CITATION: Imperatore v. Fetesko, 2023 ONSC 1340
DIVISIONAL COURT FILE NO.: 891/21
DATE: 20230227
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Stewart, Nishikawa and Leiper JJ.
BETWEEN:
Maracello Imperatore
Applicant
– and –
Alexander Fetesko c.o.b. Lagoda Auto Service
Respondent
Richard Macgregor and Abby McGivney, for the Applicant
Oleksiy Bykov, for the Respondent
HEARD: February 9, 2023 (by videoconference)
Nishikawa J.
REASONS FOR DECISION
Overview
[1] The issue on this application for judicial review is whether the doctrine of res judicata precluded the Respondent, Alexander Fetesko, from bringing a second motion to set aside default judgment after his first motion to set aside default judgment was dismissed.
[2] The Applicant plaintiff, Maracello Imperatore,[^1] commenced a proceeding in the Small Claims Court and obtained default judgment in 2006. The Respondent defendant’s first motion to set aside default judgment, brought in 2017, was dismissed. That decision was upheld on appeal to the Divisional Court.
[3] In October 2021, the Respondent brought a second motion to set aside default judgment before the Small Claims Court. In her decision dated October 20, 2021 (the “Decision”) Deputy Judge Janis Criger (the “Deputy Judge”) granted the motion, set aside the default judgment and stayed all enforcement proceedings.
[4] The Applicant brings this application for judicial review seeking to set aside the Decision. For the reasons detailed below, the application for judicial review is granted.
Factual Background
[5] The application for judicial review relates to a claim commenced in the Hamilton Small Claims Court in August 2005. The Appellant plaintiff, Mr. Imperatore, sought damages in relation to defects in a used car that he had purchased from the defendant, Evgeniy Orlov, and which had allegedly been safety-certified by the Respondent defendant, Mr. Fetesko c.o.b. Ladoga Auto Service. Mr. Imperatore alleged that after paying the full balance and taking delivery of the vehicle, he discovered that it had been involved in a prior accident. The Applicant alleged that the cause of action arose in Hamilton.
[6] At a pre-trial conference before Deputy Judge Sullivan on February 3, 2006, Mr. Orlov’s son, Leonid Orlov, was added on consent as a co-defendant. The pre-trial conference endorsement further stated that the “defendant” was to “advise proper jurisdiction within 2 weeks of today” and that the action would be transferred for trial.
[7] On February 6, 2006, at an assessment hearing before Deputy Judge Cimba, Mr. Imperatore was granted default judgment against Mr. Fetesko only, in the amount of $8,429 plus disbursements.
[8] A writ of seizure and sale was issued on a property on Rosefield Road in Pickering, Ontario and was renewed in 2013. In 2016, Mr. Imperatore’s lawyer obtained parcel registers and discovered that Mr. Fetesko was not a registered owner of the Rosefield Road property but that he was a joint owner of another property on Dellbrook Avenue in Pickering. In December 2016, Mr. Imperatore’s lawyer sent a last demand letter to Mr. Fetesko at the Dellbrook Avenue address.
[9] In early 2017, Mr. Fetesko brought a motion to set aside default judgment on the basis that he had no knowledge of the claims until receiving the last demand letter in December 2016. Mr. Fetesko took the position that the claim was not issued in the proper jurisdiction in accordance with r. 6.01(1) of the Small Claims Court Rules, O. Reg. 258/98 (the “Rules”).
[10] At the hearing on October 31, 2017, Deputy Judge Mongeon acknowledged that while Mr. Fetesko had a jurisdictional argument, his materials failed to raise a meritorious defence and, consequently, would not meet the test for setting aside default judgment. Further, Deputy Judge Mongeon found that given the passage of time, setting aside the 12-year old judgment would cause prejudice to Mr. Imperatore. Deputy Judge Mongeon dismissed the motion, stating as follows:
Motion to set aside judgment that is more than 10 years old. There is no allegation in notice of motion or accompanying affidavit that there is a meritorious defence. Based on length of time that judgment is outstanding and the lack of allegation of a meritorious defence, motion is dismissed. Costs of $100 against moving party.
[11] Mr. Fetesko appealed the order dismissing his motion to the Divisional Court, arguing, among other grounds, that the Hamilton Small Claims Court lacked territorial jurisdiction to grant the default judgment in the first place. At the hearing on April 26, 2019, Carpenter-Gunn J., sitting as a single judge of the Divisional Court (the “Appeal Judge”), dismissed the appeal with oral reasons given on the record. The Appeal Judge noted that the transcripts of the February 6, 2006 assessment hearing were not before her or Deputy Judge Mongeon and that many of the arguments that Mr. Fetesko made before her had not been made before the deputy judge.
