[1]               The defendant had been noted in default and the plaintiff brought a motion for default judgment that was heard January 12, 2016.  In reasons for decision dated January 21, 2016[1], Stinson J. held that the defendant was liable for the torts of breach of confidence, intentional infliction of mental distress, and invasion of privacy.  He granted judgment against the defendant for general damages in the amount of $50,000, aggravated damages in the amount of $25,000, punitive damages in the amount of $25,000 and costs on a full indemnity basis.  He also issued a mandatory injunction that the defendant destroy any and all intimate images or recordings of the plaintiff in his possession, power or control.

[2]               The defendant brought a motion to set aside the default judgment.  In reasons for decision dated September 26, 2016[2], Dow J. set aside the findings of liability and the assessment of damages, upon payment by the defendant of costs of $10,000.

[3]               This is a motion on behalf of the plaintiff pursuant to Rule 62.02(4)(b) for leave to appeal from that decision.

[4]                The defendant’s evidence before the motion judge consisted of his affidavit sworn March 26, 2016 and 15 exhibits. 

[5]               The motion was originally returnable April 15, 2016 and on that occasion, Lederer J. made an endorsement adjourning the hearing to July 26 based on an agreed upon schedule that the responding materials would be served and filed by May 13, 2016 and cross-examinations by both sides, if any, would be completed by May 31, 2016.

[6]               Counsel for the plaintiff did not file an affidavit in response to the March 26 affidavit but did provide the motion judge with a copy of the affidavit of the plaintiff sworn January 12, 2016 in support of her motion for default judgment.

[7]               Counsel for the plaintiff brought a motion for leave to appeal the decision of Dow J. that was scheduled for hearing in writing on January 4, 2017. The moving party’s motion record was filed November 18.

[8]               The defendant’s factum was filed on or about December 15, 2015 along with a motion record that included the affidavit sworn December 15 by Dhiren R. Chohan, the lawyer acting on behalf of the defendant in this motion for leave which affidavit included reference, inter alia, to the circumstances in which the January 12 affidavit had been filed.

[9]               Counsel for the plaintiff immediately forwarded to the Registrar of the Divisional Court a three page letter in which she objected to the filing of the affidavit of Mr. Chohan.  I agree with counsel for the plaintiff that it was improper for counsel for the defendant to have filed that affidavit without seeking leave of the court to submit fresh evidence.  Furthermore, it was improper for counsel for the defendant to have filed his own affidavit containing evidence on which he sought to rely.  I strike out and disregard the contents of that affidavit and any references to such evidence in the factum.

[10]           Counsel for the plaintiff also submitted that the defendant’s factum included statements that were not supported by the evidence in the motion record on the leave to appeal and were not in evidence before Dow J. Counsel pointed out the several paragraph numbers in which the factum referred to such evidence including paragraphs 45 and 75.  I agree with that submission and I will disregard those portions of the factum identified by counsel for the plaintiff.

[11]           The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one.

[12]           Counsel for the plaintiff relies on Rule 62.02(4)(b) which requires that the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate.”[3] In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice. [4]

[13]           Counsel agree that the motion judge identified the factors[5] relevant to setting aside a default judgment, namely:

[14]           In summary, the motion judge concluded as follows;

[15]           At paragraph 23 he held that, guided by the factors (two of which favoured the plaintiff and three of which favoured the defendant), “the overall interest of justice favours the granting of the order with terms.”

[16]           In her factum, counsel for the plaintiff takes the position that there is good reason to doubt the correctness of the decision as follows:

[17]           Counsel for the defendant takes the position that none of those give rise to reason to doubt the correctness of the decision.

[18]           I will approach the submissions on behalf of the plaintiff as follows:  whether the motion judge ignored Court of Appeal precedent barring an assessment of the proposed defence on the merits; whether the motion judge failed to identify a defence on the merits as to liability and the quantification of damages; whether the motion judge failed to recognize and take into account ongoing psychological harm as a form of non-compensable prejudice to the plaintiff.

[19]           Counsel differ as to whether the Court of Appeal has articulated the principle that, where there is evidence on the part of the defendant that demonstrates a conscious decision not to defend, the court ought not to consider the proposed defences. To consider their respective positions I will briefly refer to some of the cases to which counsel refer.

