Waterloo Park Golf Inc. v. Little Bear’s Catering Ltd. and Morrison Date:, 2011 BCPC 432

Citation: Waterloo Park Golf Inc. v. Little Bear’s Catering Ltd. and Morrison Date: 20111109 2011 BCPC 0432 File No: 9323 Registry: Rossland IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: WATERLOO PARK GOLF INC. CLAIMANT AND: LITTLE BEAR’S CATERING LITD. and KELLY MORRISON DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE MROZINSKI Counsel appearing on claimant’s behalf: R. Sookorukoff Counsel appearing on defendants’ behalf: C.

Cook Date of Hearing: October 27, 2011 Date of Judgment: November 9, 2011 Introduction [ 1 ] This is an application for an order setting aside a default and dismissal order granted by this court on February 5, 2010, and an order granting the applicant leave to file a reply to the defendant’s counterclaim. In the alternative, the applicant seeks an order that the garnishing order granted in this matter be set aside and a payment hearing be held.

Background [ 2 ] The parties in this matter came together in 2006 when the claimant, Waterloo Park Golf Incorporated (the “claimant”), and the corporate defendant, Little Bear’s Catering Ltd (“Little Bear’s Catering”), entered into a contract for services. Ms. Morrison, the sole named defendant was, at the material time, a director of Little Bear’s Catering. [ 3 ] Pursuant to the contract, Little Bear’s Catering agreed to provide restaurant, bar and other ancillary services to the claimant.

The contract provided that Little Bear’s Catering would pay to the claimant rent, a portion of utilities, and 50% of its bar profits. [ 4 ] Though Little Bear’s Catering did provide catering services, by December 2006, the parties were engaged in a disagreement concerning the fees allegedly owed to the claimant by Little Bear’s Catering. As the affidavits filed in this application indicate, the parties spent some time attempting to resolve their dispute. The claimant, at least, formed the opinion that the dispute was not resolved and on August 2, 2008, filed a small claims action against “Ms.

Morrison dba Little Bear Catering” for damages in the amount of $25,216.00. This claim, which I will refer to herein under its claim number 9015, did not include the whole amount the claimant maintained it was owed by Ms. Morrison. However, given the small claims court’s limit, any amount over $25,000.00 was waived. [ 5 ] At this juncture, it does not appear that either party was represented by counsel. In any event, the matter proceeded to a

settlement conference on January 8, 2008. There, among other things, the claimant was advised that it had not named the proper defendant. [ 6 ] Geoffrey Yule, a shareholder and one time director of the claimant, filed an affidavit in which he averred that the claimant was left with the impression that it could not proceed with claim 9015 but rather had to allow that claim to lapse and file a new claim naming the proper defendant. What then occurred was that by order dated March 26, 2008, claim 9015 was dismissed.

On April 17, 2008, the claimant filed what was basically the same claim except that the defendants were now named as “Little Bear’s Catering Ltd. and Kelly Morrison” (“claim 9323”). [ 7 ] On May 9, 2008, both defendants filed a reply and counterclaim in response to claim 9323. Each denied owing the claimant any money or being in any way in breach of the contract. Little Bear’s Catering counterclaimed that the claimant yet owed it $7,727.79 for various expenses incurred during the life of the contract. Ms. Morrison counterclaimed that she was owed $12,000 in wages for services provided at the golf counter.

She alleged that the claimant was unjustly enriched by her unpaid labour. [ 8 ] Despite being served with the defendants’ reply and counterclaim, the claimant filed no reply to the counterclaim. It says that it did not know it was necessary to do so. In this regard, I note that the form of reply and counterclaim filed by the defendants is not in Form 2 as required the Rules. I am asked to infer from this that the claimant did not as a result appreciate that it was necessary to file a reply to the counterclaim.

There is clearly a difference between the reply and counterclaim filed by the defendants and Form 2 of the Rules. Had the defendants used the proper form, the claimant may have seen the note on Form 2 reminding claimants that if they took issue with all or part of the counterclaim they had to file a separate reply. On the other hand, the obligation to reply to a counterclaim is also provided for in the Rules. It might be expected that a litigant having filed a claim would be familiar enough with the Rules to know that a reply to a counterclaim was necessary.

