Court File and Parties

Citation: Kelland v. Hardestine Holdings Limited, 2008 ONCA 537

Date: 2008-07-04

Docket: C47917

Court of Appeal for Ontario

Before: Feldman, MacPherson and Cronk JJ.A.

Between:

Paul Kelland Plaintiff (Respondent)

and

Hardestine Holdings Limited Defendant (Appellant)

Counsel: J. Daniel Dooley, Agent for counsel for the defendant (appellant) Cynthia Amsterdam and Matthew Diskin for the plaintiff (respondent)

Heard & released orally: July 2, 2008

On appeal from the decision of Justice J.R. McIsaac of the Superior Court of Justice dated October 24, 2007.

Endorsement

[1] The appellant appeals the decision of McIsaac J. that dismissed a motion to set aside a default judgment. The motion judge found 1) that the statement of claim was served in accordance with the Rules of Civil Procedure, 2) that the respondent granted an indulgence to the appellant by communicating with its historical solicitor regarding the pending default proceedings (and whose law clerk acknowledged that the lawyer would advise if he was not retained on the matter), and 3) that the appellant made a tactical decision not to defend the action because of perceived deficiencies in the service of statement of claim. McIsaac J. further found that the appellant’s affidavit did not raise an arguable defence on the merits.

[2] In our view, the motion judge applied the correct test and made no reversible error in his application of the test.

[3] The appellant failed to meet the requirements of Rule 16.07(a) of the Rules of Civil Procedure in moving to set aside the default judgment. The appellant’s affidavit material does not give any explanation for his failure to defend the action after he had been served with the statement of claim in accordance with the Rules, and after his lawyer had received the statement of claim and had been put on notice that the respondent intended to take default proceedings. This failure supports the adverse inference drawn by the motion judge that the appellant made a tactical decision not to respond to the action.

[4] With respect to the potential merit of the defence, the action was brought by the respondent as mortgagor on the basis that the appellant’s conduct as mortgagee in possession deprived the respondent of the ability to make payments on the mortgage by interfering with a financially beneficial tenancy and causing the property to deteriorate. The respondent claimed that the effect of the appellant’s actions was that nothing further was owed on the mortgages. The appellant did not respond to these allegations but stated baldly that a significant amount remained outstanding on the mortgages. The motion judge therefore made no error in concluding that there appeared to be no arguable defence on the merits.

[5] The appellant raises deficiencies in the statement of claim that he says did not entitle the respondent to a judgment for possession of the property and discharge of the mortgages. However, upon default, the appellant is deemed to admit the allegations in the statement of claim including that the mortgage contracts have been performed and that the appellant has no further right of possession. In his affidavit sworn for the purpose of responding to the motion, the respondent sets out an accounting of the amounts owing on the mortgages and the amounts that the respondent claims from the appellant for damages in respect of the appellant’s actions with respect to the property that offset the amounts owing. This accounting demonstrates that the respondent’s claim, which is deemed to be true by the default, is a justifiable one.

[6] The appellant had also argued that the respondent’s amendment of its statement of claim after the default judgment in order to correct the description of the property, allowed the appellant a new opportunity to defend. The motion judge rejected the argument because no new relief was requested. We see no error in this conclusion.

[7] The appeal is therefore dismissed with costs fixed at $20,000 for both the appeal and the motion before Watt J.A., inclusive of disbursements and G.S.T.

“K. Feldman J.A.”

“J.C. MacPherson J.A.”

“E.A. Cronk J.A.”