IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
Citation: Shaw v. 2557617 Nova Scotia Limited, 2021 NSSM 44
Claim No: SCCH 20-486809
BETWEEN:
Victoria Shaw
Claimant
vs.
2557617 Nova Scotia Limited
Defendant
Mr. Adam Harris appeared for the Claimant
Mr. Andrew Christofi appeared for the Defendant
DECISION
[1] This is my decision pursuant to telephone conference call hearing held May 5th, 2021, regarding an application made by Mr. Christofi on behalf of the Defendant Company to set aside the Judgment of Adjudicator Thompson dated May 17, 2019.
[2] I am denying this application, for the reasons that follow.
Chronology of the Claim:
[3] At the hearing before me I heard affirmed evidence from Wyatt Redmond, owner of the Defendant numbered company (“2552717”), and from Victoria Shaw the Claimant. In addition, on behalf of the Defendant Mr. Christofi entered an exhibit package which contained documents, which Mr. Redmond spoke to, which were intended to demonstrate that the Defendant had an arguable case.
[4] As timeliness is a key issue in this decision, I have developed the chronology below based upon the evidence and testimony received, as well as documents in the file before me.
1. The claim was originally filed April 3rd, 2019, with an assigned hearing date of May 13, 2019. The claim was for monies owed relating to accounting and tax advice provided by Ms. Shaw to the Defendant company, amounting to more than $25,000, but with the claim reduced to that statutory maximum available in this Court. Ms. Shaw's evidence is that she delivered the claim to the agent of the numbered company, the law firm Clyde Paul & Associates. Mr. Redmond’s evidence confirmed that the firm did receive the claim, but that Ryan Brennan of that firm who had acted for Mr. Redmond in the past could not act in this circumstance due to a conflict. Mr. Redmond did not use legal counsel on this matter until Mr. Christofi was retained in 2021.
2. The evidence of Mr. Redmond was that the claim information was given to him when he was in the law office on another matter “a few days later”. He says that the date “May 20th” was written down for him on the claim envelope as the date of the hearing in this matter. Mr. Redmond says that he still has the envelope, but it was not produced in evidence before me.
3. Mr. Redmond says that he worked with an assistant in his office to prepare for the hearing on May 20th, 2019. He says that he appeared on that night and was told by the Court clerk that the hearing had already taken place on May 13th, 2019 before adjudicator Walter Thompson. He says that he told the clerk at that time that Mr. Thompson could not hear this matter as he had acted for him in a previous matter and was therefore in a conflict. He says that the clerk told him to wait and get the decision at which point he could apply to have it set aside. Mr. Redmond says that he went to the Court two more unspecified times in the summer of 2019 in order to follow up on the decision.
4. Adjudicator Thompson's “Decision and Order” is dated May 17, 2019, but date stamped in the Court file August 13, 2019. It reads:
Decision
1. Victoria Shaw claims payment of accounts in excess of $25,000 for accounting services rendered to the Defendant, 2557617 Nova Scotia Limited. No one appeared on behalf of the Defendant. I am satisfied that it had proper notice of the hearing. I accept Ms. Shaw's evidence that the accounts are due as claimed.
Order
2. I order 2557617 Nova Scotia limited to pay Victoria Shaw the sum of $25,200 inclusive of costs.
5. An Execution Order was issued by the Court on October 15th, 2019. Mr. Redmond says that he only became aware of the decision and the Execution Order when it affected his ability to get financing in early 2020,”around the time COVID hit”.
6. Due to the impact of the COVID 19 pandemic, the Nova Scotia Small Claims Court suspended sittings on March 17, 2020. In August, 2020, hearings in this Court resumed, by way of telephone conference calls. This application was filed August 27th, 2021 (and amended September 17, 2021).
7. Since virtual hearings required that parties pre-disclose documents, the Court initiated a two-part system, wherein the parties appeared on a pre-hearing night to discuss witnesses, disclosure and confirm whether the matter was ready for hearing, after which the matter was set down by the Court for hearing on a separate night.
