2017 ONSC 6480, 2017 ONSC 6480

CITATION : 7321201 Canada Ltd. v. Intact Insurance Company , 2017 ONSC 6480 COURT FILE NO.: 16-67326 DATE: 2017/10/31 SUPERIOR COURT OF JUSTICE – ONTARIO RE: 7321201 CANADA LTD. o/a JAMROCK SOLUTIONS, Plaintiff – and – INTACT INSURANCE COMPANY, Defendant BEFORE: Madam Justice S. Corthorn COUNSEL: Christine A. Powell, for the plaintiff/responding party Ryan Kennedy, for the defendant/moving party HEARD: June 22, 2017 ENDORSEMENT Overview [ 1 ] In January 2014, a fire occurred at a property owned by Jamrock Solutions and insured by Intact.

Jamrock commenced an action for compensation with respect to various losses suffered as a result of the fire. In January 2017, Jamrock obtained default judgment; the damages awarded are approximately $225,000.00. [ 2 ] Intact requests that the default judgment be set aside.

In support of its motion, Intact highlights: • The efforts it made until the summer of 2016 to resolve Jamrock’s fire loss claim; • That inadvertence on the part of Intact’s claims examiner led to the default in defending the action; • That it has meritorious defences to the claims advanced by Jamrock; and • That the balancing of prejudice weighs in favour of setting aside the default judgment. [ 3 ] Intact also requests that the notice of garnishment, upon which Jamrock has already acted, be stayed.

Lastly, Intact requests that Jamrock be ordered to account for the monies garnished from Intact’s bank account in the spring of 2017. [ 4 ] Jamrock acknowledges that for 2.5 years after the fire, efforts were made by the parties to resolve the claim. In opposing Intact’s motion, Jamrock points to factors that caused it to move forward with the action in 2016 and 2017.

Those factors include: • The two-year limitation period within which to commence an action; • The six-month time frame within which to serve the originating process; • The financial position in which Jamrock found itself several years after the fire and without a resolution of the fire loss claim in its entirety: facing power of sale proceedings on the property; and • The consistent and clear communication on behalf of Jamrock with Intact, or its representatives, as to the status of the action, the steps Jamrock intended to take in the action, and when those steps would be taken. [ 5 ] Jamrock’s position is that at all times it was made clear to Intact that Jamrock intended to move forward expeditiously with the action and with enforcement of the default judgment.

Jamrock submits that Intact was not merely inadvertent in responding to the claim. Jamrock highlights that since the action was commenced, there has been a pattern of inaction on Intact’s part. Because of that pattern, the balance of prejudice weighs in favour of Jamrock and the dismissal of Intact’s motion in its entirety. Background [ 6 ] Throughout much of the 2.5-year period from the date of the fire to the date of service of the originating process, Jamrock and its counsel deal with an independent adjusting firm retained by Intact to handle the fire loss claim.

The originating process is served on Intact in June 2016. Intact does not respond directly to the service of the originating process. As a result, Jamrock’s counsel continues, even after service of the originating process, to communicate and deal with the independent adjuster. [ 7 ] In August 2016, approximately six weeks after the originating process is served on Intact, Jamrock’s counsel informs the independent adjuster that (

a) a deadline for the delivery of a statement of defence has been set, and (

b) failing delivery of a statement of defence by the deadline, Intact will be noted in default.

[ 8 ] The communication between Jamrock’s counsel, the independent adjuster, and Intact’s claims examiner in August 2016 is as follows: Aug. 3 – Jamrock’s counsel emails the independent adjuster and advises that, “If we do not get a response this week, I will have little option then [ sic ] to request that a statement of defence be drafted and served.” The response sought is to a settlement proposal made on behalf of Jamrock.

Aug. 15 – Jamrock’s counsel follows up by email with the independent adjuster stating, “Further to my email below, please assure your statement of defence is delivered by week’s end failing which, we will proceed to note your client in default . ” The “email below” is the August 3 email quoted above. Aug. 15 – The independent adjuster emails the claims examiner: “Another email from [Jamrock’s counsel. She] is requesting that a Statement of Defence be filed by Friday, failing which she will start default proceedings.” The independent adjuster also leaves a voicemail message for the claims examiner.

