Vanden Brink v. Russell, 2012 ABQB 523

Court of Queen ’ s Bench of Alberta Citation: Vanden Brink v. Russell, 2012 ABQB 523 Date: 20120817 Docket: 0710 00579 Registry: Red Deer Between: Ben J. Vanden Brink Plaintiff - and - Martyn Daniel Russell Defendant _______________________________________________________ Reasons for Judgment of J.T. Prowse, Q.C. Master in Chambers _______________________________________________________ [ 1 ] The defendant Martyn Daniel Russell applies to set aside a default judgment which the plaintiff Ben J. Vanden Brink obtained against him. Events leading up to the default judgment [ 2 ] Mr. Russell and Mr. Vanden Brink decided to enter into a business venture which involved purchasing used Land Rover

vehicles from the British army near Medicine Hat, Alberta, refurbishing them, and then selling them (or parts from them) for a profit. [ 3 ] Mr. Vanden Brink advanced $30,000, and those funds were used to purchase used Land Rovers which were delivered to Mr. Russell’s acreage near Tappen, British Columbia, from where Mr. Russell was to work on the vehicles. [ 4 ] The business venture did not succeed. Mr. Vanden Brink only received back $5,000 of the $30,000 which he had invested. He sued Mr. Russell for the balance, plus interest. Mr.

Russell was (allegedly) served in British Columbia with the claim, and default judgment was issued by the Clerk of the Court in Red Deer against Mr. Russell on April 14, 2009. Grounds for setting aside the default judgment [ 5 ] Mr. Russell applies to set aside the default judgment. [ 6 ] His first argument is that he is entitled to set aside the default judgment ‘as of right’ because he was never served with the statement of claim.

I have rejected that argument. [ 7 ] His second argument is that the court ought to exercise its discretion to set aside the default judgment pursuant to Rule 9.15(3), which allows the court to “set aside, vary or discharge a judgment in default of defence on any terms the Court considers just”. I have accepted that argument. [ 8 ] My detailed reasons follow. Onus of proof regarding service of a statement of claim [ 9 ] Mr.

Russell’s first argument is that he is entitled to set aside the default judgment ‘as of right’ because he was never served with the statement of claim. [ 10 ] No Alberta cases have been cited to me which specifically deal with the onus of proof when a defendant asserts that they were not served with a statement of claim, and consequently are entitled as of right to have a default judgment against them set aside. [ 11 ] There is case law in Ontario considering this point, beginning with two decisions granted by Masters which seem to contradict each other. [ 12 ] In 1988 Master Donkin issued a decision in Ivan ’s Films v.

Kostelac , (1988) 29 C.P.C. (2d) 20 , which indicates that the onus rests with the plaintiff to prove service, and if the matter is deadlocked with contradicting affidavits then the default judgment is to be set aside as of right. [ 13 ] In 1991 Master Peppiatt issued a contradictory decision in Allfur Trading Ltd. v. Polizos , 1991 CarswellOnt 471, 7 C.P.C. (3d) 39 .

Without referring to the Ivan ’s decision, he held that, once a plaintiff has prima facie established good service, there is an onus upon a defendant to rebut that evidence of service. [ 14 ] Both of these decisions were cited to the Ontario Supreme Court in Long v. Carl , [2000] O.J. No. 1007, 2000 CarswellOnt 1004 . There the court observed:

Two conflicting cases were quoted to me concerning the issue of who has the onus of establishing service of the original documentation. They are Ivan ’s Films ... and Allfur Trading ... Although these two cases appear to be diametrically opposed at first blush, I am quite satisfied that a thorough review of the underlying facts in each case will reconcile the two decisions. [ 15 ] The conflict between Ivan ’s and Allfur Trading was the subject of an

article authored by Christopher Caruana, Problematic Service and “Irregular ” Default Judgments in Ontario (June 2000) 23 Advocates Q. 254-264. [ 16 ] In 2005, a brief decision of the Ontario Court of Appeal dealing with setting aside a default judgment ‘as of right’ did not mention either decision but did state “The onus on the defendant to rebut evidence of service will depend on the circumstances”: CIBC Mortgage Corp. v.

Prasad , 2005 CarswellOnt 6663 . [ 17 ] A year later, in 2006, the Ontario Divisional Court dealt with the issue of setting aside a default judgment as of right, and discussed the Allfur Trading decision. The Divisional Court made the following observation: ... Master Peppiatt clearly set out that the onus for the defendant will vary with the particular defendant in that defendant’s particular circumstances. In other words, depending on the particular circumstances of that particular defendant, the onus may indeed be a very low one.

