ONSC 4835

DIVISIONAL COURT FILE NO.: 690/19 DATE: 20210707

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

McWatt ACJSCJ and Sachs and Penny JJ.

BETWEEN:

GAERTNER BARON PROFESSIONAL CORPORATION

Maija Pluto, for the Plaintiff (Respondent)

Plaintiff/(Respondent)

– and –

2438866 ONTARIO INC. and BO SHAO

Dr. Ran He, for the Defendants/Appellants

Defendants/(Appellants)

HEARD at Toronto by video conference: July 7, 2021

Penny J. (Orally)

[1] This is an appeal from the November 14, 2019 decision, unreported, of Leiper J. in which she dismissed the plaintiff’s motion to set aside default judgment granted in favour of the plaintiff by Schabas J. on May 13, 2018.

[2] The defendants argue that Lieper J. erred in refusing to set aside the default judgment in three respects:

(1) improper service of the statement of claim and motion for default judgment on the corporate defendant 2438866 Ontario Limited and Bo Shao;

(2) lack of full and frank disclosure by the plaintiff on the motion before Schabas J.; and,

(3) failure to apply properly the analysis established under the decision of the Court of Appeal in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at paras. 48 and 49.

[3] We would not give effect to any of these arguments.

Service

[4] The defendants argue that the motion judge erred in law by applying the wrong onus in dealing with the question of service. First, she failed to appreciate that the onus was on the plaintiff to prove service of the claim and second, she applied a summary judgment standard in dealing with the question of service. We disagree. In support of their first submission the defendants rely on caselaw where service had not been effected in accordance with the Rules. In this case, service had been effected in accordance with the Rules under Rule 16.03(6). Thus, the plaintiff discharged its threshold burden to prove service in accordance with the Rules. Rule 16.07 makes it clear that the burden then shifts to the defendant if they want to show that the claim did not actually come to their notice.

[5] In support of their second submission, the defendants rely on the recent decision of the Court of Appeal in Zeifman Partners Inc. v. Aiello, 2020 ONCA 33 where, at paras. 31-34, the Court rejected the proposition put forward by Dunphy J. in Marina Bay Sands Pte Ltd v. Tu, 2015 ONSC 5011, that on a motion to set aside a default judgment, the defendant has an onus similar to the onus on a defendant on a summary judgment motion – to put its best foot forward. In Zeifman, the Court of Appeal made it clear that the onus on the defendant in a motion to set aside a default judgment is to prove that their defence has an air of reality, which is different than the onus on a defendant in a summary judgment motion. In the case at bar, the motion judge did refer to Marina Bay Sands, but not in the context of assessing the merits of the defendants’ defence. She did so in assessing the quality of the evidence before her from the defendants on the question of service, which I will discuss further below. In doing so she did not commit the error in principle that caused the Court of Appeal to overturn the motion judge’s decision in Zeifman.

[6] The motion judge carefully considered the evidence tendered and the arguments advanced by the defendants on the service issue. She found that the evidence tendered by Mr. Gu was inadequate in that it contained hearsay attributable to his spouse, Shao, who is the only officer and director of the defendant corporation. The lack of direct evidence from Shao, on her own behalf and on and on behalf of the corporation, 243, was not explained.

[7] Further, in the context of the evidence as a whole, the motion judge simply did not accept the contention that the claim and motion for default judgment did not come to the attention of Gu, Shao and 243. She found, on the evidence, that it was more likely than not that Gu, 243 and Shao were aware of both the claim and the motion for default judgment. She therefore concluded that 243 and Shao had not established a plausible excuse for failing to defend the claim. These findings were available to her on the record before her and thus, the defendants have not established that the motion judge made an error of law or a palpable and overriding error.

Alleged Lack of Full and Frank Disclosure

[8] The motion judge, once again, carefully reviewed the materials filed on the motion for default judgment. She found, having reviewed the evidence, that the plaintiff did not fail to disclose any material fact in issue. There was ample evidence to support this conclusion.

Other Mountain View Factors

[9] The decision whether to grant or deny a motion to set aside a default judgment involves the exercise of discretion. The motion judge noted, correctly, that the Mountain View factors are not rigid rules; they serve to guide the court’s analysis in the context of the unique circumstances of each case.

[10] The motion judge analysed each of the Mountain View factors. She accepted that the defendants had moved to set aside on a timely basis but found that the defendants had not satisfied any of the other factors.

[11] In particular, she found, in addition to the failure to advance a plausible excuse for failing to defend the claim, that there was no evidence from anyone advancing any defence on the merits. Further, the defendants had not filed a statement of defence.

[12] Counsel for the defendants, in his factum before the motion judge and before this Court, raised the prospect of potentially inconsistent results given that there was an outstanding motion to refuse confirmation of an assessment report against Gu in respect of the same legal services from the plaintiff law firm.

[13] First, I would note that the potential for inconsistent results is not a defence to the claim on the merits. There was no evidence of any plausible defence on the merits.

[14] Second, and more importantly, the motion judge carefully analysed the defendants’ argument on this point. While acknowledging a theoretical risk of inconsistent results, the motion judge noted that Gu had yet to advance any substantive basis for opposing confirmation of the assessment report. Given the procedural history and the evidence before her, the motion judge concluded that the risk of inconsistent results was an “unlikely” risk at best.[^1]

[15] There was ample evidence to support the conclusion of the motion judge on the question of whether a plausible defence had been established. Indeed, on this factor alone, it was well within the discretion of the motion judge to dismiss the motion to set aside the default judgment.

[16] In any event, the motion judge also found that in the context of the full record of proceedings, the administration of justice would be best served by dismissing, not allowing, the motion to set aside default judgment. There was, once again, ample evidence to support this conclusion.

[17] The motion judge’s decision discloses no error in principle, nor was it clearly wrong.

[18] For these reasons, the appeal from the decision of the motion judge is dismissed.

[19] Costs are awarded to the respondent in the amount of $7,500 all inclusive.

[20] The funds held in trust are released in accordance with the agreement of the parties.

___________________________ Penny J.

I agree

McWatt ACJSCJ

I agree

Sachs J.

Date of Oral Reasons for Judgment: July 7, 2021

Date of Release: July 9, 2021

ONSC 4835

DIVISIONAL COURT FILE NO.: 690/19 DATE: 20210707

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

ACJ McWatt, Sachs and Penny JJ.

BETWEEN:

GAERTNER BARON PROFESSIONAL CORPORATION Plaintiff/(Respondent)

– and –

2438866 ONTARIO INC. and BO SHAO Defendants/(Appellants)

ORAL REASONS FOR JUDGMENT

Penny J.

Date of Oral Reasons for Judgment: July 7, 2021

Date of Release:

[^1]: On May 17, 2019, Wilson J. denied Gu’s request to adjourn his motion opposing confirmation of the assessment report. She found that Gu had, by his conduct, abandoned his motion to oppose confirmation and awarded costs against him (2019 ONSC 3145). Gu appealed Wilson J.’s decision to this court. That appeal was dismissed with costs (2020 ONSC 6027). We were advised that Gu sought leave to appeal to the Court of Appeal for Ontario, which was denied.