Aug. 16 - The claims examiner informs the independent adjuster that he will be referring the matter to legal counsel in order to deliver a statement of defence on behalf of Intact to Jamrock’s statement of claim. Aug. 17 – The independent adjuster emails Jamrock’s counsel and advises: I reviewed the file with the Claims Examiner … at Intact yesterday. I am advised that Intact Insurance is referring the claim to defence counsel on a priority basis in order to prepare and file the statement of defence in this matter as soon as possible. If you have any questions please do not hesitate to contact me.

Aug. 24 – Intact is noted in default of delivery of a statement of defence. Aug. 29 – A litigation assistant at the office of Jamrock’s counsel emails the independent adjuster stating, “Please be advised that as the deadline noted in counsel’s email below has passed, that steps have been taken to note your client in default . ” Aug. 30 – The independent adjuster emails the litigation assistant and informs her that her email will be forwarded to the Intact claims examiner.

The independent adjuster also provides the litigation assistant with a copy of his August 17 email to Jamrock’s counsel (identifying that the matter would be referred to legal counsel for a defence). [ 9 ] Subsequent to August 30, 2016, there is no further communication from Jamrock’s counsel to the independent adjuster. There is also no subsequent communication to Jamrock’s counsel from one or more of the independent adjuster, the claims examiner, or counsel retained by Intact.

There is no further communication from Jamrock’s counsel with Intact or anyone on its behalf until January 2017, when the default judgment is served on Intact. [ 10 ] The only communication subsequent to August 2016 and prior to the default judgment being granted in January 2017, is in December 2016. It is the claims examiner’s evidence that “on or about” December 22, 2016, he is informed by the independent adjuster that the latter has received “no further communications” from Jamrock’s counsel.

The claims examiner does not state in what form he received that communication – by email, telephone, voicemail or otherwise. A copy of the communication, if in written or print form, is not attached as an exhibit to the claims examiner’s affidavit. [ 11 ] It is the claims examiner’s evidence that the independent adjuster leaves the firm with which he had been working (and that had been retained by Intact) on December 30, 2016.

I infer from the timing of the independent adjuster’s email that he reviewed his files and sent a final email on each of them prior to his departure from the adjusting firm. [ 12 ] The motion for default judgment proceeds on January 6, 2017.

Default judgment is granted as follows: • Damages in the amount of $224,676.01 payable within 30 days; • Costs in the amount of $16,333.26; • Pre-judgment interest at the rate of 0.8 per cent from January 20, 2016 (the date on which the notice of action was issued) to the date of default judgment; and • Post-judgment interest at the rate of two per cent per year. [ 13 ] On January 10, 2017, the default judgment is served on Intact’s Ottawa office. The claims examiner receives a copy of the default judgment on January 11, 2017. He reviews his file and reports internally on the matter.

On February 22, 2017, the claims examiner receives internal authorization to retain legal counsel for the purpose of a motion to set aside the default judgment. [ 14 ] Intact retains counsel on February 23, 2017. The following day, Intact’s counsel sends a letter by fax to Jamrock’s counsel.

In the letter, Intact’s counsel: • Advises of its retainer in the matter, including the instructions to set aside the default judgment; • Requests a copy of the motion record in support of the request for default judgment; and • Requests that “you do not take any steps to enforce the default judgment”. [ 15 ] From late February 2017 forward, all communication is between Jamrock’s counsel and Intact’s counsel. The communication addresses (

a) the timing of the motion to set aside the default judgment, and (

b) the subject of enforcement of the default judgment.

[ 16 ] On February 28, 2017, (

a) a notice of garnishment is issued, (

b) the notice is served on Intact, and (

c) a copy of the notice is sent by fax from Jamrock’s counsel to Intact’s counsel. The communication between counsel with respect to the garnishment proceeding is addressed under Issue Nos. 2 and 3 below. In the end: • The sum of $243,550.39 is garnished from a bank account in Intact’s name; • On June 2, 2017 (i.e. prior to the return of Intact’s motion to set aside the default judgment), $170,782.50 is paid from the funds garnished.

The funds are paid to the mortgagee of Jamrock’s property, to avoid power of sale proceedings; and • The balance of the funds garnished (approximately $70,000) remains in the trust account of Jamrock’s counsel, pending further order of the court. [ 17 ] On March 31, 2017, counsel for Jamrock is served with the motion record on behalf of Intact for the motion to set aside the default judgment. The notice of motion identifies August 3, 2017, as the return date for the motion. An earlier date for the return of the motion is subsequently secured and the motion is heard on June 23, 2017.

