IRAC analysis on a case

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COURT FILE NO.: SC-21-00000476-0000 DATE: June 16, 2022 ONTARIO SUPERIOR COURT OF JUSTICE RICHMOND HILL SMALL CLAIMS COURT TRITON FINANCIAL 2022 CanLIl 59041 (ON SCSM) Plaintiff - and - MARGHERITA VALENTINO aka MARGHERITA SELVITELLA AND 2799021 ONTARIO LTD. Defendant COUNSEL: For the Plaintiff, Enzo Di Iorio For the Defendant, Nicholas Habets HEARD: June 16, 2022 - heard virtually via Zoom DEPUTY JUDGE L. CARR: ORDER & REASONS FOR DECISION [1] The Defendants, Margherita Valentino aka Margherita Selvitella and 2799021 Ontario Ltd., have brought this motion for an Order to set aside default judgment, terminate garnishment proceedings and return all garnished funds, pursuant to Rule 11.06 of the Rules of the Small Claims Court, O. Reg 258/98. [2] In addition to hearing submissions of counsel for the parties, I have reviewed the following: a) Notice of Motion and Supporting Affidavit sworn by Margherita Valentino February 28, 2022, attaching Exhibits "A" to "E" b) Responding Affidavit of John Schipani sworn May 19, 2022, attaching Exhibits "A" to "W" c) Notice of Motion and Supporting Affidavit sworn by Margherita Valentino June 2, 2022, attaching Exhibits "A" to "S" d) Notice of Motion and Supporting Affidavit sworn by Giovanni Chiriatti on June 2, 2022, attaching Exhibit "A"[3] For the reasons that follow, the motion is dismissed. FACTS: [4] In the month of October 2020, the Defendant, Margherita Valentino, entered an agreement with the Plaintiff, Triton Financial, to source and arrange financing to purchase the Oakville store of a high end fashion boutique chain of stores, known as SESSO. Ms. Valentino had already signed an agreement to purchase the Oakville store prior to entering the Agreement with Triton Financial. Ms. Valentino also worked as a dental hygenist at Rosedale Periodontics at 68 Scollard Street, Toronto ("The Employment Address"). Ms. Valentino states that she did not 2022 CanLII 59041 (ON SCSM) have time to find financing so she contacted Triton Financial to do the leg work for her. On December 9, 2020, Ms. Valentino incorporated the Defendant company, 2799021 Ontario Lid., for the purpose of purchasing the Oakville store. [5] On December 10, 2020, Triton Financial secured a Commitment Letter from TD to advance $400,000 for the purchase of the SESSO Oakville store, subject to terms and conditions, namely that Ms. Valentino provide an unlimited personal guarantee. The monies were advanced on or about February 16, 2021 and used for the purchase of the Oakville store at 140 Trafalgar Road, Oakville ("The Business Address"). [6] On or about February 18, 2021, two days after TD advanced the monies, Triton Financial delivered an invoice for its services to Ms. Valentino at margheritahealth@gmail.com ("The Business Email"), in the amount of $22,600.00, for its 5% fee of the monies advanced. On or about February 20, 2021, Ms. Valentino spoke with Triton Financial by telephone call and refused to pay the invoice. Triton Financial moved quickly and two days later, its counsel delivered a demand letter to Ms. Valentino, on February 22, 2020, to the same email address margheritahealth@gmail.com and by regular mail to the home address provided by Ms. Valentino, at 26 Knowland Drive, Etobicoke ("The Knowland Home Address"). The letter clearly indicates that a lawsuit would be commenced if payment was not received on or before February 26, 2021. [7] Without delay, the Plaintiff's Claim was issued on March 9, 2021. During the month of March 2021, there were multiple attempts to serve the Plaintiff's claim at The Knowland Home Address at different times of the day, The Business Address and The Employment Address. An Order for substituted service was granted on October 13, 2021, and the Plaintiff's Claim was served in accordance with that Order on October 18, 2021, by mailing a copy of the Order and Plaintiff's Claim to The Knowland Home Address, The Business Address, The Employment Address and by email to The Business Email. No defence was received and Triton Financial obtained Default Judgment and subsequently issued notices of garnishment. As of the date of this motion hearing, over $13,000.00 has been garnished ISSUES: [8] The test for setting aside default judgment is set out in Rule 1 1.06 of the Rules of Small Claims Court. The Court of Appeal added two additional factors for consideration to the statutory test, 2in the case ofMountain View Farms Ltd. v. George Donald McQueen]. The test is set out at paragraphs 48 and 49 as follows: [48] The court must consider the following three factors: (a) whether the motion was brought promptly after the defendant learned of the default judgment; (b) whether there is a plausible excuse or explanation for the defendant's default in complying with the Rules; and (c) whether the facts establish that the defendant has an arguable defence on the merits. [49] To this list, I would add the following two factors the court should have regard to, as set out in Peterbz'lt ofOntario Inc. 12. 