ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ZHIMIN REN
Plaintiff
– and –
CAN SITE CORPORATION, SIMON LIM also known as JIMMY CHONG also known as JIMMY SIMON CHONG also known as JIMMY SIMON LIM also known as SU EK LIM also known as CHEE WAI LIM also known as ALLY FANG, A1 SOYBEAN ENTERPRISES LTD., PANASIAN GLOBAL INC., A-1 PAN-ASIAN GROUP OF COMPANIES LTD., XIAOYU GUAN also known as XIAO YU GUAN, JEANNETTE TSE also known as JACQUELINE TSE, ERWIN JOHN WEISDORF also known as JOHN WEISDORF
Defendants
Christopher P. Goldson, for the Plaintiff
Roger A. Gosbee, for the Defendants
HEARD: October 27, 2016
RULING ON MOTION TO SET ASIDE DEFAULT JUDGMENT
Nature of the Proceeding
Nature of the Proceeding
1The moving parties, Su Ek Lim (Mr. Lim) and Xiaoyu Guan (also known as Xiao Yu Guan) (Ms. Lim), bring this motion to set aside a default judgment dated May 11, 2010, the corresponding noting in default and a writ of execution.
2Both parties seek costs on a substantial indemnity basis.
The Facts
The Facts
3The plaintiff Zhimin Ren (Mr. Ren) applied for immigration to Canada in 2005. He engaged Can Site Corporation (Can Site) for help with the immigration process.
4Can Site was an Ontario corporation that held itself out as an immigration consulting business. Ally Feng was the corporation’s only director and officer. On or about February 28, 2005, the government cancelled the company’s certificate of incorporation because of its failure to pay corporate taxes.
5In July 2005, the plaintiff met with an employee of Can Site named Jimmy Chong, an alias of Su Ek Lim. After meeting with Mr. Lim, the plaintiff signed an immigration services contract with Can Site on July 18, 2005 (the contract).
6The contract required the plaintiff to pay Can Site a total of $260,000: $10,000 in non-refundable service fees, and $250,000 to be forwarded to the Saskatchewan government. Can Site was to refund $250,000 if the Canadian government formally denied Mr. Ren’s immigration application. Mr. Ren was not to receive a refund if he voluntarily withdrew from the contract.
7The plaintiff paid $260,000 to Can Site. His immigration application was denied.
8In 2008, the plaintiff learned that Can Site had not forwarded any money to the Saskatchewan government. He demanded a full refund. Mr. Lim signed a promissory note in Can Site’s name. To this date, the plaintiff has not received any refund.
9On October 3, 2008, Mr. Ren commenced an action claiming reimbursement of $260,000 and $500,000 in damages. The Statement of Claim named the defendants as follows:
(a) Can-Site Corporation;
(b) Pan-Asian Global Inc. (Panasian) and A-1 Pan-Asian Group of Companies Ltd. (A-1), as “alter-ego” companies of Can-Site;
(c) A1 Soybean Enterprises Ltd., a corporation with the same registered headquarters as Can Site;
(d) Su Ek Lim, allegedly the controlling mind, director, and officer of Can Site and a director of the other defendant companies;
(e) Xiaoyu Guan, allegedly a relative or “culprit together” with Su Ek Calvin Lim, Su Ek’s son, a controlling mind, director, and officer of Can Site;
(f) Jeanette Tse, Su Ek Lim’s former common-law partner, a director of A-1, and the owner of the defendant corporations’ headquarters and Lim’s residence at 478 Weldrick Road East, Richmond Hill, Ontario (the Weldrick Property); and
(g) John Weisdorf, legal counsel.
10[Ally Feng, Can Site’s director, was listed as an alias of Su Ek and Calvin Lim, but not named as an individual defendant. Jacqueline Tse, Su Ek’s daughter, was listed as an alias of Jeannette Tse.]
11After three failed attempts at serving the moving parties, the plaintiff obtained an order for substituted service. Under that order, service was to be effected by ordinary mail sent to the corporations’ headquarters, a mailbox in Richmond Hill, Ontario, and the Weldrick Property.
12The Statement of Claim was sent through regular letter mail on December 1. Service took effect seven days later in accordance with the terms of the substituted service order.
13On May 11, 2010, the Local Registrar in Newmarket, Ontario signed default judgment. Except for Mr. Weisdorf, all of the defendants were noted in default and jointly ordered to pay the plaintiff a total of $297,416.61.
14On January 30, 2013, a Writ of Seizure and Sale in respect of the judgment obtained on default was filed against Mr. Lim. On February 26, 2013, the plaintiff’s solicitors issued a Notice of Sale of the Weldrick Property.
