COURT FILE NO.: 6779/13
DATE: 2014/12/30
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Raymond I. Ravazzolo and
Magdalene Ravazzolo
Angelo P. Fazari, for the Plaintiffs (Responding Parties)
Plaintiffs
(Responding Parties)
- and -
Dwayne F. Romaniuk, Bank of Montreal c.o.b. BMO, Lorne Bayne, Toronto-Dominion Bank c.o.b. as TD Canada Trust and Manulife Securities Incorporated
J. Ross Macfarlane, for the Defendant Dwayne F. Romaniuk (Moving Party)
Defendants
HEARD at Welland, Ontario: September 30, 2014
The Honourable Justice T. Maddalena
ORDERS ON MOTION
The Issues
[1] The issues for adjudication by this court on this long motion are as follows:
Should the court grant an order setting aside the noting in default of the defendant, Dwayne F. Romaniuk (hereinafter referred to as “Romaniuk”), dated May 14, 2013?
Should the court grant an order setting aside the default judgment against Romaniuk dated August 2, 2013 in the amount of $101,347.87 together with pre and post-judgment interest?
Should the court grant an order setting aside notices of garnishment and writs of seizure and sale issued by the plaintiffs (hereinafter also referred to as “Ravazzolo”) against the defendant Romaniuk?
Background
[2] The plaintiffs are spouses of one another and at the time of the motion were ages 81 and 80 respectively. The plaintiffs’ daughter, Mary Louise Ravazzolo, was married to the defendant Romaniuk, but the parties separated in April 2009.
[3] The defendant Romaniuk was at all material times an investment and wealth management advisor, first for Berkshire Securities Inc. In May 2008 Berkshire Securities Inc. was either acquired or amalgamated with Manulife Securities Incorporated, and Romaniuk continued his employment with Manulife Securities Incorporated at all material times.
TD Loan Agreement Dated May 3, 2001
[4] In the year 2001 Romaniuk decided that he would purchase a book of clients from a co-worker at Berkshire Securities, Edward Bobko (hereinafter referred to as “Bobko”). For this he required a $250,000 loan.
[5] At this time Romaniuk was managing a portfolio for his in-laws, the plaintiffs. The plaintiffs state that Romaniuk induced and coerced them to cosign a bank loan in favour of TD Canada Trust in the amount of $250,000 and, in addition, to pledge their mutual funds as collateral security for the loan. Romaniuk states the plaintiffs did this willingly in order to help their daughter, who was at the time the spouse of Romaniuk. Further, Romaniuk insists that the plaintiffs received proper independent legal advice from Mr. King, a lawyer in Niagara-on-the-Lake (now deceased), which the plaintiffs dispute.
[6] The loan with TD Canada Trust was executed by the two plaintiffs, Romaniuk and his then spouse Mary Louise Ravazzolo, the daughter of the plaintiffs. The loan agreement was for the principal sum of $250,000 repayable at the bank’s prime rate plus 1.2% over a term of 10 years (ending in 2011) in blended monthly payments of principal and interest of $3,000. Romaniuk was to make all payments on the loan.
[7] The plaintiffs also provided collateral security for the loan in the form of their mutual funds on deposit at Berkshire Securities and under the management of the defendant Romaniuk.
[8] The plaintiffs executed a direction that all of the proceeds of the $250,000 were to be paid to Romaniuk and all the monies were indeed paid to Romaniuk. This is not disputed.
[9] There is currently a separate lawsuit between Bobko and Romaniuk where Bobko is suing Romaniuk for forfeiture of a $200,000 deposit and damages for breach of contract in the amount of $250,000. There is no explanation by Romaniuk as to what happened to the remaining $50,000 that he received from the plaintiffs. The plaintiffs have no knowledge regarding the outcome of the lawsuit between Bobko and Romaniuk nor its current status.
[10] Romaniuk made the monthly payments of $3,000 to TD Canada Trust until January 2007 when the TD Canada Trust loan agreement was refinanced at the insistence of Romaniuk with BMO.
BMO Variable Rate Personal Loan Dated January 3, 2007
[11] Romaniuk wished to transfer the loan from TD Canada Trust to BMO for a better rate and further, he had a good friend, Lorne Bayne, at BMO who would assist him.
[12] The plaintiffs agreed to assist Romaniuk to transfer the loan to BMO but they did not agree to extend their liabilities past 2011. The plaintiffs state that on December 26, 2006 Romaniuk attended at their home with documents from BMO regarding the transfer of the loan.
