MOTION HEARD: 20170718
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Royal Bank of Canada, Plaintiff
AND:
Rocky Ridge Enterprises Inc. and Dominic Michael Raso, Defendants
BEFORE: Master B. McAfee
COUNSEL: Michael A. Polvere, Counsel for the Moving Parties, the Defendants
Stephen Brown-Okruhlik, Counsel for the Responding Party, the Plaintiff
HEARD: July 18, 2017
REASONS FOR DECISION
1This is a motion brought by the defendants for an order setting aside noting in default and default judgment dated February 13, 2017, and other relief.
2No facta or case law were filed in advance of the motion. The decisions of Champion Laboratories (Europe) Ltd. v. GQI Technologies Inc., 2016 ONSC 3377 (Ont. S.C.J. – Master) and Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 (Ont. C.A.) were provided to the court during argument. No cross-examinations took place.
3For the reasons that follow, the motion is granted.
4The parties agree that the applicable test is set forth in Mountain View Farms at paragraphs 48 and 49:
- 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.
- 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 (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.
5These factors are not to be treated as rigid rules. The court’s ultimate task is to determine whether the interests of justice favour the granting of the order (Mountain View Farms at paras 47 and 50).
6The evidence of the defendant Raso is that he first learned of the default judgment on or about April 24, 2017. Although the plaintiff takes the position that the defendants knew of the default judgment prior to April 24, 2017, there is no specific evidence from the plaintiff that addresses when the plaintiff advised the defendants that the defendants had been noted in default and that default judgment had been obtained nor is there evidence of the defendants having been served with the default judgment. The plaintiff refers to emails dated April 6, April 10, and April 19, 2017, wherein the word “enforcement” is used and an email dated April 19, 2017, wherein the word “lean” [sic] is used. However, the use of the word “enforcement” and “lean” [sic] is not sufficient to satisfy me that the defendants knew of the default judgment in advance of April 24, 2017.
7The motion was originally brought as a “walk in” motion on May 19, 2017. I am satisfied that the motion was brought promptly after the defendant first learned of the default judgment on or about April 24, 2017.
8The defendants offer two explanations for their failure to comply with the Rules of Civil Procedure. I do not accept the defendant Raso’s explanation that he did not understand the consequences of the statement of claim and that he did not know that his rights would be prejudiced if he failed to respond. The statement of claim clearly states the consequences of failing to respond. I do, however, accept the second explanation that given the ongoing dialogue between the defendant Raso and the plaintiff’s representatives and the efforts of the defendant Raso to obtain refinancing, of which the plaintiff was aware, the defendant Raso did not appreciate that the plaintiff would be proceeding to obtain default judgment.
9I was not referred to any evidence from the plaintiff that the plaintiff advised the defendant Raso that the plaintiff would be proceeding to obtain default judgment notwithstanding their ongoing discussions. I am satisfied that there is a plausible explanation for the defendants’ default in complying with the Rules.
10If the motion is granted, the defendants intend to defend the action and counterclaim against the plaintiff as set out in their proposed pleading. The defence includes allegations of two errors on the part of the plaintiff with respect to the loan. The defendants argue that only $275,000.00 was advanced but the payments were based on a loan advance of $350,000.00. The second error alleged by the defendants is that the term of the loan was to be 10 years, not 5 years as set out in the loan agreement. The defendants estimate that the loan was overpaid in the approximate amount of $50,000.00. There was a reduction in the cash flow to run the business as a result.
11In an email of July 13, 2016, the plaintiff’s representative appears to acknowledge that the loan was being paid off quicker than it should have been paid and that the plaintiff was waiting for numbers in order to determine what could be done in the circumstances. I was not referred to any evidence that the plaintiff then did anything further with respect to any overpayments or adjustments for future payments.
12The facts before me are unlike the facts in Champion Laboratories relied upon by the plaintiff. In the case before me, the defendants brought the alleged errors to the attention of the plaintiff in or about July 2016. There is also evidence that could ultimately support a finding that the plaintiff acknowledged an issue with the amount of the loan and the loan payments as set forth in the above referenced email of July 13, 2016.
13I give little weight to the affidavit of N. Naraine sworn July 11, 2017. The affidavit attaches a copy of the loan history but no explanation is given for the contents of the attachment.
14I am satisfied that there is an air of reality with respect to the defence.
15I am satisfied that there is potential prejudice to the defendants should the motion be dismissed. The action will not have been heard on its merits. I am not satisfied of prejudice to the plaintiff should the motion be allowed.
16I am satisfied that the setting aside of the noting in default and default judgment and permitting the matter to be heard on its merits would be in accordance with the overall integrity of the administration of justice.
17I am satisfied that the interests of justice favour the setting aside of the noting in default and default judgment in all of the circumstances.
18The parties agreed that the unsuccessful party would pay to the successful party costs of the motion in the all-inclusive sum of $7,500.00 payable within 60 days.
19Order to go as follows:
The noting in default and default judgment dated February 13, 2017, are set aside;
The defendants shall file a statement of defence within 30 days of today’s date;
The Requisition for Writ and Seizure and Sale dated March 6, 2017, is set aside and revoked; and,
The plaintiff shall pay to the defendants costs of the motion in the all-inclusive sum of $7,500.00 payable within 60 days.
Master McAfee
Date: August 4, 2017