Docket: CACV2193 2 Hearts Personal Care Ltd. v. Sandra McMain, 2012 SKCA 26

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 26 Date: 20120228 Between: Docket: CACV2193 2 Hearts Personal Care Ltd. and Sandra McMain (formerly, Sandra Donais) Appellants - and - Elsie Klepsch Respondent Coram: Jackson, Richards & Caldwell JJ.A. Counsel: Paul J. Harasen, for the Appellants Wei Wu, for the Respondent

Appeal: From: 2011 SKQB 433 Heard: February 28, 2012 Disposition: Allowed in Part (Orally) Written Reasons: March 7, 2012 By: The Honourable Mr. Justice Caldwell In Concurrence: The Honourable Madam Justice Jackson The Honourable Mr.

Justice Richards Caldwell J.A. [ 1 ] 2 Hearts Personal Care Ltd. and its director, Sandra McMain ( aka Sandra Donais), in her own right, appealed from the dismissal of their application under Queen’s Bench Rule 114(3) for leave to serve and file a statement of defence and from the order of the chambers judge under Queen’s Bench Rule 18 validating irregular service of the statement of claim issued against the individual appellant (see 2011 SKQB 433 ). [ 2 ] As background, the corporate appellant received a $200,000 demand letter in respect of damages sustained by the respondent in two falls which occurred at a care home operated by the appellants.

The corporate appellant forwarded the demand letter to Saskatchewan Government Insurance (“SGI”), in its capacity as liability insurer. SGI responded directly to the respondent’s lawyers to indicate it would investigate the matter. When the respondent’s lawyers followed up with SGI, SGI wrote again reiterating it was investigating the matter but also asking for documentation to substantiate the demand. A month later, the respondent served her initial statement of claim (which misnamed the corporate appellant and did not name the individual appellant).

The corporate appellant received the statement of claim but incorrectly assumed SGI had also received a copy. Several weeks later, the respondent irregularly served an amended statement of claim (which corrected the misnomer and added the individual appellant as a defendant, albeit incorrectly setting out her name). The appellants incorrectly assumed the respondent’s lawyers had provided a copy of the amended statement of claim to SGI. In fact, no one had provided SGI with either statement of claim.

As neither appellant had responded to the claim, the respondent had the Registrar of the Court of Queen’s Bench note the appellants in default of defence and, sometime after that, the respondent served and filed a notice of motion for damage assessment and judgment. At this point, the appellants contacted SGI. Four days later, counsel for SGI and the appellants wrote to the respondent’s lawyers and, fruitlessly, sought the respondent’s consent to an order setting aside the noting in default.

The appellants then promptly brought their unsuccessful application to set aside the noting for default and to obtain leave to serve and file a statement of defence. [ 3 ] In his reasons for dismissing the appellants’ application, the chambers judge correctly noted that a defendant who seeks to set aside a noting in default must: (

a) bring the application expeditiously upon becoming aware of the claim; (

b) provide a satisfactory explanation for the failure to respond to the claim; (

c) disclose a defence which raises arguable issues; and (

d) satisfy the court that an order setting aside the noting in default will not seriously prejudice the plaintiff. [ 4 ] A fundamental principle relevant to the exercise of judicial discretion in applications of this nature is that the application of the court’s rules and principles must not violate the principles of fundamental justice and equity (see: Willrun Payroll Services Inc. v. Prairie Land & Investment Services Ltd. , 2010 SKCA 42 , [2010] 5 W.W.R. 195). As Cameron J.A. pointed out in Rimmer v.

Adshead , 2002 SKCA 12 , [2002] 4 W.W.R. 119, the applicable principle requires consideration of all the circumstances and a strong reason to deny a defendant his or her day in court when he or she can demonstrate an arguable defence to the claim and the delay has not caused the plaintiff irreparable harm. See also Ballentyne and Broussie v.

Benard , 2012 SKCA 23 . [ 5 ] In this case, the chambers judge was satisfied the appellants had acted promptly and had an arguable defence to the claim, and he seems to have accepted that the respondent would not be seriously prejudiced if the noting in default were set aside. On the other hand, the chambers judge found the appellants had not advanced a “satisfactory explanation” for the failure to respond to the initial or the amended statement of claim.

In this respect, the chambers judge rejected the individual appellant’s contention that she did not understand what the statement of claim and amended statement of claim meant. The chambers judge did not, however, address the other explanation advanced by the appellants: the appellants believed SGI was aware of the statements of claim and would handle the matter on their behalf. [ 6 ] In our opinion, the chambers judge erred in principle by disregarding the second of the two explanations provided by the appellants.

The appellants had adduced sufficient evidence to prove that SGI, in its capacity as their insurer, had exchanged correspondence with the respondent’s lawyers addressing the subject-matter of the claim. The communication between SGI and the respondent’s lawyers was such that the appellants might reasonably have expected that SGI was aware of and handling the statements of

claim. While the appellants’ bare reliance on this expectation is arguably negligent (especially in the face of a $200,000 claim), it is a “satisfactory explanation” for the failure to respond to the respondent’s claim. [ 7 ] As to the validation of irregular service of the amended statement of claim, we see no compelling reason to disturb the chambers judge’s order in circumstances where the individual appellant intends to file a statement of defence in response to an amended statement of claim of which she is now clearly aware. [ 8 ] The appeal is allowed in part.

The noting in default of a statement of defence is set aside. The appellants shall have leave to serve and file their statement of defence within ten days from the date of these reasons, failing which the respondent may note them in default in the usual manner. [ 9 ] Although we reserved our decision on the matter of costs to allow for written submissions from counsel, we understand the parties have since reached an agreement on the issue.