COURT FILE NO.: CV-18-4551-00
DATE: 2019 12 05
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DRAGO EDGREDZIJA
J. Figliomeni, Counsel for the Plaintiff
Plaintiff
- and -
JASON GULLETT carrying on business as PRESTIGE STEEL BUILDINGS and PRESTIGE BUILDINGS 2016 LTD.
R. Chown, Counsel for the Defendants
Defendants
HEARD: October 22nd, 2019
REASONS FOR DECISION
LEMAY J
[1] I provided oral reasons in this matter in Court at the end of the day on October 22nd, 2019. At that time, I advised counsel that I expressly reserved the right to edit, add to and/or amend my reasons. What follows is my amended reasons. The parties will shortly be provided with a transcript of the oral reasons given in Court.
[2] This is a contractual claim brought by the Plaintiff. It is a dispute over the construction of a steel shed on the Plaintiff’s property. I will come to the facts in dispute shortly.
Background Facts
[3] A Statement of Claim in this matter was served on November 3rd, 2018. There was a noting in default on December 4th, 2018 because it is acknowledged that there was no contact from the defendant to the Plaintiff’s counsel during this time period.
[4] On December 12th, 2018 an email was sent from the Defendant to the Plaintiff’s counsel. That email, which counsel for the Plaintiff acknowledged receiving, was sent on December 12th, 2018 at 1:39 p.m. and reads:
Good afternoon. Please confirm you received my message to call after being served. I’m still deciding on a counsel to retain, and please notify before being in default. Thank you.
[5] This email references a previous phone call to the Plaintiff’s counsel. Plaintiff counsel has filed an affidavit from one of the associates in his firm which states, at Paragraph 4,:
At Paragraph 18 of his affidavit, Mr. Gullet states that after receiving the claim he immediately left a voicemail with my colleague, Joseph Figliomeni, requesting that Mr. Figliomeni give Mr. Gullet notice before taking steps to note Mr. Gullet in default. Mr. Gullet has provided no information regarding the date or time of his alleged call to Mr. Figliomeni. Mr. Figliomeni has advised me that he did not receive and has no record of having received any voicemail message from Mr. Gullet.”
[6] I will return to the significance of this correspondence later.
[7] In any event, there was no contact between the parties in this matter until July of 2019. During the course of the litigation, Justice Doi granted a default judgment on June 3rd, 2019. Garnishment proceedings were initiated by the Plaintiff and the judgment was collected on July 25th, 2019.
[8] On the same day the garnishment proceedings resulted in money being removed from the Defendant’s bank account, Mr. Chown’s colleague, Mr. Thompson, contacted Mr. Figliomeni and advised him that they were going to be taking steps in this matter.
[9] Since July 25, 2019, there has been litigation over these issues. On September 5, 2019, the Defendants served a Statement of Defence, as well as a motion record for a motion setting aside the default judgment. This matter then came to court before Justice D. Fitzpatrick on September 27th, 2019 for a motion setting aside the default judgment. The appearance before D. Fizpatrick J. the motion was adjourned for cross-examination.
[10] Since the September 27th, 2019 hearing, an extensive cross-examination was conducted of the Plaintiff. It spans just over a thousand questions and took most of the day from my understanding. That cross-examination was filed in the materials, and I have reviewed portions of that cross-examination.
The Test for Setting Aside a Default Judgment
[11] This brings me to the test for setting aside a default judgment. That five-part test is set out in Intact Insurance Company v Kisel 2015 ONCA 205. In that decision, Laskin J.A. sets out the test for setting aside a default judgment at Paragraph 14 of the decision. He sets out a five-part test. I will analyze each part in turn.
A) Whether the motion was brought promptly after the Defendant learned of the default judgment.
[12] In my view this branch of the test is satisfied. There is no evidence that I have seen that the Plaintiff notified the Defendant at any time prior to mid-July of 2019 that they were seeking to obtain or had a default judgment. Then, very shortly after the Defendant became aware of the default judgment, he took steps to have it set aside.
B) Whether the Defendant has a plausible excuse or explanation for the default.
[13] This is the branch of the test that troubles me the most in this particular case. I am concerned about the fact that there was an email sent by the Defendant on December 12th 2018, and that there was no further communication by the Defendant for more than six months. I have to weigh that fact against two other factors.
[14] First, the question is whether I accept the evidence that there was a phone call that was made to Mr. Figliomeni by the Defendant. I accept that evidence for two reasons:
a) The Defendant’s Affidavit is the more direct evidence that is before me. While I acknowledge that there was no effort made to cross-examine Mr. Figliomeni on this motion, I would note that there is an issue of proportionality in terms of conducting that cross-examination that would have rendered it potentially unnecessary.
b) The December 12th, 2018 email itself references a previous phone call, and it is not disputed that this email was received and that there was no response to this email. This fact suggests that a phone call was, in fact, made.