The Issues [ 18 ] The issues to be determined on this motion are: 1. Is Intact entitled to have the default judgment set aside? 2. Regardless of the outcome with respect to the default judgment, is Intact entitled to have the notice of garnishment stayed? 3. If the answer to one or both of Issue Nos. 1 and 2 is “yes”, on what terms is the default judgment to be set aside and/or the notice of garnishment stayed? Issue No. 1 – The Default Judgment

a) Criteria to Set Aside a Default Judgment [ 19 ] The three-part test to be considered on a motion to set aside a default judgment is: 1) Was the motion brought promptly after the defendant learned of the default judgment? 2) Is there a plausible excuse or explanation for the defendant’s default? and 3) Does the defendant have an arguable defence on the merits? (See: Mountain View Farms Ltd. v. McQueen , 2014 ONCA 194 , 119 O.R. (3d) 561, paras. 48 and 49 ). [ 20 ] In addition, the following broader issues are to be considered: • How is the potential prejudice to the parties to be balanced? (i.e.

To the moving party if the motion is dismissed, versus to the plaintiff if the motion is allowed.); and • What is the effect of any order the court might make on the overall integrity of the administration of justice? (See: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. , 2007 ONCA 333 , 87 O.R. (3d) 479).

b) The Three-Part Test [ 21 ] Jamrock acknowledges that Intact moved promptly in bringing the motion to set aside default judgment. I therefore need only address parts 2 and 3 of the three-part test and the two broader issues.

Part 2 – Plausible Excuse or Explanation for Default [ 22 ] The excuse or explanation offered by Intact for its failure to deliver a statement of defence is the claims examiner’s work load in August 2016. The claims examiner’s evidence in that regard is as follows: • In August 2016, he was responsible for approximately 143 claims.

At any given time, he typically handles an average of 125 claims; • Because of the responsibility of 18 additional claims (over and above his typical workload), the claims examiner omitted to refer the Jamrock action to legal counsel; and • The claims examiner thought he had referred the Jamrock action to legal counsel, but was mistaken in his belief in that regard. [ 23 ] Intact’s circumstances, as of August 2016, are similar to those of the defendant in Glasstech Inc. v. Belle View Construction Corp. , 2008 CarswellOnt 5189 (S.C.J.) .

Belle View moved to set aside a default judgment obtained by Glasstech on a lien claim. The explanation or excuse offered by Belle View was that the individual responsible for handling Glasstech’s lien claim was (

a) dealing with many lien claimants at the time, (

b) handling a great amount of paperwork associated with those lien claims, and (

c) responsible for the day-to-day operations of Belle View. In that setting, Glasstech’s statement of claim was misplaced or misfiled. Maddalena J. found that explanation to be “entirely plausible or reasonable” (para. 7).

[ 24 ] I find that Intact has provided a reasonable and plausible explanation for its failure to refer the Jamrock claim to legal counsel in August 2016. The claims examiner was not cross-examined on his affidavit.

I accept his evidence that he intended to refer the matter to counsel, thought he had done so, and was mistaken in his belief in that regard. [ 25 ] Intact has not, however, provided any explanation for its failure to act upon the contents of the December 22, 2016, email sent to the claims examiner by the independent adjuster (i.e. that the latter had not heard from Jamrock’s counsel since August 2016).

Given the claims examiner’s belief (although a mistaken one) that he had referred the Jamrock action to legal counsel, why did he do nothing about the file for at least three months from August through December 2016? Why did the independent adjuster’s email of December 22, 2016, not prompt the claims examiner to check his file notes or review the Jamrock fire loss file? [ 26 ] There is no evidence as to Intact’s claims handling process, internal reporting requirements, bring-forward system, tickler system, periodic file-review system, or year-end review system.

No explanation is offered by Intact as to why the Jamrock file did not come to anyone’s attention for consideration or follow up during the more than three months from mid-August through December 2016. [ 27 ] I find that Intact has not provided a plausible or reasonable explanation as to why nothing was done on the file (

a) from mid- August through December 2016, and (

b) following receipt of the December 22, 2016, email from the independent adjuster. In

summary, Intact has failed to satisfy the second part of the three-part test. [ 28 ] The failure of Intact to satisfy the second part of the three-part test does not necessarily result in dismissal of Intact’s motion to set aside the default judgment. The three-part test and the two broader factors are not to be treated as rigid rules ( Mountain View Farms , at para. 50). For example, “the presence of an arguable defence on the merits may justify the court exercising its discretion to set aside the default judgment, even if the other factors are unsatisfied in whole or in part” ( Mountain View Farms , at para. 51).

