IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]           This is an application by the defendant, Jacqueline Matson, for an order cancelling a default order dated October 5, 2017. The order was filed after Ms. Matson failed to file a reply to the claim filed on behalf of Mr. Karcher’s estate. If successful, Ms. Matson seeks further orders enabling her to file her reply to the claim, as well as an order cancelling the payment hearing commenced by the claimants.

[2]           The claimants, Ms. Schoffer as Executrix of the Estate of Mr. Karcher and the Estate of Mr. Karcher, oppose the application. They submit that Ms. Matson wilfully failed to file her reply, that she has no reasonable explanation for the delay in filing this application until this January 16, 2018 and that there is no merit to her defence in any event.

[3]           The claim in this case is for a debt alleged to be owed to the estate of Mr. Bernard Karcher in the amount of $30,500.00. The claim is brought by Mr. Karcher’s widow, Ms. Geraldine Schoffer, the Executrix of his estate. It is alleged that from approximately the spring of 2006 to the late summer of 2008, Mr. Karcher loaned Ms. Matson money from time to time. Some of the monies came directly from Mr. Karcher’s visa account and can be seen, it is submitted, on his Visa statements. Ms. Schoffer alleges that from time to time, Ms. Matson would pay the interest on these transfers but that it was always understood that she would repay the debt, largely once she sold her home.

[4]           Ms. Matson does not deny receiving money from Mr. Karcher though she does dispute the amount claimed on behalf of his estate. Ms. Matson maintains that the monies were gifted to her with no thought on the part of Mr. Karcher that they would be repaid. She swore, for example, that neither she nor Mr. Karcher ever kept track of the money that passed from him to her though as noted she denies owing what is claimed. Ms. Schoffer has introduced into evidence various Visa statements which she maintains demonstrate that Mr. Karcher always noted what monies went from that account to Ms. Matson.

[5]           By letter dated July 5, 2011, addressed to both Mr. Karcher and Ms. Schoffer, Ms. Matson looks to have acknowledged the debt, though not in any specific amount. In the letter, which is lengthy, Ms. Matson acknowledges that she is grateful to the couple for their help, and that she is anxious to return the funds to them. Ms. Schoffer argues that this is a clear acknowledgement of the debt owing with implications for one aspect of Ms. Matson’s defence which is that the claim is time barred pursuant to the Limitations Act, R.S.B.C. 1995, c. 266 (the “old Limitations Act”). Ms. Matson says the letter was a ruse; part of an arrangement between herself and Mr. Karcher to subdue Ms. Schoffer who by all accounts wanted the monies repaid as the couple was struggling financially. Ms. Matson acknowledges that latter fact in her letter.

[6]           Mr. Karcher passed on March 23, 2016. He left a will in which Ms. Schoffer is named as his Executrix. Probate was granted on August 16, 2016 and Ms. Schoffer was appointed Executrix of the will of her husband. In May, 2017, Ms. Schoffer instructed her counsel, Ms. Robertson, to send Ms. Matson a letter of demand calling for the return of all of the monies loaned to her by the late Mr. Karcher. As no response was received, Ms. Schoffer filed a notice of claim on June 27, 2017 seeking repayment of the debt. That notice was served on Ms. Matson by registered mail on July 14, 2017.

[7]           Ms. Matson does not deny signing for the registered letter. Rather, she swears in her Affidavit sworn on January 15, 2018 (“Affidavit #1”), that upon receipt of notice from Canada Post that she had registered mail, she rushed to the post office to pick it up assuming it was a parcel. Instead, she signed for delivery of a brown envelope with an address on the back. Ms. Matson avers at paragraph 12 of her Affidavit #1 that the only other time she had received registered mail was “when I received a letter from Coast Capital Savings reminding me that I have an unused dormant safety deposit box there.” Thinking the envelope looked similar, Ms. Matson swears that she left the envelope unopened, set it aside and then forgot about it. In the result, Ms. Matson did not file a reply to the claim and Ms. Schoffer was able to obtain judgement in default.

[8]           Ms. Robertson sent a further letter to Ms. Matson dated November 2, 2017, informing Ms. Matson of the default order and seeking arrangements for the payment of the judgement. Ms. Matson maintains that she did not receive the letter of November 2, 2017 or the earlier letter from Ms. Robertson dated May 16, 2017. She offers a rather unusual explanation.

