Court File and Parties
Citation: Pachino Construction Co. Ltd v. Mizzi, 2017 ONSC 6430 Court File No.: 07-35417 Date: 2017-10-26 Superior Court of Justice - Ontario
Re: Pachino Construction Co. Ltd, plaintiff And: Enzo Mizzi Bordonaro and Lydia Mizzi, defendants
Before: Mr Justice Ramsay
Counsel: Rocco A. Ruso for the plaintiff Greg Roberts for the defendant
Heard: October 26, 2017 at Hamilton
Endorsement
[1] The defendants Enzo Mizzi Bordonaro and his wife Lydia Mizzi are moving for summary judgment. Bordonaro is Enzo’s matronymic. He does not use it in Canada. Since they have the same last name I shall refer to the defendants by their first names.
[2] Enzo owes the plaintiff $416,000 on a judgment that was given in 1999. The plaintiff sued Enzo and Lydia in year 2000. It sought to execute on the 1999 judgment by seizing the matrimonial home which was registered to Lydia on the basis that it was beneficially owned by Enzo. The action was unsuccessful and the plaintiff was ordered to pay $69,000 costs to Enzo and Lydia. In the present action the plaintiff seeks a declaration that it is entitled to set off its $69,000 debt against Enzo’s $416,000 debt.
[3] The statement of claim, which was not drafted by Mr Ruso, is sparse, but reading it generously I think it sufficiently pleads a case for equitable set off.
[4] Enzo and Lydia now seek summary judgment on the basis that a trial is not required to determine that the plaintiffs have no right to a set off. Enzo and Lydia argue that the test for equitable set off is not met on the following grounds:
a. There is no connection between the judgment of 1999 and the ownership of Lydia’s house.
b. There is no manifest unfairness in allowing Lydia to collect a cost award for successfully defending her property rights.
c. There is no equitable reason to protect the plaintiff. If there were, then any judgment creditor could harass the debtor’s spouse with unmeritorious claims against the spouse’s property without risking the consequences of costs.
d. A debt to two people cannot be set off against a debt owing by only one of them.
[5] The 1999 judgment related to a contract for purchase and sale of real estate in Venezuela. Lydia was not a party to the transaction. The plaintiff has never been able to recover on the judgment. It has evidence that suggests that Enzo’s property is held by other entities or persons.
[6] The year 2000 action was defended by Enzo and Lydia together with one lawyer. The lawyer was paid by a corporation controlled by Enzo’s brother Filippo Mizzi. The corporation no longer exists.
[7] The Courts of Justice Act, RSO 1990, c. C-43 provides:
111 (1) In an action for payment of a debt, the defendant may, by way of defence, claim the right to set off against the plaintiff’s claim a debt owed by the plaintiff to the defendant.
(2) Mutual debts may be set off against each other even if they are of a different nature.
(3) Where, on a defence of set off, a larger sum is found to be due from the plaintiff to the defendant than is found to be due from the defendant to the plaintiff, the defendant is entitled to judgment for the balance.
[8] So legal, or statutory set off requires that both obligations must be debts and that both debts must be mutual: Agway Metals Inc. v. Dufferin Roofing Ltd, [1991] O.J. No 9 (Then J.).
[9] The plaintiff relies on equitable set off.
[10] According to Holt v. Telford, 1987 CanLII 18 (SCC), [1987] 2 SCR 193 such a set‑off has its origin in equity. It can apply where mutuality is lost or never existed. It can apply where the cross obligations are not debts. The principals to be applied as follow:
The party relying on a set‑off must show some equitable ground for being protected against his adversary's demands.
The equitable ground must go to the very root of the plaintiff's claim before a set‑off will be allowed.
A cross‑claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross‑claim.
The plaintiff's claim and the cross‑claim need not arise out of the same contract.
Unliquidated claims are on the same footing as liquidated claims.
[11] Both debts are liquidated. The claims need not arise out of the same contract and mutuality need not exist. The case turns, or will turn, on whether the two debts are so clearly connected that it would be manifestly unjust to allow Enzo and Lydia to enforce the debt he is owed without taking into account the amount owed to the plaintiff. The equitable ground must go to the root of Enzo and Lydia’s claim. Set off must not be applied if it would cause injustice or unfairness to Lydia.
[12] The plaintiff argues that the $69,000 is not really owing to Lydia. She paid nothing for her defence. The defence was covered by one of Enzo’s family corporations, which, it is argued, in reality means Enzo himself. She says that she borrowed the money, implying that she will have to pay it back, but that fact is contested and its determination will require an assessment of her credibility and the credibility of other witnesses. I think that there is enough evidence to require a trial to determine the issues. If determined in the plaintiff’s favour, it could be held that there is a reason to protect the plaintiff and there would be no injustice to Lydia in so doing. It could be held that it is unfair to require the plaintiff to pay $69,000 to Enzo directly or indirectly when Enzo owes the plaintiff much more.
[13] Is the plaintiff’s claim of set off so closely connected to Enzo’s demand for payment of the cost order that it would be manifestly unjust to allow Enzo to enforce it without taking into account the debt owed to the plaintiff? The case will have to be decided by applying all the circumstances in context to all the principles of equity. The plaintiff has evidence that Enzo has deliberately arranged his affairs to make himself judgment proof, and that the means he used include resort to family. There is no connection between the Venezuelan property deal and Lydia’s house, but there is a connection between the debt owed by Enzo and any property of Enzo’s and therefore the year 2000 action. Would that be enough to establish that it would be manifestly unjust not to allow the set off? So to find could be novel, but that should not preclude the plaintiff from asking. A novel question is best decided on a complete record. This is perhaps all the more true in the case of an equitable remedy.
[14] In the year 2000 action the plaintiff was unsuccessful, so it has to pay costs. Would allowing the set off give judgment creditors licence to bring unmeritorious claims against the spouses of judgment debtors? It could be that the consequence of having to deduct the cost order from the judgment debt is sufficient deterrent. Such a policy question is also best decided on a full record and in the context of specific findings of fact.
[15] The motion for summary judgment is dismissed. The parties may submit brief written submissions to costs, the plaintiff within 10 days and the defendants within 10 days thereafter.
J.A. Ramsay J.
Date: 2017-10-26