Court File and Parties

COURT FILE NO.: CV-22-00686396-0000 DATE: 20241028

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Touranto (Canada) Holdings Limited v. Mark Varnam

BEFORE: Associate Justice Rappos

COUNSEL: Stephen Jackson, for the Plaintiff Mark Varnam, self-represented Defendant

HEARD: June 3, 2024 (via videoconference)

REASONS FOR DECISION

Overview

[1] The Plaintiff, Touranto (Canada) Holdings Limited, owns 29 Gervais Drive, Suite 307, in Toronto. The Defendant, Mark Varnam, is a sole proprietor who carries on business as Immigration Action Consulting Services.

[2] Mr. Varnam rented the premises from Touranto pursuant to a lease dated March 12, 2010. The lease was for a three-year term. Upon the expiry of the term, the parties entered into a month-to-month tenancy.

[3] Mr. Varnam paid the monthly rent from April 2013 through July 2019. Touranto alleges that Mr. Varnam ceased paying rent in August 2019.

[4] On September 1, 2022, Touranto commenced this proceeding, seeking payment of $72,898.56 for rental arrears prior to July 1, 2022, and $150,000 on account of damages for breach of the lease.

[5] Mr. Varnam was personally served with the statement of claim on September 12, 2022. He delivered a notice of intent to defend on September 30, 2022.

[6] Mr. Varnam was noted in default on February 27, 2023 at the request of Touranto, due to his failure to deliver a statement of defence.

[7] Touranto obtained default judgment against Mr. Varnam on June 26, 2023 in the amount of $73,721.81 plus costs. Touranto had a notice of garnishment issued on August 1, 2023.

[8] Mr. Varnam brings a motion to set aside the noting in default, the default judgment, and the garnishment. He also seeks leave to file his statement of defence and counterclaim.

[9] Mr. Varnam argues that he is entitled to the relief he is seeking. He says that he was locked out of the premises and did not have access to his office or files, which impacted his ability to prepare his statement of defence. He also has multiple disabilities that hindered his ability to prepare his statement of defence and counterclaim and move out of the premises. He believes that he has an arguable defence and counterclaim, on the basis that his immigration consulting service business was negatively impacted by the COVID-19 pandemic, and Touranto’s actions prevented him from obtaining relief through governmental programs. Mr. Varnam served his statement of defence and counterclaim by e-mail on May 1, 2023. This date was less than 2.5 months after the noting in default, and 11 days after Touranto filed a requisition for default judgment.

[10] Touranto argues that the motion should be dismissed. It believes that it provided sufficient accommodations to Mr. Varnam, including giving him over five (5) months to serve his statement of defence. Touranto believes that it exercised patience with Mr. Varnam, and given his lack of compliance and neglect with deadlines, he is not entitled to the requested relief.

[11] For the reasons set out below, I am satisfied that Mr. Varnam is entitled to the relief he is seeking and that it is in the interests of justice for the motion to be granted.

Legal Principles

[12] It is a general principle of the Rules of Civil Procedure that they are to be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. [1] In applying the Rules, the Court is required to make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. [2]

[13] Subrule 19.03(1) of the Rules provides that a noting of default may be set aside by the Court on such terms as are just. A noting of default can be deemed to have been set aside if the defendant delivers a statement of defence with the consent of the plaintiff. [3]

[14] Subrule 19.08(1) provides that a judgment against a defendant who has been noted in default that is signed by the registrar may be set aside or varied by the Court on such terms as are just. If the default judgment is set aside, the Court may also set aside the noting of default. [4]

[15] A decision to set aside a default judgment is a discretionary one. [5] The Court’s ultimate task on a motion to set aside a default judgment is to determine whether the interests of justice favour granting the order. [6] The Court must consider the following five factors:

(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; (c) whether the facts establish that the defendant has an arguable defence on the merits; (d) 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 (e) the effect of any order the court might make on the overall integrity of the administration of justice. [7]

[16] These factors are not to be treated as rigid rules. The Court must consider the particular circumstances of the case to decide whether it is just to relieve the defendant from the consequences of his default. [8]

[17] For example, the presence of an arguable defence on the merits may justify the Court exercising its discretion to set aside the default judgment, even if the other factors are unsatisfied in whole or in part. In showing a defence on the merits, the defendant is not required to show that the defence will inevitably succeed. He only must show that his defence has an air of reality, [9] which means that the defence must be tenable in law and the defendant must lead some evidence to demonstrate that it is not devoid of factual and/or legal foundation. [10]

Analysis

Did Mr. Varnam promptly bring his motion after he learned of the default judgment?

