CITATION: Piesok v. Chessell et al, 2016 ONSC 1647
COURT FILE NO.: CV-15-538386
DATE: 20160308
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BORIS PIESOK and ISABELLA PIESOK
Plaintiffs
– and –
CHARLES CHESSELL and SOKUNTHEA PATH
Defendants
Ari A. Lokshin, for the Plaintiff
Matthew Tubie, for the Defendant
HEARD: March 7, 2016
ENDORSEMENT
DIAMOND J.:
Overview
[1] The defendants bring this urgent motion to set aside:
a) a default judgment dated November 20, 2015 which, inter alia:
i. ordered the defendants to pay the plaintiffs the sum of $479,595.70; and
ii. granted the plaintiffs possession of the mortgage premises municipally known as 258 Delaney Drive, Ajax, Ontario (the “property”), and
b) a Writ of Possession dated January 16, 2016 issued in accordance with the said default judgment.
[2] By way of background, on or about April 29, 2015 the defendants granted the plaintiffs a mortgage in the amount of $450,000.00 registered against title to the property. The term of the mortgage was for 12 months with interest at 8.75% per annum. Monthly interest-only payments in the amount of $3,281.25 each were due and payable on the 28th day of each month commencing on May 28, 2015.
[3] There is no dispute that the defendants made only two mortgage payments and thereafter defaulted on their obligations. On or about August 19, 2015, the plaintiffs served a Notice of Sale under Mortgage and Notice of Intention to Enforce Security upon the defendants via registered mail.
[4] The plaintiffs commenced this proceeding seeking debt and possession on October 14, 2015. The plaintiffs were served with the statement of claim on October 20, 2015. According to the defendants, they did not serve or file a statement of defence because they were under the belief that their mortgage broker would “save their house” by arranging alternative financing to cure their default under the mortgage.
[5] As they did not receive a statement of defence, the plaintiffs proceeded to obtain default judgment on November 20, 2015. On or about December 4, 2015, counsel for the plaintiffs delivered correspondence to the defendants advising them of the (enclosed) default judgment, and asking them to either pay the amount due thereunder or vacate the property
[6] On or about January 12, 2016, counsel for the plaintiffs served the Order dated December 16, 2015 of Master Wiebe (which granted the plaintiffs leave to issue a Writ of Possession) upon the defendants via regular mail.
[7] The plaintiffs then took possession of the property in early February 2016, and obtained two appraisals of the property, the values of which ranged between $515,000.00 - $522,000.00.
[8] Both the plaintiffs and the defendants sought to locate a buyer for the property. The defendants found a buyer who agreed to purchase the property for the sum of $570,000.00, while the plaintiffs located a buyer who agreed to purchase the property for the sum of $601,000.00. The defendants’ offer was scheduled to close on March 4, 2016, while the plaintiffs’ offer is currently scheduled to close on March 28, 2016.
[9] As held by the Court of Appeal for Ontario in Mountain View Farms Ltd. v. McQueen 2014 ONCA 194 (C.A.), on a motion to set aside a default judgment the Court is to consider the following five factors:
a) whether the motion was brought promptly after the defendant learned of the default judgment;
b) whether the defendant has a plausible excuse or explanation for the default;
c) whether the defendant has an arguable defence on the merits;
d) the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff 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.
[10] While the above principles are not to be viewed as rigid pre-conditions to the exercise of the Court’s discretion, they will nevertheless guide the Court in determining whether the interest of justice favours an order setting aside a default judgment
[11] In considering the first two factors, it appears the defendants brought their motion only after being forced to vacate the property. While the defendants have not substantively explained their interim silence in response to being notified of the default judgment and writ of possession, the resulting delay was relatively minor (only a few months) and their hope of refinancing the property to pay off the defendants’ mortgage falls within the realm of “plausible explanations”.
[12] With respect to the fourth factor, given that the $601,000.00 offer to purchase is scheduled to close later this month, and the value of that offer is greater than the offer procured by the defendants, I view this factor as neutral in the circumstances.