[12] In October 2021, Mr. Fetesko brought a second motion to set aside default judgment before the Hamilton Small Claims Court. On that motion, Deputy Judge Criger found that the issue of territorial jurisdiction had never been determined and was therefore not res judicata. The Deputy Judge found that without the transcript and the Appeal Judge’s oral reasons, neither of which was put before her, she could not conclude that the issue of territorial jurisdiction was considered and decided. The Deputy Judge concluded that Richmond Hill, and not Hamilton, was the correct territorial jurisdiction for the claim. The Deputy Judge went on to find that Mr. Fetesko met the test for setting aside default judgment. She granted the motion and transferred the action to Richmond Hill Small Claims Court for trial, staying any enforcement measures pending the outcome of the case.
Issue
[13] In support of the application, the Applicant raises issues of jurisdiction, procedural fairness and res judicata. In my view, the issues are interrelated and addressed by one question: was the issue of territorial jurisdiction res judicata? If so, there was nothing further for the Small Claims Court to adjudicate and the Deputy Judge lacked jurisdiction to set aside default judgment.
Analysis
Jurisdiction of the Divisional Court
[14] Pursuant to s. 31 of the Courts of Justice Act, R.S.O. 1990, c. C.43, an appeal lies to this court from a final order of a Small Claims Court judge. There is no statutory right of appeal from an interlocutory order of the Small Claims Court. However, because Small Claims Court judges derive jurisdiction from statute and exercise a statutory power of decision, there is jurisdiction under s. 2(1) of the Judicial Review Procedures Act, R.S.O. 1990, c. J.1, to review decisions of a Small Claims Court judge, including interlocutory orders.
[15] The purpose of the Small Claims Court is to provide expeditious and low-cost resolution of monetary disputes. Section 25 of the Courts of Justice Act states that the Small Claims Court shall hear and determine “in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience.” The absence of an appeal from interlocutory orders under the Courts of Justice Act reflects that proceedings before the Small Claims Court are intended to be expeditious.
[16] As a result, the scope of judicial review of interlocutory orders of the Small Claims Court is correspondingly narrow. This court has repeatedly expressed its reluctance to interfere with a decision of a Small Claims Court judge on judicial review unless it is an order made without jurisdiction or in breach of principles of natural justice: see e.g. Peck v. Residential Property Management, [2009] O.J. No. 3064 (Div. Ct.).
[17] In this case, I find that the issue raised is one of jurisdiction and thus falls within the narrow scope of judicial review of an interlocutory order of the Small Claims Court. As further detailed in these reasons, the circumstances warrant this court exercising its discretion to review the Deputy Judge’s decision.
Standard of Review
[18] The Applicant submits that because the application raises issues of jurisdiction and procedural fairness, the applicable standard of review is correctness.
[19] The Respondent submits that because the application does not involve an issue of jurisdiction between two or more administrative bodies, under Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, the presumptive standard of review of reasonableness applies.
[20] The application raises the issue of the Small Claims Court’s jurisdiction once a motion has been finally disposed of by that court and the Divisional Court. In my view, a correctness standard of review applies. In Vavilov, at paras. 63-64, the Supreme Court explains that the rule of law requires that courts intervene where one administrative body has interpreted the scope of its authority in a manner that is incompatible with the jurisdiction of another. While the Small Claims Court is not an administrative body, the same rationale applies here: the rule of law cannot tolerate conflicting orders and proceedings. The application of a correctness standard would safeguard “predictability, finality and certainty.”
Was the Matter of Territorial Jurisdiction Res Judicata?
The Parties’ Positions
[21] The Applicant submits that in setting aside default judgment, the Deputy Judge exceeded her statutory authority because that issue was res judicata after Deputy Judge Mongeon’s final decision refusing to set aside default judgment. The Applicant further submits that the Deputy Judge exceeded her statutory authority by overturning the decision of the Appeal Judge, which was a final decision of a higher court.
[22] The Respondent submits that the Deputy Judge exercised her authority in accordance with the Rules and relevant case law, including r. 1.03(1) and s. 25 of the Courts of Justice Act, which support disposing of a matter on its merits rather than on a procedural technicality: Dubey v. Taylor (Ont. Small Claims); First Baptist Church – Teddy Bear Daycare v. Brown (Ont. Small Claims). The Respondent further submits that the Deputy Judge correctly applied the mandatory territorial jurisdiction provision under r. 6.01(1).
The Applicable Principles
[23] The principle of res judicata prevents the re-litigation of previously adjudicated and finally decided matters: see 402 Mulock Investments Inc. v. Wheelhouse Coatings Inc., 2022 ONCA 718, at para. 16. In Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 23, the Supreme Court of Canada outlined the three pre-conditions that must be met in order for the court to exercise its discretion to apply the issue estoppel branch of res judicata:
(i) The issue must be the same as the one decided in the prior decision;
(ii) The prior judicial decision must have been final; and
(iii) The parties to both proceedings must be the same.