8. Mr. Christofi and Mr. Harris appeared on a pre-hearing night before Adjudicator Thompson on November 23, 2020, to discuss the procedure to have the matter heard as a preliminary. Based upon Mr. Redmond’s objection to Adjudicator Thompson hearing the matter, Adjudicator Thompson’s note in the file recommended (without indicating that there was in fact a conflict) that it be assigned to another adjudicator, which was done. (Normally, an application to set aside a judgment would be heard by the adjudicator who issued the Order, pursuant to section 23 (2) and 23 (4) of the Small Claims Court Act, R.S.N.S. 1989, c. 430 (the “Act”)).
9. The hearing to set aside Adjudicator Thompson’s Order proceeded May 7th, 2021, before me by telephone conference call.
[5] I consider that a fundamental issue in this case is where in the Act I can find the jurisdiction to provide the Defendant with the remedy they seek. The relevant sections of the Act are as follows:
2 It is the intent and purpose of this Act to constitute a court wherein claims up to but not exceeding the monetary jurisdiction of the court are adjudicated informally and inexpensively but in accordance with established principles of law and natural justice.
Default of defence or appearance
23 (1) Where a defendant has not filed a defence to a claim within the time required by the regulations and the adjudicator is satisfied that
(a) each defendant was served with the claim and the form of defence and with notice of the time and place of adjudication; and
(b) based on the adjudicator's assessment of the documentary evidence accompanying the claim, the merits of the claim would result in judgment for the claimant,
the adjudicator may, without a hearing, make an order against the defendant.
(2) Where a defendant against whom an order has been made pursuant to subsection (1) appears, upon notice to the claimant, before the adjudicator who made the order and the adjudicator is satisfied that
(a) the defendant has a reasonable excuse for failing to file a defence within the time required; and
(b) the defendant appeared before the adjudicator without unreasonable delay after learning of the order,
the adjudicator may set aside the order and set the claim down for hearing.
(4) Where a defendant against whom an order has been made pursuant to subsection (3) appears, upon notice to the claimant, before the adjudicator who made the order and the adjudicator is satisfied that
(a) the defendant has a reasonable excuse for not appearing at the hearing; and
(b) the defendant appeared before the adjudicator without unreasonable delay after learning of the order,
the adjudicator may set aside the order and set the claim down for hearing.
[6] The Defendant’s application was made under section 23 (2) of the Act.
[7] However, section 23 (1) (a) addresses circumstances in which the adjudicator made a decision without a hearing, in other words, what is described as a “Quick Judgment”, based on a review of the documentation in the file. In order to have the Quick Judgment set aside, the Defendant under section 23 (2) must demonstrate that a) there was a “reasonable excuse” for not filing a defence and b) that there was no “unreasonable delay” in appearing before the adjudicator after learning of the Order.
[8] This section does not address the circumstances of this case, for reasons I will expand upon below.
[9] Are there other options for the Defendant? The other avenue for seeking to have a Small Claims Court Order set aside is under section 23 (3), which addresses circumstances in which the Defendant has “filed a Defence but does not appear at the hearing”. In that case, upon being “satisfied on the evidence as to the case of the claimant”, the adjudicator can make an Order against the Defendant. Under section 23 (4), in order to have the Judgment set aside, the Defendant under Section 23(4) must demonstrate that a) the Defendant has a “reasonable excuse” for not appearing, and b) the Defendant “appeared without unreasonable delay”.
[10] This section also does not address the circumstances of this case.
[11] The Decision and Order of Adjudicator Thompson was made at a hearing, upon hearing evidence on the merits as presented on the night in question. In her evidence before me Ms. Shaw confirmed that she gave evidence at the time of hearing, and that is reflected in Adjudicator Thompson's decision.