Part 3 – Arguable Defence on the Merits [ 29 ] Intact submits that it has an arguable defence to each of the three components of Jamrock’s claims – the building claim, the loss of rent claim, and the continuing business claim.

i) The Building Claim ▪ Replacement Cost Versus Actual Cash Value [ 30 ] The policy provides for building repair coverage in the amount of $346,658, based on a replacement cost valuation. Settlement of the building claim on a repair or replacement cost basis shall only be made when repair or replacement of the building has been effected by Jamrock. If the building is not repaired or replaced, then the building claim shall be settled on an actual cash value (“ACV”) basis.

The wording of the policy is mandatory in that regard. [ 31 ] In the spring of 2014, Intact was advised that Jamrock intended to repair or replace the building. Intact had already obtained two bids from contractors for repair or replacement of the building. Intact submits that, based on the lowest of the two bids, if Jamrock intended to repair or replace the building then it was entitled to $326,570.76. [ 32 ] In June 2014, Intact reached a settlement with Jamrock for $326,570.76 on the basis of Jamrock’s representation that it intended to repair or replace the building.

Intact made an advance payment to Jamrock towards the cost of repair or replacement of the building ($164,347.49). Intact advised Jamrock that the balance ($162,223.27) would be paid once Jamrock provided Intact with proof of the completion of the repairs to or replacement of the building. [ 33 ] In the summer of 2016, Jamrock informed Intact that it had changed its mind and would not be repairing or replacing the building. Jamrock then pressed Intact to resolve the building claim on an ACV basis.

A resolution was not reached and Jamrock proceeded, as detailed above, with its action from August 2016 forward. [ 34 ] There are at least two competing appraisals with respect to the ACV of the building. In February 2014, Intact obtained a report from Bourret Appraisal Inc., titled “Valuation Report” (the “BAVR”). That six-page report includes details of the rooms, the materials used in the construction, the type of heating system, the roof, and the foundation. The estimated replacement cost for and the ACV of the building are set out in the report. The former is $389,037.77; the latter is $165,347.49.

Intact relied on that ACV figure when making the advance payment to Jamrock in June 2014. The amount paid to Jamrock took into consideration the $1,000 deductible. [ 35 ] A copy of the BAVR was not produced by Intact to Jamrock or to its counsel until a copy of the document was included as an exhibit to the claims examiner’s affidavit filed in support of this motion. Therefore, a copy of the BAVR was not available to Jamrock and its counsel on the return of the motion for default judgment.

Jamrock proceeded with the motion for default judgment on the basis of a report it obtained from Coldwell Banker, a real estate brokerage (the “CBR”). The author of that report researched and opined as to the fair market value of the property ($530,000). He estimated the ACV of the building at $350,000. [ 36 ] Jamrock submits that, for the following reasons, Intact is not entitled to rely on the BAVR in support of the motion to set aside the default judgment:

a) Intact did not produce the BAVR prior to the date on which the motion record was served for the motion to set aside default judgment; and

b) On the motion to set aside the default judgment, Intact has not provided any evidence that the ACV of $350,000 relied on in support of the motion for default judgment is not reasonable. [ 37 ] I disagree. There is nothing in the conduct of Intact that prevents or precludes it from relying on the BAVR in support of the motion to set aside the default judgment. In addition, the BAVR is evidence of an opinion as to the ACV of the building that is different

from the opinion in that regard expressed in the CBR. The difference between the two opinions is $185,000. ▪ Timing of Production of BAVR [ 38 ] Until the summer of 2016, Intact understood that it was dealing with a claim based on the repair or replacement of the building. A settlement of the building claim was reached on that basis. [ 39 ] The ACV figure upon which Intact based the advance payment made in 2014 is that set out in the BAVR.

There is no evidence that Jamrock disputed the amount of the advance payment made in 2014. [ 40 ] The settlement reached of the repair or replacement cost was based on a figure from a report other than the BAVR. The figure in the BAVR for repair or replacement cost was not relevant to the settlement reached. Production of the BAVR was not relevant to the settlement reached; there was no reason for Intact to produce the document in 2014. [ 41 ] In an email to the independent adjuster in January 2016, Jamrock’s counsel (

a) provided an update on the fire loss claim, and (

b) requested copies of several documents including, “A copy of the appraisal of the building to determine the ACV of the building”. In response, by email on January 19, 2016, the independent adjuster produced copies of three reports to Jamrock’s counsel.

