ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11126/09
DATE: 2012-01-10
B E T W E E N:
Royal Bank of Canada
J. Ross Macfarlane, for the Plaintiff
Plaintiff
- and -
Sky Wall Systems Inc., The Sky Construction Inc., Ibrahim Aslan and Nezahat Aslan
Alfred Schorr, for the Defendant Nezahat Aslan
Defendants
HEARD: November 25, 2011
The Honourable Justice C. A. Tucker
ENDORSEMENT
Issues
[ 1 ] The issues are:
Is Nezahat Aslan entitled to have the order set aside which struck out her statement of defence and her affidavit in response to the motion for summary judgment brought by the Royal Bank of Canada?
Is Nezahat Aslan entitled to an order setting aside the summary judgment of Royal Bank of Canada against her?
Is the Royal Bank of Canada entitled to have an equitable receiver appointed over Nezahat Aslan and her interest in a piece of real property known municipally as 45 Kensington Drive in Richmond Hill, Ontario?
Should these proceedings be transferred to Newmarket? I do not need to deal with this issue. Royal Bank of Canada concedes that, if I set aside the default judgment and the matter proceeds to trial, Newmarket should be the proper forum, and I do so order.
Background
[ 2 ] The defendant Nezahat Aslan (“Ms. Aslan”) together with her now ex-husband gave a joint and several guarantee in the amount of $270,000 in favour of the Royal Bank of Canada (“RBC” or “the Bank”) in connection with a loan made to The Sky Construction Inc. (“The Sky”). The guarantee was dated November 14, 2006. The Sky defaulted on its obligations to the RBC and demand was made upon the guarantors on February 5, 2009. In addition, Ms. Aslan signed another guarantee of a related company, Sky Wall Systems Inc. (“Sky Wall”), in the principal amount of $525,000 on September 27, 2007. This loan was also defaulted upon and demand was made upon Ms. Aslan in relation to her guarantee.
[ 3 ] This action was commenced by the RBC. Ms. Aslan defended and attended upon an examination of her affidavit to resist summary judgment, but refused to be cross-examined. The RBC brought a motion to strike her defence and affidavit as a result, and for summary judgment, both of which were successful. Neither Ms. Aslan nor her lawyer attended that motion, although both knew of the date and time. Mr. Zwicker, a lawyer her husband had consulted, specifically advised her to attend. The motion had been delayed at the request of the individual defendants for over a month prior to that date.
[ 4 ] The RBC has been unsuccessful in collecting its judgment and seeks the appointment of a receiver to assist in its efforts. When the RBC first brought the motion for an equitable receiver in 2010, the motion was adjourned for one week. The major asset (or perhaps the only asset) of Ms. Aslan was the home she and her husband owned valued at approximately $2,000,000 at 45 Kensington Drive in Richmond Hill. During that week the home burned to the ground. The asset is now a claim against their fire insurance company and the land. Mr. and Ms. Aslan are suing their fire insurance company. Ms. Aslan and her husband are now divorced. Mr. Aslan declared bankruptcy and is now a discharged bankrupt. Subsequent to the home being burnt, the RBC issued a garnishee on the insurers of the home. Mr. Aslan’s trustee supports the appointment of an equitable receiver.
Position of the Parties
[ 5 ] Ms. Aslan has a new lawyer who seeks to set aside the striking of the defence and the summary judgment based upon the fact that Ms. Aslan, whose first language is not English, had no independent legal advice to explain any documents she signed with the bank, no translator, and no freedom from her ex-husband to allow her to make independent financial decisions. She had no involvement in his companies as a shareholder, officer or director, yet was “obligated” by her husband to sign loan guarantees in large amounts. The Statement of Defence that was struck by me prior to granting default judgment did refer to the fact that Ms. Aslan was not a shareholder, officer or director of the company to the bank’s knowledge and the fact that the Bank did not seek independent legal advice for Ms. Aslan.
[ 6 ] The RBC’s position is that the argument of Ms. Aslan is both without merit and incredible, and so is she, and that in any event the claim is raised far too late in the proceedings. Nothing in the banking documentation provided to the court indicates any language issue for Ms. Aslan. It also waived independent legal advice for Ms. Aslan as the bank records indicated that she was employed by her husband’s company and was paid $27,000 a year for so doing. Ms. Aslan denies even receiving a salary.
[ 7 ] The RBC points out that it obtained judgment a year and a half ago and it was only when it moved for an equitable receiver that Ms. Aslan sought to set aside the judgment. Ms. Aslan also argues that the appointment of an equitable receiver is a remedy rarely granted and that it would not be appropriate to grant this relief in these circumstances. She also points out her difficult year losing her house to fire, and her husband to divorce.
