Court File and Parties

COURT FILE NO.: CV-18-498-000 DATE: 2019-06-14

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

NICHOLAS TEMPLE and SUSAN TEMPLE Plaintiffs (Responding Party)

Counsel: Mr. M. Maher, solicitors for the Plaintiffs (Responding Party)

- and -

RICHARD MOOREY and CHARLEEN MOOREY Defendants (Moving Party)

Counsel: Ms. T. Rhaintre, agent for Cheadles LLP for the Defendants (Moving Party) Mr. R. Moorey personally, and for Ms. C. Moorey

HEARD: June 6, 2019, at Thunder Bay, Ontario

Madam Justice H. M Pierce

Reasons on Motion to Set Aside Partial Summary Judgment

Introduction

[1] This is a motion to set aside partial summary judgment granted by me on April 9, 2019.

[2] The plaintiffs sued the defendants for $58,511.66 and costs based on two promissory notes and a general security agreement signed by them.

[3] The defendants had the assistance of counsel (not Mr. Mouck or his firm) in drafting their statement of defence and counterclaim. However, they did not retain the lawyer who drafted their pleadings to defend them in the action.

[4] Ms. Moorey pleaded the defence of non est factum in relation to the promissory notes and the general security agreement she signed. Mr. Moorey claims the debts are the debts of a partnership with the plaintiffs. He claims an equitable set-off against any monies found to be owing to the plaintiffs as a result of the partnership.

[5] The defendants also counterclaimed against the plaintiffs. No defence to the counterclaim has been served.

[6] In the counterclaim, Mr. Moorey claims an accounting for the partnership with the plaintiffs. As well, Ms. Moorey seeks an order setting aside the promissory notes, general security agreement and partnership agreement involving her.

[7] Mr. Warren Mouck of the law firm, Cheadles LLP., represents the defendants. He was retained on Friday, April 5, 2019 to defend the plaintiffs’ motion for partial summary judgment. Once retained, Mr. Mouck planned to seek an adjournment of the summary judgment motion in order to respond.

[8] As a result of information relayed to him by his clients, Mr. Mouck mistakenly believed that the motion would be heard on Thursday, April 11, 2019. In the Superior Court of Justice at Thunder Bay, regular motions are customarily heard on Thursdays. Special motions are scheduled at other times.

[9] Mr. Mouck began reviewing the Moorey file on Monday, April 8, 2019. He was dismayed to learn that the summary judgment motion had been heard by special appointment that day, in his absence and without any material filed on his clients’ behalf. He immediately advised his clients.

[10] After hearing argument for the plaintiffs on the uncontested summary judgment motion, I reserved decision. I was unaware of Mr. Mouck’s intention to respond to the motion. The following day, I released reasons granting partial summary judgment and costs to the plaintiffs.

[11] Through his agent, Mr. Mouck moves for an order setting set aside the partial summary judgment against his clients. The plaintiffs oppose the motion. They argue, in the alternative, that if such an order is granted, it should be on terms.

[12] The defendants have now paid the costs ordered by Newton J. on February 14, 2019. Their failure to pay these costs earlier delayed the hearing of their motion.

[13] By virtue of the order of Shaw J. dated May 16, 2019, adjourning the hearing of this motion, the writ of seizure and sale remains in place until this motion is determined.

The Test for Setting Aside Partial Summary Judgment

[14] Rule 37.14 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 under the Courts of Justice Act, R.S.O. 1990, c. C.43 sets out the procedure for setting aside an order obtained without notice. It states:

37.14 (1) A party or other person who,

(a) is affected by an order obtained on motion without notice;

(b) fails to appear on a motion through accident, mistake or insufficient notice; or

(c) is affected by an order of a registrar,

(1) may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after the service of the notice of motion.

(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.

[15] Counsel agree that the factors to be considered on a motion to set aside a judgment obtained against a party who failed to attend a motion are stated by Strathy J. (as he then was) in Ontario (Attorney General) v. 15 Johnswood Crescent, 2009 ONSC 5765. These factors are cited in Turino v. Shea, ONSC 6718, 276 A.C.W.S. (3d) 61 at para. 27.

[16] The first factor is that the moving party must prove accident or mistake in failing to attend at the motion. The plaintiffs concede that the defendants have established this ground.

[17] The second factor is that the party must move forthwith after the order comes to his or her attention. It was necessary for Mr. Mouck to retain counsel through his insurer. Although this motion has previously been adjourned, I am satisfied that the motion to set aside the judgment was launched forthwith in the circumstances.

[18] The third factor for the court to consider is whether there has been delay in bringing the motion and the reason for it. Delay is not a factor in this motion.

[19] The fourth factor is the presence or absence of prejudice. In considering this factor, Justice Strathy commented:

…The court should consider whether a party will be prejudiced by setting aside the order or failing to set aside the order. There will always be prejudice if an order is made against a party without sufficient notice and there will always be some kind of prejudice to the other party if the order is set aside. Nevertheless, the exercise of the court’s discretion may require an examination of the relative prejudice to the parties.

[20] The fifth factor is related to the fourth: it involves the underlying merits of the moving party’s case. Mr. Justice Strathy elaborated as follows:

…It may be necessary to consider the underlying merits of the moving party’s case in weighing the various factors, balancing the interests of the parties, and determining what is just in the circumstances. Lengthy delay in bringing the motion may be more readily forgiven if the moving party has a very strong case on the merits. It will be less readily forgiven if the party’s case appears frivolous.

[21] The merits of the moving party’s defence have been considered in other cases as well. See, for example, Sabourin & Sun Group of Cos. v. Laiken; Gerling Global General Insurance Co. v. Siskind, Cromarty, Ivey & Dowler, [2002] O.J. No. 2107 (Ont. S.C.J.) cited at Lavrijsen Campgrounds Ltd. v. Reville, 2014 ONSC 5302 at para. 11.

