ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-CV-418307
DATE: 20120628
B E T W E E N:
Tim Watkins and Michele Watkins
Plaintiff
- and -
Jason Sosnowski
Defendant
COUNSEL:
• Carla D. Manias , for the Plaintiff
• Jayson W. Thomas , for the Defendant
HEARING DATE: June 15, 2012
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[ 1 ] The Defendant Jason Sosnowski brings a motion to set aside: (a) having been noted in default in an action to collect a debt; (b) the default judgment granted on April 12, 2011; and (c) an order that he attend a judgment debtor examination.
[ 2 ] The Plaintiffs, Tim Watkins and Michele Watkins resist the motion, and they bring a cross-motion. For the eventuality that Mr. Sosnowski is successful in having the judgment set aside, they move by cross-motion for summary judgment.
[ 3 ] The summary judgment motion is peculiar because there is already a judgment, and I rather doubt that a court would set aside a default judgment and then immediately grant a summary judgment based on the same evidence.
[ 4 ] In any event, I need not concern myself with the cross-motion because for the reasons that follow, I dismiss Mr. Sosnowski’s motion. The default judgment stands and the cross-motion is moot.
B. FACTUAL AND PROCEDURAL BACKGROUND
[ 5 ] On January 18, 2011, Tim Watkins and Michele Watkins, who reside in the United Arab Emirates, commenced a simplified procedure action against Jason Sosnowski claiming $28,159.04 for an outstanding loan.
[ 6 ] In their Statement of Claim, the Watkins plead that on July 22, 2008, they loaned Mr. Sosnowski and his partner, Emily Adlington, 115,000 AED (Dirham) in order for Sosnowski and Adlington to purchase a property in the United Arab Emirates. The Watkins plead that Mr. Sosnoswki and Ms. Adlington agreed to repay 150,000 AED when the property was sold. The property was sold on December 31, 2009 and Mr. Sosnowski paid the Watkins 12,500 AED, but Mr. Sosnowski has refused to repay the balance of the loan.
[ 7 ] In an affidavit filed for the motions, Mr. Watkins deposed that Mr. Sosnowski’s plan was to purchase an apartment in Dubai for resale at a profit. He asked the Watkins to loan him 115,000 AED, and he offered to repay the loan, plus an additional 35,000.00 AED from the profits of the resale. Mr. Sosnowski said that if the property was not resold by the end of August, 2008, he would pay an 8% return of the sale price when the property was sold. The parties did not discuss the payment of interest. The property did not sell by August 2008, and on April 9, 2009, Mr. Sosnowski paid the Watkins 12,500.00 AED towards the outstanding loan. On December 31, 2009, the apartment was sold for 1,200,000.00 AED, but the Watkins did not receive any funds from the sale of the apartment. The Watkins demanded payment of the balance of the loan, but Mr. Sosnowski refused to pay.
[ 8 ] In October and November 2010, there was correspondence by mail and e-mail between the Watkins and Mr. Sosnowski. On October 21, 2010, the Watkins sent a demand letter to him at 213 Royal Valley Drive, Caledon, Ontario. On November 4, 2010, he sent an e-mail message indicating that he had received the demand letter. Mr. Sosnowski offered to make monthly payments to repay half of the loan. This offer was refused.
[ 9 ] By statement of claim issued on January 18, 2011, the Watkins sued Mr. Sosnowski for the balance of 104,080.71 AED, which converts into $28,159.04, Canadian dollars. It is important to note that the Watkins sued only for the principal amount of the loan and they make no claim for interest or for a share in the profits from the property that Mr. Sosnowski sold in the United Arab Emirates.
[ 10 ] On January 20, 2011, pursuant to Rule 16.03 (5) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194, Mr. Sosnowski was served with the Statement of Claim by an alternative to personal service by leaving a copy of the claim in a sealed envelope addressed to him at 213 Royal Valley Drive, Caledon, Ontario. The claim was left with Mr. Joseph Sosnowski, who is Mr. Sosnowski’s father. A copy of the claim was also sent by prepaid first class mail to Mr. Sosnowski at the 213 Royal Valley Drive address.
[ 11 ] A Motor Vehicle Search indicates that Mr. Sosnowski’s residence is 213 Royal Valley Drive. Mr. Sosnowski has a corporation with a registered head office at the same address. He is employed at RJA International Group and the contact information of RJA International Group places him at the same address. Mr. Sosnowski, however, deposed that he is estranged from his parents and has lived abroad from 2001 to 2009, except for two months in 2009 when he stayed at his parents’ home.
[ 12 ] On April 12, 2011, the Watkins obtained a default judgment against Mr. Sosnowski for $28,246.29 CDN and $500.00 for costs.
[ 13 ] On May 12, 2011, a notice of Examination was served on Mr. Sosnowski by an alternative to personal service, by leaving a copy of the Notice of Examination with his mother at 213 Royal Valley Drive, Caledon, Ontario
[ 14 ] Mr. Sosnowski did not attend the examination, and on August 4, 2011, the Watkins obtained an Order from Master Dash compelling Mr. Sosnowski to attend at a judgment debtor examination and to pay costs thrown away in the amount of $300.02, plus costs of the motion of $600.00.
[ 15 ] On August 23, 2011, Mr. Sosnowski was contacted by telephone by an articling student who advised him that he was required to attend at the judgment debtor examination. Mr. Sosnowski deposed that this was his first notice of the action against him and the default judgment.
