Gjoa Haven has $1.3 million default judgement set aside

The Hamlet of Gjoa Haven was successful in its lawsuit to have the $1.26 million in previously garnished funds returned to it from CAP Enterprises Limited.

Legal action against the municipality was previously brought by CAP, ending in a favourable judgment for the plaintiff in December 2019. The original statement of claim, filed Aug. 9, 2017, sought “significant financial damages” from the hamlet and the senior administrative officer, alleging that Gjoa Haven engaged in “improper tendering processes” of awarding municipal contracts, specifically rock-crushing, and inappropriately and wrongly withheld permits and licences from CAP in 2014-15.

On May 31, 2018, Charlie Cahill, a director of CAP Enterprises, served the statement of claim on the hamlet by leaving a copy with then-senior administrative officer David Stockley. Cahill swore through affidavit that he knew Stockley through “prior personal knowledge.”

It was later explained that the law firm of McLennan Ross LLP, despite confirming that it would assist the hamlet, never filed a statement of defence. As a result, Gjoa Haven was never informed of the legal action against it. New counsel working on behalf of McLennan Ross LLP through negligence insurance, Gowlings LLP, confirmed “that it was because of [McLennan Ross LLP's] inadvertence that a statement of defence was not filed.”

As a result a default judgment, CAP Enterprises received $1.26 million.

After two years, a garnishee summons in that amount was issued to the hamlet by the Nunavut Court of Justice (NCJ), followed by a second on Jan. 31, 2022, which was then served to the hamlet’s bank, CIBC.

The Hamlet of Gjoa Haven then asked its law firm to investigate what had occurred and to overturn the default judgment.

Throughout June and July of 2022, the hamlet's law firm communicated with CIBC, requesting that it refrain from making any payment on the garnishee summons. CIBC declined the law firm's request and paid Cap Enterprises the full amount on July 13, 2022.

Counsel for the municipality also put CAP Enterprises on notice that it was the hamlet’s intention to have the garnishee summons and default judgment set aside, which was done on Aug. 2, 2022.

According to presiding justice Christian Lyons on May 15, the crux of the matter is whether CAP Enterprises was entitled to the default judgment to begin with. He noted that CAP Enterprises failed to provide evidence of the statement of claim being served on all defendants.

Lyons also determined that CAP Enterprises was seeking "general damages," and didn't provide evidence of a specific sum of money was due and payable.

"CAP had no way to know exactly how much profit was potentially lost through the alleged tortious and contractual missteps of the hamlet," Lyons stated.

He then noted in his judgment that “approximate is not the same as specific” and the prior judge in the default judgment “did not direct an accounting.”

Indeed, because of the particular events of this case, “no judge heard the application for default judgment as no application was made.”

Since administrative and legal procedure were not properly followed due to the negligence of counsel as well as the failure of the legal system, the previous ruling against the Hamlet of Gjoa Haven was overturned.

Therefore, concludes Lyons, who heard the case on Nov. 13, 2023, “CAP’s failure to file a notice of motion applying for judgment against the hamlet is fatal to the legitimacy of the judgment that was entered... I consider it just to set aside the default judgment.”

CAP Enterprises has 90 days to return the full amount of funds, minus $1,500 in legal costs. The hamlet has 30 days to file a statement of defence.

Kira Wronska Dorward, Local Journalism Initiative Reporter, Nunavut News