The reports were attached to the email. [ 42 ] Based on the titles of the documents (as they appear in the header of the email), the references to the documents in the substance of the email, and the contents of the BAVR included as an exhibit to the claims examiner’s affidavit, it appears that the BAVR was not included in the series of reports produced at that time.

I draw an inference and find that it was an oversight on the part of the independent adjuster that he did not include the BAVR with the other documents sent to Jamrock’s counsel in January 2016. [ 43 ] The independent adjuster’s oversight in that regard is understandable given that (

a) as of the date the various reports were produced, Intact understood that it had settled Jamrock’s building claim on the basis of repair or replacement of the building, and (

b) the settlement reached of the building claim was not based on the contents of the BAVR. [ 44 ] In May 2016, Jamrock’s counsel sent an email to the independent adjuster. Jamrock’s counsel intended that her email include two attachments: a letter and the settlement proposal. The settlement proposal was not attached to the email. I draw an inference and find that it was an oversight on the part of Jamrock’s counsel that the settlement proposal was not included as an attachment to the May 2016 email.

It appears that the settlement proposal was sent to the independent adjuster by no later than early July 2016. [ 45 ] By the spring and summer of 2016, and before the independent adjuster received the settlement proposal, he was aware that Jamrock had commenced an action against Intact.

In the notice of action, the plaintiff’s claim is set out in the alternative: “replacement cost of the building and its contents and/or the actual cash value of the building and its contents.” In the statement of claim, the prayer for relief includes the following: “$330,150.00 pursuant to the Policy for building damage caused by fire, which includes but is not limited to debris removal and enforcement of by-laws, or, in the alternative damages in the amount of $330,150.00.” The statement of claim does not identify whether the building claim is being pursued on the basis of repair or replacement cost or the ACV of the building. [ 46 ] In

summary, it was not until the spring or summer of 2016, at the earliest, that Intact was made aware that Jamrock wanted to attempt to resolve its claim on the basis of an ACV payment for the building loss claim. I say “at the earliest”, because the record does not include a copy of the settlement proposal sent to the independent adjuster in July 2016. For the purpose of this motion only, I have assumed that the settlement proposal reflected Jamrock’s decision to abandon the repair or rebuilding and to resolve the building claim on an ACV basis. [ 47 ] If my assumption about the basis of the plaintiff’s settlement proposal is correct, then Intact was dealing with an insured (

a) with whom it had reached a settlement two years earlier, for $326,000 on a repair or replacement cost basis, (

b) who wished to resile from that settlement, and (

c) was seeking to resolve its claim on an ACV basis. That Intact might not immediately produce the BAVR in response to the plaintiff’s settlement proposal is understandable. The lack of production of the BAVR as of the summer of 2016 does not preclude Intact from relying on the report in support of the motion to set aside the default judgment. [ 48 ] As of August 2016, the circumstances that Intact faced had changed yet again.

Approximately one month after receiving the settlement proposal, which was a turnabout from the settlement Intact thought it had reached, Intact was given a deadline by which to deliver its pleading in the action.

In all of the circumstances, Intact had a window of opportunity from July (when it received the settlement proposal) until August 2016 (when it was noted in default) to respond to Jamrock’s settlement proposal and, if it chose to do so, produce a copy of the BAVR. [ 49 ] With a deadline set for delivery of its pleading, it was reasonable for Intact to handle the production of the BAVR in the context of the documentary discovery process as the litigation moved forward.

As of August 2016, with Jamrock pressing for Intact’s pleading, there was no requirement pursuant to the Rules of Civil Procedure for Intact to produce a copy of the BAVR. [ 50 ] In

summary, I find that there is nothing in the conduct of Intact with respect to the BAVR that precludes Intact from relying on that document in support of the motion to set aside the default judgment. ▪ Evidence as to the ACV of the Building [ 51 ] I find that the BAVR is evidence before the court of an opinion on the ACV of the building that is different, if not dramatically different, from the opinion expressed on that issue in the CBR. The opinions differ in both amount and detail. The amounts range from approximately $165,000 to $350,000. The detail ranges from a six-page report to a single paragraph.

