Court File and Parties

Court File No.: FS-12-17832-00 Date: 2017-04-27 Ontario Superior Court of Justice

Between: Silva Sogomonian, Applicant – and – Dikran Hekimian, Respondent

Counsel: Mario Middonti, for the Applicant Jack Hope, for the Respondent (moving party)

Heard: April 13, 2017

Before: Gilmore J.

Overview

[1] The parties were married in 1993 and separated on May 3, 2006. There were no children of the marriage.

[2] The main asset of the marriage was a jointly owned condominium located at 1 Read Drive, suite 2506, Toronto (“the home”). The respondent left the home on the date of separation and never returned.

[3] The applicant died on May 18, 2016. Her will appoints her sister, Anahit Sogomonian, (“Anahit”) as her Estate Trustee. The home has been sold and the proceeds are currently held on consent by the applicant’s counsel.

[4] Prior to her death, the applicant obtained a default order transferring the respondent’s share of the home to her. The respondent now seeks to set aside that order. The Estate Trustee opposes the respondent’s motion on the grounds that he has failed to meet the required test to set aside the order.

Background Facts

[5] The applicant issued a simple divorce application in 2008 and the divorce order was issued on January 6, 2009. The divorce order was not entered by the court until February 1, 2010.

[6] As the parties were not able to settle the issues relating to the home, the respondent issued an application for Partition and Sale returnable in December 2010. The parties attempted to settle the application. As the applicant indicated that she wished to make an application for an equalization of net family property, the parties agreed to let the Partition and Sale application lapse and that if the matter still could not be settled, the applicant would commence a new application in family court.

[7] The parties continued to negotiate through their lawyers but no settlement was achieved. The applicant sought certain financial information from the respondent but without complete success. She therefore commenced the within application in January 2012. As she had been paying the condo fees, mortgage and taxes for the home since the date of separation, she sought reimbursement for the respondent’s one-half share of those amounts. The applicant sought a total credit of $98,686.30.

[8] The applicant was self-represented at this point and served a Notice of Change of Representation on the respondent’s counsel. Although the Notice of Change was the proper family court form, there was no court file number indicated.

[9] The applicant had difficulty serving the respondent with her application. She used a process server who was unsuccessful on two attempts to serve the respondent both at his home and his mother’s home. The applicant then mailed the application and her financial statement by registered mail to the respondent on June 3, 2014.

[10] On August 22, 2014, the applicant obtained a court order validating service of the application and financial statement by registered mail on the respondent. The order required that the respondent serve his answer and financial statement before September 30, 2014. The court was directed to send a copy of the order to the respondent.

[11] The respondent has acknowledged that he received both the application and the August 22, 2014, order. He denies that the applicant’s financial statement accompanied the application.

[12] The respondent ignored both the court order and the application. During his cross-examination on February 10, 2017, he indicated that he did not understand the nature of the documents and that he was certain his lawyer would contact him if there was something he should know about. In any event he knew he was protected because he was still a joint owner of the home.

[13] As the respondent did not serve and file an answer, the family court matter proceeded by way of an uncontested trial and the relief sought in the application was granted on December 22, 2014, by Moore, J. (the “Moore Order”). The court granted the relief exactly as articulated in the application and ordered that:

(1) Equalization of net family properties, costs, the Applicant entitled to purchase the respondent’s interest in the matrimonial home, repaid by the Respondent for 50% of all her mortgage, common expenses and realty tax expenses paid in respect of the matrimonial home for the date of separation to the date of the judgment (with set-off those amounts against any monies owed by the Applicant to the Respondent for his interest in the home).

(2) To be entitled to set-off against any money owed to the Respondent for the home, the amount of the equalization payment due by the Respondent to the Applicant, and any costs owed by the Respondent to the Applicant.

[14] The applicant, for obvious reasons, had difficulty enforcing this order. She brought a 14B motion without notice and an order was made by McWatt, J. on April 30, 2015, (the “McWatt Order”). That order provided that the respondent’s share of the home was to be transferred to the applicant, such transfer was to satisfy any equalization claim by either party, and, neither party was to pay spousal support to the other. The property was subsequently transferred to the applicant on July 20, 2015.

[15] When the respondent heard of the applicant’s death on July 8, 2016, he immediately contacted his lawyer who in turn contacted the Estate Trustee with respect to the respondent’s claim for an interest in the home. He instructed his lawyer to advise counsel for the estate of his intention to take steps to set aside the McWatt order and arrangements were made to move the matter forward by way of this motion.

Issues and the Law

[16] The Family Law Rules do not have a specific provision relating to the setting aside of default judgments. Pursuant to Rule 1(7) of the Family Court Rules, the court may reference the Rules of Civil Procedure where necessary. Rule 19.08(2) of the Rules of Civil Procedure provides that a default judgment may be set aside or varied on such terms as are just.

