Court File and Parties

COURT FILE NO.: C-976-11

DATE: 2013-10-09

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mon Tran, Plaintiff

AND:

John Zaharis also known as Ioannis Zaharis, G & B Live Bait Inc., George Zaharis and Bill Zaharis, Defendants

BEFORE: The Honourable Mr. Justice G. E. Taylor

COUNSEL:
Alexandria (Ali) Nowak, Counsel for the Plaintiff

Saul I. Glober, Q.C., Counsel for the Defendants

HEARD: September 24, 2013

ENDORSEMENT

Introduction

[1] The plaintiff picks worms which she sells to wholesalers, one of whom was the defendant G & B Live Bait Inc. On June 1, 2012, the plaintiff obtained default judgment against the defendants for $280,786.28 plus costs representing unpaid deliveries of worms. The defendants learned of the judgment in July, 2012 and on August 30, 2012 issued the present Notice of Motion to set aside the default judgment.

Background

[2] The plaintiff began selling worms to G & B in 2004. There is no evidence of a written contract. The plaintiff hires individuals to pick worms at night and then the worms are sold the following morning. Upon delivery of worms, G & B issued receipts to the plaintiff for the number of worms delivered. Periodically G & B provided summaries to the plaintiff of the number of worms delivered indicating the amount owing to the plaintiff. What I have referred to as receipts and summaries are all on numbered documents entitled “INVOICE” with G & B’s name printed on the document. The plaintiff never prepared and issued invoices or submitted other documentation to G & B.

[3] It is not disputed that between July 30, 2009 and June 30, 2011 the plaintiff delivered $974,509.28 worth of worms to G & B for which receipts and summaries were issued to the plaintiff. It is also not disputed that G & B paid the sum of $693,723 to the plaintiff for payment of worms delivered.

[4] The defendants concede that the plaintiff is owed between $125,000 and $130,000. The defendants say that throughout the relationship, the dollar value of the worms actually delivered would be adjusted to account for dead and undersized worms, sawdust purchased by the plaintiff from G & B, rental for farms rented by G & B on which the plaintiff picked worms, the cost paid by G & B for watering fields where the worms were picked by the plaintiff and credits given to customers of G & B. The defendants say that annually or semi-annually there would be a meeting at which the dollar value of these adjustments would be discussed and agreed upon. The last such meeting was held in the 2009. The difference between the amount of the judgment and the amount conceded to be owing by the defendants is the adjustments.

[5] The plaintiff agrees that from time to time she would pick worms from farms of G & B and that the defendants watered the fields as required but she says this would be a at the specific request of John Zaharis to fill a particular order. The plaintiff also acknowledges purchasing sawdust from G & B from time to time. The plaintiff says that if she purchased something from G & B, payment would be by way of a reduction in the number of worms actually delivered so that the receipt for the worms would not reflect the actual number of worms delivered but would be for an adjusted amount to reflect the purchase. The plaintiff also says that the receipt would take into account the possible shortages in the number of worms delivered and dead or undersized worms. The plaintiff says that payments were made monthly based on the daily receipts issued by G & B. When cross examined, the plaintiff was not asked if it was the practice for the parties to meet annually or semi-annually to meet for the purpose of discussing and agreeing upon adjustments.

[6] By April, 2011, G & B owed the plaintiff a significant amount. On April 23, 2011 John Zaharis gave the plaintiff three cheques from G & B totaling $96,000 but he requested that they not be immediately deposited. John Zaharis acknowledged that he gave the cheques to the plaintiff because G & B owed money to the plaintiff but that he told her to hold the cheques. The plaintiff says that periodically over the course of the next three months she asked John Zaharis if she could cash the cheques but he did not agree. On August 22, 2011 the plaintiff attempted to deposit the three cheques into her bank account. John Zaharis says that the bank called him to authorize deposit of the cheques and he told the bank to stop payment.

[7] The Statement of Claim was issued on October 19, 2011. G & B was served with the Statement of Claim on October 25, 2011. John Zaharis was served with the Statement of Claim on November 1, 2011. The other two defendants were served substitutionally on December 22 and 28, 2011 with service effective on the fifth day following the date of mailing.

[8] After service of the Statement of Claim there was communication between the plaintiff and John Zaharis. They agree that meetings were arranged which one or the other failed to attend. The plaintiff says that the purpose for the meetings was to receive payment of the amount owing. John Zaharis says that the purpose for the meetings was to discuss the adjustments.

[9] The plaintiff’s evidence is that she talked to John Zaharis on a few occasions after service of the Statement of Claim and on each occasion she told him to speak to her lawyer. John Zaharis says that when he received the Statement of Claim he contacted the plaintiff to arrange an appointment to meet to resolve the dispute. He says the plaintiff told him not to worry about the court papers. John Zaharis testified that when he first telephoned the plaintiff after being served with the Statement of Claim she told him to go through the lawyer but when he suggested a meeting, she agreed. According to John Zaharis it was not until the conversation with the plaintiff at the end of June or beginning of July 2012 that she told him to speak to a lawyer. John Zaharis contacted his lawyer in early August 2012.

[10] There is no suggestion that the defendants provided the plaintiff with the documentation in support of the adjustments which they say reduce the amount owing during the period after service of the Statement of Claim and before the default judgment was signed. No documentation was presented on the present motion to support the claim for adjustments although John Zaharis testified that by the end of 2011 he knew the amount of the adjustments for 2010 and 2011. The amount of the adjustments has not been quantified other than to admit that $125,000 to $130,000 is the amount owing to the plaintiff.

[11] The defendants did not present a draft Statement of Defence on the present motion.

