SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 1123/09
DATE: 20120605

RE: THE TORONTO WHOLESALE PRODUCE ASSOCIATION

Plaintiff

v.

1797066 ONTARIO INC., 1494203 ONTARIO INC.,

KEYSAR NASR, AMAL NASR and NAIFA ASHKAR

Defendants

BEFORE: CONLAN J.

COUNSEL:
Ian K. Latimer, for the Plaintiff

Ronald G. Chapman, for the Defendants

E N D O R S E M E N T

Introduction and Short Conclusion

[ 1 ] Should the default Judgment be set aside? That is the issue to be decided.

[ 2 ] This lengthy Motion was heard in Orangeville on Monday, June 4, 2012. I thank both experienced counsel for their very able submissions and assistance.

[ 3 ] For the reasons that follow, the Motion is granted. This Court orders that the default Judgment issued by His Honour Justice Kruzick on September 26, 2011, as amended by the Order of MacKenzie J. on November 14, 2011, is hereby set aside, on the following terms: (i) any execution(s) or lien(s) with regard to the said Judgment or the properties that are the subject matter of the Plaintiff’s Claim shall remain in place until the within litigation is concluded, and (ii) any money currently held in trust with regard to the sale of one or more of the said properties shall remain in trust and not be dispersed to anyone until the within litigation is concluded.

[ 4 ] It should be noted that the moving party Defendants consent to the above terms.

[ 5 ] Counsel for the Respondent Plaintiff submits that the moving parties have not requested an Order setting aside that issued by Fragomeni J. on March 21, 2011, which Order struck the Statement of Defence for failure to produce Affidavits of Documents. Although it is correct that the Notice of Motion dated November 17, 2011 does not specifically refer to the said Order, in my opinion, it is implied that it must be set aside if the default Judgment is vacated and the action is allowed to proceed in the normal course, hence, the said Order of Fragomeni J. is also set aside.

[ 6 ] Voluminous materials were filed on the Motion and have been reviewed carefully by the Court, including from the moving parties the Motion Record, Supplementary Motion Record (two volumes), Second Supplementary Motion Record, Third Supplementary Motion Record, Fourth Supplementary Motion Record, Factum, Brief of Authorities, Supplementary Brief of Authorities and the additional Court decision of British Columbia v. Henfrey Samson Belair Ltd. , 1989 43 (SCC) , [1989] S.C.J. No. 78; and from the Plaintiff the Responding Motion Record, an Affidavit of Tiziana Moretti sworn on May 23, 2012, a typed chronology of events with documents attached thereto, a transcript of the examination of the Defendants’ former counsel, Irving Frisch, on April 18, 2012, Factum, Authorities Brief and the additional Court decision of Fortnum v. Royal City Plymouth Chrysler (1991) Ltd. , 2006 CarswellOnt 8362 (Ontario S.C.J. – Leitch J.).

[ 7 ] Briefly stated, in April 2009, in a former action, the Plaintiff obtained default Judgment against Nasr Foods in the amount of about $152,000.00. In October 2009, Nasr Foods went bankrupt. The Defendant in the current action, Keysar Nasr, was the sole officer and director of Nasr Foods. In December 2009, the current Statement of Claim was issued, alleging in part that properties were fraudulently transferred to defeat collection of the April 2009 Judgment and to defeat creditors, including the Plaintiff, of Mr. Nasr. It was further alleged that Mr. Nasr stripped the company of its assets before the bankruptcy.

[ 8 ] On March 21, 2011, Fragomeni J. granted the Plaintiff’s Motion and struck the Statement of Defence for failure of the Defendants to deliver Affidavits of Documents. That Motion was brought on notice to the Defendants’ now former counsel, Mr. Frisch. The Defendants had discharged Mr. Frisch at about the same time that the Motion was served on Mr. Frisch. Whether the Defendants knew about the Motion by the time it was heard on March 21, at which time they were acting for themselves, is in dispute.

[ 9 ] On August 22, 2011, the Defendants were noted in default.

[ 10 ] On September 26, 2011, Kruzick J. granted the Plaintiff’s Motion for default Judgment. That Motion was obviously brought without notice to the Defendants. It is that Judgment that the Defendants now seek to set aside.

[ 11 ] On November 14, 2011, the said Judgment was amended by an Order of MacKenzie J. The amendments were minor.

Analysis of the Issues and the Positions of the Parties

[ 12 ] First, the moving party Defendants argue that the Defendants had no knowledge or notice of the March 2011 Motion before Fragomeni J. The Plaintiff disagrees. The Plaintiff argues that the evidence put forward by the Defendants to explain why they did not attend the March 2011 Motion before Fragomeni J. is incredible, and that this Court should infer that the Defendants intentionally did not attend. I am not prepared to draw those conclusions. It seems odd that the Defendants did not receive the various documents in the record that would have given them notice of the Motion and the potential consequences that could flow as a result of the Defence being struck, however, I cannot ignore the sworn Affidavit evidence offered by the moving parties. In the circumstances, to be frank, I am not convinced that the Defendants had no notice of that Motion, but I acknowledge that it is reasonably plausible that they had no such notice. I make that finding based on the fact that Mr. Frisch at his examination indicated that there were some letters that he had sent to Mr. Nasr which his client seemed to not know anything about; and that Mr. Frisch stated further that he had no notes of anyone having discussed the pending March 2011 Motion with Mr. Nasr when Mr. Nasr picked up from Mr. Frisch’s office the Notice of Intention to Act in Person; and that, once the Defendants received the correspondence about the September 2011 Judgment, they reacted immediately to retain counsel and moved to set it aside (which seems illogical if the Defendants were deliberately not participating in the process by ignoring the March 2011 Motion); and that Mr. Nasr states unequivocally in his sworn Affidavit evidence that he either does not recall having received or did not receive the various correspondence regarding the March 2011 Motion. I disagree with the Plaintiff that there is, for the purposes of this Motion, a material difference between those two assertions.

