COURT FILE NO.: CV-19-00615205
DATE: 2022-07-22
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
CLE CAPITAL INC.
B. Waseil, for the Plaintiff, Responding Party
Plaintiff
- and -
2593485 ONTARIO LTD., 7172842 CANADA INC., and AUGUSTO BALDERAMA CAPITIN
Augusto Capitin, Defendant, appearing on his own behalf
Defendants
HEARD: February 24, 2022
ASSOCIATE JUSTICE: D. MICHAEL BROWN
REASONS
Preliminary Matters
[1] This is a motion to set aside a noting in default. The identity of the moving party (or parties) on this motion is not immediately apparent from the Notice of Motion filed. There are three defendants, one individual and two corporations, all of whom have been noted in default. The moving motion materials were filed by the individual defendant, Augusto Capitin, who is self-represented. The Notice of Motion filed by Capitin incorrectly names the defendant, CLE Capital Inc., as the moving party.
[2] Capitin swore an affidavit filed on the motion which states: “I am intending to file a motion to set aside the noted (sic) in default order because I have a meritorious defence”. Similarly, both sets of written submissions filed by Capitin on the motion conclude with “Augusto Capitin sincerely requests to set aside the noting in default.” The motion materials filed do not include or reference any request by the corporate defendants to set aside the noting in default against the corporate defendants.
[3] In oral submissions before me at the outset of the hearing, Capitin advised that he is the principal of both corporate defendants and that they are seeking to have the noting in default set aside against them as well. Capitin has filed no evidence of his relationship to the corporate defendants. More importantly, the corporate defendants are not represented by counsel and Capitin has not sought or obtained leave to represent them in this proceeding in accordance with Rule 15.01(2).
[4] The plaintiff submitted that it had interpreted the motion materials that were served as a motion by Capitin to set aside the noting in default against Capitin only. I agree with that interpretation and advised the parties at the hearing that we would be proceeding with the motion on that basis. In my view, it would not have been fair to the defendants to proceed with a motion to set aside the default judgment against the corporate defendants as the plaintiff has not been given proper notice of that motion. In any event, had I allowed a motion by the corporate defendants to set aside the noting in default as against them to proceed, I would have dismissed it for the same reasons I have dismissed Capitin’s motion, as detailed below.
Procedural History
[5] The plaintiff issued a Statement of Claim in February 2019 seeking damages for breach of a commercial equipment lease between the plaintiff, as lessor, and one of the corporate defendants, as lessee. Capitin and the other corporate defendant had signed the lease as guarantors. The Statement of Claim was issued after the defendants had defaulted on the lease and surrendered the leased equipment to the plaintiff, and after several written demands for payment on the amounts outstanding.
[6] The defendants were personally served with the Statement of Claim on March 4, 2019. Capitan acknowledges in his affidavit that he received the Statement of Claim sometime in March 2019. The defendants were noted in default on March 28, 2019.
[7] In September 2019, the plaintiff filed a motion in writing for default judgment. Although not required to do so given the noting in default, the plaintiff served the motion materials for default judgment on the defendants at three different addresses. The motion was read by Justice Stinson in October 2019 who declined to grant default judgment on the basis that the evidence provided by the plaintiff did not properly show how the amount claimed was calculated.
[8] In March 2021, the plaintiff again moved for default judgement, this time on an ex parte basis for an oral hearing. On March 8, 2021, Justice Diamond, sitting in triage court, ordered that the plaintiff’s motion record should be served on the defendants and further ordered that the defendants would have twenty days from such service to notify the plaintiff that they intend to respond to the motion, failing which the motion would proceed without the defendants. The defendants were served with the motion record for default judgement on March 9, 2021. By April 6, 2021, the plaintiff had received no response so it scheduled the motion for default judgement for an oral hearing on May 27, 2021.
[9] On May 3, 2021, Capitin emailed counsel for the plaintiff and requested an additional 30 days in relation to the motion for default judgment on the basis of financial hardship. Capitin indicated he was “seeking Legal Aid in resolving this matter”. Capitin attended the return of the motion for default judgment on May 27, 2021 and requested an adjournment to permit him to move to set aside the noting in default. This was the first time Capitin had raised the prospect of such a motion. Justice Dow granted the adjournment provided that Capitin secure a return date for the motion to set aside the noting in default from the motions office on or before June 16, 2021.
[10] Capitin did not secure a return date from the motions office by June 16, 2021 and did not respond to the plaintiff’s inquiries in that regard. Accordingly, the Plaintiff once again sought to bring its motion for default judgement on for a hearing, and on June 28, 2021, Justice Myers as triage judge set the plaintiff’s motion down for a 30 minute hearing on August 10, 2021. The next day, on June 29, 2021, Capitin advised that he had secured a return date of February 24, 2022 for a motion to set aside the noting in default. In the result, the Plaintiff’s third attempt at a motion for default judgment did not proceed.
[11] The plaintiff requested a case conference before a judge to determine if the motion to set aside noting in default could be heard earlier and to seek a timetable for the delivery of materials on the motion. That case conference was heard before Justice Sanfillipo on August 19, 2021. Justice Sanfillippo ordered a timetable for the exchange of motion materials which required the defendants to deliver their motion record within 60 days.