[18] Default judgment was signed by the registrar and is dated June 26, 2023. It is not clear from the record when Mr. Varnam first learned about the default judgment. Mr. Varnam’s affidavit includes as an exhibit a letter from Touranto’s counsel dated August 16, 2023, which includes a copy of an issued notice of garnishment and a copy of the default judgment. Mr. Varnam does not say when he received the letter. Touranto’s materials do not indicate when this letter was sent out.

[19] Based on this evidence, I find that the earliest Mr. Varnam learned of the default judgment is August 16, 2023.

[20] Neither party sets out when Mr. Varnam first began to take steps to set aside the default judgment. The court record shows that Mr. Varnam submitted a requisition to attend CPC dated February 2, 2024 to discuss bringing a motion to set aside the default judgment. The parties appeared at CPC on February 13, 2024, where Justice Akazaki traversed the motion to be heard by an associate judge.

[21] As a result, there was a 5.5-month period between when Mr. Varnam learned about the default judgment and when he filed a requisition to attend at CPC.

[22] Touranto does not take issue with this period of time in either its written or oral submissions.

[23] In the circumstances, I find that Mr. Varnam promptly brought his motion after he learned about the default judgment.

Does Mr. Varnam have a plausible excuse or explanation for his default in complying with the Rules of Civil Procedure?

[24] Mr. Varnam was served with the statement of claim on September 12, 2022. He delivered a notice of intent to defend on September 30, 2022, and requested an extra 30 days as an indulgence. A strict application of the Rules required Mr. Varnam to deliver his statement of defence by October 12, 2022. [11]

[25] Mr. Varnam has produced numerous e-mails he exchanged with counsel to Touranto regarding the delivery of his statement of defence. Mr. Varnam says that he was unable to comply with the Rules in delivering his statement of defence because:

(a) He was locked out of the premises on August 17, 2022. Because of this, he did not have access to his hardcopy files and business documents. He regained access on October 19, 2022, at which time he discovered that his computer was no longer working and had been sabotaged. (b) He is self-represented as he is unable to afford a lawyer. As a result, he had to learn the Rules of Civil Procedure and prepare legal documents, which has been very difficult and time consuming. He received some advice and guidance from Pro Bono Ontario, which he says is often difficult to access. As a result, he had to make several amendments and revisions to his statement of defence and counterclaim. (c) He is 70 and has multiple disabilities that impacted his ability to prepare his statement of defence and counterclaim, including chronic pain, fibromyalgia, glaucoma, osteoarthritis, carpal tunnel syndrome, and chronic pain depression. He is unable to afford physical therapy. He also contracted COVID-19 virus in January 2023 for a second time. (d) He is a regulated immigration consultant, and his business was negatively impacted by the pandemic. He was required to devote time and energy to deal with his business and professional obligations, which included taking a course to complete a hearings specialization requirement in order to appear before the Immigration and Refugee Board of Canada. (e) He had to deal with requests from Touranto to remove his belongings and vacate the premises by February 2023, which created undue hardship and stress. (f) Once he learned that he had been noted in default on February 28, 2023, and that Touranto would not consent to setting it aside, he had to focus on preparing a motion to set aside the noting in default.

[26] Additionally, on February 12, 2023, Mr. Varnam asked for an additional two weeks to prepare his defence. On February 15, 2023, Mr. Varnam suggested that the parties schedule a case conference to deal with these procedural matters. On February 28, 2023, Mr. Varnam asked for an additional 7-10 days. In response, Touranto’s counsel informed Mr. Varnam that he had been noted in default and that he had instructions to obtain default judgment.

[27] On March 3, 2023, Mr. Varnam reiterated his intent to file a defence, asked for the noting in default to be set aside, and that he would file his defence within 10 days. Mr. Varnam indicated that he would have to bring a motion if Touranto did not consent, which would further delay the matter. Mr. Varnam delivered his statement of defence and counterclaim to counsel to Touranto via e-mail on May 1, 2023.

[28] Touranto argues that it was patient with Mr. Varnam and provided him with numerous indulgences to complete his defence. Mr. Varnam had 5.5 months to deliver a defence to the claim, and he failed to do so. Touranto believes that it provided appropriate accommodations and Mr. Varnam has failed to provide any reasonable explanation for the default.

[29] I do not accept these submissions.

[30] I believe that Mr. Varnam has provided sufficient explanation for his default in delivering a defence. The record shows that Mr. Varnam regularly informed Touranto’s counsel of the difficulties he was facing as a self-represented litigant, and that he intended to defend the claim. He has provided a hospital record that confirms his COVID-19 diagnosis in January 2023. Mr. Varnam informed Touranto’s counsel of the diagnosis that he had been prescribed antiviral medication because of his age and prior history with the virus. He has numerous disabilities that impact his energy levels. He was locked out of the premises for a 2-month period, and then was required to move out of the premises under threat of a bailiff removing his belongings.

