2015 No. 432504 Claim No. 330427
IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
BETWEEN:
Kim Ann D’Arcy
Claimant
- and -
McCarthy Roofing Limited
Defendant
mesis Defendant
Hearing Date: January 6, 2015
Appearances: Claimant – Kim D’Arcy
Defendant – Katie Archibald, Barrister and Solicitor
DECISION and ORDER
[1] This is an application to set aside an order dated December 8, 2014.
[2] The matter was heard on January 6, 2015. George McCarthy, President and owner, gave evidence for the Defendant. The Claimant, Kim D’Arcy, also testified. Submissions were made at that time by or on behalf of both parties.
Background
[3] The Notice of Claim was filed on October 21, 2014. It was served on George McCarthy on October 30, 2014. Proper service is not disputed.
[4] On the Notice of Claim it is indicated that the hearing of the claim was set for December 2, 2014.
[5] About halfway down on the first page of the Notice of Claim form there is a box containing the following:
TO THE DEFENDANT(S): This claim has been filed against you in Small Claims Court.
1. If you do not agree with this claim, you must file a Defence/Counterclaim by filling in the lower half of this form and returning it to the court. You are also required to serve the Defence/Counterclaim upon the Claimant
2. If you do not file your Defence/Counterclaim by returning this form to court within 20 days after you receive this claim, the court may make an order against you without hearing from you.
Read the “Additional information for defendant” with this form
[Bold type in original ]
[6] No Defence was filed within 20 days.
[7] Given that no Defence was filed, the Claimant proceeded to file an application for quick judgment, under date of November 27, 2014. Such applications are provided for and governed by Section 23 of the Small Claims Court Act which reads as follows:
Default of defence or appearance
23 (1) Where a defendant has not filed a defence to a claim within the time required by the regulations and the adjudicator is satisfied that
(a) each defendant was served with the claim and the form of defence and with notice of the time and place of adjudication; and
(b) based on the adjudicator's assessment of the documentary evidence accompanying the claim, the merits of the claim would result in judgment for the claimant,
the adjudicator may, without a hearing, make an order against the defendant.
(2) Where a defendant against whom an order has been made pursuant to subsection (1) appears, upon notice to the claimant, before the adjudicator who made the order and the adjudicator is satisfied that
(a) the defendant has a reasonable excuse for failing to file a defence within the time required; and
(b) the defendant appeared before the adjudicator without unreasonable delay after learning of the order,
the adjudicator may set aside the order and set the claim down for hearing.
(3) Where a defendant has filed a defence but does not appear at the hearing and the adjudicator is satisfied that the defendant has been served with notice of the time and place of the hearing, the adjudicator, if satisfied on the evidence as to the case of the claimant, may, in the absence of the defendant, make an order against the defendant.
(4) Where a defendant against whom an order has been made pursuant to subsection (3) appears, upon notice to the claimant, before the adjudicator who made the order and the adjudicator is satisfied that
(a) the defendant has a reasonable excuse for not appearing at the hearing; and
(b) the defendant appeared before the adjudicator without unreasonable delay after learning of the order,
the adjudicator may set aside the order and set the claim down for hearing.
[8] The quick judgment application came before the Adjudicator W. Thompson on December 1, 2014. Adjudicator Thompson did not issue an order but wrote by hand on the draft order that had been prepared, the following:
This is set for tomorrow, December 2. It should be heard. It is a breach of contract on a construction job and too complex for a quick judgment. The Defendant may well show. WT
[9] On December 2, the matter came before me. The Claimant was present. No one was present for the Defendant. As well, and as noted, no written defence had been filed. I allowed the claim although I reduced the damages by approximately $5000 as there appeared to be an element of double counting in the Claimant’s calculations.
[10] As now appears, the Defendant learned of the issuance of the order on December 11, 2014. They then proceeded with apparent dispatch and instructed counsel who filed an application to set aside under date of December 15, 2014. The hearing of that application came before me on January 6, 2015.
[11] George McCarthy, the President of the Defendant gave evidence. He acknowledged being served with the notice of claim. He stated that he gave it to Chad Mills, his office manager, with instructions to email it to their lawyer. He stated that Mr. Mills emailed it to Jay Washington, the former lawyer for the company. He stated that at that stage he figured the matter was taken care of.