1565627 Ontario Ltd. 2007 ONCA 333, 87 OR. (36!) (0A.), at para. 2: (d) the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and (e) the effect of any order the court might make on the overall integrity of the administration of justice. ANALYSIS (a) Whether the motion was brought promptly after the defendant learned of the default judgment? [9] Ms. Valentino states that the default judgment came to her attention on or about February 3 or 4, 2022, when she found the default judgment in the mail at The Knowland Home Address. Ms. Valentino produced a receipt from Powell Litigation alleging that she obtained legal advice on February 10, 2022. The motion to set aside default judgment was led with the court in March 2022. [10] Default Judgment was signed on January 14, 2022, which is approximately 2 to 3 weeks prior to February 3, 2022. I am satised that the Defendants brought the motion promptly after learning of the default judgment. 1 Mountain View Farms Ltd v Meg Queen 2014 OJNO 1197 2014 ONCA 194 119 OR 3d1 561 317 OAC 255 372 DLR 14th! 526: 239 ACWS 13d! 635: 2014 CarswellOnt3011: 56 CPC g7th! 133 3 .M} '1' x.' "J SC C): 964.1 { 5 anLII 20212 C (b) whether there is a plausible excuse or explanation for the defendant's default in complying with the Rules? [11] Counsel for the Defendants submit that the Defendants need only prove that the Plaintiffs Claim did not come to their attention and refers to paragraph 20 and 21 of the Divisional Court decision in H easman 12. Mac '3 Convenience Store [110.2 [12] I agree with counsel's submission that I must decide whether the Plaintiff's Claim came to the attention of the Defendants. In order to do this, Ms. Valentino must explain why it did not come to her attention at multiple locations, being The Knowland Home Address, The Business Address, The Business Email and The Employment Address. Ms. Valentino provided these addresses to Triton Financial and none of these addresses changed from the time that Triton Financial provided its services up to the date of default judgment. I will address each location where the Plaintiffs Claim was delivered. \\ .2 :5 iv" 2"; SC x\"; I .~. f'Lll 5904i 51' "Q r\\ A; E; MM}. arm . (i) The Business Email (mar heritaheal'z mail. com [13] Ms. Valentino states that she lost access to The Business Email during the month of February 2021 and has never regained access to this email. In paragraphs 31 to 36 of Ms. Valentino's Afdavit, sworn June 2, 2022, she sates this email was \"attached\" to her iphone and when she lost her iphone, she lost all access to the email. When she originally purchased the iphone, an Apple store employee assisted her with setting up The Business Email on her iphone. The Apple employee advised her not to use the same password that she was using for her personal email mar eritaselvitella mail.com (\"The Personal Email\") for security reasons. The password was recorded in the iphone so that she did not need to re-enter the password again. [14] Ms. Valentino states that she lost her iphone in February 2021 and forgot the password to The Business Email so she has been unable to access this email on any other device. She states that Rogers provided a temporary sim card that she inserted into an old phone while she waited for a replacement phone. Ms. Valentino produced documentation to show that she received a new phone 9 months later in November 2021. [15] Contrary to Ms. Valentino's written statements, she produced an email received in The Personal Email that she forwarded to The Business Email on February 10, 2022. It is possible that this email may have been printed from The Business Email account given that The Business Email is in the upper righthand corner of the document, slightly grayed. No evidence was offered to explain this. Counsel for Ms. Valentino could only offer guesses why Ms. Valentino would forward an email to The Business Email if there was no access. [16] Triton Financial delivered its invoice, demand letter and the Plaintiffs Claim