Endorsement

Introduction

Court File No.: CV-21-309
Date: 2025-02-05
Superior Court of Justice – Ontario

Re: Bowmanville Lakebreeze West Village Ltd., Plaintiff
And: Rokulan Thangavel and Anojan Thangavel, Defendants

Before: Justice C. Boswell

Counsel:
Ankush Sondhi for the Plaintiff
Ian J. Perry and Julian Shephard for the Defendants

Heard: January 10, 2025

Background

[1] The defendants move for a variety of relief including an order setting aside a default judgment obtained by the plaintiff on October 28, 2021.

[2] The motion was on a running list of long motions in the Central East Region. It was called for a hearing during the January 2025 Civil Trial Sittings in Newmarket. When called, the plaintiff’s counsel initially indicated an intention to ask for an adjournment on the basis that he was out of the country on holiday with his family. He nevertheless appeared at the motion on January 10, 2025 and indicated that he was prepared to proceed. The court pointed out to counsel that no material had been filed on the motion by the plaintiff, by way of uploading the material to Case Centre. The plaintiff’s counsel was nevertheless prepared to argue the motion. I heard counsel’s submissions on that basis.

[3] I subsequently observed that the plaintiff’s counsel uploaded a Responding Motion Record and Factum to Case Centre a week after the motion was argued. I have not considered that material in preparing this endorsement because it was not before the court at the time the motion was argued.

The Background

[4] The background circumstances to the motion, while somewhat complicated, can be relatively briefly described.

[5] The defendant brothers purchased a home to be constructed by the plaintiff in a subdivision in Bowmanville (the “Property”). The purchase was financed, in part, by a first mortgage with a bank and a $500,000 vendor take-back mortgage (the “VTB”) with the plaintiff. The defendants discovered a number of construction defects after they moved into the Property. The plaintiff undertook remedial work. The defendants moved out of the Property while the work was being done.

[6] The defendants eventually defaulted on the VTB. The plaintiff issued a Statement of Claim on February 16, 2021 seeking possession of the Property as well as payment of $572,691.16 allegedly owing on the VTB as of February 8, 2021, together with interest at the rate of 18%.

[7] The plaintiff’s process server attempted to serve the claim on the defendants at the Property on February 17, 2021. The attempt was unsuccessful, which is not surprising because the defendants were no longer living at the Property.

[8] In any event, the process server left a business card on the door to the Property. The defendant, Rokulan Thangavel, called the process server some time after February 17, 2021. The process server’s affidavit of service is not clear about the specific date and time of that call. Mr. Thangavel advised the process server to mail the claim to the Property. The plaintiff’s lawyer, Mr. Sondhi, subsequently called Rokulan Thangavel and they discussed the claim and the plaintiff’s attempts to serve it. Mr. Thangavel advised that he would not accept service of the claim.

[9] The plaintiff subsequently obtained an order for substitute service. I have not been provided with a copy of that order, so I do not know when it was obtained. It apparently provided for service of the claim by delivering it in some form to the Property.

[10] The defendants did not respond to the claim. The plaintiff obtained default judgment on October 28, 2021. Oddly, the motion record to set aside the default judgment does not include a copy of the judgment sought to be set aside. I am unsure, in the circumstances, what the specific terms of the judgment are. Given the nature of the relief sought, it presumably provides for possession and payment of the amount claimed as owing on the VTB.

[11] After obtaining default judgment, the plaintiff commenced power of sale proceedings under the mortgage in an effort to recover the amount outstanding on the VTB. The sale proceedings were commenced by a Notice of Sale dated December 23, 2021.

[12] Rokulan Thangavel deposed, in an affidavit sworn May 28, 2022, that he attended at the Property on March 3, 2022 to check on the state of the repairs. At that time, he said, he discovered a writ of possession and the Notice of Sale taped to the front door. He said he referred them to his lawyer, Mr. Perry.