[12] Mr. McCarthy testified that he had changed law firms approximately two years previous and had moved his legal work to the McInnes Cooper law firm but, nevertheless, as I understood his evidence, Mr. McCarthy instructed Mr. Mills to send the Notice of Claim to Mr. Washington.
[13] Mr. McCarthy also testified that around that time period, he had a business trip to Las Vegas and as well went moose hunting. He stated that his company was very busy with projects in Muskrat Falls, the new Halifax library, and a new hotel in Halifax.
[14] At a point (December 11th )he received a copy of the order in the mail. He stated that he couldn’t believe it that it happened so fast, to have such an order issued.
[15] He then went to Chad Mills and asked if he had sent the Notice to the lawyer. Mr. Mills said yes he had. Mr. McCarthy testified that he called Mr. Washington, who advised that he had not received it. An email was tendered as Exhibit C1 from Jay Washington to George McCarthy dated December 11, 2014, in which Mr. Washington states:
George,
Further to our discussion I confirm that I did not receive any email from you, Chad, or a workstation account, in relation to a Small Claims Court matter.
If you provide confirmation from your end that the email was sent we can have our IT person try and track it why it was not delivered to my address.
Tks J
[16] The position asserted on behalf of the Defendant is that the Defendant sent the claim to its external counsel or at least thought they had sent the claim to its external counsel. In its brief, it is stated that:
The Defendant’s failure to file a defence to this claim and appear at the hearing was due to an honest but mistaken belief that the claim was being defended on its behalf. The Defendant did not intend to stall the hearing of this claim, and at all times intended to defend the claim. The Defendant did not simply ignore the notice of claim, but instead took steps immediately upon receiving the notice of claim to forward it to legal counsel with the intention that counsel would defend the claim on its behalf.
(Page 3 of Defendant’s submission dated January 2, 2015)
Analysis
[17] At the hearing on January 6, 2015, it was assumed that Section 23 of the Small Claims Court Act applied and that the application was properly made. No one questioned the jurisdictional basis of the application. I will have more to say about that subject below.
[18] Section 23(2) dictates that in order to set aside the Order dated December 8, 2014, the Defendant must satisfy the court of two things:
-the defendant has a reasonable excuse for failing to file a defence within the time required; and
-the defendant appeared before the adjudicator without unreasonable delay after learning of the order,
[19] I note that counsel for the defendant submits that this is the applicable provision. It seems to me that Section 23 (4) could also have application, since there was actually a hearing in this matter which took place on the date originally scheduled for the hearing i.e. December 2, 2014. In that case, the Defendant would be required to show the court that:
-the defendant has a reasonable excuse for not appearing at the hearing; and
-the defendant appeared before the adjudicator without unreasonable delay after learning of the order,
[20] In both cases, the defendant is required to show that it has a reasonable excuse either for not filing a defense or for not appearing at the hearing.
[21] I have no problem concluding that the Defendant has met the requirement that it appear before the adjudicator without unreasonable delay after learning of the order. However, whether or not there was a reasonable excuse for failing to file a defense, or appearing at the hearing, is another matter.
[22] The issue of “reasonable excuse “ in this context was dealt with in some detail by the Supreme Court in George L. Mitchell Electrical v. Rouvalis, 2010 NSSC 203. In that case Justice LeBlanc made it clear that in order to avail itself of s. 23, a defendant must provide some evidence showing it had a reasonable excuse for not filing a defence. Not any excuse but a reasonable excuse.
[23] Here, the excuse being put forward is that the Defendant had an honest but mistaken belief that the claim was being defended on its behalf by its counsel. The evidence in support of this assertion is that of Mr. McCarthy, referred to above.
[24] Had the evidence convincingly shown that a lawyer was consulted, then I think the requirement for reasonable excuse would be met. However, I am not so convinced on the evidence.
[25] While my view is that the reasonable excuse standard is not a high standard to meet, the evidence that is put forward in support of that standard must still meet the civil burden of proof, i.e., the “balance of probabilities”.
