Court File and Parties

Court File No.: 453/08 Date: 2008-12-17 Superior Court of Justice - Ontario (Divisional Court)

Re: 1317621 Ontario Inc., Barbara Vandenbergh, George Powers (Vandenburgh), Plaintiffs (Respondents) And: Larry Krauss, Black Inc., Terradigm Developments Inc., Syndicat Management Inc., Krauss, Weinryb, Defendants (Respondents in Appeal)

Before: Mr. Justice Carnwath

Counsel: Marek Z. Tufman, for the Plaintiffs (Respondents) Catherine Francis, for the Defendants (Respondents in Appeal) Larry Krauss, Black Inc., Terradigm Developments Inc., Syndicat Management Inc., Krauss, Weinryb Allan Rouben, for the Appellant, Meredith Jackson

Heard at Toronto: December 11, 2008

Endorsement

Carnwath J.:

[1] The appellant, Meredith Jackson, ("Ms. Jackson") is a judgment creditor of the plaintiff, Barbara Vandenbergh ("Ms. Vandenbergh").

[2] Before Ms. Jackson obtained judgment against Ms. Vandenbergh, the defendant, Black Inc., ("Black") obtained default judgment against Ms. Vandenbergh on a counterclaim. Ms. Vandenbergh successfully moved to set aside the default judgment, but Master Dash held that the writs of seizure of sale obtained and registered by Black following judgment should remain registered. He ordered that Black's share of any realization should be paid into court pending final determination of the issues in the above-titled action. Neither Black nor Ms. Vandenbergh appealed the order.

[3] Some time later, Ms. Jackson brought a motion to vary Master Dash's order and have the Black writs removed from the register. Master Dash held, first, that Ms. Jackson had no standing in the action and, second, that even if she had standing, the writs should remain registered on the terms previously ordered.

[4] Master Dash considered Rule 37.14(1)(a):

37.14(1) A party or person who,

(a) is affected by an order obtained on motion without notice;

may move to set aside or vary the order by a notice of motion that is served forthwith after the order comes to the person's attention and names the first available hearing date that is at least three days after the service of the notice of motion.

Master Dash then concluded that "affected" in Rule 37.14(1)(a) should be interpreted as "directly" affected. He did so on the authority of Ivandaeva Total Image Salon Inc. v. Hlembizky (2003), 63 O.R. (3d) 769, 782-783 (C.A.).

[5] Master Dash went on to find that Ms. Jackson was "affected" as an execution creditor in competition with Black, also an execution creditor. He found Ms. Jackson to be "affected" in a broad sense by Black having filed a writ before she did, but also found this was no different than the affect on any execution creditor when an execution is obtained by another creditor.

[6] He then concluded that on the facts of the case, the rights of a competing creditor may be affected, but they are affected indirectly as a result of a competing judgment or execution. His order did not "directly affect" the economic rights of Ms. Jackson. He concluded by stating that a plaintiff creditor need not give notice to a competing creditor, who was not a party to the action, of a motion for judgment against a common debtor or a motion to set aside such judgment, whether or not such competing creditor has commenced their [sic] own action and whether or not such competing creditor has obtained judgment or execution. In so concluding, Master Dash made no error in law nor committed any palpable or overriding error in his analysis of the facts. He is entitled to deference in accordance with the decision of the Divisional Court in Zeitoun v. Economical Insurance Group (2008), 53 C.P.C. (6th) 308.

[7] Master Dash then turned his mind to the possible existence of exceptional circumstances that should provide standing to Ms. Jackson. He found there were not. He found her to be in the same position as any other competing execution creditor.

[8] Master Dash then turned to consider the validity of Ms. Jackson's arguments to set aside the continuation of the writs on the assumption that he was wrong in denying standing to Ms. Jackson. He found the test on a motion under Rule 37.14 is "not alone whether the order ought or ought not to have been made, but also whether, having been made it should be rescinded or varied". He found he was not restricted to determining whether the initial decision was correct, but whether he should rescind the order "in view of any change in the state of affairs or position of the parties", citing as authority for these propositions, Ivandaeva, above.

[9] He noted that in setting aside a default judgment, in Rule 19.08(1) the Court "may impose such terms as are just". He found it had long been established that a court, in setting aside a default judgment, has the power to permit writs of seizure and sale to remain filed with the Sheriff. (see: Canadian Imperial Bank of Commerce v. Sheahen (1978), 22 O.R. (2d) 68 (Div. Ct.), at pp. 690-692)

[10] Ms. Jackson had argued that the situation before the Master was unique because Black had signed default judgment against Ms. Vandenbergh without warning the solicitors on the other side that they intended to do so. Master Dash found that Black had the legal right to do so, adding that, in his view, it was unprofessional. He found it unnecessary to consider whether the failure to warn constituted sufficient grounds to set aside a default judgment since it was set aside on the grounds that the Registrar lacked jurisdiction. He then opined that the failure to warn, without more, did not provide grounds to set aside any resulting default judgment. I agree and reject the suggestion that the situation was "unique".

[11] Shortly put, Master Dash found Ms. Jackson would obtain an unfair advantage if his order was varied to remove the writs since she would be in a position to take the entirety of any amounts recovered from Ms. Vandenbergh without having to account to Black for its pro rata share. She would be receiving a windfall at the expense of Black and an unwarranted priority over a larger creditor. I agree with his analysis.

[12] I find no error in law and no palpable or overriding error on the part of the Master in his analysis of the motion on the merits.

[13] The appeal is dismissed with costs to the respondent fixed at $2,000, inclusive of fees, disbursements and GST, on a partial indemnity basis, payable in thirty days.

Carnwath J. Date: 2008-12-17