[24] In Danyluk v Ainsworth Technologies, Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 18, the Supreme Court explained the rationale for the principle of res judicata as follows:
The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry.
[25] As a result, “a judicial order pronounced by a court of competent jurisdiction should not be brought into question in subsequent proceedings except those provided by law for the express purpose of attacking it”: Danyluk, at para. 20.
[26] In Kendall v. Sirard, 2007 ONCA 468, 225 O.A.C. 246, at paras. 43-45, the Court of Appeal examined the principles of res judicata and issue estoppel in the context of interlocutory orders. At para. 43, the court quoted at length from the decision of E. Macdonald J. in Ward v. Dana G. Colson Management Ltd. (1994), 24 C.P.C. (3d) 211 (Ont. Gen. Div.) at 218, aff’d. [1994] O.J. No. 2792 (C.A.) as follows:
A decision in an interlocutory application is binding on the parties, at least with respect to other proceedings in the same action. I agree with the submission that the general principle is that it is not open for the court, in a case of the same question arising between the same parties, to review a previous decision not open to appeal. If the decision was wrong, it ought to have been appealed within the appropriate time frames. This principle is not affected by the fact that the first decision was pronounced in the course of the same action.
But within one cause of action, there may be several issues raised which are necessary for the determination of the whole case. The rule then is that, once an issue has been raised and distinctly determined between the parties then, as a general rule, neither party can be allowed to fight that issue all over again. The same issue cannot be raised by either of them again in the same or subsequent proceedings except in special circumstances. And within one issue, there may be several points available which go to aid one party or the other in his efforts to secure a determination of the issue in his favour. The rule then is that each party must use reasonable diligence to bring forward every point which he thinks would help him. If he omits to raise any particular point, from negligence, inadvertence, or even accident (which would or might have decided the issue in his favour), he may find himself shut out from raising that point again, at any rate in any case where the self same issue arises in the same or subsequent proceedings. But this again is not an inflexible rule. It can be departed from in special circumstances.
In my view, the courts should depart from the principles expressed by Lords Denning and Diplock in extremely rare circumstances. The reasons for this are obvious. A party to a proceeding, if granted a second chance to raise what was already before the court, undermines the integrity of the rules which guide the conduct of litigation. There has to be certainty and finality of the disposition of matters by the courts. Otherwise, the results would be chaotic. [Citations omitted.]
[27] The Court of Appeal went on to quote Laskin J.A. in Minott v. O’Shanter Development Co. (1999), 42 O.R. (3d) 321 (C.A.), at 329, in which he stated that the cause of action estoppel branch of res judicata “prevents a party from relitigating a claim that was decided or could have been raised in an earlier proceeding”: Kendall, at para. 44 (emphasis in original). Otherwise, “a party who was unsuccessful the first time and where there has been no change in circumstance, could bring the same motion before any number of judges in an effort to find one who would grant the relief sought. Such multiplicity of proceedings is to be discouraged”: Kendall, at para. 45.
Application
[28] In my view, the principle of res judicata precluded the Respondent from bringing a second motion to set aside default judgment because the issue was raised and adjudicated on the first motion to set aside default judgment, which was confirmed on appeal. That motion and the outcome of the appeal resulted in a final decision.
[29] The Respondent raised the issue of territorial jurisdiction in the first motion to set aside default judgment brought in 2017. This is clear from the Respondent’s affidavit in support of the motion, in which he states:
Another reason for the Claim to be void is that it was issued in not proper jurisdiction. The events in claim took place in Toronto, and my business is located in Toronto too. I live in Pickering and the other defendant, Evgeniy Orlov, lives in Vaughan. According to the section 6.01(1)(a)(i) and 6.01(1)(a)(ii) of the Rules of the Small Claims Court, an action shall be commenced in the territorial division in which the cause of action arose, or in which the defendant carries on business.
[30] Deputy Judge Mongeon decided the motion on the basis that the material was clearly and entirely deficient to satisfy the test to set aside default judgment. However, it was open to the Respondent to argue at that hearing that default judgment was granted without jurisdiction, as stated in the notice of motion and affidavit. The failure to clearly articulate and put forward the territorial jurisdiction argument does not permit a party to circumvent the effect of res judicata. While Deputy Judge Mongeon did not specifically address the issue of territorial jurisdiction in his reasons, this does not change the fact that territorial jurisdiction was raised as a ground of appeal on the first motion to set aside default judgment.
