Court File and Parties

COURT FILE NO.: FK-1520188 DATE: 20171120 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mei Fang Lin, Applicant/Responding Party on Motion AND: Quoc Han (Wayne) Ha, Respondent/Moving Party

BEFORE: Madam Justice Kristjanson

COUNSEL: David Pomer, for the Applicant/Responding Party on Motion Julie Amourgis, for the Respondent/Moving Party

HEARD: November 16, 2017

Endorsement

[1] This is a motion brought by the Respondent father, Mr. Ha, to set aside judgment following an uncontested trial. The father has filed six affidavits from five affiants in support of his motion. At the heart of these affidavits are assertions that the father was never advised nor aware of the court proceedings which led to the judgment, and that he has an arguable defence on issues determined at trial. I set aside the Order and direct that the matter proceed as an application.

Issues

[2] There are two issues on this motion:

(1) Should the Order of Justice Harvison-Young dated December 20, 2016 be set aside pursuant to Rule 19.08 of the Rules of Civil Procedure or Rule 25.19(e) of the Family Law Rules, and

(2) If so, what are the terms of setting aside the Order?

Factual Background

[3] The applicant Ms. Lin commenced an application in June, 2015 claiming an interest in a home owned by the respondent in Markham, child support and section 7 expenses and equalization. The parties were married in 2000, and divorced in 2009. The application was based on a claim that they lived together as a family in the home from 2003 to December, 2014. The application was served on the father at a house that he owned in Markham. He did not file an Answer or Financial Statement, did not attend court in response to the first case conference notice or any subsequent notices, and did not attend the trial.

[4] At the first case conference on July 13, 2015, Justice Perkins made an order that all pleadings be served by regular mail and priority post at the Markham address. All subsequent notices and documents were served at the Markham address. Since the father did not participate in any manner whatsoever, the matter proceeded to an undefended trial.

[5] Following an undefended trial in November, 2016, the trial judge, in a decision reported at 2016 ONSC 8012, ordered that the wife be awarded $152,000 on a constructive trust/joint family venture basis, on the grounds that the husband and wife were in a joint family venture from the time they acquired the Markham house in 2003 until the wife and the child moved out in March, 2015. The couple had a “paper divorce” in 2009, but had continued living together as husband and wife after the divorce, until March, 2015. She awarded table child support and section 7 expenses for the sole child on $75,000 income imputed to the father.

[6] The father has filed substantial evidence on this motion that he was never aware of the family law proceedings, that the parties did not live together as husband and wife after 2006, and the father did not live in the Markham house from 2010 to 2014.

Motion To Set Aside

[7] The motion to set aside the Order was originally brought pursuant to rule 19.08 of the Rules of Civil Procedure, although following the decision of Gray v. Gray, 2017 ONCA 100, the father also relies on Rule 25(19) of the Family Law Rules. Rule 25(19) of the Family Law Rules provides that the court may, on motion, change an order that:

(e) was made with notice, if an affected party was not present when the order was made because the notice was inadequate or the party was unable, for a reason satisfactory to the court, to be present.

[8] Historically, motions to set aside orders following judgment in undefended family law trials have proceeded by analogy to rule 19.08 of the Rules of Civil Procedure, which allows the court to set aside judgment obtained against a defendant noted in default or who fails to attend a trial. In Gray v. Gray, 2017 ONCA 100, 137 O.R. (3d) 65 (CA), the Court of Appeal held that Rule 25 (19)(e) of the Family Law Rules includes the power to set aside an order in similar circumstances, and that the use of this Rule promotes the underlying philosophy, scheme and purpose of the Family Law Rules.

[9] Under either Rule, I must consider the context and particular circumstances to decide whether it is just to relieve the moving party from the consequences of not participating in the court process which led to the issuance of the Order. In so doing, I consider the five factors set out by the Court of Appeal in Mountain View Farms v. McQueen, 2014 ONCA 194 at paras. 48-49:

(1) Was the motion was brought promptly after the moving party learned of the default judgment (i.e. timeliness of motion to set aside)?

