ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 10499/15
DATE: 2015/12/10
B E T W E E N:
Royal Bank of Canada
J. Ross Macfarlane, for the Plaintiff/Responding Party
Plaintiff
- and -
2300165 Ontario Inc. and
Larissa Mikhailova
Susan Zakaryan, for Larissa Mikhailova, Defendant/Moving Party
Defendants
HEARD at Welland, Ontario: November 18, 2015
The Honourable Justice T. Maddalena
ENDORSEMENT ON MOTION
The Issues
[1] This is a motion by the defendant Larissa Mikhailova (hereinafter referred to as “Mikhailova”) to set aside the registrar’s default judgment dated June 25, 2015.
[2] The defendant Mikhailova claims in her motion that the default judgment is in its entirety an irregularity and should be set aside, both as against her personally and the company, 2300165 Ontario Inc. The corporation is not represented in this motion. Only Mikhailova is represented by counsel.
[3] The responding party/plaintiff, Royal Bank of Canada (“the Bank”), submits there are no irregularities. The defendants clearly defaulted on their financial obligations including Mikhailova on her personal guarantee to the Bank.
Background
[4] The defendant company 2300165 Ontario Inc. operated a clinic under the name “London Chronic Pain Institute”. The defendant Mikhailova was at all material times the director of the company.
[5] The company executed a lease and general security agreement dated June 25, 2012 in favour the plaintiff Bank.
[6] Mikhailova executed a guarantee and postponement of claim limited to the sum of $50,000 plus interest, plus costs, dated January 11, 2013.
[7] By February 24, 2015 the business of the company was no longer operating. Mikhailova removed the leased equipment to her home.
[8] The plaintiff Bank held security over the equipment it had leased to the company.
[9] On March 31, 2015 the equipment was repossessed from the home of Mikhailova and the equipment is now in storage. The removal of the equipment was done with the consent and cooperation of Mikhailova.
[10] Notices of default and notices of intent to sell the equipment were sent to both defendants. Neither the company nor Mikhailova redeemed the equipment by payment of the amounts due.
[11] Further, since the company had ceased operations, it was in default of its obligation to the plaintiff Bank.
Law and Analysis
[12] Rule 19.08(1) of the Rules of Civil Procedure provides as follows:
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. R.R.O. 1990, Reg. 194, r. 19.08(1)
[13] The court clearly has a discretion to set aside or vary a default judgment. First, the court must consider the irregularity issue raised by the moving party. If the court finds an irregularity, then the default judgment must be set aside. If there is no irregularity, then the court must still consider a five-part test.
[14] In the instant case, there was proper service of the claim. The claim was for an amount calculated as liquidated damages. The claim particularizes the amounts due and owing upon default.
[15] The moving party further submits the plaintiff’s default judgment must be an irregularity since the plaintiff’s Statement of Claim pleads possession of leased and personal property that were already in the plaintiff’s possession.
[16] This, in my view, is not an irregularity. Upon default, the plaintiff was entitled to possession of the leased equipment. The notice of intent to sell the equipment was served on Mikhailova and the company. Neither redeemed the equipment by payment of the amounts due. To date, the equipment still sits in storage, accruing costs.
[17] The company ceased operations, thus defaulting on its Master Lease agreement and general security agreement.
[18] Mikhailova executed a guarantee and postponement of claim securing all past and future payments of the company. She defaulted on this, which is clearly outlined in paragraphs 9 and 10 of the Statement of Claim. This is sufficiently particularized in the Statement of Claim.
[19] I find the judgment is not an irregularity.
[20] Thus, having found no irregularity, the court must still consider the five-part test as set out in the case of Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561. At paras. 48, 49 and 50 the Court stated 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 (Ont. 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.
50 These factors are not to be treated as rigid rules; the court must consider the particular circumstances of each case to decide whether it is just to relieve the defendant from the consequences of his or her default.
[21] After considering the relevant factors, I do not find inexplicable delay on the part of Mikhailova. However, I do find that there is no defence to the action, as the default is clear.
[22] The prejudice to the plaintiff is great. The equipment is in storage while the default continues and costs accrue.
[23] Parties must be held to the agreements which they have made. This is important to the overall integrity of the administration of justice.
[24] Mikhailova defaulted under her guarantee. She has no defence.
[25] Similarly, the company is in default under its Master Lease and general security agreement. It has no defence.
[26] Therefore, having considered all of the evidence, I conclude that this is not an appropriate case to set aside the default judgment. Setting aside the default judgment would serve only to delay the inevitable for the defendant with ongoing prejudice to the plaintiff.
[27] The motion of the moving party is dismissed.
Costs
[28] Unless otherwise agreed, the parties may make written submission on costs. The submissions of the plaintiff and the defendant are limited to two pages, plus a Bill of Costs. The plaintiff’s submissions are due by December 17, 2015. The defendant’s are due by December 24, 2015.
Maddalena J.
Released: December 10, 2015
COURT FILE NO.: 10499/15
DATE: 2015/12/10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Royal Bank of Canada
Plaintiff
- and –
2300165 Ontario Inc. and
Larissa Mikhailova
Defendants
ENDORSEMENT ON MOTION
Maddalena J.
Released: December 10, 2015