[15] Second, the Plaintiff’s affidavit and the statements he made about the phone call have been subject of cross-examination at the request of plaintiff’s counsel. In my view, then, therefore, there was both a telephone call and an email. I reject the evidence of Mr. Figliomeni’s associate in this regard.
[16] This then brings me to the other factor that I have to weigh in terms of the plausible excuse or explanation for the default, and that is the cleft in the case law that appears to exist between the decision of Justice A. J. Goodman in McCann v. Yalda 2019 ONSC 5648 and the decision of Justice Sanfilippo, quoting from Justice Brown, in Casa Manila Inc. v. Iannuccilli 2018 ONSC 7083.
[17] In McCann v. Yalda, Justice Goodman says that he is not prepared to set aside a default judgment, and at Paragraph 32 says, with paraphrasing, that counsel for the plaintiff was under no obligation to email the Defendant about further developments in the case. When I read that paragraph, however, I am of the view that the McCann case is not directly on point with the case before me because the defaulting party in McCann made a much less clear request for information than the Defendant in this case made. In the case before Justice Goodman there was a request that there be an understanding that the Defendant was going to be notified about further developments. In the case before me, the Defendant specifically asked not to be noted in default. That, in my view, is a very different request.
[18] In my view it brings me to two points. First, I am of the view- and I disagree with counsel for the plaintiff’s submission on this point- that the best litigation practice in the circumstances of the case before me would have been to respond to that email and say “I have noted you in default.” If that had been done and the delay had still been six months, this motion would probably have had a different outcome. This response was not sent by Plaintiff’s counsel.
[19] Why should this response have been sent? In my view because correspondence has been received by counsel, and by not responding to it, there is a risk that counsel lulls somebody, particularly an unrepresented plaintiff, into a false sense of security. In my view, that is not the best practice, particularly since the Court of Appeal has reminded trial judges in many cases that they are obligated to have matters heard on the merits where possible.
[20] Second, I am in general agreement with Justice Sanfilippo when he says at Paragraph 16 of his Reasons:
This is why “by far the better practice” is to provide the defaulting defendant with the material necessary to understand without doubt that the claim for judgment against the defaulting defendant is about to be determined. Where the plaintiff has not followed this practice, the court must consider whether the interests of justice, and the procedural and trial fairness, demand that the court’s discretion be exercised in favour of requiring notice to the defaulting defendant. The court must balance the plaintiff’s entitlement to proceed without participation of the defendant who has elected to abstain against the defendant’s entitlement to have sufficient notice on which to make this election.
[21] In my view, that is the sort of principle that I would expect to be applied here when we have a clear and unambiguous request from the Defendant to be advised about any noting in default.
c) Whether the defendant has an arguable case on the merits.
[22] I have in many ways dealt with this on my ruling on whether an adjournment for further cross-examination of the Plaintiff should have been permitted. I denied that request in essence on the basis that an additional examination would not have been proportional, given the issues in dispute. I would add simply this – that the question of whether or not the defendant is being reasonable or truthful with the court is not something that can be inquired into too terribly far on a motion of this nature.
[23] This portion of the test is a question of whether or not there is an air of reality to the defence. It is not whether or not the defence is correct. It is not whether or not the defence is going to be sustained at trial. By venturing into the area of assessing credibility on a motion of this nature, the court is running very far up the line of different summary disposition motions. In my view, on these facts, if the court does what counsel for the Plaintiff is requesting, then the court is probably engaged in something that is best done under Rule 20 rather than at a motion of this nature.
[24] In that regard, I note the underlying facts of the Intact Insurance case in which Laskin J.A. expressed some concern about the motions judge going too far in interpreting the documents that had been placed before him. In my view conducting the analysis proposed by counsel for the Plaintiff in this case would be amounting to the same conduct that Laskin J.A. expressed concern about.
D) The potential prejudice to the Defendant should the motion be dismissed, and the potential prejudice to the Plaintiff should be motion be allowed.
[25] With respect to this element of the test. I would say that the potential prejudice to the Defendant is that they are going to be required to pay the entire claim. The potential prejudice to the Plaintiff is that they are going to have to litigate the entire claim.
[26] If the motion is dismissed, the Defendant will have no opportunity to remedy their prejudice in that the action will be ended. If the action proceeds, then the Plaintiff will have an opportunity to remedy their prejudice by collecting costs in this case if they are successful. And I would also note if the Defendant is demonstrated to have a significantly unmeritorious defence, those costs can be awarded on a substantial indemnity scale. That is for the trial judge to determine, but it is a factor that further reduces the prejudice to the Plaintiff.
e) The effect of any order the court might make on the overall integrity of the administration of justice.