[13] Mr. Perry contacted Mr. Sondhi on March 3, 2022 and advised that the defendants intended to resolve the matter in a timely way. Mr. Sondhi forwarded to Mr. Perry a copy of the Notice of Sale and the default judgment. There followed a period of negotiation in an attempt to resolve the outstanding balance owing to the plaintiff so that the defendants might redeem the Property.

[14] The negotiations did not bear fruit. Accordingly, the plaintiff proceeded with its efforts to sell the Property under power of sale. In response, the defendants commenced an application on May 26, 2022 seeking to set aside the Notice of Sale and prevent a sale of the Property while they attempted to source out refinancing.

[15] The defendants’ application was unsuccessful. On June 9, 2022, de Sa J. ordered that the sale of the Property would proceed. He directed that, on closing, the first mortgagee was to be paid out and that the sum of $561,965.19 was to be paid to the plaintiff in relation to the VTB. The funds to be paid to the plaintiff reflected the amount claimed as owing in the plaintiff’s Notice of Sale dated December 23, 2020. The net proceeds were to be paid into court.

[16] It is unclear to me when the sale of the Property closed. At any rate, the net proceeds of sale were $393,184.86 and they were paid into court on October 31, 2022.

[17] At about the same time the defendants commenced their application to set aside the Notice of Sale, their counsel prepared a Notice of Motion to set aside the default judgment. That Notice of Motion, dated May 25, 2022, is attached as an exhibit to the affidavit of Rokulan Thangavel, sworn May 28, 2022. There is otherwise no evidence that the Notice of Motion was ever served, though I am prepared to accept counsel’s representation that it was.

[18] Having said that, the defendants do not appear to have taken any steps to prosecute the May 25, 2022 motion. Two years went by. On May 28, 2024 the defendants served a fresh motion to set aside the judgment, and for other relief. The motion was added to the running list for long motions and, as I noted, heard on January 10, 2025.

The Motion

The relief requested in the defendants’ May 28, 2024 Notice of Motion raises the following questions for determination:

1. Should the sum of $249,833.83 be released to the defendants from the sale proceeds presently paid into court?
2. Should any writ of execution filed further to the default judgment be vacated?
3. Should the default judgment be set aside?
4. Should this proceeding be consolidated with the application commenced by the defendants on May 26, 2022, bearing file no. CV-22-735?
5. Should a timetable be set for a summary judgment motion?

[19] I will address these questions in turn.

Discussion

(i) Question One: Should Funds be Released to the Defendants?

[20] I have started with this issue because it is on consent. The plaintiff was paid $561,965.19 following the sale of the property under power of sale. It takes the position that it is still owed $143,351.03. There was a total of $393,184.86 paid into court following the sale, to the credit of the related application. Counsel assured me that there is no dispute about the sum of $249,833.83 being released to the defendants.

[21] The one caveat to the release of funds is that there are two costs orders outstanding in favour of the plaintiff.

[22] As I noted, in May 2022 the defendants issued a Notice of Application seeking, amongst other things, to set aside the plaintiff’s Notice of Sale. Subsequent to his order of June 6, 2022, de Sa J. ordered costs payable by the defendants to the plaintiff in relation to the hearing before him, in the amount of $8,000.00, all inclusive.

[23] The defendants appealed the ruling of de Sa J. to the Court of Appeal for Ontario. Their appeal was dismissed on August 1, 2023 with costs to the plaintiff fixed in the amount of $20,000.00, all-inclusive.

[24] In the result, I direct that, of the sale proceeds paid into court to the credit of application CV-22-735, the sum of $221,833.83 is to be released to the defendants, or as they may direct. The sum of $28,000.00 is to be released to the plaintiff, or as it may direct, in satisfaction of the cost awards owing by the defendants to the plaintiff arising from the decision of de Sa J. and the subsequent decision of the Court of Appeal. The defendants will be credited with the receipt of a total of $249,833.83 from the funds paid into court.

(ii) Question Two: Should the Writ of Execution be Lifted?