The Motion Materials
[12] Capitin served a motion record on October 19, 2021, one day after the deadline imposed by Justice Sanfilipo. As noted above, the included Notice of Motion incorrectly identified the plaintiff as moving party and sought to set aside a noting in default. The only evidence filed in the motion record is an affidavit of Capitin consisting of five single-sentence paragraphs with no exhibits. The affidavit acknowledges service of the statement of claim and Capitin’s failure to defend but provides no explanation for such failure and no explanation for the delay in bringing this motion. The only justification provided by Capitin in his affidavit for the motion to set aside noting in default is a bald assertion that he has “a meritorious defence”. The affidavit does not provide any details of such defence and does not attach any proposed or draft Statement of Defence.
[13] The defendant’s initial motion record also includes a 12-paragraph written argument. The written argument is confusing and at times incoherent. It appears to assert drafting and formatting defects in the lease agreement with the plaintiff, particularly in relation to the guarantee, that had the alleged effect of misleading the defendants. I take the written argument to be an outline of the “meritorious defence” referenced in the defendant’s affidavit. As with the affidavit, the written argument does not address or explain the defendants’ failure to defend or the delay in bringing this motion.
[14] The plaintiff served its responding motion record on November 15, 2021 which included an affidavit detailing the history of the proceedings and the plaintiff’s interactions and communications with the defendants throughout. The plaintiff served its factum on January 19, 2022. On or about February 4, 2022 the defendant served a supplemental written argument and, for the first time, a proposed Statement of Defence. The proposed Statement of Defence was not attached to any affidavit. I note that it was served by the defendant a week after receiving the plaintiff’s responding factum.
[15] The defences asserted in the proposed Statement of Defence differ significantly from the position asserted by the defendant in the written argument filed with the motion record in October 2021. Whereas that written argument focused exclusively on the allegedly misleading nature of the lease contract, the defence asserted in the proposed Statement of Defence appears to be based entirely on alleged technical flaws in the execution of the lease agreement. In particular, the proposed Statement of Defence asserts that the lease (including the guarantee) is not binding because it was “not accepted in writing by dated signature of a duly authorized representative of the Lessor [the plaintiff]”.[^1] The proposed defence also appears to assert that the guarantee is unenforceable because the plaintiff failed to perform a credit check on Capitin or collect Capitin’s financial information as provided in the agreement.
Analysis
[16] The defendant’s sole submission in support of setting aside the noting in default is that he has a “meritorious defence”. The plaintiff’s primary submission is that I should dismiss the defendant’s motion because the defendant has not demonstrated an intention to defend the action and has failed to explain both his initial failure to defend and his delay in bringing the motion. The plaintiff argues that in light of these failures, I don’t need to consider the merits of the proposed defence. In the alternative, the plaintiff submits that the defendants proposed defence is not meritorious and that it lacks an “air of reality”. For the reasons that follow, I agree with the plaintiff’s submissions, both primary and in the alternative, and would dismiss the defendant’s motion.
[17] The principles for setting aside a noting in default were summarized by the Court of Appeal in Intact Insurance Co. v. Kisel, 2015 ONCA 205. Per Laskin J.A., writing for the court:
[12] Rules 19.03(1) and 19.08(1) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] provide the basis for setting aside a noting of default and a default judgment, respectively. Both rules give the court discretion to set aside the default "on such terms as are just". This court has held that the tests to be met under these rules are not identical. See Metropolitan Toronto Condominium Corp. No. 706 v. Bardmore Developments Ltd. (1991), 1991 CanLII 7095 (ON CA), 3 O.R. (3d) 278, [1991] O.J. No. 717 (C.A.), at pp. 284-85 O.R.
[13] When exercising its discretion to set aside a noting of default, a court should assess "the context and factual situation" of the case: Bardmore, at p. 284 O.R. 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] O.J. No. 2378, 2007 ONCA 444, 225 O.A.C. 36, at para. 3; Flintoff v. von Anhalt, [2010] O.J. No. 4963, 2010 ONCA 786, 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, [2005] O.T.C. 891 (S.C.J.), 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 O.R.
In the Enbridge Gas Distribution Inc. v. 135 Marlee Holdings Inc., [2005] O.J. No. 4327, referred to by the Court of Appeal in Intact, Justice Ducharme held that on a motion to set aside a noting in default, the court should principally be concerned with three questions [at para. 8]:
(1) Is there believable evidence that, in the time permitted for responding to a statement of claim, the defendant had an intent to defend?
(2) What prevented the defendant from responding to the statement of claim in a timely fashion?
(3) Has the motion been brought with reasonable dispatch?
[18] The defendants in this case were at all material times aware of the plaintiff’s claim against them. This lawsuit would not have come as a surprise. The defendants defaulted on an active commercial lease agreement. They acknowledged the default at the time and received numerous demands from the plaintiff for payment of amounts outstanding in the months that followed. They acknowledge service of the statement of claim in March 2019 and were sent further demands for payment by the plaintiff in June and July 2019.
