BASF Canada Inc. v. Ebreo et al, 2015 ONSC 1584
COURT FILE NO.: CV-13-492879
DATE: 20150317
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: BASF Canada Inc., Plaintiff
AND:
Winston Ebreo and Genevieve Ebreo, Defendants
BEFORE: Carole J. Brown, J.
COUNSEL: Kirsten Thoreson, for the Plaintiff
Winston Ebreo representing himself
HEARD: March 9, 2015
ENDORSEMENT
[1] The defendant brings this motion pursuant to Rule 19.089(2) of the Rules of Civil Procedure to set aside default judgment issued against him on October 2, 2014. The defendant, Genevieve Ebreo sought and was granted an order setting aside the noting in default against her of February 10, 2014.
The Law
[2] Pursuant to Rule 19.08(2), a judgment against a defendant who has been noted in default and 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.
[3] The test for setting aside a properly obtained default judgment is as follows:
Whether the motion was brought without delay after the defendant learned of the default judgment;
Whether the circumstances giving rise to the default were adequately explained; and
Whether the defendant has an arguable defence on the merits.
HSBC Securities (Canada) Inc. v Firestar Capital Management Corp., [2008] O. J. No. 5345, 2008 ONCA 894 (Ont. C.A.); Mountain View Farms Limited v McQueen, 2014 ONCA 194.
[4] While the motions court will be guided by the principles identified in the authorities, it must ultimately determine whether the interests of justice favour an order setting aside the default judgment, having regard to the potential prejudice to the moving party should the motion be dismissed, the potential prejudice to the responding party should the motion be allowed, and the effect of any order which the motions court may make on the overall integrity of the administration of justice: Mountain View Farms Ltd. v McQueen, supra.
[5] The first branch of the test is straightforward. It is not contested that the defendant brought his motion without delay. However, the plaintiff submits that it is important to understand the circumstances leading to the noting in default and default judgment, which the plaintiff submits bespeaks an intentional litigation strategy as set forth below.
[6] As regards the second branch of the test, a conscious decision by the moving party not to participate in the proceedings bars consideration of a defence on the merits, even if one exists.: Sun Life Assurance Co. of Canada v Premier Financial Group Inc. (cob Premier Financial), [2013] O.J. No. 1107, 2013 ONCA 151 (Ont. C.A).
[7] As regards the third branch of the test, the test is whether the defence is "arguable", which is a lower threshold than requiring that the defence be "meritorious". The principles applicable on a motion for summary judgment should be considered in assessing whether a default judgment should be set aside. The defendant must establish an arguable defence on the merits and must establish that the defence has an air of reality. The court will take a "good hard look at the merits" and address whether the moving party has established an arguable defence. HSBC Securities (Canada) Inc. v Firestar Capital Management Corp., supra.
The Facts
[8] The defendant commenced employment with BASF in 2001 as Accounts Receivable Coordinator. At the material time, he held the position of Finance and Business Services Liaison Officer, responsible for coordinating all aspects of BASF's accounts receivables processes. He was, inter alia, responsible for ensuring the integrity and accuracy of BASF's accounting records. During his employment, he had access to BASF's confidential information including account information and accounting procedures, and also enjoyed substantial autonomy, possessing power and discretion that he could exercise unilaterally in a manner affecting BASF's interests.
[9] In April 2013, CIBC contacted BASF to advise that, following investigations prompted by detection of a cheque made payable to BASF which had been deposited into a personal CIBC account held by the defendant, he had investigated and discovered multiple checks payable to BASF having been deposited to the defendant's account in 2013. CIBC met with Mr. Ebreo, who signed a consent form permitting CIBC to provide copies of the cheques in question to BASF. CIBC continued its review of the defendant's accounts, to verify whether there had been other deposits.
[10] Based on the information obtained from CIBC, BASF conducted an internal investigation and met with Mr. Ebreo, who admitted that he deposited cheques made payable to BASF in his personal account, and also signed a written confession admitting responsibility for fraudulent activity, which is in evidence before this Court. He further admitted to altering BASF's accounting records in order that his actions would not be detected. His employment was suspended pending further investigation by both BASF and CIBC.