Discussion

[12] In Morgan v. Toronto Police Services Board (2003), 2003 14993 (ON CA), 34 C.P.C. (5th) 46, the Ontario Court of Appeal confirmed the factors to be considered on a motion to set aside a default judgment as follows:

(a) the motion must be brought without undue delay;

(b) the circumstances which led to the default must be explained; and

(c) the defendant must present a triable defence on the merits.

[13] In Romanov v. 854336 Ontario Ltd., [2004] O.J. No. 6250, Echlin J. stated at paragraph 5:

Clearly the applicants have the burden of demonstrating, on the basis of a hard look at the evidence, that their proposed defences raise a genuine issue for trial. Such issues should have an "air of reality" about them.

[14] In Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, the Ontario Court of Appeal, in relation to a motion to set aside a default judgment, stated at paragraph 2:

The motion judge must, however, ultimately determine whether the interests of justice favour an order setting aside the default judgment. In doing so, the motion judge will have regard to the potential prejudice to the moving party should the motion be dismissed, the potential prejudice to the respondent should the motion be allowed, and the effect of any order the motion judge may make on the overall integrity of the administration of justice.

[15] In the present case, the defendants learned that default judgment had been obtained against them in early July, 2012. They retained counsel in early August. Mr. Glober promptly contacted Ms. Nowak, counsel for the plaintiff and requested a copy of the Statement of Claim and the material in support of the default judgment. The evidence does not disclose why the defendants did not provide Mr. Glober with a copy of the Statement of Claim. The Notice of Motion seeking to set aside the default judgment is dated August 30, 2012.

[16] The delay between the date when the defendants learned that judgment had gone against them and when counsel was retained to bring a motion to set aside the default judgment is approximately 1 month. The reason for this delay has not been satisfactorily explained. However, the delay in retaining counsel to respond to the plaintiff’s action after learning that judgment had been obtained is only one of the factors to be considered when deciding if the default judgment should be set aside.

[17] There is conflicting evidence with respect to the reasons why the defendants did not take steps to defend this action after they were served with the Statement of Claim. The evidence of John Zaharis is that the defendants were lulled into a sense of security by the plaintiff saying they need not worry about the court papers while they attempted to arrange a meeting to resolve the issue of the amount owing. The plaintiff’s evidence is that she agreed to meet with John Zaharis in the expectation that she would receive payment of the amount owing.

[18] I am mindful that I have not had the benefit of seeing and hearing the testimony of witnesses but I am doubtful that the plaintiff, after serving the defendants with the Statement of Claim, then told John Zaharis not to worry about the lawsuit. The affidavit of attempted service on the defendants George Zaharis and Bill Zaharis is instructive. The process server deposes that he was told by John Zaharis that George Zaharis and Bill Zaharis did not work at the G & B warehouse. That statement was patently false. In my view, it is likely that John Zaharis was attempting to frustrate the plaintiff in her efforts to serve the defendants with the Statement of Claim. This leads me to conclude that the plaintiff’s evidence about the discussions with John Zaharis after service of the Statement of Claim were more likely about receiving payment than about discussing and agreeing on the appropriate amount of the adjustments.

[19] The third factor to be considered is whether the defendants have presented a triable defence to the lawsuit. The defendants did not produce any documentation in support of the adjustments which they say reduce the amount owing to the plaintiff for the delivery of worms. John Zaharis testified that such documents exist. John Zaharis testified that he wanted to meet with the plaintiff to discuss the adjustments and that the meeting was not arranged because of scheduling difficulties. It seems incredible to me that, in such circumstances, the defendants would not have presented at least a written summary of the adjustments which they claim reduce the amount owing to plaintiff. According to John Zaharis, historically, there had been a meeting at least annually to adjust the amount owing to the plaintiff and yet no documentary evidence in support of this course of the past dealing was presented.

[20] In my view, in order to overcome the “good hard look” requirement, the defendants are required to put forward something more than a bald unsubstantiated statement that the amount owing to the plaintiff must be reduced by certain unquantified set off amounts. Based on the evidence before me, I conclude that all documentation with respect to the sale of worms by the plaintiff to G & B was produced by the defendants. No invoices were ever issued by the plaintiff. Payment was based solely on receipts issued by G & B. In these circumstances, I find it to be incumbent upon the defendants to produce documentation in support of their claim for adjustments to reduce the amount owing to the plaintiff based on the receipts issued. The absence of such documentation leads inevitably to the conclusion that it does not exist.

[21] In HSBC Securities (Canada) Inc.v. Firestar Capital Management Corporation, 2008 ONCA 894, the Court of Appeal concluded that the motion judge was correct in refusing to set aside a default judgment when the affidavit in support of the motion was “self-serving and devoid of detailed evidence supporting his [the defendant] key assertion…”. The Court also found that a self-serving affidavit does not create a triable issue in the absence of detailed facts and supporting evidence. That is the situation in the present case.

Conclusion

[22] Taking into consideration the three factors to be addressed in deciding whether to set aside a default judgment and taking into consideration the overall integrity of the administration of justice, I find that the defendants have not met the necessary burden to cause me to exercise my discretion and set aside the default judgment.

[23] For these reasons, the motion is dismissed.

[24] If counsel are unable to agree on an appropriate disposition as to costs, they may make written submissions. Submissions on behalf of the plaintiff are to be delivered to my office in Kitchener no later than October 25, 2013. Responding submissions are to be delivered to my office in Kitchener within 14 days of service of the plaintiff’s submissions. Written submissions are not to exceed three pages in addition to a Bill of Costs and Costs Outline.

G. E. Taylor J.

Date: October 9, 2013