Nevertheless, in this case, the claimant says it was unaware of its obligation to respond to the counterclaim which it now maintains is completely without merit. [ 9 ] A settlement conference with regard to claim 9323 proceeded on December 8, 2008. Ms. Morrison attended for the defendants and Mr. Doug Johnstone appeared on behalf of the claimant.

For reasons which are not apparent on the record or in the materials, the settlement conference was adjourned generally. [ 10 ] No further steps appear to have been taken in this matter until, on August 2, 2009, the claimant was served by registered mail at its registered office with a copy of the defendants’ application for both a dismissal and default order. The Certificate of Service indicates the notice was signed for by Carol Gleave, a person listed in Ms.

Mainzer’s affidavit as a director of the claimant until December 8, 2009. [ 11 ] The notice provided that the dismissal order was being sought on the ground that the claimant was estopped from filing claim 9323 by virtue of the earlier dismissal of claim 9015. Alternatively, it was asserted that claim 9323 should be dismissed as the claimant had taken no steps to proceed with its claim by the disclosure of documents or otherwise. The defendants also sought a default order with respect to their counterclaim as the claimant had not filed a reply.

The application was set for hearing on September 1, 2009. [ 12 ] Despite having received this material, no one appeared for the claimant at the application on September 1, 2009. Nonetheless, the court file indicates the application was adjourned and a settlement conference ordered. The defendants were granted leave to reinvigorate their application at the settlement conference. [ 13 ] On October 2, 2009, the Registry sent notice to all parties of the settlement conference scheduled for February 5, 2010. [ 14 ] Although given notice, no one appeared for the claimant on February 5, 2010.

At that time, the defendants spoke to their application for dismissal and default judgment. Both orders were granted and the claimant was ordered to pay the defendant $21,608.67 plus filing fees and court ordered interest. [ 15 ] The defendants thereafter obtained a Garnishing Order (After Judgment). [ 16 ] In contrast to the attention given to this matter by the defendants, the claimant’s efforts have been desultory. As Mr.

Yule averred in his affidavit, although he knew about the default order, he took no steps to seek any legal advice until he attended a social event at which time a lawyer advised that it might be possible to bring this application to set aside the default and dismissal. That was in July, 2011. [ 17 ] The very source of the claimant’s inaction at this point is set out in the affidavit of Annette Mainzer, a director of the company since March 30, 2010. In para. 2 of her affidavit, Ms. Mainzer avers that between December 8, 2009 and March 30, 2010, the claimant did not have a board of directors.

It was essentially rudderless. [ 18 ] On the other hand, up until December 8, 2009 the claimant did have a board of directors. Moreover, as the Minutes of the Annual General Meeting of December 8, 2009, indicate, the directors and the shareholders present were aware that claim 9323 was still outstanding. Even so, up to that point, no one had taken any steps in regard to the claim after filing it in April except Mr. Johnstone’s attendance at the settlement conference in December 2008.

The Law [ 19 ] Under Rule 17(2) of the Small Claims Rules, this Court may set aside a dismissal or default order made in the absence of a party. Rule 17(2)(

b) provides that in doing so, the court must consider the following:

i) The reason the party did not file a reply or attend the settlement conference; ii) The reason for the delay, if any, in filing the application; and

iii) The facts that support the claim or the defence. [ 20 ] In Lou Guidi Construction Ltd. v. Fedick , [1994] B.C.J. No 2409 , Judge Stansfield observed at para. 5 that given the purpose of the Small Claims Act , and the preponderance of self represented litigants in this court, as a general rule greater emphasis should be placed upon the facts which support the claim or defence than the other factors in Rule 17(2)(b).

He added that though “the reasons for the party failing to do that which led to the default, or delaying bringing the application to set aside, are relevant considerations, they are less so than whether on the merits the party “deserves their day in court”.” [ 21 ] It follows that it is necessary to consider these other relevant factors only if the court is satisfied there is merit to the claim or defence.

The Merits of the Claim and Defence to the Counter-Claim [ 22 ] Counsel for the defendants submits that this application must be dismissed as there is no evidence on which this court could find any merit to the claimant’s claim or its defence to the counterclaim. This is because the claimant has filed no documents in respect of its claim, and has filed no reply or even draft reply in respect of the counterclaim. In Royal Bank Canada v. Marshall , [1996] B.C.J.