[11] Those investigations revealed cheques totaling an amount significantly in excess of Mr. Ebreo's confession.
[12] During a second meeting between BASF and Mr. Ebreo, he again admitted to the misappropriations and confirmed that he took cheques made payable to BASF and deposited them at a CIBC bank machine into his personal account. At the end of the second meeting, BASF terminated his employment for cause.
[13] Subsequent to his termination, Mr. Ebreo e-mailed Stuart Lawson at BASF to apologize for betraying their trust and to indicate that he intended to repay BASF for the damages he caused. He further requested a letter of reference from Mr. Lawson for a job that, according to the e-mail, did not require handling of cheques or cash. There is no evidence that such reference was provided. The letter of apology and request for reference letter from Mr. Ebreo is in evidence before this Court. The defendant made no repayment to BASF.
[14] In November of 2013, this action was commenced against Mr. Ebreo for fraudulent conversion, fraudulent misrepresentation, breach of fiduciary duty and breach of contract, and against his wife for breach of constructive trust and unjust enrichment. A certificate of pending litigation registered on title to the defendant's home was obtained.
[15] On December 17, 2013, both defendants were personally served with the statement of claim, the motion record and materials filed for the motion to obtain the CPL, the Order granting the CPL and the CPL as registered. Mr. Ebreo admits that the defendants were personally served, although he stated that he lied to his wife about the contents of the documents, and continued to do so. He did not want to divulge to her his defalcation of funds from BASF. Both defendants failed to defend and were noted in default on February 10, 2014.
[16] In August of 2014, the defendants attempted to sell their home, but were unable to do so due to the CPL on title. At that time, the defendant, Mr. Ebreo, exchanged e-mails with BASF's counsel to request a discharge of the CPL. At that time, he made further admissions of guilt, confessing to "misappropriating funds" from and "committing fraud" against BASF. He further admitted to having "intercepted" service of the statement of claim on his wife.
[17] In response, on August 30, 2014, BASF's counsel advised Mr. Ebreo of the pending motion for default judgment against him and the scheduled return date for the motion of October 2, 2014. He urged Mr. Ebreo to obtain independent counsel. Ms. Ebreo did retain counsel and the noting in default against her was set aside and the CPL discharged.
[18] However, Mr. Ebreo did not bring such a motion, nor did he defend the motion for default judgment which was granted by Stinson J on October 2, 2014. At the motion, the plaintiff filed extensive documentary evidence confirming the quantum of its losses. The evidence indicated that during the period from at least 2005 to 2013, the defendant took, signed and deposited at least 73 checks payable to BASF into his own accounts. All cheques were produced and, on the back of all cheques was the signature of the defendant. Stinson J awarded BASF its losses in the amount of $801,131.02 plus damages, pre-judgment interest and costs on a substantial indemnity basis. He further granted a declaration that Mr. Ebreo's liability arose by reason of his fraud while acting in a fiduciary capacity.
The Positions of the Parties
[19] It is the position of the defendant, Mr. Ebreo, on his motion to set aside default judgment, and that he was not, at the material times, mentally unstable and not able to represent himself, but now feels able to do so, and wishes to do so.
[20] It is the position of the plaintiffs that the defendant has failed to meet the tripartite test for setting aside the default judgment and, particularly, that he has no defence on the merits. Further, it is the position of the plaintiff that, although the defendant was properly served with the statement of claim in December of 2013, and indeed admits to such service, he consciously decided not to defend the action.
[21] The plaintiff submits that even after being alerted to the plaintiff's motion for default judgment over a month before its scheduled return date, the defendant intentionally took no steps to respond until after the motion was heard, when he immediately delivered a motion to set aside the default judgment, even before he was served with it.
The Issue
[22] The issue before this Court is whether the default judgment issued against the defendant on October 2, 2014, should be set aside.
Analysis
[23] In the present case, I find that the requisite tests for setting aside default judgment have not been met.