[19] In September 2019, the defendants were served with a motion record for default judgment, which put them on notice that they had been noted in default. In March 2021, they were served with another motion for default judgment as well as an endorsement from the court indicating that they had 20 days to respond, failing which the motion for default judgment would proceed without them. Despite all of these opportunities to respond and assert a defence to the plaintiff’s claims, none of the defendants indicated any intention to set aside the noting in default until May 27, 2022, when Capitin attended the return of the plaintiff’s third attempt at a motion for default judgment, more than 2 years after service of the Statement of Claim. As such, Capitan has not brought this motion “with reasonable dispatch”.
[20] Capitin has filed no evidence to explain his failure to defend the action or to explain the delay of more than 2 years to bring a motion to set aside the noting in default.[^2] The evidence on the record before me does not a support a finding that Capitin has ever held a bona fide intention to defend the plaintiff’s claims, let alone during the time permitted for responding to the statement of claim back in 2019. The fact that Capitin’s October 2021 and February 2022 filings on this motion propose such different theories of defence is telling in that regard. After receiving the plaintiff’s factum in January poking holes in the “meritorious” defence he proposed in October, he appears to abandon the October defence altogether and proposes an entirely new defence in his draft statement of defence filed in February. This “switching horses” on the theory of the defence in such a short time period is inconsistent with a consistently-held intention to defend the claim on the merits.
[21] Rather than evidencing an intention to defend the plaintiff’s claim on the merits, Capitin’s conduct in response to the statement of claim and the motions for default judgment suggests that his primary intention has been to delay and obstruct the plaintiff’s enforcement efforts. It should go without saying that enforcement delay is not a legitimate reason for seeking to set aside a noting in default.
[22] In summary, in response to the three questions posed in Enbridge, I find that the defendant, Capitin, did not have a bona fide intention to defend the claim, that there was nothing preventing him from defending the claim within the time permitted, and that he has not moved with reasonable dispatch to set aside the noting in default. I would decline to exercise my discretion to set aside the noting in default and would dismiss the defendant’s motion for those reasons alone.
[23] While I agree with the plaintiff’s submission that it is not necessary in the circumstances to consider the merits of the defendant’s proposed defence to the plaintiff’s claims, in case I am wrong, I also find that the defendant has failed to demonstrate an arguable defence on the merits. The defendant has not filed any evidence in support of either iteration of his proposed defence. This lack of evidence coupled with the defendant’s assertion of entirely different defences in October 2021 and February 2022, suggest that the defendant himself is undecided on whether his defence has merit or on which defence he might bring.
[24] In my view, the proposed statement of defence filed on this motion in February does not make out an arguable defence on its face. The allegation that the agreement is unenforceable due to some defect in signing authority is inconsistent with the defendants’ performance of the lease for almost a year prior to default. The defendants would have acquiesced in any technical signing defect by their conduct. The allegation that the guarantee is unenforceable due to the plaintiff’s failure to conduct a credit check on the defendant or collect the defendant’s financial information is of similarly questionable merit. The right to perform such checks would have been included in the agreement for the sole benefit of the plaintiff as lessor and could have been waived at the plaintiff’s sole discretion. The failure to perform such checks would not have rendered the agreement unenforceable as against the defendants.
[25] For all of these reasons, I find that it is not in the interests of justice to set aside the noting of default as against the defendant, Augusto Balderama Capitin. The defendant’s motion is dismissed.
Costs
[26] When asked for his submissions on costs of this motion, Capitin advised that he had no submissions on costs and would “abide by the court’s decision”. The plaintiff seeks partial indemnity costs if successful and has filed a costs outline calculating partial indemnity costs of the motion as $6,737.54. Those costs seem to me to be within the range of the parties’ reasonable expectations given the materials filed on the motion and the importance of the motion to the parties. The plaintiff shall have its costs on the motion, fixed at $6,737.54 inclusive of HST, payable by the defendant, Augusto Capitin, within 30 days of the release of these reasons.
D. Michael Brown, Associate Judge
Released: July 22, 2022
COURT FILE NO.: CV-19-00615205
DATE: 2022-07-21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
CLE CAPITAL INC.
Plaintiff
- and –
2593485 ONTARIO LTD., 7172842 CANADA INC., and AUGUSTO BALDERAMA CAPITIN
Defendants
REASONS
ASSOCIATE JUSTICE D. MICHAEL BROWN
Released: July 22, 2022
[^1]: The plaintiff responded to the proposed Statement of Defence with a supplementary affidavit attaching documents that it says demonstrate that the lease agreement and the guarantee were, in fact, accepted in writing by a duly authorized representative of the plaintiff. However, as I did not need to address the evidentiary basis for the proposed defence, this supplementary affidavit did not factor into my decision.
[^2]: In his oral submissions on the motion, Capitan said that he was having unspecified personal and financial difficulties in 2019 which distracted him from the litigation. These personal and financial difficulties were not included in the evidence on the record and were not even alluded to in Capitan’s written submissions on the motion, which meant the plaintiff had no notice of these submissions and no meaningful opportunity to respond. Accordingly, I gave these submissions very little weight.