[20]           In TD Bank[7] the plaintiff sued on a guarantee given by McNicol.  Following a default judgment, Master Donkin dismissed the motion to set aside the judgment and Adams J. heard the appeal from the dismissal. The court applied the three requirements articulated in Chitel v. Rothbart[8]. At paragraph 4, Adams J. noted that the default in that case was intentional within the meaning of the cases[9] and concluded that the defendant had taken a “calculated risk” and lost. Under those circumstances the court ought not to intervene.  Adams J. also concluded that McNicol had not disclosed any valid defence. In other words, in dismissing the appeal, Adams J. dealt with two of the three factors articulated in Chitel, not solely the intentional disregard for the claim.  

[21]           In Schill & Beninger[10]the plaintiffs had brought an action for damages in the amount of “approximately $450,000” for conversion and fraud alleging that Rosalind Gallagher stole money from the plaintiff employer with the connivance of her husband.  Rosalind and her husband died in a motor vehicle action and C.R. (a Manitoba lawyer) was appointed litigation administrator. At the hearing of the appeal, the deceaseds’ daughter replaced C.R.

[22]           C.R. did not defend the Ontario action based on his belief that a trial on the merits would be required in Saskatchewan where the estate had assets.

[23]           The defendant was noted in default and the plaintiffs obtained default judgment pursuant to rule 19.04(1)(a) as a debt or liquidated demand in the amount of $450,000 plus interest for a total of $557,013.

[24]           The litigation administrator brought a motion to set aside the default judgment. The motions judge refused to set aside the judgment because the administrator had intentionally defaulted. 

[25]           At paragraph 11, the Court of Appeal held as follows:

[26]           For the first time, counsel for the appellant raised the issue of the jurisdiction of the registrar to sign judgment under rule 19.04 and argued that the proper procedure was under rule 19.05 to a judge on affidavit material.  On this point, the Court held at paragraphs 9 and 10 as follows:

[27]           Counsel for the plaintiff relies on paragraph 11 in support of the submission that a finding of intentional refusal to defend is a permanent bar to intervention.  I do not agree that the Court articulated such a broad principle. It appears that the evidence of intentional disregard was strong, coming from a lawyer who had to understand the risks associated with disregarding the case. Furthermore, the Court referred to no authorities and, while not setting aside the noting in default, did set aside the judgment of the Registrar.   The defendant in the case achieved significant success in that the plaintiff was required to prove its damages even without the participation of the defendant.

[28]           In Luciano v Spadafora[11] it appears that the plaintiff and her parents sued the defendants (who were husband and wife) for damages for assault caused by the defendant wife. The defendants did not file a defence and the plaintiffs obtained a judgement dated September 17, 2003 in which the defendants were ordered to pay damages for assault and mental distress.  The defendants brought a motion to set aside the default judgment which was heard by Justice H.J.W. Siegel.  He applied the threefold test under rule 19.08(1) and at paragraph 13 he held as follows:

[29]           Siegel J. went on to conclude that neither party had a prima facie defence on the merits; that the pleading on the issue of the liability of the husband defendant was sufficient and that he had not put forward facts that would establish a viable defence, that with respect to the issue of the amount of damages, the defendants had relied on the amounts of damages for past awards for injuries for a broken nose and Siegel J.  held that he would not set aside a general damage award that involved an important element of discretion; that the record strongly suggested that the defendants did not move expeditiously to set aside the judgement until the plaintiffs took steps to enforce it; that in his affidavit, the husband defendant had misrepresented important facts relevant to the motion that were only acknowledged under cross-examination and that it was probable that the defendants chose not to respect the judgment of the court until such time as it became clear it could be enforced.   In “all these circumstances” he declined to exercise discretion to set aside the judgment “in the absence of compelling evidence of a viable defence”.   He concluded that “as the defendants have failed to meet this standard, both as to the liability of the husband defendant and as to the quantum of damages”, the motion was denied.

[30]           In other words, he considered the important factor of deliberate disregard of the proceedings but he also considered other factors and it was all of them that led him to dismiss the motion.

[31]           In Sunlife Assurance[12] at paragraph 1, the Court of Appeal held as follows:

[32]           The underlying decision of Justice B.P. O’Marra dated August 22, 2012 is not available and further facts about the “ample evidence” cannot be located.  However, the Court of Appeal relied on Schill & Beninger where the evidence was not only overwhelming, but appears to have been admitted by the litigation administrator. I do not take that sentence as an articulation by the Court of Appeal that, in all cases where there is an intentional non-participation in the case that the court ought not to consider whether the defendant has raised an arguable defence on the merits.

