2006 BCSC 1003 Willey v. Ronik Security Ltd. et al

Before: The Honourable Madam Justice Gill

Oral Reasons for Judgment
In Chambers

January 9, 2006

Counsel for the Plaintiff:	D. Montrichard C. Rhone
Counsel for the Defendant, Voxcom Incorporated:	A. Zasada
Place of Trial/Hearing:	Vancouver, B.C.

[1] THE COURT: The defendant Voxcom Incorporated, seeks to set aside a default judgment obtained by the plaintiff on July 20, 2005 and asks for leave to deliver an appearance and statement of defence.

[2] To briefly refer to the nature of the action, the plaintiff and the defendant Voxcom had entered into an agreement whereby Voxcom would provide remote monitoring services in respect of an alarm system. In early 2004, there were a number of alarm activations at the plaintiff’s residence. The appropriateness of the defendant’s response to these activations is at issue. Damages are sought in respect of water damage allegedly caused by burst water pipes.

[3] On February 2, 2005, the plaintiff delivered its writ and statement of claim to Voxcom and in turn the pleadings were delivered to Aviva Canada, Voxcom’s insurer. Mr. Nagtegaal, an insurance claims specialist with Aviva Canada, has been responsible for dealing with this matter.

[4] Although the plaintiff takes some issue with how to characterize the forbearance, Mr. Rhone, counsel for the plaintiff, did not press for the filing of an appearance until July 6, 2005. Mr. Nagtegaal had requested a concession in order to give Aviva time to investigate the plaintiff’s claim. On July 6, Mr. Rhone sent an e-mail to Mr. Nagtegaal stating that the plaintiff now insisted that an appearance be filed and delivered by July 15. If that did not occur, default judgment would be taken. An appearance was not entered and as stated, default judgment was obtained on July 20.

[5] Turning to the application, I will begin by referring to the evidence of Mr. Nagtegaal and Mr. Rhone.

[6] Mr. Nagtegaal’s evidence may be briefly summarized as follows. He does not dispute that he received the e-mail from Mr. Rhone dated July 6. However, he deposed that he did not read this e-mail until the time that he next spoke with plaintiff’s counsel, which was on approximately September 1. His only explanation is that he was extremely busy and he receives many e-mails.

[7] Mr. Nagtegaal’s affidavit says nothing about an e-mail from Ms. Besanger, counsel for the defendant Ronik Security, which was sent on July 13 and therefore received prior to the date that default judgment was taken. The e-mail states:

I was away last week and have now read the e-mail from Chris Rhone requesting your insured’s appearance and statement of defence by July 15^th, 2005. Will you please forward a copy of the filed appearance and statement of defence to my office as well.

[8] After Mr. Rhone obtained default judgment, he e-mailed Mr. Nagtegaal advising that judgment had been taken and that ongoing settlement discussions would not operate as a stay. Again, Mr. Nagtegaal says that he did not open or read this e-mail until approximately the 1^st of September.

[9] It is seemingly not disputed that a letter enclosing a copy of the judgment was also sent to Mr. Nagtegaal in the ordinary mail on July 25. His affidavit says nothing about that letter.

[10] Mr. Nagtegaal deposed that it had always been his intention to either settle the plaintiff’s claim or defend it as required. He deposed that when he and Mr. Rhone discussed the matter on September 1, settlement was also a topic and negotiations continued through the month of September.

[11] In respect of the September 1 telephone call, Mr. Nagtegaal also says this:

During my September 1^st, 2005 telephone discussion with Mr. Rhone, we also discussed the possibility of his consent to setting aside of the default in exchange for a consideration in costs. It was my understanding that the plaintiff would consent to an order setting aside the default judgment provided Voxcom agreed to pay $1,000 in costs to the plaintiff.

[12] By the end of September it had become apparent to Mr. Nagtegaal that a settlement would not be reached. He advised Mr. Rhone that he would begin the process of assigning the matter to counsel. On November 8 the file was forwarded to Mr. Boswall at Clark Wilson. Mr. Nagtegaal advised Mr. Boswall that there had been an agreement to set aside the default judgment in exchange for payment of costs. When Clark Wilson learned that there was no agreement, this application was brought.

[13] I turn now to the evidence of Mr. Rhone. Mr. Rhone’s affidavit is lengthy with many exhibits attached. His evidence differs from that of Mr. Nagtegaal in a number of respects which are material. I begin by noting that Mr. Rhone and Mr. Nagtegaal had communicated by e-mail prior to July 6 and no issue is raised by the defendant regarding this method of communication.