[17] In Intact Insurance Company v. Kisel [1] the Ontario Court of Appeal set out the factors to be considered by the court on a motion to set aside a default judgment as follows:

(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.

Was the Motion Brought Promptly?

[18] It is conceded that the respondent brought this motion promptly upon learning of the default judgment.

Is There a Plausible Excuse or Explanation for the Default?

[19] The respondent’s submission on this point is that he made a mistake. His English is not very good and he considered that he still had a lawyer who would contact him in the event there was something he should know. He assumed that all of the documents that he received had also been received by his lawyer. Further, he felt protected by the fact that he was still a joint owner of the home.

[20] The respondent relies on Schryver v. Schryver [2] for the proposition that a miscarriage of justice had occurred when the self-represented father did not understand that he was required to file an answer in order to protect his right to participate.

[21] However, the facts of that case differ from the case at bar. In Schryver, the father had been engaged in litigation with the mother for three years. It was understandable that the father did not realize he was required to respond to issues in a new application which contained claims related to the same issues raised in the mother’s Motion to Change and litigated over the three previous three years.

[22] In the case at bar, the respondent was well aware that once the application for Partition and Sale had been allowed to lapse that, failing settlement, the applicant would commence an application in family court. That is exactly what she did.

[23] In the respondent’s affidavit sworn October 28, 2016, he deposes that in July 2011, the applicant’s lawyer sought further financial disclosure from him through his lawyer. He did not provide the information but heard nothing more until receipt of the application by registered letter on May 30, 2014, and receipt of the order validating service on September 5, 2014. Despite the fact that the order validating service required him to serve and file his answer and a financial statement by September 30, 2014, the respondent did nothing for over two years from receipt of the application. In my view, his explanation that he was waiting for his lawyer to contact him is not credible for the following reasons:

(a) The respondent is educated. He has a civil engineering degree from Armenia;

(b) The respondent has business experience. He has operated his own construction project management company, DH & Associates, since 2000;

(c) The respondent speaks English well enough to understand the documents he received. He admitted that he knew the family court application related to the home and that the applicant was seeking an equalization of net family property and repayment of expenses the applicant had paid for the home on his behalf. He explained this during his cross-examination making it clear that he could not only read the documents he received but understood what relief the applicant sought and the implications of that relief. In fact, his comprehension went beyond simply an understanding of the claims. During his cross-examination he testified that although the applicant was making certain claims for expenses, this did not mean she was entitled to what she was asking for. [3]

[24] Given the above, the respondent’s position that he was simply waiting for his lawyer to contact him defies logic. He understood that the applicant would be making an application in family court, he understood what that claim was for and he acknowledged having received and read both the application and the order validating service.

[25] While the respondent deposed that he was sure that his lawyer would have received the same documents and contacted him if there was a problem, this explanation would be satisfactory if the respondent had done nothing for a month or two. However, the respondent never called his lawyer to find out if he had actually received the documents or what he should do. In fact, he never called his lawyer until he heard of the applicant’s death in June 2016.

[26] I therefore do not find that the respondent’s explanation is either adequate or plausible. I reject the contention in his affidavit that he “did not understand the nature of the documents.” [4] It is clear from his cross-examination that he did understand what the documents were, he simply made a conscious decision to do nothing about them.

Does the Respondent have a Defence on the Merits?

[27] The respondent’s position is that he wants an opportunity to present an accounting. He submitted that this should be a straightforward exercise because there was an accounting in the application and that would simply need to be updated. Further, the value of the property has been established because it has been sold. Finally, the respondent would need to establish his claim for occupation rent. This can be done by way of expert evidence on similar rental values.

[28] The respondent submits that any equalization payment owing by him to the estate would be minimal as financial disclosure has been made and the respondent concedes he owes an equalization payment of $674.

[29] The concern of the respondent is that the McWatt order does not relate to the Moore order in a meaningful way. The respondent is content to allow the Moore order to stand to allow an accounting to be completed.

[30] The respondent may have a defence on the merits but faces the following problems:

(a) The respondent failed to provide a properly sworn financial statement or net family property statement with corroborating documentation to support his contention that the equalization payment is only $674. The information he provided was bank statements produced only on request during his cross-examination in February 2017, and some disclosure resulting from an exchange of correspondence by counsel in 2011. The respondent concedes that a further request by the applicant’s lawyer for more financial disclosure from him went unanswered. The respondent’s position on equalization is, therefore, simply a bald assertion without foundation;

(b) The applicant asserted in the Schedule A to her application that as of December 31, 2011, she had spent $99,000 on mortgage payments, realty taxes and condominium fees. This amount represents expenditures by the applicant for a five and a half year period following separation. If the expenses from January 1, 2012, to the date of death on May 18, 2016, are added, (at approximately $1,455 per month) that would bring the total expended by the applicant to approximately $176,000. Without any further calculations as to the cost of maintaining the property until sale, payments made by the applicant for the respondent may extinguish the value of his interest;