15Mr. Lim became aware of the default judgment at some point in 2013. At that time, his lawyer advised him that he should move to set aside the default judgment.
16Ms. Guan deposed that she did not find out about the default judgment until October 2015. Shortly thereafter, a lawyer for Mr. Lim advised the plaintiff’s lawyers that Mr. Lim intended to sell the Weldrick Property.
17On August 23, 2016, Mr. Lim and Ms. Guan filed this notice of motion.
18The Weldrick Property was sold in September 2016.
19The moving parties say that they never received the Statement of Claim because they were in China between June 2008 and January 2009.
20In January 2013, Jeanette Tse sought to set aside the default judgment as against her. Upon cross-examination, Ms. Tse said that Mr. Lim ran the Can Site business. She could not explain why her mother, Ally Feng, was listed as a Can Site director.
Issues
Should the affidavits supporting the plaintiff’s position be struck?
Was the default judgment irregularly obtained?
Has the test for setting aside a default judgment been met?
Should the noting in default be set aside?
Positions of the Parties to this Motion
- Should the affidavits supporting the plaintiff’s position be struck?
Positions of the Parties to this Motion
21The moving parties contend that the affidavits filed in support of the plaintiff’s facta should be struck. The impugned affidavits were given by Xue Chen, a law clerk at Mr. Ren’s lawyer’s law firm.
22Citing Master MacLeod’s decision in Mapletoft v. Christopher J. Service, 2008 CanLII 6935 (ON SC), the moving parties argue that the affidavits should be struck in their entirety because they included (i) legal opinions and (ii) evidence regarding contentious issues of which the affiant had no personal knowledge.
23The moving parties also allege that Ms. Chen’s affidavits were inappropriate because they were submitted in order to protect persons with important knowledge of contentious issues from cross-examination.
24The plaintiff argues for the admission of the Chen affidavits. Rule 39.01(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, allows for the admission of Ms. Chen’s evidence regarding facts of which she had no personal knowledge, because she clearly identified the source of her information and fact of her belief.
25Citing Mapletoft, the plaintiff argues that the affidavits should stand because (i) it is common and practical for law clerks to give affidavit evidence, and (ii) much of the evidence was essentially highlighting matters of record that could have been derived from reviewing the file.
26The moving parties’ counsel cross-examined the plaintiff without any limitation on questions regarding the Chen affidavits. Therefore, having Ms. Chen provide affidavit evidence did not shield anyone with important knowledge of contentious issues from cross-examination.
Disposition
27The Rules of Civil Procedure permit the court to receive evidence in an affidavit that is based on the deponent’s information and belief. There is nothing in the affidavits relied upon by the plaintiff that could not effectively be contradicted or challenged by the moving parties. The weight of the evidence can adequately be assessed, having regard to all of the evidence for the limited purposes of the disposition of this motion.
- Was the default judgment irregularly obtained?
Was the Default Judgment Irregularly Obtained?
28The moving parties argue that the default judgment was irregularly obtained for two reasons:
They were not served with the Statement of Claim, and
the plaintiff’s claim against Mr. Lim is not the proper subject of a default judgment.
29Both Ms. Guan and Mr. Lim claim that they did not receive notice of this action because they were in China when the Statement of Claim was served. Ms. Guan also says that she did not live at the Weldrick Property at the time of service. To the contrary, it may be noted, Ms. Guan deposed that she had lived at the Weldrick Property since 2008 in her answer to question 45 at her cross-examination.
30The moving parties submit that only a liquidated claim can be the subject of a default judgment. Though Mr. Ren’s claim for reimbursement against Can Site is a liquidated claim, his claim against Mr. Lim is for damages. Thus, according to the Court of Appeal’s decision in Schill & Beninger Pumbing & Heating Ltd. v. Hallagher Estate, 2001 CanLII 24134 (ON CA), the default judgment must be set aside.
31Mr. Lim and Ms. Guan argue that they are entitled to set aside the default judgment as of right because the plaintiff improperly obtained it. Therefore, it is unnecessary for them to meet the usual test for setting aside a default judgment.
32The plaintiff submits that the moving parties were properly served in accordance with the substituted service order and that the default judgment was properly signed by the registrar.
The plaintiff notes that the subject of the default judgment was his claim for repayment of $260,000. This claim was brought against all of the defendants jointly and severally, not Can Site alone. Under r. 19.04(1) of the Rules of Civil Procedure, a default judgment may be signed by the registrar in respect of “a debt or a liquidated demand in money, including interest if claimed in the statement of claim.”
