Executive Summary: Key Legal and Evidentiary Issues

• The court considered whether the default judgment and the subsequent noting of default against Comtech should be set aside, focusing on Comtech’s explanations and intentions to defend.

• The classification of Norfield’s claimed damages as “liquidated” or “unliquidated” was disputed, affecting the registrar’s authority to enter default judgment under Rule 19.04(1)(a).

• The sufficiency of notice and service of the statement of claim on Comtech, and the impact of internal communication failures, were central to the procedural issues.

• Liability for flood damage, including the roles and insurance coverage of Comtech, Avocado, and A.S.H., was contested, with arguments about who bore responsibility and whether insurance coverage applied.

• The appropriateness and proportionality of solicitor-client costs awarded to Norfield, and the conduct of both parties regarding delays and compliance with procedural deadlines, influenced the court’s decision on costs.

• The court examined whether Comtech’s delay in filing a defence was inadvertent or wilful, and considered whether any prejudice to Norfield could be compensated by a costs award.

Facts of the case

Norfield Enterprises Ltd. (“Norfield”) filed a statement of claim against Comtech (Communication Technologies) Ltd. (“Comtech”) on December 20, 2023, seeking recovery of expenses for emergency services and repairs to address flood damage at leased premises in Winnipeg. The premises were originally leased by A.S.H. Management Group (“A.S.H.”), acting as Norfield’s agent, to Comtech on December 19, 2016. With Norfield’s consent, Avocado Motorsports Corporation (“Avocado”) entered into a sub-lease for the premises from July 1, 2020, to December 30, 2022. The lease required payment of rent and compliance with all terms, including insurance requirements. Issues arose between Comtech and Avocado regarding non-payment or late payment of rent. On or about May 19, 2022, the premises suffered flood damage, which was attributed by A.S.H.’s insurance adjuster to the intentional removal of a water valve under a sink. Comtech claimed it incurred $11,200 in cleaning costs and lost its damage deposit and related fees totaling $10,675.73. Norfield’s claim also related to costs for remediating the flood damage.

Comtech’s insurer denied coverage, stating indemnity should be sought from Avocado’s insurance. Comtech asserted that Avocado’s insurance policy, which named both A.S.H. and Avocado, expired on July 16, 2021, and that Comtech was not notified of the expiration. On March 27, 2023, Comtech sued Avocado and Boyang Zhu for unpaid rent and flood remediation costs, initially claiming $119,822.93, with $21,617.80 for remediation. An amended claim increased the remediation portion to $67,863.83. Default judgment was entered against Avocado on September 11, 2023, for $169,359.59, and Comtech began enforcement steps.

Procedural background and litigation history

Norfield’s statement of claim was served on a Comtech employee in Winnipeg on January 4, 2024. Comtech admitted there was “no good explanation” why the employee did not forward the claim within the company. On March 7, 2024, Norfield obtained a $75,147.78 default judgment against Comtech. Norfield sought to register this judgment in Saskatchewan, serving Comtech’s Saskatchewan power of attorney. Comtech became aware of the action at that time and moved to set aside the Manitoba default judgment on July 29, 2024. The Associate Judge set aside the default judgment on December 5, 2024, awarding Norfield solicitor-client costs up to the date of the motion and requiring Comtech to file a statement of defence within 20 days. Comtech was awarded tariff costs for the motion to set aside the default judgment.

Disputes arose over the scope of the solicitor-client costs. Norfield’s Bill of Costs totaled $19,938.89, covering the period from the claim’s inception to the date of Comtech’s motion, including Saskatchewan proceedings. The order was filed on May 7, 2025. Comtech appealed the costs award on May 21, 2025, and Norfield cross-appealed the setting aside of the default judgment on May 27, 2025.

On May 28, 2025, Norfield noted Comtech in default for not filing a statement of defence within 20 days of the order. Comtech argued the failure was inadvertent and due to not being advised the order had been entered. Comtech moved to set aside the noting of default and for leave to file a defence. Norfield opposed, seeking solicitor-client costs.

Discussion of policy terms and clauses at issue

The lease and sublease required Avocado to maintain property damage and public liability insurance, and Comtech contributed to the landlord’s insurance as “additional rent.” Comtech argued it should benefit from the insurance coverage, especially since Avocado’s policy had expired without notice. The insurance policy named A.S.H. and Avocado, but not Comtech, and expired on July 16, 2021. Comtech maintained it was not informed of the expiration by A.S.H. or Avocado.

Analysis of the parties’ positions

Comtech asserted it had an ongoing intention to defend once aware of the action, and that its proposed defence was meritorious, addressing Norfield’s allegations of negligence and breach, and raising issues about insurance coverage and the nature of damages. Comtech also argued that the damages claimed were not liquidated and that the registrar should not have entered default judgment. Norfield argued Comtech’s proposed defences were irrelevant or speculative, that Comtech’s actions reflected delay, and that Comtech’s claim against Avocado for remediation costs amounted to an acknowledgment of liability. Norfield also contended that Comtech’s motion to set aside the noting of default was not timely and that it suffered prejudice through increased legal costs and procedural delays.

Court’s analysis and outcome

The court agreed with the Associate Judge’s decision to set aside the default judgment, finding Comtech’s explanation for not filing a defence satisfactory and that Comtech had demonstrated an arguable defence. The court found that the damages claimed by Norfield were not liquidated, and thus the registrar should not have entered default judgment. The court also set aside the May 28, 2025, noting of default, finding Comtech’s failure to file a defence was inadvertent, not wilful, and that any prejudice to Norfield could be compensated by costs.

Regarding costs, the court found Norfield’s Bill of Costs excessive and awarded an all-inclusive amount of $10,000 in solicitor-client costs and disbursements to Norfield for the period up to Comtech’s motion to set aside default judgment (July 29, 2024). Comtech was awarded tariff costs for the motion to set aside default judgment, and Norfield was awarded tariff costs for the motion to set aside the noting of default.

Final ruling and outcome

The court set aside both the default judgment and the subsequent noting of default against Comtech. Comtech was given fourteen days to file its statement of defence. Norfield was awarded $10,000 in solicitor-client costs for the period up to Comtech’s motion to set aside default judgment. Comtech and Norfield each received tariff costs for specific procedural steps. The court encouraged both parties to resolve the matter promptly, noting that further litigation would not be economical. The successful party for the costs award was Norfield, with a total amount of $10,000 ordered in its favor for solicitor-client costs, while the underlying claim remains to be determined on its merits.