Court File and Parties
COURT FILE NO.: 11-CV- 420205T
Heard and partially decided: October 7, 2014
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Tobias v. Di Carlo et al.
BEFORE: Master Joan Haberman
COUNSEL:
Pochmurski, T. for the moving parties
Neirinck, M.J. for the responding party
REASONS
Master Haberman:
[1] Donato Di Carlo (“Donato”) and his daughter, Rosanna Di Carlo (“Rosanna”) move to set aside default judgments obtained against them on August 17, 2011 and October 6, 2011 respectively. Rosanna also seeks payment out of the residual funds from the sale of her property at 40 Park Drive, Vaughn, currently held in trust pending the outcome of this motion.
[2] At the conclusion of the hearing on October 7, 2014 I dismissed Rosanna’s motion to set aside the default judgment obtained against her. During the course of the hearing, her counsel made no submissions regarding the funds in trust nor did he address the issue in his factum. I therefore infer that his view accords with mine, such that the outcome of the motion, insofar as the default judgment was concerned, should determine the fate of those funds. Accordingly, Rosanna`s motion is dismissed in its entirety.
[3] In these Reasons, I explain how I reached this decision and I deal with why I have also decided to dismiss Donato`s motion.
THE LAW
[4] The motions proceed under Rule 19.08, which essentially gives the court discretion to set aside a default judgment signed by the registrar on terms that are just. While the Rule, itself, provides little guidance, case law has established how the court should approach such a motion.
[5] As a starting point, the cases distinguish between situations where the default judgment has been irregularly obtained, and those obtained in the normal course. While there are no defined parameters for what constitutes an irregularly obtained judgment, the cases suggest that the focus should be on the judgment, and on the manner in which it was obtained. This approach is most often seen in cases where there are issues concerning the validity of service of the initiating process.
[6] Thus, in Royal Trust Corp of Canada v. Dunn (1961), 1991 7227 (ON SC), 6 OR (3d) 468, Borins, J. noted that where judgment has been irregularly obtained, default judgment will normally be set aside as of right and there is no test to be met in order to achieve that result. The use of this language and the qualifier, “normally” suggests that there can be deviation from the norm.
[7] In Dawson’s Marina Ltd. v. Telfer, 2005 CarswellOnt 9966, Herman J was asked to set aside a default judgment irregularly obtained. There, the statement of claim had been given to the law firm that acted for the defendant in another matter, and the firm wrote a notation on the back of the pleading to indicate that they accepted service on behalf of all defendants. They failed to state, however, that they were solicitors for the defendants in the particular case in issue and Telfer then denied having received the materials.
[8] It was therefore unclear if Telfer been properly served with the statement of claim and, on that basis, the judge found default the judgment had been irregularly obtained and she set it aside automatically without Telfer having to cross further hurdles. Improper service is an obvious example of how a judgment can be seen to have been irregularly obtained.
[9] Where judgment has been regularly obtained, the court is directed to consider certain factors when exercising its discretion. Those factors include (see Nu-Fish Import Export Ltd. v. Sunsea Import Export Ltd. (1997), 1997 12270 (ON SC), 35 OR (3d) 153; Cohen Estate v. Cohen, 2014 CarswellOnt 1522):
Whether the motion to set aside has been brought without undue delay;
If the circumstances leading to the default have been explained and the explanation is acceptable; and
Whether the defendant has demonstrated that there is a triable issue on the merits. In the normal course, that involves filing a draft statement of defence on the merits, which allows the court to assess the strength of the defendant’s assertions in the context of whether what they say is legally tenable and supportable by the evidence filed on the motion.
[10] In Karas v. Gegios 2001 CarswellOnt 577, Nordheimer J. dealt with issues (1) and (3) and found that a 5-month delay between the defendants becoming aware of the default judgment and launching the motion to set aside the default judgment was excessive. He also noted that none of the affidavits filed by the defendant asserted that they had a good defence on the merits and the absence of a draft statement of defence was found to be problematic.
[11] As is the case generally when the court develops a list of factors, it is not expected that they be applied in a rigid fashion. Further, all three needn’t be satisfied before a defendant can succeed on the motion. A more contextual approach is needed so the court is bound to examine the factors but then move beyond them to balance the equities between the parties.
[12] Thus, in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 CarswellOnt 2713, the Court of Appeal noted that, in addition to the factors referred to in the authorities, the court had to consider whether the interests of justice favour setting aside the default judgment. In that context, they stated that the court should have regard to any potential prejudice the moving party will suffer if the motion is dismissed; any potential prejudice to the responding party if the motion is allowed and the effect of any order on the overall integrity of the administration of justice.
[13] It is important to note that the defendant’s onus when moving to set aside a default judgment is not as light as it would be if the motion simply involved setting aside a noting in default before judgment is obtained. The case law is clear that, in the latter case, obtaining the relief sought is a fairly straightforward exercise. As noted by the Divisional Court in Garten v. Kruk, 2009 58071:
…motions to set aside a noting of default are generally granted in the usual case. The Courts should strive to grant reasonable accommodations and allow disputes to be resolved on their merits. Matters should not be determined based upon a technical default.
[14] There is no three-part test in that instance, so the burden on the moving party is considerably lighter if the matter is caught before judgment has been rendered. Here, however, judgment has been granted, so a more stringent approach applies.
THE EVIDENCE: CHRONOLOGY and COMMENTARY
[15] A lengthy and complicated saga precedes the Di Carlos` appearance in court on these motions. A close look at the chronology of events is critical in order to understand the interplay between the parties; assess whether the explanations provided by each for their current plight can withstand close scrutiny and determine if the considerable delay in getting this matter before the court after the judgments were obtained should be excused. This review will also facilitate the balancing of interests and the impact on the integrity of the administration of justice.
