Court File and Parties

TORONTO COURT FILE NO.: 645/15 DATE: 2016/05/13 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

SHELLY WINE Plaintiff (Moving Party) – and – LENNY KARMIOL, STEPHEN WHITE, HOUMAN MAHADJERI, RAYVIN TEENA SQUIRES, HAPPY PLANE ENTERPRISES INC. also known as HAPPY PLANT ENTERPRISES and CANGROPRO INC. also known as CANGROPRO Defendants (Responding Parties/Appellants)

Counsel: Mitchelle Wine, for the Plaintiff Stepan Juzkiw, for the Defendants

HEARD: In Writing (Toronto)

REASONS ON MOTION FOR LEAVE TO APPEAL

MADAM JUSTICE B. R. WARKENTIN

[1] This is a motion by the plaintiff, Shelly Wine, for leave to appeal to the Divisional Court pursuant to Rule 62.02(4)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 from the Order of Justice G. Dow (the Motion Judge) dated November 19, 2015 in which he set aside the default judgment of Justice Chiappetta dated March 9, 2015 against two of the defendants, Houman Mahadjeri (Mahadjeri) and Rayvin Teena Squires (Squires) (collectively the Respondents).

[2] The Motion Judge set aside the default judgment on the following terms:

a) The Respondents were to pay the plaintiff her costs thrown away in the amount of $15,000.00 forthwith as a condition to the judgment being set aside; b) The Writs of Seizure and Sale registered with the Sheriff in the County in which the Respondents reside were also set aside; c) The Respondents were provided credit for any amounts that had already been garnisheed by Squires’ employer and the Notice of Garnishment was set aside; and d) Costs were fixed in the amount of $3,500.00 inclusive of HST and disbursements.

Procedural History and Background

[3] A Statement of Claim was issued on July 28, 2014. The Appellant’s evidence was that the Claim was served on the Respondents on August 13, 2014. The Respondents were noted in default on September 15, 2014. The Respondents claimed they did not become aware of the Claim until September 2014 and by the time they were able to consult counsel, they had been noted in default.

[4] The Respondents were spouses; however, in 2014 they were separated and involved in both marital and child protection proceedings. Mahadjeri was suffering from an addiction to opiates. The Respondents have claimed that Mahadjeri was also suffering from mental health issues during this period of time and was not residing with Squires nor did he have a permanent residence.

[5] The Respondents claim they were not properly served with the Statement of Claim, although that conflicts with the Appellant’s evidence.

[6] Squires consulted and retained counsel in September 2014 who drafted and served a Statement of Defence and Crossclaim in November 2014, however was unable to file the Statement of Defence and Crossclaim due to the Respondents having been noted in default.

[7] There was communication between the parties’ respective lawyers between November 2014 and the December 2014. Counsel for the Appellant refused to consent to setting aside the noting of the Respondents in default. Counsel for the Respondents did not bring a motion seeking to set aside the noting in default in spite of being advised there would be no consent.

[8] In December 2014, counsel for the Appellant drafted a Motion for Default Judgment, dated December 10, 2014. Default judgment was obtained by order of Justice Chiappetta on March 9, 2015. Judgment was against the Respondents for the sum of $461,700.00 together with pre-judgment interest of $338.15 and costs of $1,912.60.

[9] Subsequent to obtaining the default judgment, Counsel for the Appellant and Counsel for the Respondents continued to correspond and in May 2015 the Respondents retained a new lawyer who informed counsel for the Appellant that they would be bringing a motion to set aside the default judgment. An initial date for that motion was scheduled for September 2, 2015 but was eventually heard on November 9, 2015. The Respondents’ motion was granted on November 19, 2011 when the Motion Judge released his written reasons.

[10] The Appellants now seek leave to appeal decision of the Motion Judge to set aside the default judgment for the following reasons:

a) The Motion Judge misapprehended the evidence before him in that he referred to the Defendants (Squires and Mahadjeri) having retained counsel in September 2014 when Mahadjeri was not represented by counsel until June 2015. b) The Motion Judge found that by having retained counsel in September 2014 the Defendants had exhibited “some (although not perfect) diligence”. c) As a result of this misapprehension of the evidence, the Motion Judge failed to address the delay of Mahadjeri in retaining counsel and responding to having been noted in default. d) The Appellant has suffered prejudice as a result of the delays because the Respondents have encumbered assets and further delay will result in greater prejudice.

