Court File and Parties
COURT FILE NO.: 57655/17 DATE: 2018/09/19 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
620369 Ontario Inc. c.o.b. as Herman’s Building Centres Plaintiff – and – Anthony El Badry, Hanan El Badry and Ottawa Permanent Roofing Inc. Defendants
COUNSEL: Rachel Goerz, for the Plaintiff Christopher Moore, for the Defendant Hanan El Badry Anthony El Badry and Ottawa Permanent Roofing Inc. not appearing
HEARD: September 10, 2018
The Honourable Justice J.R. Henderson
Endorsement on Motion
Introduction
[1] This is a motion brought by Hanan El Badry (“Hanan”), to set aside a default judgment dated November 23, 2017 (“the Judgment”). The Judgment was obtained by the plaintiff (“HBC”) against Ottawa Permanent Roofing Inc. (“Ottawa”), Hanan, and Anthony El Badry (“Anthony”), but only Hanan requests relief in this motion.
[2] The preamble in the Judgment reads as follows:
THIS MOTION, made by the Plaintiff, for default judgment against the Defendants on the Statement of Claim, was heard this day in St. Catharines.
ON READING the Motion Record of the Plaintiff, the Defendants having been noted in default, on consent of the Defendants, Hanan El Badry and Ottawa Permanent Roofing Inc., and upon hearing the submissions of the lawyers for the Plaintiff.
[3] Paragraph one of the Judgment reads as follows:
- THIS COURT ORDERS AND ADJUDGES that the Plaintiff recover from the Defendants in full satisfaction of all claims herein the sum of $77,541.24 for breach of trust, as at September 1, 2017.
[4] Hanan submits that the Judgment should be characterized as a default judgment. Accordingly, she submits that this court should set aside the Judgment by applying the test for setting aside default judgments as stated in the case of Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at paras. 48-49.
[5] Further, if the entire Judgment is not set aside, Hanan submits that this court should not permit the part of the Judgment that states that her liability to the plaintiff is “for breach of trust” to remain in effect, as the particulars of Hanan’s alleged breach of trust are not set out in the pleadings and were never acknowledged by Hanan.
[6] HBC submits that the Judgment should be characterized as a consent judgment and that the test in the Mountain View Farms case is not applicable; rather, HBC submits that the stricter test with respect to setting aside consent judgments should apply. Further, HBC submits that the statement of claim contains sufficient particulars regarding Hanan’s alleged breach of trust to support a consent judgment.
Findings of Fact
[7] HBC is a supplier of building material and roofing products. HBC supplied roofing materials to Ottawa that Ottawa used in its roofing business.
[8] Hanan and Anthony held themselves out to be a married couple who controlled Ottawa. I accept that Anthony was the operating mind of Ottawa, and I find that Hanan was an officer and a director of Ottawa.
[9] There is an issue as to the degree of Hanan’s involvement in, and knowledge of, Ottawa’s business operations. In that respect, I find that Anthony was the primary contact at Ottawa for suppliers and customers, and further that Anthony negotiated the contracts and engaged the customers.
[10] However, I do not accept that Hanan was uninvolved in Ottawa’s business operations. There is evidence that Hanan at least occasionally picked up cheques, paid bills, picked up and delivered materials, and engaged the customers. Further, I note that in January 2018, Hanan wrote a letter to a disgruntled customer in which she described herself as the “president and owner” of Ottawa. Among other things, she wrote that “Anthony was simply a salesman” and that Ottawa “is a family owned business that was built by both my brothers and me years ago prior to Anthony coming into the picture.” Therefore, I conclude that Hanan was involved in, and generally familiar with, Ottawa’s business operations.
[11] I find that both Hanan and Anthony had some prior business dealings with HBC through a business known as 973 Roof. Those business dealings generated a lawsuit that was eventually resolved. Thereafter, HBC and Ottawa entered into a relationship whereby HBC agreed to supply Ottawa with roofing materials on an ongoing basis.
[12] On May 31, 2017, Hanan signed a written Contract/Guarantee (“the Guarantee”) whereby Hanan agreed to be personally responsible for all invoices and charges made by Ottawa to its account with HBC with respect to HBC’s supply of roofing materials.
