Court File and Parties

COURT FILE NO.: CV-21-00658708-0000 MOTION HEARD: 20220815 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BRIDGEPOINT FINANCIAL SERVICES LIMITED PARTNERSHIP I et al, defendants to counterclaim/moving parties AND: SERGIO GRILLONE and GRILLONE LAW FIRM, plaintiffs by counterclaim/responding parties

BEFORE: Associate Justice R. Frank

COUNSEL: Vanessa De Sousa for the plaintiff and defendants to counterclaim/moving parties Sergio Grillone for the plaintiffs by counterclaim/responding parties

HEARD: August 15, 2022

ENDORSEMENT

[1] This is a motion by the defendants to the counterclaim, BridgePoint Financial Services Limited Partnership I (“BPLP”) and BridgePoint Financial Services Inc. (“BPFS”) (collectively “BridgePoint”) for an order setting aside the noting in default of BridgePoint in the counterclaim.

[2] This action was commenced by statement of claim issued on March 12, 2021. The Defendant, Sergio Grillone (“Mr. Grillone”), is a plaintiff-side personal injury lawyer. He carried on business under the business name “Grillone Law Firm”, and he is the general partner of a limited liability partnership called Grillone Bekiaris LLP. Mr. Grillone is representing the defendants/plaintiffs by counterclaim in this action.

[3] In May 2019, Mr. Grillone went on medical leave from the practice of law. In September 2019, Mr. Grillone voluntarily agreed to execute an undertaking with the Law Society of Ontario not to practice law, which undertaking remains in place.

[4] The statement of claim alleges that the defendants are liable to the plaintiff, BPLP, in the amount of $1,697,582.74, plus interest and costs.

[5] In May 2021, the defendants served a statement of defence and counterclaim. The counterclaim named 27 parties as defendants, including BridgePoint. The counterclaim sought, among other things special, general, and punitive and aggravated damages for breach of privacy, abuse of process, conspiracy, breach of fiduciary duty, unjust enrichment, negligence and interference with contractual relations, defamation, and negligent and intentional misrepresentation, for a total of $34.5 million in pecuniary damages. The counterclaim also sought the appointment of a receiver, a tracing order, assorted declaratory relief, security for costs, and other relief.

[6] Miller Thomson LLP became counsel for the plaintiff in May 2022. Mr. Eric Sherkin (“Mr. Sherkin”) has had primary carriage of this action on behalf of the plaintiff since that time.

[7] Represented by Mr. Sherkin, most (but not all) of the defendants to the counterclaim brought a motion to strike the counterclaim on grounds that it did not disclose a reasonable cause of action as against the moving parties (the “Motion to Strike”). Mr. Sherkin served the motion record for the Motion to Strike on Mr. Grillone on August 16, 2021, and the Motion to Strike was scheduled for a full day hearing on January 13, 2022.

[8] The parties agreed to a timetable for steps leading up to the hearing of the Motion to Strike. The moving parties’ factum was served on Mr. Grillone on September 22, 2021 in accordance with the timetable.

[9] In late October 2021, Mr. Grillone retained Matthew Moloci (“Mr. Moloci”) of Scarfone Hawkins LLP on a “limited retainer basis” to deal with the Motion to Strike. Mr. Moloci advised Mr. Sherkin that the plaintiffs by counterclaim intended to amend their pleading to “remove much of what is the subject matter” of the Motion to Strike.

[10] The agreed-upon deadline for delivery of the responding materials on the Motion to Strike passed. Mr. Sherkin followed up with Mr. Moloci on multiple occasions throughout November 2021 with respect to the delivery of the responding materials, both prior to and after the agreed‑upon deadline. The responding materials were ultimately served two weeks beyond the agreed‑upon deadline.

[11] The parties reached a negotiated resolution of the Motion to Strike in January 2022 and obtained a consent order striking the original statement of defence and counterclaim and granting leave to amend. The pleading was amended, and the fresh as amended statement of defence and counterclaim seeks $10 million in general damages and $500,000 in punitive damages, certain declaratory relief, interest and costs.

[12] Mr. Moloci’s office sent the issued fresh as amended statement of defence and counterclaim to Mr. Sherkin on February 15, 2022 and asked Mr. Sherkin to “Please confirm acceptance of service on behalf of your clients, BridgePoint Financial Services Limited Partnership 1 and BridgePoint Financial Services Inc. by reply email.” On February 17, 2022, Mr. Sherkin sent a reply email confirmed acceptance of service of the fresh as amended statement of defence and counterclaim.

