CITATION: Schmidt v. Yacoub, 2017 ONSC 6305

COURT FILE NO.: CV-14-098-00

DATE: 20171020

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: KURT REINHOLD SCHMIDT, Plaintiff

AND:

RANDY YACOUB, RONNY YACOUB, RICHARD BOURDEAU, HARRY GREENBERG and GREENBERG & LEVINE LLP, Defendants

BEFORE: Mr. Justice Graeme Mew

COUNSEL: Kurt R. Pearson, for the Plaintiff

Cemal Acikgoz, for the Defendants/Moving Parties, Randy Yacoub and Ronny Yacoub

HEARD: 3 October 2017, at Kingston

ENDORSEMENT

[1] Randy Yacoub and Ronny Yacoub were noted in default on 1 March 2017. They now seek an order, pursuant to rule 19.03(1), setting aside that noting of default.

[2] Motions to relieve against defaults “are frequently made and are typically granted on an almost routine basis”: McNeill Electronics Ltd. v. American Sensors Electronics Inc. (1996), 5 C.P.C.(4^th) 266 (Ont. Gen. Div.), at para. 2 (reversed on other grounds (1998), 109 O.A.C. 257 (C.A.)).

[3] Accordingly, when called upon to do so, a court will usually exercise its discretion in favour of a defendant and permit the setting aside of the noting of default. There will, however, be circumstances in which the court declines to grant that relief.

[4] The principles governing the court’s exercise of its discretion are conveniently summarised by the learned editors of Archibald, Kileen & Morton’s Ontario Superior Court Practice 2017 (Toronto: LexisNexis, 2017), at p.1003:

It is the context and factual situation in which the discretion arises which should determine its application. If the omission to file the statement of defence within the required time can be explained, D should not be in a different position than a defendant who serves and files a statement of defence within the prescribed time. Other relevant factors to be taken into consideration include the behaviour of P and D, the length of D’s delay, the reasons for the delay, and the complexity and value of the claim involved. These factors can justify setting aside the noting in default even where D’s explanation for the delay is “questionable”. P’s proper course of action if there is a lack of merit on the statement of defence is to move for summary judgment. It would only be in extreme situations that a trial judge would exercise his or her discretion to require an affidavit as to the merits of the defence on a motion to set aside a noting in default.

[5] The cases of Metropolitan Toronto Condominium Corp. No. 706 v. Bardmore Developments Ltd. (1991), 1991 CanLII 7095 (ON CA), 3 O.R. (3d) 278 (C.A.), Axton v. Kent (1991) 1991 CanLII 7196 (ON SC), 2 O.R. (3d) 797 (Div. Ct.) and Intact Insurance Co. v. Kisel, 2015 ONCA 205 are cited as authorities for the foregoing statement of applicable principles.

[6] This case is unusual in almost every aspect.

[7] For a start, the subject matter of the claim is unusual.

[8] The plaintiff is incarcerated and resident at a federal penitentiary. He is currently designated as a dangerous offender and, accordingly, has no certain release date.

[9] In July 2007, the plaintiff inherited a house in Toronto from his mother. He immediately transferred a 50% interest in the property to the wife of another inmate as a tenant-in-common.

[10] There is a mortgage of $25,000 on the property, which the plaintiff is responsible for. According to the plaintiff, his co-owner and her ex-husband continue to look after the property, pay outgoings, collect rent, etc.

[11] The plaintiff met Ronny Yacoub while they were both incarcerated at Bath Institution. The plaintiff claims that Ronny Yacoub and his brother, Randy Yacoub, spent several months befriending him under what he now realises was false pretenses for the purpose of persuading the plaintiff to convey his remaining interest in the property to Randy Yacoub.

[12] On 19 March 2012, the plaintiff’s interest in the property was conveyed to Randy Yacoub. The stated consideration for the transfer was the assumption by the Yacoubs of a one-half interest in the $25,000 mortgage registered against title to the property. However, in addition, the plaintiff alleges that the Yacoubs promised to cover certain expenses and to assist the plaintiff with various matters including the storage of personal property items and assistance with respect to the plaintiff’s parole hearings.

