NEWMARKET

COURT FILE NO.: CV-13-113243-SR

DATE: 20140818

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mondial Granite and Marble Inc., Plaintiff (Responding Party)

AND:

Gayatri Sharma, Yogesh Kumar Sharma, Swapnika Yvas, also known as Twinkle Yvas, Guarav Yvas, Baldev Singh, Vijay Mamta and Overseas Marble & Granite Inc., Defendants (Moving Parties)

BEFORE: THE HON. MR. JUSTICE G.M. MULLIGAN

COUNSEL:
T.D. Kerr, Counsel for the Plaintiff (Responding Party)

S. Keser, Counsel for the Defendants (Moving Parties), Gayatri Sharma, Yogesh Kimar Sharma, Swapnika Yvas, (also known as Twinkle Yvas), and Guarav Yvas

HEARD: August 12, 2014

ENDORSEMENT

[1] The defendant, Swapnika Yvas, known as Twinkle Yvas, (“Twinkle”) brings a motion to set aside a default judgment entered against her April 23, 2013. The plaintiff, Mondial Granite and Marble Inc. (“Mondial”) opposes the relief sought.

[2] The plaintiff issued a Statement of Claim against various defendants on the 20th day of February, 2013. The defendant, Twinkle, was served with the Statement of Claim. No defence or Notice of Intention to Defend having been filed, the plaintiff signed default judgment on April 23, 2013 for $105,115.83 plus costs.

[3] Two days later, on April 25, counsel for Twinkle served a Notice of Intention to Defend on counsel for the plaintiff, and then learned that default judgment had been obtained against this defendant.

[4] Counsel requested consent to set aside the default judgment. Although there was much correspondence back and forth between counsel, consent was not forthcoming. On June 7, 2013, counsel for the defendant requested available dates in June and July for a motion to set aside the default judgment. Counsel for the defendant also sent a draft Statement of Defence. On July 16, 2013, counsel for the defendant sent a draft of the proposed Motion. Plaintiff’s counsel provided some August dates for availability. However, it appears that the matter went in to abeyance. Defendant’s counsel took no further steps to advance the matter until its motion record was filed on March 28, 2014.

Position of the Defendant Twinkle

[5] It is the defendant’s position that the court should exercise its discretion to set aside the default judgment. Counsel submits that the defendant always intended to defend the action as evidenced by the Notice of Intention to Defend, which was served after the default judgment, and the subsequent service of the proposed Statement of Defence, as well as the draft Notice of Motion, evidently prepared in July of 2013. The defendant further submits that it would be an injustice to allow the default judgment to stand against her when she clearly intended to defend this action and made it known to the plaintiffs shortly after the default judgment was signed. She submits that she has a good defence to the action. The defendant further submits that any prejudice to the plaintiff can be compensated by way of costs if the judgment is set aside.

[6] The plaintiff opposes the setting aside of the default judgment on the basis that the motion was not brought promptly after the default was brought to the defendant’s attention, and there is no satisfactory explanation for the delay. The plaintiff further submits that it would be prejudiced if the judgment is set aside, and it has been frustrated in efforts to conduct examinations of the other defendants represented by the same counsel. Some of the other defendants have filed for bankruptcy. The plaintiff also argues that the Statement of Defence is a mere bald denial of the claim against this defendant.

The Statement of Claim and the Statement of Defence

[7] The Statement of Claim was issued against a corporate defendant and various other personal defendants, including the defendant, Twinkle. The plaintiff contracted with a company called Albano International Inc., however, it went into bankruptcy and was not named as a defendant in this action. The plaintiff claimed in its Claim at para. 12:

The defendants Gayatri, Yogesh, Twinkle and Singh were at all material times an officer and/or director, and/or owner, and/or shareholder, and/or the person having effective control of Albano Inc. and Overseas Inc.