(2) Is there a plausible excuse or explanation for the moving party’s default in complying with the Rules?

(3) Has the moving party set out facts that support the conclusion that there is at least an arguable defence on the merits?

(d) What is the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the party obtaining the Order should the motion be allowed?

(e) What is the effect of any order the court might make on the overall integrity of the administration of justice?

[10] I note that the factors are not to be rigidly applied. The Court of Appeal has held that: “the presence of an arguable defence on the merits may justify the court exercising its discretion to set aside the default judgment, even if the other factors are unsatisfied in whole or in part.” Ultimately, I must consider the all of the factors taking into account the primary objective of the Family Law Rules, which is to enable the court to deal with cases justly.

Factor #1: Timeliness of Motion to Set Aside

[11] I find that Mr. Ha moved in a timely manner to set aside the Order as soon as he became aware of the Order. The evidence is that Mr. Ha received a copy of the Order on about February 28, 2017. He retained counsel. On April 26, 2017, Mr. Ha’s counsel wrote to Ms. Lin’s counsel to advise that she had been retained to set aside the order and to obtain dates for the motion for late May or June, 2017.

[12] On June 23, 2017, Mr. Ha’s counsel served a Notice of Motion, five affidavits, a Form 35.1 Affidavit in support of custody/access, and a sworn Financial Statement. The parties then exchanged correspondence, and Mr. Ha’s counsel obtained a long motion date. On November 8, 2017 the Applicant brought a cross-motion discussed below.

Factor #2: Plausible Explanation for Failing to Participate in Court Proceedings

[13] I find that Mr. Ha has put forward a plausible explanation for failing to participate in the court proceedings. His evidence is that he did not have notice of the court proceedings and was unaware that they were taking place. He has filed sworn affidavit evidence to this effect. The affidavits of Mr. Brian Grosse and Mr. Khalil Ahmad support the evidence of Mr. Ha. I find as a fact that the court proceedings did not come to attention of Mr. Ha prior to the Order being made.

[14] The initial application was served on the Markham address on June 20, 2015. The affidavit of service states that the application was served by: “leaving a copy in a sealed envelope addressed to the person at the person’s place of residence with an adult male who declined to provide his name, who appeared to be a member of the same household and by mailing another copy of the same document(s) on the same day to the person named … at that place of residence.”

[15] Mr. Ha’s evidence, supported by Mr. Grosse and Mr. Ahmad, is that at that time he was not living at the Markham address. His evidence is that shortly after his second wife came to live with him in the Markham House in December, 2014, there was an altercation, police were called, and he was placed under an undertaking that he not reenter the house. He states that his friend and tenant at the Markham house, Brian Grosse, was aware of the terms of the undertaking and was careful not to accept service for anything. Mr. Ha says he was completely unaware of these proceedings until receiving a letter from the court enclosing a copy of the court order in February, 2017.

[16] There is evidence that Mr. Ha was under a criminal undertaking to abstain from going to the Markham address. That undertaking was dated February 26, 2015 with respect to outstanding criminal charges relating to his second wife. The charges were dismissed on July 13, 2015.

[17] Mr. Grosse gave evidence that there was a no contact order between Mr. Ha and his second wife as part of bail conditions. When a person came to the door asking for Mr. Ha with documents in his hand, Mr. Grosse told him that Mr. Ha was not living in the house at the time. A few days later that person returned, threw papers on the ground and said his job was done. Mr. Grosse said that he telephoned the court asked them what to do and they said he should drop the papers off. His evidence is that he went to the 10th floor of the courthouse and gave the papers to the person that the information counter. On another occasion, when an envelope was left in the screen door addressed to Mr. Ha, who did not reside at the house, he crossed off the addressee and returned it to the sender.

[18] Mr. Grosse noted that the community has community mailboxes rather than home deliveries. He said there were one or two notices in the mailbox regarding registered mail for Mr. Ha. He says that he did not pick up the mail nor tell Mr. Ha about it. He said that he did not tell Mr. Ha about any of this until confronted when Mr. Ha received the letter from the court.