Procedural History

[13] On 10 March 2014, the plaintiff commenced an action naming as defendants the Yacoubs as well as the solicitors involved in the transaction. Against the Yacoubs, the plaintiff seeks an order setting aside the transfer of the property on the grounds of misrepresentation, unconscionability, non est factum and lack of consideration, (in the alternative) damages representing the fair market value of the plaintiff’s interest in the property, an accounting of the Yacoub’s use and any profits arising from Randy Yacoub’s ownership of the property and punitive damages.

[14] An attempt was made to serve the statement of claim on the Yacoubs at 85 Whitley Avenue, Toronto on 6 September 2014. A female occupant at that address told the process server that neither Randy Yacoub nor Ronny Yacoub lived there. The process server did ascertain that there was a telephone listing for a R. Yacoub at that address, but each time the process server called, an answering machine without a message picked up and then disconnected.

[15] The Rules of Civil Procedure require personal service of an originating process (rule 16.02) or service by an alternative to personal service (rule 16.03) where an action is commenced by a statement of claim, service must be affected within six months after the claim is issued: rule 14.08(1).

[16] The statement of claim should have been served by no later than 10 September 2014. No extension of time for service of the statement of claim was obtained. Other than the attempted service on 6 September 2014, there is no evidence of personal service. Nor is there any indication of service by an alternative to personal service or of the court being requested to permit service by some other means.

[17] On 10 December 2014, Ronny Yacoub made contact with one of the plaintiff’s solicitors by telephone and confirmed that his address for service was the same address as that at which service had been attempted. There is no indication as to why Mr. Yacoub contacted the plaintiff’s solicitor or where he got the solicitor’s details from. I am asked to infer that the Yacoubs must, by some means, have received a copy of the statement of claim, or at least been made aware of it.

[18] Counsel informs me that the statement of claim was never served on one of the co-defendants, Richard Bourdeau, and that the claim against the other co-defendants, Harry Greenberg and Greenberg & Levin LLP, while served, was subsequently discontinued or dismissed.

[19] On 29 September 2016, the plaintiff brought a motion requesting summary judgment. The motion record was served on the defendants by mail at the 85 Whitley Avenue address on 27 October 2016.

[20] On 8 November 2016, the plaintiff’s solicitor received a letter from a solicitor representing the Yacoubs and purporting to enclose a “Notice of Appointment of Lawyer” (although the document enclosed was titled “Notice of Change of Lawyer”).

[21] The plaintiff’s solicitor sent the Yacoubs’ solicitor a courtesy copy of the statement of claim under the cover of a letter dated 29 November 2016. In the same letter, he recorded an agreement to adjourn the summary judgment motion, which had been scheduled for 2 December 2016, and indicated that a holding date of 26 May 2017 for the return of that motion had been obtained and asked for confirmation that the date was agreeable. A notice of intent to defend was also requested.

[22] In the absence of any response from the Yacoubs’ solicitor concerning the proposed motion date, the 26 May 2017 appointment was confirmed.

[23] On 4 January 2017, having still not received a notice of intent to defend, the plaintiff’s solicitor advised that if a statement of defence was not delivered by 16 January 2017, the Yacoubs would be noted in default.

[24] On 25 January 2017, the Yacoubs’ lawyer contacted the plaintiff’s lawyer and it was agreed between them that a statement of defence would be served by 3 February 2017 and that responding materials for the summary judgment motion would be delivered by 24 February 2017.

[25] On 7 February 2017, instead of delivering material, the Yacoubs’ solicitor wrote to the plaintiff’s solicitor advising that he had not been able to finalize the statement of defence, but indicated that the statement of defence and the responding materials would be served together, which the plaintiff’s solicitor understood to mean by 24 February 2017. However, that date came and went. Accordingly, the Yacoubs were noted in default on 1 March 2017.