[14] As Mr. Rhone had received no response to his July 6 e-mail, or to Ms. Besanger’s e-mail of July 13, he forwarded materials to the registry to obtain default judgment on July 18. On July 25, he e-mailed Mr. Nagtegaal attaching a copy of the default judgment and instructed his secretary to forward the judgment to both Mr. Nagtegaal and to Voxcom’s head office in Vancouver. (His secretary has also filed an affidavit confirming what she did.)

[15] By August 31, Mr. Rhone had received no response to his communications and he therefore telephoned Mr. Nagtegaal. That telephone conversation was brief. Mr. Rhone deposed that during their discussion, Mr. Nagtegaal acknowledged having received the default judgment and confirmed his intention to attempt to settle the matter with the plaintiff. In his note of this conversation, Mr. Rhone quoted Mr. Nagtegaal’s words as follows, “I know you have us up against a wall on this one.”

[16] On September 1, Mr. Nagtegaal telephoned Mr. Rhone and on that date they had a lengthy discussion. One of the issues discussed was liability. Mr. Rhone said that in his view liability was irrelevant as default judgment had been obtained. Mr. Nagtegaal disagreed, arguing that he could easily set aside the default judgment because he had simply missed a couple of notices.

[17] Mr. Rhone agrees that there was discussion about setting aside the default judgment. His evidence, however, contradicts Mr. Nagtegaal’s assertion that he understood that an agreement had been reached. Paragraphs 62 through 66 of his affidavit are as follows:

62. I also recall Mr. Nagtegaal asking me to set aside the Default Judgment; but I told him that I could not do so for two reasons: I did not have instructions from my client; and in any event, I would need to review and consider his excuses by considering any Affidavit that he might file in relation to a motion to set aside Default Judgment. I added that even after I reviewed and considered Mr. Nagtegaal’s Affidavit, my client would probably not agree to set aside the Default Judgment unless Aviva paid our costs thrown away. I recall Mr. Nagtegaal telling me that he understood that I could not agree to set aside the Default Judgment without instructions. He asked me what our costs thrown away were, and I said I did not know but that they might be around $1,000. Mr. Nagtegaal told me that payment of the Plaintiff’s costs thrown away would not be an issue if it was in the $1,000 range.

63. At the time, based on my own view of proceedings to date, and Mr. Nagtegaal’s delays, I believed Voxcom would not succeed in setting aside the Default Judgment; and absent a compelling excuse from Mr. Nagtegaal for those delays, I felt unable to recommend to my client that Default Judgment be set aside. Thus, during my conversation with Mr. Nagtegaal I would certainly have not suggested to Mr. Nagtegaal that I had agreed that we would set aside the Default Judgment if negotiations broke down. In this regard, I dispute the accuracy of Mr. Nagtegaal’s suggestion at paragraph 20 of his Affidavit; sworn November 21, 2005 in which he asserts that I had agreed that the “Plaintiff would consent to an Order setting aside the Default Judgment provided Voxcom agreed to pay $1000 in costs to the Plaintiff”.

64. In fact, I proceeded to negotiate on the strength of the Plaintiff’s Default Judgment. In this regard, I recall telling Mr. Nagtegaal that we were willing to try to settle this matter, but I emphasized that any settlement would be premised on the fact that the plaintiff had a Default Judgment.

65. Mr. Nagtegaal raised, as an additional concern, the fact that in the face of the Third Party Notice issued by Ronik against Voxcom he would have to defend the matter in any event, even if he settled with us. I suggested to Mr. Nagtegaal that my client would likely agree to a “BC Ferries Agreement” which would probably protect Voxcom’s interests. Mr. Nagtegaal was interested in this mechanism, and asked that I send him background information explaining this process. He also noted his concern that Ronik might proceed to take default against Voxcom while he negotiated with the Plaintiff. I suggested that he contact Ronik’s counsel to request that they refrain from doing so.

66. In concluding our conversation, I agreed to send Mr. Nagtegaal a letter outlining the Plaintiff’s damages and attaching documents supporting the Plaintiff’s position, together with information concerning a potential “BC Ferries Agreement”. I also agreed that I would refrain from taking further proceedings against Voxcom during September, 2005.

[18] Mr. Rhone deposed that September 30, 2005 marked the expiry of the grace period extended by Ronik Security to Voxcom for the filing of an appearance to the third party notice and the end of the period during which he had agreed on behalf of the plaintiff to take no further steps against Voxcom. He therefore telephoned Mr. Nagtegaal who advised him, amongst other things, that he attended to appoint counsel and deliver materials to counsel during the following week, which would have been the first week of October. That did not occur. On October 25, Mr. Nagtegaal telephoned to advise that he would be delivering the materials to counsel by the end of the week, that is by the 28^th of October. He was waiting to hear back from his litigation manager as to what firm he could select.