In its entirety, the CBR is three-paragraphs in length. [ 52 ] The full particulars of the opinion expressed in the CBR on the ACV of the building are, “The Building area is two thousand

square feet (2,000) and had been completely upgraded at that time. I would estimate that the value of the building alone in August 2014 was [t]hree hundred and fifty thousand ($350,000)”. [ 53 ] There is no evidence as to the qualifications of the author of the CBR with respect to the ACV of a building.

It appears that the primary purpose of the CBR was to address the fair market value of the property (both the building and the land). [ 54 ] On the basis of the record before me, it is not possible to determine whether the contents of the BAVR support a finding that the opinion expressed in the CBR is “unreasonable.” However, that is neither the issue nor the test to be met by Intact on the motion to set aside the default judgment. ▪

Summary [ 55 ] I find that the BAVR demonstrates that Intact has an arguable defence to the building loss claim. If Intact’s position is accepted then Jamrock was, as of 2014, fully and fairly compensated for the ACV of the building. [ 56 ] Intact’s arguable defence on the building loss claim is sufficient, on its own, to satisfy the second part of the three-part test.

I shall therefore briefly address the “arguable defence” with respect to the lost rent claim and the continuing business claim. ii) The Lost Rent Claim [ 57 ] Prior to the default judgment being granted, Intact paid Jamrock $17,150 for lost rent ($13,400 was paid in March 2014 and $3,750 in August 2014).

These amounts should be deducted from any award of damages for lost rent claimed by Jamrock and awarded as part of the default judgment ($21,441); otherwise, there is double recovery by Jamrock in the amount of $17,150. [ 58 ] On the return of the motion, Jamrock’s counsel acknowledged that the default judgment awarding $21,441 for damages for lost rent results in an overpayment of $17,150 on that aspect of Jamrock’s claim. Jamrock submits, however, that the default judgment does not need to be set aside to address the overpayment.

Jamrock relies on rule 19.08(1) of the Rules of Civil Procedur e and requests that the default judgment be varied to reduce the amount awarded for lost rent ( R.R.O. 1990, Reg. 194 ). [ 59 ] If the default judgment is set aside, it is to be set aside in its entirety.

It would not be appropriate to address one element of the plaintiff’s claim, vary the award made with respect to lost rent and allow the relief granted (as varied) with respect to the lost rent to stand alone ( Mountain View Farms , at paras. 57 – 64). iii) Continuing Business Claim [ 60 ] Jamrock claimed $10,800 for payment of nine months’ rent for its new shop. That rent expense would have been incurred by Jamrock in any event, because it did not immediately repair or replace the existing building.

Jamrock needed other premises from which to carry on business. [ 61 ] Jamrock’s position is that because of its intention, for the first couple of years following the fire, to repair or replace the building, it is entitled pursuant to the terms of the policy to recover expenses incurred to continue its business elsewhere (pending completion of the repair or rebuild). Jamrock has not, however, addressed the impact of its decision in 2016 to resile from the settlement reached in 2014 and upon which the rent payments were based. [ 62 ] In

summary, there is the potential for the continuing claim to be fully defended in the event Jamrock’s claim is pursued on an ACV basis. Once again, I highlight that the notice of action and the statement of claim are ambiguous as to whether the building loss claim is being pursued on an ACV or a repair or replacement cost basis.

c) The Additional Factors [ 63 ] I find that the balance of prejudice weighs in favour of Intact and setting aside the default judgment: • If the default judgment is set aside, Jamrock will still be able to pursue its claims on their respective merits; • Jamrock acknowledges that the compensation awarded by the default judgment includes an overpayment of $17,150 with respect to lost rent; and • There is a potential swing of $184,650 from the compensation awarded on the building loss claim to Intact’s position that Jamrock has been fully and fairly compensated for the ACV of the building. [ 64 ] I find that setting aside the default judgment in this matter will not negatively impact the integrity of the administration of justice.

In that regard, I have considered that Jamrock resiled from a settlement reached in 2014, notified Intact some two years later of its desire to resile from the settlement, gave Intact approximately one month within which to resolve the fire loss claim (including the building claim on an ACV basis instead of on a repair or replacement cost basis), and thereafter took an aggressive approach to the litigation.

d) Summary [ 65 ] I find that:

a) The arguable defences on the merits support setting aside both the default judgment against and the noting in default of Intact;

b) The balance of prejudice weighs in favour of setting aside the default judgment and noting in default; and

c) The administration of justice will not be negatively affected by an order to that effect. Issue No. 2 – The Notice of Garnishment [ 66 ] Given that the default judgment is to be set aside, it follows that the notice of garnishment be stayed. [ 67 ] The notice of garnishment was issued and served four days after Jamrock’s counsel was informed that Intact had retained counsel to bring a motion to set aside the default judgment.

