Court File and Parties
BARRIE COURT FILE NO.: CV-18-478-00
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 2343680 Ontario Inc., Plaintiff (Responding Party)
AND:
Lisa Prescott, Defendant (Moving Party)
BEFORE: Justice V. Christie
COUNSEL: A. Jaramillo, Counsel, for the Plaintiff (Responding Party)
D. Lee, Counsel, for the Defendant (Moving Party)
HEARD: October 22, 2019
ENDORSEMENT
1This is a motion brought by the defendant to set aside her being noted in default, the default judgment, and the leave to issue a writ of possession.
2This action arises from a second mortgage the defendant, Lisa Prescott, obtained from the plaintiff. Ms. Prescott loaned the funds from this second mortgage to Everton Campbell pursuant to a promissory note dated September 7, 2017. The promissory note provided that Mr. Campbell was to pay Ms. Prescott the principal amount of $150,000 by November 17, 2017, in addition to a one-time loan fee of 15%, equalling $22,500. The promissory note also provided that if the loan continued past the due date of November 17, 2017, the one-time loan fee rate would increase to 20%, equalling $30,000.
3The mortgage between the plaintiff and the defendant in these proceedings was signed on September 13, 2017 and the money was advanced to the defendant. Payments were made for some period of time, however, in or around March 7, 2018, the plaintiff alleges that the mortgage went into default.
4The plaintiff commenced legal proceedings and a statement of claim was issued on March 23, 2018.
5On April 12, 2018, counsel for Ms. Prescott, Samil Chagpar, wrote to counsel for the plaintiff, who at that time was Scott Cook, and advised that he had been retained by Ms. Prescott and enclosed a Notice of Intent to Defend. The letter stated in part:
As you are aware, the nature of the mortgage contract involved a third party Everton Campbell, who was directly involved in the negotiation of the mortgage with your client and to whom Mr. Campbell was making the monthly interest payments directly.
We are advised that the mortgage payments may have lapsed and then been cured for the months of March and April 2018.
We requested that you please provide us with particulars in regards to the monthly payments and whether they are in good standing, as our client will be commencing companion proceedings against Mr. Campbell, which we suggest need to be dealt with together with your client’s proceeding as noted above.
In the meantime, we trust that you will not take any steps to note our client in default without first providing to us at least 15 days advance notice in writing as our client intents to deliver a Statement of Defence
6There was no immediate response to this letter. However, on May 3, 2019, counsel for the plaintiff, Scott Cook, sent an email to counsel for the defendant, stating:
I am receipt of your recent email regarding the above-captioned matter. I would advise that our client has instructed us to continue with our legal proceedings, however, the client is agreeable to consenting to having both matters tried together.
There was no expressed agreement regarding default proceedings, although counsel for the defendant argued that an agreement not to pursue default proceedings without notice was implicit in the agreement to try the matters together. There was also no response to the request for particulars.
7On May 7, 2018, the companion action between Ms. Prescott and Mr. Campbell, bearing court file number CV-18-135666, was commenced. A statement of claim was filed. Mr. Campbell filed a Statement of Defence on May 29, 2018.
8At some point, the plaintiff changed counsel, however, new counsel never delivered a Notice of Change of Solicitor to the defendant.
9On January 11, 2019, the new lawyer for the plaintiff, Alejandro Jaramillo, wrote directly to the defendant, Ms. Prescott. The letter stated:
We act on behalf of your second mortgagee on the above-noted property. We have been advised by our client that your mortgage has expired on September 7, 2018 and payment required immediately.
Kindly advise by no later than Friday January the 18th 2019 on how you will proceed. Please note that we have been instructed to commence enforcement proceedings immediately thereafter should you choose or neglect to not make appropriate arrangements as aforementioned. Govern yourself accordingly.
10Ms. Prescott provided that letter to her counsel and counsel responded by letter on January 18, 2019. The letter was very similar to the letter sent on April 12, 2018. It advised Mr. Jaramillo that Samil Chagpar represented Ms. Prescott. The letter again requested particulars in regards to the monthly payments and whether those payments were in good standing. It stated:
Our client has already commenced companion proceedings against Mr. Campbell, which we suggest will need to be dealt with together with your client’s threatened proceeding as noted above.
We suggest that your client agree to hold off on prosecution of its enforcement entitlements such as an action for possession, power of sale, etc. pending the continuation of payments of monthly interest by Mr. Campbell.
11There was no response to this correspondence. The plaintiff takes the position, despite the fax confirmation showing receipt, that this correspondence was not received.
12On January 31, 2019, counsel for the plaintiff, Mr. Jaramillo, wrote to the director for the numbered company plaintiff asking if she knew whether a defence had been filed. The director did not know, therefore, counsel decided to follow up with the court.
