A. Introduction

[1] Over a period of several months, the plaintiffs, Mohamed Imran Ali and Rehana Shereza Ali, loaned about $200,000.00 to the defendant, Mazhar Ali. The defendant did not comply with the terms for re-payment of the loans. The plaintiffs had a statement of claim issued and assert it was personally served on the defendant. No statement of defence was issued in response.

[2] The plaintiffs had the defendant noted in default. Judgment was then granted in favour of the plaintiffs in the amount of $243,0000.00 plus interest.

[3] The defendant brings a motion under rule 19.04 to set aside the default judgment. It is the defendant’s position that he was not properly served with the statement of claim and did not learn about the plaintiffs’ action until after the default judgment was obtained. He says that he has moved to set aside the default judgment in a timely manner, has provided a plausible explanation for the default and that he has an arguable defence and should be permitted to have his case tried on its merits.

[4] The issue to be determined is whether, having regard to the relevant legal principles for setting aside a default judgment, and the particular facts before me, I should exercise my discretion to set aside the default judgment.

[5] For the reasons that follow, the motion is dismissed.

B. The Legal Principles

[6] While there are no rigid rules to be applied, the parties agree that there are three general factors for the court to consider on a motion to set aside a default judgment:

a. Whether the motion to set aside the judgment was brought promptly;

b. Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; and

c. Whether the facts establish at least an arguable defence.

[7] In addition, consideration must be given to the potential prejudice to the defendant of dismissing the motion and to the plaintiffs of allowing it. It is also important to weigh the effect of any court order on the overall integrity of the administration of justice. See: Mountain View Farm Ltd. v. McQueen, [2014] O.J.

No. 1197; 2014 ONCA 193, 2014 ONCA193 at paras. 48-49; Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. 2007 ONCA 338, 87 O.R. (3d) 479 at para. 2; Chitel v. Rothbart, [1988] O.J. 1197, 29 C.P.C. (2d) 137 (C.A.); HSBC Securities Inc. v. Firestar Capital Management Corporation 2008 ONCA 894, 245 O.A.C 47 at paras. 21, 30.

C. Chronology of Events

[8] Some appreciation of the relevant chronology of events is required.

[9] The evidence is that there were three loans made by the plaintiffs to the defendant. The first loan agreement, entered into on October 26, 2011, was for $100,000.00. The second loan agreement, entered into on April 3, 2012, was for $30,000.00. The third loan agreement, entered into on April 30, 2012, was for $70,000.00. The money loaned to the defendant was drawn on a line of credit and from the plaintiffs’ savings.

[10] The plaintiffs say that the defendant did not make all of the payments in accordance with their agreements. On about February 7, 2013, the plaintiffs’ counsel send a notice to the defendant, through counsel, demanding the return of the principal of $200,000.00 and the agreed upon “bonus” of $43,400.00.

[11] On February 11, 2013, the defendant transferred his interest in his Thornhill residential property to his wife and son.

[12] On March 18, 2013, the plaintiffs had a statement of claim issued for recovery of the money loaned. The plaintiffs claimed that the debt owing was $243,400.00.

[13] On March 20, 2013 the plaintiffs say that their statement of claim was personally served on the defendant by a process server. It is this statement of claim that the defendant asserts was never served on him.

[14] No statement of defence was filed.

[15] On April 22, 2013, the defendant was noted in default. On June 18, 2013, judgment was granted in favour of the plaintiffs for $243,400.00, plus interest.

[16] On June 26, 2013, the plaintiffs obtained a writ of seizure and sale. A declaration to enforce writ was also filed.

[17] On July 22, 2013, the plaintiffs had issued a second claim against the defendant, his wife and son alleging, among other things, that the transfer of the Thornhill residential property was a fraudulent conveyance and was done with intent to defraud the plaintiffs.

[18] The defendant asserts that he was unaware of the existence of the first statement of claim until he was served with the second one on July 25, 2013, and saw that it made reference to the first statement of claim, the noting in default and the subsequent judgment.

[19] On August 2, 2013, counsel for the defendant advised the plaintiffs’ counsel of the defendants’ position that they were unaware of the first statement of claim and wished to see it. It is clear that counsel was considering whether to bring a motion to set aside the default judgment. Counsel for the plaintiffs responded on August 6, 2013 that the defendants could obtain copies of the documents they needed from the court.

[20] On August 23, 2013, a statement of defence to the plaintiffs’ second action was filed. One of the assertions pleaded in the statement of defence is that the defendants were unaware of the first action of the plaintiffs.

