Court File and Parties

Court File No.: CV-17-131777 Date: 2020-02-27 Ontario Superior Court of Justice

Between: The Toronto Dominion Bank, Plaintiff – and – Mary Tatiana Picard, Defendant

Counsel: Philip Polster, for the Plaintiff John Mullen, for the Defendant

Heard: February 20, 2020

Reasons for Decision

CHARNEY J.:

Introduction

[1] The defendant, Mary Picard, brings this motion for an order setting aside the order noting her in default and setting aside the default judgment dated August 15, 2017, as well as an order setting aside the writs of execution obtained in reliance on the default judgment.

[2] The default judgment relates to three Toronto Dominion Bank (TD Bank) credit cards. The defendant claims that these cards were in the name of a corporation controlled by her, not in her personal name, and that she is not liable for the corporate debts.

[3] This motion raises three issues:

(a) Was the defendant properly served with the Statement of Claim? (b) If she was not, should default judgment be set aside? (c) If default judgment is set aside, should the writs of execution obtained in reliance on the default judgment be set aside?

Facts

[4] On July 11, 2017, the plaintiff, TD Bank, issued a Statement of Claim against the defendant for $137,977 plus interest in relation to unpaid credit card debt and an account overdraft. The unpaid credit card debt relates to three credit cards that TD Bank alleges were in the defendant’s name.

[5] The Statement of Claim was served on July 19, 2017 by a process server who attended what he believed to be the defendant’s residence at 192 Alta Road, The Blue Mountains, Ontario. His affidavit of service states:

An adult female answered the door and confirmed that the Defendant did indeed reside there but that she was currently not in. The woman refused to disclose her name, relationship to the defendant or when the defendant was expected to return to the residence. When advised that I was serving her substitutionally, the envelope containing the Statement of Claim was dropped at her feet as she was closing the door.

[6] The process server also “sent” a copy of the Statement of Claim to the defendant at the same residence on July 17, 2017.

[7] No Statement of Defence was filed, and the plaintiff obtained default judgment on August 15, 2017. The plaintiff obtained a Writ of Seizure and Sale and initiated a seizure of the defendant’s RRSP account. On consent of the parties, the seizure of the RRSP account is on hold (the account is frozen) pending the outcome of this motion.

[8] The defendant alleges that she never resided at 192 Alta Road, The Blue Mountains. This was her husband’s residence, and the person who answered the door was her then 16 year old daughter. The defendant alleges that her daughter did not give her the Statement of Claim or tell her about it. There is no affidavit from the daughter.

[9] The defendant has provided a copy of her driver’s licence, which was issued in 2014, and indicates a different residential address at 1912 Highway 27, Tottenham, Ontario.

[10] The defendant alleges that she was never served with the Statement of Claim, and only became aware of the claim against her on September 21, 2017, when her financial advisor notified her that the bank intended to pay the judgment from her RRSP that day.

[11] The defendant sought to bring a motion setting aside the default judgment on an urgent basis on September 27, 2017. The motion has been adjourned several times because the defendant was not available to be cross-examined on her affidavit in support of her motion. The motion was finally heard on February 20, 2020.

[12] The defendant has filed a proposed Statement of Defence, in which she alleges that the credit card agreements were with the non-party corporation Maram Building Corp. (Maram) alone, and not with her in her personal capacity.

[13] The defendant was the sole Officer and Director of Maram, a general contractor incorporated in 1998. It ceased doing business in 2016.

[14] The defendant alleges that Maram obtained two CIBC Aerogold cards for its business expenses, the first in July 2002, the second in November 2007. The defendant alleges that these were for business expenses only, although her name appeared on the cards.

[15] In 2014, CIBC sold these Aerogold cards to the TD Bank. The new TD Bank cards were mailed to the defendant at Maram’s Woodbridge address. Each card was covered with a sticker indicating that a certain telephone number should be called to activate the card. The defendant phoned to activate the card.

