they were not dealing with an instance of non‑compliance with rule nor with an irregularity in acting under any rule. As Justice Fry said at page 769 "The irregular entry of judgment was made independently of any of the rules; the plaintiff had no right to obtain any judgment at all.. There is strong distinction between setting aside judgment for irregularity, in which case the Court has no discretion to refuse to set it aside..." (underlining mine) That is both materially different from the facts before me and think quite different than the scope of our own Civil Procedure Rules. In Nova Scotia, do have clear discretion not to nullify proceedings for reasons of irregularity. Whereas, my reading of the old English cases is that there was no such discretion to refuse to set aside in those specific circumstances. So to, in Baker v. Abunnadi, to which have already made reference and which is relied upon by this defendant. In that case, the plaintiff's default judgment was set aside as being premature, as it was obtained before the expiry of the time available to the defendant to file an appearance. Similarly, in Craig v. Kanssen, (1942) K.B. 256, the English Court of Appeal held it was beyond question that the default judgment ought to be set aside following an admitted failure to serve that defendant with the very summons upon which the order was based. In summary, find that the cases relied upon by the defendant to support its primary argument, are not applicable to the circumstances with which am faced. The older cases which held that an irregularly obtained judgment was nullity, are, think, inconsistent with the interpretation and application of our own Rules to which have earlier made reference. Here, the plaintiff's mistake was not one of substance rendering its claim for relief nullity. It had the right to default. It attempted to exercise it. It merely erred in choosing the Prothonotary as being the appropriate authority to grant it. Further, find that the claim for return of the sum of Eight Thousand Dollars ($8,000.00) meets the definition of "liquidated" damages in the authorities presented to me and is, therefore, claimable and recoverable upon default. think it also significant that had the plaintiff's Statement of Claim been restricted to the demand for Eight Thousand Dollars ($8,000.00), which is what, in fact, the plaintiff eventually obtained in the Prothonotary's default order, that order would be unassailable. Were it necessary for me to decide, would likely have found that the defendant had failed to bring itself within the requirements of Civil Procedure Rule 2.02. Given the flurry of communications between Mr. Stobie and Ms. Roberts in December 1994 and the obvious state of readiness evident between them both, the defendant could have acted much more promptly in applying to set aside the plaintiff's default order, rather than waiting until mid February 1995 before deciding to engage Mr. Latimer to apply to set it aside. now turn to the third and final argument of the defendant which will require brief analysis of the merits of the defendant's defence and excuse. deal first with the law applicable to this part of the application. Civil Procedure Rule 12.06 provides "The court may, on such terms as it thinks just, set aside or vary any default judgment entered in pursuance of Rule 12." The leading case in Nova Scotia is Ives v. Dewar, 1948 CanLII 275 (NS CA), [1949] D.L.R. 204 where Mr. Justice Parker said at p. 206: "Before the interlocutory judgment should have been set aside, it was necessary for the appellant to show by affidavit, facts which would indicate clearly that he had good defence to the action on the merits; not necessarily defence that would succeed at the trial because the action was not being tried on that application; but facts which would at least show beyond question that there was substantial issue between the parties to be tried. He must also show by affidavit why his defence was not filed and delivered within the time limited by the Rules. The reasons thus disclosed are material matters which the judge or Court should consider in determining whether the application to set aside the judgment should be granted or refused." The first branch of the two‑fold test may be dispensed with quickly. Mr. Stobie concedes that there are triable issues between these parties. However, he says that the defendant has failed to establish any reasonable excuse for its failure to file a defence. agree with Mr. Stobie. This was not a mistake or an oversight. This was not an omission through inadvertence or insufficient time or other pressing business. It was not a failure to file a defence but rather, a deliberate decision not to file a defence. can come to no other conclusion from clear reading of the correspondence passing between Mr. Stobie and Ms. Roberts. will now refer to some of those letters in detail. The first important letter is that of Mr. Stobie to Ms. Roberts sent by telecopier and dated December 19, 1994. He begins by acknowledging receipt of her letter dated December 15, 1994. He refers back to his letter of December 8, 1994 by which he told her he was in the process of preparing an Originating Notice and Statement of Claim and, in fact, enclosed with that communication, copy of the draft. He points out that it was served upon the corporate secretary of Ms. Roberts' client on December 12, 1994. In the second paragraph, Mr. Stobie goes on to explain to Ms. Roberts the application of Civil Procedure Rules relating to service and the time limits within which defence must be filed. He