[19] An affidavit was filed by Khalil Ahmad, a friend of Mr. Ha’s since 1994. His evidence was that Mr. Ha lived with Mr. Ahmad in his home in Scarborough from about 2010 to 2014, and again for another 6 months in 2015.

[20] The evidence of Ms. Lin’s counsel is that following the order of Justice Perkins for substituted service on July 13, 2015, all documents were served by Priority Post and regular mail. Ms. Lin’s evidence is that Mr. Ha was served at the Markham address by delivery to the community mailbox on about July 14, 2015, the same day that the criminal charges were dismissed against Mr. Ha.

[21] The next document served on Mr. Ha was the August 24, 2015 Order of Justice Perkins; Ms. Lin’s counsel’s records show that the Priority Post was returned, unclaimed.

[22] The next document served was June 23, 2016, a notice advising of the trial date. Ms. Lin’s counsel’s records show that the Priority Post was returned unclaimed.

[23] Ms. Lin’s counsel served the respondent by Priority Post with a Factum and Brief of Authorities for the trial on November 17, 2016. Ms. Lin’s counsel’s records show that the package was never claimed at the post office.

[24] On December 20, 2016, the applicant appeared for trial before Justice Harvison-Young, and the respondent did not attend.

[25] Ms. Lin’s counsel relies on the fact that since the criminal charges were dismissed on July 13, 2015, that the undertaking that kept him from the house would have expired as well. He also relies on the fact that a letter from Mr. Ha’s criminal lawyer dated August, 2015 is contained in the materials and was directed to the Markham address, and that his tax returns use the Markham address. This does not establish that Mr. Ha was in the house at the time, or received the mail, given the affidavit evidence to the contrary. There were no cross-examinations of the affiants.

[26] On all of the evidence before me, and in particular the affidavit evidence of Mr. Ha, Mr. Grosse, Mr. Ahmad and the returned or unclaimed Priority Post packages, I find that Mr. Ha did not have notice of the Court proceedings. As a result, he has a reasonable explanation for not attending.

[27] It is important for parties to realize that the purpose of service is to ensure that proceedings come to the attention of litigants. Even where there is an order for substituted service, a party which has not taken steps to ensure that the opposing party is personally aware of the proceedings runs the risk that default orders and judgments in undefended proceedings may be set aside. In order to mitigate that risk, in cases where there has never been personal service on the other party, and thus no assurance that the party is aware, parties should take steps to actually bring the commencement of family law proceedings to the attention of the other party. In this case, for example, an explanatory phone call or e-mail to Mr. Ha or his mother, who after all had raised the granddaughter for years, coupled with sending a copy of materials to the grandmother’s address or a copy by e-mail to Mr. Ha, could well have eliminated the need for default proceedings and this motion.

Factor #3: Arguable Defence on the Merits

[28] There are two key issues relating to the Order. The first is whether there is an arguable defence to the finding of a “joint family venture”. The second is whether there is an arguable defence to the finding that child support and s. 7 expenses should have been based on attributing annual income to Mr. Ha of $75,000. I find that Mr. Ha has an arguable defence on both these issues, and should be allowed to make these arguments on a full record in contested proceedings: the issues should be argued on the merits.

Joint Family Venture Findings

[29] In the original Notice of Application, Ms. Ha stated that she and the Respondent lived at the Markham address from 2004 to December, 2014 “when I moved out of the matrimonial home.” Following the uncontested trial, the trial judge found that although Mr. Ha and Ms. Lin divorced in 2009, “they continued to live as husband and wife in the matrimonial home until March, 2015:” (para. 2)

[30] Since there was no equalization following the 2009 divorce, it was statute barred by 2015 when the application was commenced. However, the trial judge found that there was a constructive trust with unjust enrichment, applying the Kerr v. Baranow principles: 2011 SCC 10. She found that there was a joint family venture, where the basis for the unjust enrichment claim occurs following the breakdown of a relationship where one party retains a disproportionate share of the assets which are a produce of their joint efforts. The trial judge divided the post–divorce appreciation of property for the period December 1, 2009 (the paper divorce) to the end of the relationship in December, 2014. She found the markers of a joint family venture here to be mutual effort, economic integration, intent, and that monies earned by the wife through working went to support the family in the period the parties were living as husband and wife, from 2003 to 2014. The constructive trust remedy issued “in order to prevent Mr. Ha from retaining the entire value of the fruits of the joint family venture during the parties’ relationship and particularly between their divorce and their separation.”

