SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-09-4246-SR
DATE: 2012-02-10

RE: FEELIX YOGA EPS INC. and EQUITY THREE HOLDINGS INC.

BEFORE: Justice M. J. Donohue

COUNSEL: John Russo, for the Applicant
Respondent Self-represented

ENDORSEMENT

ISSUES

[ 1 ] The defendant seeks an order setting aside default judgment obtained November 23, 2009.

[ 2 ] In the alternative, the defendant seeks to vary the award of $72,822.72 to $53,718.00 (to exclude the 36% pre-judgment interest included in the claim).

COSTS

[ 3 ] The plaintiff (responding party) seeks an order dismissing the motion with costs.

[ 4 ] The plaintiff proposes to forego the interest rate of 36% on the claim if the court finds an arguable defence on this issue and claim either 6% as per the judgment or 5% as per the Interest Act .

FACTS

[ 5 ] The plaintiff and defendant entered into a property management agreement whereby the plaintiff would provide property management services to the defendant for 3085 Hurontario Street, Mississauga. The defendant agreed that the services were provided.

[ 6 ] The plaintiff provided the services from January 2007 to December 2008. Invoices were rendered. All were paid except for $10,710.00 on the August 2008 invoice and no payments were made for October, November or December 2008. The amounts total $53,718.00.

[ 7 ] Some of the invoices claimed 3% per month or 36% per annum. The plaintiff acknowledged that was never agreed to by the defendant.

[ 8 ] The plaintiff sought to execute the judgment and garnishment materials were served in August 2010.

LITIGATION

[ 9 ] On September 18, 2009, the plaintiff issued its statement of claim. On October 21, 2009 the statement of claim was served on the defendant. The Statement of Defence was due 20 days later on November 10, 2009.

[ 10 ] On November 23, 2009, default judgment was obtained by the plaintiff for $72,822.72 plus $1,157.45 for costs.

[ 11 ] On November 23, 2009, the defendant’s principal, Mr. Ash Singh, advised by email that they were planning to defend the action.

[ 12 ] On November 25, 2009, the plaintiff’s counsel e-mailed the defendant’s principal, Mr. Singh, and advised that the defendant had already been noted in default and the default judgment had been requisitioned before receipt of Mr. Singh’s e-mail.

[ 13 ] No motion was served on the plaintiff to set aside the default judgment until January 16, 2012. It was September 2011 before the defence arranged for a long motion date with the court.

[ 14 ] Over the course of that 25 month period, the defendant took various courses of action:

(a) they sought consent to set aside the default judgment but were denied as early as January 27, 2010;

(b) they sent a draft statement of defence for the plaintiff to consider as late as May 2, 2011;

(c) they sought an order setting aside the default by way of a counterclaim in a companion action of Triple C. v. Equity Three Holdings, Court File CV-10-269-00; much of the counterclaim was dismissed by Seppi J. June 30, 2011. I understand the defendant has not actively pursued that portion of the counterclaim relating to setting aside the default.

LAW

[ 15 ] A judgment against a defendant noted in default may be set aside or varied under Rule 19.04 of the Rules of Civil Procedure.

[ 16 ] The judge, before exercising such discretion, is to consider a three part test. (I note the Court of Appeal’s 2008 decision of HSBC Securities Canada Inc. v. Firestar Capital Management Corp. :

Whether the motion was brought without delay after the defendant learned of the default judgment;

Whether the circumstances giving rise to the default were adequately explained; and

Whether the defendant has an arguable defence on the merits.

[ 17 ] Regard must be had for the relative prejudice that results to the parties and in consideration of the administration of justice as a whole.

A. Was the motion brought without delay

[ 18 ] The litigation history and evidence in the affidavits shows that the defendant advised it would be seeking to set aside the judgment. They do not do so month after month.

[ 19 ] I find that it was not done “as soon as possible” or “without delay”.

[ 20 ] The fact that the defendant wished to set it aside does not satisfy this test.