With respect, this observation is too vague to be of much use to a chambers master or judge wrestling with the issue of onus. [ 18 ] In my view, as inferred in the Long decision, the apparent disagreement is more one of semantics than of substance. [ 19 ] The plaintiff bears the burden of proving service. Common sense dictates that, if the plaintiff has filed an affidavit which, on its face, establishes service, then the plaintiff is going to be taken to have satisfied its burden unless the defendant files evidence which puts the matter in doubt.

This may be referred to as some kind of a ‘shifting onus’, or an ‘evidentiary onus’ on the defendant, but the use of that terminology should not obscure the fact that the ultimate burden rests on the plaintiff to prove service on a balance of probabilities. [ 20 ] What puzzles me, from some of the cases I have reviewed, such as the Ivan ’s case, is the approach that, faced with conflicting affidavits that leave the matter deadlocked, the chambers master or judge should set aside the default judgment on the basis that the plaintiff has not fulfilled the onus on it. [ 21 ] It seems to me, where the conflicting affidavits result in a deadlock, that viva voce evidence should be heard by a chambers judge who might be able to resolve the matter based on findings of credibility.

Only if the matter remains deadlocked after a viva voce hearing should the default judgment be set aside based on the plaintiff’s failure to meet its onus. [ 22 ] With the current unsettled state of the law as to onus, a plaintiff obtaining a default judgment faces the prospect of that judgment later being set aside based on a bare denial of service by the defendant. The consequence of setting aside the judgment may be that time for service of the statement of claim will have elapsed, and the cause of action now lost due to limitations issues. While Rule 3.27(1)(

b) allows for the time for service of a statement of claim to be extended where, for example, an order for substitutional service is later set aside, there is no provision to extend the time for service of a statement of claim where proof of service, upon which a default judgment has been issued, is later rejected. Evidence regarding service of the statement of claim on Mr. Russell [ 23 ] We have an affidavit of service from a process server named Mark Hanson who says he served Mr. Russell in B.C. on November 4, 2007. Mr. Hanson deposes that Mr.

Russell “identified himself to me by means of his verbal acknowledgment to me that he was in fact the proper person to be served with the above mentioned documents”.

[24] In his subsequent affidavit Mr. Hanson says that the property on which he served Mr. Russell “had several Land Rovers on it”. Atranscript of Mr. Russell’s questioning indicates that the property where he resides has 25 or 30 Land Rovers on it. This lends strength toMr. Hanson’s assertion that he indeed served Mr. Russell on November 4, 2007. Mr. Hanson was not cross examined on his affidavits. [25] Mr. Russell’s evidence to the contrary begins with an affidavit he swore in the B.C. proceedings (the affidavit was in support ofMr.

Russell’s application to set aside the registration of the Alberta judgment in B.C.). In that affidavit, Mr. Russell swore that “I have norecollection of being served with any documents by Mark Hanson or any other person”. Not being served was the key point in Mr.Russell’s application in B.C. To me it is extremely noteworthy that he did not swear that he had not been served - he merely swore thathe did not recall being served. [26] It was only about 6 months later, after his application to set aside the registration in B.C. was unsuccessful, that Mr.

Russellswore another affidavit, this time asserting positively that he was never served with the Statement of Claim. [27] Given these facts, Mr. Russell’s claim that he was not served with the statement of claim has no air of reality. Mr. Vanden Brinkhas satisfied the onus which rests upon him to prove service of the statement of claim. [28] In addition, Viet J. in Graylake Holsteins Ltd. v.

Kzam Farms Ltd., 2004 ABQB 828 at para. 19 observed, when dealing withdefective service of a statement of claim, that the defendant was entitled as of right to set aside the resulting default judgment “if heproceeds promptly”. As noted later in this decision, Mr. Russell did not move promptly to set aside the default judgment. [29] For both of these reasons, I am denying Mr. Russell’s application to set aside the default judgment ‘as of right’. Applying the three step test for applications to set aside a default judgment [30] Even though Mr.