[13] Including this action, Mr. Sherkin currently has six open litigation files on behalf of BridgePoint that involve Mr. Grillone and/or Grillone Law Firm and/or Grillone Bekiaris LLP in some manner. Two matters involving Mr. Grillone and BridgePoint were scheduled for a full-day application hearing together on April 13, 2022.

[14] On February 11, 2022, prior to service of the fresh as amended statement of defence and counterclaim, Mr. Grillone emailed Mr. Sherkin, advising that Grillone Bekiaris LLP would be seeking summary judgment in this action as well as another action involving BPLP as plaintiff, and Grillone, Grillone Law Firm and Grillone Bekiaris LLP, as defendants (the “Lending Action”). Mr. Grillone and Mr. Sherkin attended at Civil Practice Court on March 9, 2022 with respect to Mr. Grillone’s proposed motion for summary judgment (the “Motion for Summary Judgment”). At that attendance, Myers J. declined to schedule the Motion for Summary Judgment on the basis that it would be seeking partial summary judgment and would create a “risk of overlap and inconsistent verdicts”. There is no evidence that the timing for delivery of BridgePoint’s defence to the counterclaim was raised during the attendance before Justice Myers.

[15] Following the Civil Practice Court date on March 9, 2022, Mr. Grillone emailed Mr. Sherkin asking when he could expect the defence to the counterclaim in this action. Mr. Sherkin responded that he would deliver the defence by the end of the month, i.e. by the end of March 2022. Mr. Sherkin’s evidence is that he inadvertently filed these e-mails in his online folder for the Lending Action rather than this action. As well, Mr. Sherkin acknowledges that he failed to diarize the deadline for the delivery of a defence to the counterclaim as he ordinarily would do.

[16] BridgePoint did not deliver its defence to the counterclaim by the end of March 2022. Mr. Sherkin’s evidence is that he inadvertently missed the “end of March 2022” deadline for doing so.

[17] Without any further notice to Mr. Sherkin about BridgePoint’s failure to deliver a defence to the counterclaim, Mr. Grillone filed a requisition dated April 8, 2022 to note BridgePoint in default in the counterclaim, and the Registrar noted BridgePoint in default on April 11, 2022.

[18] Mr. Sherkin served BridgePoint’s reply and defence to counterclaim on Mr. Grillone on May 4, 2022. Upon attempting to file the reply and defence to counterclaim, Mr. Sherkin was advised by his process server that BridgePoint had been noted in default on April 11, 2022.

[19] Mr. Sherkin emailed Mr. Grillone when he learned that BridgePoint had been noted in default, requesting his consent to set it aside. When Mr. Grillone refused to consent, BridgePoint sought and obtained an urgent date for this motion. The motion was scheduled for August 15, 2022, and the moving parties served their motion record by May 30, 2022 in accordance with a timetable agreed to between Mr. Grillone and Mr. Sherkin.

LAW AND ANALYSIS

[20] The issue to be determined on this motion is whether the Court should use its discretion to set aside the noting in default of BridgePoint (BPLP and BPFS) and permit them to deliver a defence to the counterclaim.

[21] The law on setting aside a noting in default is well‑settled. Pursuant to Rule 19.03(1) of the Rules of Civil Procedure, “the noting in default may be set aside by the court on such terms as are just.” The Court of Appeal has described the key applicable principles as follows:

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. 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 (Ont. C.A.), at para. 3; Flintoff v. von Anhalt, 2010 ONCA 786, [2010] O.J. No. 4963 (Ont. C.A.), 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 (Ont. 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.[^1]

[22] As set out in Economical Mutual Insurance Co. v. Montgomery, in hearing a motion to set aside a noting in default, the Court should be concerned principally with the answers to three questions:

a. Is there believable evidence that, in the time permitted for responding to a statement of claim, the defendant had an intent to defend?

b. What prevented the defendant from responding to the statement of claim in a timely fashion?

c. Has the motion been brought with reasonable dispatch?[^2]

[23] The case law recognizes that the threshold for setting aside a noting in default is low,[^3] and the Court of Appeal has noted the importance of having disputes resolved on their merits:

We agree with the observations of Molloy J. of the Superior Court of Justice at para. 2 of McNeill Electronics Ltd. v. American Sensors Electronics Inc. (1996), 5 C.P.C. (4th) 266 (Ont. Gen. Div.), reversed on other grounds (1998), 1998 CanLII 17693 (ON CA), 108 O.A.C. 257 (C.A.):

