r v. Campanella, 2023 MBKB 106

Date: 20230629 Docket: CI 21-01-32515 (Winnipeg Centre) Indexed as: Peltier v. Campanella Cited as: 2023 MBKB 106 COURT OF KING’S BENCH OF MANITOBA B E T W E E N: ) BRIANNA PELTIER, ) ) Lauren Gergely plaintiff, ) for the plaintiff ) - and - ) Wayne Onchulenko ) for the defendant CLAUDIO CAMPANELLA CARRYING ON ) BUSINESS AS CAMPANELLA CONSTRUCTION, ) ) Judgment Delivered : defendant. ) June 29, 2023 Corrected Judgment: An Erratum was issued on January 12 th , 2024. The text of the initial judgment is reproduced here with corrections, and the Erratum is appended at the end of this Corrected Judgment.

TOEWS J. [ 1 ] This is a motion to set aside a default judgment entered against the defendant. The Background [ 2 ] The defendant was hired by the plaintiff in October 2020, for the construction of a new home located in Grosse Isle Manitoba (the “project”). A contract was executed between the parties on October 4, 2020 (the “contract”). [ 3 ] Over the course of the project the relationship between the parties deteriorated significantly. The defendant alleges that the plaintiff would routinely berate him and the subcontractors he had hired in order to complete the project.

He alleges that the plaintiff continually changed the scope of the project and her expectations. [ 4 ] By the end of April 2021, the defendant states that he found it increasingly difficult to work on the project due to the conduct of the plaintiff. He states that the plaintiff refused to pay for changes or upgrades that she requested and that she stated on a number of occasions that she would not be paying for the remainder owing under the contract. [ 5 ] At that time the defendant states that the working relationship ended and the defendant ceased working on the project.

He states that he did not demand any outstanding monies still owing to him which he states was almost $100,000 plus approximately $8,000 for the underground wire service. The defendant states he left materials on site for the plaintiff’s use. [ 6 ] The defendant received a letter from the plaintiff’s counsel on July 30, 2021, requesting that the defendant provide a plan to address deficiencies in the project and to complete the project. In response the defendant wrote a letter dated August 12, 2021, in reply to the letter from plaintiff’s counsel.

In it he denied any deficiencies, indicating that the work had been properly completed by professionals in the industry and had passed inspection. He stated that he would require additional funds due to the repeated changes requested by the plaintiff as to the scope of the project before he would return to work. [ 7 ] The defendant was served with a statement of claim on September 21, 2021. Instead of responding to the claim, he did nothing, owing, he states, that he was unaware of his obligation to do so and because he states he was and continues to be struggling with anxiety

and severe stress brought on by the actions of the plaintiff. [ 8 ] The defendant states that he heard nothing further with respect to the claim until he received notices of registration from the land titles registry indicating that a judgment had been registered against his property on or about November 27, 2022. Immediately after receiving the land titles notices, he contacted legal counsel seeking legal advice.

Prior to this time, he had not consulted with legal counsel regarding this dispute. [ 9 ] The plaintiff states in her material that as a result of a fire destroying her home, she entered into the contract with the defendant for the construction of a new residential home.

Pursuant to the contract, the total sum of $447,300 including GST was payable by the plaintiff to the defendant in installments and in respect of any remaining outstanding amounts, upon completion of the project. [ 10 ] The plaintiff states that in May of 2021, the defendant had for all intents and purposes abandoned the contract, although he did not notify her that he was doing so. By that time the plaintiff says she had paid the defendant $350,000 in accordance with the contract and that when he ceased work the interior and exterior finishing of the house had not been completed.

She states that in accordance with the contract, the remaining amount of approximately $100,000 was not yet due and payable. [ 11 ] The plaintiff states that on or about September 9, 2021, the contract was ultimately terminated by the plaintiff as a result of the defendant’s refusal to rectify the defects and deficiencies identified by experts which she retained. In September 2021, the plaintiff filed this action and served it on the defendant. When he failed to file a statement of defence, counsel for the plaintiff brought a motion for judgment in this court.

The justice on the uncontested list declined to endorse the judgment and adjourned the plaintiff’s motion to a hearing which was heard by a second justice on September 26, 2022. After hearing the matter and reviewing the material, the justice granted judgment against the defendant in the amount of $574,043.76 in addition to pre and post judgment interest and costs. After a certificate of judgment was issued on November 9, 2022, the judgment was registered against a number of the defendant’s properties.