[31] While I recognize that it took Mr. Varnam over 7.5 months to deliver a statement of defence and counterclaim, given the circumstances he was facing, I believe he has a plausible explanation for his default.

Do the facts establish that Mr. Varnam has an arguable defence on the merits?

[32] In its Statement of Claim, Touranto sought payment of $72,898.56 for rental arrears prior to July 1, 2022. Schedule “A” to the claim includes listings of monthly invoices dated August 2019 through July 2022. The default judgment amount was $73,721.81 plus costs.

[33] Mr. Varnam submits that he has an arguable defence.

[34] In addition to his affidavits, I have reviewed Mr. Varnam’s statement of defence and counterclaim dated December 18, 2023, which replaced the earlier version he delivered as that version had been rejected by the court staff due to formatting issues.

[35] First, he alleges that he paid rent for certain of the months Touranto claimed he had failed to do so. He has produced a statement dated June 6, 2021 from Touranto that shows a payment of $1,000 on September 2019, and three payments of $2,024.96 on January 20, 2020, and $4,049.92 on March 6, 2020. He has produced copies of cheques for each of these payments other than the $1,000 payment.

[36] Mr. Varnam also has produced documentation that he was found eligible for the Canada Emergency Rent Subsidy. He has included a copy of cheque payable to Touranto dated September 17, 2021 in the amount of $1,335.14, and a bank draft payable to Touranto dated December 13, 2021 in the amount of $1,058.34.

[37] Payment of these amounts were not reflected in the amount of the default judgment. Touranto has not denied receiving these amounts.

[38] Mr. Varnam alleges that his inability to pay rent to Touranto was due, in part, to Touranto’s lack of co-operation and support for Mr. Varnam applications for a CEBA loan and other financial assistance. Mr. Varnam claims that Touranto failed to provide him with copies of rental invoices, which were required for his application. He believes that had Touranto provided the invoices, he could have obtained a $60,000 CEBA loan. Mr. Varnam has produced emails he received from the government that indicates that, in part, his applications were rejected due to the failure to produce rental invoiced.

[39] Mr. Varnam has commenced a counterclaim for $550,000 for negligence, breach of duty of honest contractual performance, breach of contract and wrongful conduct, and for the disruption and displacement of Mr. Varnam’s business. Mr. Varnam claims that the lease was improperly terminated, and he was unfairly locked out of the premises. He also alleges that Touranto incorrectly issued a notice of distress in August 2022 after they claimed to have terminated the tenancy in September 2021. Mr. Varnam claims that Touranto breached the lease through failures to provide proper maintenance, repairs and electrical support. He has produced copies of correspondence with the property manager regarding the state of the premises, and has included pictures of the unit.

[40] The law is clear that I do not need to be convinced that the defence will inevitably succeed. Mr. Varnam only must show that his defence has an air of reality. In my view, he has done so. The actual quantum of rent that was in arrears is clearly at issue, given the evidence Mr. Varnam has tendered for this motion. As well, Mr. Varnam has put forward sufficient evidence to satisfy me that he has a tenable defence regarding the apparent failure of Touranto to mitigate its losses through providing Mr. Varnam with the requested documentation to assist in his applications for pandemic related governmental programs. Lastly, Mr. Varnam has satisfied me that he has a tenable counterclaim regarding whether Touranto satisfied its obligations under the lease concerning the state of the premises, whether Touranto’s enforcement steps in terminating the lease and then issuing a notice of distress were improper, and whether Touranto breached the organizing principle of Canadian common law of good faith contractual performance in its interactions with Mr. Varnam.

[41] As a result, I find that Mr. Varnam has an arguable defence on its merits.

What is the potential prejudice to Mr. Varnam should the motion be dismissed, and the potential prejudice to Touranto should the motion be allowed?

[42] If I dismiss Mr. Varnam’s motion, he will be prejudiced by having to satisfy a judgment that he says is in an incorrect amount and that he believes he has a valid defence against. If the motion is granted, Touranto will be prejudiced by having to continue on with this litigation.

[43] In my view, having this case determined on its merits is the appropriate course of action, and the prejudice to be faced by Mr. Varnam if the motion is not granted outweighs the prejudice that will be suffered by Touranto if it is required to continue with this action.

