SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-14-5189-00
DATE: 2015 07 17
RE: MARIA BAPTISTA – and – TED SAFRANKO and ANA BAPTISTA
BEFORE: André J.
COUNSEL:
Amandeep Sidhu, for the Plaintiff
Catherine Willson, for the Defendant/moving party, Ted Safranko
HEARD: June 30, 2015
E N D O R S E M E N T
[1] The defendants seek to set aside the default judgment of Justice O’Connor dated March 13, 2015, (the “default judgment”) and the writ of seizure and sale issued on the same date. They also seek an order extending the time for filing and serving Mr. Safranko’s Statement of Defence, Counterclaim and Cross-claim. The plaintiff, Ms. Maria Baptista opposes the motion and seeks to have the defendants’ motion dismissed.
BACKGROUND FACTS
[2] The defendants jointly owned a property located at 1565 Scenic Lane Drive, Pickering, Ontario (the “property”).
[3] On January 29, 2012, Ms. Baptista “gave” the defendants $129,000 as a down payment towards the purchase of the property.
[4] The parties allegedly signed a gift letter in support of the defendants’ mortgage application.
[5] The plaintiff claims that the $129,000 was financed through a $168,000 mortgage taken out against her property and that this amount was a loan to her daughter, Ana Baptista, and Mr. Safranko to enable them to purchase the property. Both agreed to make the mortgage payments directly to the mortgagee. The defendants subsequently made the monthly mortgage payments of the plaintiff’s loan.
[6] Ana Baptista executed an acknowledgment confirming that the debt in the amount of $168,000 at an interest rate of 8.75% remains outstanding.
[7] Following a dispute between Mr. Safranko and Ana Baptista, the property was sold in December 2014 with a closing date in March 2015.
[8] In January 2015, the Canada Revenue Agency issued a Requirement to Pay to Mr. Safranko requiring him to pay $25,943.25, due to Ana Baptista’s failure to provide documentation proving her place of residence.
[9] The plaintiff served Mr. Safranko with a Statement of Claim on February 10, 2015. Mr. Safranko maintains that he did not respond in a timely fashion because of financial stress and his failure to appreciate the necessity of responding within the stipulated time period. Additionally, he was removed from the property on February 24, 2015, and was subsequently denied access to the property where the Statement of Claim remained.
[10] Mr. Safranko was advised on March 30, 2015, of a writ of seizure and sale issued against Ana Baptista and himself on March 13, 2015, as a result of a default judgment obtained by the plaintiff for the $168,000 received from the plaintiff.
POSITION OF THE DEFENDANTS
[11] Mr. Safranko submits that the default judgment should be set aside because he has an arguable case to present on its merits. He maintains that there is a genuine issue requiring a trial in that the money given to the defendants in this matter was a gift, rather than a loan.
[12] In support of this position, Mr. Safranko relies on a mortgage application and a gift letter, allegedly signed by the plaintiff, confirming that the money received from the plaintiff was a gift. He deposes that he never made any representations to the plaintiff that he owes her any money and is not privy to any understanding between the plaintiff and Ana Baptista concerning the money.
[13] He also submits that given that the net proceeds of sale of the property is currently being held in trust, there is little to no prejudice to the plaintiff if the default judgment is set aside.
POSITION OF THE PLAINTIFF
[14] The defendant, Mr. Safranko, has failed to put forth a defence on the merits and accordingly, the default judgment should not be set aside.
[15] Mr. Safranko has given a written acknowledgment that the money advanced by the plaintiff was a loan rather than a gift. Second, the mortgage agent retained by the defendants to secure financing on their home, also confirms that the money was a loan rather than a gift. Third, the defendants have made partial payments to the plaintiff’s mortgage, although the debt remains outstanding. Lastly, any gift letter purportedly signed by the plaintiff was for the specific purpose of providing a source for the down payment on the property purchased by the defendants.
LEGAL PRINCIPLES
[16] The three pronged test to set aside a default judgment is as follows:
(a) whether the motion was brought promptly after the defendant learned of the default judgment;
(b) whether there is a plausible explanation for the defendant’s default in complying with the Rules; and
(c) whether the facts establish that the defendant has an arguable case on the merits.
Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, at para. 48.