(c) The respondent takes the position that the expenses paid by the applicant on his behalf should be set off by occupation rent and that he should not have to contribute to condominium fees. However, the respondent did not provide an expert’s report on rental income, or indeed any formal calculation setting out his position as to why the applicant’s payments on his behalf would not subsume his interest. His submission was simply that the amounts in question were known and were not contested. His affidavit of October 28, 2016, provides no assistance in this regard. The problem with this submission is that without any actual evidence of the respondent’s position as to what he says he is owed, it is difficult to determine the merits of his case or whether he has a viable defence;

[31] Therefore, while the respondent may have a defence on the merits if able to surmount the abovementioned problems, that is insufficient on its own in the face of his failure to meet the other parts of the required test.

What is the Potential Prejudice if the Respondent’s Motion is Allowed?

[32] Both parties claim that they would suffer prejudice if this motion is/is not allowed. The respondent submits that the process is unfair. The Moore order would have permitted an accounting but the McWatt order makes no provision for that and leads to an unfair result.

[33] The respondent submits that if the McWatt order is set aside a fair result can be achieved because the accounting is straightforward and the numbers will not be contested. Corroboration by the applicant is not required because the amount of the mortgage, taxes and condominium fees is known.

[34] Finally, the respondent submits that even using the applicant’s numbers there would be money owed to the respondent and therefore there is serious prejudice to the respondent if the McWatt order is not set aside and the accounting contemplated in the Moore order is not performed.

[35] The Estate Trustee submits there will be serious prejudice to the Estate of the applicant if the McWatt order is set aside. The main reason for this is the operation of s.13 of the Ontario Evidence Act which requires corroboration of a living person’s evidence in an action against an estate.

[36] The Estate will be in a difficult position as it cannot provide contradictory evidence to any position taken by the respondent.

[37] I accept that in this case that the prejudice to the applicant’s Estate is greater than the prejudice to the respondent for the following reasons:

(a) The applicant was a private person according to her sister, Anahit. The applicant did not share information about her financial affairs with her sister so she will not be in a position to furnish any contradictory evidence with respect to positions taken by the respondent; [5]

(b) I do not accept that the numbers in relation to the accounting will be uncontested as submitted by the respondent;

(i) The issue of occupation rent is often one which is contested in family law matters. The respondent submitted no evidence as to how much occupation rent he was seeking. There is also a question of whether the respondent’s claim for occupation rent is even viable given limitation period issues or laches;

(ii) There may be issues as to whether both interest and equity payments on the mortgage payments are to be included in the accounting;

(iii) During his cross-examination, the respondent mentioned on more than one occasion that although he understood the applicant had made a claim against him that did not mean she was entitled to receive what she asked for. [6] I infer from the repetition of this position that it would not be as smooth an accounting process as the respondent’s counsel suggested;

(iv) These are only a few examples of the types of evidentiary and accounting issues which may arise. Without any testimony from the applicant or an ability to contradict the respondent, the prejudice arising to the Estate is obvious.

[38] In summary, I find that the potential prejudice to the Estate far outweighs that which might be faced by the respondent and this part of test has not been met by the respondent.

What is the Overall Effect on the Integrity of the Administration of Justice if the Motion is Granted?

[39] I do not view this consideration as one which should prevent the dismissal of this motion. The respondent made a conscious decision to do nothing about a claim which was validly served on him notwithstanding that he understood the nature of it. The excuse that he was waiting for his lawyer to call him was rejected given the amount of time that had passed. Indeed, one can infer that if the applicant were alive, the respondent would still have taken no steps to respond.

[40] Even if the respondent had a valid defence (and that is not clear), the prejudice arising to the applicant’s Estate in trying to defend contested issues would be verging on insurmountable. The submission by the respondent that there would not be any contested issues was rejected for the reasons articulated above.

Final Order and Costs

[41] The respondent’s motion is dismissed.

[42] The parties shall submit written submissions on costs of no more than two pages in length exclusive of any Offers to Settle or Bill of Costs. The submissions are due on a 7 day turnaround from the date of release of this judgment starting with the applicant. If no costs submissions are received within 35 days of the date of this judgment, the matter of costs will be deemed to be settled. Costs submissions are to be sent to my assistant at therese.navrotski@ontario.ca.

Gilmore J. Released: April 27, 2017

Footnotes

[1] 2015 ONCA 205 at para 14. [2] [2012] O.J. No. 1637 (ONSC). [3] Cross-examination of Dikran Hekemian, February 10, 2017, p.36, Q.159. [4] Affidavit of Dikran Hekemian sworn October 28, 2016, para 14. [5] Affidavit of Anahit Sogomonian sworn January 12, 2017, para 15-16 [6] Cross-examination of Dikran Hekimian, February 7, 2017, question 159 and 176.