Docket: CACV1992 Mike Ballentyne v. Lena Broussie, 2012 SKCA 23

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 23 Date: 20120306 Between: Docket: CACV1992 Mike Ballentyne and Lena Broussie (Defendants) Appellants - and - Marc Benard (Plaintiff) Respondent Coram: Richards, Smith & Caldwell JJ.A. Counsel: Timothy E. Turple for the Appellants Ashley M. Smith and Ryan LePage for the Respondent Appeal:

From: QBG No. 247 of 2010, J.C. of S askatoon Heard: September 12, 2011 Disposition: Allowed Written Reasons: March 6, 2012 By: The Honourable Mr. Justice Caldwell In Concurrence: The Honourable Mr. Justice Richards The Honourable Madam Justice Smith Caldwell J.A. [ 1 ] Mike Ballentyne and Lena Broussie appealed from the Queen’s Bench chambers decision dismissing their application under Queen’s Bench Rule 346 to set aside a default judgment against them. For the reasons that follow, I would allow the appeal and set aside the default judgment. [ 2 ] The issues in this appeal are twofold: (

i) whether the chambers judge erred by finding the appellants had not satisfactorily explained their default; and (ii) whether the chambers judge erred in finding there was no defence on the merits. The issues are straightforward, as are the facts. [ 3 ] Mr. Benard has had a few legal encounters with Mr. Ballentyne and Ms Broussie in his capacities as their landlord and creditor. His lawyers had various communications with lawyers acting, from time to time, for Mr. Ballentyne or Ms Broussie, or both of them. This culminated when Mr.

Benard caused his lawyers to issue a statement of claim in respect of the debt allegedly owed to him by the appellants. Mr. Benard had his lawyers effect personal service of the claim. The claim was not served on any lawyer who had acted for Mr. Ballentyne or Ms Broussie in the past. On his acknowledgment of service, Mr. Ballentyne identified his lawyer and set out his lawyer’s office address as the “address in Saskatchewan where Court documents may be mailed to or left for me”. Regardless, neither appellant entered an appearance or filed a statement of defence within the 20 days allowed therefor. Mr.

Benard obtained a default judgment shortly thereafter and then promptly undertook judgment enforcement proceedings and collection efforts through the local Sheriff’s office. No attempt was made to contact the lawyer Mr. Ballentyne had identified in his acknowledgement of service. [ 4 ] Upon their receipt of a collection letter from the Sheriff, the appellants contacted Mr. Ballentyne’s lawyer and promptly applied to a Queen’s Bench judge to set aside the default judgment. In their affidavits in support of the application, the appellants each stated they were unaware Mr.

Benard had filed a statement of claim until they received notice of the default judgment from the Sheriff. On this bare assertion, the chambers judge concluded the appellants had not read and were therefore “wilfully blind” to the contents of the statement of claim. For this reason, he held that they had failed to provide a satisfactory explanation for their failure to file a timely appearance and dismissed the application to set aside the noting for default. Mr.

Ballentyne and Ms Broussie appeal from that decision. [ 5 ] The appellants brought their application to set aside the default judgment entered against them pursuant to Queen’s Bench Rule 346, which reads: Setting aside default judgment 346 Subject to Rule 271 any judgment by default, whether by reason of non-delivery of defence or non-compliance with any of these rules or with any order of the court, may be set aside or varied by the court upon such terms as to costs or otherwise as the court may think fit.

It is clear the power conferred on a judge of the Court of Queen’s Bench to set aside a default judgment is discretionary. Rule 271 has no application to this case. [ 6 ] There is no question that the standard of review in this appeal is that which Cameron J.A. set out in Rimmer v. Adshead , 2002 SKCA 12 , [2002] 4 W.W.R. 119: [58] In turning to this issue, it is necessary to bear in mind that the powers in issue are discretionary and therefore fall to be exercised

as the judge vested with them thinks fit, having regard for such criteria as bear upon their proper exercise. The discretion is that of thejudge of first instance, not ours. Hence, our function, at least at the outset, is one of review only: review to determine if, in light of suchcriteria, the judge abused his or her discretion. Did the judge err in principle, disregard a material matter of fact, or fail to act judicially?Only if some such failing is present are we free to override the decision of the judge and do as we think fit.

