Queen Britain Holdings v Louro Jewellers Inc., 2018 ONSC 7075

COURT FILE NO.: CV-17-572611

DATE: 20181127

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

QUEEN BRITAIN HOLDINGS INC.

Plaintiff

– and –

LOURO JEWELLERS INC., LOUIS LOURO, LOURO & SON’S JEWELLERS INC., and KYLE LOURO

Defendants

James P. McReynolds for the Plaintiff

Nicolas C. Canizares for the Defendants

HEARD: November 23, 2018

ENDORSEMENT

DIAMOND J.:

1Several motions were scheduled to proceed before me on November 23, 2018. Those motions all arose from a default judgment dated January 11, 2018 and granted by Justice Lederer (“the default judgment”). Pursuant to the default judgment, the defendants were ordered to pay to the plaintiff the sum of $93,225.00 plus pre-judgment interest in the amount of $5,604.99 and costs in the amount of $9,308.94.

2Prior to the hearing, the parties confirmed that they had settled the terms of the plaintiff’s contempt motion. In addition, the parties both agreed that the principal amount of the default judgment was incorrect, as the default judgment failed to take into account a payment made by the defendants in the spring of 2016. I will address this issue later in this Endorsement.

3While the defendants do not explicitly challenge their liability under the commercial lease between the parties, they continue to take issue with the amount of the default judgment on the basis that the plaintiff allegedly failed to include other payments made by the defendants directly and/or on the plaintiff’s behalf. As a result, the parties made submissions on the defendants’ motion seeking an order setting aside the default judgment. At the conclusion of the hearing, I took my decision under reserve.

4When asked to set aside a default judgment, the Court’s ultimate task is to determine whether the interests of justice favour granting the order requested. As held by the Court of Appeal for Ontario in Mountain View Farms Ltd. v. McQueen 2014 ONCA 194, I must consider the following five factors:

(a) whether the motion was brought promptly after the defendants learned of the default judgment;

(b) whether there is a plausible excuse or explanation for the defendants’ default in complying with the Rules;

(c) whether the facts establish that the defendants have an arguable defence on the merits;

(d) the potential prejudice to the defendants 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.

5As stated in Mountain View, the above five factors are not to be treated as rigid rules, as I must consider the particular circumstances of the case when deciding whether it is just to relieve the defendants from the consequences of their default.

6Dealing with the first factor, the defendants learned of the existence of the default judgment sometime in late February 2018 when they were served with Notices of Examination in Aid of Execution. They did not move to set aside the default judgment until mid-August 2018 (some six months later). In my view, this delay is not so inordinate to qualify as “not moving promptly”.

7However, the defendants have not proffered any evidence setting out an explanation (plausible or otherwise) for their failure to deliver a Statement of Defence. On the contrary, the evidence tendered by the plaintiff discloses that the plaintiff afforded the defendants several opportunities to comply with their obligations and deliver a Statement of Defence when preliminary negotiations to resolve the dispute proved unsuccessful. For reasons not explained by the defendants, they never served or filed a Statement of Defence. While it was argued before me that I should infer a lack of action on behalf of their counsel at that time, I simply cannot do so in the absence of any evidence to support such an inference.

8The defendants submit that they have an arguable defence on the merits, and in particular with respect to the amount of damages sought by the plaintiff in light of payments they made in 2014. However, the evidence tendered by the plaintiff discloses that in early February 2016, the parties entered into a further agreement permitting the defendants to remain at the leased premises in the face of them having allegedly defaulted under the lease. The terms of that agreement included the following clause (my emphasis in bold):

“The tenant and the indemnifier acknowledge that the Landlords’ distrait has been proper and that there are no claims as against the Landlord which relate to the distraint nor does it have any other claims against the Landlord that have accrued prior to February 10, 2016. They will sign a full and final release in a form to be provided by counsel for Landlord. All other terms of the lease remain the same. Nothing contained herein as part of the settlement in any way restricts the rights of the Landlord to take any steps relating to any default under the Lease at any time. If the Landlord elects to waive any breach in writing then opt to renew will be deemed to take effect as set out above.”

9I note that this agreement was expressly included in the plaintiff’s Motion Record filed before Justice Lederer. As previously stated, the credits sought to be enforced by the defendants relate to claims which are disputed by the plaintiff, but more importantly accrued prior to February 10, 2016. On its face, the agreement amounts to a waiver and release on the part of the defendants of their 2014 claims. The defendants have tendered no evidence to address this issue in their motion materials. As such, it is difficult to conclude that the defendants have an arguable defence on the merits given their express waiver of their 2014 claims. While I am cognizant that the defendants need not show that their defence will inevitably succeed, in the absence of evidence addressing their express waiver, I cannot conclude that their defence has the required “air of reality”.

10I find the potential prejudice to each party in the event the defendants’ motion is dismissed or allowed to be a neutral factor. In my view, the lack of an explanation for the delay coupled with the lack of an arguable defence on the merits tips the scales in favour of the plaintiff, and for these reasons the defendants’ motion is dismissed.

11The plaintiff’s motion seeking an order under Rule 59.06 amending its judgment, and reducing the principal amount of the judgment by the sum of $7,375.00 to $85,850.00 is granted and the default judgment should be amended accordingly.

12In accordance with the agreement between the parties, costs of the defendants’ motion are fixed in the all-inclusive sum of $3,000.00 and ordered payable by the defendants to the plaintiff.

Diamond J.