No. 878 , Judge Martinson, as she then was, dismissed an application to set aside a default order on the basis that no evidence was presented as to a valid defence to the claim. [ 23 ] Though documentation could provide the necessary factual basis on which to assess the claim, it is possible to assess the merits of the claim without such evidence. The question on this leg of the test under Rule 17(2)(

b) is whether there is any evidence on which this court could find the applicant has a meritorious claim or defence or at least one worthy of investigation. On its face, claim 9323 has merit particularly when read in conjunction with the defendants’ reply.

The defendants have conceded, for example, that the parties did enter into the contract as alleged and that a dispute regarding the contract arose sometime in or around September 2006, which dispute the defendants admit at para. 10 of their reply had not been resolved by the time claim 9015 was filed. [ 24 ] Though the claimant has not submitted a draft reply to the counterclaim, the claimant has for all practical purposes set out its response to the counterclaim at paras. 13 to 16 of Mr. Yule’s affidavit. Mr.

Yule’s affidavit contains not only the requisite denial of the counterclaim, but also contains allegations of fact and evidence which, if believed, could constitute a defence to much or all of the counterclaim. At the very least, the affidavit discloses a defence worthy of investigation. [ 25 ] Having concluded there is merit to both the claim and the claimant’s defence to the counterclaim, it is still necessary to consider the remaining factors in Rule 17(2)(b). To paraphrase Judge Stansfield, while the merits of a claim or defence must be given paramount consideration, the other factors in Rule 17(2)(

b) remain relevant. In addition, in this case I must also consider the reasons the claimant failed to prosecute its claim in the first instance which consideration raises slightly different concerns than those regarding its failure to attend the settlement conference and file a reply to the defendants’ counterclaim. Reasons for Failing to Comply with the Rules [ 26 ] In considering the reasons for the claimant’s failure to file a reply or attend the settlement conference, I found the comments of Judge Stansfield in Klienfelder v. Stoy , [1994] B.C.J. No. 2823 , at para. 32 useful.

There it was held that in considering an application to set aside a default order, it is necessary to consider the reasons why the applicant failed to file a reply. Judge Stansfield pointed to various factors which could be considered in assessing the merits of these reasons. Those include a consideration of the background of an applicant, his or her level of commercial sophistication or legal experience, and any other evidence that might suggest a blatant disregard for the Rules or otherwise of a contempt for the court process. [ 27 ] On the face of it the claimant is not an unsophisticated entity.

It is a registered company that at the relevant time was engaged in the operation of a golf course in Castlegar. It entered into a written contract with Little Bear’s Catering which contract itself evidences some complexity. Up until December 8, 2009, the claimant had a board of directors, held shareholder’s meetings, took minutes and among other things, commenced claim 9323. [ 28 ] While the claimant evidences some sophistication in business matters, there is an obvious lack of understanding of basic legal process – a fact not uncommon among the litigants in these courts.

As an example, I accept the submissions of counsel for the claimant that rather than apply to amend its style of cause to remedy the deficiencies in claim 9015, it formed the opinion, without any legal advice, that it was necessary to let that claim lapse and to file a new claim in which the defendants were properly named. The fact the claimant filed claim 9323 so quickly after its claim 9015 was dismissed supports this submission in my mind.

However, I hasten to add that without the explanation provided in the affidavit of Geoffrey Yule, neither this court nor the defendants would have any reason to suspect the filing of claim 9323 was anything other than an abuse of process. This was in fact what was found at the defendants’ application to dismiss on February 10, 2010.

With this explanation, which was not provided at the February 10 th application due to the absence of anyone for the claimant, I find that there was no abuse of process; rather, I accept that claim 9015 was allowed to lapse and claim 9323 filed in error. [ 29 ] The defendants however cannot be faulted for seeking an order striking claim 9323 for an abuse of process as the claimant neither explained its logic to them, nor did it bother to attend at court on March 26, 2008 when the application was made by the defendants to dismiss claim 9015 to provide the court with any explanation either.

The claimant had a second opportunity to explain its purpose for allowing claim 9015 to lapse when the defendants sought an order dismissing claim 9323 on February 10, 2010. It failed to appear on that application as well. [ 30 ] The claimant explains its failure to attend the application to dismiss on March 26, 2008 as a misunderstanding of the law. Its failure to attend at the defendants’ second application to dismiss on February 10, 2010, is said to be a consequence of it having no directors after December 8, 2009.