[9]           In her Affidavit #2, sworn on February 14, 2018, and filed in response to Ms. Robertson’s two letters, Ms. Matson avers that sometime around 2015 she had accumulated such a vast backlog of paperwork from her family company’s bankruptcy in 2004 that she took the step of hiring a professional organizer to help her attend to her mail and household. Part of that process involved sorting mail so that upon receipt, if Ms. Matson recognized it and saw it as a priority she would open it; otherwise it would go into a box to be sorted with her organizer at one of their scheduled meetings. Those meetings stopped sometime in the summer of 2017 due to the organizer’s schedule, Ms. Matson’s holidays and other more pressing personal issues. Still, this is the explanation for not having read or opened Ms. Robertson’s letter of May, 2017, or the second letter dated November 2, 2017.

[10]        This application is brought pursuant to Rule 17(2) of the Small Claims Rules. The rule provides as follows:

[11]        In Davis v. Carlaw, [1995] B.C.J. No. 2807, Judge Stansfield, as he then was, wrote at page 8 of his reasons that Rule 17(2) is an apparent attempt to codify the principles enunciated by Justice Hinds in Miracle Feeds v. D & H Enterprises Ltd., (1979) 10 BCLR 58. This was largely, as Judge Stansfield saw it, to make it apparent to laypersons what rules or principles would guide the court in applications to strike.

[12]        Miracle Feeds is regarded in this court as the seminal decision on the test for setting aside a default order. The oft quoted paragraph 5 provides as follows:

[13]        In Lou Guidi Construction Ltd. v. Fedick, [1994] B.C.J. No 2409, Judge Stansfield observed at paragraph 5 that given the purpose of the Small Claims Act, and the preponderance of self-represented litigants in this court, as a general rule greater emphasis should be placed upon the facts which support the claim or defence than the other factors in s. 17(2)(b). He added that though “the reasons for the party failing to do that which led to the default, or delaying bringing the application to set aside, are relevant considerations, they are less so than whether on the merits the party deserves their day in court.”

[14]        Judge Stansfield later clarified this point in Davis v. Carlaw, [1995] B.C.J. No. 2807 when he revisited the weight to be attached to the first leg of the Miracle Feeds test. His reasons, at paragraph 31, are as follows:

[15]        In Davis v. Carlaw, Judge Stansfield refused an application to set aside a default order that was granted when the claimant failed to attend for trial as Judge Stansfield satisfied himself the applicant had lied about her reasons for her absence. Judge Stansfield noted at paragraph 34 that it was necessary for an applicant seeking to set aside a default order to “come to the court with clean hands” just as would be the case for an applicant seeking equitable relief.

[16]        In Rudrakumar & Pawar v. FIC Investments et al, 2011 BCPC 46 (Can LII), Judge Phillips denied an application to set aside a default order granted when the defendants failed to attend a settlement conference on the grounds they had not established their failure to attend was not wilful or deliberate.

[17]        In Rudrakumar, the defendants had filed a defence to the claim and moreover had successfully applied for an order vacating a mediation date set by the court after satisfying the Chambers Judge the mediation would not succeed. Instead, the defendants pressed that the matter go directly to trial. Still, as Judge Phillips found, the defendants were advised by the Chambers Judge that a pre-trial conference should be set or if possible a settlement conference. A notice of settlement conference was duly sent out by the registry within a week of the order vacating the mediation session. It is undisputed the notice was sent to the defendants’ address for service.

[18]        The default order was granted in March, 2010, and various payment hearings were subsequently adjourned by the claimant as the defendants appeared to have been evading service. Following an order for substitutional service by posting documents on the door of the residence of one of the defendants, the defendants took steps to have the default order set aside.

[19]        As in this case, the applicants in Rudrakumar averred that they had no notice of the settlement conference or at least not that they were aware of it as their corporate office was in such a disarray at the material time they could not be sure whether the notice was received or not: only that it was not brought to their attention. While the court had some difficulty accepting that explanation, Judge Phillips found the defendants’ inaction even more significant. Her comments in this regard are set out at paragraph 38 of the reasons:

[20]        Judge Phillips held that the failure of the applicants to discharge the burden showing they did not deliberately and wilfully fail to attend in court was fatal to their application. It was, the court held, the kind of inactivity that had an element of culpability. Judge Phillips acknowledged, as Judge Stansfield had as well, that in Miracle Feeds, Justice Hinds “contemplated a person with a meritorious defence being denied their day in court only when their failure to do that which led to the default was in fact culpable.”

[21]        In considering the question of culpability I feel bound by the reasons of Judge Stansfield in Davis v. Carlaw to adjust the threshold for culpability as may be necessary in this case taking into account the factors set out above.

[22]        Before turning to those I would note that like the case of Rudrakumar, I find the explanation given by the applicant in this case for not receiving notice of the claim difficult to accept. The idea that the applicant did not open the registered letter upon attending at the post office and signing for it because she confused it for a registered letter she had once received from Coast Capital is at the very least suspect.