As indicated earlier, the defendant received notice of the registration of the judgment in November 2022. [ 12 ] It is noted that the defendant was not served with notice of the hearing to endorse the judgment either for the uncontested list appearance or at the subsequent hearing after which a justice granted judgment against the defendant. It is also noted that the statement of claim does not claim any specified or liquidated amount, claiming only damages, pre and post-judgment interest, costs and such other unspecified relief as the court may consider just.

The Law [ 13 ] Rules 19.02(4), 19.03(1) and 19.08(1-3) of the King’s Bench Rules provide: Notice not required 19.02(4) Notwithstanding the provisions of any other rule, a defendant who has been noted in default is not entitled to notice of any step in the action and need not be served with any document in the action, except where the court orders otherwise or where a party requires the personal attendance of the defendant … . . . . Terms 19.03(1) The noting of default may be set aside by the court on such terms as are just.

Under rule 19.04 19.08(1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just. Under rule 19.05 19.08(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial, may be set aside or varied by a judge on such terms as are just.

Noting of default 19.08(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the noting of default under rule

19.03. [14] When determining whether or not default ought to be set aside, the court must consider a number of factors which have beenarticulated in the case law. The applicable factors have been set out in GFK Capital Base Corp. v. Fernando, [1993] 88 Man.R. (2d)125, (MBCA), and summarized in subsequent cases. In Bank of Montreal v.

Blackmon, 2011 MBQB 48, 263Man.R. (2d) 209 (QL), the court held: 7 The basis upon which a court may set aside default judgment in Manitoba is to be found in Queen’s Bench Rule 19.08(1), whichprovides: 19.08(1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court onmotion under rule 19.04 may be set aside or varied by the court on such terms as are just. 8 In applying this rule, decided cases in this province establish that a court should consider the following: firstly, any delay by thedefendant in bringing the motion before the court and the reasons for that delay; secondly whether setting aside default judgment willoccasion irreparable harm to the plaintiff; and lastly, whether the defendant has both a genuine wish to defend and an arguable defence tothe action [see for example, GFK Capital Base Corp. v.

Fernando, [1993] M.J. No. 529, (Man. C.A.)]. 9 These considerations are to be made based on the affidavit evidence filed and relied on by the parties, either in support of themotion, or against it. [15] Similarly, in Limneos v. Knispel, 2004 MBQB 118, 185 Man.R. (2d) 101 (QL), the court held at para. 12: . . . . (iii) from the Manitoba Court of Appeal decision in GFK Capital Base Corp. v.

Fernando (1993), (MB CA), 88Man.R. (2d) 125: on a motion to set aside default judgment, if a defendant satisfies the judge that there was an arguable defence and he genuinely wishedto defend, default judgment should be set aside; it is only in exceptional circumstances where a defendant should be required to post security when a default judgment is set aside;exceptional circumstances would include a situation where there is evidence that a defendant was likely to remove or dissipate assets orotherwise attempt to evade any future judgment a plaintiff might obtain; if there is an arguable defence, which a defendant genuinely wishes to put forward, default judgment should only be refused whereirreparable harm will be done and the defendant's delay was willful; if this were the case, costs should be awarded on a solicitor andclient basis to avoid irreparable harm to the plaintiff; [16] As counsel for the defendant notes in his brief, none of these factors are in and of themselves determinative.

This approach tothe consideration of the relevant factors is made clear in Protect-A-Home Services Inc. v. Heber, 2001 MBCA 171, 160 Man.R. (2d)100 (QL), where the court held at paras. 10 – 13: 10 The exercise of the power is unfettered by any express condition or by any judge-made rule. In Evans v. Bartlam, [1937] A.C. 473(H.L.(E.)), the House rejected the argument that the power to set aside a default judgment could not be exercised in the absence of proofthat the defendant had a serious defence to the action and that he had some satisfactory explanation for his failure to enter an appearanceto the writ.

In rejecting the suggestion that proof of these two matters was a condition precedent to the exercise of the court’s discretion,Lord Russell of Killowen said (at p. 481):

For myself I can find no justification for this view in any of the authorities which were cited in argument; nor, if such authority existed,could it be easily justified in face of the wording of the rule. It would be adding a limitation which the rule does not impose. 11 The view of Lord Russell was expressly approved by this court in GFK Capital Base Corp. v. Fernando (1993), (MB CA), 88 Man.R. (2d) 125 at 128, and the absence of a requirement that the defendant demonstrate a meritorious defence wasemphatically confirmed in Beardy v.

