CITATION: CHC CASINOS v. LUO, 2015 ONSC 3

COURT FILE NO.: CV-13-482139

DATE: 20150102

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CHC CASINOS CANADA LIMITED, Plaintiff

AND:

WEI-HONG LUO a.k.a. WEIHONG LUO

a.k.a. SELENA LUO, Defendant

BEFORE: CAROLE J. BROWN, J.

COUNSEL: Kyle Gossen, for the Plaintiff

Chris Donovan, for the Defendant

HEARD: December 17, 2014

ENDORSEMENT

[1] The defendant seeks to have the default judgment against her set aside pursuant to Rule 19.08 on the grounds that she is an unsophisticated party who does not understand English, was served with the statement of claim and subsequently the default judgment, which she did not understand.

[2] It is the position of the defendant that she meets the tests for setting aside default judgment as follows: she moved promptly to bring this motion upon becoming aware of the default judgment; she had a plausible explanation for failing to defend, i.e. her inability to understand the legal documents in English; and she has an arguable case on the merits which will be defended on the basis of unconscionability of the loan and whether the loan agreement is void for public policy.

[3] It is the position of the defendants that the plaintiff had applied for, was approved for and obtained loans by line of credit from Casino Rama, which line of credit was increased over a period of almost one year from $20,000, to $50,000, to $100,000 upon the request of the defendant. The evidence indicates that the defendant always repaid her loans to Casino Rama until November 28, 2012, when she sought and was granted a loan of $100,000. The evidence further indicates that, the following day, November 29, 2012, the defendant transferred her joint interest in their home, purchased March 26, 2010 for $938,880, to her husband. On January 30, 2013, the defendants' mortgage on the residence was discharged and remains unencumbered. The transfer was subsequently declared to be a fraudulent conveyance by this Court by default judgment.

[4] The evidence indicates that from May 8, 2013, Casino Rama made demands on the defendant for payment of the outstanding $100,000 loan, which demands were not satisfied. On June 15, 2013, the statement of claim was served on the defendant by way of personal service. She responded to the claim by a letter dated June 22, 2013, written in English, in which she stated "I admit these charges I am simply unable to repay the debts and pay legal fees… May I pay these money later or $100-$150 per month… I will try my best ability to repay the money". Her evidence was that her son, who is fluent in English, wrote the letter for her. She took no steps to defend the action, was noted in default on July 9, 2013 and default judgment was thereafter granted for the $100,000. Seizure and sale were issued on August 28, 2013 and filed with the Sheriff's offices of the City of Toronto and the Regional Municipality of York on August 30, 2013 and September 10, 2013, respectively.

[5] A Notice of Examination in Aid of Execution was delivered to the defendant by process server on September 20, 2013. The defendant retained a paralegal to attend the Examination in Aid with her, which was conducted on October 11, 2013. Her evidence was that the paralegal was retained to translate for her.

[6] At the Examination in Aid, she testified that she understood the reason for the examination and admitted that she was the person who owed money to Casino Rama according to the judgment obtained. At that time, no steps were taken by her to set aside the judgment.

The Law and Analysis

[8] Pursuant to Rule 19.08 of the Rules of Civil Procedure, in determining whether a judgment should be set aside, the court must consider the following:

(a) whether the motion was brought without delay after the defendant learned of the default judgment;

(b) whether the circumstances giving rise to the default were adequately explained; and

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

[9] These factors are not rigid preconditions to the exercise of the courts discretion and failure to satisfy one of the factors does not require dismissal of the motion to set aside default judgment. The motion judge must determine whether the interests of justice favour an order setting aside a default judgment having regard to the potential prejudice to the defendants if the motion were dismissed, the potential prejudice to the plaintiff if it were allowed, and the effect of any order on the overall integrity of the administration of justice: Peterbilt of Ontario Inc. v 1565727 Ontario Limited, (2007) 2007 ONCA 333, 87 O.R. (3rd) 479; Chitel v Rothbart, [1988] O.J. No. 1197 (C.A.)

[10] I will address each of the factors set forth above, in turn.