indicates the specific date, that is, the final date by which defence ought to be filed and confirms very clearly in the fourth paragraph of his letter, that if defence is not received by that date, he will be filing default judgment against Ms. Roberts' client on Friday December 23, 1994. He goes on to refer to her earlier communication which described her preparation of Statement of Claim on behalf of her client. He asks her to disclose whether it will be originating out of this jurisdiction or that of the Province of Ontario. He goes on to suggest that if the former, then it appeared to him the appropriate procedure would be for her client to add its counterclaim to the Nova Scotia proceedings. If, on the other hand, the action were commenced in Ontario, then he advises he would have to obtain instructions to determine whether he was authorized to accept service of such pleading. Her letter to Mr. Stobie is dated the next day, December 20, 1994, sent by facsimile confirming receipt of his and indicating that her client intends to commence action in Ontario as being, in her words, "the most appropriate forum for the resolution of their dispute." She goes on to indicate that her client does not submit to nor attorn to the jurisdiction of Nova Scotia, that being the place where Mr. Stobie commenced his action. The next communication appended to the Affidavit of Ms. Roberts, is telecopier communication from Mr. Stobie to Ms. Roberts dated December 23, 1994, confirming receipt of her December 20th letter and indicated that having regard to the position she articulated in her letter, he has proceeded to enter default judgment. He encloses copy of the order for default totalling Eleven Thousand Two Hundred and Eighty Four odd dollars. He asks her to say whether the judgment will be paid forthwith or whether he will be obliged to take enforcement proceedings. In his letter to her dated December 23, 1994, also sent by telecopier, he advises that he is not authorized to accept service. This is acknowledged by Ms. Roberts' letter dated December 28, 1994, simply enclosing copy of her client's Statement of Claim which she is in the process of having served upon the defendant in that action. consider the communications to which have made reference, to be clear evidence of strategic position deliberately adopted by the defendant. Having been forewarned by Mr. Stobie, Ms. Roberts was well aware that the consequences of not filing defence would be default in Nova Scotia. The defendant has not brought itself within the scope of the remarks of Chief Justice Cowan in Pinard and Pinard v. Bushell et al. (1975), 20 N.S.R. (2d) 317 at p. 333: "It is not sufficient...for him to give reasons, but the reasons must show that he has reasonable excuse for the delay..." Nor the observations of Mr. Justice Cooper in Errol B. Hebb and Associates v. Enterprises Ltd. (1977), 23 N.S.R. (2d) 369 at p. 375: "...an explanation for delay capable of furnishing basis for the exercise of the discretion of the chambers judge." find there is no basis for me to exercise my discretion in favour of this defendant. With respect, cannot accept Mr. Latimer's submission that the plaintiff rushed to judgment; that the defendant had impliedly sought an extension of time within which to file defence, or that Ms. Roberts was waiting for Mr. Stobie to reply on the subject of the most appropriate forum. The letters to which have referred belie that. Even after the default judgment was entered, there is not the slightest complaint raised in the correspondence from Ms. Roberts that she was taken by surprise, or mistaken, or was dealing with Mr. Stobie under some misapprehension. If she had any such concerns, they were not matters which Mr. Stobie was ever asked to address. He had obtained his default judgment just as he said he would. It was not as if Ms. Roberts had invited Mr. Stobie's participation on the forum question. She announced her client's position by letter to Mr. Stobie of December 20, 1994. In the face of that letter, it would be self‑evident to Mr. Stobie that the defendant had no intention of defending in Nova Scotia. As such, the defendant is, in my view, barred from relief. find the circumstances of this case similar to that which faced Justice Trainor in the British Columbia Supreme Court in Bank of Montreal v. Thompson (1977) C.P.C. 72. There, the defendant had allowed default judgment to be entered in British Columbia on the basis of advice from California lawyer, that the judgment would not be enforceable in California. Justice Trainor held that this amounted to wilful and deliberate decision to ignore the proceedings in British Columbia. Notwithstanding the faulty legal advice in California, the defendant knew that there would be judgment against him in British Columbia. The application to lift the default judgment was dismissed. Counsel for the defendant here, has referred to and relied upon the decision of the Nova Scotia Court of Appeal in the case of Ross, Barrett Scott v. Simanic (1994), 30 C.P.C. (3d) 145. There, the court dismissed an appeal from the decision of Justice Bateman wherein she allowed the defendant's motion to set aside the plaintiff's default judgment. She concluded that there were number of triable issues and that the defendant had presented reasonable excuse for his failure to defend. Her reasons for the latter were expressed in these words and am now referring to the extract quoted by Justice Hallett writing for the Court of Appeal at page 148 of the case report cited earlier. These are Justice Bateman's findings "I am