Daum v. Elko

2009 BCSC 349 Daum v. Elko IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Daum v. Elko, 2009 BCSC 349 Date: 20090127 Docket: 80217 Registry: Kelowna Between: Tyrone Harold Daum Plaintiff And: Susan Elko Defendant Before: The Honourable Mr. Justice Barrow Oral Reasons for Judgment In Chambers January 27, 2009 Counsel for the Plaintiff: T. Brown Counsel for the Defendant: C. Ferris Place of Hearing: Kelowna, B.C. [1] THE COURT: These are my reasons for judgment in an application in the matter of Daum and Elko, Kelowna Registry 80217. The defendant Susan Elko applies to set aside a judgment obtained in default of filing a statement of defence. The plaintiff commenced this action with a writ of summons and statement of claim filed on September 3, 2008. Although the materials in the chambers record do not disclose when Ms. Elko was served, it is apparent she was served. On September 19, 2008, she filed an appearance indicating she was acting on her own behalf. [2] Mr. Murray was counsel for the plaintiff until early 2009, when Mr. Ferris assumed conduct of the matter for purposes of this application. On September 26, 2008, Ms. Elko met with Mr. Murray and delivered her filed appearance. She also told him she would be preparing a statement of defence. She was obliged to file her statement of defence on or before October 4, 2008. When she failed to do that, the plaintiff applied for default judgment. Although not obliged to do so, the plaintiff did not provide notice of his intention to seek default judgment to the defendant. The application was spoken to and granted on October 20. [3] The affidavit of the plaintiff filed in support of his application for default judgment addresses the merits of the claim but makes no mention of the fact that the defendant had met with his lawyer, and indicated her intention to defend the action. The defendant has deposed that after her meeting with Mr. Murray she spoke first with duty counsel and then with a representative of the Elizabeth Fry Society, all with a view to obtaining assistance in the preparation and filing of her statement of claim. On November 4, 2008, shortly after judgment was obtained, she applied to have it set aside. [4] The leading authority on the criteria to be considered in determining whether to set aside a default judgment is Bank of Montreal v. Erickson, [1984] B.C.J. 1540 (C.A.). The court in Bank of Montreal adopted the criteria of Hinds C.C.J. in Miracle Feeds. In Miracle Feeds, Hinds C.C.J. held that an applicant must establish on affidavit evidence the following matters if the court is to set aside a default judgment: first, that the applicant did not wilfully or deliberately fail to enter an appearance or file a statement of defence to the plaintiff's claim; second, that the applicant applied as soon as reasonably possible after learning of the default judgment to set it aside, and if there is a delay in applying to set it aside, that that delay is explained; and third, that the applicant has a meritorious defence or at least a defence worthy of investigation. [5] The plaintiff concedes that the defendant has met the second criteria of the Miracle Feeds test, and given the chronology of this case I am satisfied that is so. The plaintiff argues, however, that the defendant has not met the first and third criteria. [6] Inclusion of the words "wilfully" and "deliberately" in the first prong of the Miracle Feeds test imply that where a defendant has decided to either not defend an action or chosen to simply ignore it, then the test has not been satisfied. The fact that the defendant has not filed a statement of defence in compliance with the rules may, and perhaps often will, give rise to an inference that the defendant has, at least, chosen to ignore the action. If, however, there is evidence of steps taken by the defendant during the time limited for the filing of the statement of defence which are inconsistent with the inference that the defendant has simply chosen to ignore his or her obligations, then the inference need not be drawn. [7] In the matter at hand, Ms. Elko took steps that are inconsistent with that notion, and I am satisfied she was not simply ignoring the action. She spoke with the plaintiff's lawyer and also sought advice from others. In the face of this evidence, I am not satisfied it can be said that she wilfully or deliberately failed to file a statement of defence. [8] That leaves for consideration the third prong of the Miracle Feeds test, namely whether on the affidavit material it can be said that she has a meritorious defence or at least a defence worthy of investigation. A defence is not worthy of investigation merely because it is asserted. It is necessary for the defendant to provide evidence in support of the defence alleged, such that a court is able to determine whether the defence is either meritorious or worthy of investigation (see, generally, Schmid v. Lacey, [1991] B.C.J. No. 3501 (C.A.) per Locke