COURT FILE NO.: CV-18-66552 DATE: 2024-04-12

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Gore Mutual Insurance Company Plaintiff/Respondent – and – Issa Mohammed Abdulkadir, Ahmed Ahmed and RBC General Insurance Company Defendants/Moving Party

Counsel: Jennifer Somerville, for the Plaintiff/Respondent Issa Mohammad Abdulkadir, Self-Represented/Moving Party

HEARD: November 16, 2023

JUSTICE ANTONIANI

Overview

[1] The Defendant, Issa Mohammed Abdulkadir, (the “Defendant”) has moved to set aside the default judgment obtained against him by Gore Mutual Insurance Company (the “Insurer”).

[2] The Defendant was insured by the Insurer. A car accident occurred involving the Defendant’s car. This motion comes after the litigation arising from a car accident has been concluded.

[3] At the time of the accident, the Defendant had a policy in good standing with the Insurer. After the Statement of Claim was issued, the Insurer denied coverage, took a Statutory Third Party position, and later settled the litigation.

[4] The plaintiff in the litigation assigned her rights to the Insurer, and the Insurer obtained a default judgment against the Defendant.

[5] The Defendant’s motion herein arose after the Insurer’s enforcement efforts impacted his driver’s licence.

[6] The Defendant was self represented in this motion to set aside default judgment.

Background

[7] On September 12, 2016, the Defendant’s vehicle was involved in a rear-end collision where the driver of the other vehicle was an individual named Alsop. It appears that the Defendant’s vehicle was being driven, with his consent, by his friend Ahmed Ahmed.

[8] Alsop initiated litigation against the Defendant, Issa Abdulkadir (the “Alsop” litigation). At the time of the Accident, the Defendant and his vehicle were insured by the Insurer, and the policy was in good standing.

[9] The Defendant made an initial report of the accident to the Insurer. The record shows that he advised the Insurer that he was not the driver at the time of the accident, and that his friend Ahmed Ahmed had been driving. The Defendant spoke to representatives of the Insurer on February 20, 2018 and again on April 10, 2018. I was provided no additional details of what information the Defendant provided during those calls. During the calls, the Defendant provided an email address to the Insurer and set a date for an interview. The Defendant did not attend the interview.

[10] Ahmed Ahmed was added as a defendant in the Alsop litigation and he later attended at examinations for discovery and participated in the litigation, though he did not file any defence, and was noted in default. After it resolved the Alsop litigation, the Insurer did not seek any remedy against Ahmed Ahmed.

[11] Had the Defendant responded to the numerous requests by the Insurer to cooperate with the claim investigation, the Insurer indicates that the Defendant would have had the benefit of insurance coverage for the entire amount in issue here, less any deductible.

[12] However, despite receiving numerous communications from the Insurer, it is alleged that the Defendant did not respond to the Insurer, and that he failed to cooperate in the investigation or the litigation, as was his duty under the insurance policy and the Insurance Act, R.S.O. 1990, c. I.8.

[13] The Insurer denied coverage, and took a Statutory Third Party defendant position in the litigation.

[14] The Insurer settled the litigation with Alsop by paying out $125,000 inclusive of all costs. The Insurer took an assignment of Alsop’s rights in the litigation, and in February 2023, it obtained default judgment against the Defendant.

History of the proceedings

[15] I provide below a detailed chronological history of the proceedings:

a. On April 11, 2018, the Insurer emailed the Defendant asking that he sign a non-waiver agreement, which would permit the Insurer to commence an investigation into the claim.

b. The claims representative, Jaclyn Morgan, spoke to the Defendant and emailed him following a conversation. However, Jaclyn Morgan did not obtain a new mailing address for the Defendant. Ms. Morgan also left voicemails for the Defendant on April 12, April 17, May 24, June 25, and July 27, 2018. The Defendant did not return her calls.

c. Alsop issued a statement of claim on August 24, 2018.

d. After a number of failed attempts to effect personal service on the Defendant, a court order for substituted and extended service was made on February 15, 2019. The substituted service required Alsop to mail the statement of claim to two known addresses for the Defendant, and to place a legal notice in the Hamilton Spectator (the local newspaper) for two consecutive issues. The record shows that the Defendant did not reside at either address at the time of the alternate service.

e. In 2019, the Defendant resided at 165 Queen Street South, unit 908, in Hamilton, Ontario.

f. On April 8, 2019, the Insurer sent a registered letter to the Defendant at his last known address of 165 Queen Street South, advising that they would not be providing coverage due to the Defendant’s failure to assist in the defence of the actions. This notice was mailed to the insured at the street address, but no unit number was included in the address line of the correspondence envelope.

g. On May 27, 2019, the Defendant was sent an email copy of a motion by the Insurer to be added as a Statutory Third Party in the Alsop litigation.