Either that, or the result mustbe so plainly wrong as to amount to an injustice and invite intervention on that basis. (See, for example, McKinnon Industries Ltd. v.Walker, (UK JCPC), [1951] 3 D.L.R. 577, at p. 579 (P.C.) and Saskatchewan Power Corporation v. John Doe, (SK CA), [1988] 6 W.W.R. 634 (Sask. C.A.). The fundamental question in this appeal is whether the chambers judge properly exercised his judicial discretion under Queen’s BenchRule 346 in dismissing the appellants’ application to set aside the default judgment entered against them. [7] In Willrun Payroll Services Inc. v.

Prairie Land & Investment Services Ltd., 2010 SKCA 42, [2010] 5 W.W.R. 195, this Courtidentified the basis upon which a judge will hear and consider an application under Rule 346: [34] That said, I turn to the basis on which an application to open up a default judgment was made. Such an application is not basedon the defendant having an established legal right to an order setting aside a properly entered default judgment or a writ of executionbased thereon.

Thus, it essentially is a request for an indulgence; a request that the court intervene and grant the applicant relief from theconsequences of the applicant having failed to comply with the law. Courts often will grant the relief sought based on the principle thatan application of their rules and procedures should not violate the principles of fundamental justice and equity. Consequently, anapplication to set aside a default judgment brings into play the conflicting interests of the parties and potential prejudice to either of themif relief is or is not granted.

This decision identifies the purpose or underlying principle of Rule 346 which is to ensure that the application of the Court’s rules andprinciples do not violate the principles of fundamental justice and equity. [8] In his fiat, the chambers judge relied on Strange v.

Saskatchewan, 2008 SKQB 481, in which Popescul J. (now C.J.Q.B.)identified the following criteria for opening up a noting for default and setting aside a default judgment (at para. 43): (1) the application is to be made as soon as possible after the judgment sought to be set aside comes to the attention of the applicantin the event of any delay, the applicant must justify and satisfactorily explain the reasons for the delay; (2) the applicant must provide a satisfactory explanation for his failure in responding to the claim; (3) the applicant must disclose the defence that raises arguable issues; and (4) the applicant must satisfy the court that an order setting aside the judgment will not seriously prejudice the party who hasobtained the judgment. [9] In this case, the appellants did not delay in bringing their application under Rule 346.

Nor was there any realistic suggestion thatMr. Benard would be seriously prejudiced if the default judgment were set aside, as he had noted the matter in default at the firstopportunity to do so. Rather, the issues arose around whether the appellants had provided a “satisfactory explanation” for their defaultand whether their supporting materials had disclosed an arguable defence. [10] As to the first point, in Strange v.

Saskatchewan, the applicant had offered his failure to read or understand the seriousness of thelegal documents which set out the claim against him by way of explanation for his failure to respond to them. Popescul J. found that thisconduct amounted to “wilful blindness” and could not, for that reason, satisfy the requirement to provide a “satisfactory explanation”. Insuch circumstances, Popescul J. concluded the application for relief must fail. In the appellants’ case, the chambers judge was of theview the situation before him was indistinguishable from Strange v.

Saskatchewan and fell within that principle. [11] The reference to “wilful blindness” may have its source in Klein v.

Schile (1921), (SK CA), 59 D.L.R. 102, anearlier decision of this Court, where Lamont J.A., setting out the circumstances in which judicial discretion will be exercised in favour ofan applicant under what is now Rule 346, suggested that the delay in setting aside the default judgment should not be “wilful” (atp. 103): The circumstances under which a court will exercise its discretion to set aside a judgment regularly signed are pretty well settled.The application should be made as soon as possible after the judgment comes to the knowledge of the defendant, but mere delay will notbar the application, unless an irreparable injury will be done to the plaintiff or the delay has been wilful.