[31] The trial judge made the following findings of fact that were critical to her decision:

• Although Mr. Ha and Ms. Lin divorced in 2009, they continued to live as husband and wife in the matrimonial home until March, 2015;
• Initially Ms. Lin’s contribution was as a mother and homemaker while Mr. Lin worked long hours on computer sales and service;
• Ms. Lin worked outside the home to contribute to finances, and her funds went to support the family;
• The March, 2009 divorce was a “paper divorce” so that Ms. Lin could obtain OSAP, since as a married person, given Mr. Ha’s income, she would not have been eligible to receive student aid.
• The decision to divorce was to enhance the future of the partnership by accessing funds to send Ms. Lin to university so that she could earn a better living in the future, a decision Mr. Ha actively participated in;
• In 2009, Mr. Ha worked as a self-employed computer technologist earning an estimated $75,000 per year, working long hours; and,
• In March, 2015, Ms. Lin left the matrimonial home with their child.

[32] Mr. Ha has called a significant amount of evidence which directly contradicts the findings of fact made by the trial judge, which raise a plausible defence to the joint family venture found by the trial judge based on a relationship from 2000 to March, 2015. His evidence is that:

• The parties began living separate and apart in 2006;
• They ceased co-habiting at that point. He slept in the living room of the Markham house until 2010. Ms. Lin occupied one bedroom, and the other three bedrooms were rented to tenants;
• Mr. Ha lived with his friend Mr. Ahmad in Scarborough from 2010 to 2014, and again for six months in 2015;
• Mr. Ha moved back into the Markham property with his second wife in December, 2014, and left again in February, 2015 due to the undertaking in the criminal proceedings;
• There was no reconciliation after November, 2006 when they commenced living separate and apart, and any other separation date as claimed by Ms. Lin is completely “false and untrue;”
• The Markham house was purchased as an investment property, and 3 of the 4 bedrooms were rented out;
• Commencing in 2006, their daughter lived with his parents in Mississauga until the summer of 2015. Ms. Lin did not reside with Mr. Had and her daughter in the Markham home from 2000 to March, 2015 as claimed by the applicant;
• There was no joint family venture. The parties did not live together after the divorce. They did not socialize together; there were no joint finances; they did not raise their daughter together; their lives were completely separate;
• Ms. Lin did not consult him with respect to University and her plans. There was no joint family plan for her to go to school to earn more money. The parties were separate and apart when she went to University;
• Their money was completely separate, other than one bank account established for sponsorship purposes;
• Ms. Lin did not contribute to the utilities or mortgage payments as she claimed; and,
• Ms. Lin did not cook, clean, or look after the house in any way. She lived rent-free in one of the bedrooms while she went to University, that was it.

[33] The trial judge found that the parties “lived as husband and wife” in the Markham marital home from 2004 until separation in March, 2015. In her affidavit on this motion, however, Ms. Lin states that: “We continued to reside together after the divorce in 2009, although separate and apart, as I had no other place to live.” This appears to be an admission that the parties were not living as husband and wife, undermining the very basis of the constructive trust/joint family venture claim.

[34] Ms. Lin filed additional evidence on her application, which I have considered. Much of it appears to be consistent with the evidence at trial, which Mr. Ha disputes. The issue here is whether the dispute should be the subject of a trial on the merits, as I am not deciding today which version of events is true, but whether there is an arguable defence.