Sass et al. (1997), (MB CA), 118 Man.R. (2d) 99 per Kroft J.A. (at paras. 13and 15). 12 The absence of any pre-condition to the exercise of the discretion does not mean, however, that a judge is free to exercise his or herdiscretion without regard to relevant factors. Lord Russell made the distinction this way in Evans v.

Bartlam (at p. 482): The contention [that proof of a meritorious defence and a sufficient explanation for the delay was required] no doubt contains thiselement of truth, that from the nature of the case no judge could, in exercising the discretion conferred on him by the rule, fail toconsider both (

a) whether any useful purpose could be served by setting aside the judgment, and obviously no useful purpose would beserved if there was no possible defence to the action, and (

b) how it came about that the applicant found himself bound by a judgmentregularly obtained, to which he could have set up some serious defence. But to say that these two matters must necessarily enter into thejudge’s consideration is quite a different thing from asserting that their proof is a condition precedent to the existence or exercise of thediscretionary power to set aside a judgment signed in default of appearance. 13 The factors which must be considered by a judge will vary from case to case … .

The Position of the Defendant [17] It is the defendant’s position that he failed to respond to the statement of claim because he had suffered from a stroke and a heartattack and that this condition makes him more susceptible to developing anxiety and depression. As a result of being harassed by theplaintiff while working on the project there was a significant impact on his mental health, which improved when he left the project.

When confronted with the claim, he states that he was unable to make decisions or inquire further regarding his obligation and as adefence mechanism chose to disassociate. [18] The defendant states that he did not willfully fail to submit a defence, but rather was unable to do so due to his mental health.

Inresponse to the letter he received from the plaintiff’s lawyer, he proposed a way forward, but never received a specific response to thatletter. [19] The defendant points out that some time had passed before he was served with the default judgment and only became aware of itwhen he received the land titles notification in November 2022.

When he did become aware of the judgment registered against hisproperty, he acted quickly to rectify the situation and retained legal counsel to have the judgment set aside. [20] The defendant states that he has a meritorious defence to the action, presenting evidence purporting to show that the work wascompleted in a workmanlike manner and that he acted with expediency and due diligence.

He argues that save for the mistake of failingto file a defence, he has not acted in a way that would suggest that he is intending to unnecessarily delay these proceedings. [21] The defendant argues that the plaintiff in these proceedings would not suffer any prejudice or irreparable harm as a result ofsetting aside the judgment. He states that he has acted with goodwill and candor throughout the process and has demonstrated nounfavourable conduct. In other words, the delay was not willful.

The Position of the Plaintiff [22] The plaintiff states that the defendant abandoned the project and was therefore in breach of the contract. She states that at thetime the defendant abandoned the project it was not completed and that the remaining sum of $97,000 was not yet due and owing to thedefendant when he ceased to work. [23] The plaintiff points out that her counsel wrote to the defendant in July 2021, asking him to come up with a plan to remediate thedeficiencies and cure his default under the contract.

After receiving the defendant’s reply to counsel’s letter in which he denied anydeficiencies and requested additional payments, a statement of claim was filed on September 13, 2021 and served on him on September21, 2021. [24] The defendant filed no statement of defence and only brought a motion seeking an order to set aside the default judgment onJanuary 18, 2023, two months after he received notice of the registration of the default judgment against his property. [25] The plaintiff states that the defendant has not met his burden of showing cause why the judgment should be set aside.

Theplaintiff takes the position that the factors cited by the defendant which are to be considered when determining whether a default

judgment should be set aside, are outdated. Instead, she states that the decision in Manitoba Public Insurance Corp. v.

Landry, 2005MBQB 141, 196 Man.R. (2d) 136 (QL), establishes the following factors to be considered on a motion to set aside a default judgment (atpara. 11): 1) whether the defendant had an ongoing intention to defend; 2) whether the defendant adequately explained why there was delay in filing a defence; 3) whether the delay in filing a defence was willful; 4) whether the motion to set aside the noting of default was brought with dispatch; and 5) whether the delay in filing a defence caused prejudice to the plaintiff. [26] She states that the defendant willfully failed to file a defence, and has not adequately explained why he failed to file a defence.