[26] My difficulties with the evidence are these. First, Mr. Chad Mills did not testify. Why not? Mr. McCarthy testified that he told Mr. Mills to send the notice of claim to Mr. Washington. Mr. McCarthy further testified that Mr. Mills did send it by email to Mr. Washington and that upon questioning later on, Mr. Mills apparently confirmed that was the case.
[27] However, there is no email confirmation that such occurred.
[28] In fact, the only email is the one from Mr. Washington where he indicates he did not receive an email from either Mr. McCarthy, Mr. Mills, or a workstation account regarding a Small Claims Court matter and McCarthy Roofing. I conclude from this that Mr. Washington did not receive such an email.
[29] Whether it was sent is, of course, a different factual issue. Applying the civil burden of proof to these facts, I conclude that no such email was sent.
[30] Assuming a scenario most favourable to the defendant, possibly the email went into a quarantine or firewall at the recipient’s end. However, no such notice of that came back to the sender, i.e. Mr. Mills. In that case, I would expect there would still be something on Mr. Mills’ email records showing the attempted transmission. That is, either a sent indication or a failed indication. The attempted transmission would not have completely disappeared from Mr. Mills computer.
[31] Admittedly, I make these comments partly on taking notice of how email transmissions operate. If there is something unique or extraordinary at work with respect to Mr. Mills’ emails, then I fully would have expected evidence in that regard. No such evidence was proffered either from Mr. McCarthy or from Mr. Mills who, as already indicated, did not attend or give evidence.
[32] I repeat that I conclude, as a fact, that no email was sent by Mr. Mills or anyone else to an external lawyer on this matter.
[33] That leaves the question of whether or not Mr. Mills did in fact instruct Mr. Mills to send the notice of claim to the external lawyer to file a defense. Does the evidence satisfy the civil burden of proof that he did in fact do so? There is nothing to corroborate his bare evidence. The fact that Mr. Mills was not produced on behalf of the Defendant militates against such a finding.
[34] However, even if I did conclude as a fact that Mr. McCarthy instructed Mr. Mills to send the notice of claim, is that enough to meet the reasonable excuse standard? While I do not think the standard is an onerous one, I think it does require some minimal degree of due diligence on the part of a defendant who seeks to avail himself or itself of the relief provisions in the Small Claims Court Act. Here, I am mindful of the comments of Adjudicator Richardson in Consumer Impact Marketing Ltd. v. Rzepus, 2003 NSSM 9 (CanLII), case where he stated (para 31):
In this regard I note that there was no evidence that any representative of the Defendant did anything but move the matter off their desk on to someone else’s. No one followed up; no one diarized the hearing. While service of the claim was effected on April 11, 2003 when it was served on Mr. Chiasson, neither he nor anyone else made any apparent effort to ensure that a defence was entered; or that anyone was actually dealing with the matter. All that the various people did was forward the Notice to someone else. No one “took ownership” of the need to respond in any meaningful way to the fact that a claim for $10,000 had been filed against the Defendant.
[35] In this present case, I am not satisfied that Mr. McCarthy took “ownership”, at least, not to the minimum required. As the president of the company, it is to be expected that he delegates matters to his subordinates. However, where is the documentation that he has passed this on to Mr. Mills? Where is the follow-up? What minimum due diligence has been demonstrated?
[36] The notice of claim, apart from requiring the filing of the defense also had a stated hearing date of December 2 on it. As noted above, Adjudicator Thompson was not prepared to issue a quick judgment. Instead, he let it proceed to the actual stated hearing date of December 2. No one was present on that date on behalf of the defendant. A minimal degree of due diligence would have seen someone appear on behalf of the defendant.
[37] With respect, I cannot find that the evidence here satisfies the requirement that there was a reasonable excuse for failing to file a defence.
[38] Accordingly, I would dismiss the application to set aside and confirm the order of December 8, 2014.
Further Analysis Regarding Section 23 Jurisdiction
[39] Following the preparation of the above reasons, the case of Leighton v. Stewiacke Home Hardware Building Center, 2012 NSSC 184 (CanLII) came to my attention. In that case, Rosinski, J. decided that where a defendant neither files a defense nor appears at a hearing, that there is no jurisdiction at all in section 23 to set aside the Court’s decision.
Further, it is not a situation where the parties can somehow attorn or agree to jurisdiction.
