Let’s assume you commence a legal action, and the defendant doesn’t bother to defend; does that mean that you simply get what you claimed without having to go through the litigation process?
Not quite. It does means you will be able to skip many steps, including proving the facts, but you will still need to satisfy a court that the damages you seek are appropriate.
We have written about the possibility of jail time for failing to comply with one’s obligations in the litigation process. It typically does not go so far, however; the more common penalty for a defendant failing to participate (it would be unusual for the plaintiff, who initiated the proceeding, to subsequently ignore it) as required is being noted in default.
When this happens, the defendant loses their right to defend and the matter goes forward, undefended, without input from the defendant or its legal counsel.
A default proceeding means that all allegations in the Statement of Claim are admitted as true. However, this does not mean that the plaintiff is awarded all the relief that they have set out in their Statement of Claim. Instead, the Rules of Civil Procedure require the plaintiff prove the damages they claim to be entitled to.
542491 Ontario Limited v 8240631 Canada Inc.
The recent case of 542491 Ontario Limited v 8240631 Canada Inc. 2023 ONSC 4095 stands as a reminder of the importance of proving one’s entitlement to damages, even in an undefended proceeding.
The Facts
Based on the Statement of Claim, it appears that the plaintiffs, Donald Foster, (“Mr. Foster”) and his numbered company, had provided commission-based sales services to Presentoirs Clic Inc. (“Presentoirs”) since 2002. In 2014, Presentoirs made an assignment in bankruptcy and the defendant, Innovation CLIC (“Innovation”) continued its business. The plaintiffs continued to provide the same services post-bankruptcy. In April 2014, soon after the transition, their commission structure was changed and in December 2014, their retainer with Innovation was terminated.
The plaintiffs sued and the action appears to have stalled over the “last many years” due to what the Court describes as Innovation having “obstructed the prosecution”.
In March 2022 the Court struck Innovation’s Statement of Defence. In December 2022, Mr. Foster had Innovation noted in default and moved for default proceedings. In April 2023 the Court permitted default proceedings to go forward. Innovation was properly served with the motion materials but failed to respond.
Among the relief sought in the claim were damages for Mr. Foster’s wrongful dismissal.
The Holding
The plaintiffs still had to prove their damages and the defendant’s liability. Even with all allegations in the Statement of Claim admitted as true due to the defendant’s default, the Court was still unable to award the plaintiffs all requested remedies. In particular, the Court noted that it was not clear as to whether Mr. Foster was an employee based on the material before it. The record included an unsigned employment agreement with Presentoirs which included no language confirming Mr. Foster’s commission structure.
This employment agreement indicated that the relationship between Mr. Foster and Presentoirs would terminate upon Presentoirs ceasing operations. The Court noted that as Presentoirs had ceased operations with its assignment in bankruptcy. Nothing before the Court indicated whether the agreement also applied to the relationship with Innovation. The Court held that further case law and argument would be needed to address the matter. The record did not show that Innovation carried on with Presentoirs’ business, even with all allegations in the Statement of Claim being admitted.
Crucially, it was not clear, based on the record, whether Mr. Foster was in fact an employee, either of Presentoirs or Innovation. The Court noted that in his Affidavits, Mr. Foster stated that he was an employee but provided no facts to substantiate this assertion. Finally, the Statement of Claim indicated that Mr. Foster and his numbered company entered into an agency agreement, and accordingly, additional evidence would be required to clarify this issue.
All that the Court could find, based on the record, was an outstanding amount of $79,745.15 for unpaid work between February and July 2014.
Takeaways
Litigation is a difficult process, with many important steps to be followed. As with most things in law, thorough preparation is essential to succeed, even in a default proceeding. The Court will only award you what you can show you are entitled to receive.
At Rudner Law, we have experience representing both employees and employers in litigation. You can visit our website to learn more about employee-side litigation and employer side litigation.
If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.