satisfied that Mr. Simanic in failing to defend the Nova Scotia action did not appreciate the consequences of doing so, and that he understood that the action in Nova Scotia was not properly constituted or could be adequately responded to in Ontario... In the circumstances, find that there was no wilful or excessive delay on Mr. Simanic's part in moving to set aside the default judgment. The applicant has met the burden of establishing that there is substantial issue to be tried and that he has reasonable excuse for failing to file defence." Leaving aside that portion of the Court of Appeal Judgment which dealt with whether the chambers judge had erred in admitting certain evidence challenged as hearsay, Justice Hallett, after dismissing that ground of appeal, then went on to consider the "second ground" which was really the first of the Appellant's Factum, that being that there was no evidentiary justification for Justice Bateman's finding that the defendant had reasonable excuse. The Appellant complained that the only basis for her coming to that conclusion, was the deliberate decision made by the defendant not to defend the Nova Scotia action. On the contrary, Justice Hallett in writing for the Court of Appeal, determined that there was sound evidentiary basis for the chambers judge to have come to that conclusion. In his argument yesterday, Mr. Latimer stressed this statement from the decision of Justice Hallett appearing at page 153 "I cannot accept counsel's argument that the deliberate decision not to attorn to the jurisdiction of the Nova Scotia courts should not be regarded as reasonable excuse for failing to file defence." (emphasis per Hallett, J.A.) Mr. Latimer urges me to apply that statement here. With deference, do not think Justice Hallett would wish to be taken to say, that by his rejecting the Appellant's submission, that therefore refusal to defend for fear of attorning to jurisdiction would always amount to reasonable excuse. Every case depends on its own set of facts. The observation of Justice Hallett may well be dicta and in any event, it is qualified by his frequent references to the fact that the defendant did not appreciate the consequences of not appearing to the action in Nova Scotia and that the defendant, lay person, had relied upon defective legal advice. To illustrate, will refer to at least six such references by Justice Hallett. "The respondent did not defend in Nova Scotia because of the legal advice he received; although it would appear to be questionable advice it was the reason why the respondent did not file defence to the Nova Scotia action.. Nor is the fact that he agreed to the course of action that was proposed by his counsel. His agreement does not negate the fact that underlying the respondent's decision not to file defence was the advice he had received." (p. 153). And back at page 151 "She..."(referring to Justice Bateman)"found that the respondent did not appreciate the consequences of not defending; the respondent's testimony supports this finding. She also found that he understood the action in Nova Scotia may not have been properly constituted; the respondent's testimony supports this. She also found that he understood an adequate response could be made in Ontario; the respondent's testimony supports this finding." All of those factors are materially different than the case before me. In the result, see no evidentiary basis sufficient to persuade me that in order to do justice between these parties, should exercise my discretion in favour of the defendant. This is especially so, where as here, the defendant (hardly neophyte to litigation elsewhere) was not willing to cure its default by either agreeing to commit itself to forthwith defend in Nova Scotia or bring motion to stay on the basis of forum non conveniens. The defendant\'s apparent intention to avoid the jurisdiction of the Nova Scotia Supreme Court, while simultaneously drawing the plaintiff into litigation in Ontario where it has no presence, is, in my view, incapable of constituting a reasonable excuse, as contemplated by this court\'s interpretation of Civil Procedure Rule 12.06 in previous cases. For all of these reasons then, the defendant\'s application is dismissed with costs to the plaintiff in the amount of One Thousand Dollars ($1,000.00). It is, therefore, unnecessary for me to consider the plaintiff's subsidiary request for directions, pursuant to Civil Procedure Rule 25, nor the issue of appropriate forum.
The plaintiffs statement of claim was served on the defendant in Ontario two days after it was issued. Two weeks later the prothonotary issued default judgment for $8,000, plus $2,880 in interest and $404.42 in costs. The defendant applied, pursuant to Civil Procedure Rule 12.06, to set aside the default judgment, on the ground that the plaintiff did not meet the requirements for obtaining a default judgment from the prothonotary or, in the alternative, on the merits that it had, by affidavit evidence, raised triable issues and provided a reasonable excuse for its failure to file a defence. Dismissing the application with costs of $1,000 to the plaintiff, that although the plaintiff ought to have sought the court's leave to take default judgment such a procedural ommission did not, in the circumstances, prejudice the defendant. Further, while there were triable issues between the parties, the defendant's failure to file a defence was neither a mistake nor an oversight, but rather a deliberate decision so as not to attorn to Nova Scotia jurisdiction, and therefore was not a reasonable excuse.