[40] Justice Rosinski’s analysis of Section 23 is logical and meticulous. He states, in part:
[51] To reiterate, sections 23(1) and s. 23(3) differ. The applicability of s. 23(1) is premised on No Defence being filed on time, whereas the applicability of s. 23(3) is premised on a Defence being filed, (not necessarily on time) and thereafter a non appearance at the hearing by the Defendant.
[52] However, neither of these sections were applicable to the case at Bar. While there was no Defence filed “within the time required by the Regulations”, neither was there an Application for Quick Judgment such that s. 23(1) was applicable. While the Defendant did not appear at the hearing, neither was a Defence filed, such that s. 23(3) was applicable.
[53] Where the Act is silent, as in the case at Bar, where no Defence is ever filed and the Defendant does not appear, what is the authority of an adjudicator to order a judgment against a Defendant, and what remedy does a Defendant have, to have that decision reversed in order to have a contested hearing take place? Form 7(a) is designed for cases such as Ms. Leighton’s, [i.e. No defence filed on time and no appearance by the Defendant at the hearing]. The Act necessarily must have intended to allow for proof on the merits of claims in such circumstances.
[54] I accept that an adjudicator may, at a scheduled hearing date, where no Defence is filed and the Defendant does not appear, make an order against the Defendant, if satisfied that: the Defendant had proper notice; and he/she is satisfied on a balance of probabilities that the claim and amounts/remedy sought (presuming also that the rules of natural justice have been respected) are meritorious ‑ see Justice LeBlanc's comments in Surrette Battery Co. v. McNutt (c.o.b. TNT New& Used ATV's, Parts and Accessories) 2003 NSSC 6 (CanLII) and Justice Haliburton's comments in Clarke v. P.F. Collier and Sons Ltd. (N.S.S.C.) (1993) 1993 CanLII 3447 (NS SC), 129 NSR (2d) 113 (NSSC) and comments regarding the Small Claims Court’s jurisdiction to control its own process in pursuit of simplicity (informally and inexpensively) without sacrificing fundamental fairness - Crombie Developments Ltd. and Atton (supra).
[55] As a consequence of concluding that the August 8 hearing was not held pursuant to ss. 23(1) [or 23(3)], I must conclude that Ms. Leighton improperly made her application to the adjudicator under s. 23(2) of the Act, because the adjudicator’s Order did not arise under s. 23(1). The adjudicator erred in purporting to act pursuant to s. 23(2) of the Act on October 18, 2011.
[56] One must ask then, on October 18, 2011, was there any other source of jurisdiction that would allow the adjudicator’s reconsideration of his August 8, 2011 decision to order judgment against Ms. Leighton? In my opinion only if the adjudicator had jurisdiction under s. 23(1) initially on August 8, 2011, could he then have had jurisdiction under s. 23(2).
[57] The adjudicator had jurisdiction to proceed on August 8. However having done so, he had no authority under s. 23 of the Act to reconsider his order, and there being no other statutory basis to do so, he was functus officio on August 8, 2011.
[41] The result of this Supreme Court decision, which is binding on the Small
Claims Court, is that once my order dated December 8, 2014 was issued, I was functus officio.
[42] Further, it follows from this that the Order I issued on December 8, 2014, was not issued under any provision of section 23 but rather was issued under the Small Claims Court’s general authority to control its own process. Justice Rosinski refers to and acknowledges this jurisdiction in paragraph 54 of the Leighton decision.
[43] Given this, it would appear that I had no authority to consider the application on January 6th, since at that point I was functus officio, and, according to the analysis in the Leighton case, there was no available statutory provision under which I have jurisdiction to consider an application to set aside my December 8 order.
[44] As will be seen, on either analysis, I get to the same point. That is, either I had no jurisdiction after December 8 in which case that order stands and cannot be further considered or challenged at this level. Alternatively, even if I had authority under section 23 to set aside the December 8 order, I have concluded that the defendant did not meet the necessary tests to have that discretion exercised.
ORDER
[45] For the reasons outlined above, the Defendant’s application under Section 23 is dismissed, either on the merits or for want of jurisdiction to make such application, and the Order of December 8th, 2014, is affirmed.
DATED at Halifax, Nova Scotia, this 2 day of March, 2015.
Michael J. O’Hara
Adjudicator