[17] In order to give full and fair consideration to the issue of whether the application has a defence on the merits, the principles applicable in a motion for summary judgment should be considered in assessing whether a default judgment ought to be set aside: see Bank of Montreal v. Chu, 1994 7246 (ON SC), [1994] O.J. No. 388 (Gen. Div.), at para. 21.
[18] On a motion to set aside a default judgment the court has a duty to assess the merits of the action and may freely canvass the facts and the law to determine whether or not there is a genuine issue for trial. An apparent factual conflict between the plaintiff and defendants does not end the inquiry on a motion to set aside a default judgment. The court may, on a common sense basis, draw inferences from the evidence: Ron Miller Realty Ltd. v. Honeywell et al., 1991 7268 (ON SC), [1991] O.J. No. 1251 (Gen. Div.), at paras. 13 and 18.
ANALYSIS
[19] The defendant Mr. Safranko raises the following issues in support of his position that the default judgment should be set aside:
While the judgment indicated that the motion for a default judgment had been “made with notice”, the notice was inadequate and does not constitute appropriate notice under Rules 3 and 6 of the Rules of Civil Procedure.
The defendant Ana Baptista was involved in the drafting of the statement of claim and acted as an interpreter for her mother who spoke little or no English;
The affiant in the motion for default judgment had no personal knowledge of the matter and her affidavit evidence is hearsay;
There is ample proof that the money advanced by the plaintiff to the defendants was a gift rather than a loan.
ISSUE NO. ONE – Should the default judgment be set aside because of inadequate notice to Mr. Safranko?
[20] Rule 19.02(3) of the Rules of Civil Procedure notes that:
Despite any other rule, a defendant who has been noted in default is not entitled to notice of any step in the action and need not be served with any document in the action, except where the court orders otherwise or where a party requires the personal attendance of the defendant…
[21] There is no dispute that Mr. Safranko was noted in default prior to March 15, 2015, when the default judgment was made. To that extent, the plaintiff was not obliged to give Mr. Safranko any notice of its application for default judgment. Accordingly, this ground to set aside the default judgment must fail.
ISSUE NO. TWO – Should the default judgment be set aside being of the apparent collusion between Ana Baptista and the plaintiff?
[22] Mr. Safranko maintains that the gift only became a loan following the dissolution of the relationship between Mr. Safranko and Ana Baptista. He points to the following developments which confirms this conclusion:
(a) An affidavit indicates that Ana Baptista attended at the office of the plaintiff’s lawyer to receive the statement of claim filed by the plaintiff;
(b) An “Acknowledgment of Debt” signed by Ana Baptista on November 14, 2014, was done in the presence of the plaintiff’s lawyer.
[23] While this information clearly shows that Ana Baptista visited the office of the plaintiff’s lawyer and undoubtedly interacted with him, it does support the contention that the money in question was a gift rather than a loan.
[24] Mr. Safranko relies on this evidence to suggest that Ana Baptista was so angry with him following the breakup of their relationship that she persuaded her mother to claim, after the breakup, that the money was a loan. Evidence of Ana Baptista’s anger towards Mr. Safranko could be found in her refusal to sign a “Declaration of Residence” for the Canada Revenue Agency and her decision to force him to leave their residence in February, 2015.
[25] On the other hand, Ana Baptista has denied this assertion and has testified during her Examination for Discovery that the amount received from the plaintiff was a loan. Additionally, Brad Wilson who negotiated the mortgage on behalf of the defendants, testified at his Examination for Discovery on June 3, 2015, that it was important to show that the money was a gift to enable the defendants to qualify for a mortgage on the property they were purchasing. Mr. Wilson confirmed that the money given by Maria Baptista to Ted Safranko and Ana Baptista was a loan rather than a gift.
[26] The only reservation I have concerning this evidence is that Mr. Safranko has not been afforded an opportunity to test Mr. Wilson’s credibility concerning this testimony. Second, according to the affidavit signed by Mandy Prosser, on behalf of Mr. Safranko, Mr. Wilson has not complied with two requests from Mr. Safranko’s counsel to provide him with copies of all his and Ana Baptista’s mortgage paperwork including a signed gift letter.