Motions to extend the time for delivery of pleadings and to relieve against defaults are frequently made and are typically granted on an almost routine basis. Usually opposing counsel will consent to such relief as a matter of professional courtesy. Where there is opposition to a motion of this kind, it is usually related to additional terms which are sought as a condition to the indulgence being granted or to issues of costs...It is not in the interests of justice to strike pleadings or grant judgments based solely on technical defaults. Rather, the Court will always strive to see that issues between litigants are resolved on their merits whenever that can be done with fairness to the parties.[^4]

[24] Mr. Grillone concedes that the moving parties acted without delay in bringing this motion. However, he submits that the defendants to the counterclaim have failed to demonstrate their intention to defend the counterclaim in the time permitted for responding. While Mr. Grillone initially submitted at the hearing of the motion that the respondents would suffer prejudice if the noting in default is set aside, there is no evidence of prejudice to the responding parties and Mr. Grillone did not pursue this argument.

[25] BridgePoint submits that it has always shown an intent to defend the counterclaim. It points to the evidence that the late delivery of the responding pleading was caused by inadvertence and that BridgePoint’s intention to defend is clear from the conduct of the parties, as described above.

[26] Mr. Grillone takes issue with the fact that the moving parties’ evidence is from Mr. Sherkin rather than a representative of BridgePoint. In this regard, he relies on Ferreira v. Cardenas[^5] as support for his argument that it is not appropriate for the moving parties to rely on a lawyer’s affidavit in support of their motion. I do not agree. As Myers J. noted in Ferreira:

[15] Some procedural motions turn on evidence that counsel is uniquely situated to provide. For example, a motion for dismissal for delay under rule 24.01 or a motion to amend a timetable under rule 3.04 will turn on facts concerning how the litigation has progressed or the reasons why it may not have progressed for a period of time. Counsel, rather than clients, are often best suited to have personal knowledge of these types of facts. Similarly, if the conduct of counsel is the subject matter of a proceeding, such as a motion for costs under rule 57.07 or more a motion brought to compel undertakings under rule 34.15, then, once again, counsel will likely be best suited to provide firsthand evidence of relevant facts.[^6]

[27] In the current circumstances, BridgePoint was represented by counsel at all material times, and Mr. Sherkin is best placed to provide the supporting evidence for this procedural motion in which the conduct of counsel is clearly relevant.

[28] Mr. Grillone also argues that BridgePoint’s intention should be considered in light of the fact that it failed to deliver its responding pleading twice – first by March 7, 2022 and then again by the end of March 2022. Mr. Grillone submits that BridgePoint’s intention to defend during each of those periods is relevant. In this regard, Mr. Grillone submits that March 7, 2022 was the first deadline for delivery of a defence to a counterclaim, and he calculates that date by counting 20 days from February 15, 2022, the date on which the fresh as amended statement of defence and counterclaim was sent to Mr. Sherkin. However, the evidence is that Mr. Sherkin confirmed that he accepted service of the fresh as amended pleading on February 17, 2022, which would make the deadline for delivery of a responding pleading March 9, 2022, at least as it relates to BPFS, which was only added to the proceedings as a defendant to the counterclaim. In any event, I find that even if there were a deadline for BPLP (or both defendants to the counterclaim) to have delivered a responding pleading by March 7, 2022, the default would have been a waived and the deadline would have been reset as a result of the email correspondence between Mr. Grillone and Mr. Sherkin. More specifically, on March 9, 2022, Mr. Grillone emailed Mr. Sherkin to inquire about the timing for delivery of BridgePoint’s responding pleading and Mr. Sherkin responded that the responding pleading would be delivered by the end of March 2022.

[29] I find that BridgePoint has demonstrated that it had an intent to defendant the counterclaim at all material times. In this regard, I am mindful of the overall context and factual situation, including the conduct of the parties. Of note is Mr. Sherkin’s March 9, 2022 email response, referred to above, confirming that BridgePoint intended to defend the counterclaim. From that point forward, the relevant context includes the following:

a. Mr. Sherkin’s inadvertent misfiling of his email advising that a responding pleading would be delivered by the end of March 2022; b. Mr. Sherkin’s inadvertent failure to diarize the deadline for pleading contrary to his normal practice; c. the fact that Mr. Sherkin was retained to deal with numerous matters on behalf of BridgePoint that involved Mr. Grillone or parties related to him; d. the Motion to Strike; e. Mr. Grillone’s proposed Motion for Summary Judgment in this action and the Lending Action, and the attendance at Civil Practice Court on March 9, 2022 with respect to that proposed motion; and f. an email exchange between Mr. Grillone and Mr. Sherkin with respect to the steps that could be taken to move this action forward, including the preparation of a joint discovery plan and the exchange of affidavits of documents.

