Executive Summary: Key Legal and Evidentiary Issues

• Dispute arose from a construction contract and subsequent Settlement Agreement regarding deficiencies in building a home and laneway house in East Vancouver

• Defendants failed to complete construction deficiencies by the March 31, 2021 deadline, triggering liquidated damages provisions under the Settlement Agreement

• Central procedural issue was whether the defendants deliberately absented themselves from the summary trial hearing when it was moved from New Westminster to Abbotsford

• Evidence from registry notes indicating "one side will not be attending" corroborated plaintiffs' counsel's account of events, weighing against the defendants

• Defendants failed to demonstrate a meritorious defense with sufficient particularity, offering only assertions without documentary or independent evidence

• Application to set aside the Caldwell Order was dismissed as not in the interests of justice under the three-factor Miracle Feeds test

Background of the construction dispute

Mukhtiar Gill and Jasjit Gill, owners of a property in East Vancouver, entered into a construction contract dated July 18, 2018 with Flying Home Construction Ltd. and its principal, Harpreet Singh Sandhar, for the construction of a house and laneway house. By February 2021, the buildings were essentially completed, but neither party was satisfied with the state of affairs. The owners alleged construction deficiencies, delay, and resulting financial loss, while the builder claimed that additional work had been performed for which they had not received payment.

The Settlement Agreement and its key terms

To resolve their disputes, the parties signed a "First Amendment Agreement" on February 17, 2021, which functioned as a settlement. The agreement acknowledged that the owners had already paid $719,200 to the builder. Under the Settlement Agreement, the owners agreed to pay an additional $60,000 in three installments: an initial $15,000 deposit on or about the day the builder commenced rectifying the deficiencies, a second $15,000 payment fifteen days later provided the builder was rectifying deficiencies in good faith, and a final $30,000 payment upon completion of all deficiency work.

The Settlement Agreement contained several critical clauses. It stipulated that all deficiencies must be completed by March 31, 2021, designated as the "Outside Date." If the builder failed to meet this deadline, no remaining payment would be due, and the builder was required to refund the deposit. Additionally, the agreement included a liquidated damages provision whereby the builder would pay the owners an amount equal to fifteen percent of the Amount Paid in the event of a "Deficiencies Breach." The parties expressly acknowledged that the liquidated damages constituted compensation and not a penalty, recognizing that the harm caused by the breach would be impossible or very difficult to accurately estimate. The builder also agreed to indemnify the owners against any lien claims filed by subcontractors.

Litigation history and procedural developments

The owners paid the first $15,000 deposit but did not pay the second installment, claiming they were trying to contact the builder and getting no reply, and that the builder was not rectifying deficiencies in good faith. The deficiencies were not completed by March 31, 2021. Consequently, the owners commenced legal action on June 9, 2021. When the builder failed to file a response to the civil claim, the plaintiffs obtained default judgment on September 27, 2021. This default judgment was later set aside by Justice Mayer (2022 BCSC 255), and on March 10, 2022, having retained counsel, the defendants filed a response to civil claim and a counterclaim seeking damages of $175,000 under the original Construction Contract.

The plaintiffs advised the defendants' counsel of their intention to proceed with a summary trial on May 4, 2023 and requested available dates, but no dates were provided by defence counsel. On June 23, 2023, the plaintiffs received a notice of withdrawal of defendants' counsel. Despite attempts to coordinate with the now self-represented defendants, the plaintiffs received no response. They set the summary trial application for September 7, 2023, and wrote to the defendants on July 24, 2023, advising them of the summary trial date and urging them to seek independent legal advice. The defendants did not respond.