[27] The plaintiff also raises an objection to Mr. Wilson’s Examination for Discovery in this motion. She relies on the case of Davylock v. Drouillard, [1953] O.W.N. (N.C.) 629 at 630 for the proposition that upon an application to set aside a default judgment, it is improper to file affidavits of persons who might subsequently be called as witnesses at a trial of the action. The court noted that if this were permitted to happen, it would follow that affidavits made by the plaintiff and her witnesses, as well as the witnesses of the defendant, might be used on such an application.
[28] Rule 19.03(1) provides for the setting aside of a default judgment. There is no reference made as to the required material to be placed before the court in support of a motion: Mantia v. Honour Oak Investments Ltd., 1985 2243 (ON SC), 50 O.R. (2d) 788 (H.C.), at para. 9. Furthermore, if the principles applicable in a motion for summary judgment should be considered in assessing whether a default judgment ought to be set aside, one would think that relevant evidence from third parties should be considered in assessing the merits of the motion.
[29] However, even without Mr. Wilson’s examination, there is evidence that Mr. Safranko sent an email to Mr. Wilson acknowledging his indebtedness to the plaintiff.
[30] An email from Mr. Safranko to Mr. Wilson dated August 19, 2014, therefore states that:
I think we may be leaning towards giving Ana’s mom a lump sum this year.
Significantly, this email was sent prior to the defendants ending their relationship.
[31] Furthermore, Mr. Safranko sent a series of text messages to Ana Baptista confirming that the couple received $168,000 loan from the plaintiff. One stated that:
She’s not going to have the loan fully paid with the sale of the house.
[32] Another stated:
Well you find someone who can pay me 350000 and your mom 168000 plus all the fees and penalties associated with the selling of the house.
[33] Additionally, Mr. Safranko wrote a note dated December 25, 2013 in which he stated:
− House gets sold after March, 2014
− Ana’s mom gets paid first
[34] In the same note he cautioned that:
If Ana does anything to impede Ted
− financially
− reputation
− general character
− ruin any of Ted’s current sources of income
Ted dos not owe Ana’s mom any money.
[35] It appears that Mr. Safranko sent these text messages and note to Ana Baptista after their relationship had broken down. However, his words to her provide added confirmation that the two had received a loan, rather than a gift from the plaintiff.
[36] Additionally, the plaintiff, who is a 71 year old pensioner, has filed a mortgage application which confirms that she borrowed $168,000 with an interest rate of 8.75% secured by the condominium she owned. This mortgage was being repaid not by her but by one of both of the defendants. It is simply incongruous that the plaintiff would borrow this money at a significant rate of interest to simply give to Mr. Safranko and Ana Baptista.
[37] To sum up, even if I disregard the evidence of Brad Wilson, there is sufficient evidence before me that conclusively establishes that the $168,000 received by the defendants when they purchased their home, was a loan rather than a gift. To that extent, Mr. Safranko’s motion lacks a “meritorious defence” or air of reality and accordingly, must be dismissed.
COSTS
[38] The plaintiff seeks costs in the amount of $5,893.49 on a substantial recovery basis. This includes costs for the examination for discovery and the cost of the transcripts.
[39] In my view, the plaintiff was substantially successful. While not unduly complex, the matter required some preparation. The hourly rate of the plaintiff’s counsel is not unreasonable given his year of call.
[40] In my view costs fixed in the amount of $4,000 inclusive, are fair and reasonable in this matter.
DISPOSITION
It is ordered that Mr. Safranko’s motion is dismissed.
It is ordered that the funds being held in the trust account of Amandeep Walia from the sale of 1561 Scenic Lane Drive, Pickering, Ontario, shall be immediately released to the plaintiff or as the plaintiff shall direct.
It is further ordered that the defendant, Ted Safranko, pay the plaintiff’s costs of this motion in the amount of $4,000 within sixty (60) days of today’s date.
André J.
DATE: July 17, 2015
COURT FILE NO.: CV-14-5189-00
DATE: 2015 07 17
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MARIA BAPTISTA – and – TED SAFRANKO and ANA BAPTISTA
BEFORE: André J.
COUNSEL: Amandeep Sidhu, for the Plaintiff
Catherine Willson, for the Defendant/moving party, Ted Safranko
ENDORSEMENT
André J.
DATE: July 17, 2015