[16] The defendant describes the third card as a “business travel card”. She alleges that she applied for this card in 2014 and obtained the card for Maram for its travel expenses. When the card arrived, it had the defendant’s name on it. She alleges that she called some unidentified employee of the TD Bank and was told that, notwithstanding the fact that her name appeared on the card, it was a business card for which Maram was solely responsible.

[17] The plaintiff has provided an affidavit including the credit card statements of each of the three credit cards at issue. All of the statements indicate that the credit cards are in the defendant’s name and are addressed to her. Even the credit card statements for the original CIBC Aerogold cards were in the defendant’s name, and not in the name of Maram.

[18] The plaintiff has also provided the cardholder agreements in respect of these credit cards, and each agreement confirms that even if the business borrower is a corporation, the individual cardholder is also responsible to pay the balance owing on the account. The defendant has testified that she does not remember receiving any documents from the TD Bank indicating that she is in any way personally responsible for the amounts on the credit card.

Analysis

Was the defendant properly served with the Statement of Claim?

[19] Rule 16.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 establishes the general rules for serving a Statement of Claim. It provides:

16.01 (1) An originating process shall be served personally as provided in rule 16.02 or by an alternative to personal service as provided in rule 16.03.

[20] There is no evidence that the Statement of Claim was served personally on the defendant. As such, the first issue in this case is whether she was properly served by an alternative to personal service under Rule 16.03. The relevant provision is Rule 16.03(5), which provides:

(5) Where an attempt is made to effect personal service at a person’s place of residence and for any reason personal service cannot be effected, the document may be served by,

(a) leaving a copy, in a sealed envelope addressed to the person, at the place of residence with anyone who appears to be an adult member of the same household; and

(b) on the same day or the following day mailing another copy of the document to the person at the place of residence,

and service in this manner is effective on the fifth day after the document is mailed

[21] The defendant alleges that she has never resided at the 192 Alta Road, The Blue Mountains residence. She has provided her driver’s licence as evidence to support this allegation.

[22] The onus is on the plaintiff to prove that the defendant was properly served with the Statement of Claim. The plaintiff has not, in my view, been able to provide satisfactory evidence to contradict the defendant’s position. The plaintiff has provided a TD Bank memo dated May 26, 2016 that states: “Address change of Ms. Mary Tatiana Picard from 1912 Highway 27 Tottenham… to 192 Alta Rd. The Blue Mountain…” This memo appears to be the only source for the plaintiff’s knowledge of the defendant’s residence. There is, however, no indication as to who wrote the memo or the source of the information in the memo. As such, I am forced to prefer the information contained in the defendant’s driver’s licence, in the absence of any other evidence to the contrary.

Should default judgment be set aside?

[23] Where the defendant was not properly served with the Statement of Claim, the plaintiff is not entitled to note the defendant in default or obtain default judgment, and the default judgment must be set aside.

Should the writs of execution obtained in reliance on the default judgment be set aside?

[24] Rule 19.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 authorizes the court to set aside or vary a default judgment “on terms that are just”.

[25] In Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, the Ontario Court of Appeal considered the principles that must be applied to the application of the court’s discretion to set aside default judgment under Rule 19.08. The court stated, at paras. 47 – 50:

The court’s ultimate task on a motion to set aside a default judgment is to determine whether the interests of justice favour granting the order. The approach to be taken to this determination has been considered numerous times by this court. The following draws heavily on the summary of the principles in those cases by Perell J. in Watkins v. Sosnowski, 2012 ONSC 3836, at paras. 19-20 and 23-24.

The court must consider the following three factors:

(a) whether the motion was brought promptly after the defendant learned of the default judgment; (b) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; and (c) whether the facts establish that the defendant has an arguable defence on the merits.

To this list, I would add the following two factors the court should have regard to, as set out in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, 87 O.R. (3d) 479 (C.A.), at para. 2:

(d) the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and (e) the effect of any order the court might make on the overall integrity of the administration of justice.