[35] There is evidence from other affiants that indicates Mr. Ha has an arguable defence on the joint family venture as found by Justice Harvison-Young. Thus, Mr. Ha’s mother has filed an affidavit indicating that the child lived with her from the age of 3.5 years, in 2006, until the summer of 2015, when Ms. Lin removed the child from the paternal grandmother’s care, and did not in fact live with Ms. Lin. Her evidence is that Ms. Lin paid the grandmother to look after the child, although this did not cover all expenses.

[36] The affidavit evidence of Mr. Ahmad is that contrary to the finding at trial that Mr. Ha and Ms. Lin co-habited in the Markham house from 2004 to March, 2015, in fact Mr. Ha lived with Mr. Ahmad in Scarborough from 2010 to 2014, and again for six months in 2015.

[37] There is also an affidavit by Ms. Siouga, a retired high school teacher of Mr. Ha’s, who provided evidence that in about 2010, Mr. Ha told her that he was moving out of the Markham house, and that at no time following the divorce did Mr. Ha ever talk about reconciliation or having a conjugal relationship.

[38] Brian Grosse also gave an affidavit, confirming that in 2003, he helped Mr. Ha purchase the Markham house by helping financially with respect to the deposit. Mr. Grosse was the person to mow the lawn, clean the snow, repair and renovate. His evidence is that Ms. Lin never did anything with respect to maintaining the house in any way. His evidence is that Ms. Lin moved in to the house approximately in 2005, as she wanted to live closer to Seneca College. When she moved into the house there were two other tenants there as well as Mr. Grosse.

[39] His evidence was that by about 2006, Mr. Ha had moved out of the bedroom shared with Ms. Lin and slept on the sofa in the living room for the next 3 years. Mr. Grosse’s evidence is that in about 2010, Mr. Ha moved out of the Markham house, lived at a different address and did not return to the house until his second wife arrived from China in December, 2014. Mr. Grosse's evidence, which spans the contested period, is that after Mr. Ha and the mother stopped occupying the same bedroom about 2006, there was no relationship between the two of them. They did not eat together, seldom spoke, and did not go out as a couple.

[40] Taken together, the evidence filed on this motion raises a plausible defence to the joint family venture/constructive trust finding. The evidence from Mr. Ha, supported by the other affiants, is that the parties were living separate and apart as of 2006, not as of 2015 as found at the trial. The evidence is that Mr. Ha was not even living at the Markham house from 2010 to 2014, but living at another house in Scarborough. The evidence of Mr. Ha is that they did not have a joint family venture; that there was no common intention; no mingling of finances; no contribution by Ms. Ha either through domestic duties or financially. The evidence of Mr. Ha also establishes that the child did not reside with Ms. Lin, except for weekend visits, but with the paternal grandmother, and so Ms. Lin did not leave with the child in March, 2015 as found following trial.

[41] The admission by Ms. Lin that the parties were living separate and apart in the house following the 2009 divorce casts doubt on the evidence at trial. There is an air of reality and a plausible defence by Mr. Ha to the joint family venture/constructive trust claim.

Child Support and Imputed Income Claim

[42] The table child support and section 7 expenses allocation awarded following the uncontested trial was based on imputed income of $75,000. The trial judge found on the evidence before her that in 2009, Mr. Ha’s self-employment income was $75,000.

[43] Mr. Ha has filed income tax returns and CRA notices of assessment showing income of 0 in 2009. His evidence shows 2014 income of $11,040, 2016 income of $45,196, and 2017 income of $45,000, which Mr. Ha swears is the most he has ever earned.

[44] As a result, there is a plausible defence by Mr. Ha to the level of child support and ratio of section 7 expenses set on an imputed income of $75,000. The level of section 7 expenses should also be resolved on the merits in a contested proceeding.

