



COURT OF APPEAL FOR ONTARIO

CITATION: Franchetti v.
    Huggins, 2022 ONCA 111

DATE: 20220207

DOCKET: C69243

Lauwers, Huscroft and Coroza JJ.A.

BETWEEN

Charles Franchetti
    and Emily Thomas and Benjamin Franchetti pursuant to The Family Law Act, R.S.O.
    1990, c. F.3, as amended

Plaintiffs (Respondents)

and

Alan Douglas Huggins,
    Basil Mills,
1729780 Ontario Inc., c.o.b. as Jovys Bar
    & Café
,
Zelijka Stankovic-Zubic
,
    Shannon Malouin, Niagara Health System-Greater Niagara General Site, Dr. Rajeshwar
    Hanmiah, Dr. F. Gadhafi, Pamela Lockey,

Marlene Caldwell, Dr.
    Charles L. Consky, and Dr. Gerald D. Scaife

Defendants (
Appellants
)

Roman Botiuk, for the appellants

Benjamin Salsberg, for the respondents

Heard: January 24, 2022 by video conference

On appeal from the order
    of Justice David L. Edwards of the Superior Court of Justice, dated February
    25, 2021, with reasons at 2021 ONSC 1435.

REASONS FOR DECISION

[1]

This is an appeal by 1729780 Ontario Inc., carrying on business as
    Jovys Bar & Café (Jovys Bar), and its owner Zelijka Stankovic-Zubic,
    from the motion judges decision refusing to set aside their noting of default.
    For the reasons set out below, the appeal is dismissed.

The Factual Background

[2]

The respondent, Charles Franchetti, was assaulted on May 26, 2011 by
    another patron at Jovys Bar. The statement of claim was served on Jovys Bar,
    Ms. Stankovic-Zubic, and Ms. Malouin, an employee, in April 2013. In March
    2014, counsel for the respondents advised the appellants that they would be
    noted in default if they did not file a statement of defence. After getting no
    response, counsel noted the appellants in default on March 13, 2014.

[3]

Jovys Bar and Ms. Stankovic-Zubic brought a motion for an order setting
    aside their noting of default. The respondents opposed. The other defendants
    consented, apart from Ms. Malouin, who did not participate.

[4]

Ms. Stankovic-Zubic deposed that she sought legal advice from a lawyer, Zijad
    Saskin. According to Ms. Stankovic-Zubic, his advice was that she did not have
    to file a statement of defence because she had no insurance, and it was
    therefore not tactically worthwhile for the respondents to sue her. She did
    not provide the date of that visit, but counsel for the respondents, Mr.
    Toomath, deposed that Mr. Saskin called him around October 3, 2017. They
    discussed damages briefly. Mr. Saskin did not request an extension of time or a
    waiver of the requirement that a statement of defence be filed. Mr. Toomath later
    refused to consent to a request to have the noting of default set aside. The
    case has been pre-tried and a non-jury trial has been set for October 2022.

The Standard of Review

[5]

Whether to set aside a noting of default is a discretionary decision:
Intact
    Insurance Company v. Kisel
, 2015 ONCA 205, 125 O.R. (3d) 365, at para. 12.
    Lower courts discretionary decisions are entitled to appellate deference, but
    will be reversible where that court misdirected itself or came to a decision
    that is so clearly wrong that it amounts to an injustice:
Penner v.
    Niagara
, 2013 SCC 19, [2013] 2 S.C.R. 125, at para. 27. The court added: Reversing
    a lower courts discretionary decision is also appropriate where the lower
    court gives no or insufficient weight to relevant considerations.

The Governing Principles: Setting Aside a Noting of Default

[6]

The
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 are meant
    to be taken seriously by plaintiffs and defendants. Under r. 1.04(1), the rules
    are to be liberally construed to secure the just, most expeditious and least
    expensive determination of every civil proceeding on its merits. Further, with
    respect to a failure to comply with the rules, the court, under r. 2.01(1)(a)
    may grant all necessaryrelief, on such terms as are just, to secure the just
    determination of the real matters in dispute.

[7]

Rules 18.01 and 18.02 oblige a defendant to respond with a statement of
    defence within 20-30 days of the date the defendant is served with the
    statement of claim. The consequences of failing to respond can be dire. Under
    r. 19.01, the claimant may have the defendant noted in default. A defendant
    noted in default under r. 19.02(1) is deemed to admit the truth of all
    allegations of fact made under the statement of claim and may not otherwise
    participate in the action, other than by bringing a motion to set aside the
    noting of default. The next dire consequence is that after noting the defendant
    in default, in certain circumstances the plaintiff may move for default
    judgment under r. 19.04.

[8]

Under r. 19.03, a defendant noted in default may move to have the noting
    of default set aside, and this may be ordered on such terms as are just. In
    the context of an action that had been dismissed for delay, Weiler J.A.
    discussed several guiding principles that are also relevant to setting aside a
    noting of default:
H.B. Fuller

Company v. Rogers
, 2015 ONCA
    173, 386 D.L.R. (4th) 262, at paras. 25-29. These include the strong
    preference for deciding civil actions on their merits, the desire to construe
    rules and procedural orders non-technically and in a way that gets the parties
    to the real merits, and whether there is non-compensable prejudice to either
    party.

[9]

There are many cases discussing the criteria for setting aside a noting
    of default. See particularly Laskin J.A.s detailed exposition in
Kisel
,
    at para. 13. To summarize the jurisprudence, the following factors have been
    found to be relevant in considering whether a noting of default should be set
    aside:

(1)

The parties behaviour;

(2)

The length of the defendants
    delay;

(3)

The reasons for the delay;

(4)

The complexity and value of the
    claim;

(5)

Whether setting aside the noting
    of default would prejudice a party relying on it;

(6)

The balance of prejudice as
    between the parties; and

(7)

Whether the defendant has an
    arguable defence on the merits.