J.A.). It is not necessary, however, for the applicant to establish that the asserted defence is bound to succeed. [9] The substantive issues in dispute in this lawsuit relate to the plaintiff's effort to acquire and operate a hotel in the community of Beaverdale. The hotel sits on one or two parcels of property. To the rear of the hotel and separated from it by a lane are four lots. Three of those lots were, when this action was commenced, registered in the name of the defendant. The plaintiff has deposed that he acquired the Beaverdale hotel and the lots behind it using nominees in order to mask his involvement in the enterprise at least while he was in the process of assembling its constituent parts. He caused a company to be incorporated, in which the shares were held by his former girlfriend. That company obtained the liquor licence under which the pub in the hotel operates, from the vendors. Mr. Daum planned to promote concerts at the hotel using the lots behind it for that purpose. To that end, he acquired the three lots, again in the name of his former girlfriend. [10] He had a falling out with that girlfriend, and in or about May of 2007 became acquainted with the defendant. Shortly after they met, they became romantically involved. Shortly after that, the plaintiff arranged to have title to the lots behind the hotel transferred from the name of his former girlfriend to the name of the defendant. The shares in the company which owned the liquor licence and, I gather, the land on which the hotel itself is located were similarly transferred into the name of the defendant from the plaintiff's former girlfriend. [11] The defendant concedes that she paid nothing for the lots. She maintains, however, that they were given to her by the plaintiff. She points in her affidavit material to other gifts the plaintiff gave her, gifts of some considerable value, although not gifts of real property and not gifts that approach the modest value of the lots in question. The plaintiff maintains that the defendant's assertions are so at odds with common sense and human experience that they do not rise to the level of a defence worthy of investigation. He points to the fact that on her account, within three or four weeks of making her acquaintance, he is said to have given her three parcels of property. On the other hand, he is unable to point to any documentary evidence contemporaneous with the transactions that support his assertion that the property was always beneficially his. Interestingly, in his affidavit in support of the application to obtain default judgment, the plaintiff made no mention of the fact that the defendant was or ever had been in a relationship with him, other than that of an employee. [12] The law favours orderly, efficient, and timely disposition of disputes. The Rules of Court are designed to promote those goals. The law also favours the disposition of disputes on their merits. Applications of this kind pit those objectives one against the other. Although this may be considered a borderline case, I am satisfied that the defendant has met the criteria set out in Miracle Feeds. On the one hand, the defendant argues that the transactions by which she acquired the property were gifts. On the other, the plaintiff argues that they are held by her in trust. It is beyond dispute that the lots were in the defendant's name. There is no documentary evidence that directly supports the plaintiff's contention. While it may be at odds with common sense to gift property to a recent confidant, it might also be said that it is equally at odds with common sense for a businessman to put property such as land in the name of that same acquaintance without any documentary record of the reason for doing so. In these circumstances, I am satisfied that the defendant's materials raise a defence that is at least worth of investigation, and therefore I am granting the application and setting aside the default judgment. [13] The default judgment obtained by the plaintiff consisted of an order that the property in question be conveyed into the plaintiff's name. That was done. Subsequent to that, the plaintiff conveyed the properties into the name of a third party. In allowing the defendant's application, I am not to be taken as casting into doubt the validity of that subsequent conveyance. The defendant is simply entitled to defend this action, and if successful her remedy will be monetary in nature. [14] The defendant will have 14 days from today's date to file her statement of defence. The defendant is to bear her costs of this application, regardless of the outcome of the lawsuit. The plaintiff's costs will be left to the discretion of the trial judge. [15] From your perspective, Mr. Brown, are there any questions? [16] MR. BROWN: No, Your Lordship, that's fine. [17] THE COURT: No? Mr. Ferris? [18] MR. FERRIS: No. Thank you, Your Lordship. [19] THE COURT: All right. Thank you, counsel. We will adjourn. [20] MR. BROWN: Thank you. Barrow J.