[25] I am advised that the plaintiff obtained and filed a writ of execution against the defendants, following the issuance of the default judgment. I do not know the date of the writ or its filing number. A copy of it was not filed in evidence on this motion and it was only referred to in broad terms.

[26] The defendants take the position that the default judgment has been paid in full and, as such, the writ should be lifted.

[27] It was unclear to me, on the basis of the evidentiary record filed, whether the default judgment has been paid in full. The defendants filed the affidavit of Anojan Thangavel, sworn April 11, 2024, in support of their motion. Mr. Thangavel deposed that de Sa J. had ordered that the plaintiff be paid the amount owing under the default judgment from the proceeds of the sale of the Property. That is not correct. Justice de Sa ordered that the plaintiff be paid the amount set out in their Notice of Sale, which was dated some ten months prior to the time that the default judgment was signed. Since I do not have a copy of the default judgment, I am unable to compare the amount of the judgment to the amount ordered by de Sa J. to be paid to the plaintiff.

[28] The plaintiff’s counsel, however, conceded that the writ could be lifted. On the basis of that consent, I direct that the writ of execution obtained by the plaintiff following the issuance of the default judgment is to be vacated. The defendant will have to provide particulars of the writ in a draft order, sufficient to properly identify the writ in issue for the Sheriff’s office.

(iii) Question Three: Should the Default Judgment be Set Aside?

[29] The defendants ask that the default judgment be set aside and that they be permitted to file a Statement of Defence within 20 days. They want to contest (i) the plaintiff’s entitlement to the balance of the sale proceeds paid into court; and (ii) the balance owing to the plaintiff on the VTB. They say the only means for them to do so is through the setting aside of the default judgment.

[30] The plaintiff’s counsel opposed the request to set aside the default judgment. He did not articulate the basis of the opposition, other than to say that the plaintiff has made a number of reasonable settlement proposals that have been rebuffed.

[31] The test to be applied on a motion to set aside a default judgment is well-settled. The overarching question is whether the interests of justice favour granting the order. To make that determination, motions judges are to consider the following five factors:

• (a) Whether the motion was brought promptly after the defendant learned of the default;
• (b) Whether there is a plausible explanation for the default;
• (c) Whether the facts establish that the defendant has an arguable defence on the merits;
• (d) The potential prejudice to each party should the motion be granted or not granted, as the case may be; and
• (e) The effect of any order on the overall integrity of the administration of justice.

See Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, at paras. 47-49, recently confirmed in Storoszko & Associates v. 1489767 Ontario Ltd., 2024 ONCA 147, at para. 3.

[32] The foregoing factors are not meant to be applied rigidly. Each of them must be considered in service of the overarching question of what the interests of justice require. I will consider them in turn.

(a) Was the motion brought promptly?

[33] I have set out the history of the motion to set aside the default judgment. It leaves the distinct impression that the motion was not brought promptly after the defendants first learned of the judgment.

[34] I may have been prepared to accept, with some reluctance, that the motion had been brought promptly on the basis of the May 25, 2022 Notice of Motion had that motion actually proceeded with any sort of reasonable dispatch. But nothing happened with it. The defendants served only a Notice of Motion, with no fixed return date and no supporting evidence. Then they did nothing with respect to the motion for two years.

[35] I believe the requirement to promptly bring a motion to set aside a default judgment requires more than the perfunctory service of a Notice of Motion. A motion must be commenced and diligently pursued. In this case it was not.

[36] No explanation was offered in the evidentiary record as to what happened between May 2022 and May 2024 that might explain why the motion to set aside the default judgment was never proceeded with.

[37] In the circumstances here, it would not be reasonable to conclude that the defendants moved to set aside the default judgment promptly after they learned of it. This factor weighs against granting the relief sought.

(b) Is there a plausible explanation for the default?

