2011 ONSC 3166, 2011 ONSC 3166

CITATION : National Leasing Group Inc. v. High Point Environment Inc. et al , 2011ONSC 3166 COURT FILE NO.: CV-10-401436 MOTION HEARD: 2011/05/19 SUPERIOR COURT OF JUSTICE - ONTARIO RE: National Leasing Group Inc., Moving Party AND: High Point Environment Inc.et al, Responding Party BEFORE: Master Haberman COUNSEL: Drake, R., for the Moving Party Potasky, A., for the Responding Party HEARD: May 19, 2011 REASONS FOR DECISION [ 1 ] The defendants move to set aside default judgment and the noting in default signed against them in this Simplified Rules action. [ 2 ] The action is a straightforward one.

The plaintiff seeks payment of just over $66,000, as well as the return of their chattels. The claim is based on a lease entered into in January 2009, which required the defendants to make monthly payments of $1008.24 for 66 months in exchange for the lease of telephone equipment. The evidence [ 3 ] The statement of claim was issued on April 20, 2010 and served on the defendants as follows: - On May 2, a sealed envelope, addressed to Joseph DeFranco, was left with an adult male who refused to identify himself, at the defendant’s home address.

Further, a copy of the pleading was mailed to DeFranco by regular mail; and - On May 3, a copy of the pleading was left with Michelle DeFranco, High Point’s receptionist, at the defendant’s place of business. It is not clear what her relationship is to the defendant. [ 4 ] The fact that these documents came to the defendants’ attention is clear, as they delivered a notice of intention to defend, filing a copy with the court on May 14, 2010.

They neglected, however, to follow up with a statement of defence, hence the current motion. [ 5 ] Default judgment was requisitioned on June 2, 2010 and judgment issued on August 10, 2010. [ 6 ] Thereafter, the plaintiff undertook a series of steps, each of which provided the defendants with notice that judgment had been obtained: a. On September 1, 2010, they wrote to both defendant by regular and registered mail, enclosing a copy of the judgment and advising that they would proceed to execution unless they heard back by September 13, 2010. They did not; b.

On November 2, 2010, they served DeFranco personally at his office with a notice of examination returnable on November 9, 2010. He did not attend; c. On December 10, 2010, DeFranco was served by mail with a notice of motion for an order compelling his attendance at an examination in aid of execution in view of his previous failure to attend. The motion was returnable on December 30, 2010 and again, DeFranco failed to attend. This time, Master Muir ordered him to attend to be examined and to and pay costs totalling $843.52, inclusive of costs thrown away; d.

On January 10, 2011, DeFranco was served with Master Muir’s order as well as a notice of examination returnable on February 2, 2011. I am unclear as to how DeFranco was served on that occasion as I do not have exhibit “L” in the court copy of the motion record

and exhibit “K” is simply the notice of examination. There is no evidence, however, to suggest that this was not received, yet, once again, DeFranco failed to attend. [ 7 ] According to the plaintiff’s evidence, the lease started on February 1, 2009 and the defendants started to go into arrears in May of that year, such that the plaintiff’s collection department got involved. [ 8 ] In her supporting affidavit, Christine Joyal, an employee of National who deals “primarily with leases that have gone into default” explained what had transpired.

She states that this situation led to an exchange between DeFranco and Ellen York, National’s “collector”. A copy of DeFranco’s e-mail of May 26, 2009 to Ms. York is appended as an exhibit to the affidavit. [ 9 ] In his response to what I assume was a request to pay, DeFranco wrote: We have experienced problems with one of our customers which has had an impact on our finances these past months. We are now (sic) expecting payment within the next two weeks which once we are in receipt we will bring our account up to date.

We will make out payment to you no later than June 12 th and will make the monthly payments thereafter, we would also like to have the monthly payments withdrawn from a different account, please send us the necessary information to have this change completed. [ 10 ] There is no evidence or suggestion from DeFranco that he did not send this e-mail or that its contents do not accurately reflect High Point’s financial status.

There is no indication in the e-mail that the equipment towards which monthly payments were sought and promised was in any way deficient or that any of it had not been delivered. [ 11 ] DeFranco’s evidence is vague and raises, in many instances, more questions than it answers. He admits having been served with the statement of claim and states that he drafted and served a notice of intent to defend on May 10, 2010. [ 12 ] He then states: Due to my medical condition, as described below, my attention to this file was severely hampered by the medication I was taking .

After serving the notice of intent to defend, the matter fell out of my mind. [ 13 ] At this point, one would expect a detailed explanation of what the medication was, how frequently DeFranco was taking it during the material time, and its side effects. The evidence regarding these issues, however, is far from satisfactory. [ 14 ] Under the heading, “incapacitating medical condition”, DeFranco states that, while vacationing in Costa Rica in 2006, he had a serious accident.

