BARRIE COURT FILE NO.: CV-15-1510
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Derek Friend
Plaintiff/Respondent
– and –
Susan Davidson (Also known as “Susan Bugow”)
Defendant/Applicant
Derek Friend, Self-Represented
Susan Davidson (Bugow), Self-Represented
HEARD: September 12, 18 and 19, 2017
REASONS FOR DECISION
Overview
1The Applicant, Ms. Bugow, has brought a motion to set aside the default judgement, the order of foreclosure, and the writ of possession issued by Justice Healey on May 10, 2017 in relation to the property located at 1670 Muskoka Road #38, Bala, Ontario (the “Property”). Ms. Bugow takes the position that she was not given notice of the motion, and accordingly had no opportunity to respond. She only became aware of the proceedings at the time she was served with the writ of possession in relation to her property on August 10, 2017.
2For the reasons set out below, I grant the application. I will set aside the default judgement and reopen the matter to allow Ms. Bugow to respond.
The Facts
The Property
3The Property was purchased by Ms. Bugow and Dwayne Davidson on January 15, 1997. It was put into Ms. Bugow’s name solely in September 24, 2010. The Property constitutes 88 acres of vacant land. While it is vacant land, the Property is where Ms. Bugow lives and it is currently the only meaningful asset she has to her name.
The Events Leading up to the Default Proceedings
4Ms. Bugow hired the Respondent, Mr. Friend, in 2009 to represent her in a family law proceeding against her husband. As part of that retainer agreement, Ms. Bugow agreed to have Mr. Friend place a lien in the amount of $40,000 on the Property as security for any fees owing.
5Mr. Friend represented Ms. Bugow in her family law matters for a period of time. Ms. Bugow was not able to pay any of the fees owing to Mr. Friend. Accordingly, Mr. Friend took Ms. Bugow to Small Claims Court for non-payment. Mr. Friend originally sought amounts in excess of the $40,000 for legal fees.
6On September 23, 2011 in the Small Claims Court, Barrie, at Midland Courthouse, after a contested trial, Mr. Friend obtained judgment against Ms. Bugow for outstanding legal fees in the amount of $14,200. While the original $40,000 lien remains on the Property, the actual amount owed to Mr. Friend is the $14,200 + interest (totalling just over $20,000).
7The record indicates that Mr. Friend did make demands for payment in relation to the outstanding debt of $14,200 plus interest. Letters were sent to Ms. Bugow in September of 2011 and December 2013. The amounts owing were never paid.
8In December of 2015, Mr. Friend brought an action for foreclosure in relation to the Property to satisfy the debt. In response, Ms. Bugow filed three separate Statements of Defence. Two were filed on December 22, 2015, and the third Statement of Defence was filed on December 23, 2015.
9After December 23, 2015, nothing was done on the action for well over a year. Apparently, the Township had instituted proceedings of its own against the Property for non-payment of taxes. Mr. Friend acknowledged in submissions that he expected that the Property would be sold, and he would get paid out of any residual amounts owing. Accordingly, he took no further steps in the action.
10By 2017, the Township was no longer pursuing its taxes in relation to the Property as the taxes had been paid.
Service of Foreclosure Motion
11Mr. Friend served Ms. Bugow with his foreclosure motion at her address of record which was 472 Alberta Street, Port McNicoll, by regular mail and registered mail on March 27, 2017. The motion was returnable April 11, 2017. This was the last known address listed on Ms. Bugow’s Statements of Defence, and also was the address she had been served at in relation to an unrelated proceeding in Barrie Superior Court.
12On April 11, 2017, the matter came before Justice Healey. No one attended on behalf of Ms. Bugow. Justice Healey asked Mr. Friend about the efforts taken to confirm Ms. Bugow’s last known address. The matter was remanded to May 9, 2017 with a view to having additional materials filed to satisfy the court that “reasonable efforts” had been made to serve Ms. Bugow, and for the hearing of the motion on that date.
13When the matter returned on May 9, 2017, Mr. Friend was able to demonstrate that “reasonable efforts” had been made to locate the last known address of Ms. Bugow. All the searches conducted by Mr. Friend or his agents came back to the Alberta Street address. No efforts were made, however, to serve Ms. Bugow at the Property. As it turns out, Ms. Bugow was residing at the Property on Muskoka Road at the relevant time, and accordingly was never made aware of the motion. While her family was still living at the Alberta Street address, the motion materials were never brought to the attention of Ms. Bugow. This fact is not contested.
14On the basis of the non-attendance and the materials filed, Justice Healey understandably granted default judgment and ordered foreclosure in favour of Mr. Friend on May 10, 2017.