[27] I wish to address two points in explaining why I am of the view that this part of the test is also met.
[28] First, I acknowledge that counsel for the Plaintiff has argued that one of the factors I need to consider is whether or not the Defendant is engaged in improper conduct by advancing his arguments.
[29] In that respect, Plaintiff’s counsel points me to 1705371 Ontario Limited v Leeds Contracting Restoration Incorporated 2018 ONSC 7423 where it states at paragraph 59:
Given this conclusion, in my view, if Mr. Duric were able to obtain an order setting aside the consequences of default following service of an originating process in accordance with the Rules of Civil Procedure by tendering affidavit evidence that the originating process did not come to his notice when it was served and explaining why the document did not come to his notice and, when the explanation is challenged on cross-examination, materially changing his evidence in relation to a key factual statement and then unjustifiably refusing to answer proper questions directed to testing the truthfulness of the explanation, the overall integrity of the administration of justice would be impaired.
[30] I would make two observations about this passage. First, it is distinguishable from the case before me because Mr. Duric’s evidence appears to have been related to the explanation for delay. In this particular case, I see nothing in terms of Mr. Gullet’s explanation other than he did not do what he was supposed to do. I was taken to questions 151 to 176 of the cross examination outlining that he did nothing, and he was quite candid in his cross-examination that he did nothing. So, he is not misleading the court in that regard.
[31] Second, in my view, this particular passage has to be balanced with my earlier observation about the Court of Appeal expecting cases to be determined on their merits. In my view, cases need to be determined on their merits unless there is a good explanation for setting them aside, and allowing technical arguments to succeed would, in my view, runs the risk of bringing the administration of justice into disrepute when there is not any significant prejudice to the side seeking to enforce the technical argument.
[32] For all of those reasons, the five categories are satisfied and the default judgment is set aside.
The Writ of Seizure
[33] This brings me to the request from Defendant’s counsel to remove the Writ of Seizure. I have had the opportunity to read the decision of Merchant Advance Capital Limited v 2200816 Ontario Inc. et al 2019 ONSC 2477 (Ont Master), a decision of Master Sugunasiri. In that decision Master Sugunasiri points to Rule 19.08 that says that the default judgment may be set aside on such terms as are just. In some cases that can include maintaining any writs filed against the defendant.
[34] However, Master Sugunasiri goes on to say (in Paragraph 20):
In the circumstances of this case I see no reason to allow Merchant to essentially obtain security for its potential judgment. No other plaintiff enjoys this opportunity except for a motion for security for costs. In the absence of Merchant taking any steps to warn Prabakhar of its intention to take default proceedings, it is not in my view just to maintain the writ. There is no prejudice to Merchant other than losing the privilege of having protection for its judgment. I have been provided with no evidence that such protection is needed or warranted.
[35] In my view that case is applicable in these circumstances as well. I do not see on the record before me a justification for providing security – what is often referred to as enforcement before judgment. The writs taken out by the Sheriff in this case were entirely appropriate because they were after judgment had been granted. Given my order setting aside Justice Doi’s order, we are now before judgment. As a result, we are in a position where I can consider that issue by applying the Merchant Advance Capital decision, and I do so. I see no reason why the Plaintiff should be entitled to security before judgment. The writs are set aside.
Conclusion and Costs
[36] For the foregoing reasons, I order as follows:
a) The Decision of Doi J. dated June 3rd, 2019 granting default judgment is set aside.
b) The monies collected pursuant to the Writ of Seizure are to be returned to the Defendant.
[37] In terms of costs, the Defendant is to provide his costs submissions within seven (7) days of October 22nd, 2019. Those submissions are to be no longer than two (2) single-spaced pages, exclusive of Bills of Costs, Offers to Settle and case law.
[38] The Plaintiff will have seven (7) further days to provide his costs submissions. Those submissions are also to be no longer than two (2) single-spaced pages, exclusive of Bills of Costs, Offers to Settle and case law.
[39] There are to be no reply submissions without my leave.
[40] The time-limits for costs submissions are not to be extended without my leave. If no costs submissions are received within the time period, then I will assume that the parties have agreed upon costs, and there shall be no order as to costs.
LEMAY J
Released: December 5, 2019
COURT FILE NO.: CV-18-4551-00
DATE: 2019 12 05
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
DRAGO EDGREDZIJA
Plaintiff
- and -
JASON GULLETT carrying on business as PRESTIGE STEEL BUILDINGS and PRESTIGE BUILDINGS 2016 LTD.
Defendants
REASONS FOR JUDGMENT
LEMAY J
Released: December 5, 2019