While riding a moped, he flew over the handle bars and was thereafter diagnosed with traumatic acute cervical disc herniations. [ 15 ] DeFranco states that he was flown home to Toronto and admitted to Sunnybrooke where he was admitted on January 29, 2006. After two weeks in hospital, he was transferred to a Rehabilitation Institution where he remained from February 14 to May 19, 2006. [ 16 ] DeFranco states that he was prescribed a strenuous regime of medication, including Baclofen and Gabapentin.

He describes the first as a drug that treats muscle spasticity in cases of spinal cord injury, stating that the latter is used to relieve pain and neuropathic pain. [ 17 ] At paragraph 15, DeFranco states that he still takes both of these drugs, though he does not state if he takes them regularly or on an as needed basis, or more importantly, what his regime was at the material time, between mid-May 2010 and the present.

[18] DeFranco discusses the relevance of his drug regime briefly, stating that these two drugs: limit my ability to concentrate on anything, including my business. [19] There are no details regarding the extent to which concentration is affected. There is, more importantly, no report from any ofDeFranco’s treating physicians, explaining how these drugs work, what their potential side effects are and how they are affecting DeFranco. The law [20] Neither party filed a factum or any law in advance of the motion. The moving party handed up one case during submissions. [21] In Valente v.

The Personal Insurance Company 2011 ONSC 516 , the Divisional Court set out the well-known testapplied by the court when asked to consider whether it should set aside a default judgment. [22] The three elements of the test, as set out in Lenskis v. Roncaioli, [1992] O.J.

No. 1713, indicate that the moving party must: 1) move as soon as possible to set aside the default judgment after becoming aware of it; 2) explain the circumstances under which the default arose and provide a plausible explanation for the default; and 3) set out sufficient facts to demonstrate that they have at least an arguable case to present on the merits. [23] In Valente, the Divisional Court held that though these were the factors to be considered, each factor need not be satisfied beforethe default judgment could be set aside. [24] As the Court of Appeal has already done in so many areas, the Divisional Court here took a more contextual approach, indicatingthat the factors had to be weighted rather than rigidly applied and that the merits was “the most significant factor.” As the court stated: If a party can be made whole in costs, and is not prejudiced, the merits will often carry the day for the defaulting party.

But that is notnecessarily so. [25] In weighing the factors, the court has also stated, based on its review of 441612 Ontario Ltd. v. Albert (1995), 36 C.P.C. (33d)198 that: Where it is apparent that there exists a strong defence, such as one based on the Statute of Frauds, failure to satisfy the other twofactors may not prevent relief. [26] It is in the context of these principles that I have approached these factors. Analysis and conclusion [27] The moving party’s evidence on a motion such as this one is critical.

Details of what DeFranco knew, when and how he becameaware of it and why he ignored it must be set out with particularity. [27] Thus, before I turn to the individual factors, I must make some general comments regarding the quality of the evidence tendered

for this motion. [ 28 ] DeFranco relies, in large part, on his 2006 accident and what he claims was the impact of the medications he was taking in 2010 and 2011 as justification for his not having filed a defence and for his not having moved sooner to set aside the default judgment. [ 29 ] Although he had the presence of mind to deliver a notice of intent to defend, he wants the court to accept that the matter “fell out” of his mind thereafter.

There is no explanation as to why he was able to deliver the notice or why, as he states in his evidence, he can manage to work 2-3 hours per day but was unable to even contact plaintiff’s counsel regarding this matter earlier. [ 30 ] The most recent medical report appended to the affidavit, from Dr.

Ismail, is dated April 22, 2009, which pre-dates these events and it makes no mention at all of the two drugs on which DeFranco hangs his hat. [ 31 ] There is also no explanation as to why others in the office failed to react when some of these court documents were served on them and why Michelle DeFranco, the receptionist and presumably a relative, failed to follow up with DeFranco after the statement of claim was served on High Point through her. [ 32 ] The absence of evidence addressing these key points is seriously problematic.

If the plaintiff chooses to rely on a position akin to non es factum, the onus is on him to support that position with evidence. That he has failed to do. [ 33 ] I will now turn to the factors.

Have the defendants moved as soon as possible after becoming aware of the judgment? [ 34 ] When reviewing the evidence above, I set out a series of four occasions between September 2010 and January 2011 at which time the fact of the judgment was brought to DeFranco’s attention, yet no steps were taken until this motion record was served in May of this year to have the judgment set aside, though there is every reason to believe that DeFranco and the corporate defendant were aware of it. [ 35 ] DeFranco effectively points to his health as the reason for not having moved sooner.

