SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-454697

DATE: 20130226

RE: FRANK RASO, Plaintiff

AND:

CARLO COLACCI and SPOUSE OF CARLO COLACCI, Defendants

BEFORE: T. McEwen J.

COUNSEL:
Ronald B. Moldaver, Q.C., for the Plaintiff

Guillermo Schible, for the Defendants

HEARD: January 31, 2013

ENDORSEMENT

[1] The defendant Carlo Colacci (“Colacci”) brings this motion to set aside the noting in default against him as well as the default judgment of Swinton J. dated August 13, 2012.

[2] Colacci also seeks other relief which I will not deal with since it involves the action that he has commenced bearing Court File No. CV-12-455268. That action involves other defendants that were not served with the motion materials.

[3] With respect to the above-noted relief sought, the test to set aside a default judgment was aptly set out by Perell J. in Watkins v. Sosnowski, 2012 ONSC 3836, where he stated:

[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), 2005 46934 (ON CA), 78 O.R. (3d) 321 (C.A.); and Morgan v. Toronto (Municipality) Police Services Board, 2003 14993 (ON CA), [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. 132n (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), 2007 ONCA 333, 87 O.R. (3d) 479 (C.A.).

[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, 2007 14304 (ON SC), [2007] O.J. No. 1609 (S.C.J.); Maplecrete Group Ltd. v. Canning Contracting Ltd., [2009] O.J. No. 2456 (Master); Bank of Montreal v. Chu (1994), 1994 7246 (ON SC), 17 O.R. (3d) 691 (Gen. Div.); Cherry Central Cooperative Inc. v. D’Angelo (2001), 2001 27940 (ON CA), 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), 1994 7246 (ON SC), 17 O.R. (3d) 691 (Gen. Div.); Hunt v. Brantford (City) (1994), 34 C.P.C. (3d) 379 (Gen. Div.); Grieco v. Marquis (1998), 1998 14662 (ON SC), 38 O.R. (3d) 314 (Gen. Div.).

[4] This action concerns the claims of the plaintiff Frank Raso (“Raso”) with respect to the non-payment of Colacci’s mortgage debt to Raso. There is no question that Colacci has refused to pay the mortgage. As a result, Raso commenced this action which was not defended by Colacci. Raso obtained default judgment. Colacci has deposed that he was not aware of the action or aware that he had been noted in default. I accept that he has brought the motion without delay.

[5] Insofar as his awareness of the claim is concerned, Colacci has deposed in his affidavit that for a number of reasons, largely surrounding his own ill health, he did not become aware of the Statement of Claim. In my view, Colacci’s assertion that he would have defended the claim had he been fully aware of it is supported by the fact that in or about the same time he was served with the Statement of Claim he was in the process of commencing, and has subsequently commenced, an action against Raso and others concerning the subject property. Specifically, Colacci claims that, amongst other things, Raso made a number of representations and warranties to Colacci that induced him to purchase the subject property.

[6] Based on the above, Colacci argues that he is entitled to plead equitable setoff, amongst other defences, in response to this action. Counsel for Raso concedes that Colacci has an arguable claim to equitable setoff.

[7] Based on my review of the record, I agree with Colacci that he has provided a plausible explanation for his default given his health issues. This argument is buttressed by the fact that he was in the process of instituting his own action which demonstrates that he took issue with the proposition that the monies were owed to Raso on the mortgage. I also find that the evidence adduced at the motion establishes an arguable defence. In my view, the interests of justice favour setting aside the noting of default and the default judgment.

[8] A great amount time was spent at the motion dealing with the form of the order if I were inclined to accept the arguments of Colacci.

[9] Counsel for Raso submits that the Order of Swinton J. should not be set aside but rather stayed and that a term of my Order should be that Colacci pay Raso the amount of $150,000.

[10] Colacci submits that the Order should be set aside and he is prepared to pay $250,000 into court. The amount of the current judgment is approximately $238,000 but interest is accruing at the rate of 28% per annum.

[11] In the circumstances, although I believe that there is merit to Raso’s submission that the money be directly paid to him, particularly given the fact that the interest rate is running at 28%, I am not inclined to do so. In my view, this would invoke a form of summary judgment that I think would be inappropriate.

[12] Rather, it is reasonable in my view that Colacci pay the amount of $250,000 into court. Further, the Order of Swinton J. should be set aside as opposed to stayed. This is typically the remedy. Further, by simply staying the Order, complications may arise down the road that I cannot yet foresee if Colacci is successful with respect to the action he has commenced. It would make more sense to start afresh with respect to both actions.

[13] Given the circumstances, however, I accept Raso’s submission that he ought to be awarded partial indemnity costs. It was certainly reasonable that Raso should oppose this motion given what has transpired.

[14] I therefore order that the noting in default be set aside and the Order of Swinton J. dated August 13, 2012 be set aside on the condition that Colacci pay into court the amount of $250,000 within 15 days of the date of the Order being taken out. Colacci is to move expeditiously to ensure that the Order is approved as to form and content so that it may be taken out forthwith and the monies paid into court. If there are any difficulties in this regard, I can be spoken to. Colacci is also to deliver his Statement of Defence within 15 days of the Order being taken out.

[15] I have reviewed the costs outline submitted by Raso. It is reasonable. Colacci is therefore to pay Raso costs of the motion in the amount of $8,918.72 within 30 days.

T. McEwen J.

Date: February 26, 2013