[11] The Respondents argued that leave to appeal should not be granted because the Motion Judge properly considered the factors required to set aside a default judgment as summarized by the Ontario Court of Appeal in Mountain View Farms Ltd. v McQueen, 2014 ONCA 194 as follows:

a) Whether the motion was brought promptly after the defendant learned of the default judgment; b) Whether there was a plausible excuse or explanation for the defendant’s default in complying with the rules; c) Whether the facts establish that the defendant has an arguable defence on the merits; d) The potential prejudice to the moving party should the motion be dismissed and the potential prejudice to the respondents 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.

[12] The Motion Judge confirmed that in Mountain View Farms, Justice Gillese on behalf of the Court of Appeal indicated that none of the enumerated factors was to be treated as rigid and that no one factor is more or less important than another.

[13] In addition to the facts already set out, the Respondents noted that the Appellant had settled her claims as against the other defendants, Lenny Karmiol and Stephen White for $222,000.00 although the Appellant claims only $150,000.00 of this settlement relates to this action. This settlement was reached after the Respondents were noted in default but prior to the Appellant obtaining default judgment against the Respondents. The Appellant did not disclose this information to Justice Chiappetta in the motion for default judgment.

[14] The Respondents also allege that the amount claimed by the Appellant is not supported by the evidence and that her loss was closer to $200,000.00 rather than the amount in excess of $400,000.00 that she has claimed. Because of these issues, the Respondents claim that the Respondents have a defence on the merits and they would suffer prejudice if the default judgment was reinstated.

Test for Leave to Appeal

Good Reason to Doubt Correctness of the Decision

[15] The Appellant has brought her motion for leave to appeal under Rule 62.02(4)(b) of the Rules of Civil Procedure.

[16] Rule 62.02(4)(b) provides that leave to appeal an interlocutory Order shall not be granted unless:

b) there appears to the judge hearing the motion good reason to doubt the correctness of the Order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[17] The test under rule 62.02(4)(b) contains two branches that are conjunctive. To succeed in a motion for leave to appeal pursuant to rule 62.02(4)(b), the Appellant must satisfy the court that (1) there is good reason to doubt the correctness of the Motion Judge’s decision and (2) that the appeal raises matters of general importance. (Bell ExpressVu Limited Partnership v. Morgan (2008), 67 C.P.C. (6th) 263 at paras. 1-3 (Ont. Div. Ct.))

[18] The phrase “good reason to doubt the correctness of a decision” does not require a conclusion that the decision in question was wrong or even probably wrong. Nor does it require that the judge hearing the leave motion would have decided it differently had he or she been presiding as the motion judge. The test is whether the decision is open to serious debate (Judson v. Mitchele, 2011 ONSC 6004 at para 15, 108 O.R. (3d) 129. See also Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 at 284 (Gen. Div.)).

[19] The Motion Judge considered Rule 19.08(1) of the Rules of Civil Procedure; the Rule permitting the setting aside of a default judgment, in reaching his decision to set aside the Default Judgment as against both Respondents. It was his finding that the Respondents had met the onus of establishing that the default judgment should be set aside. The issue of the promptness of commencing their motion after having learned of being noted in default was only one of the five factors enumerated in Mountain View Farms that he considered. He clearly stated that if this was the only factor he would have granted the relief sought by the Respondents.

[20] The Motion Judge then examined the remaining four factors and determined that his analysis also favoured the Respondents in each of those factors. He considered and dealt with the potential prejudice to the Appellant by his order for costs thrown away as a precondition to the setting aside of the default judgment and determined that the overall interests of justice favoured setting aside the default judgment.

[21] As already articulated, the test on a leave to appeal under Rule 62.02(4)(b) does not require a conclusion that the decision in question was wrong or even probably wrong. Nor does it require that I would have decided it differently had I been presiding as the motion judge. The test is whether the decision is “open to serious debate”.

[22] A Motion Judge is provided with much discretion to determine whether or not to set aside a default judgment, guided by the legal test as already set out by the Ontario Court of Appeal in Mountain View Farms.

[23] Even if he erred, as alleged by the Appellant, in his characterization of Mahadjeri having retained counsel in September 2014, that factual error does not provide good reason to doubt the correctness of his decision when considered in light of his entire reasoning as to why he granted the motion to set aside default judgment.

[24] I therefore find that there is not good reason to doubt the correctness of the Motion Judge’s decision and thus the Appellant has not satisfied the first branch of the two part test.

[25] Having made this finding, I do not need to consider the second part of the test under Rule 62.02(4)(b). The Appellants’ motion for leave to appeal is therefore dismissed.

[26] Having considered both parties submissions on costs, I award costs to the Respondent in the amount of $3,600.00 inclusive of HST and disbursements.

Madam Justice B. R. Warkentin Released: May 13, 2016