Backstory
[16] Rosanna was married to Kevin Lisso (“Lisso”) at the outset of these events. Lisso found himself in some financial difficulty and in December 2008, he borrowed $350,000 from the plaintiff, Stephen Tobias (“Tobias”). Lisso was ultimately petitioned into bankruptcy sometime before the spring of 2011 (according to plaintiff’s counsel, this occurred in May, 2011)
[17] Though neither Donato nor Rosanna have been precise about the dates of so many of these important events in their affidavit evidence, when cross-examined, Rosanna stated that she and Lisso separated in December 2008, so either a few days before or after the Tobias loan was made.
[18] In early 2010, Rosanna advised Donato about Lisso’s financial problems, adding that he owed Tobias a substantial amount of money on a loan.
[19] Donato is currently in his early 70’s, having arrived in Canada in 1963. He completed grade 5 before immigrating and he worked as a carpenter from the time of his arrival until he retired at age 60. He and his wife live in the home they bought in Vaughn about 30 years ago.
[20] Donato does not go so far as to state that he is illiterate, but he does claim that, though he can speak and understand English well enough to get by on a day by day basis:
…my knowledge of the language is not sophisticated enough to be able to express myself adequately in the context of a legal proceeding such as this one, or to be able to fully understand questions asked of me in a legal context. I also have limited ability to read and write English. I feel I would be in a better position to understand what is asked of me in the context of this case, and to express myself properly with respect to the matters have explained herein, if I have the assistance of an Italian interpreter.
[21] Elsewhere in his affidavit, Donato says that
…it was not unusual for me to rely on my daughter or my son, or even my son-in-law, to take care of financial or other matters for me. Throughout their marriage, both my daughter and Kevin, as well as my own son, would help my wife and I in understanding our bills, writing out cheques, going to the bank, reviewing documents, letters or agreement, or attending at doctors’ or lawyers’ offices with us.
[22] It appears that Donato has insight into his limitations in the English language, an important point that I will return to.
[23] Rosanna makes no such claim. She was apparently born and educated in this country and, on cross examination, she indicated that she worked for a time in real estate, so she clearly does not share her father’s limitations.
[24] The law suit underlying these motions concerns repayment of the Tobias loan, which was secured by a promissory note and mortgages on three properties; as follows:
40 Park Drive, Vaughn, previously owned by Rosanna and Lisso, which was sold in February 2012 to pay creditors. After the first mortgage was paid off, there was something left for Tobias but not enough to retire the loan. Those are the funds currently in trust, the subject of Rosanna’s motion;
194 Monsheen Drive, Vaughn, owned in its entirety by Rosanna; and
186 Monsheen Drive: though it appears that Lisso funded the purchase of this property, Donato was identified as its sole the sole legal owner. Donato claims that he held the property in trust for Lisso at Lisso’s request. This property was sold in August 2010.
[25] Rosanna and Donato have recently claimed that their signatures on the original mortgage documents, executed in 2008, were forged, likely by Lisso. On that basis, they claim that the judgments against them were irregularly obtained and should be set aside as of right.
[26] The second string to their “irregularity bow” involves their assertion that default judgment was obtained without their knowledge or instructions. In that regard, they cast blame on their lawyer, Frank Mendocino. Apparently, he is being sued by them in a separate action, along with other counsel who has represented Rosanna from time to time.
[27] Both defendants concede that their signatures appear on several documents executed in 2009 and 2010, in which they both acknowledge that the debt secured by the mortgages remained outstanding and that they are responsible for repaying it.
[28] Rosanna gave several and different explanations for having signed these acknowledgements in her various affidavits and when cross-examined. At one point, she stated that she didn’t know her signature had been forged on the 2008 mortgage document and that had she known, she would never have signed. At other times, she claimed that she signed to ensure that her father would not be pursued, by Tobias, who she claims had agreed to leave Donato out of this if she ensured that Tobias was paid in full.
[29] Donato’s explanation for signing the various acknowledgments is that he signed what his daughter gave him to sign, as he wanted to help her. He claims she never told him that by signing, he would become personally liable to repay the loan to Lisso. Donato therefore walked in with his eyes closed, aware that he needed assistance comprehending legal language, assistance which he did not seek.
[30] To complicate matters further, this action was dismissed by the court as abandoned in error in October 2011. Though both defendants were notified of the dismissal, both claim that neither was told by the court that the dismissal had been extinguished. They rely on this, too, as a basis for having done nothing to de fend the action or deal with the default judgments once they learned of their existence. Of course, the dismissal order issued well after the acknowledgements have been signed so it is not clear how this court error can be relied on to address this issue.
[31] Donato’s evidence throughout is fairly clear and straightforward. For the most part, he claims he relied on what his daughter told him because he wanted to help her as he had done in the past. Rosanna does not dispute what he says in that regard.
[32] Rosanna, on the other hand, weaves her story through 4 successive affidavits, going back and forth in time, so it is difficult to get a clear picture of what happened when. Key dates, such as when she separated from Lisso and when he declared or was petitioned into bankruptcy, have been omitted. On more than one occasion, Rosanna’s sworn statement is contradicted by the documents she appends to support it. She is prone to declaring what did not occur, without explaining what did, and she presented conflicting evidence on critical points. In the absence of a draft statement of defence, this presentation has made it all the more difficult to get a good grip on whether she in fact has a defence to the action that raises a triable issue.
[33] Locating documents within her 4 affidavits also presented a challenge as none are described in their respective index. This lengthened both the hearing and writing time.
(continues exactly as in the source text)
Master Joan M. Haberman
Released: November 20, 2014