[21] In his affidavit filed on this motion, the defendant asserts that he was on a limited financial budget and that he was not able to retain counsel to move to set aside the default judgment until earlier.

[22] A notice of garnishment was issued on January 6, 2014 and a garnishee’s statement was received from the defendant Mr. Ali’s employer on January 16, 2014.

[23] There was no communication between counsel for the plaintiffs and defendants from August 6, 2013 until February 13, 2014, other than the scheduling of a debtor examination for February 18, 2014.

[24] On February 13, 2014, counsel for the defendant advised that he was retained to prepare materials to seek to set aside the default judgment. He also advised that he would not be attending the debtor examination and asked that it be cancelled.

[25] Counsel for the plaintiffs cancelled the debtor examination and offered five dates on which he was available for the motion to set aside the default judgment in June, July and September, 2014.

[26] The plaintiffs retained new counsel on May 6, 2014. An agreement was reached that the motion to set aside the default judgment would take place on August 29, 2014. The defendant’s counsel then advised the plaintiffs’ counsel that he wished an adjournment as he had lost preparation time due to complications from his son’s surgery. The motion was re-scheduled for October 30, 2014.

[27] The defendant’s motion materials were served sometime after October 18, 2014. The motion date was adjourned so that cross-examinations could take place. Cross-examinations of four witnesses in this matter they took place over the following seven months: December 17, 2014 (Sirajuddin Kazani); April 16, 2015 (Mazhar Ali) May 12, 2015 (Alfred Moody) and May 21, 2015 (Gursimran Singh).

[28] This motion was then scheduled for December 1, 2015, but did not proceed as Justice LeMay concluded that it was a long motion and should be set for two hours. It was adjourned to June, 2016.

[29] The matter returned before Justice LeMay on June 24, 2016 on a regular motions list. He declined to hear it as it required two hours. It was adjourned to July 19, 2016 for a long motion.

D. Analysis

[30] I will address each of the factors to be considered on a motion to set aside a default judgment.

a) Was the motion to set aside the judgment was brought promptly?

[31] I am not persuaded that the defendant acted promptly to set aside the default judgment.

[32] First, as set out below, I do not accept that the defendant only learned of the statement of claim in July 2013. It is my view that he was personally served on March 20, 2013.

[33] Second, even if he first learned about the default judgment against him on July 25, 2013, it cannot be said that he acted with dispatch. Indeed, on his own evidence, he did nothing until February 2014 as he says he could not afford to retain counsel (although it appears that he did retain counsel to file a statement of defence on the second action). Even at the point when he did retain counsel to bring the motion to set aside the default judgment, the process seems to have me to have moved very slowly in scheduling and completing the examinations and filing materials.

[34] That said, while the pace at which steps were taken to set aside the default judgment is a factor to consider in the analysis, given the timing in this case, I am not inclined to conclude that the defendant’s lack of diligence resulted in such a long delay in this case that it should bar setting aside the default judgment, if the other relevant factors warrant setting the default judgment aside.

b) Has a plausible excuse or explanation for the defendant’s default in complying with the Rules been offered?

[35] The defendant’s explanation for failing to file a statement of defence is that he was never served with the plaintiffs’ statement of claim. The onus to prove service is on the party purporting to have served (Rajasekaram v. Naagularajah, [2010] O.J. No. 422, 2010 ONSC 533 (S.C.J.) at para. 13.).

[36] In my view the evidence establishes that Mr. Ali was personally served with the statement of claim on March 20, 2013.

[37] Mr. Singh is a process server. On March 21, 2013, he swore an affidavit that he served Mr. Ali personally with the statement of claim at his home at 4:20 on March 20, 2013. He indicated in the affidavit that he was able to identify Mr. Ali “by his admittance to me that he is the same person”.

[38] Mr. Singh was clear under cross-examination that he does not recollect much from that day, but that, as was his usual practice, he made a memo with notes immediately after serving the statement of claim. His memo notes include the date of March 20, the time 4:20 pm, a car license plate of BMHE152, the word “personally” and a reference to a physical description of “bald, goatee, fair colour”.

[39] Mr. Ali asserts in his affidavit that he was never served with the statement of claim and that he was work until about 5:00 p.m. on March 20, 2013. In his affidavit, he says that there was no one at home until later in the day.

[40] Under cross-examination, Mr. Ali’s evidence seems to be that there is nothing about the day that stands out and that he is basing his evidence on “just the regular thing that we do at work.”