[19] On October 27, Mr. Rhone forwarded a notice of motion and affidavit. These materials were sent as a courtesy as in Mr. Rhone’s view, Voxcom was not entitled to notice. On November 8, Mr. Rhone was contacted by Clark Wilson. The issue of the default judgment was discussed, leading to the present application.

[20] I turn now to the applicable law. The test on an application such as the present is not in dispute. Both counsel have referred to the decision in Miracle Feeds v. D & H Enterprises Ltd. The defendant must prove that:

(1) it did not wilfully or deliberately fail to enter an appearance;

(2) application to set aside the default judgment was made as soon as reasonably possible after obtaining knowledge of the default judgment or an explanation for the delay must be given; and

(3) it has a meritorious defence or at least a defence worthy of investigation.

[21] These requirements must be established to the satisfaction of the court through affidavit material filed on behalf of the defendant.

[22] I begin by stating that I am satisfied that there is at least a defence worthy of investigation. In that regard, I refer to the evidence of Mr. Sparrow, Voxcom’s vice-president of operations, and specifically his evidence regarding the activity logs and the nature of the alarm signals which were received.

[23] I have concerns, however, about the first two requirements and those concerns flow from the evidence of Mr. Nagtegaal. As I have stated, Mr. Nagtegaal does not refer to the e-mail from Ms. Besanger sent July 13. I cannot simply make the assumption that this too was overlooked and frankly, I would have thought that Mr. Nagtegaal would address this issue in view of Mr. Rhone’s evidence.

[24] Mr. Rhone deposed that he recalled Mr. Nagtegaal acknowledging receipt of a postal copy of the letter and default judgment during their conversation of September 1. Further, the July 6 e-mail was not the first communication from Mr. Rhone regarding the need to file an appearance. On May 30, he had asked that an appearance be filed within three weeks, although he also indicated he was amenable to discussing that requirement further. Such a discussion did take place and Mr. Rhone did not insist on the three week deadline because Mr. Nagtegaal advised him that their investigation was progressing. However, Mr. Nagtegaal not only understood the significance of the requirement to file an appearance and defence, but he also knew that the plaintiff felt that he was taking too long.

[25] It is for the defendant to satisfy the court that the failure to appear was not deliberate or wilful. In this regard, I cannot accept what is said to be a common sense conclusion that liability insurers do not wilfully or deliberately fail to file appearances. Liability insurers are like anyone else. In fact, insurers have an additional reason to consider the filing of an appearance as insurers would not generally do so unless satisfied that coverage for the claim exists.

[26] In my view, Mr. Nagtegaal’s evidence regarding what occurred after July 25 is also lacking. As stated, he says that he learned of the judgment on September 1 but says nothing about the July 25 letter. Again, I cannot assume that it did not come to his attention shortly after it was sent.

[27] Defence counsel accepts that Mr. Nagtegaal’s “understanding” regarding any agreement to set aside the default judgment was erroneous but says that the court should accept his evidence regarding his belief. The agreement referred to by Mr. Nagtegaal is significant in terms of this application as it is the main explanation for the delay.

[28] It is my view that the evidence of Mr. Nagtegaal and Mr. Rhone cannot be reconciled. Mr. Rhone specifically recalls being told by Mr. Nagtegaal that Mr. Nagtegaal understood he could not agree to set aside the judgment as he did not have instructions to do so. Mr. Nagtegaal does not describe his conversation with Mr. Rhone in any detail and thus the court has only Mr. Rhone’s evidence which, as I have said, is detailed. The conversation as narrated by Mr. Rhone in his affidavit could not, in my view, have led Mr. Nagtegaal to conclude that Mr. Rhone had actually agreed to set the judgment aside. One would be hard pressed to even conclude that Mr. Nagtegaal could have believed that Mr. Rhone would seek instructions to make such an agreement.

[29] In summary, the defendant has not established to the satisfaction of the court that its failure to enter an appearance was not wilful, nor has it provided, in my view, satisfactory evidence regarding the delay in applying to set the judgment aside.

[30] The application to set the judgment aside is therefore dismissed.

“K.M. Gill, J.”
The Honourable Madam Justice K.M. Gill

Citation:	*Willey v. Ronik Security Ltd. et al.,*
	2006 BCSC 1003