Process server's incomplete notes meant person wasn't properly served
The Ontario Court of Appeal has ruled that the period of delay in bringing a motion to set aside judgment and admit a statement of defence should be considered from the date of judgment, not the date of alleged service of the statement of claim. Further, failure to contain a description of the recipient of the statement of claim does not constitute valid service, according to the court.
In Leaf Homes Limited v. Khan, 2022 ONCA 504, Farrukh and Nadia Khan entered into a purchase and sale agreement with Leaf Homes Limited to buy a house. The agreement required post-dated cheques and pre-approved financing. Since he did not have either at the time of the signing, Khan returned with several post-dated cheques. However, Khan failed to secure mortgage financing.
In April 2019, Leaf Homes obtained default judgment against Khan with damages and costs, and later sold the property. A month later, Khan attempted to withdraw money from his bank, but was told that his account was garnished. This was the first time he was informed of the case against him.
Shortly after, Khan retained counsel. They sought to have the default judgment set aside and be allowed to file a statement of defence and counterclaim. They argued that Leaf Homes’ sales associate misrepresented that the cheques and the pre-approved mortgage was not required before the signing of the purchase agreement. They sought to recover their down payment and mitigation of damages.
The motion judge set aside the default judgment only to the extent that Khan could litigate the quantum of damages. She ruled that Khan’s motion was not promptly brought before the court since the statement of claim was served upon them.
On appeal, Khan argued that the judge erred in validating the service of the statement of claim and ruling that the motion was not promptly filed, among others.
The appellate court agreed.
Air of reality and failure to identify recipient of documents
Contrary to the motion judge’s conclusion, Khan only needed to show that their defence had an air of reality and not that it would inevitably succeed, said the court. The fact that Khan went to the sales appointment without cheques or a pre-approval of mortgage financing support, despite the agreement requiring both, supported their version of what transpired.
Further, the motion judge erred in relying on the process server’s “contemporary notes” that Khan received copies of the statement of claim, said the court. The appellate court found that neither the document nor the affidavit of service contained a description of the alleged recipient of the documents or any effort to ascertain whether the recipient was Khan, said the court.
Lastly, the motion judge erred in considering Khan’s actions after the statement of claim was allegedly served, the court found. In considering whether a motion was promptly brought, the history of the proceedings was irrelevant, since the delay should be considered from when the default judgment was granted, said the court.
The appellate court set aside the default judgment and allowed Khan to file and serve the statement of defence and counterclaim.