[ 21 ] The motion was actually served in January 2012, a total of 25 months after the defendant was aware of the default.

B. Whether the circumstances giving rise to the default were adequately explained

[ 22 ] The defendant’s affidavit material dated January 12, 2012 states the claim did not come to his attention “for a number of weeks” – Para. 14. He was then noted in default November 23, 2009.

[ 23 ] There is, however, an e-mail from Mr. Singh, dated November 30, 2009, (Exhibit No. K to the affidavit of Feelix Yogaretnam of January 19, 2012), stating that they wanted an extension (after the fact) as they were awaiting Justice Lemon’s ruling (released November 16, 2009). [Justice Lemon ruled in another action on what amount of rent was payable by The Church of Our Lady Fatima, owned by the plaintiff, to the defendant Equity Three Holdings Inc. based on interpreting the terms of their lease.]

[ 24 ] I do not find how this explains the default.

[ 25 ] The fact that there was other litigation ongoing regarding other issues does not adequately excuse the defendant from putting in a statement of defence or notice of intent to defend in this claim, which is a claim for payment of services rendered.

[ 26 ] The defendant was no stranger to the court system, already had consultations with lawyers and was in a position to deal with this promptly.

[ 27 ] The evidence speaks rather to a deliberate delay and deliberate default.

C. Whether the defence has an arguable defence on the merits

[ 28 ] The evidence provided by the defence is the affidavit of Mr. Ash Singh, including exhibits.

[ 29 ] To consider whether there is a defence on the merits, the principles applicable in a motion for summary judgment should be considered in assessing whether a default judgment ought to be set aside. They are:

(1) whether there is a genuine issue for trial;

(2) whether the defence has an air of reality in “light of the evidence”; and

(3) whether there are real credibility issues relating to important facts. See Bank of Montreal v. Chu , 1994 7246 (ON SC) , 1994 O.J. No. 388.

D. Merits of the defence

(i) The bulk of the plaintiff’s claim is for property services contracted for; services that the defence agreed were provided; services that were billed by the defendant landlord to the tenants; and services that the plaintiff is owed.

[ 30 ] Nothing in the statement of defence sensibly contradicted the above facts regarding most of the claim.

(ii) Defence alleges that the plaintiff paid for unauthorized property repairs that a tenant should pay, which are not the landlord’s responsibility.

[ 31 ] This alone has the air of reality, a possible defence. The two invoices are Leon Refrigeration $10,710.00 and Marbo Incorporated $6,142.50. These total $16,852.50.

[ 32 ] In the interests of justice, I am prepared to vary the judgment to allow the defendant to defend that portion of the claim against it. In light of the amount, I will direct the matter be transferred to Small Claims Court for adjudication.

(iii) The 36% interest is not justified.

[ 33 ] The defence argued that Equity demands that interest rate be set aside. The evidence is that 3% per month was unilaterally added to some of the invoices.

[ 34 ] In the interests of justice, I order that the judgment be reduced to attract pre-judgment interest of 5%.

CONCLUSION

[ 35 ] The judgment is varied to give the plaintiffs partial judgment in the amount of $36,865.50 ($53,718.00 - $16,852.50) plus 5% interest.

[ 36 ] The balance of the default judgment is set aside insofar as the two claims for the invoices totalling $16,852.50. The defendant shall file a statement of defence within 20 days.

[ 37 ] The action is to be transferred to the Small Claims Court for adjudication.

COSTS

[ 38 ] I ask for each party to provide submissions, not more than 3 pages, within 14 days.

M. J.Donohue J.

DATE: February 10, 2012

COURT FILE NO.: CV-09-4246-SR
DATE: February 10, 2012

SUPERIOR COURT OF JUSTICE - ONTARIO RE: FEELIX YOGA EPS INC. and EQUITY THREE HOLDINGS INC. BEFORE: Justice M. J. Donohue COUNSEL: John Russo, for the Plaintiff Respondent Self-represented ENDORSEMENT M. J.Donohue J.

DATE: February 10, 2012