Whether the Motion Was Brought without Delay
[24] It appears from the documentation before this Court that the plaintiff was aware of the plaintiff's motion for default judgment returnable October 2, 2014, but did not attend at the said motion. The evidence indicates that on October 3, 2014, the day that the default judgment was entered with the court, and prior to the defendant being served with the judgment, as issued and entered, the defendant affirmed an affidavit in support of his motion to set aside the default judgment before Commissioner for Taking Oaths and served said motion on BASF and the co-defendant on the same day. The evidence indicates that he was served with the default judgment, as issued and entered, on October 6, 2014. Accordingly, he moved to set aside the default judgment prior to having been served with the default judgment.
[25] There is no explanation for his not having attended at the plaintiff's motion to obtain the said default judgment. However, it is clear that the motion was brought quickly after the judgment was issued and entered, and indeed, as above noted, before it was even served on the defendant. It is the position of the plaintiff that these actions are due to the defendant's intentional litigation strategy, namely the intentional choice not to appear at or respond to the default judgment motion, nor to have responded at any earlier step, including filing a statement of defence or seeking to have the noting in default set aside, as did Mr. Ebreo's wife. BASF submits that when all of the steps are considered, it is evident that the defendant made a conscious, intentional decision not to participate in the litigation.
[26] While it appears that this motion was brought without delay, the other two steps of the tri this partite test must be considered.
Whether the Circumstances Giving Rise to the Default Are Adequately Explained
[27] While the defendant argued that he was unable to defend this action due to his hospitalization and treatment for depression and suicidal tendencies, based on the evidence before me, it appears that he was treated for these conditions between September 12, 2014 and October 1, 2014. However, based on the evidence before me, and the admission made by the defendant, the statement of claim was served on the defendant in December of 2013. The defendant thereafter contacted the Law Society of Upper Canada ("LSUC") and, through the LSUC, contacted and met with a lawyer, Johanna Braden of Stockwood's. As Mr. Ebreo stated in his affidavit filed in support of this motion, Ms. Braden advised him that he lacked a defence, or as he stated in his affidavit "I seeked [sic] legal advice from the law society and met with a referred lawyer, who stated that in regards to my case, I was "dead in the water"". He thereafter attempted to sell his home consulting and contacting a real estate lawyer in September of 2014. Based on the evidence before me, he was, at the material times, namely between the time that he was served with the statement of claim in December of 2013 and the hospitalization in September of 2014, capable of defending this action and, indeed, he had consulted a lawyer in that regard and instructed another lawyer as regards the sale of his home.
[28] I do not find that the defendant has adequately explained the circumstances giving rise to the default judgment, which he says was attributable to his hospitalization. There is no evidence to substantiate that during the material times from December 2013, when he was served with the statement of claim, he was unable to defend the action or the motions for noting in default and default judgment.
Whether the Defendant Has an Arguable Defence
[29] As regards the third branch of the test, the defendant has failed to present any defence on the merits, and certainly no arguable defence. Indeed, in the materials before me, he admitted wrongdoing, admitting that he deposited cheques into his bank account although the cheques were made out to his former employer, BASF, and admitted to the misappropriation of these funds. There were also numerous other written admissions made by him since the fraud was discovered, as set forth in the plaintiff's factum at paragraph 48 and in the supporting him materials filed by the plaintiff in responding to this motion, as well as admissions to the doctors in hospital, based on their medical notes and records contained in the defendant's materials.
[30] I do not find that the defendant has an arguable defence.
[31] Given the foregoing, I find that the three-pronged test has not been met. Further, I find that the greater prejudice in this case is to the plaintiff in setting aside the default judgment, particularly given that there is no arguable defence which is been presented to this Court.
[32] Based on all of the foregoing, I dismiss the defendant's motion to set aside the default judgment.
Costs
[33] The plaintiff seeks it costs on a substantial indemnity basis in the amount of $9,307.39, which I grant.
Carole J. Brown, J.
Date: March 17, 2015