COURT FILE NO.: 450/15

DATE: 20151216

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: KRISTINA ZAKHARY PROFESSIONAL COPORATION and KRISTINA ZAKHARY, Plaintiffs/Responding Parties

AND:

AGE-LESS DERMAL THERAPY INC., Defendant/Moving Party

BEFORE: MOLLOY J.

COUNSEL: Arthur Zeilikman and Dennis Ovsyannikov, for the Moving Party

Bryan Fromstein, for the Responding Parties

HEARD: In writing

ENDORSEMENT

Introduction

[1] The defendant seeks leave to appeal from the Order of Myers J. dated August 31, 2015, allowing an appeal from the Order of Master Pope dated June 11, 2015 and ordering Joyce Palmer to attend for examination in aid of execution, as a representative of the defendant corporation Age-Less Dermal Therapy Inc. (“Age-Less”). Master Pope had refused to compel Ms. Palmer to attend for examination on the basis that the plaintiffs had commenced a second action against the corporate defendant, Joyce Palmer and others, essentially seeking to set aside property conveyances alleged to be fraudulent and made in an attempt to defeat creditors.

[2] In the within action, commenced in 2010, the parties reached a settlement. Age-Less agreed to pay $90,000 in monthly installments, plus costs of $40,000. As a term of the agreement, Age-Less consented to a judgment in the amount of $145,000 and it was agreed that the plaintiffs would not enforce the judgment as long as Age-Less complied with the terms of the settlement by making the required monthly payments.

[3] In February 2013, the plaintiffs learned that Age-Less was no longer carrying on business under its own name, but that the same people previously involved in the business were carrying on the same business at the same location under a new name. At that time, however, Age-Less was continuing to make its monthly payments under the settlement.

[4] In October 2014, Age-Less defaulted in its monthly payment, and advised that it was financially unable to make any further payments. The parties agreed to a judgment debtor examination, and further agreed that the appropriate representative to be examined on behalf of Age-Less was Joyce Palmer, a shareholder, officer and director of Age-Less. The parties agreed that the examination would proceed on March 17, 2015. The plaintiffs served a notice of examination in January.

[5] Shortly after service of the notice of examination, the plaintiffs served their statement of claim in a new action (CV-15-121466-00) against Age-Less, Joyce Palmer and four other individuals. At the heart of the action is the allegation that Age-Less had conveyed its assets to the other named defendants for the purpose of defeating its creditors, in particular the judgment debt it owed to the plaintiffs.

[6] Upon being served with the statement of claim in the second action, Joyce Palmer refused to attend for examination in aid of execution in the first action. The plaintiffs brought a motion to compel her attendance. Master Pope ruled that an examination in aid of execution is discretionary and refused to compel Ms. Palmer's attendance. The Master reasoned that there was an overlap between the two actions and permitting an examination in aid of execution in the first action would have the result of exposing Ms. Palmer to multiple examinations on the same issues. She held that once the plaintiffs commenced the second action, their prior rights merged in that action and they were no longer entitled to conduct an examination in aid of execution.

[7] The plaintiffs appealed the decision of Master Pope. On appeal, Justice Myers held that the Master had exercised her discretion on an incorrect principle of law. He allowed the appeal and directed Ms. Palmer to attend for examination.

[8] Age-Less now seeks leave to appeal from the decision of Justice Myers.

Test for Leave to Appeal

[9] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted. The moving party relies upon both branches of the test.

[10] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 7405 (ON SC), 7 O.R. (3d) 542 (Div. Ct.).

[11] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., 2003 40868 (ON SC), [2003] O.J. No. 3442 (S.C.J. per Then J.); Ash v. Lloyd’s Corp. (1992), 1992 7652 (ON SC), 8 O.R.(3d) 282 (Gen. Div. per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod, Young, Weir Ltd. (1986), 1986 2749 (ON SC), 57 O.R. (2d) 569 (H.C.J. per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.).

Analysis

[12] I will deal first with the test under Rule 62.02(4)(b)—reason to doubt correctness. I do not see any basis to doubt the correctness of the decision made by Justice Myers. He correctly identified the standard of review with respect to an appeal from the Master. He recognized that he ought not to substitute his own discretion for that of the Master. He found that the Master had exercised a discretion, but that she had done so on an incorrect legal principle. In particular, the Master applied case law and legal principles relating to the examination of a third party, stranger to the litigation in aid of execution, as provided for in Rule 60.18(6).

[13] I agree with Myers J. that the Master erred in holding that there was no “right” to examine a judgment debtor in aid of execution. The judgment creditor is required to attend for examination upon being served with a notice. If the judgment debtor fails to attend in response to the notice and if a motion is brought as a consequence, the Master or judge hearing the motion may have some discretion as to what remedy, if any, to grant. However, that is a very different matter from saying the examination itself is discretionary. The Master seems to have failed to appreciate the examination of a party in aid of execution (under Rule 60.18(2) and (3)) with an order for the examination of a person who is not a party but who may have knowledge of matters relating to the difficulty in enforcing the judgment.(under Rule 60.18(6)). Further, I agree with Myers J. that the Master erred in applying case law dealing with the examination of strangers to the original litigation. Ms. Palmer is not a stranger to the first action; she is an officer and director who is to be examined as the representative of the judgment debtor. Many of the cases relied upon by the Master are distinguishable on that basis. Further, I agree with Myers J. that cases that pre-date Canadian Imperial Bank v. Sutton, 1981 CarswellOnt. 265 (C.A.) are of limited weight to the extent that they turn on the proposition that the sole purpose of the examination in aid of execution was to obtain facts to determine whether to embark on litigation against a third party. Sutton overrules that proposition.

[14] Accordingly, I am not satisfied that there is any reason to doubt the correctness of the decision of Myers J. and the test under Rule 62.02(4)(b) is not met. That being the case, there is no need to consider whether issues of broad public importance are raised.

[15] The defendant’s argument with respect to conflicting decisions under Rule 62.02(4)(a) closely parallels the argument about correctness. The defendant points to a line of cases which, it is submitted, are inconsistent with the decision of Justice Myers. As I have already indicated, those cases are distinguishable because they pre-date Sutton and/or because they relate to examinations of third parties under Rule 60.18(6), rather than the examination of the judgment debtor itself.

[16] Further, even if there were inconsistent decisions, I would not consider it “desirable” that leave be granted in this case. The defendant consented to judgment and has now defaulted. The plaintiffs have information suggesting that the defendant’s assets have been transferred to non-arm’s length people. I see not injustice to Ms. Palmer if she is subjected to more than one examination on related topics. The plaintiffs could have examined her in aid of execution and then immediately turned around and started their second action. Two examinations would be the inevitable result. Further delay in this matter is not in the interests of justice.

Order

[17] Accordingly, this motion for leave to appeal is dismissed.

[18] The responding parties submitted a request for costs of $4344.22 in the event they were successful. If Age-Less had been successful, they would have been seeking costs of $6110.03. The costs claimed by the respondents are within the normal range for motions such as this, and clearly within the contemplation of the moving party. Accordingly, the plaintiffs (responding parties) shall have their costs of this motion fixed at $4344.22, payable by the defendant forthwith.

MOLLOY J.

Date: December 16, 2015