COURT FILE AND PARTIES

COURT FILE NO.: 09-13856
DATE: 2012-11-27
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1775323 ONTARIO INC., cob as Sylvite Fuels & Lubricants, Plaintiff

AND:
AAH GAS INC., MOHAMMAD ASGHAR, FIVE STAR GAS BARS INC. and ADNAN ASGHAR, Defendants

BEFORE: The Honourable Mr. Justice Robert B. Reid

COUNSEL:
M. Emery, Counsel, for the Plaintiff

S. Gill, Counsel, for the Defendants

HEARD: November 2, 2012

COSTS ENDORSEMENT

[1] The plaintiff secured a default judgment against defendant Mohammad Asghar. That judgment flowed from an order striking the Statement of Defence. The defendant was then noted in default and the default judgment was issued.

[2] In this motion, Mr. Asghar asked the court, in effect, to turn back the clock: setting aside the default judgment, the noting in default and the order striking the Statement of Defence, so that he can defend the action in which a claim was made against him personally. No relief was sought by the other defendants.

[3] The claim itself relates to a debt for gasoline supplied by the plaintiff to gas stations operated by one of the corporate defendants which was controlled by Mr. Asghar. The plaintiff alleges that the contractual relationship was between the plaintiff and Mr. Asghar as well as with the corporate defendants, or alternatively that Mr. Asghar induced one of the defendant corporations to breach their contractual obligations to the plaintiff. Mr. Asghar has denied any personal responsibility.

[4] An examination for discovery was scheduled by the plaintiff in consultation with counsel for the defendants. Counsel for the defendants requested a rescheduling and eventually was served with a notice of examination requiring the defendants’ attendance on September 29, 2010. Mr. Asghar did not attend.

[5] The plaintiff brought a motion to strike the Statement of Defence for the defendants’ failure to attend at the examinations, returnable December 2, 2010. It was adjourned on consent to January 6, 2011. On that same date, counsel for the defendants moved successfully to be removed from the record and, in the absence of any attendance by the defendants, an order was made striking the Statement of Defence for the failure to attend at the examination. A costs order was made against the defendants.

[6] The defendants were then noted in default and judgment was signed by the Registrar on April 28, 2011 against Mr. Asghar in the amount of $80,670.14 plus $2,160.15 prejudgment interest and $1,615.60 costs. A writ of seizure and sale was filed on May 4, 2011.

[7] The plaintiff prepared a notice of garnishment dated June 14, 2011 in an attempt to collect on the outstanding judgment. That garnishment came to the attention of Mr. Asghar soon thereafter. As well, he was served with a notice of judgment debtor examination in early August 2011 which required his attendance on August 25, 2011.

[8] In response, by letter dated August 17, 2011 his then former (and now current) lawyers advised that they were “presently on the record for the defendants” and that they were commencing a motion to set aside the default judgment. Nothing more happened in terms of the court file until correspondence was received by the plaintiff from counsel for the defendant on May 14, June 6, and July 3, 2012 indicating once again Mr. Asghar’s intention to bring a motion to set aside the default judgment. The defendants’ original law firm officially became solicitors of record for Mr. Asghar once again in June 2012.

[9] According to Mr. Asghar, there was an “on and off” retainer in the fall of 2010 leading up to the motion to remove counsel of record on January 6. Apparently shortly after the aborted examination for discovery on September 29, the defendant came to his lawyers office and picked up his file, allegedly on the basis that nothing was happening. It is hard to reconcile that position with the clear correspondence between counsel attempting to deal with the scheduling issue. It was suggested that, because of his language barrier, the defendant understood that reference was made to another active file in small claims court rather than this case. In any event, this defendant claims that he did not attend on January 6, 2011 through inadvertence. He further claims that he did not know that proceedings were taken in default until he received the notice of garnishment in July 2011.

[10] Counsel also submitted that the delay in bringing this motion, which was originally contemplated in August 2011, resulted from inadvertence and a personnel change within the law firm.