Tomlinson v. Kiddo, (SK CA), 7 Sask. L.R. 132, 7 W.W.R. 93, 29 W.L.R. 325; Mills v. Harris, 8 Sask. L.R. 114. The application should besupported by an affidavit setting out the circumstances under which the default arose and disclosing a defence on the merits. Chitty’s Forms, 13th ed., p. 83. It is not sufficient to merely state that the defendant has a good defence upon the merits. The affidavits must show the nature ofthe defence and set forth facts which will enable the Court or Judge to decide whether or not there was matter which would afford adefence to the action. Stewart v. McMahon, (SK KB), 1 Sask.

L.R. 209, 7 W.L.R. 643.

If the application is not made immediately after the defendant has become aware that judgment has been signed against him, theaffidavits should also explain the delay in making the application; and, if that delay be of long standing, the defence on the merits mustbe clearly established. Sandhoff v. Metzer, 4 W.L.R. 18. [12] A review of the jurisprudence indicates this Court has consistently followed Klein v. Schile, see: Hamel v. Chelle (1964), (SK CA), 48 W.W.R. 115 (Sask. C.A.); Warner Construction Co. v. Wood River (Rural Municipality) (1979), (SK CA), 105 D.L.R. (3d) 370 (C.A.); Bank of Montreal v.

Pauls (1984), (SK CA), 35 Sask. R. 204 (C.A.);Wicks v. Wicks (1990), (SK CA), 87 Sask. R. 139 (C.A.); and Rimmer v. Adshead. These cases interpret Klein v.Schile as having established the four requirements subsequently referred to in Strange v. Saskatchewan, including the requirement toprovide a “satisfactory explanation” for failure to respond to the claim. However, in Rimmer v. Adshead, at para. 60, Cameron J.A.added that “the merit of the matter is the dominant consideration provided the delay not be accompanied by irreparable harm.” Of thesecases, only Warner Construction Co. v.

Wood River (Rural Municipality) made any reference to the idea of “wilful delay” as a reason, initself, to deny the application. [13] While one might imagine circumstances in which a “wilful” failure to defend an action might constitute sufficient reason to denyan application to set aside a default judgment, as noted, the fundamental principle relevant to the exercise of judicial discretion in thesecases is that it is necessary to ensure that the application of the Court’s rules and principles does not violate the principles of fundamentaljustice and equity. As Cameron J.A. pointed out in Rimmer v.

Adshead, the applicable principle requires consideration of all thecircumstances and a strong reason to deny a defendant his or her day in court when he or she can demonstrate an arguable defence to theclaim and the delay has not caused the plaintiff irreparable harm. [14] This point is particularly apt with respect to defendants who, like the appellants, do not appreciate the risk of not responding to astatement of claim.

Despite the cautionary wording on the face of a statement of claim, it is not uncommon that an individual will fail toappreciate that not responding in a legal way to a statement of claim will result in a legally enforceable judgment against him or her bydefault. There may be many reasons for this. For example, an individual may fail to read the document out of fear, or he or she may readit but not understand it or what it requires, or may fail to read it carefully enough, or may simply ignore it as yet another tactic in an on-going dispute with the party opposite.

Such conduct may well be negligent; but, if it falls short of a deliberate decision to allow a defaultjudgment to issue, such conduct, in and of itself, does not justify denial of an application to set aside a default judgment brought in atimely way where the applicant has shown an arguable defence and no irreparable prejudice to the plaintiff if the default judgment is setaside.

In short, in my opinion, a “wilful” default (i.e., one which could in and of itself justify dismissal of an application to set aside thedefault judgment) occurs where the defendant understands the import of a statement of claim and deliberately decides to let the matter goto default judgment, whether to vex the plaintiff with the cost, delay and inconvenience of defending an application to set it aside orotherwise. And, that is not the case here. [15] In addition to these general observations, in this case, the chambers judge overlooked that Mr.