Was the Motion Brought without Delay after the Default Judgment Was Discovered

[11] Based on the evidence before me, the defendant would have learned of the default judgment, at the latest, on September 20, 2013 when the Notice of Examination in Aid of Execution was served on the defendant by process server and she then met with a paralegal. On October 11, 2013, when she attended the Examination in Aid, she admitted that she was the Ms. Luo who owes money to Casino Rama, according to the judgment obtained". The question, indicating that judgment had been obtained, to which she responded, was translated for the defendant.

[12] Despite this, the defendant did not move to have the default judgment set aside until July 2014, following communication from Casino Rama indicating that they would request the Sheriff to seize and sell the defendant's property. The plaintiff argues that a defendant cannot simply ignore the legal proceeding until the plaintiff takes steps to enforce the judgment. In such a situation, "a strong suggestion arises that the defendant did not move expeditiously to set aside the default judgment".: CN Railway v Gateway Reload Inc., 2006 CarswellOnt. 6976; Hanratty v Woods, 2009 CarswellOnt 4879. It further relies on Bodkin Leasing Corp. v Celej, 2010 ONSC 3470, aff’d 2011 ONCA 25 in which, in similar circumstances, the default judgment was not set aside as the defendant was found to be "reckless in her disregard of the claims being advanced against her from the day she was served."

[13] I am not satisfied that the first factor has been met. This, however, does not end the analysis.

Was Adequate Explanation of the Circumstances Giving Rise to the Default Given

[14] As regards the second factor to be considered, namely whether adequate explanation of the circumstances giving rise to the default was given, the plaintiff maintained that the default occurred due to her inability to understand English.

[15] The evidence indicates that demand letters were sent to the defendant commencing May 8, 2013. The defendant' s evidence was that she was too embarrassed by the situation to advise or seek assistance from her husband. Further, she stated on cross-examination that when she received correspondence in English, she ignored it unless it had a government logo on it, in which case she would have someone assist her to understand the correspondence.

[16] The evidence further indicates that the defendant understood that an action had been commenced against her, admitted in the letter of June 22, 2013, referenced at paragraph 4 above, that she owed the monies but wanted to pay in small amounts, that she received three letters from Casino Rama requesting payment from January 2013 through February 2013, and thereafter a demand letter on May 8, 2013 threatening legal proceedings if payment were not made. She thereafter was served with the statement of claim personally at her home on June 15, 2013. She also has two sons who are fluently bilingual in both English and Cantonese or Mandarin, although the evidence suggests that she spoke a dialect of Chinese with her younger son.

[17] Based on the evidence before me, I am not satisfied that the defendant failed to respond because she did not or could not, with assistance, understand the documents or their import. She knew that she had received documentation from Casino Rama, that she had borrowed $100,000 and had not repaid it, and had acknowledged that fact in her correspondence following service of the statement of claim. Either she failed to understand the nature of the court documentation or she was willfully blind as to its meaning and import. In any event, she did not seek assistance as regards the legal documentation and did not respond as she would have had there been a government logo on the correspondence, according to her evidence. I do not find that she has given any adequate explanation of the circumstances giving rise to the default such as to justify setting it aside. In this regard, I have considered the case law relied upon by the plaintiff, including Bassi v Bassi, 2013 BCFC 284, rev’d in part on other grounds 2013 BCCA 422; Hoodle v Guertin 2012 SKQB 92; Brilliant Trading Inc. v Wong, 2005 FC 571; Danco Electric v Cvetkovic, 2002 CarswellOnt 2720, Goldberg v Sussman, 1992 CarswellOnt 2264 and Doyle v Lunny Design & Production Group Inc., BCSC 925.

Whether the Defendant Has an Arguable Defence on the Merits

[18] In considering the third factor, namely whether the defendant has an arguable defence on the merits, I recognize that the test is whether the defence is "arguable", which is a lower threshold than requiring the defence to be "meritorious". I have, in considering whether there is an arguable defence, considered whether the defence raises a genuine issue, whether it has an air of reality about it in light of the evidence before me and whether there are credibility issues.