[11] In making my decision on the motion, I first considered the order striking the Statement of Defence for failure to attend the examination for discovery made on January 6, 2011. I felt that it was virtually certain that if the defendant had personally attended on that day, even with minimal excuse for missing the September 29 scheduled discovery date, he would have been provided with another opportunity to attend and only after further failure would his pleadings have been struck. The order striking the Statement of Defence led directly to the notice of default which in turn led to the default judgment.

[12] Rule 37.14(1)(b) allows a party to move to set aside an order on a motion when the person has failed to appear on the motion through accident, mistake or insufficient notice. In this case, I was satisfied that there was a mistake or accident and that Mr. Asghar, if properly advised and fully aware of the legal process, would have attended on January 6. As a result I set aside that order. The rule requires a prompt motion to set aside an order. Since instructions were given to counsel soon after finding out about the default judgment in July 2011, it appeared that there was no undue delay to that point. Counsel has taken the blame for delay after the initial correspondence in August 2011, and I was reluctant to make the defendant responsible for the inadvertence of counsel. As a result, I considered that there was no excessive delay following the fact of the default judgment coming to Mr. Asghar’s attention.

[13] Rule 19.03(1) allows the court to set aside the noting of default on such terms as are just. I was satisfied that the defendant intended to defend this matter despite his lack of attention to the ongoing course of the proceedings and the difficulties with the retainer of his lawyers. I acknowledged that intention is only one of the relevant factors to consider and that I needed to look at the entire factual matrix. The language issue is part of that matrix as is the need for a lack of undue delay. I was satisfied that the noting in default should be set aside.

[14] Finally, I dealt with the default judgment itself. My jurisdiction to set it aside is found in Rule 19.08. I considered whether the motion was brought promptly, whether there was a plausible excuse or explanation for the defendant’s default in complying with the rules and whether the facts establish at least an arguable defence.

[15] I concluded that the default judgment should be set aside. In coming to that decision, I considered the principles set out in Rule 1 of the Rules of Civil Procedure as reflected in various reported cases that civil proceedings should be tried on their merits when possible. However, there needs to be fairness as between the parties and in this case, the defendant asked me to do justice to him by setting aside the default proceedings. There is also the issue of fairness to the plaintiff. Although there may be no irreparable prejudice to the plaintiff in the delay of the proceedings, there certainly has been expense incurred and I made no criticism whatsoever of any steps taken by the plaintiff including bringing the motion to strike out the Statement of Defence for the defendant’s failing to appear at the examination for discovery and all the steps that have been taken since that time. As a result, in addition to the costs awarded to the plaintiff at the original motion of January 6, 2011 striking the Statement of Defence, I awarded costs to the plaintiff on a substantial indemnity basis for costs of the enforcement proceedings. As well, I ordered that the writ of seizure and sale will stay in place so that it will continue to bind the defendant’s property while this matter is litigated, subject of course to any subsequent court order or agreement of the parties.

[16] The plaintiff filed submissions indicating that the enforcement costs incurred by the plaintiff on a substantial indemnity basis amount to $2,800.60 plus disbursements of $1,365.67 for a total of $4,166.27. The defendant has not challenged that figure and therefore there will be a costs award in that amount in favour of the plaintiff against the defendant Mohammad Asghar accordingly.

[17] Although in court on November 2 I indicated an intention to calculate the substantial indemnity costs award to include the costs of the January 6, 2011 motion attendance, counsel agreed that I should simply leave the costs order of Madam Justice Carpenter-Gunn in the amount of $2,020.90 in place. I accept that submission so that, although my order sets aside that of Justice Carpenter-Gunn as to the striking out of the Statement of Defence, her costs award will remain in place.