13On February 2, 2019, there was a discussion between the director of the company and the defendant, Ms. Prescott, about repayment. The director, Mrs. Araujo, followed up with an email to Ms. Prescott, which indicated that unless an acknowledgement was signed, she would not accept further payments and would continue with enforcement proceedings. The email dated February 2, 2019 stated:
I will not accept any further payments as acceptance of any payments can only happen upon signing of the attached Acknowledgement Re Acceptance of Payments.
Pls advise how you want to proceed otherwise we will persue frw for taking possession of the property.
Govern yourself accordingly.
The attached acknowledgement stated in part as follows:
The undersigned (the “Mortgagor”) hereby acknowledges that acceptance of any payments by 2343680 (the “Mortgagee”) shall not, in anyway whatsoever, modify, change or amend, or shall not be construed to modify, change or amend, the mortgage payment terms or nullify any power sale proceedings or actions commenced under the existing mortgage between the parties.
The acknowledgement was never signed.
14The plaintiff noted the defendant in default on May 6, 2019
15The plaintiff obtained default judgment on May 15, 2019.
16On July 9, 2019, the plaintiff brought a motion, without notice, and received an order granting leave to issue a writ of possession with respect to the premises.
17Shortly thereafter, plaintiff’s counsel wrote directly to Ms. Prescott and provided her with a copy of the Order. Ms. Prescott provided her counsel with a copy of the order on July 24, 2019. Counsel for Ms. Prescott immediately wrote to counsel for the plaintiff asking why these steps were taken without notice. Counsel for the plaintiff immediately telephoned Blackburn Lawyers, the firm representing the defendant, and spoke with lawyer, David Lee, to whom he explained that he had not received any prior communication from him or his firm.
18On July 26, 2019, counsel for the defendant, David Lee, emailed Mr. Jaramillo to confirm that counsel for the plaintiff would not be taking any steps to enforce the Order of July 9 unless the defendant was provided reasonable prior written notice. There was a suggestion that counsel for the plaintiff was considering holding the matter in abeyance and extending the appeal period for 90 days after the final Order in the summary judgment motion in the companion action.
19An hour after receiving this email, counsel for the plaintiff responded in an email, stating in part:
Following our conversation of yesterday’s date whereby we advised you that we had not received any prior communication from your office, we agreed that there would be no enforcement until after X amount of days to be agreed upon (tentatively 90) until after disposition of your client’s summary motion. Not that we would extend the appeal period until then…
20A summary judgment motion has been scheduled for the November 18, 2019 Newmarket Trial sittings in the companion action CV-18-135666.
Analysis
21The courts have repeatedly stated that the tests to be met to set aside a noting in default and to set aside a default judgment are different. See: Intact Insurance company v. Kisel, 2015 ONCA 205, para. 12.
22With respect to setting aside the noting in default, Rule 19.03 provides as follows:
(1) The noting of default may be set aside by the court on such terms as are just.
23The court in Intact Insurance stated as follows:
13When exercising its discretion to set aside a noting in default, a court should assess “the context and factual situation” of the case: Bardmore, at p. 285. It should particularly 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. Some decisions have also considered whether setting aside the noting of default would prejudice a party relying on it: see e.g. Enbridge Gas Distribution Inc. v. 135 Marlee Holdings Inc., [2005] O.J. No. 4327, at para. 8. Only in extreme circumstances, however, should the court require a defendant who has been noted in default to demonstrate an arguable defence on the merits: Bardmore, at p. 285.
24It is the view of this court that the noting in default should not be set aside in these circumstances.
25First, this court considers the behaviour of the plaintiff and the defendant. The defendant wrote to counsel for the plaintiff on April 12, 2018 requesting that the matters be heard together, asking for particulars and asking that the plaintiff “not take any steps to note our client in default without first providing to us at least 15 days advance notice in writing as our client intends to deliver a Statement of Defence.” The only response received from counsel for the plaintiff was that “our client has instructed us to continue with our legal proceedings, however, the client is agreeable to consenting to having both matters tried together.” This is not a commitment on the part of counsel for the plaintiff that no default proceedings would be pursued without 15 days notice or that particulars were forthcoming as suggested by the defendant. The only agreement was to consent to trying the two actions together. Yet, counsel for the defendant did not pursue any motion to consolidate these actions. The plaintiff certainly never suggested that it would bring such a motion. They agreed to consent. Having received this response, the defendant then did absolutely nothing with respect to this action.
26The next piece of correspondence between the parties comes on January 11, 2019, when new counsel for the plaintiff wrote to the defendant directly to advise that the mortgage had expired on September 7, 2018, requiring immediate payment and that if she did not advise of her intentions by no later than January 18, 2019, counsel was instructed to commence enforcement proceedings immediately thereafter. This could not have been clearer. This piece of correspondence should have been sent to counsel for the defendant, however, what is clear is that it did make its way to counsel sometime prior to January 18, 2019, because counsel for the defendant wrote to counsel for the plaintiff. I accept that this correspondence from counsel for the defendant was sent, however, there is no reason to disbelieve counsel for the plaintiff when he submitted that he did not receive this correspondence. It is unclear why this would be, however counsel points to other issues that occurred between the parties when it came to faxes being sent.