[ 16 ] Mr. Sosnowski attended an examination on September 7, 2011. During his examination, he admitted receiving the loan money from the Watkins and that he had not repaid the loan.
[ 17 ] After the judgment debtor exam, Mr. Sosnowski decided to bring a motion to set aside the default judgment and he advised the Watkins’ lawyers. Unfortunately, Mr. Sosnowski, who was unrepresented at the time, mistakenly believed that this required a motion to the Divisional Court. This misapprehension led to a series of scheduling mishaps, but eventually his motion and the cross-motion came on for hearings.
[ 18 ] Mr. Sosnowski has prepared a draft Statement of Defence. He raises three defences on the merits: (a) the loan is illegal as it claims a criminal rate of interest under Section 347 of the Criminal Code , R.S.C., 1985, c. C-46; (b) this action is time barred pursuant to Sections 4 and 5 of the Limitations Act, 2002 , S.O. 2002, c. 24, Sched. B; and (c) if liable, he is liable for only half of the amount loaned, with his former wife liable for the other half.
C. DISCUSSION
[ 19 ] On a motion to set aside a default judgment, the court will consider: (a) whether the motion to set aside the judgment was brought promptly; (b) where there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; and, (c) whether the facts establish at least an arguable defence. See: Nelligan v. Lindsay , [1945] O.W.N. 295 (H.C.J.) ; Laredo Construction Inc. v. Sinnadurai (2005), 78 O.R. (3d) 321 (C.A.); and Morgan v. Toronto (Municipality) Police Services Board , [2003] O.J. No. 1106 (C.A.).
[ 20 ] The factors, however, are not treated as rigid rules, and 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: Morgan v. Toronto (Municipality) Police Services Board , supra ; Chitel v. Rothbart , [1988] O.J. No. 1197, 29 C.P.C. (2d) 136 (C.A.) , leave to appeal refused [1988] S.C.C.A. No. 427, 98 N.R. 132 n (S.C.C.). The motions judge or master must ultimately determine whether the interests of justice favour setting aside the default judgment: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. (2007), 87 O.R. (3d) 479 (C.A.).
[ 21 ] In the case at bar, I am satisfied that the motion to set aside the default judgment was properly brought and that there was an explanation for Mr. Sosnowski failing to deliver a statement of defence. I note here that these conclusions made it unnecessary for me to rule on a preliminary objection raised by the Watkins that privileged material that had inadvertently been disclosed to Mr. Sosnowski’s lawyer should be returned.
[ 22 ] The determinative issues for Mr. Sosnowski’s motion is whether he has shown a defence on the merits and whether the interests of justice favour setting aside the default judgment.
[ 23 ] In circumstances where the plaintiff has obtained a default judgment, the factor of showing a defence on the merits is particularly important because it 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: Chitel v. Rothbart , supra ; Morgan v. Toronto (Municipality) Police Services Board , supra . Conversely, the motion to set aside the judgment may be dismissed, if the defendant cannot show a reasonable defence: Bayview Financial, L.P. v. Spartan Collision Corporation ; Maplecrete Group Ltd. v. Canning Contracting Ltd .; Bank of Montreal v. Chu (1994), 17 O.R. (3d) 691 (Gen. Div.); Cherry Central Cooperative Inc. v. D’Angelo (2001), 56 O.R. (3d) 655 (C.A.).
[ 24 ] In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. Rather, the principles applied on a motion for summary judgment should be considered. To set aside a default judgment, the defendant should show that his or her defence has an air of reality and that there is a genuine issue requiring a trial: Bank of Montreal v. Chu (1994), 17 O.R. (3d) 691 (Gen. Div.); Hunt v. Brantford (City) (1994), 34 C.P.C. (3d) 379 (Gen. Div.) ; Grieco v. Marquis (1998), 38 O.R. (3d) 314 (Gen. Div.).
[ 25 ] In my opinion, in the case at bar, there are no genuine issues requiring a trial. Mr. Sosnowski admits he borrowed the money, he made one payment, he discussed further payments, but he has not repaid the balance. His defences do not have an air of reality.
[ 26 ] The fact that his former wife is a co-debtor does not discharge Mr. Sosnowski from his several liabilities. The pleading of an illegal interest charge does not discharge him because the Watkins are suing only for the principal amount of the loan without any claim for interest. As for the limitation period defence, there is no genuine issue for trial that Mr. Sosnowski has acknowledged his liability. Among other things, he made a payment of 12,500 AED towards the loan less than two years before the Statement of Claim was issued.
D. CONCLUSION
[ 27 ] For the above reasons, I dismiss Mr. Sosnowski’s motion. The cross-motion is moot.
[ 28 ] As for costs, at the hearing, the parties delivered draft bills of costs. Had he been successful, Mr. Sosnowski would have claimed costs of $1,858.85 on a partial indemnity basis. The Watkins claimed costs of $4,943.25 on a partial indemnity basis.
[ 29 ] I award the Watkins costs of $2,500 all inclusive of fee, disbursements, and taxes.
[ 30 ] Order accordingly.
Perell, J.
Released: June 28, 2012
COURT FILE NO.: 11-CV-418307
DATE: 20120628
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Tim Watkins and Michele Watkins
Plaintiffs
‑ and ‑
Jason Sosnowski
Defendant
REASONS FOR DECISION
Perell, J.
Released: June 28, 2012