[30] Mr. Grillone submits that Mr. Sherkin has acknowledged that BridgePoint could have filed a defence but did not do so. This is of no moment. It is regularly the case that a party noted in default could have pleaded but failed to do so. As noted above, the key questions include whether the failure is properly explained, whether the party in default has moved promptly to correct the failure, and whether setting aside the noting in default would cause prejudice. In this case, the facts and events leading up to and following the noting in default are unique. They support BridgePoint’s submission that it had an intention to defend the counterclaim and they are entirely consistent with the explanation that the failure to do so was caused through inadvertence. The only prejudice that comes into play is the prejudice to BridgePoint that would result if the noting in default is not set aside and the moving parties are unable to defend the counterclaim on its merits.

[31] On the issue of intention, Mr. Grillone also submits that the moving parties cannot meet the onus of showing that BridgePoint intended to deliver a responding pleading given that the issued fresh as amended statement of defence and counterclaim was not forwarded to BridgePoint’s in-house counsel before the noting in default occurred. Essentially, Mr. Grillone argues that a party cannot manifest an intention to respond to a pleading that it has not even seen. I do not accept this argument. The fuller context of these proceedings includes the fact that BridgePoint is a defendant to a counterclaim (rather than a defendant in an action in respect of which it has not previously pleaded or participated). More pertinent is the fact that BridgePoint and its in-house counsel had seen the original statement of defence and counterclaim, were aware of the Motion to Strike, and had been provided with a draft of the fresh as amended statement of defence and counterclaim in connection with the settlement of the Motion to Strike that resulted in a consent order striking the original defence and counterclaim and granting leave to amend.

[32] Both parties made submissions with respect to the fact that following BridgePoint’s failure to deliver a responding pleading by March 9, 2022, Mr. Grillone did not provide any prior notice of an intention to note BridgePoint in default. The moving parties acknowledge that Mr. Grillone had no strict obligation to warn them of such an intention but submit that this conduct is relevant in the context of the overall conduct of the parties, including past failures by Mr. Grillone and Mr. Moloci to meet agreed-upon deadlines for various proceedings in this action, including the timetable for this motion. Considering the factual circumstances of this motion, I find that the noting in default without any prior notice of an intention to do so, or an opportunity for BridgePoint to cure the default, is an additional, relevant factor that weighs in favour of exercising my discretion to set aside the noting in default.

[33] In summary, I find that the moving parties have demonstrated an intention at the relevant time to deliver a responding pleading in the counterclaim. Given the complexity and value of the counterclaim, pleadings and discovery will be necessary to properly adjudicate the claims on their merits, and this is another factor that weighs in favour of an order setting aside the noting in default.[^7] In the result, I find that it would not be in the interests of justice for the counterclaim to be determined based solely on a technical default. Rather, it is appropriate for me to exercise my discretion to set aside the noting in default in order to allow the issues to be resolved on their merits.[^8]

DISPOSITION

[34] For the reasons outlined above, I order that the April 11, 2022 noting in default by the Registrar of BridgePoint Financial Services Limited Partnership I and BridgePoint Financial Services Inc., defendants to the counterclaim, is set aside.

[35] In terms of costs, the parties agreed that the successful party should be awarded costs in the amount of $6,000. As BridgePoint was successful on this motion, I order that Mr. Grillone pay to the moving parties $6,000, inclusive of disbursements and taxes, within 30 days.

R. Frank Associate J.

Date: August 19, 2022

[^1]: Intact Insurance Co v Kisel (“Intact”), 2015 ONCA 205 at para 13

[^2]: Economical Mutual Insurance Co. v. Montgomery (“Montgomery”), 2013 ONSC 6153 at para 55

[^3]: Westcott v. Khan, 2021 ONSC 1396 (“Westcott “) at para 21

[^4]: Nobosoft Corp v No Borders Inc (“Nobosoft”), 2007 ONCA 444 at para 7

[^5]: Ferreira v. Cardenas (“Ferreira”), 2014 ONSC 7119

[^6]: Ferreira at para 15

[^7]: See Intact at para 13 and Westcott at para 51

[^8]: Nobosoft at para 7