Evenson Bundgard LLP v. Quattrociocchi

COURT FILE NO.: CV-16-566507

DATE: 2019-09-17

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: EVENSON BUNDGARD LLP, Plaintiff

AND:

DINA QUATTROCIOCCHI, Defendant

BEFORE: Sossin J.

COUNSEL: Eric Bundgard, Counsel for the Plaintiff

Marshall Reinhardt, Counsel for the Defendant

HEARD: September 10, 2019

ENDORSEMENT

OVERVIEW

[1] The defendant, Dina Quattrociocchi (“Quattrociocchi”), seeks an order under Rules 19.08(2) and (3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules of Civil Procedure”), to set aside the default judgment, dated June 16, 2017, for $27,184,12, in unpaid legal bills to the plaintiff, Eric Bundgard LLP (“Bundgard”).

[2] Bundgard was retained by Quattrociocchi in October, 2014, to provide legal services in relation to disputes which had developed between Quattrociocchi and the hospital caring for her elderly mother. These legal services expanded in the ensuing months to include not only negotiations with the hospital, but also proceedings before the Consent and Capacity Board, interactions with the Public Guardian and Trustee and preliminary steps in a defamation action against a physician at the hospital.

[3] Quattrociocchi paid for these legal services from Bundgard in full until October, 2015. That month, she paid a portion of her account, and following that payment, no further payment was made on that account or on the four subsequent accounts Bundgard sent her, ending in April, 2016. At that point, the relationship between Quattrociocchi and Bundgard had broken down.

[4] Quattrociocchi continued to negotiate with Bundgard over the remaining unpaid accounts, and at the same time expressed dissatisfaction with some aspects of the legal services provided, throughout the rest of 2016.

[5] In an email to Quattrociocchi dated September 9, 2016, Bundgard stated, “I cannot continue in representation and providing advice without your discharge of all outstanding accounts, in full.”

[6] In her lengthy reply that same day, Quattrociocchi outlined a series of concerns with Bundgard’s representation of her, with the main theme being her view that Bundgard was not sufficiently aggressive in taking the disputes in question to court.

[7] Bundgard sent a further reply that day in which he stated that he did not accept her characterization of past matters, and that her options at that point were to retain new counsel or self-represent.

[8] On October 5, 2016, Jennifer Short, a legal assistant to Bundgard, wrote to Quattrociocchi to remind her of the outstanding accounts, which amounted to approximately $27,000.00, and stated:

While we are sensitive to your expressed concerns and stated circumstances, we cannot permit the matter of your account balance to linger without resolution. Unless we have mutual agreement on some alternative payment amount, and receipt of an agreed-upon initial payment together with your binding commitment to a mutually-agreed, reasonable payment schedule, we will have no option but to initiate collection proceedings.

[9] On December 21, 2016, Bundgard issued a statement of claim, seeking recovery of the unpaid legal bills.

[10] On February 14, 2017, Quattrociocchi wrote to Bundgard and acknowledged, “I see that you filed court papers in December that I am only just learning about. I think it would have been prudent and courteous to inform me of any possibility or [sic] court. Again, I never did stop communicating with you.” Quattrociocchi also reiterated her concerns and her desire to “negotiate a reduced bill.”

[11] That same day, Bundgard wrote back to Quattrociocchi, “We have been waiting for months – since at least the spring of 2016 – for your specific proposal on payment of your outstanding account balance. You have not provided yet any specific payment proposal, to my understanding. If you have one, it should be detailed, unequivocal, and presented forthwith for our consideration. Until such time as there is any settlement between us respecting the outstanding account balance, I regret that we have no reasonable option but to continue with the legal process.”

[12] On February 22, 2017, Quattrociocchi again wrote to Bundgard reiterating that she had “a number of valid complaints with your handling of the hospital matter” and that she had made a proposal for an initial payment on her outstanding accounts. Further, on February 28, 2017, Quattrociocchi sent Bundgard a lengthy document entitled, “final bill review” in which she takes issue with a number of specific charges in the accounts between October 2014-October 2015.

[13] On April 10, 2017, Bundgard sent Quattrociocchi an offer to settle pursuant to Rule 49 of the Rules of Civil Procedure. Bundgard observed that a discount of 30 percent already had been applied to her accounts but that he was willing to provide a further discount in settlement of the action.

[14] By way of response, on April 23, 2017, Quattrociocchi provided another detailed account of her concerns with his representation, and sought further negotiations with a view to reducing the amount she would owe under the settlement.

[15] On April 25, 2017, Bundgard responds that he is unclear on her position, which did not come in the form of a counter-proposal and concluded his email by stating, “Failing a mutually agreed-upon settlement between us on May 1, 2017, I am requiring delivery of your defence in the action.”

[16] Finally, on April 27, 2017, after further correspondence, Bundgard stated:

I will await then receipt by May 8/17 of your direct response to the terms of my recent Offer to Settle, as you have committed to provide your response by that date. If we have no full agreement between us on settlement terms however by May 15/17, I will be requiring delivery of your defence by that date, failing which I may move thereafter to note you in default without further notice.

For your understanding, moving this litigation matter along through the pleading stage does not preclude us from continuing settlement discussions. (Emphasis added)

[17] On May 8, 2017, Quattrociocchi sent a further email to Bundgard stating that she had yet to finalize terms of a loan intended to enable her to make payments on her unpaid accounts. She told Bundgard to “stay tuned for an update from me in the coming days.” On May 12, 2017, she wrote again to state that she still had not finalized the loan and asked for the deadline to be extended from May 15, 2017 to May 22, 2017. Further emails from Quattrociocchi continued throughout May, 2017 with additional updates and negotiating positions.