[12] The Defendant’s representative Mr. Redmond devoted a good deal of his evidence to demonstrating that he has an “arguable case” for the defence, in essence saying that he was not satisfied with the services provided by Ms. Shaw. The Defendant relies upon the decision of Justice Chipman in Vaughn v. Green, 2019 NSSC 331, which dealt with an application to set aside a Default Judgement issued by the Supreme Court, under CP Rule 8.09. The case describes the test for setting aside such a judgment under that rule, that being that there be an “arguable case” and “a reasonable excuse for the delay” (para. 13) The case goes on to cite authority for the proposition that where there is a strong defence, a “lesser but still reasonable excuse” may be sufficient.
[13] For reasons I will explain below, I do not think that the test in this case is that used for default judgements in the Supreme Court. The Act focuses entirely on the mechanics of why the delay and failure to file occurred, rather than assessing the viability of the defence. This may be because the Small Claims regime does not contemplate detailed defences, as the majority of litigants are self represented. Form 2, which is used by Defendants to file, provides three lines to explain the Defence (although of course additional information can be filed).
[14] Of the cases that counsel referred me to, only one deals with this exact scenario, that provided by the Claimant, the case of D’Arcy v. McCarthy Roofing Limited, 2015 NSSM 6. In that case, Adjudicator O’Hara was asked to set aside an Order he had issued, after a hearing on the merits, in which no Defence had been filed and no one appeared for the Defendant. Adjudicator O’Hara in his analysis reviewed Justice Rosinski’s decision in Leighton v. Stewiacke Home Hardware Building Center, 2012 NSSC 184 , noting “where a defendant neither files a defence nor appears at a hearing, there is no jurisdiction at all in section 23 to set aside the court's decision.”
[15] Justice Rosinski’s analysis concluded that in the hearing of the matter under his review, that being a Decision made on the merits, without a Defence having been filed, in which the Defendant did not appear, did not fall under section 23 (1) or 23 (3) of the Act. In terms of alternatives, he states:
[55] As a consequence of concluding that the August 8 hearing was not held pursuant to ss. 23(1) [or 23(3)], I must conclude that Ms. Leighton improperly made her application to the adjudicator under s. 23(2) of the Act, because the adjudicator’s Order did not arise under s. 23(1). The adjudicator erred in purporting to act pursuant to s. 23(2) of the Act on October 18, 2011.
[56] One must ask then, on October 18, 2011, was there any other source of jurisdiction that would allow the adjudicator’s reconsideration of his August 8, 2011 decision to order judgment against Ms. Leighton? In my opinion only if the adjudicator had jurisdiction under s. 23(1) initially on August 8, 2011, could he then have had jurisdiction under s. 23(2).
[57] The adjudicator had jurisdiction to proceed on August 8. However having done so, he had no authority under s. 23 of the Act to reconsider his order, and there being no other statutory basis to do so, he was functus officio on August 8, 2011.
[16] Based on Leighton, Adjudicator O’Hara thereby concluded that he was functus officio (without authority to rule) as to the application. If he was wrong in that conclusion, he further found that the application should be dismissed as the Defendant had not met the test of demonstrating a reasonable excuse for not attending the hearing.
[17] The Leighton case has been further discussed in later cases in this Court. In Hosseini v. Armour Transport Inc, 2017 NSSM 2, Adjudicator Richardson reviewed Leighton in light of its subsequent application:
[56] In CIBC Life Insurance Company v Hupman 2015 NSSM 48 Adjudicator Barnett, despite misgivings about the interpretation of s.23(1) arrived at in Leighton, concluded that he was bound by that decision. He accordingly dismissed a s.23(2) application in a case where an order had been issued against a non-attending defendant on the ground that he had no jurisdiction: see para.37; see also Pike v. Simms 2014 NSSM 55, and D’Arcy v. McCarthy Roofing Limited 2015 NSSM 6 at para.43 to similar effect.
[57] However, this does not end the discussion.