A claim for breach of contract can be a liquidated claim if the quantum owing is ascertainable from the contract or from the allegations in the Statement of Claim. Here, submits the plaintiff, it is clear from the Statement of Claim that the plaintiff demanded repayment of the $260,000 paid to Can Site. Thus, the claim was a proper subject of a default judgment.
Disposition
Disposition of Irregularity Issue
33Service of the Statement of Claim was in accordance with the order for substituted service. The evidentiary burden rests on the moving parties to establish, on a balance of probabilities, that they did not receive the Statement of Claim. I am satisfied, on a balance of probabilities, that each of the moving parties received the Statement of Claim that was delivered by mail to the Weldrick Property, at which they resided. I reject their evidence that they did not receive the mail containing the Statement of Claim, when they returned from China. At the very least, the evidence establishes that those who were resident at the address at which service was effected would have known to bring the mail that had been received to the attention of one or both of the moving parties and each would have known to notify the other.
34The relief sought by the plaintiff when default judgment was sought was confined to a refund of the sum he had advanced to the defendants, pursuant to a contract that had stipulated what he was to have advanced. In the particular circumstances, what he sought in judgment falls within the provision of rule 19.04(1)(a).
- Has the test for setting aside a default judgment been met?
Has the Test for Setting Aside a Default Judgment Been Met?
35Both sides rely upon the three-part test to be applied on a motion to set aside a default judgment. Generally, the moving party must show that:
it moved promptly to set aside the default,
there is a plausible excuse or explanation for the default, and
there is an arguable defence on the merits.
36Mr. Lim and Ms. Guan argue that the deficient service is to blame for their delay in moving to set aside the default judgment.
37Ms. Guan says that the plaintiff has not presented a prima facie cause of action as against her. The plaintiff failed to present evidence that she had any relationship with Can Site or any other “culprit”. She deposed that she began working with Mr. Lim in 2007, two years after the contract was signed. In the absence of a prima facie cause of action, the default judgment must be set aside as against her.
38Mr. Lim contends that he is not liable for Can Site’s debts. The plaintiff paid Can Site, not Mr. Lim. He was unaware that Can Site’s certificate of incorporation had been cancelled in 2005. He was not an officer or director of the company, but merely an employee. The plaintiff presented minimal (and inadmissible) evidence that Mr. Lim was a controlling mind of Can-Site. Thus, the default judgment must be set aside as against him.
39In his affidavit, Mr. Lim argues that Mr. Ren was not entitled to a refund because he breached the contract with Can Site. He alleges that Mr. Ren intentionally sabotaged his interview with an Immigration Officer, and that this amounted to a voluntary withdrawal from the contract. Therefore, the default judgment should be set aside entirely.
40In answer, the plaintiff argues that the moving parties’ response to the motion was anything but timely. Mr. Lim admits that he was advised to move to set aside the default judgment in 2013. Ms. Guan admits that she knew about the judgment in October 2015. Neither party sought to set it aside until August 2016.
41The plaintiff further alleges that the moving parties’ explanation for their default is not plausible. The Statement of Claim was sent by mail to the Weldrick Property in December 2008 and would have been waiting for them upon their return from China in January 2009. Both Mr. Lim and Ms. Guan lived at the Weldrick Property until September 2016.
42Mr. Lim knew about the default in 2013, but says he delayed in responding to it because he did not appreciate the seriousness of the judgment. The plaintiff argues that such an explanation should not be considered as sufficient.
43The moving parties have no arguable defence on the merits. Mr. Lim was the controlling mind of a dissolved corporation that was illegally providing immigration-consulting services. He denies that he voluntarily withdrew from the contract and argues that any purported term that would deny him a refund was unconscionable. Therefore, Mr. Lim is liable to pay back all of the money that Mr. Ren delivered to Can Site.
44Despite Mr. Lim’s claims that he was only an employee of Can Site, there is overwhelming evidence that he was the company’s controlling mind. Jeanette Tse gave evidence that Mr. Lim ran the company. Mr. Lim reviewed all of Can Site’s application documentation and had control over client immigration records. It was Mr. Lim who induced Mr. Ren into the contract and subsequently refused to repay him. Finally, Mr. Lim negotiated and signed the 2008 promissory note in Can Site’s name.
45When the contract was signed, the Immigration and Refugee Protection Regulations, SOR/2002-227 prohibited Can Site from providing immigration services. The Regulations barred anyone other than an “authorized representative” from charging a fee for representing, advising, or consulting with a person who is the subject of an immigration proceeding or application. Can Site was not an authorized representative; neither was Mr. Lim. Therefore, Can Site and Mr. Lim are jointly and severally liable for improperly soliciting and receiving payment for Mr. Ren’s immigration applications.