[33]           In Ball v. Bradon[13] the plaintiff claimed he had been misled as to the true nature and extent of Bradon’s business and they sought return of their investments. The action started in October 2011 and the defendants were noted in default followed by a default judgment by the Registrar dated October 24, 2013. Master Muir heard a motion to set aside the default judgment.  

[34]           He relied on the factors in Mountain View and concluded that the defendant Compta “candidly admitted that he chose not to defend this action. He preferred to let sleeping dogs lie.”  He referred to the Court of Appeal in Sunlife. He concluded that the defendants had not provided a plausible excuse or explanation for not defending the action and for the delay in bringing the motion to set aside. Furthermore, they failed to put forward any evidence in support of the allegations in their draft statement of defence and that the factor of prejudice favoured the plaintiffs.  He held as follows at paragraph 16:

[35]           In other words, the decision by the defendants to not defend was a significant factor but the Master nonetheless addressed the other factors relevant to setting aside a default judgment.

[36]           In Ravazzolo v. Romaniuk[14] Romaniuk had purchased a co-worker’s book of clients in the investment and wealth management sector.  His wife and her parents co-signed a loan to facilitate the transaction.   The Bank of Montreal subsequently took over the loan.  In 2009, Romaniuk and his wife separated.  In 2012, the Bank demanded payment of $2,775.   The plaintiffs paid $13,877 on the loan and sued, alleging that Romaniuk had been their investment advisor and he had breached various duties. The claim was served and Romaniuk delivered a notice of intent to defend but no statement of defence and he was noted in default.  In a default judgment dated August 2, 2013, Romaniuk was ordered to pay $101,347 with respect to payments on the loan, the amounts owing to the bank, punitive damages and costs.  The court also issued an unclaimed declaration that Romaniuk had committed breaches of fiduciary duty and made an unclaimed order that the judgment survived any order of discharge from bankruptcy.

[37]           The Bank obtained default judgment against Romaniuk for the full amount owing on the loan.

[38]           Romaniuk brought a motion to set aside the default judgment. The Court of Appeal declined to consider his proposed fresh evidence. The Court referred to the factors in Mountain View and noted the conclusion of the motion judge that the defendant knew that the Statement of Defence and costs had to be paid and “he deliberately chose to do nothing.   This was a deliberate, calculated and conscious act.  He acted only when he realized that a garnishment of his wages was to occur.” 

[39]           The Court of Appeal went on to conclude that the motion judge erred in several ways.   The Court held that once he learned of the default judgment, the defendant had moved reasonably promptly to set it aside. Furthermore, the Court held that the motion judge erred in concluding that the defendant did not have an arguable defence on the merits in that the plaintiffs had not advanced a simple, liquidated claim  and there had been no consideration in the granting of the default judgment whether the plaintiffs were entitled to the damages awarded; that the motion judge erred in including the amount claimed by the Bank of Montreal and since the defendant did not contest that judgment, the plaintiffs had a judgment for damages that they had not suffered and may never suffer; that the plaintiffs did not claim the declaratory relief  or an order that the judgment survive any order of discharge from bankruptcy;  and that the motion judge failed to consider prejudice to the plaintiffs and the defendant. The Court concluded that “in these circumstances” the defendant should be relieved of the consequence of his default. The Court set aside the default judgment substituted a judgment of $13,877.  

[40]           In other words, while the motion judge had made a finding that the defendant had deliberately chosen not to file a Statement of Defence, a finding that does not appear to have been altered by the Court of Appeal, that did not impede consideration of all the other relevant factors.

[41]           In Cozzi v. Jeffery[15] the plaintiff had been retained by the defendant and had obtained a default judgment.  Myers J. heard the motion to set aside the default judgment.  He noted that the defendant had participated in settlement negotiations with the plaintiff but he had “declined to participate in the litigation”.  Myers J. quoted from Ravazzolo and concluded that the defendant had no acceptable basis for having failed to defend.  He referred to the endorsement in Schill & Beninger and he held as follows:

[42]           In Mountain View there are three other relevant excerpts, one before the articulation of the list and two after the articulation of the list of factors, namely:

[43]           Without considering all of the decisions on which all counsel rely, I conclude that, in circumstances where there is evidence of an intentional non-participation in the case, there is no precedent that bars an assessment of the proposed defence on the merits. 

[44]           I am not persuaded that the motion judge erred in his consideration of the evidence of N.D. that he would not file a defence and the plaintiff could do what she needed to do.  In his discretion, the motion judge identified other factors that mitigated that statement.  Although he did not make specific mention at that point in his reasons, he had summarized the evidence that the defendant had actively participated in settlement negotiations but that the settlement agreement was not signed because it required an immediate payment, which he could not pay. 