Its failure to apply to set aside the default order of February 10, 2010, is said to be a function again of the claimant’s lack of understanding of the law and the stubborn refusal of any of its directors or shareholders to seek legal advice in

regard to these claims. [ 31 ] Even accepting the claimant was mistaken about its legal obligations, including its obligation to reply to the defendants’ counterclaim, or even to take quick action to seek to set aside the last default order, there is little in the way of evidence to explain why it took no steps to prosecute its own claim before December 8, 2009. As I have said, in determining whether the dismissal order should be set aside, the considerations are slightly different than those that apply to the question whether the default order should be set aside.

As with the test in this court on applications to set aside default orders, there is no reason not to analogize an application in this court to set aside a dismissal for want of prosecution with Rule 22(7) of the BC Supreme Court Rules. In such applications, the court has to bear in mind that the dismissal of a claim for want of prosecution is a draconian order that should not be lightly made. It is an order that should be made only where it is clear the claimant acted intentionally or contemptuously, or that the delay or length of the delay has given rise to a substantial prejudice suffered by the defendant.

Fundamentally, the question is whether on balance justice requires a dismissal of the claim: PMC Builders & Developers Ltd. v. Country West Construction, Ltd ., 2009 BCCA 535 . [ 32 ] From what little evidence there is in this case regarding the claimant’s prosecution of the claim, I infer that though it had the trappings of a reasonably sophisticated commercial entity, it was in fact for the most part disorganized, incapable of acting, and yet disinclined to seek any legal advice.

How the claimant thought its claim was supposed to proceed is a mystery. [ 33 ] This was reckless behaviour to be sure, but I cannot be satisfied that it was intentional or contemptuous of this court. On balance, given the merits of the claim and defence to the counterclaim, and the absence of any prejudice to the defendants’ ability to obtain a fair hearing in this matter, I find that it is in the interests of justice in this case to set aside the dismissal and default orders.

Absent any evidence of prejudice or contumelious conduct, there are compelling reasons to ensure that litigants have an opportunity to bring their meritorious claims before these courts. It has long been a tradition in the civil courts that litigants are not to be driven from the judgment seat too quickly or too easily. This, as Judge Stansfield acknowledged, may be difficult for litigants like the defendants herein who have complied with the Rules to accept.

However, without evidence of the sort of intentional disregard for the court process necessary to justify a denial of an application to set aside a default order, there is no good juridical reason except prejudice caused by delay not to set it aside. This is so particularly when other remedies are available which can address much of the inconvenience caused by the lack of action on the part of this claimant in particular. [ 34 ] The conduct of the claimant in this case was desultory and reckless as I have found.

This conduct resulted in four unnecessary appearances in this court by the defendants in addition to their appearance on this application. In addition, the defendants were required to file two replies to the claimant’s various claims, one of which was unnecessary. [ 35 ] In its application for an order dismissing claim 9323, the defendants set out the various fees expended by them to that date. I find that the defendants are entitled to recover filing fees for their reply to claim 9015 in the amount of $50.00.

They are entitled to filing fees for their applications for the default and dismissal orders in the amount of $25.00 each. They are entitled to the costs of obtaining the Garnishing Order in the amount of $102.00. Finally, they are also entitled to filing fees for the application for the Certificate of Judgment in the amount of $30.00. [ 36 ] In addition, to compensate the defendants for their lost time and trouble in appearing in this court on March 16, 2008, December 9, 2008, February 5, 2010, and February 10, 2010, I order the claimant pay to the defendants the sum of $400.00.

This and the filing fees referred to above in the amount of $232.00 are payable within 7 days of the date of this judgment failing which the default and dismissal orders will not be set aside. [ 37 ] The claimant must also file and serve its reply to the defendants’ counterclaim within 7 days of the date of judgment or the default and dismissal orders will not be set aside. [ 38 ] The Registry will advise the parties of the date for a settlement conference in this matter. [ 39 ] Although the claimant’s were successful herein, I order that they bear their own costs on this application whatever the outcome of this litigation. [ 40 ] Finally, it follows given these reasons that the Garnishing Order must be set aside. __________________________________ The Honourable Judge L.J.

Mrozinski