[26] In support of the request to note the Yacoubs in default, the plaintiff filed the affidavit of a solicitor which recorded the attempted personal service in September 2014, the 10 December 2014 telephone conversation with Ronny Yacoub, the receipt, in November 2016, of a notice of change of lawyer from the Yacoubs’ solicitor and the provision, by the plaintiff’s solicitor to the defendants’ solicitor of a copy of the statement of claim under cover of the letter of 29 November 2016. The Registrar was evidently satisfied that service of the statement of claim had been proved and, accordingly, recorded a noting in default.

[27] It was not until 18 May 2017 that the defendants’ solicitor sent a letter enclosing a proposed statement of defence and indicating that responding motion materials would be served on 19 May. Those motion materials were not delivered.

[28] In the meantime, on 19 May 2017, the plaintiff’s solicitor wrote to the Yacoubs’ solicitor advising that the court had rescheduled the motion for summary judgment, which was originally scheduled to be heard on 26 May, to 23 May, owing to availability of judicial resources. The letter went on to note that responding materials had not yet been received and that any attempt by the Yacoubs to adjourn the motion would be resisted.

[29] Counsel for the plaintiff attended at court on 23 May 2017 for the hearing of the summary judgment motion by Madam Justice MacLeod-Beliveau. No one appeared for the Yacoubs. During the morning recess, counsel became aware that Yacoubs’ solicitor had sent an urgent letter by fax advising that he had only just found out that the motion date had been moved, having not received the previous correspondence because he had been out of town. He requested that the motion be adjourned to any date in June or July and indicated a willingness to pay costs of counsel’s attendance in court.

[30] Madam Justice MacLeod-Beliveau also granted the adjournment request on terms which included a requirement that by 28 June 2017, the Yacoubs should bring a motion to set aside the noting in default.

[31] Madam Justice MacLeod-Beliveau also awarded costs of $7,500 against the Yacoub defendants as a term of the adjournment of the 23 May 2017 motion. Those costs were paid on 25 May.

[32] On 19 June 2017, the defendants’ solicitor wrote to advise that he intended to bring a motion to set aside the noting in default. The plaintiff’s solicitor responded the next day confirming that they would not consent to setting aside the noting in default.

[33] On 20 June 2017, the Yacoubs’ solicitor advised that the only date that would be available for the return of the motion was 29 June 2017, one day beyond the deadline imposed by MacLeod-Beliveau J.’s order.

[34] On 22 June 2017, the plaintiff’s solicitor advised that they would consent to the 29 June 2017 return date but that the Yacoubs’ motion materials should be filed in accordance with the rules.

[35] In a telephone conversation on 23 June 2017, the Yacoubs’ solicitor requested a further extension to 13 July 2017 because of a scheduling conflict (an attendance before the Immigration and Refugee Board of Canada). The plaintiff’s solicitor refused to further extend the deadline in the court order.

[36] On 4 July 2017, the plaintiff’s solicitor received documentation from the Yacoubs’ solicitor purporting to serve a motion for an order granting an extension of time for the defendants to bring a motion to set aside the noting in default. This was presented as an over-the-counter motion, with no return date. The plaintiff’s solicitors indicated that they would not consent to the motion, intended to oppose it and make oral argument.

[37] An endorsement of 6 July 2017 by Madam Justice MacLeod-Beliveau indicated that the matter should be argued and placed the matter on the motions list for 27 July 2017 at 10:00 a.m. for that purpose.

[38] On 27 July 2017, counsel appeared on behalf of the plaintiff. The defendants’ solicitor had instructed local counsel who requested an adjournment of the motion on his behalf. Abrams J. noted that the Yacoub defendants had “been granted numerous indulgences to date”. He nevertheless granted the adjournment on terms, which included a further costs award of $2,000 against the Yacoub defendants and a peremptory return date of 24 August 2017 at 10:00 a.m.