[13] Romaniuk states it was not him who presented the documents to the plaintiffs from BMO, but the documents were signed in the plaintiffs’ home and brought to the plaintiffs by Mr. Lorne Bayne from BMO.
[14] Notwithstanding, both plaintiffs and Romaniuk agree there was no independent legal advice requested from BMO at the time the second loan was signed.
[15] It is also clear the loan at BMO was extended to January 3, 2017. The plaintiffs state they did not consent to this and were not aware that this is what they were agreeing to. The plaintiffs also state, unknown to them more of their securities were pledged as collateral.
[16] On or about September 2012 Romaniuk stopped making payments to BMO. Romaniuk states he stopped the payments because his spouse Mary Louise Ravazzolo also had an obligation to pay, notwithstanding that it is clear and undisputed evidence that all $250,000 was paid directly to Romaniuk.
[17] On September 19, 2012 Ravazzolo received from BMO a notice of repossession and intent to sell their securities being held as collateral.
[18] The plaintiffs paid BMO $13,877.36 to protect their mutual fund investment held at BMO as security for the loan. This is undisputed.
[19] The defendant Romaniuk has been sued by BMO. BMO has obtained default judgment against Romaniuk in the amount of $47,043.44 on November 7, 2013. This is also undisputed.
[20] Romaniuk is not seeking to set aside the BMO default judgment and does not dispute the debt to BMO.
[21] Romaniuk does not dispute that he owes the amount of $13,877.36 to the plaintiffs also.
Independent Legal Advice
[22] Romaniuk states, firstly, that pertaining to the TD Canada Trust loan, the plaintiffs received independent legal advice from Mr. Bill King, a lawyer in Niagara-on-the Lake (now deceased).
[23] The plaintiffs state they received no independent legal advice from Mr. King or any other lawyer regarding the TD Canada Trust loan.
[24] The evidence is that Romaniuk drove the plaintiffs to Mr. King’s office in Niagara-on-the-Lake in May 2001. The plaintiffs state that this was for the purpose of signing documents regarding the TD Canada Trust loan but that Mr. King was the lawyer acting on the Bobko purchase and sale of the book of business and also acting for TD. He did not act for them or provide to them independent legal advice.
[25] There is no correspondence and/or reporting letter provided or any document provided as evidence to the court in what capacity Mr. King acted. The plaintiffs indicate they have no such reporting letter from Mr. King regarding independent legal advice.
[26] It is clear and undisputed that no independent legal advice was provided when the loan was refinanced with BMO.
[27] BMO currently still holds the plaintiffs’ securities. The plaintiffs state that these additional securities were pledge by Romaniuk without their knowledge or consent.
[28] The plaintiffs state the original loan is now over 13 years ago and they are elderly. They thought that this would be done and ended in 2011 but BMO still holds their securities and they remain indebted to BMO for the defendant Romaniuk.
Chronology of Default
[29] The local court registrar noted Romaniuk in default May 14, 2013.
[30] Romaniuk was noted in default by BMO and judgment was obtained by BMO November 7, 2013. (Romaniuk is not moving to set this judgment aside.)
[31] The affidavit of service of the plaintiffs’ Statement of Claim in this proceeding shows that the claim was personally served on Romaniuk on March 25, 2013 at his place of employment at 509 Glendale East, Suite 305, Niagara-on-the-Lake, Ontario.
[32] On April 5, 2013 the lawyer for the plaintiffs (Mr. Fazari) received at his office a Notice of Intent to Defend on behalf of Romaniuk. This was sent from the law offices of Sullivan, Mahoney under a cover letter from Nicholas Debono, articling student. The letter stated in part:
“Further, please be aware that Sullivan Mahoney LLP is not on record as solicitors for Mr. Romaniuk.”
[33] Romaniuk did not serve a Statement of Defence.
[34] On or about May 15, 2013 a lawyer, Geoffrey Spurr, on behalf of Romaniuk wrote to the plaintiffs’ lawyer. In part, the letter states:
“Mr. Romaniuk advises that, in any event, a Statement of Defense has not been delivered and that the time required for delivery of a Defence notwithstanding the delivery of the Notice of Intent to Defend has elapsed.”
[35] As a result of discussions between Mr. Spurr and Mr. Fazari, Mr. Fazari sent a letter dated May 30, 2013 to Mr. Spurr which reads in part as follows:
“We will consent to you serving and filing the Statement of Defence if you provide us with the sum of $500.00 plus HST for the costs of preparing and filing the request to note pleadings closed. In addition, we also require the Statement of Defence to be served and filed no later than June 20, 2013 failing which we will proceed with the motion for summary judgment.”