Ballentyne had, in fact, taken at leastone step to indicate an intention to respond to the statement of claim: he had identified his lawyer on the acknowledgement of service andhad given his lawyer’s address as the address for service of further court documents. This fact would appear to be inconsistent with adeliberate intention to allow the matter to go to default judgment. [16] Given the foregoing, I need not address the question of whether the chambers judge erred by finding Mr. Benard’s lawyers had noobligation to notify Mr. Ballentyne’s lawyers of Mr. Benard’s intention to note the claim in default.

Nevertheless, in the circumstancesof this case, I must say I would have expected, as a professional courtesy at the very least, Mr. Benard’s lawyers to have attempted tonotify the lawyer specifically identified by Mr. Ballentyne in his acknowledgment of service before taking the significant step of notingMr. Ballentyne in default. [17] I turn now to the second issue: whether the chambers judge erred in concluding there was no defence on the merits in this case.

Inhis fiat, the chambers judge acknowledged that an action which might have been commenced after expiration of a limitation period willbe barred from proceeding if a defendant pleads the limitation provision and a judge rules on it. However, the chambers judge then notedthere was no statement of defence in this matter and, therefore, he found the appellants had not pled the limitation period. The chambersjudge further determined he could not look to the appellants’ affidavits and the draft statement of defence exhibited thereto as “those arenot pleadings.” With respect, this is an error in principle. Klein v.

Schile and the cases which followed require the applicant to state thatthe applicant has a good defence upon the merits and to show the nature of that defence in affidavit form. If this were not so, fewapplicants could satisfy the court of the existence of a defence on the merits on the basis of the pleadings alone because an applicationunder Rule 346 arises only where the applicant has failed to file a statement of defence.

In light of this, it is necessary to consider afreshwhether the applicants in this case discharged their burden of establishing a defence on the merits on the basis of the affidavit evidencethey put before the chambers judge. [18] In his affidavit, Mr. Ballentyne stated Mr. Benard took no action to recover judgment within the two years following termination oftheir landlord and tenant relationship or the execution of an assignment of Mr. Ballentyne’s prospective settlement from his residentialschool claim. In her affidavit, Ms Broussie stated Mr.

Benard’s claim was barred by the “Statute of Limitations” and, in a separate

paragraph, by the “ Limitations Action Act ”. The draft statement of defence exhibited to Mr. Ballentyne’s affidavit stated: f. The Defendants say further that the Plaintiff’s claim is Barred by the Limitations of Action Act [ sic ], as the Plaintiff’s action was not commenced within two years of either the date of execution of the “assignment” or the date the said premises were vacated. [ 19 ] While none of these statements correctly identify The Limitations Act , S.S. 2004, c. L-16.1, or a specific

section thereof, as potentially barring the claim, they are sufficient to show the nature of the defence proffered by the appellants. Further, the pleadings and the appellants’ affidavits (including the exhibited draft statement of defence), while by no means exemplary, do contain sufficient facts to support a determination that a limitation period defence is at least arguable or presents a bona fide question to be decided (see: Bank of Montreal v. Pauls ).

As such, I find the appellants met the requirement of providing affidavit evidence which supported the existence of a defence on the merits. [ 20 ] Accordingly, for the reasons given, I would allow this appeal and set aside the default judgment. The appellants shall have ten days from the date of these reasons to serve and file their statement of defence, failing which the respondent may note them in default in the usual manner.

As the appellants did not seek as relief in this Court an order setting aside the writ of execution obtained on the entering of the default judgment, the writ shall remain in place, but enforcement thereof shall be held in abeyance pending the determination of the claim in Queen’s Bench Court. [ 21 ] As the simple courtesy of notifying counsel identified in Mr. Ballentyne’s acknowledgement of service of the intention to note the claim in default might have avoided the necessity of the appellants’ application and of this appeal, I would make no order as to costs.

DATED at the City of Regina, in the Province of Saskatchewan, this 6 th day of March, A.D. 2012. “Caldwell J.A.” _____________________ Caldwell J.A. I concur. “Richards J.A.” Richards J.A. I concur. “Smith J.A.” Smith J.A.