On the return of the motion, Jamrock’s counsel informed the court that prior to receipt of the initial communication from Intact’s counsel, the wheels had already been set in motion with respect to the notice of garnishment. As a result, there was not an opportunity between February 24 and 28, 2017, to put a stop to the service of the notice of garnishment. [ 68 ] Upon receipt of the initial letter from Intact’s counsel, Jamrock agreed to wait until the motion record was served on its counsel before deciding how much further to proceed with enforcement of the default judgment.

That agreement was subject to the condition that the motion record be served prior to the end of March 2017. That condition was met. [ 69 ] After the motion record was served, Jamrock continued to take an aggressive approach to enforcement of the default judgment. That approach, in particular given that the return of the motion was pending, is not without consequences. Those consequences are addressed in the terms pursuant to which the default judgment is set aside and the notice of garnishment is stayed.

Issue No. 3 – Terms of Setting Aside Default Judgment [ 70 ] On the return of the motion, Intact recognized that if the default judgment (and noting in default) is set aside, it is incumbent upon Intact to deliver its pleading in a timely manner. [ 71 ] Intact requests that Jamrock be ordered to account for the portion of the garnished funds released from the trust account of Jamrock’s counsel. I find that an accounting is not a meaningful or an appropriate solution in the circumstances.

Intact is in a position to include in its pleading a counterclaim for reimbursement from Jamrock to the extent of an overpayment, if any, based on terms of the subject policy. Intact may identify other bases for a counterclaim. [ 72 ] Intact shall, within 20 days of the date of release of this endorsement, deliver its pleading, including a counterclaim, if any. [ 73 ] The balance of the funds garnished, and which remain in the trust account of Jamrock’s counsel, shall, pending further order of the court and at the option of Intact:

a) Be paid to the Accountant for the Superior Court of Justice; or

b) Remain in the trust account of Jamrock’s counsel. [ 74 ] In the event Intact selects option (b), then the funds are to be placed in an interest-bearing account or vehicle (i.e. guaranteed income certificate) to be agreed upon by the parties. If the parties are unable to agree upon the interest-bearing account or vehicle, one or both of the parties may seek further directions from the court by way of a motion.

The motion for directions, if required, shall be returnable before me. [ 75 ] Jamrock requests that Intact be ordered to pay full indemnity costs, thrown away, from August 24, 2016 (the date Intact was noted in default) to the present. I agree that Jamrock is entitled to costs thrown away for the period identified. I do not agree that Jamrock is entitled to costs on a full indemnity basis.

I find that Jamrock is entitled to its costs on a substantial indemnity basis. [ 76 ] In making the award of costs, I have considered the following: • Following inadvertence on the part of Jamrock’s counsel (the delay of several weeks in sending the settlement proposal in the summer of 2016), Jamrock did not account for the resultant delay in communicating the settlement proposal and did not allow a reasonable amount of time for Intact to respond to the settlement proposal before noting Jamrock in default; • In its settlement proposal, Jamrock resiled from a settlement reached in 2014.

Shortly after resiling from the settlement, it adopted an aggressive approach to the litigation; • Regardless of the aggressive approach adopted, counsel for Jamrock was always clear in communication with Intact’s representatives as to deadlines set and the consequences of failing to meet deadlines; • Intact, its claims examiner, and the independent adjuster are sophisticated in their knowledge and understanding of litigation of fire loss claims.

They were capable of appreciating the significance of deadlines set, the consequences of failing to meet deadlines, and the potential consequences of failing to routinely review claims files; • Jamrock was aware of the motion to set aside the default judgment and proceeded to enforce the judgment in any event. It was aggressive in doing so.

Jamrock gave Intact only a matter of days within which to obtain an order prohibiting the release of a portion of the garnished funds, before releasing approximately 70 per cent of the funds; • Intact was given an opportunity, however brief, to prohibit the release of funds and failed to avail itself of that opportunity; • None of the steps taken by Jamrock, to and including enforcement of the default judgment, was prohibited by the Rules of Civil Procedure ; and • It was not incumbent upon Jamrock to double-check or follow-up with Intact after August 24, 2016, when Intact was noted in

default. Having obtained default judgment, it was not incumbent upon Jamrock to consent to the default judgment being set aside.