[19] It is the position of the defendant that her defences comprise unconscionability of the loan contract and whether the contract is void on the basis that it is contrary to public policy. As regards unconscionability, the defendant must establish that there is an inequality of bargaining power between the parties, that one of the parties has taken undue advantage of the other and that the terms of the agreement were very unfair or the consideration was grossly inadequate: Birch v Union of Taxation Employees, Local 70030, 2008 ONCA 809. The defendant maintains that the terms of the loan contract were grossly unfair, that there was no consideration obtained by the defendant as the Casino was statistically certain to recover the money if the defendant played long enough. The defendant further maintains that there was an inequality of bargaining power between the sophisticated Casino and the defendant, who was socially isolated, illiterate and a gambling addict.

[20] It is the position of the plaintiff that the terms of the contract were not unfair, there was nothing that required the defendant to borrow money or to gamble, that while the defendant claims to have a gambling addiction, there is no evidence to support this, that she acted of her own will and that there was no evidence that the Casino took undue advantage of her, that the contract was translated for her by a Chinese speaking interpreter and that she understood the terms of the agreement, given that she borrowed and repaid the loans on 261 occasions.

[21] As regards the defendant's second defence that the contract was void for public policy, the defendant maintains and I note that the operation of casinos in this province is both permitted and strictly regulated through the Ontario Lottery and Gaming Commission. The Alcohol and Gaming Commission of Ontario, established by the Alcohol and Gaming Regulation and Public Protection Act, 1996, S.O. 1996, 26, sets standards and requirements for the conduct, management and operation of casinos, including Casino Rama, including standards and requirements which permit and regulate the practice of extending credit to patrons. These standards and requirements are contained in the Interim Standards and Requirements Established by the Registrar of Alcohol and Gaming, Ontario Regulation 385/99 and the credit section of an Internal Policy Manual approved by the Alcohol and Gaming Commission of Ontario. Where a patron wishes to establish credit with a casino, he or she must provide information, undergo a credit check and an assessment of the ability to repay the line of credit.

[22] Further, as regards public policy, the jurisprudence in Ontario has recognized that "an Ontario court cannot say that the judgment founded upon a contract related to gambling is tainted by immorality and should be refused enforcement".: See Boardwalk Regency Corp. v Maalouf , 1992 CarswellOnt 3368 (C.A.); Atlantic City Showboat Inc. v Smith, 1993 CarswellOnt 4187; Wynn Las Vegas LLC v Li, 2012 MBQB 191. In this regard, neither the casino nor the player can be seen to be tainted by "immorality".

[23] As regards an arguable defence, I note that it is not necessary that the defendant establish and that the defence will succeed at trial, but rather must establish an arguable defence or, at least, one which has an air of reality.

[24] I am of the view that the defendant has, at least, an arguable defence or one having some air of reality, and that she should be permitted to present her evidence before the courts and have a full hearing of the issues, although in all of the circumstances as presented above, such will be permitted only on stringent terms that protect the plaintiff's interests in exchange for the defendant being given the opportunity to defend this action.

[25] In arriving at my decision as to whether this Court's discretion should be exercised to set aside the default judgment, I have also considered the importance of ensuring that a party should generally not be faced with judgment without a full hearing on a full evidentiary record and after careful determination on the merits.

[26] I have also considered whether the interest of justice favours granting an order to set aside the default judgment, having regard to the potential prejudice to the parties. I note that if the judgment is not set aside, the defendant will be faced with a judgment of over $100,000 without having defended the action against her. On the other hand, while the plaintiff will now be faced with prosecuting its action, its interests can be protected by the imposition of the strict conditions sought by the plaintiff, in the alternative.

Conclusion

[27] Accordingly, I order that the default judgment of July 9, 2013 be set aside on the following conditions:

1. That the defendant pay the sum of $121,706.71 plus post judgment interest into court to the credit of this action on or before January 16, 2015;

2. That in the event that the defendant fails to make the above payment by January 16, 2015, Casino Rama may apply without notice for an order dismissing the defendants motion to set aside the default judgment, on filing an affidavit confirming that defendants noncompliance;

3. That the defendant file a statement of defence, sworn affidavit of documents and productions by January 23, 2015

Costs

[28] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown, J

Date: January 2, 2015