[23]        Secondly, the applicant has to take responsibility for her wilful failure to open mail delivered to her residence in a timely manner or at all unless she recognized by looking at the envelope whether it was a priority or not. It is conduct that should not be lightly countenanced.

[24]        Turning to the factors identified by Judge Stansfield to determine the threshold of culpability in this case I accept firstly on the evidence in this application that Ms. Matson is of an age and background where it could be said she is not commercially unsophisticated. Among other things, Ms. Matson described the toll dealing with her family company’s bankruptcy had taken on her. Ms. Matson is not the kind of litigant that appears in this court from time to time having perhaps little formal education and little or no business experience.

[25]        I accept also that Ms. Matson has previously been a party to litigation. That much was proven on the evidence before me as well in this application.

[26]        Despite this, I find there is insufficient evidence on which I can infer that Ms. Matson understood the need to file a reply. It is the case, and I find, that Ms. Matson has only herself to blame for not being alive to the litigation. Her excuse for not opening the registered letter is feeble but unlike the case in Davis v. Carlaw, I cannot be satisfied on balance that it is untrue. I find I must accept that Ms. Matson did not know of the existence of the claim however unsatisfactory her explanation.

[27]        Finally I find no suggestion in the evidence that Ms. Matson acted in a manner which could be characterized as being contemptuous of the court process. That may have informed the reasons in Rudrakumar but here there is no existing knowledge of the case. On the evidence before me I cannot be satisfied that Ms. Matson knew or must have known of the litigation and was simply ignoring it in the hope it would go away.

[28]        Ms. Matson’s reasons for not filing her reply do her little credit. They are not particularly compelling but at the same time they do not in my view rise to the level of culpability such that the application must fail at this stage.

[29]        For the same reasons, I would not deny the application on the second leg of the Miracle Feeds test. I find I must accept that Ms. Matson did not know of the claim or the other demand letters until she was served personally with notice of the payment hearing after which I accept also that she took immediate steps to apply to have the default order set aside.

[30]        This then leaves the question of the merits of the defence. Here, Ms. Matson argues she has a strong, multipronged defence. It is set out in the draft reply attached as Exhibit D to her Affidavit #1. In summary, Ms. Matson denies the monies were loaned to her; they were, she maintains, a gift from Mr. Karcher. Alternatively, Ms. Matson denies she received from Mr. Karcher the amount of money sought by the claimants. Ms. Matson submits also that the claim is statute barred in any event under the old Limitations Act having been brought more than six years after the last alleged loan was made. In the final alternative it is alleged that Ms. Schoffer has no standing to bring this claim on behalf of the Estate as her appointment under the will should have been revoked pursuant to s. 56(2) of the Wills, Estates and Succession Act.

[31]        Ms. Schoffer submits that Ms. Matson has advanced no meritorious defence to her claim. The first three defences are largely undermined, it is submitted, by Ms. Matson’s letter dated July 5, 2011 acknowledging the debt, though not the amount. The parties herein dispute the significance of that latter fact. Ms. Matson relies on Freeway Properties Inc. v. Genco Resources Ltd., [2012] B.C.J. No. 1219, as authority for the proposition that the bare acknowledgement of the existence of a cause of action would be insufficient to constitute confirmation of a cause of action for the purposes of s. 5(2) of the old Limitations Act.

[32]        Still as the court notes at paragraph 24 of Freeway Properties, quoting from the rule in Nguyen v. Johnson, 2008 BCCA 218, the test to determine whether an acknowledgement of a cause of action has been made is an objective one; would a reasonable person looking at the letter in this case conclude Ms. Matson was acknowledging a debt owed to Mr. Karcher. This is the sort of issue that could be decided summarily, even in the context of an application such as this, but for the fact that Ms. Matson alleges the letter was a ruse. That in my view makes it impossible to rule out the merits of this defence in this application. It is, I find, a matter for trial.

[33]        In addition, even if the letter could constitute an acknowledgement of a debt, the question of the amount remains controversial. That matter could obviously have been easily resolved before Mr. Karcher’s passing and even still the claim might survive the limitations period given the reasoning at paragraph 27 of Freeway Properties. However, that would still not resolve the question in this claim regarding the amount of debt owing. I cannot find at this stage that that question is so unmeritorious as to deny the application.

[34]        Having made these findings, I find it unnecessary to consider the remainder of Ms. Schoffer’s objections to the merits of Ms. Matson’s defence. I will leave that to the trial judge if matters proceed that far.

[35]        For the reasons set out above, I find the applicant has met the test required to set aside the default order. I order the default judgement be set aside. I further order that the applicant’s reply to the claim be filed and served on the claimant within 14 days of the date of this order. The payment hearing set down but adjourned is hereby cancelled.