



COURT OF APPEAL FOR ONTARIO

CITATION: Redabe Holdings Inc. v. I.C.I. Construction
    Corporation,

2017 ONCA 808

DATE: 20171024

DOCKET: C63526

MacPherson, van Rensburg and Roberts JJ.A.

BETWEEN

Redabe Holdings Inc.

Plaintiff (Respondent)

and

I.C.I. Construction
    Corporation, Glenn Steven Abugov and
Luc Stang

Defendants (
Appellant
)

Rahul Shastri, for the appellant

Robert W. Scriven, for the respondent

Heard: October 16, 2017

On appeal from the order of Justice Patrick J. Flynn of
    the Superior Court of Justice, dated March 7, 2017.

REASONS FOR
    DECISION

[1]

The appellant appeals from the order of the motion judge dismissing his
    motion to set aside a default judgment dated July 4, 2016, and garnishment orders
    and writs of seizure and sale.

[2]

To give some necessary context to this appeal, the recitation of a few
    brief facts is required.  The appellant introduced his co-defendant, Glenn
    Steven Abugov, to the respondents principal for the purpose of obtaining
    financing for Abugovs company, ICI
Construction
    Corporation
.  The respondent alleges that the appellant provided an oral
    personal guarantee for $50,000 on the first loan agreement between ICI and the
    respondent.  ICI subsequently defaulted on that loan and the respondent looked
    to the appellant to honour his guarantee.

[3]

The respondent commenced an action to recover the outstanding debt
    against ICI and the $50,000 pledged under the appellants personal guarantee. 
    Although served personally with the statement of claim in May 2016, the
    appellant took no steps to defend the action, other than to obtain Abugovs
    assurance that he would take care of the matter.  Abugov failed to do so.  As
    reflected in his June 2016 communications with the respondent, the appellant
    unsuccessfully attempted to resolve the dispute but did not defend the action. 
    The respondent subsequently noted the appellant in default and then obtained
    default judgment in July 2016 on motion without notice to the appellant.

[4]

The preamble to the default judgment makes no reference to any motion or
    affidavit material.  However, in response to questions from the panel,
    respondents counsel revealed that, unknown to the appellant, or to the motion
    judge whose order is under appeal, the respondent had brought a motion for
    default judgment supported by an affidavit that appended and referenced the communications
    between the appellant and the respondent in June 2016, regarding the debt owed
    to the appellant and a payment plan proposed by the respondent.

[5]

The motion judge applied well-established criteria for determining
    whether the justice of the case required him to order that the default judgment
    be set aside:  see, for example,
Intact Insurance Co. v. Kisel
, 2015 ONCA 205, 125 O.R. (3d) 365, at para. 14; and
Mountain
    View Farms Ltd. v. McQueen
, 2014 ONCA 194,
    372 D.L.R. (4th) 526, at paras. 48 to 50
.  While allowing that the
    appellant had an arguable defence and that he (and his company) would suffer
    prejudice, the motion judge found that the appellants June 2016 communications
    with the respondent (over which the appellant does not assert any privilege),
    demonstrated that the appellant had acknowledged his debt to the respondent
    under a personal guarantee.  Further, the motion judge concluded that the
    appellant had deliberately failed to respond to the respondents statement of
    claim until he became aware of the garnishment and realized that his assets
    were at risk.  After weighing all of these factors, the motion judge determined
    that the justice of the case did not warrant setting aside the default judgment
    and that, to grant the motion would have a more adverse effect on the overall
    integrity of the administration of justice than to deny it (para. 21).

[6]

The appellants primary argument on appeal is that the motion
    judge erred in failing to set aside the default judgment because it was
    irregularly obtained.  The appellant asserts that the motion judge failed to appreciate
    that pursuant to r. 19.06 of the
Rules of Civil Procedure
,
R.R.O. 1990, Reg. 194,
the statement of claim
    did not permit judgment to be granted.  Rule 19.06 provides that: 
A plaintiff is not entitled to judgment on a motion
    for judgment or at trial merely because the facts alleged in the statement of
    claim are deemed to be admitted, unless the facts entitle the plaintiff to
    judgment.
The appellant asserts that the statement of claim pleads
    only that the appellant is liable to the respondent on the basis of his oral
    guarantee; no facts are pleaded to take the matter outside the scope of  s. 4
    of the
Statute of Frauds
, R.S.O. 1990, c. S.19,
which
    precludes action on a guarantee unless in writing.

[7]

The appellant framed his argument on the reasonable understanding that,
    as reflected in the order, default judgment was irregularly obtained as a
    result of a requisition submitted without evidence.  If it had been obtained in
    this way, the appellants argument would have had merit because, in accordance
    with r. 19.06, on the face of the statement of claim, the pleading of an oral
    guarantee alone would not have entitled the respondent to judgment.  If a default
    judgment is irregularly obtained, as a general rule, a defendant is entitled to
    an order, as of right, setting it aside, without the requirement of
    establishing a defence to the plaintiffs claim, and without the imposition of
    terms, other than possibly costs:
Tomazio v. Rutale
, (1995), 26 O.R.
    (3d) 191,
[1995] O.J. No.
    3032
(Gen. Div.), at paras. 9 and 10;
Royal Trust Corp.
    of Canada v. Dunn
(1991), 6 O.R.
    (3d) 468 (Gen. Div.), at para. 19
.

[8]

However, unknown to the appellant, the order for default judgment was
    obtained on a motion under r. 19.05, supported by affidavit evidence from which
    the motion judge could infer that the appellant had acknowledged his debt to
    the respondent and properly grant default judgment.  This inference was equally
    open for adoption by the motion judge hearing the motion to set aside the default
    judgment in assessing the merits of the appellants defence to the respondents
    action.  The appellants acknowledgment of his debt under his guarantee,
    coupled with what the motion judge found to be unreasonable and deliberate
    delay in responding to the statement of claim, tipped the balance of the
    factors that the motion judge had to consider and resulted in the dismissal of
    the appellants motion to set aside the respondents default judgment against him.

[9]

It is common ground that the determination of the appellants motion to
    set aside the default required an exercise of the motion judges discretion in
    accordance with the well-known criteria that he applied:
Hill v. Forbes
, 2007 ONCA 443, at para. 4
.  Absent overriding
    and palpable error, or error of law, we cannot interfere with the outcome.  We
    discern no such error here.

[10]

Accordingly,
    the appeal is dismissed.

[11]

We
    are of the view that the circumstances warrant no order as to costs.  The
    default judgment order was incorrectly drafted and should have included a
    reference to the default judgment motion materials, rather than reciting only
    the statement of claim, proof of service of the statement of claim, and the
    noting of the appellant in default.  In these circumstances, the respondent
    should have placed those materials before the motion judge in response to the
    appellants motion.  If the respondent had done so, the appellant and the
    motion judge would have been made aware of the context in which the respondent
    obtained default judgment, which was relevant to the appellants motion and
    appeal.

J.C.
    MacPherson J.A.

K
    van Rensburg J.A.

L.B.
    Roberts J.A.