[45]           In his decision, Stinson J. had identified the elements of the three causes of action as follows:

[46]           Counsel for the plaintiff takes the position that the motion judge erred because he failed to distinguish between liability and damages; that on the issue of liability, the defendant had admitted to “tortious conduct” and did not deny that the plaintiff had suffered harm as a result.

[47]           At paragraph 18 of his decision the motion judge dealt with the arguable defence factor. It is the case that he appears to focus on damages rather than liability yet in paragraph 23 he set aside the finding of both liability and damage. Furthermore, I note that the affidavit of N.D. sworn March 26, 2016 does not attach a draft proposed Statement of Defence and paragraph 26 of that affidavit suggests that his challenge was to damages and not to liability:

[48]           In addition to taking the position that he erred in so doing, counsel for the plaintiff takes the position that the reasons fail to provide the parties with functional knowledge about the reasoning and that the reasons must show that a judge is alive to the essential elements of the claim and their factual findings must deal with each of those requirements.[16]

[49]           The extent to which the judge must provide reasons is relative to the nature of the proceeding.  In R. v. Sheppard, it was a trial.  In Barbieri it was a motion for partial summary judgment on the question of liability only. In the case before me, it was a motion to set aside a default judgment for which the reasons contained lengthy findings of fact and law.

[50]           Prior to beginning his analysis of the Mountain View factors, in paragraphs 6 – 13 the motion judge provided his overview of the evidence before Stinson J. and before him, including the exhibits to N.D.’s affidavit. For example at paragraph 9, the motion judge referred to an email from the defendant dated July 4, 2014. Furthermore, one of the elements of the tort of intentional infliction of mental distress is “a visible and provable injury” thereby conflating both the elements establishing liability for the tort and damages for the tort.

[51]           In a motion to set aside a default judgment  it is not necessary that the motion judge engage in the same detailed examination of the elements of the torts in question or the damages arising therefrom as did the judge hearing the original motion because the motion judge need only conclude that there is an arguable defence on the merits.

[52]           Counsel for the plaintiff takes the position that N.D. admitted to “tortious conduct” and on that admission, the findings of Stinson J. on liability ought not to be set aside. I do not agree. He admitted to posting a video on a pornographic web site. He did not admit that it was “tortious” or constituted conduct on which a finding of liability should be made. 

[53]           It would have been preferable if the proposed Statement of Defence had been provided to the motion judge. It appears that the motion proceeded without it and without comment by the motion judge or counsel for the plaintiff  (who is not the same as counsel in this motion).  However, bearing in mind the standard by which reasons are to be assessed, I am not persuaded that the motion judge erred in his conclusion that both liability and damages should be the subject of a trial on the merits.

[54]           As indicated above, the plaintiff did not file an affidavit in response to N.D.’s affidavit.  Her evidence was contained in her affidavit sworn January 12, 2016.  As a result, there was no evidence before the motion judge that would have led him to consider “ongoing psychological harm” arising from setting aside the default judgment as opposed to ongoing psychological harm arising from the events that had occurred in December 2011.

[55]           I am not persuaded that the motion judge erred in his application of the Mountain View factors. 

[56]           Counsel for the plaintiff takes the following position:

[57]           For the reasons set out above, I have not agreed with the first and second sentences.  With respect to the third sentence, I do not see the dismissal of this motion for leave to appeal as a discouragement of victims.  Indeed, it is a matter of general importance that the facts in this case be the subject of a hearing on its merits so that the significant legal conclusions deriving therefrom will have more weight in future cases as opposed to findings made as a result of a hearing where only one side participated, albeit through the fault of the other side.   The uniqueness of the case and the prospect for a decision on the merits making a contribution to the development of torts in an important area of the law is a compelling reason to conclude that it is a question of general importance that the defendant have the opportunity to participate in a trial.

[58]           The claim was issued in September 2012.  Now that this motion has been resolved, I encourage counsel to explore with the Civil Team Leader whether an early settlement conference might be productive.

[59]           By letter dated December 22, 2016, counsel confirmed their agreement that each party will be responsible for her/his own costs in respect of the motion for leave to appeal.

[60]           The motion for leave to appeal the decision of Dow J. dated September 16, 2016 is dismissed without costs.

[61]           Within 20 days of receipt of this decision, the defendant shall pay the costs ordered by Dow J.  and he shall deliver a statement of defence.