Jamrock was within its rights to oppose the motion. [ 77 ] Given the potential for a finding to be made that Jamrock has been overpaid on the building claim, and the release of approximately $170,000 of the funds garnished, the costs payable shall, at Intact’s option, be paid on the same terms as set out with respect to the balance of the funds garnished (see paragraphs 73 and 74 above). [ 78 ] All funds paid to the Accountant or held in trust by Jamrock’s counsel shall be accounted for upon resolution of the action (and counterclaim if any) by settlement or judgment at trial.

It is intended that the funds paid to the Accountant or held in trust be available to be applied towards an overpayment, if any is found to have been made, to Jamrock.

If the claim is resolved on the basis that there has not been an overpayment, then the funds paid to the Accountant or held in trust may, together with any interest earned, be released to Jamrock. [ 79 ] If the parties are unable to agree upon the amount of the substantial indemnity costs to be paid, thrown away, I shall address Jamrock’s costs of the motion to set aside the default judgment on the basis of the cost envelopes provided by counsel at the conclusion of the argument on the motion. [ 80 ] Written submissions shall be delivered with respect to costs from August 24, 2016, until the commencement of the work by Jamrock’s counsel in response to the motion to set aside the default judgment.

The written submissions shall satisfy the following requirements:

i) The submissions shall be limited to a maximum of four pages, exclusive of a bill of costs; ii) Written submissions shall comply with Rule 4 of the Rules of Civil Procedure ; iii) Hard copies of any case law or other authorities relied on shall be provided with the submissions and shall comply with Rule 4 of the Rules of Civil Procedure with respect to font size; iv) The submissions, the documents referred to therein, case law, and other authorities, shall be on single-sided pages;

v) Written submissions shall be delivered by 5:00 p.m. on the twentieth business day following the date on which this Endorsement is released; and vi) In the event either party wishes to deliver a reply to the costs submissions of the opposing party, the reply submissions shall be delivered by 5:00 p.m. on the twenty-fifth business day following the date on which this Endorsement is released. Reply submissions shall comply with paragraphs (

a) to (

d) above.

Summary [ 81 ] I order as follows: 1. The noting in default of Intact Insurance Company (“Intact”) shall be set aside. 2. The default judgment dated January 6, 2017 shall be set aside. 3. The notice of garnishment herein shall be stayed. 4. Intact shall, within 20 days of the date on which this Endorsement is released, deliver its pleading, including a counterclaim, if any. 5.

The balance of the funds garnished (the “Funds”) shall, pending further order of the court and at the option of Intact, be paid to the Accountant for the Superior Court of Justice or remain in the trust account of counsel for 7321201 Canada Ltd. o/a Jamrock Solutions (“Jamrock”). 6. In the event Intact opts to have the Funds remain in the trust account of Jamrock’s counsel, then the Funds shall be placed in an interest-bearing account or vehicle (the latter, for example, including a guaranteed income certificate) to be agreed upon by the parties. 7.

In the event the parties are unable to agree upon the interest-bearing account or vehicle, then one or both of the parties may seek further directions from the court by way of a motion returnable before me. 8. Intact shall pay to Jamrock its costs of the action, from August 24, 2016 to and including the motion to set aside the default judgment, on a substantial indemnity basis, thrown away. 9.

The costs to be paid by Intact to Jamrock shall be paid to either the Accountant for the Superior Court of Justice or remain in the trust account of counsel for Jamrock on the terms set out in paragraphs 6 and 7 immediately above. 10. Upon resolution of the action and counterclaim, the latter, if any, the Funds and costs paid to the Accountant for the Superior Court of Justice and/or that remain in the trust account of counsel for Jamrock shall be accounted for. __________________________________________ Madam Justice Sylvia Corthorn

Date: October 31, 2017 CITATION : 7321201 Canada Ltd. v. Intact Insurance Company , 2017 ONSC 6480 COURT FILE NO.: 16-67326 DATE: 2017/10/31 ONTARIO SUPERIOR COURT OF JUSTICE RE: 7321201 CANADA LTD. o/a JAMROCK SOLUTIONS, Plaintiff AND INTACT INSURANCE COMPANY, Defendant BEFORE: Madam Justice S. Corthorn COUNSEL: Christine A. Powell, for the Plaintiff Ryan Kennedy, for the Defendant ENDORSEMENT Madam Justice Sylvia Corthorn Released: October 31, 2017