[13] However, a consideration of the third factor results in the dismissal of the defendants’ motion. The defendants have tendered a brief, draft statement of defence in which they acknowledge “their mortgage payments having gone into default”. The essence of their draft defence is two-fold:
a) the interest claimed by the plaintiffs under the mortgage is “in such rapid progression” that it runs contrary to the principles established by the Court of Appeal for Ontario in P.A.R.C.E.L. Inc. v. Acquaviva 2015 ONCA 331 (C.A.), and
b) the additional charges sought by the plaintiffs under the mortgage are “illegal”.
[14] With respect to the interest issue, I see no merit to this defence. A review of the plaintiffs’ February 9, 2016 discharge statement discloses that the interest sought by the plaintiffs has been calculated at 8.75% on a simple and standard basis. There are no “interest escalation provisions” in the mortgage or evidenced in the discharge statement.
[15] Under the mortgage, the daily interest is $107.88. At paragraph 9 of the statement of claim, accrued interest from June 29, 2015 – October 7, 2015 was calculated at $10,787.67. That outstanding sum increased to $24,380.14 as at the date of the discharge statement (February 9, 2016). Those calculations are accurate, and there is no “increasing interest rate in rapid progression” as alleged by the defendants.
[16] The defendants also take issue with a default/pre-payment charge in the amount of $9,843.75 included on the discharge statement. That sum is based upon the following clause in the Standard Charge Terms under the mortgage:
“The Chargor agrees that should this Charge not be discharged on the “Balance Due Date” or if the Chargor fails to renew/extend this Charge on or before the “Balance Due Date” together with the applicable renewal/extension fees or if the Chargees commence an action due under any default of the Charge, that the Chargees, in additional to all the revenues available, at their options shall be entitled to charge an additional amount equal to the payment of three months interest on the principal then outstanding.”
[17] This exact clause was cited and approved by Justice Lauwers (as he then was) in Piesok v. Johnson 2010 ONSC 1284 (S.C.J.). As held by Justice Lauwers, the bonus payment is not a “fine”, “penalty” or a “rate of interest” charged on the interest arrears, but rather a payment the mortgagor is required to make for the privilege of retiring the mortgage without providing three months’ notice. As the plaintiffs are entitled to claim the three months’ interest payment upon default, there is no merit to the position advanced by the defendants.
[18] Finally with respect to the “illegal” charges, counsel for the defendants agreed to waive the following charges on a with prejudice basis at the conclusion of the motion:
CHARGE
AMOUNT
NSF Fee
$250.00
Administration Fee Upon Default
$1,200.00
Mortgage Statement Fee
$150.00
Discharge Fee
$275.00
TOTAL:
$1,875.00
[19] Accordingly, to the extent necessary, the default judgment is varied to reduce the amount owing to the plaintiffs by the sum of $1,875.00.
[20] The defendants have provided no further particulars of which charges they claim to be “illegal”. In reviewing the discharge statement, I do not believe there are any further charges being claimed by the plaintiffs other than legal fees and disbursements. To the extent that the defendants take issue with the legal fees and disbursements sought by the plaintiffs, they have redress by way of the remedies and procedures set out under the provisions of Mortgages Act R.S.O. 1990 c. M.40.
[21] The defendants have no arguable defence on the merits of this claim. Accordingly, their motion to set aside the default judgment is dismissed.
[22] If the parties cannot resolve the issues of costs of this motion, the plaintiffs may serve and file written costs submissions (totaling no more than four pages including a Costs Outline) within ten business day of the release of this endorsement.
[23] The defendants shall thereafter serve and file their responding costs submissions (also totaling no more than four pages including a Costs Outline) within ten business days of the receipt of the plaintiffs’ costs submission.
Diamond J.
Released: March 8, 2016
CITATION: Piesok v. Chessell et al, 2016 ONSC 1647
COURT FILE NO.: CV-15-538386
DATE: 20160308
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BORIS PIESOK and ISABELLA PIESOK
Plaintiffs
– and –
CHARLES CHESSELL and SOKUNTHEA PATH
Defendants
ENDORSEMENT
Diamond J.
Released: March 8, 2016