to The Business Email on multiple occasions. Ms. Valentino contacted Triton Financial on February 20, 2021 at 3: 15 pm. refusing to pay the invoice. Counsel for Triton Financial delivered a demand letter to The Business Email Address on February 22, 2021. The 2 Heasman v Mac's Convenience Store Inc 2015 OJ No 1746 2015 ONSC 2290 4 [17] [18] [19] [20] Plaintiff' s Claim was also delivered to The Business Email Address on March 30, 2021 and again on October 18, 2021, with a copy of the Order for substituted service. The written and documentary evidence summarized above, raises the issue of credibility of Ms. Valentino's evidence. I do not doubt that Ms. Valentino received a new phone in November 2021, but there is no evidence that she lost her phone 9 months earlier. She did not provide any documentation to show that she reported the phone lost or stolen to Rogers. She did not provide any documentation to show when she ordered a new phone. She did not provide any documentation or invoice from Rogers for the temporary sim card. This is a gmail account and she did not produce any documentation to show that she tried or was unable to recover the password. She did not provide any evidence that she contacted an IT professional to help her recover the password. Counsel for Ms. Valentino was given an opportunity to explain the February 10, 2022 email forwarded to The Business Email but no explanation was given, other than guesses. Ms. Valentino did not attend the motion with her counsel and therefore no explanation was given. I find that Ms. Valentino is not a credible witness for reasons summarized in the paragraph above, more specically the lack of documentary evidence on the loss of her phone and being locked out of The Business Email, in addition to the inconsistency between her written statements and documentary evidence on her access to The Business Email. As a result, I do not find Ms. Valentino to be truthful and attach little to no weight to her written statements. The Plaintiffs Claim was delivered to The Business Email as early as March 2021 and again in October 2021. Ms. Valentino has not provided a plausible excuse for the delay. (it) The Knowland H omeAddress At paragraph 37 of Ms. Valentino's Affidavit sworn June 2, 2022, she states that The Knowland Home Address was her residential address and she was occupying the basement when she was dealing with Triton Financial. She offers a number of explanations why the Plaintiffs Claim did not come to her attention at this address. First, the tenants living on the main floor may have took her mail and secondly, there was a sewage back up rendering the basement of The Knowland Home Address uninhabitable. As a result, Ms. Valentino moved to 63 Buttonwood but she Checked her mail regularly at The Knowland Home Address. However, she had a motor vehicle accident after which she was no longer able to Check the mail at The Knowland Home Address. First, I will deal with the sewage back up. The documentation produced by Ms. Valentino shows the sewage backup occurred more than 6 months prior to her dealings with Triton Financial. Ms. Valentino produced a one year lease agreement at 63 Buttonwood commencing April 2020. Ms. Valentino did not deal with Triton Financial until October 2020. I question why she gave The Knowland Home Address to Triton Financial when she actually residing at 63 Buttonwood when she met with Triton Financial. Ms. Valentino also renewed her driver license in August 2020 at The Knowland Home Address, although she was not physically residing there. [21] [22] [23] [24] [25] [26] [27] With respect to the motor vehicle accident, the documentary evidence shows the accident occurred on November 28, 2021, which is after all of the service attempts and cards left by the process servers and more than a month after the Plaintiffs Claim, and Order Substituting Service, was mailed to The Knowland Home Address, on October 18, 2021. The only documents mailed after the car accident was the Default Judgment, which Ms. Valentino received. (iii) The Business Address Defence counsel relies on paragraph 22 of the Divisional Court decision, Poisson v. Economical Mutual Insurance C0mpany3. In that case, the Plaintiff's Claim was served on an employee of the business but did not forward it to the person responsible to defend the action. The Divisional Court found it was too demanding to require an explanation into the inner workings of the company. The Business Address is the registered ofce address of the Defendant, 2799021 Ontario