SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 12-38541SR

DATE: 2013-04-18

RE: B2B Trust, plaintiff

AND: Grant Pearce and Theresa Parker-Pearce, defendants

BEFORE: Mr Justice Ramsay

COUNSEL:
Mr Sharoon Gill for the defendant Parker-Pearce, moving

Mr C. Argiropoulos for the plaintiff

HEARD: 2013-04-17 at Hamilton

ENDORSEMENT

[1] The defendant Theresa Parker-Pearce moves to set aside default judgment on a mortgage.

[2] The defendant, as co-mortgagor with her husband and co-defendant, gave a mortgage to the plaintiff to secure a $50,000 loan that the husband used for his own business purposes. The defendant got no direct benefit. The defendants subsequently separated. The husband agreed to pay off the loan and have the mortgage discharged. He did not do so. Instead he went bankrupt.

[3] The plaintiff filed the action on December 15, 2012. On January 31, 2013 he noted the defendant in default. The defendant misread the notice about filing a statement of defence, but she made efforts to hire a lawyer and she communicated directly with the plaintiff. On February 6, 2013, having been notified of the default, the defendant hired a lawyer. The lawyer wrote to the plaintiff’s lawyer on February 11, 2013 to ask for consent to set aside the default. The next day the plaintiff’s lawyer wrote back inquiring as to the grounds for setting aside the order. The defendant filed the present motion, which first returned on March 7, 2013. In these circumstances I think that the defendant has explained the default and established that she moved promptly to set it aside.

[4] In order to succeed, she also has to establish that she has a defence. She does not need to prove her defence. It is enough if the defence has an air of reality and requires a trial: Watkins v. Sosnowski, 2012 ONSC 3836, per Perell J. at ¶24. This requirement is not meant to be enforced rigidly. I have to take into account the interests of justice as a whole and whether the opposite party will suffer prejudice: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd, 2007 ONCA 333. The Court of Appeal in Peterbilt and in Nobosoft Corp. v. No Borders Inc., 2007 ONCA 444 has made it quite clear that default judgments should normally be set aside whether or not the defaulting party has strictly met the traditional three part test, as long as it would be consistent with the interests of justice to do so. An example of a case in which setting aside the default judgment was not considered to be consistent with the interests of justice may be found in 1067609 Ontario Inc. (Turner's Garage) v. Schell, 2012 ONCA 310. In that case the defendants took a year to ask for relief, and then made their motion on the eve of the scheduled uncontested trial, after having been warned repeatedly that they had to take steps or face the consequences.

[5] In the circumstances of the present case, there is no procedural prejudice. The delay is slight and the plaintiff has not relied on the default to its detriment. Setting aside the notice of default will delay the plaintiff in recovering on the debt but that would only be unfair if there is no arguable defence.

[6] The defendant has drafted a proposed statement of defence, but has not filed it. I am told that it talks about the execution of the mortgage and the husband’s subsequent conduct, but makes no mention of any counter-claim against the lender. The prospect of a counterclaim has been mentioned in oral argument, but not with any clarity. A counter-claim might not result in setting aside the default anyway: the court could allow the default judgment to stand but stay its enforcement pending disposition of the counter-claim: Marleigh Aluminum Prod. Ltd v. Scott, [1960] O.W.N. 346 (H.C.J. Senior Master).

[7] To me the motion should be decided in favour of the defendant if any of the three proposed defences is arguable:

a. The defendant deposes that she was given no legal advice whatsoever when she executed the mortgage. Plaintiff’s counsel obtained documentation that proves that she did receive legal advice independent from the lender. She had the same lawyer as her husband, but they were not adverse in interest at that time. This defence has no air of reality.

b. The husband failed to live up to his obligation to the wife to discharge the mortgage. This has nothing to do with the lender or the validity of the mortgage and does not, in my view, constitute a defence to the plaintiff’s claim.

c. The debt has been paid. The defendant deposes that she had reason to believe that the debt had been paid, although she has no personal knowledge of it. She filed in evidence a letter dated October 31, 2011 from the lender, who was also trustee in bankruptcy for the husband, saying that the husband filed an assignment in bankruptcy on December 22, 2009 and was discharged on September 23, 2010. “All known creditors have been paid in full pursuant to Inspector’s authorization.” That statement is not necessarily correctly understood without the context of the correspondence to which it was replying. The defendant has not provided the context. However, taken with the materials as a whole, it does raise an arguable defence, even if the evidentiary basis upon which it is made is thin, and for all I know may yet be refuted in a motion for summary judgment or at trial.

[8] The default judgment is set aside. The defendant shall file a statement of defence within 20 days. The defendant was successful, but she is getting an indulgence. There will be no order as to costs.

J.A. Ramsay J.

Date: 2013-04-18