Executive Summary: Key Legal and Evidentiary Issues

• The Tracey Family Trust applied to set aside a default judgment dated May 1, 2025, which had awarded the plaintiff damages to be assessed.
• Central to the dispute is whether the plaintiff, Charles Vorselaars, was entitled to exercise a put option under a shareholders' agreement and asset purchase agreement, both dated September 26, 2022.
• At issue is whether the Tracey Trust willfully or deliberately failed to file a response to the notice of civil claim within the prescribed time.
• Timeliness of the application to set aside the default judgment was contested, with the plaintiff arguing the Tracey Trust did not act with sufficient urgency.
• David Tracey's efforts to secure financing and retain legal counsel between April and July 2025 were examined as evidence of good faith rather than deliberate inaction.
• Establishing a defence worthy of investigation — specifically regarding interpretation of the asset purchase agreement and shareholders' agreement — was a key threshold question for the court.

Facts of the case

This case arises from the 2022 sale of the assets of Vortech Plumbing & Drainage Inc., a plumbing business operated by the plaintiff, Charles Vorselaars. On September 26, 2022, the parties entered into two agreements: an Asset Purchase Agreement (APA) and a Shareholders' Agreement (SA). Under the APA, a new company — Vortech Plumbing & Drainage (2022) Inc. (NewCo) — was incorporated to purchase the assets of the original company for $1,500,000, funded by David Tracey through the Tracey Family Trust (Tracey Trust). Under the arrangement, Vorselaars was issued shares representing 43% of NewCo, while the Tracey Trust held 57%. The SA granted Vorselaars a put option to sell his shares two years after closing of the asset purchase, and he also entered into an employment agreement with NewCo.

On October 1, 2024, Vorselaars delivered notice of his intent to exercise the put option, setting November 30, 2024, as the closing date. On or about November 29, 2024, his lawyer delivered to Mr. Tracey a promissory note and director's resolution to approve the share transfer, which anticipated a payment of $10,599,999.84. The Tracey Trust disputed the adequacy of the closing documents. A revised promissory note was delivered on December 17, 2024, but the Tracey Trust maintained that Vorselaars was not entitled to exercise the put option and that NewCo's financial position needed to improve before it could be exercised. Discussions between the parties — including with the assistance of a corporate solicitor — continued through the end of 2024 and into 2025 without resolution.

On March 13, 2025, Vorselaars emailed Mr. Tracey to put him on notice that he had instructed his lawyer to file a claim. On April 2, 2025, he outlined settlement proposals, advising that a claim would still be filed to protect his position but could be modified or withdrawn upon agreement. On April 3, 2025, Mr. Tracey says he was told by the plaintiff that the filing was to protect his interests and that he did not intend to push things along expeditiously; Mr. Tracey in turn communicated that he would need time to hire a lawyer and would file a response once retained. On April 7, 2025, Mr. Tracey, as representative of the Tracey Trust, was served with the notice of civil claim. A default judgment was entered on May 1, 2025, awarding the plaintiff damages to be assessed. Mr. Tracey received a copy of the default judgment by mail on or around May 16, 2025.

Between May and July 2025, Mr. Tracey worked to obtain financing — including pursuing a home equity line of credit and a reverse mortgage — to fund legal representation. By June 2025, he had obtained financing through RBC. Between June and July 2025, he reached out to five law firms; the first four were unable to assist. On July 21, 2025, Mr. Tracey retained legal counsel on behalf of the Tracey Trust. Counsel then engaged with the plaintiff's counsel regarding the Default Judgment and explored a global resolution; when those discussions failed, the Tracey Trust set down the application to set aside the default judgment. On February 6, 2026, Vortech Plumbing & Drainage (2022) Inc. filed its response to civil claim, and both it and the Tracey Trust filed a counterclaim against Shoretech Contracting Inc. and the plaintiff. On March 2, 2026, the plaintiff and Shoretech Contracting Inc. filed their response to counterclaim.

Contractual framework at issue

The APA — a 182-page document — and the SA — a 58-page document — are the central instruments in dispute. The APA provided for the incorporation of NewCo, the $1,500,000 purchase price funded by Mr. Tracey through the Tracey Trust, the share allocation between Vorselaars and the Tracey Trust, and the granting of a put option to Vorselaars two years after the closing of the asset purchase. It also required Vorselaars to enter into an employment agreement with NewCo. The SA further governed the mechanics and conditions for exercising the put option. The core dispute is whether Vorselaars devoted sufficient time and effort to the business and whether he was entitled to exercise the put option when and in the manner he did — a question the court expressly declined to resolve at this stage, noting that full determination would require interpretation of both agreements in the context of evidence tested through examinations for discovery or cross-examination.

Court's reasoning and analysis

Justice LeBlanc applied the three-factor framework from Miracle Feeds v. D. & H. Enterprises Ltd. (1979), 10 B.C.L.R. 58, to assess whether to set aside the default judgment: (1) whether the defendant willfully or deliberately failed to file a response; (2) whether the defendant applied to set aside the default judgment as soon as reasonably possible or explained the delay; and (3) whether the defendant has a meritorious defence worthy of investigation.

On the first factor, the court found no willful or deliberate failure to respond. The evidence established that Vorselaars was aware the Tracey Trust intended to file a response and was working to secure financing to retain counsel. The court also found credible Mr. Tracey's understanding that the plaintiff would not pursue the claim with expediency while settlement discussions were ongoing. Critically, the plaintiff's counsel — who was representing Vorselaars at the time — gave no notice to Mr. Tracey that default would be taken if a response was not filed by a certain date. Justice LeBlanc cited Forgotten Treasures International Inc. v. Lloyd's Underwriters, [2020] B.C.J. No. 1943, for the proposition that, as a matter of professional courtesy, plaintiff's counsel should not take out default judgment without first warning the defendant of the intention to do so.

On the second factor, the court acknowledged some delay but found it reasonably explained. Approximately two months elapsed between service of the default judgment on the Tracey Trust and counsel's outreach to the plaintiff's lawyers to discuss setting it aside. The additional time required to schedule the application was attributed to counsel and court availability, not to any delay on the Tracey Trust's part.

On the third factor, the court found that the Tracey Trust had established a defence worthy of investigation. Mr. Tracey filed a detailed affidavit outlining the Tracey Trust's position on the interpretation of the APA and SA, and on the plaintiff's entitlement to exercise the put option. Justice LeBlanc noted that the threshold at this stage is not onerous and that the court is not to engage in a detailed weighing of the evidence.

Ruling and outcome

Having considered all three factors, Justice LeBlanc concluded that it was not in the interests of justice to allow the Default Judgment to stand. The court set aside the default judgment in favour of the Tracey Family Trust. No monetary amount was ordered or awarded at this stage, as damages remained to be assessed. Costs of the application were awarded to the Tracey Trust as costs in the cause.