[10]

These
    factors are not exhaustive nor are they to be applied as rigid rules. An
    arguable defence on the merits may justify the court in exercising its
    discretion to set aside a default judgment, and for that purpose it is
    sufficient for the defence to have an air of reality:
Mountain View Farms
    Ltd. v. McQueen
, 2014 ONCA 194, 119 O.R. (3d) 561, at para. 51.
    However, perhaps because requests to set aside noting in default usually occur
    early in the litigation process, unlike this case, courts will rarely require a
    defendant who has been noted in default to show an arguable defence on the
    merits. In a case such as this one involving a significant delay, the moving
    party is required to show an arguable case on the merits.

The Motion Judges Decision

[11]

The motion judge instructed himself on the factors from
Kisel
and made the following determinations:

(1)

The behaviour of the plaintiff and defendant:
Mr.
    Franchetti behaved appropriately in pursuing his claim, while Ms. Stankovic-Zubic
    did not since she did not seek legal advice until approximately three years
    after she received the statement of claim.

(2)

The length of the defendants delay:
There are two
    periods of delay. First, there was the delay between the service of the
    statement of claim in April 2013 and Ms. Stankovic-Zubic seeking legal advice in
    October 2017 from Mr. Saskin. The second delay occurred between October 2017
    and February 2020, when Ms. Stankovic-Zubic again sought legal advice, this
    time from her present counsel, Mr. Botiuk, who took action.

(3)

The reasons for the delay
:
The
    first period of delay is unexplained. The reason offered for the second period
    of delay is that Ms. Stankovic-Zubic was following erroneous advice from
    Mr. Saskin, who has since been disbarred. There is no corroboration of this
    advice from Mr. Saskin, nor any supporting documentation.

(4)

The complexity and value of the claim:
The claim is
    complex and involves a significant sum of money. There are claims against the
    parties involved in the bar incident, as well as against doctors and a hospital
    for events that occurred during treatment.

(5)

Prejudice to a party relying upon the default:
There is significant prejudice to the parties noted in default since they will
    not be able to contest liability and damages, and may be held responsible for a
    potentially significant amount of damages. On the other hand, there is
    prejudice to Mr. Franchetti. He is in ill health, and although the incident
    occurred in 2011, the trial will likely not take place until October 2022.

[12]

With
    respect to prejudice, the motion judge noted that counsel for Ms. Stankovic-Zubic
    argued that prejudice to Mr. Franchetti could mostly be alleviated by his
    agreement to not examine the plaintiff and the other defendants. However, the
    motion judge was concerned about trial scheduling and noted that Mr. Franchetti
    might seek an earlier trial date after waiving the jury. The jury has since
    been waived without any effect on the scheduled trial date.

[13]

After considering these factors, the motion judge declined to set
    aside the noting of default.

He emphasised that
    no reason was offered for the initial period of delay. As for the second period
    of delay, he found it highly unlikely that a trained lawyer would advise a
    client to ignore a Statement of Claim and refused to accept this justification
    based solely on Ms. Stankovic-Zubics uncorroborated affidavit.

The Principles Applied

[14]

The
    appellants counsel asserted that their defence on the merits  that the attack
    at Jovys Bar was unforeseen and unforeseeable  is arguable and has an air of
    reality. We agree. But that is only part of the picture, albeit one that the
    motion judge did not consider.

[15]

With
    respect to the delay, counsel admitted that the initial decision by his clients
    not to defend was strategic or tactical, and that the appellants proceeded on
    the erroneous advice that the absence of insurance on the bar made them
    unlikely targets for legal action. Ms. Stankovic-Zubic deposed that obtaining
    insurance had been prohibitively expensive in light of the bars low-cost business
    model, although as counsel noted, licensed bars must be insured as a matter of
    law. This court is reluctant to provide relief to parties who make strategic
    decisions that turn out to be wrong.

[16]

The
    appellants counsel was candid in admitting that the explanation for the
    appellants delay in responding to the lawsuit was weak, but he asserted that
    any prejudice to the respondents could be alleviated by agreeing to strong
    terms that would ensure that the trial could proceed as scheduled, including
    setting aside the right to discovery. He added that he would not be calling
    expert evidence.

[17]

The
    motion judge was clearly disturbed by the appellants behaviour. He said: I
    agree that courts should strive to have matters determined on their merits and
    not be defeated by technical defaults, but parties are responsible for the[ir]
    actions, not only with respect to those actions upon which a cause of action
    arose, but thereafter as well. We agree.

[18]

The
    motion judges analysis was relatively brief on the issue of prejudice, but respondents
    counsel pointed out that the litigation ground would shift significantly if the
    default were set aside. In particular, the respondents would be obliged to
    prove the appellants fault over a decade after the critical event, and over eight
    years after the noting of default deemed liability to be admitted. This outcome
    is unacceptable in a situation where the trial is imminent, and the necessary
    evidence is difficult to get. Counsel for the appellants admitted that the
    server, who might well have over-served the patron who attacked Mr. Franchetti,
    cannot be located, and also that the bars records are sparse and may not exist
    at all for that time. Had these elements of prejudice been made known to the
    motion judge, they would only have shifted the balance of prejudice even more
    in favour of the respondents.

[19]

The
    appeal is dismissed with costs in favour of the respondents fixed at $10,000
    all-inclusive.

P. Lauwers J.A.

Grant Huscroft J.A.

S. Coroza J.A.