[58] The decision in CIBC was appealed: CIBC Life Insurance Company v. Hupman 2016 NSSC 120. There the Supreme Court noted that the court in Leighton had not had the decision in Kemp v. Prescesky 2006 NSSC 122 brought to its attention. Kemp had held that there was a broader question of potential breaches of natural justice when gaps in legislation were not abridged. The court in CIBC concluded that there was an “ability on the part of adjudicators to fill gaps in the legislation to ensure there is natural justice in the proceedings before the Small Claims Court:” para.24. That being the case the court ruled that the adjudicator’s failure to consider the s.23(2) application constituted a breach of natural justice on the Adjudicator’s part: para.21. The court thereby filled the apparent “gap” in the Act introduced by the decision in Leighton and, as I read it, returned to adjudicators the jurisdiction to consider applications to set aside their orders against defendants who had not filed a defence and had not attended a hearing.
Conclusion With Respect to Jurisdiction
[59] I am accordingly satisfied that an Adjudicator who issues an order against a defendant where
a. The defendant was served,
b. No defence was filed, and
c. A hearing took place where the defendant did not appear,
does have jurisdiction under the Act to hear an application by that defendant to set aside the order. That jurisdiction may be found in s.23(2) or, if I am incorrect in that, in s.2 (as noted by the Supreme Court in CIBC at para.21).
[18] Having the benefit of the further interpretation of Leighton by the Supreme Court, I am like Adjudicator Richardson concluding that the Court does have the jurisdiction to consider the application. I base that reasoning on the further direction provided by the Supreme Court in Kemp.
[19] Adjudicator Richardson concluded that section 23 (2) could be extended to meet this circumstance. Working with the interpretive tools given to the Small Claims Court, which has no inherent jurisdiction, I am loathe to disturb what seems to me to be a clear direction in the legislation that the section provides a process in cases where there was no hearing. I do not think that the use of the word “may” changes that. If the word “shall” had been used, it would have completely removed the discretion of the adjudicator to deny an application to set aside an Order under section 23 (2).
[20] I note as Adjudicator Richardson did, the inclusion in the Small Claims Court Forms and Procedures Regulations of Form 7 a, which states [with my emphasis added]:
On _______________________ 20 ____, a hearing was held in the above matter and the following Order is made:
The Claimant having appeared, and the Defendant ☐ appearing ☐ not appearing;
AND UPON FINDING
(a) that the Defendant was served with a notice of the claim; and
(b) that the Defendant did not file a defence and the time for filing a defence has elapsed; and
(c) that the Claimant has established the merits of the claim,
I THEREFORE ORDER that the Defendant pay to the Claimant the sums as follows:
Debt:
Costs:
Total:
[21] As others have noted, there are two other Forms in the regulations used for filing Orders. Form 7b deals with scenarios where a Defence has not been filed, but does not reference whether the party appeared. Form 7c appears to deal with circumstances where the usual processes have been followed, a hearing is held, and an Order follows.
[22] So, clearly the regulations contemplate that an adjudicator has the authority to issue an Order where no Defence is filed and no appearance is made. However, regulations cannot create jurisdiction, they must find their authority from the Act. The tail does not wag the dog. If section 23 is silent as I say it is when no defence is filed and no appearance made, where then is the jurisdiction to consider an application to set aside found?
[23] I conclude that if the residual jurisdiction exists, it exists under section 2, as indicated by the Supreme Court in CIBC, in which Justice Hood states:
[24] There is, therefore, in my view, the ability for adjudicators to fill gaps in the legislation to ensure there is natural justice in the proceedings before the Small Claims Court. This is a broad and purposive approach to the Small Claims Court Act.
[24] I further find that natural justice requires a procedural remedy for Defendants who neither file a Defence or appear, as there is a remedy for failing to do either one or other. It is far from perfect, and far from ideal to have to use the broad statements in section 2 as a fallback in this way. Like Justice Rosinski, I believe that the Act should be more clearly drafted regarding this scenario, but to leave the parties without a remedy is I submit contrary to the intent of the Act as expressed in section 2.