She states that he has failed to provide proper medical evidence to demonstrate that he was suffering from anxiety and stress when hereceived the claim. She states that he claims that he was suffering from anxiety and stress as a result of the defendant and her husband’sharassment of him and his subcontractors carrying out work on the project, but only when faced with the judgment does he allege that hewas harassed and abused.

For their part, the defendant and her husband deny any harassment or abuse. [27] The plaintiff states that the defendant was aware of the contents of the claim and willfully chose not to respond. She states thathe has not established any medical reason he could not respond to the claim nor is fearing the defendant a justifiable reason. Analysis and Decision [28] In my opinion the court in Landry did not change the law in Manitoba in respect of the factors that the court shall consider inassessing whether a default judgment should be set aside.

In that decision, Greenberg J. of this court made it clear that the five factorswhich she specifically enumerates in that decision may include but are not limited to those five factors. It is instructive to set out thecontext in which those enumerated factors appear in her reasons for judgment. She states: 11 Queen’s Bench Rule 19.03(1) provides that the noting of default may be set aside by the court on such terms as are just. There areno criteria set out in the rule to guide the court’s discretion.

A review of the cases under this rule indicates that courts in Manitobahave looked at a variety of factors in determining whether or not to set aside default, including: 1) whether the defendant had an ongoing intention to defend; 2) whether the defendant adequately explained why there was delay in filing a defence; 3) whether the delay in filing a defence was willful; 4) whether the motion to set aside the noting of default was brought with dispatch; and 5) whether the delay in filing a defence caused prejudice to the plaintiff. 12 Counsel for the defendant argued that there is no requirement for the court to find that the defendant has a meritorious defence inorder to set aside the noting of default.

In fact, that was the clear statement of the Court of Appeal in Beardy v. Sass (1997), (MB CA), 118 Man.R. (2d) 99 (C.A.). However, in the more recent decision of the Court of Appeal in Protect-A-Home ServicesInc. v. Heber, [2001] MBCA 171, Twaddle J.A., writing for the Court, referred to Beardy v. Sass, but held that, although proof of ameritorious defence was not a pre-condition to the exercise of discretion to set aside default, it is a relevant factor for the court toconsider.

And it was one of the factors upon which Twaddle J.A. relied in upholding the noting of default in that case. 13 Twaddle J.A. held that the factors which the court should consider will vary from case to case. He stated further: [18] The factors to be taken into consideration in the exercise of the court’s discretion to set aside a noting of default are not to beconsidered each in isolation from the others. As the Sinclair decision shows, a factor which may otherwise be dominant may lose itsdominance when considered in conjunction with another.

It is equally true that several factors which individually might not warrant arefusal to set aside a default may in combination do so. 14 In my view, where the delay in moving to set aside default is excessive (as I believe the four and one-half years is in this case), thecourt cannot help but consider whether there is merit to the defence. A court may be more inclined to excuse the delay in filing adefence where the defence has clear merit.

(Emphasis added) [ 29 ] It is apparent that among all of the factors which Greenberg J. considered in Landry , the excessive delay in that case played a very important role, as on the facts of that case it left the court to consider, if not question, whether there was merit to the defence. [ 30 ] Furthermore, as Twaddle J.A., stated and which Greenberg J. specifically recognized in her reasons, a factor “which may otherwise be dominant may lose its dominance when considered in conjunction with another.” Clearly, there is a significant degree of flexibility in how the court considers and evaluates each relevant factor, including those not specifically enumerated in Landry . [ 31 ] A judge’s broad discretion in considering whether to set aside default judgment was more recently reaffirmed in Thermo Applicators Inc. v.

C.I.R. Mechanical Installations Ltd. , 2016 MBCA 94 , [2016] M.J. No. 283 (QL) , at para. 6 , where Steel J.A. explained: … Rule 19.08(1) of the Court of Queen's Bench Rules states that the Court may set aside or vary a default judgment on such terms as are just.

The judge's discretion to do so is broad, and may consider a number of factors including, but not limited to, whether there is a meritorious defence, whether there was delay on the part of the defendant in bringing the motion and whether there will be irreparable harm to the plaintiff. … [ 32 ] I am satisfied that in this case that there is an arguable defence and that the defendant has a satisfactory explanation for his failure to file a statement of defence within the required time period.