h. On May 28, 2019, a copy of the same motion, returnable June 4, 2019, was hand delivered to the Defendant at his last know address of 165 Queen Street South, unit 908.

i. On May 29, 2019, one day after the motion to add the Insurer as a Statutory Third Party was hand delivered to the Defendant’s girlfriend at his Queen Street South residence, the Insurer’s counsel, Jennifer Somerville, emailed the Defendant referencing a telephone call she had with the Defendant that very morning.

j. In the email, counsel offers that the Insurer’s motion to be added as a Statutory Third Party would be adjourned 30 days if the Defendant attended her office to provide a statement about the accident. The Defendant did not attend for an interview.

k. On July 4, 2019, the Insurer was appointed as a Statutory Third Party to the Alsop litigation and filed a defence in this capacity.

l. A copy of the July 4th order was served on the Defendant at 165 Queen St. South, unit 908, by regular mail and by email.

m. An amended amended statement of claim was sent to the Defendant by mail in February 2020, to his address at 165 Queen Street South, unit 908.

n. On February 23, 2020, an amended statement of defence and crossclaim was sent to the Defendant at 165 Queen Street South, unit 908, and by sending a mailed copy to that address.

o. On February 28, 2020, a copy of the statement of defence of the Insurer (as Statutory Third Party) was mailed to the Defendant at 165 Queen Street South, unit 908.

p. On December 22, 2020, a copy of an amended statement of defence and crossclaim of the Insurer (as Statutory Third Party) was mailed to the Defendant at 165 Queen Street South, unit 908, and sent to the email address he used in this motion.

q. Throughout 2019 and 2020, Jennifer Somerville, counsel for the Insurer, attempted to communicate with the Defendant by email to his current Hotmail email address. She wrote to him on May 20, 2019 and June 11, 2019 without response. She also wrote to him on April 16, April 21, April 23, April 30, and May 4, 2020, again, without response.

Settlement of the Alsop Litigation:

r. There is sworn evidence from the Defendant that he moved to a new residence in March 2022.

s. On or about August 9, 2022, the Defendant was noted in default in the Alsop action.

t. On August 15, 2022, the Insurer and other parties involved in the Alsop claim entered into minutes of settlement, wherein the Insurer paid $125,000 to Alsop. On the same date, Alsop assigned her rights in the litigation to the Insurer. An order to continue was signed the same date.

u. The Insurer obtained default judgment against the Defendant on February 2, 2023. That judgment is for the recovery of the $125,000 payment the Insurer made to Alsop plus legal costs in the amount of $29,660.37.

v. In May 2023, the Insurer commenced efforts to enforce their judgment and made an application to the department of motor vehicles. It was the impact on his driver’s licence that resulted in the Defendant bringing this motion to set aside the default judgment.

w. On June 5, 2023, the Defendant sent his motion record in the current motion to set aside the default judgment. The materials were emailed to the Insurer from the same email address that the Insurer had used in every instance referred to in the above chronology.

The Law Re Setting Aside Default Judgment

[16] The test for setting aside a default judgment was set out by the Court of Appeal in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 199 O.R. (3d) 561:

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 of Civil Procedure;

c. whether the facts establish that the defendant has an arguable defence on the merits;

d. the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff 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.

Was the motion brought promptly after the defendant learned of the default judgment?

[17] I find that the Defendant did bring his motion to set aside the default judgment promptly after he factually learned about the default judgment. By the time default judgment was obtained, the Defendant had moved to a new address.

[18] Once he prepared his motion, the Defendant had some trouble filing and uploading the documentation onto CaseLines, resulting in a couple of adjournments. Nevertheless, overall, I find that the Defendant acted promptly upon learning of the default judgment.

[19] The Defendant stated in submissions that he had no knowledge of the current litigation. I note that the new title of proceedings is Gore Mutual Insurance Company v. Abdulkadir. The Defendant would not have seen this previously. On the motion to set aside default judgment, the Defendant made the submission on the record that he did not understand how judgment was obtained against him: his insurance was in good standing and he reported the accident and advised the Insurer that he was not driving.

[20] The Defendant is self represented, and English does not appear to be his first language. On the limited record before me, and on the limited interaction I had with the Defendant during the motion, I find that it is plausible that he did not understand or appreciate some of the communications he received.

[21] Gore Mutual Insurance Company’s efforts to get the Defendant’s attention regarding the main action were substantial. As seen above, the evidence discloses numerous emails and calls over a three-year period. There can be no doubt that, at some point long before the main action was concluded, the Defendant was aware of the Alsop litigation. Whether he appreciated that his interests were not being covered by the Insurer requires a factual determination on evidence.

[22] The Defendant’s close friend, Ahmed Ahmed, a co-defendant in the Alsop litigation, attended at examinations for discovery. Ahmed Ahmed testified under oath that he had discussed the litigation with the Defendant.