These factors are not to be treated as rigid rules; the court must consider the particular circumstances of each case to decide whether it is just to relieve the defendant from the consequences of his or her default.

[26] While the plaintiff’s failure to properly serve the defendant with the Statement of Claim compels the setting aside of the default judgment, the defendant has not persuaded me that she has an arguable case on the merits, or “that there is an air of reality to the defence”: Merchant Advance Capital Ltd. v. 2200816 Ontario Inc. et al, 2019 ONSC 2477, at para. 11; Long Term Recovery Ltd. v. Bolden, 2018 ONSC 4918, at para. 27: “To meet the “air of reality” test, the defence must be tenable in law and the defendant must lead some evidence to demonstrate that it is not devoid of factual and/or legal foundation.”

[27] The evidence provided by the plaintiff confirms that the credit cards were in the defendant’s name, and the cardholder agreements provided confirm that the defendant, as the individual cardholder, is responsible to pay the balance owing on the accounts. The defendant’s affidavit evidence is very weak, and her reliance on an alleged telephone conversation with an unidentified employee of the TD Bank is contrary to the parol evidence rule, see: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 59:

The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing... To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties…The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract… (Citations omitted, emphasis added)

[28] Rule 19.08 states that a court may set aside default judgment on such terms as are just. In some cases, this can include maintaining any writs filed against the defendant: Merchant Advance, at para. 19.

[29] In 1317621 Ontario Inc. v. Krauss, 2008 ONSC 39224, Master Dash stated, at para. 30:

Rule 19.08(1) allows the court to impose “such terms as are just” if a default judgment is set aside. It has long been established that a court, in setting aside a default judgment, has the power, as a term thereof, to permits writs of seizure and sale to remain filed with the sheriff. Some of the considerations that a court may consider in allowing writs to stand include evidence indicating a risk that the defendant will dispose of his or her assets before judgment to the detriment of the plaintiff creditor and the apparent merits of a proposed defence to the plaintiff’s claims. Ultimately the court has a broad discretion to order terms that the court considers just in all the circumstances. (Footnotes omitted)

[30] Permitting writs of seizure to be maintained is generally discouraged because the setting aside of the default judgment effectively turns the seizure into execution before judgment (Egredzija v. Gullett, 2019 ONSC 6475, at paras. 34 and 35). In this case, however, the merits of the defence are so weak that, in my view, the “overall integrity of the administration of justice” requires that the security be preserved pending the outcome of the case on its merits.

[31] Maintaining the writs of seizure and the corresponding freeze of the defendant’s RRSP will not prejudice the defendant. Her RRSP has been frozen since September 2017, and the defendant did not proceed with any sort of urgency to have this motion heard. Had the matter been urgent, she would have made herself available for cross-examination prior to March 2019.

[32] On the other hand, the plaintiff will be prejudiced if the writ is removed and the defendant is given an opportunity to dissipate assets.

Conclusion

[33] For all of the above reasons, I allow the motion and set aside default judgment dated August 15, 2017, and the noting in default against the defendant.

[34] The defendant shall serve and file her Statement of Defence within 20 days of today’s date.

[35] The motion to lift any writs of execution issued with respect to such default judgment is dismissed.

[36] The writ of seizure and sale is maintained along with the corresponding freeze of the defendant’s RRSP account, until judgment.

[37] The parties have had divided success. Unless one of the parties offered to settle this motion on terms substantially similar to those set out in paragraphs 33 – 36 above, my inclination is to order no costs. If the parties cannot agree on costs, the plaintiff may serve and file costs submissions of no more than 3 pages, together with costs outline and any offers to settle, within 20 days of the release of this decision, and the defendant may serve and file costs submissions on the same terms within a further 10 days.

Justice R.E. Charney Released: February 27, 2020