[31] On appeal to the Divisional Court, the Respondent again raised the issue of territorial jurisdiction. The notice of appeal states:
The learned Judge erred in failing to properly apply the mandatory provisions found in 6.01(1) of the Rules in that the action was not commenced in the appropriate jurisdiction. As a result, the Hamilton Small Claims Court had no jurisdiction to issue the noting in default, default judgment and Writ.
[32] Before the Appeal Judge, the Respondent’s submissions focused on Deputy Judge Mongeon’s refusal to grant an adjournment and Deputy Judge Cimba’s lack of authority to assess damages when the claim was for an unliquidated amount. It is clear from the transcript that the Respondent’s lawyer also raised the issue of territorial jurisdiction. The Respondent’s lawyer argued that the pre-trial judge had transferred the matter for lack of jurisdiction. The Appeal Judge, however, found no support in the record for the Respondent’s position.
[33] Because the issue of territorial jurisdiction was raised and considered, it was not open to the Respondent to bring a second motion to set aside default judgment. For all intents and purposes, the issue of territorial jurisdiction was res judicata. The fact that no specific findings were made on the issue of territorial jurisdiction does not mean that it was not adjudicated. By dismissing the motion to set aside default judgment and the appeal, Deputy Judge Mongeon and the Appeal Judge effectively rejected the jurisdictional ground.
[34] After receiving the decision of the Appeal Judge, the proper route for the Respondent to pursue would have been to seek leave to appeal to the Court of Appeal. Having raised the issue of territorial jurisdiction on the motion, the Respondent could have raised as a ground of appeal that the courts below erred in failing to determine the issue of territorial jurisdiction or that they erred in failing to set aside the default judgment in the absence of jurisdiction in the Hamilton Small Claims Court. It was not appropriate for the Respondent to bring a second motion to set aside default judgment, which amounts to a collateral attack on the Appeal Judge’s decision, which was a final decision of the Divisional Court.
[35] In adjudicating the issue of territorial jurisdiction despite the fact that it had been raised on the first motion to set aside default judgment, the Deputy Judge in effect reversed the Appeal Judge’s decision. This is not intended to be critical of the Deputy Judge, who was significantly hampered by the parties’ failure to put before her the transcript of the hearing before the Appeal Judge. Had the transcript been before the Deputy Judge, there would have been no ambiguity that the issue of territorial jurisdiction had been squarely raised on the appeal of the first motion to set aside default judgment.
[36] In addition, the Deputy Judge further found that the prejudice to the Respondent in not setting aside the default judgment would be greater than the prejudice to the Applicant in setting it aside. The issue of prejudice was also res judicata as it had previously been determined by Deputy Judge Mongeon and the Appeal Judge.
[37] As noted above, the principle of res judicata includes not only what was raised, considered and determined by a court at first instance, but also all grounds that could have been raised with reasonable diligence. Even if the Respondent had failed to raise the issue of territorial jurisdiction on the first motion to set aside default judgment, he would have been estopped from raising it on a second motion. A failure to raise the issue, or raising it poorly, does not afford the Respondent a second opportunity to have the issue adjudicated.
[38] The principle of res judicata is intended to preclude precisely what happened here: (i) re-litigating in the form of repeated motions between the same parties on the same issues and the same record; and (ii) inconsistent results from different judges on the same issues and same record: see Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at paras. 50-52; Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company), 2021 ONCA 141, 457 D.L.R. (4th) 530, at para. 30, citing Danyluk, at para. 18.
[39] This case demonstrates the necessity of ensuring a complete record before the court at all stages to enable the court to fairly adjudicate the matters raised. The Appeal Judge also noted the lack of the transcript of the assessment hearing on the appeal. The conduct of this proceeding was far from the expeditious and cost-effective process envisaged by the legislation and applicable rules.
Conclusion
[40] Accordingly, the application is granted. The Decision is set aside. The original judgment of Deputy Judge Mongeon, as upheld by the Divisional Court, is reinstated.
[41] Pursuant to the agreement between the parties that the successful party be entitled to $5,000 in costs of the application, the Respondent shall pay the Applicant costs of $5,000, all-inclusive.
“Nishikawa J.”
“I agree: Stewart J.”
“I agree: Leiper J.”
Released: February 27, 2023
CITATION: Imperatore v. Fetesko, 2023 ONSC 1340
DIVISIONAL COURT FILE NO.: 891/21
DATE: 20230227
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Stewart, Nishikawa and Leiper JJ.
BETWEEN:
Maracello Imperatore
Applicant
- and -
Alexander Fetesko, c.o.b. Lagoda Auto Service
Respondent
REASONS FOR DECISION
Released: February 27, 2023
Nishikawa J.
[^1]: The Applicant’s materials use both “Maracello” and “Marcello”.