Does the Defendant have an arguable defence on the merits?

[23] As a self represented litigant, the Defendant did not make any submissions about either an arguable defence on the merits either as against Alsop, or as against the Insurer. As a result, I have addressed these issues based on a review of all of the materials available to me on the motion.

[24] It is clear that the Defendant’s insurance policy was in good standing at the time of the accident.

[25] The Insurer appears to have denied coverage on the basis of Schedule 5(3) of Statutory Conditions – Automobile Insurance, O. Reg 777/93, which provides:

The insured shall, whenever requested by the insurer, aid in securing information and evidence and the attendance of any witness and shall co-operate with the insurer, except in a pecuniary way, in the defence of any action or proceeding or in the prosecution of any appeal.

[26] The Defendant could have an arguable defence if he had either a plausible factual basis for failing to participate in the claims process or the Alsop litigation, or if he had an arguable basis to claim relief from forfeiture.

[27] I find that there is no arguable defence that the Defendant could now present on the merits of the Alsop litigation. That litigation was concluded a year ago, without the benefit of his participation, and the outcome is settled. The Defendant made no suggestion to me that he takes issue with the amount that the Insurer paid to settle that litigation. His submissions in the motion were focused on the fact that he believed he was covered in that litigation by his insurance policy. As a result, I do not make this determination on the basis of any arguable defence to the Insurer’s resolution of the Alsop litigation.

[28] However, the conclusion that the Defendant has no arguable defence in the Alsop litigation does not address whether the Defendant has an arguable defence in an action brought by the Insurer. The Defendant may wish to challenge the decision to deny coverage, or he might make an application for relief from forfeiture. I have considered whether he has an arguable position in his defence of the Insurer’s action.

[29] In its motion for default judgment, the Insurer’s claim relied on its rights pursuant to section 258(13) of the Insurance Act, and Alsop’s assignment of her rights in the litigation. Section 258(13) of the Insurance Act states:

The insured shall reimburse the insurer upon demand in the amount that the insurer has paid by reason of this section and that it would not otherwise be liable to pay. [Emphasis added.]

[30] The Insurer would be obligated to show that it made payment pursuant to s. 258 of the Insurance Act, and that it would not otherwise have been liable to make that payment.

[31] Section 258(1) allows any person who has a claim against an insured, upon receiving judgment against the insured, is entitled to have insurance money payable toward the satisfaction of the judgment.

[32] In Economical Mutual Insurance Co. v. Montgomery, 2013 ONSC 6153, the Court relied on the Ontario Court of Appeal in Lockhard v. Quiroz (2006), 83 O.R. (3d) 797 (C.A.) and on State Farm Mutual Automobile Insurance Company v Mawere, 2012 ONSC 3299 to find that s. 258 only applies where the plaintiff has obtained judgment against the insured:

Any payment made in the absence of a judgment is not an amount paid “by reason of” section 258 and the insurer cannot rely on section 258(13) to seek reimbursement from its insured. In the case before me the plaintiffs did not obtain any judgment against the defendants and as such Economical cannot rely on section 258(13) to recover the payment from the defendants.

[33] In the case before me, the plaintiff in the Alsop litigation did not obtain a judgment against the Insurer. The Defendant may have an argument that the Insurer was therefore not entitled to rely on s. 258 of the Insurance Act in obtaining default judgment against him.

Relief from Forfeiture

[34] In exercising its discretion to grant relief from forfeiture, a court must consider three factors: (i) the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity between the value of the property forfeited and the damage caused by the breach: Kozel v. The Personal Insurance Company, 2014 ONCA 130, 119 O.R. (3d) 55, at paras. 30-31.

[35] Section 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides:

A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.

[36] Section 129 of the Insurance Act provides:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

[37] Relief from forfeiture seeks to prevent hardship to insured persons when they have failed to comply with a condition of their insurance contract, and where leniency in requiring strict compliance with the condition will not result in prejudice to the insurer.

[38] On a review of Insurer’s sworn materials in response to the motion to set aside default judgment, I find that the Defendant has an arguable position that he should be granted relief from forfeiture.

[39] According to the Insurer’s materials, the Defendant reported the accident, advised that Ahmed Ahmed was driving the Defendant’s vehicle with the Defendant’s consent, and had two calls with representatives of the Insurer to discuss the accident.

[40] Ahmed Ahmed participated in the litigation and admitted that he was the driver of the vehicle at the time of the accident, with the Defendant’s consent. There is no suggestion that the Defendant was present in the vehicle at the time of the accident.

[41] The Insurer’s affidavit materials on the motion for default judgment state the following:

“Should this matter proceed to a trial it is highly likely that the trier of fact will determine that Ms. Alsop was rear-ended on the date alleged by a vehicle owned by Issa and operated by Ahmed. Pursuant to Ontario law, Issa is vicariously liable for the actions of Ahmed.”