Discussion

[22] In this case, the principal factors for consideration are competing claims to prejudice and the merits of the defendants’ case. Mr. Mouck deposes that his clients have a triable if not potentially successful defence in this matter, based on the circumstances surrounding the loan transactions and the defences available to them, including a lack of consideration, and the implications of the partnership agreement between the parties.

[23] Customarily, the courts expect to hear both sides of an argument. The Latin maxim, audi alteram partem, expresses the expectation that courts will hear both sides of a dispute before rendering judgment. Ordinarily, a person who fails to appear will be given a chance to present evidence and argue the motion.

[24] However, if the defendants’ case is without merit, the plaintiffs may suffer greater prejudice if the judgment is set aside and the case re-opened. There may be, for example, collection issues in a contest to collect on debts, such that the plaintiffs may lose their priority.

The Defence of Non Est Factum

[25] Ms. Moorey pleaded the defence of non est factum, declaring that she had no legal advice before signing the promissory notes and related documents. She also pleaded that her husband misrepresented the effect of the documents and that she was unduly influenced by him with respect to the plaintiffs’ claims. It is telling that she did not sue her husband with respect to these allegations.

[26] In the statement of defence, the defendants allege that the money advanced pursuant to the promissory notes was used to start a restaurant business in which the parties were partners. Their statement of defence also admits that the defendants would lose their restaurant business if they didn’t sign the documents.

[27] While Ms. Moorey alleges in the statement of defence that she did not understand the “true nature” of the partnership agreement, promissory note and general security agreement that she signed, she admits in her pleading that she understood that “the documents were agreeing to pay money into the business.” She also says that she felt “under pressure at the request of her husband trusting that he had their family’s best interests at heart.”

[28] The title on the larger promissory note reads “Joint and Several Demand Promissory Note, Richard and Charleen Moorey indebted to Nick and Susan Temple.” The title on the smaller promissory note is similar but refers only to the defendants’ indebtedness to Nick Temple. Therefore, the intent of the promissory notes is evident on their face.

[29] At para. 14 of my reasons for partial summary judgment, I cited Duca Community Credit Union Ltd. v. Fulco Automotive Ltd. ((1994), 71 O.A.C. 351 at 380 (Div. Ct.)) as follows:

[Non est factum] is an extremely restricted defence. To invoke it, the person relying on it must show that he or she is not barred from doing so by reason of carelessness. In the absence of carelessness, it is then necessary to show that the document signed was different from the one that the person thought she was signing.

[30] The onus is on the defendant claiming a defence of non est factum to prove it. Ms. Moorey did not file an affidavit on the motion to set aside the judgment; consequently, there is no evidence whatever that the defence of non est factum can be sustained. Had the defendants appeared at the summary judgment motion, they would have been limited by the admissions in their own pleading.

The Defence of Equitable Set-Off

[31] Mr. Moorey claims that the amounts alleged to be owed to the plaintiffs are debts of the partnership and are subject to an equitable set-off when there is a full accounting of the revenues and liabilities from the partnership. The Mooreys’ counterclaim seeks an accounting from the partnership. As of yet, the plaintiffs have not served a defence to the counterclaim.

[32] The indebtedness arises from two promissory notes signed by the defendants in favour of the plaintiffs. Promissory notes are bills of exchange as defined in s. 176 (1) of the Bills of Exchange Act, R.S.C. 1985, c. B-4.

[33] At para. 11 of my reasons for partial summary judgment, I cited 1652620 Ontario Inc. v. Cornerstone Builders Ltd., 2018 ONCA 973. In that case, the Court of Appeal considered whether a claim of equitable set-off was available as a defence to a motion for partial summary judgment for monies due under a bill of exchange, such as a promissory note. The court concluded that it was not.

[34] At para. 12 of my reasons for partial summary judgment, I also cited King v. McHugh, 2009 ONSC 4603, 82 C.P.C. (6th) 263, (S.C.J.). At para. 13, Gunsolus J. explained:

The rule that equitable set-off cannot be asserted as a defence to a claim on a bill of exchange is a well settled one, with the principle basis being supported by many years of jurisprudence. The principle underlining the rule is that a bill of exchange is meant to be in the nature of cash….

[35] Consequently, the defence of equitable set-off is not sustainable as a defence to the claim. Had Mr. Mouck appeared at the summary judgment motion, he would have been constrained by this jurisprudence.

Prejudice

[36] The plaintiffs have not sought an order dismissing the defendants’ counterclaim for an accounting. Therefore the defendants are still at liberty to advance any claims that they say arises out of a partnership among the parties. They are not prejudiced in that regard.

[37] However, I have concluded that the plaintiffs would suffer the greater prejudice if the partial summary judgment is set aside when the defences advanced are without merit.

[38] Ms. Temple filed evidence of multiple claims against the defendants by other creditors. As well, she deposed that the defendants defaulted on a litigation timetable ordered by Newton J. on February 14, 2019.

[39] On February 14th, Justice Newton also ordered the defendants to pay the plaintiffs’ costs of $500.00 within 30 days. These costs were not paid until the evening of June 5th, well past the 30-day deadline.

[40] A re-hearing of the summary judgment motion would inevitably increase the plaintiffs’ costs and delay resolution of the claim, to no purpose.

[41] The motion to set aside the partial summary judgment is therefore dismissed.

Costs

[42] If the parties cannot agree on costs, either may apply to the trial coordinator within 30 days of the release of these reasons for an appointment to argue costs, failing which costs will be deemed to be settled. Costs submissions are not to exceed 5 pages.

“original signed by”

The Hon. Madam Justice H.M. Pierce

Released: June 14, 2019