[38] The Statement of Claim was not served personally on the defendants. It was delivered in some manner to the Property, which they were not living in. In my view, it is reasonable to conclude that the plaintiff was aware that the defendants had moved out of the residence to accommodate the remediation work being carried out by the plaintiff’s contractors. It is not entirely surprising that the claim did not come to the defendants’ attention.

[39] That said, the defendants are not entirely blameless. Rokulan Thangavel instructed the process server to mail the claim to the Property. He refused to meet with the process server at a neutral location to receive the claim. And he refused to co-operate with the plaintiff’s counsel to accommodate service.

[40] I note that Anojan Thangavel deposed, in his April 11, 2024 affidavit, that he attended at the Property in March 2022 and found a Notice of Sale and Statement of Claim taped to the front door. Recall that Rokulan Thangavel deposed that it was the Notice of Sale and a writ of possession he found taped to the door. In any event, Anojan Thangavel did not say that this occasion was the first he learned of the claim. Indeed, had he said so, I would have considered it disingenuous. The defendants were aware, since February 2021, that the claim had been issued and that the plaintiff was attempting to serve it. I think it extremely unlikely that they had not been regularly attending the Property between February 2020 and March 2021 to check on the progress of repairs. They would have been understandably very interested in the progress of those repairs and eager to get back into the home. Similarly, I think it highly unlikely that they were not regularly checking their mail at the Property. I conclude that they knew about the claim but avoided dealing with it for reasons best known to them.

[41] In the circumstances, I am not satisfied that there is a plausible explanation for the failure to defend. The explanation is that they were attempting to avoid service of the claim. This factor weighs against the relief sought.

(c) Is there an arguable defence on the merits?

[42] By convention, defendants moving to set aside a default judgment will file a draft Statement of Defence with their motion materials. That was not done here. That said, I am able to discern two lines of defence from the evidence filed on the motion.

[43] The first line of defence is that some of the charges claimed by the plaintiff as owing on the VTB are inflated and unsupportable. These charges included elevated interest, penalties, and over $120,000 in claimed real estate fees. Having considered the nature of the charges in issue, I am satisfied that the defendants have an arguable case to make regarding the amounts properly recoverable on the VTB. In that limited respect, this factor weighs in favour of granting the relief sought.

[44] The second line of defence is in the nature of a set-off or counterclaim, for damages arising from negligent or otherwise deficient construction. It appears to me, however, that the defendants have known about the purported construction deficiencies since at least March 2020. That being the case, it would appear to me that any claim for damages for alleged negligence in the construction of their home, or an alleged breach of an implied obligation to build the home in a good and workmanlike manner, is statute-barred by the Limitations Act, 2002, SO 2002, c 24, Sch B. I would not, in the result, consider this proposed line of defence to be “arguable”.

(d) The balance of prejudice

[45] In my view, there would be little practical prejudice to the defendants in refusing to set aside the default judgment. Their application raises issues relating to the amounts they say the plaintiff improperly seeks to charge on the VTB. They are able to litigate those issues in that proceeding.

[46] They will not be able to proceed with a claim for damages for negligent or deficient construction if the default judgment is not set aside. But I have already observed that such a claim appears to be statute-barred as out of time.

[47] There would, on the other hand, be prejudice to the plaintiff; in particular, in terms of costs and delay, should their 2 ½ year old judgment now be set aside.

[48] In my view, this factor tends to weigh against granting the relief sought.

(e) The integrity of the administration of justice

[49] On balance, I am of the view that the integrity of the administration of justice favours a refusal to set aside the default judgment.

[50] The Rules of Civil Procedure, RRO 1990, Reg 194 are to be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” See r. 1.04. This overarching principle is not focused only on the manner in which the court interprets and enforces the Rules. It provides direction to litigants about how to conduct themselves in the context of civil litigation.

[51] Taking active steps to avoid service and thereby increase costs and delay is contrary to the overarching interpretive principle of the Rules and the interests of justice more generally.

[52] Similarly, failing to move promptly after learning that a default judgment has been issued creates delay – in this case more than two years of delay – which is also contrary to the interests of justice.

