REASONS FOR DECISION

COURT FILE NO.: CV-12-03165-00
DECISION: 20121212
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Tribecca Finance Corporation, Yogesh Shah, and Rita Shah, Plaintiffs

AND:
Ani Tabrizi and Haroutioun Tabrizi, Defendants

BEFORE: MILLER, J.

COUNSEL:
R. Macklin, for the Plantiffs
R. Piehler, for the Defendants

HEARD: December 11, 2012

REASONS FOR DECISION

[ 1 ] This is an action in a second mortgage. The Plaintiffs allege that the Defendants defaulted on the mortgage. A Statement of Claim was issued July 24, 2012. It was served on both Defendants by July 28, 2012. The Defendants served a Notice of Intention to Defend on July 31, 2012. They did not serve a Statement of Defence. They were noted in default September 17, 2012. Default Judgment was granted October 10, 2012.

[ 2 ] The Defendants move to set aside the noting in default and the default Judgment.

[ 3 ] In a letter dated August 6, 2012 counsel for the Defendants wrote to counsel for the Plaintiffs of the Defendants’ intention to serve and file a Statement of Defence and a desire to discuss the matter with a view to resolution before doing so.

[ 4 ] It is not disputed that counsel for the Plaintiffs, Paul DiFrancesca, and counsel for the Defendants, Joseph Maggisano, spoke on the telephone August 15, 2012 about the matter. Mr. Maggisano deposes that he asked for and was granted an indulgence by Mr. DiFrancesca in respect of filing the Statement of Defence .He deposes that Mr. DI Francesco told him “take your time”. Mr. DiFrancesca deposes that he granted no indulgence.

[ 5 ] There was no correspondence between the parties or their counsel between August 15, 2012 and September 17, 2012 when the Defendants were noted in default. That same day, a Notice of Change in Solicitors (for the Defendants) was served on Mr. DiFrancesca.

[ 6 ] New counsel for the Defendants was unable to contact Mr. Maggisano despite many attempts to do so, so sent a letter October 5, 2012 to Mr. DiFrancesca asking whether Mr. Maggisano had served a Statement of Defence. Mr. DiFrancesca did not respond to the letter or to subsequent voicemails. After Default Judgment had been granted October 10, 2012, new counsel for the Plaintiffs served a Notice of Change of Solicitor October 11, 2012.

[ 7 ] Rule 19.03(1) of the Rules of Civil Procedure provides that the noting of default may be set aside by the court on such terms as are just.

[ 8 ] Rule 19.08(1) provides that a judgment against a defendant who has been noted in default that is signed by the registrar may be set aside or varied by the court on such terms as are just.

[ 9 ] Rule 19.08(3) provides that on setting aside a judgment under subrule (1) the court or judge may also set aside the noting of default under rule 19.03.

[ 10 ] The Defendants argue that given the clear intent to defend, counsel for the Plaintiffs should have, as a professional courtesy, contacted counsel for the Defendants before seeking to have the matter noted in default.

[ 11 ] The Defendants further argue that had counsel for the Plaintiffs responded to their correspondence of October 5, 2012, they might have been able to move to set aside the noting of default before default judgement was granted. The Defendants seek to set aside the default judgment and the noting in default to put the parties back in the position they would have been had counsel for the Plaintiffs acted properly.

[ 12 ] The Defendants argue that even if Mr. Maggisano was at fault for failing to follow up on the conversation he had with Counsel for the Plaintiffs on August 15, 2012, that should not be visited on the Defendants by removing their ability to argue the case on its merits.

[ 13 ] The Defendants argue that they have shown that there is an arguable defence on the merits which they should be permitted to put forward.

[ 14 ] The Plaintiffs argue that there is no arguable defence on the merits and point to the fact that even today they have not received a draft Statement of Defence. The Plaintiffs argue that if the Court is considering granting the motion, to be fair to both parties the Court should protect the interests of the Plaintiffs by preserving the Plaintiffs (presently stayed) leave for a writ of possession or by requiring the Defendants to make interest payments on the mortgage pending the completion of the litigation.

[ 15 ] I am in agreement with the comments of the Ontario Divisional Court in Garten v. Kruk 2009 58071 (ON SCDC) , [2009] O.J. No 4438 in overruling the decision of Master to decline to set aside a noting of default. At paragraph 24 the Court noted that the Master did not consider the questionable conduct of plaintiff's counsel. Counsel failed to advise either verbally or in writing the defence counsel of his intent to note the defendant in default if the statement of defence was not filed. The Court held, at paragraph 29, that counsel for the plaintiff had a professional duty to advise opposing counsel before taking steps to note the defendant in default.

[ 16 ] The error was further compounded in this case, , I find, by the failure of counsel for the Plaintiffs to contact new counsel for the Defendants, once served with the Notice of Change in Solicitor September 17, 2012 and again further when they failed to respond to the correspondence of October 5, 2012 until after the default judgment had been issued.

[ 17 ] It is just, in my view, to set aside the default judgment and the noting in default in this case. I have considered whether there should be terms on the Defendants requiring them to give up possession of the subject property or to pay interest on the mortgage pending disposition of the litigation. I conclude it would not be just to do so.

[ 18 ] The noting of default September 17, 2012 and the default judgment of October 10, 2012 are set aside. The Defendants are ordered to serve and file their Statement of Defence within 20 days of this decision being released.

[ 19 ] The parties may exchange and file written submissions as to costs, if necessary, no later than January 15, 2012.

MILLER J

Date: December 12, 2012