PETERBOROUGH COURT FILE NO.: CV-19-00000186

DATE: 20210707

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2545890 Ontario Ltd. and Leonardo Muscato Plaintiffs

– and –

Cambium Inc. Defendant

COUNSEL:

Ian Peddle, for the Plaintiffs

Gabrielle K. Kramer and Simon Fung, for the Defendant

HEARD: June 24, 2021

REASONS FOR DECISION

DE SA J.:

[1] The Defendant, Cambium Inc. (“Cambium”) has brought a motion to set aside the noting in default and default judgment obtained by the Plaintiffs, 2545890 Ontario Ltd. (“254”) and Mr. Leonardo Moscato, (“Mr. Moscato”).

The Default Judgment

[2] On August 21, 2019, Cambium was served with a Notice of Action and Statement of Claim by the Plaintiffs. That same day, Cambium immediately provided notice of the claim, along with the pleadings, to its insurance broker, BrokerLink, and sought coverage for a defence.

[3] Just five days later, on August 26, 2019, DWF Adjusting (Canada) Ltd. (“DWF”) was retained to investigate the legal proceedings commenced by the Plaintiffs. DWF is an insurance adjusting firm specializing in liability insurance.

[4] Ms. Sharon Coutinho-de Souza (“Ms. Coutinho-de Souza”), Principle Adjuster at DWF, was assigned to this matter. Pursuant to the insurance policy, DWF was authorized to respond to legal proceedings on behalf of Cambium. That same day, Ms. Coutinho-de Souza contacted Cambium to gather more information about the matter.

[5] Cambium understood that its interest in defending the action was being protected by DWF and that DWF would coordinate the review of the materials and the preparation and filing of a defence.

[6] On August 26, 2019, Ms. Coutinho-de Souza contacted Mr. Ian Peddle (“Mr. Peddle”), legal counsel for the Plaintiffs, to introduce herself and to request an indulgence for the filing of a defence on behalf of Cambium in order to review the matter further. Ms. Coutinho-de Souza also requested documentation in possession of the Plaintiffs pertaining to the matter.

[7] On August 29, 2019, Ms. Coutinho-de Souza received an email from Mr. Peddle’s office advising that the Plaintiffs would not take any steps to note Cambium in default without providing notice. Mr. Peddle advised he would provide his clients’ draft affidavit of documents and cautioned that there may be substantially more documents available in the coming months.

[8] On September 12, 2019, Mr. Peddle’s office sent emails to Ms. Coutinho-de Souza enclosing documents in possession of the Plaintiffs pertaining to the matter. That same day, Ms. Coutinho-de Souza acknowledged receipt of documents from Mr. Peddle’s office and advised she would be in contact with Mr. Peddle.

[9] Unbeknownst to Ms. Coutinho-de Souza, Mr. Peddle’s assistant sent further emails to her on November 15, 2019 and December 3, 2019, enclosing letters from Mr. Peddle. The November 15, 2019 letter sought an update on the matter and advised that the Plaintiffs may take steps if they did not hear back. The December 3, 2019 letter was the only letter advising that the Plaintiffs would be noting Cambium in default if there was no response.

[10] Ms. Coutinho-de Souza did not see those emails in her inbox and did not open or read the attached letters. As of March 16, 2020, Ms. Coutinho-de Souza’s office was under lockdown and many litigation matters went dormant. She mistakenly believed that the matter was dormant and that no further steps were needed during that time.

[11] The next time the Plaintiffs contacted Ms. Coutinho-de Souza or Cambium was September 1, 2020, when Mr. Peddle’s office sent an email enclosing a letter from Mr. Peddle and a Court Order dated August 26, 2020 granting default judgment against Cambium. The letter advised that the Plaintiffs obtained a default judgment order and demanded payment from Cambium within 21 days.

[12] Neither Ms. Coutinho-de Souza nor Cambium were notified that the Plaintiffs requisitioned the registrar to note Cambium in default nor were they sent a copy of a motion materials for default judgment.