46The plaintiff argues that Mr. Lim is personally liable for the contract because Can Site was not a registered corporation when it was agreed to on July 18, 2005. According to s. 21(1) of the Business Corporations Act, R.S.O. 1990, c. B.16, a person who enters into a contract in the name of a corporation before it comes into existence is personally bound by the terms of the contract. In Pelliccione v. John F. Hughes Constructing and Development Company, 2005 CanLII 34822, at p. 15, Ferrier J. held that s. 21(1) applies “where a person enters into a contract in the name of a non-existent company.” Since Mr. Lim entered into the agreement on Can Site’s behalf after the corporation certificate was cancelled, he is personally liable for the terms of the contract.
47Even if Mr. Lim could claim that the corporation protected him from personal liability, the plaintiff submits that the corporate veil should be pierced, because Mr. Lim controlled Can Site and used the company for fraudulent or improper conduct. He used Can Site to provide immigration services illegally and failed to direct the plaintiff’s $250,000 deposit to the Saskatchewan government.
48The plaintiff denies having voluntarily withdrawn his application and intentionally sabotaging his interview with the Immigration Officer. He also argues that any terms of the contract that purportedly deny him a refund of his entire investment are unconscionable.
49The existence of an arguable defence does not automatically mean that a default judgment will be set aside, submits the plaintiff. Citing Laredo Contruction Inc. v. Sinnadurai, 2005 CanLII 46934 (ON CA), he emphasizes that the second and third parts of the test to set aside a default judgment must be weighed together. Courts must be flexible, but time limits should mean something.
50In addition to the standard three-part test, the plaintiff submits that two additional factors should be considered:
The potential prejudice that would result from allowing or dismissing the motion, and
the effect that any order would have on the overall integrity on the administration of justice.
51The Court of Appeal suggested that these additional factors were appropriate considerations for determining whether to set aside a default judgment in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at para. 49; and Frankie Tomatto’s Woodbine Inc. v. De Groot, 2015 ONCA 739, 2015 CarswellOnt 16544, at para. 13.
52The plaintiff argues that he would suffer great prejudice from the moving parties’ delay in seeking to set aside the default judgment. Mr. Lim deposed that Can Site employees Sally Tsang and Calvin Lim dealt with the plaintiff’s immigration application and had central roles in the company. Both of these important witnesses have died in the past few years. Further, the plaintiff does not have a clear memory of the events relevant to this action, some of which occurred over 10 years ago.
Disposition
Disposition of Test to Set Aside Default Judgment
53The evidence clearly establishes that Sally Tsang and Calvin Lim must have had compelling and relevant evidence as to the circumstances under which the plaintiff’s funds were received and expended by the defendants, especially Sally Tsang. Their evidence and those circumstances are directly relevant to the issue of whether the plaintiff was entitled to his money back. They have died and their evidence is no longer available to the plaintiff. There is real prejudice to the plaintiff arising from the lapse of time and their death. Considerations of prejudice are relevant to a motion to set aside a default judgment and they are particularly material to the case here.
54The defendants failed to promptly bring a motion to set aside the judgment, despite becoming aware of it, Mr. Lim in 2013 and Ms. Guan in October of 2015. Even if the Statement of Claim had not come to their attention when served in December 2008, they have not proffered a credible explanation as to why there was such a delay in responding to the knowledge as and when it was acquired. There may be an arguable defence but, given the decisions in Laredo Construction, Mountain View Farms Ltd., and De Groot, this does not necessarily entitle the moving party to the relief sought. When all are taken together, the plausibility of any defence does not nearly outweigh the circumstances that warrant this motion’s dismissal.
Costs
55The parties may make submissions as to costs within 10 days.
Madam Justice A.M. Mullins
Released: December 21, 2016
CITATION: Ren v. Can Site Corporation, 2016 ONSC 7738
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ZHIMIN REN
Plaintiff
– and –
CAN SITE CORPORATION, SIMON LIM also known as JIMMY CHONG also known as JIMMY SIMON CHONG also known as JIMMY SIMON LIM also known as SU EK LIM also known as CHEE WAI LIM also known as ALLY FANG, A1 SOYBEAN ENTERPRISES LTD., PANASIAN GLOBAL INC., A-1 PAN-ASIAN GROUP OF COMPANIES LTD., XIAOYU GUAN also known as XIAO YU GUAN, JEANNETTE TSE also known as JACQUELINE TSE, ERWIN JOHN WEISDORF also known as JOHN WEISDORF
Defendants
RULING ON MOTION TO SET ASIDE DEFAULT JUDGMENT
Madam Justice A.M. Mullins
Released: December 21, 2016