[42] This statement is another way of saying that liability was not in issue in the Alsop litigation.

[43] The relationship between the Insurer and the Defendant is not determined by the merits of the Alsop litigation. As between the Insurer and the Defendant, the question is which of them should bear the costs of the Alsop litigation.

[44] The Insurer admits that the Defendant’s policy was in good standing as of the date of the Alsop accident. It is clear that participation in the litigation was a statutory condition of the Defendant’s policy, but it is unclear how the Defendant’s breach/non participation, after he reported the accident and gave the information about the person who was driving, impacted the outcome of the Alsop litigation, given the vicarious liability.

[45] In obtaining judgment against the Defendant, the Insurer asserted that:

a. It had paid out $125,000 in the Alsop litigation, and it incurred legal costs; and

b. It denied coverage to the Defendant and took a position as a Statutory Third Party.

Statutory Third Party status does not determine the rights between the Insured and the Insurer

[46] An Insurer is entitled to be added as a Statutory Third Party when it provides a court with evidence that it has denied coverage to its insured on a policy that was in effect at the time of the accident. The addition of the Insurer as a Statutory Third party does not require a determination by a court that the denial of coverage was reasonable.

[47] In this case, the order added the Insurer as a Statutory Third Party states: “….the question of the right of the Defendant against the Statutory Third party shall not be disposed of at Trial, but after the Trial in such a manner as may be directed by the Trial Judge….”

[48] The Defendant referred to is Issa Abdulkadir. I find that the Defendant has an arguable position that the rights as between the Insurer and the Defendant must be addressed.

[49] The issue of a determination of the issues as between the Insured and the Insurer, where the Insurer obtains the status of Statutory Third party, was also addressed in Economical Mutual Insurance Co. v. Montgomery, 2013 ONSC 6153. The court discussed how Economical would go about recovering from its insured:

“Presumably coverage could be made an issue in this action either by Economical amending the statement of claim for a declaration of non-coverage and entitlement to reimbursement, or by the defendants as a defence to a judgment in favour of Economical by pleading that Economical is obliged to indemnify them for any damages paid to the original plaintiffs and is thus is disentitled to judgment. Such plea might also be made by the defendants for declaratory relief by way of counterclaim or in a third party claim under Rule 29 for indemnity under the policy.”

[50] I find that the Defendant has an arguable position that the Insurer was not entitled to recover from him under the Insurance Act, or that he has an arguable claim for relief from forfeiture, in all the circumstances and evidence available to this court on the limited record in this motion.

[51] In coming to this conclusion, I have not determined that any argument by the Defendant would be successful. The record before me was far from complete on these issues. In the context of a motion to set aside a default judgment, I am not tasked with determining the outcome of any defence, but only to determine whether an arguable defence exists, as one element for consideration in determining whether to set aside default judgment.

The Prejudice to the Parties on the outcome of this motion

[52] The prejudice to the Defendant is the payment of a significant sum of money. He is a truck driver, living in rental accommodation in downtown Hamilton, Ontario. Without the specifics of his finances, I infer that the payment of $150,000 would be a serious burden to him. The Insurer has already paid out to Alsop and that litigation has concluded. The additional prejudice to the Insurer in setting aside the default judgment is limited to the additional costs and effort involved in a continuation of the litigation. On balancing the two, I find that the prejudice to the Defendant is more substantial.

Decision

[53] On a balancing of all the considerations as directed by the Court of Appeal in Mountain View Farms Ltd., I find that the overall integrity of the administration of justice favours the moving party, and the default judgment against Issa Abdulkadir is set aside.

[54] Issa Abdulkadir shall have 45 days from the release of these decisions to file a Statement of Defence.

Costs

[50] I would urge the parties to agree on costs. If they are unable to do so, then costs submissions may be made as follows:

a. Within 15 calendar days of the distribution of these reasons to the parties, Issa Abdulkadir shall serve and file written costs submissions, not to exceed three pages, double-spaced, together with a draft bill of costs;

b. Gore Mutual shall serve and file its responding costs submissions of no more than three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers, within 25 calendar days of the distribution of these reasons; and

c. Issa Abdulkadir’s reply submissions, if any, are to be served and filed within 30 calendar days of the distribution of these reasons, and are not to exceed two pages.

d. If no submissions are received within times allocated, the parties will be deemed to have resolved the issue of the costs, and costs will not be determined by me.

Justice S. Antoniani

Released: April 12, 2024

COURT FILE NO.: CV-18-66552 DATE: 2024-04-12

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Gore Mutual Insurance Company Plaintiff/Respondent – and – Issa Mohammed Abdulkadir, Ahmed Ahmed and RBC General Insurance Company Defendants/Moving Party

REASONS FOR DECISION ON MOTION

Justice S. Antoniani

Released: April 12, 2024