[36] No Statement of Defence was filed or costs delivered, and nothing further was heard from Romaniuk.
[37] Consequently, the motion for judgment was originally returnable July 31, 2013 and the plaintiffs obtained judgment in the amount of $101,347.87, which judgment is dated August 2, 2013.
[38] Subsequent to the judgment of August 2, 2013, a writ of seizure and sale was filed with the Sheriff’s Office. Further, a garnishment notice was issued January 21, 2014 on Manulife Securities Incorporated.
[39] Romaniuk states in his affidavit sworn April 29, 2014 that he was informed by Mr. Spurr in early May 2013 that he was noted in default yet was advised by Spurr to “simply wait and see”.
[40] Paragraphs 7, 8 and 9 in the affidavit of Romaniuk, sworn the 29th day of April 2014, state as follows:
In May 2013, I received a telephone call from Ken Lofranco from Manulife Securities’ head office, who told me that a defense had not been filed on my behalf. I then called another lawyer, Geoffrey Spurr, whose name I had received from a colleague in my office. He spoke with Mr. Fazari, the lawyer for the Plaintiffs, who advised him that I had been noted in default the previous day.
Mr. Spurr suggested to me that I simply wait and see what happened.
I heard nothing further in relation to this action until on or about January 21, 2014.
The Law and Analysis
The Rules of Civil Procedure
[41] Rule 19.03(1) provides as follows:
“19.03(1) The noting of default may be set aside by the court on such terms as are just.”
[42] Rule 19.08(1) and (2) states:
“19.08(1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just.
(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge on such terms as are just.”
Threshold Test for Setting Aside Default Judgment
[43] The test for setting aside default judgment was further clarified by the Ontario Court of Appeal in the case of Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194.
[44] At paras. 48 and 49 the Court noted as follows:
“[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 establish that the defendant has an arguable defence on the merits.
[49] To this list, I would add the following two factors the court should have regard to, as set out in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. 2007 ONCA 333, 87 O.R. (3d) 479 (C.A.), at para. 2:
(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 court might make on the overall integrity of the administration of justice.”
[45] At para. 51 the Court further noted “the defendant must show that his or her defence has an air of reality.”
[46] Romaniuk states that he first learned of the default judgment on January 21, 2014.
[47] Based on the evidence I find that Romaniuk knew by May 15, 2013 that his Statement of Defence had not been delivered and was outstanding and that the Notice of Intent to Defend had elapsed. This is confirmed by the Spurr letter of May 15, 2013. Further, he states that his lawyer at the time advised him to “wait and see” and do nothing. This is quite incredulous and has no air of reality. It is not credible to this court that in the face of such circumstances, he was advised to simply “wait and see” at a time when even he knew his Statement of Defence was overdue. By this time he had received advice from two lawyers in some capacity.
[48] Further, he provided no response to the plaintiffs’ proposal to set aside the default judgment and pay $500 plus HST and have his Statement of Defence filed by June 20, 2013. I find he deliberately chose to do nothing.
[49] It was open to Romaniuk at all times to produce notes or documents or a retainer agreement to confirm in fact that he had been advised to “wait and see”, but he has not done so. I conclude this is likely because none exists to support such a position.
[50] Further, Romaniuk states that he moved from 3 Court Street in Thorold in June or early July 2013 and therefore did not receive any documentation regarding the default judgment. Romaniuk stated he left no forwarding address with the post office and simply contacted the people who needed to know of his change of address. He did not have mail forwarded by Canada Post. I find this is most unusual, particularly in view of the fact that he knew of the litigation and had consulted with both the law office of Bruce Macdonald and the law office of Geoffrey Spurr in some capacity. I find he is a sophisticated defendant involved in financial planning and wealth management. I am persuaded that he deliberately and intentionally did not leave a forwarding address intending to thwart the efforts of the plaintiffs in their lawsuit against him. However, he knew, or ought to have known, based on the events in May 2013, that there would be serious consequences to his inaction. Yet he deliberately took no steps to file a Statement of Defence.
[51] Further, the plaintiffs in this case are both elderly persons. Mr. Ravazzolo is 81 and Mrs. Ravazzolo is 80. Mr. Ravazzolo has grade six education and for 33 years has been a factory labourer. I am not satisfied, based on the evidence, that they did in fact receive independent legal advice from Mr. William King with respect to the first loan. There is no document filed from Mr. King’s office confirming the independent legal advice to the plaintiffs. This should have been relatively easy to obtain. Both Romaniuk and the bank ought to have gone out of their way to ensure independent legal advice for these plaintiffs. Indeed, when dealing with unsophisticated and elderly clients, extra caution should be taken to confirm their understanding of financial transactions, particularly in view of the fact that this “plan” was originally put in place by Romaniuk who managed their securities.