[41] Mr. Ali’s evidence as to whether or not his wife would have been at home that afternoon is inconsistent. In his affidavit he says no one was there. In response to a question, he said his wife was at home.

[42] In response to a question as to whether the license plate BMHE152 was his, initially, he said it was not. He then said that the car belonged to them, was in his wife’s name and that he did not drive it. His evidence seems to be that the car was not at his home. He said that he had the car and he drove it to work. He clarified with his counsel that the car was at the warehouse where he worked.

[43] This evidence about the car causes me to have real doubts about the truthfulness of Mr. Ali’s evidence that he was not at home. He says that he drove the car to work and asserts he was at work until 5:00 p.m. with the car. Yet, the process server who went to the home at 4:20 p.m., made a note of the license plate of the car that defendant says was still at his work. This strongly suggests to me that both the car and Mr. Ali were at the residence when the process server was there to serve the statement of claim. Indeed, how else would Mr. Singh have correctly noted the license plate in his memo?

[44] There is another aspect of Mr. Ali’s evidence that also causes me to doubt his denial of having been served. Mr. Ali was asked whether he had a goatee at the time. He denied that he did and said that he had not shaved for 19 years and had a full beard. A best effort undertaking was given to produce a photograph of Mr. Ali from the first half of 2013. No photograph was ever produced. Furthermore, Mr. Moody, a colleague of Mr. Ali’s, confirmed that Mr. Ali had a goatee and a little bit of beard on the side. I do not agree with counsel’s submission that Mr. Moody was being “almost badgered” by counsel and was agreeing with all of counsel’s suggestion. I read Mr. Moody’s evidence as a whole as him as trying to assist Mr. Ali. In these circumstances, I find Mr. Moody’s evidence about Mr. Ali’s goatee to be reliable and to be some confirmatory evidence of Mr. Singh having served the defendant personally.

[45] I acknowledge that Mr. Ali’s evidence that he was at work that afternoon until 5:00 p.m. is confirmed by the evidence of his employer, Sirajuddin Kazani and his colleague, Mr. Moody. Having carefully reviewed the evidence of these witnesses, I have real doubts about their reliability with respect to Mr. Ali’s presence at work that day.

[46] Mr. Kazani provided a letter dated September 24, 2014 in which he confirmed that Mr. Ali was at work until 5:00 p.m. on March 20, 2013. Under cross-examination, however, he acknowledged that the company kept no logs of the times that employees leave. Further, he said that he believed that Mr. Ali was honest and so he issued the letter saying he was at work on the basis that Mr. Ali told him that he had been at work.

[47] It is clear to me from the cross-examination that Mr. Kazani did not have a specific memory of March 20, 2013 and had no system upon which to base his evidence. I cannot rely on his evidence that Mr. Ali was at work.

[48] Similarly, I am not able to rely on the evidence of Mr. Moody. While Mr. Moody was consistent that Mr. Ali was at work until 5:00, there were other areas in which he was inconsistent. For example, at one point he says that the routine was for him to go to work at 11:00 or 12:00 and first have lunch. Subsequently, he said that he had lunch that day at “12:30, 1:00”. He is clear that he had lunch with Mr. Ali. Yet, Mr. Ali testified that he had lunch from 1:00 to 1:30. While nothing turns on the time of lunch, the evidence viewed as a whole suggests that Mr. Moody’s recollection as to the events of that day is not particularly reliable.

[49] Further, Mr. Moody said that he had a specific memory of March 20, 2013. Asked why, he explained that “I had some very important deliveries for that day” and explained that there was one in particular he recalled. There was an undertaking given to produce some record of that delivery. Nothing was ever produced. Again, this suggests to me that, perhaps not surprisingly, there as nothing unique or memorable about that day and Mr. Moody’s evidence as to Mr. Ali’s presence at work until 5:00 p.m. is not reliable.

[50] The plaintiffs say that having been served with the statement of claim, the defendant took a calculated and informed risk when he decided not to file a statement of defence. In support of this position, the plaintiffs point to the fact that the defendant transferred his interest in his property a few days after receiving the demand letter and that he then did nothing to defend because he believed he had shielded his property from judgment. They say that he chose to do nothing until the garnishment proceedings were brought.