There is no evidence, however, as to why the corporation took no steps to move earlier. In his affidavit, DeFranco effectively treats himself and High Point as one. [ 36 ] High Point, however, is an incorporated entity with a separate legal personality. Further, in his affidavit, DeFranco notes that he had his former office manager in place, handling the day to day affairs of the business, which also employs other employees (see paragraph 26).

It is entirely unclear why none of these people intervened to deal with the litigation. [ 37 ] The only evidence we have as to why DeFranco suddenly resumed interest in this action is his own. He states that: It was only when my wife saw the reference to jail time in the copy of the plaintiff’s motion record seeking an order for contempt that this matter was brought to my attention again. [ 38 ] There is no affidavit from Ms. DeFranco confirming that this was the case. There is no indication when this event occurred.

There is no suggestion that DeFranco had not read this or any of the earlier materials served on him and the corporation – or, for that matter, that his wife had read none of it before this. [ 39 ] The total lack of detail suggests that the documents were received, reviewed and ignored, up until DeFranco realized how very serious the matter was, in that incarceration was now looming.

[ 40 ] In that the defendants were made aware of this judgment in September 2010, and De Franco was reminded of it on three subsequent occasions (see page 1), I am hard pressed to accept that his health and medication regime constitute a sufficient basis to excuse the delay in moving to set aside the default judgment. Explanation for the default [ 41 ] Again, DeFranco relies on his medical condition and his medication as the root of the problem.

But, as noted above, the evidence of both is far from satisfactory as regards him, particularly in the context of his having delivered a notice of intent to defend, and non-existent as regards the corporation. [ 42 ] As a result of the evidentiary deficiencies set out above, I am not satisfied that either party has provided a reasonable explanation for the default. Is there merit to the defence position? [ 43 ] In order to satisfy this factor, a party usually has to show that he has an arguable case on the merits.

Case law detailed above, however, suggests that when balancing the factors, if the other two are not satisfied, in may be necessary to demonstrate the existence of a strong case on the merits. [ 44 ] The defence presented here is two-fold. First, DeFranco alleges that the equipment was never delivered. As proof for his position he claims that he has no record of delivery and that the bailiff was unable to locate the equipment when sent to search for it. [ 45 ] Of course, both the absence of a delivery record and of the equipment, itself, can be referable to other fact scenarios.

Both could have been hidden or destroyed by DeFranco or those he employs. Neither is conclusive of the issue. [ 46 ] What is significant, however, is the May 29, 2009 e-mail from DeFranco to Ms. Young, where he explains the delay in making payments and assures her that he will catch up and make all payments on time thereafter. In fact, payments were made until December 2009. [ 47 ] It is extremely difficult to give credence to the defence position of non-delivery in the face of this e-mail and on the basis of the evidence that payments were made for 11 months.

Why, three months after having begun making payments, would DeFranco blithely agree to make up a shortfall and to be timely with future payments if the equipment had not been received? [ 48 ] The evidence one would expect to see in support of this position are e-mails from DeFranco, complaining about the failure to deliver and threats to cancel the lease if the situation persisted. Instead we see 11 months of payments having been made. [ 49 ] In view of the e-mail to Ms.

Young, the regular payments for almost a full year and the absence of any explanation from DeFranco, I am unable to accept that this constitutes even an arguable defence on the merits. It simply does not have an air of reality to it. [ 50 ] The second prong to the defence position is an attempt by DeFranco to extricate himself from the litigation. He claims that he: w ould not read any of the documents that needed my signature. I would rely on representations of various documents given to me by my employees. The plaintiff’s lease was no exception.

As the documents were already vetted, I would sign wherever there was a signature line without reading the document. [ 51 ] Once again, DeFranco attempts to advance an argument akin to non es factum , without first providing a solid evidentiary base.

There is no indication in the evidence as to why he was unable to read. Further, as a man running a business that, at one point, generated $8 million in revenue, he would surely have been aware that few will do business with a corporation absent, at the very least, a personal guarantee from a principal. [ 52 ] Again, this proposed defence lacks an air of reality and does not meet the test of being an arguable defence on the merits. DeFranco does state that the business stopped operating in 2009.

Coincidentally, payments on the lease stopped entirely in December of that year. [ 53 ] Accordingly, after reviewing each factor on its own and then weighing them together, I am unable to set aside the default judgment. While I sympathize with the defendant in view of his current health and the loss of his business, I am required to deal with this matter on the basis of the state of the law and the evidence before me. [ 54 ] The costs of the motion are to the responding party, fixed at $1800 and payable within 30 days. Master Joan M. Haberman Date: May 25, 2011