[8] The Statement of Defence denies the claim against various defendants, including Twinkle, and sets out at para. 4:

In an attempt to pierce the corporate veil, Mondial has alleged in the action, inter alia, fraud, misrepresentation, and breach of trust. The defendants, Gayatri, Yogesh, Swapnika [Twinkle], and Guarav, deny all allegations as contained in the action.

As to this defendant, the Statement of Defence states at para. 11:

Swapnika [Twinkle] was not employed by Albano during the period of supply, but rather a company called All About Furniture. Swapnika did not have any decision-making authority at Albano during the period of supply.

[9] The Statement of Defence further denies that Twinkle embezzled or misappropriated any funds of the company, nor was there any breach of trust pursuant to the Construction Lien Act. The defence sets out at para. 49, “Mondial is attempting to recover the outstanding account from the defendants as it is unable to recover the same from Albano.”

[10] There is nothing in the Statement of Claim to indicate that Twinkle signed any documents with respect to the account to the plaintiff, or had any direct dealing with the plaintiff.

Analysis

[11] Rule 19.03(1) of the Rules of Civil Procedure provides: “The noting of default may be set aside by the court on such terms as are just.” The test for setting aside a default judgment is well known and was recently canvassed by Gillese J.A. of the Ontario Court of Appeal in Mountain View Farms Limited v. McQueen, [2014] ONCA, 194. As Her Honour stated at paras. 47-48:

[47] The Court’s ultimate task on a motion to set aside a default judgment is to determine whether the interests of justice favour granting the order.

[48] The Court must consider the following three factors:

(a) whether the motion was brought promptly after the defendant learned of the default judgment;

(b) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; and

(c) whether the facts established that the defendant has an arguable defence on the merits.

[12] Her Honour also added two more points to this list. As she stated at para. 49:

To this list, I would add the following two factors the Court should have regard to …

(d) the potential prejudice to the moving party, should the motion be dismissed, and the potential prejudice to the respondent, should the motion be allowed; and

(e) the effect of any order the motion judge may make on the overall integrity of the administration of justice.

[13] The presence of an arguable defence can weigh heavily in the equation when all factors are considered by the court for setting aside a default judgment. As Justice Gillese stated in Mountain View, supra, at paras. 50-51:

[50] These factors are not to be treated as rigid rules; 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.

[51] For instance, the presence of an arguable defence on the merits 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. In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.

Conclusion

[14] I am satisfied that the default judgment should be set aside as against the defendant, Twinkle. In making that determination, I have considered the factors above noted. The Statement of Claim and Statement of Defence weighs heavily on this analysis. There is nothing in the Statement of Claim to directly tie this defendant to the obligations between the plaintiff and Albano. In order to be successful, the plaintiff would have to show that this defendant was an officer of the company or committed a breach of trust under such circumstances as would obligate her to the plaintiff. This is the very conduct denied by this defendant. It would be unjust to allow the judgment to stand against this defendant, given that she attempted to file a Notice of Intent to Defend and raised the issue promptly of a proposed motion to set aside the default judgment, and sent a draft Statement of Defence. Although there was a period of inactivity for several months until the motion was filed in March of 2014, I give this factor less weight when I consider the arguable defence on the merits. There is real prejudice to the plaintiff if the default judgment is not set aside. In addition, I am not satisfied that there is any prejudice against the plaintiff which cannot be addressed by compensating the plaintiff for costs thrown away.

[15] The plaintiff has asked for security for costs in response to this motion. However, I am not prepared to deal with that issue today. It can be the subject matter of a proper motion brought by the plaintiff if so advised, with an opportunity for the defendant, Twinkle, to respond.

Costs

[16] The defendant has been successful in this motion, but has been granted an indulgence by the court and the defendant does not seek costs. I am satisfied that the plaintiff should have its costs thrown away. I fix those costs at $3,000, payable within thirty days. The payment of those costs by the defendant Twinkle is a condition precedent to the order setting aside the default judgment.

MULLIGAN J.

Date: August 18, 2014