Ltd., incorporated December 9, 2020. It is also the Oakville store location which is open to the public. Ms. Valentino is the sole ofcer and director of 2799021 Ontario Ltd. Ms. Valentino denies that the Plaintiff' s Claim was received at this address prior to receiving the default judgment. Ms. Valentino states that the prior owner of the business, Mr. Chiarotti, checked the mail at The Business Address. Mr. Chiarotti also states that he attended The Business Address regularly after he sold the business to check any mail that continued to be sent there. Mr. Chiarotti also states that he offered to collect Ms. Valentino's mail during covid. The Business Address is a retail store open to the public with employees. There is no evidence when the store was closed for covid and when it was open. From March 12 to March 22, 2021, there were at least 3 attempts to serve The Business Address but the business was closed due to covid restrictions at the time. On each occasion a card was left by the process server. A fedeX card was also left but removed prior to the next service attempt. There was also a telephone call from a male in response to the process server's card but the male refused to provide his name. The Plaintiff's Claim and Order for Substituted Service was mailed to the business address on October 18, 2021. Again, this is more than a month before Ms. Valentino's motor vehicle accident. (iv) The Employment Address Ms. Valentino was employed as a dental hygienist which requires her to meet with patients throughout the day. Ms. Valentino admits that a person initially stating to be a patient, attended at her employment while she was seeing another patient. The receptionist asked 3 Poissonv Economical Mutual Insurance Co 2021 OJ No 6697 2021 ONSC 7827 6 \\ .2 Q}: iv" 2"; SC x\"; I .~. f'Lll 5904i 51' "Q r\\ A; E; MM}. 20\"\" . [28] [29] [30] (I) [31] [32] her twice to see this person, but Ms. Valentino states she refused because she did not know the person. At the time that this occurred, the Plaintiff's Claim had been emailed to The Business Email, and there had been multiple service attempts at The Business Address and The Knowland Home Address. I find this behaviour to be more consistent with evading service. (c) whether the facts establish that the defendant has an arguable defence on the merits? Counsel for the Defendants submits there is an arguable Defence on three grounds: (i) Ms. Valentino is not personally liable; (ii) Triton Financial did not complete the work; and (iii) The Agreement with Triton Financial is ambiguous, vague and drafted Triton Financial. Counsel for the Defendants relies on another small claims court decision in Harris v. Abrams '5 Towing Services" and argues that a defence with merit does not have to be a sure thing. It only needs to be arguable. Counsel also relies on the Divisional Court decision in Poisson v. Economical M uiual Insurance C 05 . that the threshold is low to find a defence with merit. Iwill address each of the grounds raised by counsel. Personal liability ost. Valentino Ms. Valentino denies personal liability and states that, at all times, she was acting on behalf of a corporation to be incorporated. The Agreement with Triton Financial identifies \"the clients\" as \"Margherita Valentino & or SESSO , Oakville 0/0 \"A Company To Be Inc\". Paragraph 8 of the Agreement sets out Triton Financial's service fee as follows: TF's Service Fee: In exchange for sourcing and arranging financing for THE CLIENTS, both parties hereto agree that TF shall be entitled to a total consideration comprising of $20,000+ hst (i.e. 5% of $400,000). The Agreement identies Ms. Valentino as a client and paragraph 8 of that Agreement clearly states that both parties will be held liable and the amount that each will be liable. This is the same amount claimed in the Plaintiffs Claim. Triton Financial has not included any other fees in the Plaintiffs Claim. It is also consistent with the personal guarantee that Ms. Valentino gave to TD Bank for the advancement of $400,000.00. in} Q.