Russell cannot set aside the default judgment as of right, he asks that it be set aside pursuant to Rule 9.15(3),which allows the court to set aside a judgment in default of defence. [31] When considering an application to set aside a judgment under Rule 9.15, the court considers three factors: - what reason does the defendant have for not filing a statement of defence within the time provided by the Rules of Court? - did the defendant delay in applying to set aside the default judgment once he became aware of it? - does the defendant have an arguable defence? [32] The answer to these three questions provides guidance to the court, but, in the end, the approach which ought to prevail is theexercise of judicial discretion to promote fairness between the parties: Don Reid Upholstery v.

Terry Patrie, (ABKB), 1995 CarswellAlta 357, 32 Alta.L.R. (3d) 281, 173 A.R. 233. What is Mr. Russell’s reason for not filing a statement of defence on time? [33] Mr. Russell’s evidence is that he was not served with the Statement of Claim. I have already concluded that Mr. Russell’sevidence that he was not served on November 4, 2007 has no air of reality. Accordingly Mr. Russell has no adequate reason for nothaving filed a statement of defence within the time afforded by the Rules of Court.

Did Mr. Russell delay in applying to set aside the default judgment? [ 34 ] Mr. Russell did delay in pursuing his application to set aside the default judgment. [ 35 ] The first period of delay occurred after Mr. Russell became aware of the default judgment, on or about September 24, 2008, when Mr. Russell’s son signed for a letter forwarding the judgment to Mr. Russell. Mr. Russell did not do anything about the default judgment until more than a year later, November of 2009 - when he applied to set aside the registration of the judgment in B.C. [ 36 ] Mr.

Russell first applied to set aside registration of the judgment in B.C. rather than applying to set aside the judgment in Alberta. I do not fault Mr. Russell for this delay. In retrospect it would have been better for him to immediately apply in Alberta - but his only assets were in B.C. and if he could set aside the registration of the judgment in B.C. then he may have achieved an equivalent result. [ 37 ] The next period of delay occurred after Mr. Russell applied in Alberta on May 17, 2010, to set aside the judgment. Even though cross-examinations and counter affidavits were necessary, Mr.

Russell should have been able to bring his application on for a hearing by December of 2010. Instead, Mr. Russell refused to make himself available for cross-examination so that, on April 5, 2011 counsel for Mr. Vanden Brink was forced to obtain an order compelling Mr. Russell to attend for cross-examination. Mr. Russell still refused to attend, and a further compelling order had to be obtained. Does Mr. Russell have an arguable defence? [ 38 ] In my view, Mr. Russell has an arguable defence. After reviewing the evidence presented, it is not clear whether the $30,000 payment made by Mr.

Vanden Brink was in essence a capital contribution, only to be repaid from joint venture profits if and when made, or whether it was a loan to Mr. Russell to be paid back in any event, whether the underlying business venture was profitable or not. It was on the basis that the payment was a loan that Mr. Vanden Brink obtained default judgment. [ 39 ] The only written record in evidence which deals with this issue is a draft joint venture agreement prepared by Mr. Vanden Brink forwarded to Mr. Russell, which Mr. Russell declined to sign on the basis that it did not accurately reflect the deal between the two.

The draft agreement was more consistent with the advance of funds being a capital contribution, and not a loan. [ 40 ] Mr. Vanden Brink says that there were subsequent oral discussions in which Mr. Russell agreed that the $30,000 was to be treated as a loan. Mr. Russell denies any such subsequent oral agreement to treat the $30,000 as a loan. Obviously this is a triable issue. [ 41 ] In addition, Mr. Russell has at least an arguable limitations defence. Conclusion regarding Mr. Russell ’s application to set aside the default judgment under Rule 9.15 [ 42 ] While Mr.

Russell failed to give satisfactory answers with respect to his failure to file a timely defence, and failed to promptly pursue the setting aside of the default judgment, he clearly has arguable defences, and, given the lack of prejudice to Mr. Vanden Brink, the merits of the defences should be determined at trial. However, given the delays attributable to Mr. Russell, the writ obtained pursuant to the judgment should remain in place until the disposition of the matter at trial. This will provide Mr. Russell with an incentive to get the matter on to trial, and not to delay as he has in the past. Costs

[ 43 ] If counsel cannot resolve the issue of costs they may approach me to arrange for a hearing (possibly via telephone) in that regard. Heard on the 10 th day of July, 2012. Dated at the City of Red Deer, Alberta this 17 th day of August, 2012. J.T. Prowse, Q.C. M.C.C.Q.B.A. Appearances: Paul D. Greep Reynolds, Mirth, Richards & Farmer LLP for the Plaintiff Bruce N. Bothwell Siewert Bothwell for the Defendant