[18] The parties disagree as to the appropriate costs award arising from this motion. The defendant submits that, as a result of his substantial success on the motion and the fact that an offer to settle was made which indicated a genuine effort to settle the matter, partial indemnity costs of the motion should be awarded to the defendant. The plaintiff's perspective is that the need for the motion in the first place arose from a series of mistakes made by the defendant and that the price of the “indulgence” granted by the court allowing the defendant to defend the case should be the plaintiff’s costs on a partial indemnity basis. As result, the plaintiff is looking for costs of the motion in the total amount of $13,347.51 and the defendant is seeking $9,123.41.

[19] As to the offer to settle made by Mr. Asghar, it does not attract the mandatory consequences set out in rule 49.10(1) since the defendant did not obtain a decision as favourable as or more favourable than the terms of the offer. I have considered the provisions of rule 49.13 which allow me to take into account the terms of any offer to settle made in writing in the exercise of my discretion as to costs. In this case, the offer made by the defendant on October 4, 2012 included the removal of the writ of execution in return for a payment into court of 50% of the damages awarded in the default judgment. I accept that the offer may well represent a serious attempt by Mr. Asghar to settle the motion. I also note that it offers in effect half of the security provided by the writ of execution. As a result it does not come close to the actual terms of my decision. This is especially true since the main concern of the plaintiff was the reduction in its ability to collect on the judgment given the stated intention of Mr. Asghar to refinance his personal residence and the apparent inability of the other defendants to make any payment on the judgment. As a result, the offer to settle made by the defendant has no significant impact on my decision as to costs.

[20] The discretion to award costs is found under section 131 of the Courts of Justice Act, and the provisions of rule 57.01 list a variety of factors to be considered in exercising that discretion. The result in the proceeding is a key factor and the one on which the defendant relies primarily in this case. The plaintiff submits however that costs need not follow the event and notes that the court is specifically entitled to award costs against a successful party a proper case under the provisions of rule 57.01(2).

[21] It was clear that Mr. Asghar was the author of his own misfortune in the series of events leading to the default judgment. He failed to attend at the scheduled examination for discovery. He made the choice to remove his file from his counsel's office shortly thereafter but apparently did not take any responsibility for the contents of the file which would have clearly shown the active involvement of plaintiff’s counsel in attempting to move the matter forward. He did not respond to his own counsel’s motion to be removed from the record which would have had to be served on him in advance of the January 6, 2011 hearing date. Although one can assume that he was also made aware by his counsel of the plaintiff's motion to strike his statement of defense, he would certainly have been aware of it had he been in court on January 6. Thereafter, he did not serve a notice of his intention to act personally as required by the rules. Even allowing for some misunderstandings as a result of a language barrier, it is clear that Mr. Asghar took no steps to protect his interest until the enforcement proceedings were well underway.

[22] Is not unreasonable for the plaintiff to have characterized the decision in this motion as an indulgence in favor of Mr. Asghar allowing him the opportunity to argue the merits of his defense long after the default judgment was signed. If he had pursued the matter diligently, none of the costs incurred by the plaintiff in attempting enforcement or in response to the motion would have been necessary. Under the circumstances, I consider that it is appropriate for there to be a cost of the indulgence, to be borne by Mr. Asghar, in addition to the costs of the enforcement proceedings undertaken by the plaintiff to which reference has already been made.

[23] As a result, there will be a costs order in favour of the plaintiff against the defendant Mohammad Asghar fixed in the amount of $7,500 inclusive of HST and disbursements.

[24] In total, the costs payable by the defendant Asghar to the plaintiff are as follows:

a. Costs of the enforcement proceedings on a substantial indemnity basis: $4,166.27

b. Costs of this motion: $7,500.00

c. Costs of the motion January 6, 2011: $2,020.90 plus interest from that date at 3% per year.

[25] Interest is payable on the costs order made today at 3% per year from this date.

[26] As indicated in my decision of November 2, 2012, costs of the motion and of the enforcement proceedings are to be paid by the defendant within 60 days of November 2, 2012 failing which the plaintiff will be at liberty to bring a summary judgment motion without notice to the defendant.

Reid J.

Date: November 27, 2012