\" HLII filirfli'i {CM SEC\": "1 \"MIA. r\\ a, r 2023 E 4 Harris v Abram's Towi Services 84 Ltd 2021 OJ No 1427 5 Poissonv Economical Mutual Insurance Co, 2021 OJ No 6697, 2021 ONSC 7827 7 (ii) Work not completed by Triton Financial [33] [34] [35] [36] [37] [38] [39] Ms. Valentino states that Triton Financial did not perform the work as claimed. Ms. Valentino states that she was too busy to do the legwork to seek nancing and therefore retained Triton Financial to do it. Paragraph 8 of the Agreement between the parties, cited above, clearly sets out the work to be performed and the amount of the fee. It was agreed that Triton Financial would source and arrange nancing for the Defendants, in exchange for a 5% fee of the amount of nancing. The Defendants do not dispute that it was Triton Financial's efforts that led to the Letter of Commitment from TD Bank to advance $400,000.00. Ms. Valentino states that she incurred additional fees such as legal fees, in addition to Triton Financial's fee to obtain the funds from TD Bank. I accept submissions from plaintiff's counsel that the Agreement between the parties did not include legal services to advance funds after obtaining the commitment from TD Bank. Ms. Valentino also made some references to the preparation of a business plan. However, the fee for the business plan is not included in the Plaintiff' s Claim and therefore not relevant. (iii) Contract is ambiguous, vague and drafted by the plainti" Counsel for Ms. Valentino also advances general statements that the Agreement between the parties is ambiguous and vague. Specic references were not provided, except for inconsistent references in the Agreement to \"client\" and \"clients\". This was discussed under the heading personal liability above. The Agreement clearly identies the parties, the service to source and secure nancing and the fee for such service. The Agreement is not lengthy. It is 14 paragraphs and does not ll 3 full pages. Having considered all of the evidence and submissions of counsel, I do not nd that the Defendants have a defence with merit. (d) the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed Counsel for the Defendants did not raise any argument with respect to prejudice for the Defendants. But there is the obvious argument of prejudice if the Defendants are unable to defend. Counsel for the Plaintiff did raise prejudice against Triton Financial, given that Triton Financial has incurred over $10,000 in legal fees to obtain default judgment and pursue more than one garnishment. These costs will be thrown away if the judgment is set aside. [40] (e) the effect of any order the court might make on the overall integrity of the administration of justice As discussed above, I do not nd Ms. Valentino to be a credible witness and her written statements are not reliable. Granting this motion on such evidence, would harm the integrity of the administration of justice. DECISION [41] [42] [43] [44] Defence counsel refers me to the Divisional Court decision in Passion v. Economcial M utual Insurance C ompans to argue that the Defendants ought to be afforded an opportunity to have a full and complete hearing on the merits. I agree with this principle but the facts and evidence before me do not reach the low threshold to set aside the default judgment in the present case. On review of the evidence discussed above, the issue of credibility of Ms. Valentino's written statements became apparent. Ms. Valentino asks the court to accept her unsupported statements that she lost her phone in February 2021 and therefore lost permanent access to The Business Email and this is the sole reason she did not receive the Plaintiff's Claim by email. As set out above, no evidence was produced to support these written statements. When attempting to argue that she has a defence with merit, Ms. Valentino produced an email that she forwarded from The Personal Email to The Business Email on February 10, 2022, after receiving the default judgment. This document contradicts her written statement that she is permanently locked out of The Business Email. I do not nd that Ms. Valentino is a credible witness given the inconsistencies and lack of evidence. Little to no weight has been placed on Ms. Valentino's written statements. Having considered the totality of the evidence and lack of evidence, Ms. Valentino has not provided a plausible explanation for the default and there is no defence with merit. The motion is dismissed. COSTS [45] I did not hear submissions on costs. If either party wishes to make submissions on costs, they may serve and file same within 30 days of the date of this decision. If either party wishes to respond to any submissions that may or may not be delivered, they may serve and le same within 44 days of the date of this decision. All submission shall not exceed 2 pages in length. Delivered: June 28, 2022 DEPUTY JUDGE L. CARR 6 Poissonv Economical Mutual Insurance Co 2021 OJ No 6697 2021 ONSC 7827 9 b0 9.\" C'r'lel fi-QGr-il'i {ON 530: 2013i