The September 7, 2023 hearing and disputed events

On the hearing date, both parties attended at the New Westminster Law Courts. Ms. Zhang was acting as counsel for the plaintiffs, and Mr. Sandhar attended on his own behalf and as representative of Flying Home. They waited in regular chambers for a judge to become available through the morning sitting. Due to scheduling issues and judicial availability, the matter was transferred to the Abbotsford courthouse. A factual dispute emerged regarding what occurred at approximately 12:30 p.m. that day. According to the plaintiffs' counsel, Ms. Zhang, the registry staff indicated there likely would not be a judge available in New Westminster but there was a judge available at the Abbotsford courthouse at 2 p.m. Ms. Zhang informed the registry and Mr. Sandhar that the plaintiffs wished to be referred to Abbotsford, and Mr. Sandhar stated that he had to work that day and did not think he would go to the Abbotsford courthouse. Mr. Sandhar's version differed: he stated he believed they were free to leave and the summary trial application would not occur, that he was unaware the matter was moved to Abbotsford, and that the plaintiffs' counsel never informed him of this change.

The registry notes sent to the Abbotsford scheduling office indicated that "one side will not be attending," which was objectively true. Justice Ross found that the evidence, and thus the balance of probabilities, favoured the plaintiffs on this issue.

The Caldwell Order and subsequent proceedings

Ms. Zhang appeared before Justice Caldwell in Abbotsford in the afternoon of September 7, 2023. Justice Caldwell reserved judgment until February 12, 2024, and granted judgment in favor of the plaintiffs in the amount of $154,629.50, comprising 15% of the $719,200 that had been paid by the plaintiffs for construction before the Settlement was signed, plus the return of the $15,000 deposit paid by the plaintiffs pursuant to the Settlement, plus $26,749.50 as damages for the lien filed by HPA Construction Ltd. for which the defendants are liable to indemnify the plaintiffs, and $5,000 as reasonable legal fees to discharge the HPA lien and the second lien filed on the property. The counterclaim of the defendants was dismissed. The plaintiffs were awarded costs at 1.5 times Scale B rates, as contemplated by s. 2(5) of Appendix B of the Supreme Court Civil Rules, given the defendants' failures to address the claim, repeated delays, and avoidance of the court process. Following the release of the reasons, the plaintiffs garnisheed the defendants and recovered a substantial portion of the judgment amount, and those funds were paid into court.

Application to set aside the judgment

Upon learning of the judgment, the defendants retained counsel and initially pursued an appeal of the Caldwell Order but then pursued an application under Rule 22-1(2)–(3) of the Supreme Court Civil Rules to set aside the judgment. The court applied the three-factor test from Miracle Feeds v. D & H Enterprises Ltd.: whether the defendants wilfully or deliberately failed to enter an appearance or file a defence; whether they made application to set aside the judgment as soon as reasonably possible after learning of it, or whether there is a reasonable explanation of the delay; and whether they have a meritorious defence or at least one worthy of investigation.

On the first factor, Justice Ross found the evidence favored the plaintiffs. The note from the registry suggested that they had information indicating that Mr. Sandhar would not be attending at Abbotsford, which was consistent with Ms. Zhang's evidence. The only possible fact scenario wherein Mr. Sandhar did not convey this information would require Ms. Zhang to hide the Abbotsford referral from Mr. Sandhar and then lie to the registry about his attendance, which the court viewed as extremely unlikely. On the second factor regarding timeliness, the court considered this a neutral factor, not holding the defendants' procedural decisions against them. On the third factor, the defendants failed to provide sufficient particularity for their alleged defence. The plaintiffs relied on the decision of the Court of Appeal in Rangi v. Rangi, 2007 BCCA 352, which held that one must "descend to details" to show a meritorious defence, rather than merely making allegations. The court accepted the plaintiffs' submission that the defendants put forward assertions of a defence without explaining the nature or specifics of that defence.

Final ruling and outcome

Justice Ross dismissed the defendants' application to set aside the Caldwell Order on January 7, 2026, finding it was not in the interests of justice to do so. Factors a) and c) favoured the plaintiffs and not the defendants, while factor b) was neutral. The plaintiffs, Mukhtiar Gill and Jasjit Gill, were the successful parties and were entitled to their costs. The judgment of $154,629.50 plus pre-judgment and post-judgment interest in accordance with the Court Order Interest Act, R.S.B.C. 1996, c. 79, remains in force against the defendants, Harpreet Singh Sandhar and Flying Home Construction Ltd., jointly and severally.