Analysis
The Law Regarding Setting Aside a Default Judgment
15Rules 19.03(1) and 19.08(1) provide the basis for setting aside a noting of default and a default judgment, respectively.
16When exercising its discretion to set aside a noting of default, a court should assess “the context and factual situation” of the case. It should consider such factors as the behaviour of the plaintiff and the defendant; the length of the defendant’s delay; the reasons for the delay; and the complexity and value of the claim. These factors are not exhaustive. See Nobosoft Corp. v. No Borders Inc., 2007 ONCA 444, 225 O.A.C. 36, at para. 3; Flintoff v. von Anhalt, 2010 ONCA 786, [2010] O.J. No. 4963, at para. 7.
17In Intact Insurance Co. v. Kisel, (2015) 2015 ONCA 205, 125 O.R. 365 (Ont. C.A.), the Ontario Court of Appeal explained that on a motion to set aside default judgment, the court is to consider five factors:
Whether the motion was brought promptly after the defendant learned of the default judgment.
Whether the defendant has a plausible explanation for the default.
Whether the defendant has an arguable defence on the merits.
The potential prejudice to the defendant should the motion be dismissed and the potential prejudice to the plaintiff should the motion be allowed; and
The effect of any order the court might make on the overall integrity of the administration of justice.
18These factors do not constitute rigid rules. Rather, on a motion to set aside default judgment, a court must decide whether, in the particular circumstances of the case, it is just to relieve a defendant from the consequences of default.
Application to this Case
19In this case, Ms. Bugow brought the application to set aside the default as soon as she became aware of it. It is evident that Ms. Bugow did not receive the motion materials related to the default judgment, nor was she given an opportunity to respond. This point has not been seriously contested. This is not a situation where the defendant has made a conscious decision not to respond.
20Moreover, in the circumstances here, the consequences of allowing the default against Ms. Bugow will have a serious impact on her personal and pecuniary interests. Ms. Bugow will be losing her home, and the only meaningful asset she owns. The impact of allowing the default against Ms. Bugow will be extremely significant.
21On the other hand, any prejudice to Mr. Friend can be addressed in terms of a monetary award. He has not made any improvements to the Property, nor has he taken any action in relation to the Property that requires him to retain possession of it. The primary concern of Mr. Friend is that the outstanding debt be paid.
22There are also some issues relating to the materials filed on the motion. While Mr. Friend’s materials in support of the default judgment and foreclosure reference the fact that there were additional liens on the Property, the evidence of Ms. Bugow indicates that those liens are no longer in place. For example, while the materials filed indicate that the Canadian Mortgage and Housing Corporation (“the CMHC”) have an outstanding lien of $96,051.94 on the Property, that lien is no longer registered on the Property. Ms. Bugow confirmed this fact with the property registry and with the CMHC. Mr. Friend himself acknowledged that he had negotiated the lifting of CMHC’s lien in exchange for $10,000 just prior to obtaining the default judgment from Justice Healey. However, this fact was not included in the materials filed on the foreclosure motion.
23Additionally, the actual appraised value of the Property is in dispute. While the appraisal report filed on the motion estimated the value at $77,000, that value is disputed by Ms. Bugow. Her position is that the Property is valued anywhere from $300,000-$500,000 dollars. Given that the Property itself is 88 acres located in Muskoka, the appraisal value of $77,000 seems low. Regardless, I think a proper property appraisal from Ms. Bugow is warranted before a final determination on the default is made.
24The foreclosure was granted on the basis that Ms. Bugow had no remaining equity in the Property. However, even on the conservative estimate of $77,000, Ms. Bugow likely has meaningful equity remaining in the Property. Even if Ms. Bugow is not in a position to pay out her debt to Mr. Friend with her existing funds, a foreclosure in favour of Mr. Friend may not be warranted. If Ms. Bugow has residual equity in the Property, to grant the foreclosure in favour of Mr. Friend would result in an unjust enrichment. Alternate remedies like a judicial sale may be more appropriate.
25Given the uncertainties related to these various other circumstances, I will grant the motion and set aside the default judgment. Ms. Bugow will be provided 90 days to provide a proper response. Obviously, Mr. Friend will be afforded the opportunity to supplement his materials if necessary.
Justice C.F. de Sa
Released: October 31, 2017
NOTE: This written ruling is to be considered the official version and takes precedent over the oral reasons read into the record. If there are any discrepancies between the oral and written versions, it is the official written ruling that is to be relied upon.
CITATION: Friend v. Davidson, 2017 ONSC 6531
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Derek Friend
Plaintiff/Respondent
– and –
Susan Davidson (Also known as “Susan Bugow”)
Defendant/Applicant
REASONS FOR DECISION
Justice C.F. de Sa
Released: October 31, 2017