Factor #4: Prejudice

[45] The prejudice to Mr. Ha is significant. He has not had the opportunity to contest the matter on the merits, and has offered a reasonable explanation for his lack of participation – he says he did not know of the proceedings. He has been deprived of his day in court. While Ms. Lin obtained a judgment, and spent money to do so, she will have the opportunity to argue the issues at trial. Because personal service was never effected on the respondent, and applicant’s counsel had a number of packages returned to sender or unclaimed, it was unwise to proceed without even once establishing that the respondent knew of the legal proceedings. There is no prejudice to the applicant that cannot be compensated for by appropriate terms. On balance, the prejudice to the respondent leans in favour of granting the motion to set aside default judgment.

Factor #5: Interests of Justice

[46] I must decide whether the interests of justice favour an order to set aside the default judgment. No factors are determinative, and I must consider the totality of circumstances. In this case, given the lack of notice, the respondent’s prompt response once he learned of the judgment, and the significant concerns on the substantive issues based on the evidence before me, I am of the view that default judgment should be set aside in its entirety and the matter should be argued on the merits. This is consistent with the Family Law Rules objective of ensuring that matters are dealt with justly.

Cross-Motion

[47] The applicant brought a cross-motion seeking an order that the respondent not be heard until the respondent complied with the Order, including the arrears of child support and the costs of the trial.

[48] While generally costs orders must be satisfied before a party can take a further step in the proceeding, costs orders associated with setting aside default proceedings are an exception. The very basis of a motion to set aside a default proceeding is that it is in the interests of justice, in that a party did not have notice of proceedings or has offered a reasonable explanation for non-participation, and has established a plausible defence. As such, the payment of costs following default proceedings which arguably should never have taken place, is not a pre-condition to bringing a motion to set aside a default order or judgment. Rather, the issue of costs incurred in the default proceedings is dealt with on the motion to set aside as part of the question of remedy, and is a matter in the discretion of the motions judge. Whether or not those costs will be payable will depend on the context of the default proceedings and explanations offered on the motion. The same logic applies to the other terms of default orders and judgments. The cross-motion is dismissed.

Remedy

[49] The Order of Justice Harvison-Young dated December 20, 2016 is set aside in its entirety.

[50] Counsel for Ms. Lin argues that the costs orders below should be paid, since the applicant took proper steps and made service in accordance with the Rules. In the circumstances of this case, however, those costs awards are also set aside. The burden of establishing proper service is on the applicant. She took no steps to bring the proceedings to the attention of the Respondent such as calling him or the paternal grandmother. Even when the Priority Post materials were returned to counsel for the Applicant marked as “Unclaimed”, or counsel was advised that a package was not picked up, no steps were taken to ensure that the Respondent knew of the proceedings, even though a doubt was raised as to whether service was ever effective. The signature option was not requested, so no signature was ever obtained. There was no personal service. Delivery to a community mailbox, when Ms. Lin knew that there were tenants, also raises a concern. In the circumstances of this case, the costs awards are set aside as well.

[51] Ms. Lin has apparently obtained a writ of seizure and sale based on the Order. The writ of seizure and sale on the property with PIN 02943-0226 (LT), municipally known as 123 Chloe Crescent, Markham, ON, L3S 2J3, is to be deleted. In the event of any inconsistencies, irregularities or omissions that arise in the implementation of this order, the land registrar shall make or modify the relevant records as the land registrar sees fit in order to implement this order.

[52] The applicant shall take no steps to enforce any order of seizure and sale or any other order regarding the property based on the Order.

[53] The Order was registered with the Family Responsibility Office. There is a refraining order, which must be vacated. Neither the applicant nor the Family Responsibility Office will take any steps to enforce the Order or any support deduction order filed in relation to the final order.

[54] The Respondent has filed a Form 13.1 Financial Statement and a Form 35.1 Affidavit. He must file his Answer in 30 days, by December 20, 2017. The Respondent may participate in the case.

[55] The Respondent has been wholly successful on the motion to set aside. Brief costs submissions of no more than 3 pages, together with a costs outline and any offers to settle, are due by November 27, 2017. The Applicant to respond, costs submissions of no more than 3 pages together with a costs outline and any offers to settle, by December 4th.

Kristjanson J. Date: November 20, 2017