27Having received no response to this communication, given its nature, it is surprising that counsel for the defendant did not follow up with counsel for the plaintiff to ensure that enforcement proceedings would not commence. In fact, counsel for the defendant never followed up with counsel for the plaintiff at all. Given the correspondence dated January 11, 2019, it should have been obvious to counsel for the defendant that the plaintiff was serious about enforcement proceedings, and that, at the very least, they should seek to file a statement of defence. However, this was not done. In fact, nothing was done. The defendant appears to have had some conversation with the director of the company, directly, that counsel for the defendant may not have been aware of, however, certainly the defendant was again notified on February 2 that enforcement proceedings were imminent. Yet nothing was done.
28Given the nature of these discussions, the defendant and counsel for the defendant had more than three months notice that enforcement proceedings were coming, prior to the noting in default.
29As to the length of the defendant’s delay, this statement of claim was filed in March 2018. The noting in default did not occur until May 2019. As for the reasons for the delay, the defendant claims that they required particulars in order to prepare a defence. If this were the case, one would think that counsel would have followed up on the request for particulars from April 12, 2018, after receiving the brief email from counsel for the plaintiff nearly three weeks later. Counsel for the defendant did not follow up on this at all until after receiving the letter from new counsel for the plaintiff in January of 2019. Further the particulars requested by counsel for the defendant appeared to have more to do with the companion action than with preparing a statement of defence in this action, as the letter of April 12, 2018 stated, “We requested that you please provide us with particulars in regards to the monthly payments and whether they are in good standing, as our client will be commencing companion proceedings against Mr. Campbell, which we suggest need to be dealt with together with your client’s proceedings as noted above.” The comments in the January 18, 2019 letter are similar with respect to particulars. There is no reference to this standing in the way of preparing a statement of defence.
30There does not appear to be great complexity to this claim. Ms. Prescott obtained a second mortgage from the plaintiff. The suggestion was that she defaulted on that mortgage. The fact that a third party was responsible to Ms. Prescott does not make that third party responsible to the mortgagee in this case. As I understand it, Mr. Campbell was not a party to that mortgage between the plaintiff and the defendant in this case. The fact that Ms. Prescott chose to have this other agreement with Mr. Campbell is between her and Mr. Campbell. The value of the claim is that which is covered in the mortgage agreement, nothing more, nothing less.
31As for prejudice, clearly, Ms. Prescott will suffer prejudice as a result of these proceedings as she stands to lose this property. However, that was the mortgage that she openly agreed to. That was the risk that she took. She did not comply with her end of the mortgage contract and the consequences are clear. Further, she did not actively participate in these proceedings but rather chose to pursue Everton Campbell as the priority.
32For all of the foregoing reasons, the noting in default stands.
33With respect to the request to set aside the default judgment, Rule 19.08 of the Rules of Civil Procedure provides as follows:
(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.
34In Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, [2014] O.J. No. 1197 (C.A.), the Court of Appeal articulated a five-part test:
a. Whether the motion was brought promptly after the defendant learned of the default judgment;
b. Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
c. Whether the facts establish that the defendant has an arguable defence on the merits;
d. The potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent 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.
35There is no question that the motion was brought promptly after the defendant learned of the default judgment and writ of possession. Counsel took immediate steps to rectify the situation, first considering an appeal and then pursuing this avenue.
36With respect to the plausible excuse or explanation, this has been addressed above. While there has certainly been an explanation put forward, this court does not find the actions of the defendant reasonable in the circumstances for the reasons already stated.
37As for an arguable defence on the merits, no submissions have been forthcoming as to any defence. There was nothing provided in the written material that would support an arguable defence and nothing in oral argument.
38The issue of prejudice has already been addressed above.
39The final consideration is the effect of an order on the overall integrity of the administration of justice. The Rules are in place for a reason and should be followed. Parties should be entitled to have their matters dealt with as expeditiously as possible and therefore timelines are imposed for certain things to be done. Rule 1.04(1) states that:
These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
40Given that there is no arguable defence on the merits put forward, it is difficult to see how it would make any sense to set aside the default judgment in this case.
41The default judgment stands.
42Given the reasons above, there is no reasonable basis to set aside the granting of leave to the plaintiff to issue a writ of possession with respect to the premises.
43The motion is dismissed.
44If the parties are unable to agree as to costs of this motion, the court will accept written submissions on costs, which shall be no more than three pages in length, excluding supporting documentation, and which shall be provided to the court office in hard copy or by email no later than November 1, 2019.
Justice V. Christie
Date: October 24, 2019