[39] I heard the motion for an extension of the time provided for in Madam Justice MacLeod-Beliveau’s order on 24 August 2017. The motion was granted on terms which included a requirement that the Yacoub defendants should serve all materials they intended to rely on by 13 September 2017, the filing of all factums by 29 September 2017 and a further award of costs against the Yacoub defendants of $1,200. I set a return date for the motion to set aside the noting in default of 3 October 2017, peremptory to the Yacoub defendants.

[40] There was substantial compliance with the scheduling provisions of my 24 August 2017 order, save and except for the non-delivery by the Yacoub defendants of a factum. Their factum was not delivered until the afternoon of 2 October 2017.

The Evidence

[41] An affidavit from Randy Yacoub advises that the plaintiff and Mr. Yacoub’s brother, Ronny, were serving a period of incarceration together at Bath Institution. Randy Yacoub was “informed through my family members that the Plaintiff was looking for someone who could help assist him with his community responsibilities”. Mr. Yacoub states that he became aware of the plaintiff’s belief that the co-owners of the property were determined to take over the whole property and deprive him of his remaining interest in the property. He goes on to say that the plaintiff needed someone outside of the jail to help assist him with finding legal representation to assist his efforts in obtaining parole.

[42] Mr. Yacoub’s affidavit goes on to describe the circumstances surrounding the conveyance of the property including the fact that Mr. Yacoub obtained independent legal advice from Richard Bourdeau who was, at the time, a practising lawyer in the Kingston area. The affidavit goes on to make the unusual statement that “[a]lmost all communications between the Plaintiff and me pertaining to the transfer of the subject-property were transparent”. One wonders which communications were not “transparent”. Be that as it may, Mr. Yacoub goes on to state that he met a parole lawyer to help the plaintiff for his parole hearing. However, he acknowledges that no parole hearing has been scheduled. Mr. Yacoub also says that he retrieved the plaintiff’s personal belongings and placed them in storage and that he is now paying the storage fees.

[43] The affidavit of Mr. Yacoub also suggests that his old address was put on the statement of claim. He says that in 2015, someone attended his place asking to talk to him. Mr. Yacoub’s father, who does not have English as his primary language, was there and apparently signed something. Mr. Yacoub states that “our old address was put in the statement of claim” and that he received no written correspondence or any information as to the statement of claim by the plaintiff “since their initial attendance to my residence”.

[44] All of this is difficult to understand. For a start, the attempted service of the statement of claim took place in September 2014. The process server spoke to a woman at the Whitley Avenue location.

[45] However, in December 2014, as already noted, a solicitor for the plaintiff spoke to Ronny Yacoub.

[46] It gets murkier. Mr. Yacoub’s affidavit, which is unsworn, has exhibited to it an invoice purporting to relate to the storage of Mr. Schmidt’s goods. The invoice is from Esource Parts and is addressed to Randy Yacoub at 85 Whitley Avenue, Toronto. This is supposedly Mr. Yacoub’s “old address”. But the invoice is dated 1 August 2017. Furthermore, it turns out, as a result of investigations made by the plaintiff’s solicitors, that Randy Yacoub works at Esource Parts and “deals with accounting matters”. The invoice attached to Mr. Yacoub’s affidavit makes reference to “sales tax” but does not provide a H.S.T. number.

[47] Also filed on behalf of the Yacoubs is an affidavit from a law clerk working in the office of the Yacoubs’ solicitor. He offers as excuses for the various adjournments, and in addition to the scheduling conflict on 29 June 2017, that the materials are voluminous, resources at the office are limited and that the principal of the firm, who also acts as counsel, had come down with a flu and could not work for several days in the second half of 2017.

Discussion

[48] As indicated at the outset of this endorsement, motions to set aside a noting in default are routinely granted.

[49] Perhaps the strongest evidence in support of a commitment by the defendants to the pursuit of this litigation is the fact that all of the costs orders which have been made, totalling $10,700, have been paid.

[50] In terms of the reasons for the defendants’ delay, most if not all of that delay can rightly be laid at the feet of the solicitor for the Yacoub defendants. Courts are generally cautious about visiting the sins of a solicitor upon a client in situations where an indulgence is requested to avoid a default.