[ 13 ] Second, the Defendants submit that they moved without delay to set aside the default Judgment issued on September 26, 2011. The Plaintiff does not dispute that. It is clear on the evidence that the Defendants moved without delay, in fact within a month, to try to remedy the Judgment.

[ 14 ] Third, the Defendants assert that the Claim should be dismissed entirely because the Plaintiff failed to obtain leave from the Bankruptcy Court under section 38 of the Bankruptcy and Insolvency Act to have the claim transferred from the Trustee in Bankruptcy for Nasr Foods to the Plaintiff. The Plaintiff disputes that leave was even required and states further that, if required, failure to obtain it is a red herring and merely a procedural irregularity. As I said to counsel during oral argument, the Court declines to decide this issue. It is not necessary to do so in order to deal with the relief sought – to set aside the default Judgment granted in September 2011.

[ 15 ] Fourth, the Defendants submit that the default Judgment should not have been granted in the first place as the evidence before Kruzick J. was lacking. The Plaintiff disputes that. I agree with the Plaintiff. The allegations in the Statement of Claim, deemed to be admitted on the Motion before Kruzick J., were capable of grounding the Judgment, and specifically, were sufficient to establish the material facts that Mr. Nasr stripped assets of the company and conveyed, or caused to be transferred, properties while insolvent.

[ 16 ] Fifth, the Defendants argue that they have a viable defence to the Claim on the merits. The Plaintiff disputes that. The starting principle is that litigants should not lightly be denied their day in Court. The adversarial process that underlies our justice system has served Canadians very well for a long time now. It is not for this Court to try the case on a Motion. I need not decide whether the Defendants will likely succeed at trial. The facts are that Mr. Nasr has sworn in his Affidavit material that he did not strip the company of assets; that he in fact put money into the company; and that he did not convey or transfer properties for the purpose of defeating creditors, including the Judgment debt owed to the Plaintiff; and that he was not insolvent at the time of those conveyances. There is nothing inherently unreliable or just plain silly about that evidence. It may or may not carry the day at trial, but surely it is an arguable defence. It raises triable issues. I am satisfied that the Defendants have established a potentially viable defence on the merits of the Claim.

[ 17 ] Finally, on the overall balancing exercise, the Defendants submit that there is no prejudice to the Plaintiff if this Motion is granted in that there is security for the Judgment in the form of executions, liens and money held in trust from the sale of one of the properties in question. The Plaintiff, through the Affidavit of Ms. Moretti sworn on May 23, 2012, disputes that. That Affidavit alleges, in part, that there are massive outstanding judgments against Keysar Nasr and a smaller, though still significant, one against the co-Defendant, Amar Nasr. This Court is satisfied that, with the terms being imposed for the setting aside of the default Judgment (which terms were suggested by counsel for the Plaintiff during oral submissions and consented to by the Defendants), any prejudice to the Plaintiff will likely be minimal and far less significant than the prejudice that the Defendants would suffer should the default Judgment not be set aside.

[ 18 ] In summary, the law as it relates to this Motion to set aside the default Judgment was clearly set out in the decision of the Court of Appeal for Ontario in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. , 2007 CarswellOnt2713 . This Court must ultimately determine whether the interests of justice favour the Order sought, taking in to consideration the potential prejudice to the moving parties if the Motion is dismissed, the potential prejudice to the Plaintiff if the Motion is granted, and the overall effect of any Order that I do make on the integrity of the administration of justice. Having considered those factors and applied that test, I am satisfied that the moving parties have demonstrated on balance that the Motion ought to be granted. Order accordingly as outlined in the “short conclusion” section above.

[ 19 ] In the event that counsel cannot settle costs, I will entertain brief written submissions on costs on the following timetable: the moving party Defendants within 10 days of the release of this Endorsement; the Respondent Plaintiff within 10 days after receipt of the former submissions; and reply, if any, by the Defendants within 5 days of receipt of the Plaintiff’s submissions. In all cases, the submissions shall not exceed 2 pages excluding a Bill of Costs, Costs Outline and/or Offer(s) to Settle.

[ 20 ] Thank you, counsel.

Conlan J.

DATE: June 5, 2012

COURT FILE NO.: 1123/09

DATE: 20120605

SUPERIOR COURT OF JUSTICE - ONTARIO RE: THE TORONTO WHOLESALE PRODUCE ASSOCIATION Plaintiff v. 1797066 ONTARIO INC., 1494203 ONTARIO INC., KEYSAR NASR, AMAL NASR and NAIFA ASHKAR Defendants BEFORE: CONLAN J. COUNSEL: Ian K. Latimer, for the Plaintiff Ronald G. Chapman , for the Defendants ENDORSEMENT Conlan J.

DATE: June 5, 2012