[53] Granting the defendants’ motion in the circumstances would tend to countenance the conduct of the defendants that has undermined the interests of justice. The plaintiff was well within its rights to obtain an order for substitute service – given the conduct of the defendants – and well within its rights to obtain default judgment. That judgment has now been paid and the writ filed in support of the judgment has, or will, be lifted. In the circumstances, to now permit the defendants to re-open the case and seek to undermine that judgment would tend, in my view, to undermine the integrity of the civil justice system.

[54] This factor similarly weighs against granting the motion.

Conclusion

[55] The overarching question on a motion to set aside a default judgment is what order will best serve the interests of justice?

[56] In my view, the interests of justice require that the motion be dismissed. The phrase, “interests of justice” covers a fair bit of ground. On motions of this nature, however, the factors that tend to inform the interests of justice are the ones set out in Mountain View Farms. Having considered those factors, I have found that the defendants’ motion was not brought promptly, there is no plausible explanation for their default, there would be greater prejudice to the plaintiff if the judgment is set aside than there would be to the defendants if it were not, and the integrity of the administration of justice would be negatively impacted should the judgment be set aside. The conclusion, in the circumstances, must be that the judgment stands.

[57] I appreciate that the interests of justice ultimately bend towards the determination of every case on its merits. And in this case, I have concluded that the defendants do have an arguable case to advance regarding some of the amounts claimed as owing on the VTB by the plaintiff. In my view, however, it is unnecessary to set aside the default judgment in order for the merits of this dispute to be resolved by the court. The issue of the disputed charges is engaged in the defendants’ related application and it remains a live issue. It can be resolved in that proceeding.

[58] Taking all relevant considerations into account, I find that the motion to set aside the default judgment should be, and is, dismissed.

(iv) Question Four: Should this Action be Consolidated with the Related Application?

[59] The short answer to this question is obviously no, in light of the fact that I have not set aside the default judgment. The application may proceed as a stand-alone proceeding.

(v) Question Five: Should a Timetable be Set for a Summary Judgment Motion?

[60] Again, the short answer to this question is no. Applications are already summary in nature. The parties can take the necessary steps to conduct whatever examinations they deem appropriate and they can attend Central East Triage Court to obtain a date for the hearing of the balance of the application, not otherwise addressed by de Sa J., should they agree that it can be determined on a paper record. Otherwise, one or the other of the parties can move for an Order Giving Directions.

Costs

[61] The defendants seek their partial indemnity costs in the amount of roughly $26,000, which includes $22,675.25 in fees, $551.01 in disbursements, and the balance in HST.

[62] The plaintiff seeks its partial indemnity costs in the amount of roughly $15,000, all but $24.86 of which are fees and HST.

[63] By convention, costs are generally awarded to a successful party and are ordinarily measured on a partial indemnity basis. See Bell Canada v. Olympia & York Developments Limited et al.. In fixing any amount payable the overarching principles to be applied are fairness, proportionality and reasonableness: see Beaver v. Hill, 2018 ONCA 840; Boucher v. Public Accountants Council for the Province of Ontario; and Moon v. Sher.

[64] Success on the motion was somewhat divided. The defendants were successful in obtaining an order for payment out of a court of a substantial sum of the remaining proceeds of sale and in obtaining an order lifting the writ of execution filed by the plaintiff in relation to its default judgment. To be fair, however, all of that relief was on consent.

[65] The one issue that was argued to any extent was whether the default judgment should be set aside. On that issue, the plaintiff prevailed. For that reason, I might be inclined to find that the plaintiff had been the more successful party on the motion, on balance.

[66] Having said all of that, the plaintiff did not file any material for the motion. The fact that materials were prepared is of little consequence when they were not filed or available to the court to consider.

[67] In all the circumstances, I am of the view that this is an appropriate case where no costs should be awarded to either side for the motion.

C. Boswell
Date: February 5, 2025