[13] Immediately after receiving the September 1, 2020 email from Mr. Peddle’s office, Ms. Coutinho-de Souza contacted Mr. Peddle to apologize for her lack of response to his previous letters and to explain the situation. She advised that legal counsel would be retained shortly and offered to discuss the matter with him in the meanwhile. On the same day, Ms. Coutinho-de Souza contacted Ms. Gabrielle Kramer, Partner with Borden Ladner Gervais LLP (“BLG”), to retain her on behalf of Cambium.

[14] Once retained, Ms. Kramer contacted Mr. Peddle on September 9, 2020 on behalf of Cambium to seek the Plaintiffs’ consent to set aside the default judgment and noting in default. When consent was not provided, BLG began preparation of a Notice of Motion. A copy of a draft Notice of Motion was provided to Mr. Peddle on September 22, 2020 and formally served on October 7, 2020. On November 5, 2020, the Court confirmed this motion.

The Applicable Principles Favour Setting Aside Default Judgment

[15] Rule 19.08 of the Rules of Civil Procedure provides that a default judgment may be set aside or varied by a judge on such terms as are just:

19.08 (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. R.R.O. 1990, Reg. 194, r. 19.08 (2).

(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).

Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), at Rule 19.08, Schedule B.

[16] The Ontario Court of Appeal set out the following five factors that should be considered in determining whether the interests of justice favour setting aside default judgment:

(i) whether the motion was brought without delay after the defendant learned of the default judgment;

(ii) whether there is plausible excuse or explanation for the defendant’s default in complying with the Rules;

(iii) whether the facts establish that the defendant has an arguable defence on the merits;

(iv) 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

(v) the effect of any order the court might make on the overall integrity of the administration of justice.

Mountain View Farms Ltd v. McQueen, 2014 ONCA 194, at paras. 48-49.

[17] These factors are not to be treated as rigid rules, the court must consider the particular circumstances of each case to decide whether it is just to relieve the defendant from the consequences of his or her default. It is not necessary for each factor to be satisfied.: Mountain View Farms Ltd v. McQueen, 2014 ONCA 194, at para. 50.

[18] I am satisfied that Cambium’s failure to deliver a Statement of Defence was due to no fault of its own. Ms. Coutinho-de Souza did not respond to the letters sent by Mr. Peddle’s office due to inadvertence. Alcantara v. Tulsiani, 2021 ONSC 85, at para. 37.

[19] In this case, Cambium has clearly maintained a continuing intention to defend the action. Cambium became aware of the default judgment on September 1, 2020 and immediately retained Ms. Kramer of BLG. When consent to setting aside the default proceedings was not provided by the Plaintiffs, a draft Notice of Motion was prepared and provided to Mr. Peddle on September 22, 2020.

[20] Cambium has demonstrated that it has defences to advance at trial. While the Plaintiffs dispute these defences, on the evidence put forward by Cambium, I am satisfied that the defences advanced by Cambium are arguable ones. Cambium is only required to show that the defences have an air of reality. Zeifman Partners v. Aiello, 2020 ONCA 33, at paras. 30-32, 2289878 Ontario Inc. v. Gourmet Gringos Ltd., 2016 ONSC 6204.

[21] This action is primarily based on documentary evidence rather than viva voce evidence. Other than the inconvenience and costs associated with the delay, there is no real prejudice to the Plaintiffs’ fair trial interests: Aluminum Window Design Installations Inc. v. Grandview Living Inc., 2020 ONSC 1294, at paras. 65 and 66.

[22] The amount of the judgment is substantial. The judgment obtained by the Plaintiffs was in the amount of $278,821.41. To permit a sizable judgment to stand on the basis of an oversight is not in the interests of justice: Zeifman Partners Inc. Inc. v. Aiello, 2020 ONCA 33, at para. 47.

[23] In the circumstances, I will order that the registrar’s noting in default of Cambium, and default judgment be set aside. Cambium will also be permitted to serve and file its Statement of Defence.

[24] I will receive costs submissions from Cambium within two weeks of the release of this decision. The Plaintiffs will have 1 week thereafter to respond.

Justice C.F. de Sa

Released: July 7, 2021

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2545890 Ontario Ltd. and Leonardo Muscato Plaintiffs

– and –

Cambium Inc. Defendant

REASONS FOR DECISION

Justice C.F. de Sa

Released: July 7, 2021