[51] I am also required to consider the behaviour of the parties generally. I would start by observing that the plaintiff’s solicitors have acted with considerable restraint and professional courtesy. However, the fact remains that the plaintiff, who initially represented himself, waited until almost the last moment (for limitation purposes) before commencing his action. Service was then attempted, just a few days before the statement of claim expired. The record would suggest that there was no service of the statement of claim within six months of its issuance. Somehow the existence of a lawsuit came to the attention of Randy Yacoub, as evidenced by the telephone conversation that took place between him and the plaintiff’s solicitor on 10 December 2014.

[52] Thereafter, nothing happened for almost two years (there is no explanation for the contact which Randy Yacoub suggests took place between somebody who wanted to speak to him and Mr. Yacoub’s father in 2015). It was not until September 2016 that motion materials relating to the summary judgment motion brought by the plaintiff were served by mail. It was the delivery of these materials which then prompted the defendants’ solicitor to send in a notice of change of lawyer. This document was, of course, redundant, because there was no lawyer of record and, indeed, there had therefore been no response by anyone on behalf of the defendants to the statement of claim.

[53] The plaintiff’s solicitor subsequently did send a copy of the statement of claim to the defendants’ solicitor. Putting together the attempted service, the telephone conversation with Randy Yacoub in December 2014, the service of the motion materials in September 2016 and the subsequent provision of a copy of the statement of claim to a lawyer representing the defendants, the plaintiff represented to the Registrar that service of the statement of claim had been effected and obtained a noting in default.

[54] In my view, the Rules of Civil Procedure regarding service of the statement of claim have not been complied with. There is no indication that the statement of claim was served within six months of its issuance. There is no indication that an extension of time for service of the statement of claim was obtained. There was no acceptance of service of the statement of claim by the solicitor for the Yacoubs, (although he may have mistakenly believed that the statement of claim had been served when he delivered a notice of change of lawyers).

Decision

[55] Were it not for the irregularities concerning service of the statement of claim, I might very well be tempted to decline the Yacoub defendants’ motion to set aside the noting in default. As Abrams J. previously noted, the Yacoub defendants have been granted numerous indulgences. Other than dutifully paying costs awards, just about every other request that has been made of the Yacoub defendants has been ignored, as have a number of orders made by this court.

[56] I have concluded, however, that it would be wrong for me to penalise this non-compliance by the Yacoub defendants in the face of proceedings which I have now found to be defective in the sense that there is no evidence of valid service of the statement of claim.

[57] By reason of the foregoing, I grant the motion to set aside the noting in default. I also order that service of the statement of claim is now deemed to have been effected.

[58] The Yacoub defendants shall serve and file their statement of defence by no later than 3 November 2017. Any reply should be delivered by the plaintiff within 10 days thereafter.

[59] With respect to the motion for summary judgment, the Yacoub defendants shall serve and file all affidavits upon which they intend to rely by no later than 17 November 2017. Any cross-examinations on affidavits should be conducted by 15 December 2017.

[60] In her order of 23 May 2017, MacLeod-Beliveau J. indicated that she would be excluded from hearing the summary judgment motion in the event that the motion to set aside the noting in default was granted. Accordingly, the summary judgment motion should be scheduled to be heard by a judge other than MacLeod-Beliveau J.

[61] I am not seized of this matter. However, I will assist the parties with the scheduling of a date for the return of the summary judgment motion and propose, in that regard, to schedule a telephone case conference with counsel. The trial coordinator at Kingston will be in touch with counsel to schedule that case conference.

[62] I am provisionally of the view that there should be no order as to the costs of this motion. However, if either side wish to persuade me that a different disposition of costs would be appropriate, a written submission of not more than three pages in lengthy, accompanied by a costs summary, should be delivered to me via the trial coordinator by no later than 3 November 2017.

Graeme Mew J.

Date: 20 October 2017