[25] In terms of what test applies, I find the best approach is to adopt as a hybrid the tests the Courts already use for failing to file a Defence or appear, that the Court is directed in the legislation to use to consider applications to set aside an Order under section 23, as addressing both failure to file and to appear: 1) was there a reasonable excuse for not filing a defence, 2) was there a reasonable excuse for not appearing and 3) did the Defendant appear without unreasonable delay?
1) Reasonable excuse for not filing a defence:
[26] In his evidence, Mr. Redmond stated that he had no intention of filing a Defence. He testified that although he had appeared in Small Claims Court before, possibly on more than one occasion he had never filed a defence in any of those appearances and relied instead on attending on the night in question.
[27] While it is true that Defendants who appear without filing a Defence are often heard by the Court, in accordance with section 2 of the Act, a basic reading of the Claim form makes clear the need to file a Defence in order to protect the Defendant’s interests, and to provide fair notice to the Claimant of whether and how the claim is being disputed.
[28] I note the decision of the Honourable Justice Arthur J. LeBlanc in George L. Mitchell Electrical v. Rouvalis, 2010 NSSC 203, wherein in assessing the test for failure to file a Defence he concluded that the Defendant requires a ““reasonable excuse”, not “any excuse”” [para. 26]. Mr. Redmond, although a layperson, is a businessperson owning several companies, and should have exercised more diligence in protecting his interests. He does not have a reasonable excuse for failing to file a Defence.
2) Reasonable excuse for not appearing:
[29] The date of hearing is written on the bottom of the front page of the Notice of Claim. I consider that a review of the Claim document after its initial receipt would have revealed the correct May 13, 2019 date. I do not consider normal diligence was achieved by relying upon an alternative date written on the envelope, which it appears is what was done.
[30] I do not consider failing to properly diarize the court date a reasonable excuse. I note the decision, provided to me by the Claimant, of Justice E. Van den Eynden in Strait Excavating v. LeFrank, 2013 NSSC 420, in which failure to diarize a court date was found not to be a reasonable excuse, with the Court noting:
[35] Although small claims court hearings are intended to be accessible to the parties and informal, parties need to be reasonably diligent, mindful and respectful of the process. Otherwise the integrity of and respect for the process is undermined.
3) Unreasonable delay:
[31] In any analysis of delay, I do not take into account the period of time during the COVID shutdown. However, all of the relevant events regarding this matter predate that crisis. It is notable that Mr. Redmond says that he attended at Court as many as three times looking for the decision in the summer of 2019, but does not have any documentation indicating a formal request to the Court that they provide him with the decision and also ensuring that the Court had the right address for him.
[32] By his own admission, in the fall of 2019 “life got busy” and he did not follow up. It was only when he was unable to obtain financing that he became concerned about the effect of this judgment. A formal letter should have been sent to the Court upon learning that a decision had been rendered, indicating his concerns with Mr. Thompson's writing the decision and ensuring that he was kept advised of developments.
[33] Again, while Mr. Redmond was at that time a self-represented litigant, he is a self-employed businessman running several companies, and can be expected to understand the need to protect his interests, especially when such a large amount by small claims standards is involved.
[34] I thank both counsel for their submissions in this matter. As a final note, the Defendant did not raise before me the issue of adjudicator Thompson having issued the Order when the Defendant says he was in a conflict. Leaving aside the fact that it does not appear that Adjudicator Thompson was made aware of the alleged conflict until after the decision was made, the parties were correct in not doing so, as that argument in my submission would have been beyond my jurisdiction and subject instead only to an appeal of the Order to the Supreme Court as an error of law or jurisdiction.
[35] For all of the reasons above, the application to set aside the Order of Adjudicator Thompson in this matter is denied.
Dated at Halifax, Nova Scotia on May 12, 2021.
Dale Allane Darling, QC
Adjudicator