[52] Further, when the loan was transferred to BMO, it is remarkable that there was no independent legal advice provided to the plaintiffs. In fact, either a representative from the bank Mr. Bayne, or Romaniuk, or both, attended at the home of the plaintiffs on December 26, 2006 for the plaintiffs to execute BMO loan documentation. In addition, unknown to the plaintiffs, Romaniuk pledged their additional securities. Furthermore, Romaniuk extended the loan to 2017, when clearly the plaintiffs had understood from the earlier loan that their indebtedness would be at an end in 2011.
[53] I find it both alarming and inexcusable that this banking transaction was carried out at the home of the elderly plaintiffs in the complete absence of their own independent legal advice lawyer.
[54] As a result of the actions of Romaniuk, there is great prejudice to the plaintiffs who are elderly and whose securities are still being held by BMO as a result of the indebtedness of Romaniuk. The plaintiffs were required to pay an additional sum of $13,877.36 to BMO to keep their securities from being sold by BMO. In addition, they are also indebted to BMO for the entire amount of the outstanding loan.
[55] The court has considered each of the five factors as outlined by the Court of Appeal in the case of Mountain View Farms Ltd. v. McQueen. I find the delay of Romaniuk unexplained, inexplicable, inexcusable, and unjustified. Romaniuk’s defence has no “air of reality”. In spite of being aware as early as May 15, 2013 that his Statement of Defence was due, and in spite of having an offer that the Statement of Defence must be filed by June 20, 2013 and paying $500 plus HST, he deliberately chose to do nothing. This was a deliberate, calculated and conscious act. He acted only when he realized that a garnishment of his wages was to occur. Except for this action he would have continued to do nothing.
Conclusions
[56] Romaniuk has received the $250,000 and that is undisputed. He owes the balance outstanding and he should therefore pay it. The fact that his former spouse may be a joint debtor does not discharge or excuse him from making the payments. I find no reasonable explanation for the continuing default from May 20, 2013 to January 2014.
[57] I find Romaniuk’s position that, in view of all the circumstances, Mr. Spurr simply told him to “wait and see” is not credible. Romaniuk deliberately chose to ignore the lawsuit and hoped that nothing would happen.
[58] I find the default was intentional and he has no valid explanation or excuse.
[59] The setting aside of the judgment would be at great prejudice to the plaintiffs who are elderly and whose securities are still pledged with BMO, and remain indebted to BMO as a result of Romaniuk.
[60] I find the defendant Romaniuk has failed to meet the test regarding the factors outlined by the Court of Appeal in the case of Mountain View Farms Ltd. v. McQueen.
Duplicate Judgment
[61] The judgment of BMO of November 7, 2013 is in the amount of $47,043.44 together with $1,118.50 for costs and interest at the rate of 3% per year from its date.
[62] The judgment granted August 2, 2013 in the amount of $101,347.87 includes $46,317.64 as monies claimed by BMO. It is clear that once the BMO monies are fully paid those monies ought to be deducted from the judgment of August 2, 2013.
Orders Made
[63] Orders made are as follows:
The motion of the moving party/defendant Dwayne F. Romaniuk is dismissed.
The stay of garnishment as ordered on the 14th of May 2014 is hereby lifted.
The duplicate judgment in favour of BMO is not owed by the defendant Dwayne F. Romaniuk twice; that is, once judgment in favour of BMO is satisfied by the defendant Dwayne F. Romaniuk and all securities pledged are returned to the plaintiffs, the amount of the BMO judgment shall be deducted from the total judgment of August 2, 2013.
Costs
[64] Unless otherwise agreed, the parties may make written submissions as to costs, limited to three pages, plus a bill of costs. The plaintiffs’ submissions are due by January 13, 2015. The defendant Romaniuk’s submissions are due by January 27, 2015.
Maddalena J.
Released: December 30, 2014
COURT FILE NO.: 6779/13
DATE: 2014/12/30
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Raymond Ravazzolo and
Magdalene Ravazzolo
Plaintiffs
(Responding Parties)
- and –
Dwayne F. Romaniuk, Bank of Montreal c.o.b. BMO, Lorne Bayne, Toronto-Dominion Bank c.o.b. TD Canada Trust and Manulife Securities Incorporated
Defendants
ORDERS ON MOTION
Maddalena J.
Released: December 30, 2014