Although limited, the medical evidence together with the more substantive evidence he presented in respect of alleged harassment and abuse, including the evidence of a third party (see the affidavit of Frank Guenther affirmed March 19, 2023) provide an appropriate explanation as to why he did not immediately file a defence to the action. When he was notified that the default judgment had been filed against his property, he acted quickly to retain legal counsel to set the judgment aside. [ 33 ] I am also satisfied that there is an arguable defence to the action.

He states in his evidence that the work he and the skilled subcontractors he hired completed the work done in accordance with industry standards and code requirements. Whether this defence will be ultimately successful is not for me to determine at this point. However, I would note that while the contract itself called for the payment of the total sum of $447,300 including GST to the defendant, the default judgment itself was entered in the amount of $574,043.76 in addition to pre and post judgment interest and costs, totaling over $600,000.

This amount was granted even after $350,000 had been paid to the defendant, that payment indicating at least on a prima facie basis that the plaintiff was satisfied that some value in respect of the contract had been provided by the defendant. Certainly, there was no liquidated amount noted in the statement of claim itself. [ 34 ] Perhaps it would have been prudent for the plaintiff to have served the defendant with the default proceedings even though there is no requirement that she do so.

Had she done so, especially where the statement of claim does not provide the defendant with a claim for a liquidated amount, I have no doubt that the amount of any default judgment, if granted following the default judgment hearing that was held, could have been substantially less.

In any event, it would have avoided this motion and its related expense, well over a year after a default judgment had been entered. [ 35 ] Had the defendant not responded to a notice of the motion for a default judgment, after having been served with notice of that hearing, I would have considered that a relevant factor. [ 36 ] In the result, after considering the factors relevant to the setting aside of a default judgment identified by the courts in, inter alia , GFK Capital Base Corp. , Beardy v.

Sass , Landry and Thermo Applicators Inc. , the defendant has satisfied me that he has a persuasive explanation as to why he initially failed to file a statement of defence, that there is an arguable defence in whole or in part to the claim, and that he moved as quickly as possible once he became aware of the default judgment. [ 37 ] The plaintiff has not presented any compelling evidence of irreparable harm that would be occasioned by setting aside the default judgment and I am also satisfied that there would be no such harm.

If the plaintiff is entitled to the damages which she claims, she can move against any property which the defendant owns in order to satisfy that judgment. There is no indication here that the defendant will attempt to evade any future judgment a plaintiff might obtain. I am also satisfied that this case fits within the regularly obtained default judgment described by Twaddle J.A. in GFK Capital Base Corp. at para. 15 , such that any irreparable harm may be avoided by ordering the defendant to pay reasonable solicitor and client costs to the plaintiff. [ 38 ] Accordingly, the default judgment is set aside.

The defendant is to file a statement of defence similar in substance and form to the draft included with his materials within 15 days of the date of this judgment. (See Exhibit 14 to the affidavit of Claudio Campanella affirmed February 21, 2023) [ 39 ] As alluded to, the plaintiff is entitled to her “throw away” costs related to this action on a solicitor/client basis, up to the filing of the motion by the defendant to set aside the default judgment. Since it is the defendant who is successful on this motion, costs for the motion to set aside the default judgment will be in the cause on the usual tariff basis.

J. Date: 20240112 Docket: CI 21-01-32515 (Winnipeg Centre) Indexed as: Peltier v. Campenella Cited as: 2023 MBKB 106 COURT OF KING’S BENCH OF MANITOBA B E T W E E N: ) ) Lauren GergelyBRIANNA PELTIER, ) for the plaintiffplaintiff, ) - and - ) Wayne Onchulenko ) or the defendantCLAUDIO CAMPANELLA CARRYING ON, ) BUSINESS AS CAMPANELLACONSTRUCTION, ) ) Judgment delivered:defendant. ) January 12, 2024 TOEWS J. E R R A T U M For purposes of clarity, the following amendments have been made to p. 12 of the above-noted judgment: (

i) In paragraph 31, [2016] M.J. No. 284 referred to has been changed to 2016 MBCA 94 , [2016] M.J. No. 283. Please replace the existing p. 12 with the attached revised p. 12. DATED this 12th day of January 2024. J.