[51] I agree that the defendant received the statement of claim. He has shown no valid reason for not responding to it earlier, and says he failed to do so when he had notice of the default judgment because he could not afford counsel. I find that he made a conscious decision not to participate in the litigation. I cannot say why he made this poor choice, although it may well be, as the defendants suggest, that he thought he had avoided judgment by transferring his interest in his property. The defendant’s decision should, absent exceptional circumstances, operate as a bar to his motion (Luu v. Thai 2008 CarswellOnt 9116 (S.C.J.) at para. 9; Schill & Beninger Plumbing & Heating Ltd. v. Gallagher Estate (Litigation Administrator of) (2001), 2001 CanLII 24134 (ON CA), 140 O.A.C. 353; 6 C.P.C. (5th) 80 (C.A.) at para.6).

c) Do the facts establish at least an arguable defence?

[52] In my view, the defendant Mr. Ali has failed to adduce any evidence to support his position that he has an arguable defence.

[53] While counsel for the defendant suggested that I could rely on the proposed statement of defence to find that the defendant has an arguable defence, pleadings are not facts or evidence upon which I can properly rely for this purpose, particularly when there is no affidavit evidence from Mr. Ali adopting the contents of the statement of defence as true (Citifinancial Services of Canada v. 1472354 Ontario Inc. (2003) CarswellOnt 507 (Ont.Master) at para. 38).

[54] The only evidence before me setting out a defence is Mr. Ali’s affidavit. He did not adopt the contents of the proposed statement of defence. There is one paragraph of Mr. Ali’s affidavit in which counsel says that the defence is put forward:

The Plaintiffs knew that they should have put in a statement of claim as against another party who was acquiring their investment monies from me for the purpose of investing instead of naming me as the defendant. The crux of the defence is that the plaintiffs knew that I was simply a middleman and that their investment monies were being invested by me on behalf of them to a third party who later disappeared.

[55] While it may not be evidence, I have reviewed the proposed statement of defence and it appears to me to advance the same defence as that in Mr. Ali’s affidavit.

I do not see how, even considering the contents of the statement of defence, the defendant has raised an arguable defence to the plaintiffs’ claim. The affidavits of the two plaintiffs set out the terms of their agreements with the defendant. I have before me the three signed agreements relating to the three debts. There is no evidence that the plaintiffs entered into any agreement with any third party relating to re-payment of the loans. Even if the defendant entered into an agreement with a third party, who invested the money that the defendant borrowed from the plaintiffs, I do not see how this undermines the plaintiffs’ claim against Mr. Ali.

[56] I find that the defendant has failed to adduce facts that would support an arguable defence to the plaintiffs’ claim.

E. Prejudice

[57] The plaintiff Mr. Mohamed Ali makes clear in his affidavit evidence that he and his wife used their life savings and the equity in their home to lend money to the defendant. Their unchallenged evidence is that they are unable to pay the interest on their line of credit and are falling into debt. The delays in this matter have led to increased stress for both of the plaintiffs.

[58] I am satisfied that setting aside the default judgment, which would further delay the plaintiffs’ ability to collect the money they are owed, would be very prejudicial to them.

F. Conclusion

[59] I am not satisfied that the defendant Mr. Ali has met the threshold for setting aside the default judgment of Justice Andre. He was properly served with the statement of claim and chose not to respond. When he did try to set aside the default judgment, he did not proceed with dispatch. Further, he has not made out a basis for me to find that he has an arguable defence. There is real prejudice to the plaintiffs of granting the motion. Accordingly, the defendant’s motion is dismissed.

G. Costs

[60] The parties have not had the opportunity to make submissions as to costs. If they are unable to agree on costs for this motion, they may make written

[61] submissions of not more than three pages, in addition to any bill of costs and cases. The plaintiffs shall have 10 days from the release of this decision to serve and file their costs submissions. The defendant shall have a week to respond. There will be no reply without leave of the court.

Woollcombe J.

Released: July 22, 2016

CITATION: Ali v. Ali, 2016 ONSC 4736

COURT FILE NO.: CV-13-1177

DATE: 2016 07 22

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mohamed Imran Ali and Rehana Shereza Ali

-and-

Mazhar Ali

REASONS FOR JUDGMENT

Woollcombe J.

Released: July 22, 2016

Ali v. Ali, 2016 ONSC 4736

Case Summary

A. Introduction

B. The Legal Principles

C. Chronology of Events

D. Analysis

a) Was the motion to set aside the judgment was brought promptly?

b) Has a plausible excuse or explanation for the defendant’s default in complying with the Rules been offered?

c) Do the facts establish at least an arguable defence?

E. Prejudice

F. Conclusion

G. Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 1

Legal Tests 1