[18] Bundgard obtained default judgment against Quattrociocchi, dated June 16, 2017, signed by Master Muir, in the amount of $27,184.12, together with $2,860.37 in costs and $222.24 in prejudgment interest.

[19] As of June, 2017, communications between the parties appear to have ceased. After that date, Quattrociocchi took no steps to continue negotiations or resolve the unpaid accounts, and Bundgard took no steps to enforce the default judgment until March, 2019.

[20] In February, 2019, Quattrociocchi’s mother passed away.

[21] In March, 2019, Bundgard initiated efforts to enforce the default judgment through a Sherriff’s Writ of Seizure and Sale with respect to Quattrociocchi’s home.

[22] Shortly, thereafter, Quattrociocchi commenced this motion to set aside the default judgment, though the May, 2019 hearing initially scheduled was adjourned to this date, on terms, due to missed timelines by Quattrociocchi.

ANALYSIS

[23] Rule 19.08 of the Rules of Civil Procedure governs the setting aside of default judgments and provides as follows:

19.08 (1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just.

(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge on such terms as are just.

(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the noting of default under rule 19.03. R.R.O. 1990, Reg. 194, r. 19.08 (3).

[24] The decision on a motion to set aside a default judgment under Rule 19.08 of the Rules of Civil Procedure is a matter of discretion. The test for the exercise of this discretion is well-settled (see Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194). In exercising this discretion, a court must be satisfied,

(a) that the defendant has moved promptly once becoming aware of the judgment;

(b) that there is an explanation for the default; and,

(c) that there is at least an arguable defence on the merits.

[25] Additionally, a court may consider the potential prejudice to the moving party should the motion be dismissed and the potential prejudice to the respondents should the motion be allowed, as well as the effect of any order a court might make on the overall integrity of the administration of justice (see Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. 2007 ONCA 333, at para. 2).

[26] In this case, Quattrociocchi meets each of these elements.

[27] First, Quattrociocchi moved promptly upon becoming aware of the default judgment through the enforcement activities in the Spring of 2019 to set aside the default judgment.

[28] Second, Quattrociocchi has an explanation for the default. While Bundgard’s letter of April 27, 2017, mentions the possibility of a noting in default in order to collect on the debt, the letter also indicated settlement negotiations could continue. There was no indication from Bundgard during these follow up exchanges in the Spring of 2017 that a default judgment was in fact being sought, nor was there any confirmation that a judgment was in fact obtained in June, 2017.

[29] Third, while Quattrociocchi has never denied owing Bundgard money for unpaid legal accounts, she has a plausible defence on the merits to liability for the full amount of the default judgment. She asserts that Bundgard offered her a 30% discount on the fees but failed to follow through in the statement of accounts. Further, she alleges she was not properly advised of the process for the defamation suit and should not be responsible for a portion of fees relating to that process, in addition to a range of other concerns and deficiencies in Bundgard’s representation which, she argues, could be the basis for a reduction in the amount owing under the accounts.

[30] While Bundgard denies these allegations and points to aspects of the record and cross-examination of Quattrociocchi which fail to substantiate her allegations, the test at this stage of the analysis is simply to ascertain if the defendant has an arguable defence, not a strong or successful one. In these circumstances, I find Quattrociocchi does have at least an arguable defence to the claim by Bundgard for payment in full on all the outstanding accounts.

[31] Finally, there appears to be no prejudice to Bundgard in permitting Quattrociocchi to defend the claim beyond the additional cost and delay to pursue the claim inherent in any decision to set aside a default judgment.

[32] Bundgard’s position, in short, is that he has abided by the Rules and Quattrociocchi has not. Quattrociocchi’s position is that as a self-represented, single mother dealing with a difficult period in her life, she acted responsibly and believed negotiations were continuing and would be concluded prior to any steps to obtain or enforce a judgment. Quattrociocchi argued that a simple communication in or around June, 2017, confirming that Bundgard was in fact seeking a default judgment, would have prompted her to defend the claim at that point.

[33] I accept that Bundgard’s email of April 27, 2017, stating that if the matter was not settled he may move to note Quattrociocchi in default, was ambiguous. It could be read as a final warning before default proceedings against Quattrociocchi would proceed, or that default proceedings remained an option that could be sought while negotiations continued.

[34] In either case, this situation is not one in which Quattrociocchi should be precluded from defending the claim. In situations where a defendant has actively resisted responding to a plaintiff or been reckless in disregarding a judgment, there may well be grounds for dismissing a motion to set aside a default judgment, but where, as here, there is a record of active and ongoing negotiations between the parties relating to a dispute over fees, followed by a mutual period of non-activity, I do not see a sufficiently clear basis to deny the defendant her opportunity to file a defence.

[35] For the reasons set out, I grant the motion by Quattrociocchi to set aside the default judgment pursuant to Rule 19.08, and order that a statement of defence by her be filed within 10 days of this judgment.

COSTS

[36] Generally, on a motion to set aside a default judgment, even if successful, costs to the defendant are rarely appropriate. Generally, costs thrown away by the plaintiff typically are at issue. I see no reason to depart from this view in this case.

[37] Bundgard’s record of patience in attempting to resolve the unpaid accounts, good faith efforts to settle the matter, and delay in undertaking enforcement activities to collect the default judgment while Quattrociocchi’s issues relating to the care of her mother continued, all reflect appropriate steps on his part to avoid, and then resolve this litigation.

[38] That said, there is also the need to consider the proportionality of costs in light of the overall amount of the claim being pursued, and the fact that this motion could have been avoided had Bundgard consented to setting aside the default judgment, once it became clear that Quattrociocchi had retained new counsel and wished to defend the claim.

[39] I find in the circumstances of this case that the defendant shall pay costs of $5,000.00 to the plaintiff, all inclusive, within 30 days.

Sossin J.

Date: September 17, 2019