What effect, if any, would the Court order have on the overall integrity of the administration of justice

[44] This case involves a represented plaintiff dealing with a self-represented litigant. As officers of the court, lawyers have a duty to assist both self-represented litigants and the Court in order to ensure that justice is not only done but is seen to be done. [12]

[45] Where counsel is opposite a self-represented litigant, they should not attempt to derive benefit for their client from the fact that the opposing litigant is self-represented. Counsel must also be aware of their duty to the Court in considering reasonable requests for adjournments or waivers of procedural formalities when there is no real prejudice to their client’s rights or interests. [13]

[46] It is the law of this Province that 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. Opposing counsel typically consents to such relief as a matter of professional courtesy. [14]

[47] I echo the following words of Justice Myers: “Default proceedings…are not to be used for tactical purposes. When counsel are involved for both sides and are having a disagreement about pleadings, timing, or otherwise, it is not appropriate to take default proceedings to enforce the plaintiff’s position… If counsel have a disagreement on process matters that they cannot sort out themselves despite reasonable efforts and compromise, a case conference is available under Rule 50.13 (1) … Using the default judgment rules for tactual advantage just sets the parties down the path of unnecessary motions to set aside the default. This is the opposite of ensuring the efficient, affordable, and fair resolution of the civil dispute on the merits.” [15]

[48] In my view, how this case has transpired to date was largely influenced by the fact that Mr. Varnam is self-represented.

[49] Mr. Varnam regularly made it clear to Touranto’s counsel that he intended to defend this action. Before he was noted in default, Mr. Varnam suggested that the parties attend a case conference. Touranto’s counsel did not respond to this suggestion. Immediately upon being advised that he had been noted in default, Mr. Varnam told counsel that he intended to bring a motion to set it aside. Mr. Varnam delivered a statement of defence and counterclaim on May 1, 2023. At that time, default judgment had not been issued, as the requisition had only been filed on April 20, 2023. It was open for Touranto to consent to the delivery of the statement of defence and counterclaim, and consent to the setting aside of the noting in default and judgment. Terms could have been discussed. Touranto did not choose this course of action.

[50] In my view, the steps taken by Touranto were done for tactical purposes, and it is unlikely that the steps would have been the same of Mr. Varnam had a lawyer representing him. I believe that it is important for the administration of justice that there be confirmation from this Court that self-represented litigants are entitled to the same procedural rights that represented parties have, and that counsel dealing with self-represented litigants must extend to them the same courtesies that would have been offered to represented parties.

Disposition and Costs

[51] For the reasons set out above, Mr. Varnam’s motion is hereby granted. The noting in default, default judgment and notice of garnishment are hereby set aside. Any funds recovered by Touranto from the notice of garnishment shall be returned to Mr. Varnam. Mr. Varnam shall have until November 15, 2024 to serve and file his statement of defence and counterclaim.

[52] With respect to cost submissions, they shall be no more than five pages in length, together with a Bill of Costs. They shall be served and sent to my Assistant Trial Coordinator Kimi Sharma by e-mail. Mr. Varnam shall serve his costs submissions by November 8, 2024. Touranto shall serve its costs submissions by November 20, 2024.

[53] As Mr. Varnam is self-represented, I expect costs submission to address the restrictions on costs available to self-represented litigants as set out by the Court of Appeal in cases such as Girao v. Cunningham [16] and Benarroch v. Fred Tayar & Associates P.C. [17]

Associate Justice Rappos

DATE: October 28, 2024

[1] Subrule 1.04(1), Rules of Civil Procedure. [2] Subrule 1.04(1.1), Rules of Civil Procedure. [3] Subrule 19.03(2), Rules of Civil Procedure. [4] Subrule 19.08(3), Rules of Civil Procedure. [5] Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 [“Mountain View”], para. 55. [6] Mountain View, para. 47. [7] Mountain View, paras. 48 and 49. [8] Mountain View, para. 50. [9] Mountain View, para. 51. [10] Long Term Recovery Ltd. v. Bolden, 2018 ONSC 4918, para. 27. [11] Subrules 18.01 and 18.02, Rules of Civil Procedure. [12] Grand River Conservation Authority v. Ramdas, 2021 ONCA 815 [“Grand River”], para. 22. [13] Grand River, para. 23. [14] Nobosoft Corporation v. No Borders, Inc., 2007 ONCA 444, para. 7, citing with approval McNeill Electronics Ltd. v. American Sensors Electronics Inc. (1996), 5 C.P.C. (4th) 266 (Ont. Gen. Div.), para. 2. [15] Strathmillan Financial Limited v. Teti, 2021 ONSC 7603, paras. 1-5. [16] 2021 ONCA 18. [17] 2019 ONCA 228.