[ 8 ] Ms. Aslan agrees that if I set aside the judgment, the execution and garnishment presently held by the RBC may stay in place, thereby protecting its interest in the event any assets are located or sold, or insurance proceeds paid. Her solicitor points out that unless I set aside the judgment, Ms. Aslan will lose any opportunity to make her case and perhaps, if successful, preserve her only asset, being the claim to the insurance proceeds from the home. As noted, she and her ex-husband have commenced an action against their insurance company to recover the insurance monies arising from the loss of their home. In this lawsuit they fail to note either their divorce or his bankruptcy, although his trustee has now been advised of the litigation.
Analysis and Decision
[ 9 ] I can empathize with the Bank’s position in this matter. Two years after a default judgment has been gained by it, and which motion was delayed by the actions of the individual defendants and was not attended by them although advised to do so by their former lawyer, Ms. Aslan now seeks to have her day in court asserting a lack of independence from her husband, a language issue, and a lack of independent legal advice. She says the delay was due to a lack of resources, her upset with her home burning, and a lack of knowledge of her husband’s financial affairs. The Bank points out that the very long delay in bringing her request for relief without a reasonable explanation, based on certain case law, could bar her relief. Her lawyer says she was betrayed by her husband, the bank, and “her” lawyer, a person who had been retained by her husband, and as such deserves an equitable result.
[ 10 ] The Bank calls Ms. Aslan a liar arguing that she had knowledge, which she now denies, of the lawsuit and of the examination at which she refused to be cross-examined.
[ 11 ] As noted, I acknowledge the Bank’s position. Ms. Aslan’s cross-examination of her affidavit in support of her motion is at its best case evasive, in the worst case an attempt at stonewalling to avoid the natural consequences of her actions in signing the guarantee. She even denies the statements she made in support of her own motion. She does not even acknowledge her signature on her guarantee. Her credibility during cross-examination I find suspect, although language could be part of the issue. Her divorce, especially its timing, is also suspect.
[ 12 ] However, it is clear that Ms. Aslan’s first language is not English. I find no reference to that fact in any of the banking loan documents. The Bank knew she was not a director, officer or shareholder of the companies she was being asked to guarantee. The Bank provided no legal reporting letter in relation to the security it obtained for its loans. The affidavit given on behalf of RBC is not from the banker who was involved in the loans to the companies, but a banker who reviewed the file. It is this banker who notes a reference in such file to Ms. Aslan working for the guaranteed company and receiving a salary. We do not know the source of this information or if that was the reason no independent legal advice was sought. Ms. Aslan denies ever working at all or ever receiving any salary.
[ 13 ] The Bank used a translator first to examine Ms. Aslan in aid of execution prior to the motion to set aside the judgment and during cross-examination of her affidavit in support of this motion. It would appear, therefore, that there was a recognition at least on the part of the Bank’s lawyers that language is an issue.
[ 14 ] It also appears clear from the cross-examination of Ms. Aslan that her present lawyer brought the motion only after he was brought in his retainer to do so by her children. Accordingly, her claim of lack of funds appears to be legitimate.
[ 15 ] The “complete domination” by her husband appears to be a situation where she trusted his decision-making while the family was financially successful, but questioned it when the Bank came calling. However that is not an issue which I need to or can decide based on the matter and information before me. The unwitnessed guarantee is again a question which perhaps could have been answered had the person who witnessed the document provided evidence, but I do not have that evidence to assist me.
[ 16 ] I find that the Bank’s position will not be prejudiced by the setting aside of the order striking her defence, her affidavit, and the default judgment as against her given her consent to have the execution and garnishment remain in place pending the outcome of the proceedings. Ms. Aslan would also be responsible for all costs thrown away to be paid forthwith. The Bank is not precluded from bringing a further motion for summary judgment. Ms. Aslan, however, could be prejudiced if she is not given the opportunity to have her day in court.
[ 17 ] Accordingly, I set aside my order striking her defence and affidavit and the default judgment as against Ms. Aslan. I order that any executions and any garnishments remain in place pending further order of this court. I order Ms. Aslan to pay all costs of the Bank thrown away forthwith, including the costs of this motion and of the motion for an equitable receiver.
[ 18 ] Given my decision, I will not deal with the appointment of an equitable receiver at this point in time.
[ 19 ] If the parties cannot agree upon costs, I may be spoken to. If the parties cannot agree upon a timetable to move forward in the action, I may also be spoken to.
Tucker, J.
Released: January 10, 2012
COURT FILE NO.: 11126/09
DATE: 2012-01-10
ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Royal Bank of Canada Plaintiff - and – Sky Wall Systems Inc., The Sky Construction Inc., Ibrahim Aslan and Nezahat Aslan Defendants ENDORSEMENT Tucker, J.
Released: January 10, 2012