[13] By the summer of 2017, Ottawa fell behind on its account with HBC. On September 11, 2017, Hanan and Anthony purportedly signed an agreement called a Payment Arrangement regarding money owing by Ottawa to HBC in the amount of $77,541.24 (“the September Agreement”).
[14] The September Agreement included terms that Hanan and Anthony pay $10,000 to HBC in September 2017, and make further payments of $5,000 per month thereafter. Paragraph four of the September Agreement provided that if payments were not made in accordance with the agreement, Hanan and Anthony agreed to “consent to judgment against you for the full amount owing in both the personal capacity of Anthony El Badry and Hanan El Badry for breach of trust and damages pursuant to the Construction Lien Act.”
[15] Hanan has deposed that she was not aware of the September Agreement and she did not sign it. She deposed that what appears to be her signature on the document is likely an electronic signature that was placed on the document by Anthony. However, for reasons set out herein, I find that Hanan was aware of the September Agreement and either signed the agreement or consented to her signature being placed on the agreement.
[16] The court proceedings in this matter were commenced by a statement of claim that was served on the defendants on October 5, 2017. HBC noted all defendants in default by a requisition dated October 25, 2017. The noting in default of all defendants was never vacated.
[17] Hanan and Anthony retained a lawyer, Ken Dunham (“Dunham”), at some point in October, and Dunham delivered a notice of intent to defend on October 26, 2017. This notice of intent to defend was ineffective as the defendants had already been noted in default.
[18] Thereafter, HBC prepared a notice of motion for summary judgment against all defendants, returnable on November 23, 2017, based upon the defendants’ failure to comply with the September Agreement, and the fact that the defendants had been noted in default. This notice of motion was not served on Dunham or on any of the defendants as the defendants remained in default.
[19] At approximately the same time, counsel for HBC entered into negotiations with Dunham regarding a resolution. These negotiations resulted in Minutes of Settlement dated November 8, 2017 (“the Minutes of Settlement”) that were signed by HBC, Hanan, and Ottawa. Anthony was not a party to the Minutes of Settlement.
[20] I find that the Minutes of Settlement were received in draft by Dunham, that Dunham reviewed the draft with Hanan, and that Dunham requested some changes on Hanan’s behalf. Hanan and Ottawa signed the revised Minutes of Settlement after these changes were made.
[21] The preamble of the Minutes of Settlement makes reference to the September Agreement and the terms of the September Agreement. Thus, I find that at least by November 8, 2017, Hanan was aware of the existence of the September Agreement.
[22] Paragraph seven of the Minutes of Settlement reads as follows:
- The parties agree that HBC shall be entitled to obtain judgment for breach of trust, in the full amount of the claim in court file number 57655/17 against the Defendants, Mrs. El Badry and Ottawa Permanent Roofing….
[23] I find that the noting in default of the defendants, the defendants’ failure to comply with the September Agreement, and the terms of the Minutes of Settlement are all factors that form the basis for the Judgment dated November 23, 2017.
[24] I accept Hanan’s evidence that she was not immediately aware of the Judgment, as she had not been served with the notice of motion. I find that, given the terms of the Minutes of Settlement, and the ongoing default, Hanan ought to have known that HBC would be obtaining a judgment against her.
[25] I find that Hanan definitely was aware of the Judgment by May 2018, at which point she consulted with her present lawyer. This motion to set aside the Judgment was prepared in July 2018 and delivered returnable in August 2018. The motion was then adjourned to September 10, 2018 for argument.
Analysis
[26] The first issue is to determine whether the Judgment should be treated as a judgment that was obtained as a result of the default of the defendants, or a judgment that was obtained as a result of the consent of two of the defendants.
[27] Although Hanan was in default, had been noted in default, and was not served with the notice of motion, I find that in essence the Judgment was a consent judgment against Hanan and Ottawa. The preamble of the Judgment clearly references the consents of Ottawa and Hanan. Moreover, I find that the Minutes of Settlement agreement, signed by both Hanan and Ottawa, was an essential part of HBC’s motion for summary judgment. Therefore, I find that the test for setting aside a consent judgment should apply, not the test for setting aside a default judgment.
[28] I accept that it is more difficult for a party to successfully move to set aside a consent judgment. As stated by the Ontario Court of Appeal in the case of Monarch Construction Ltd. v. Buildevco Ltd. (1988), 26 C.P.C. (2d) 164 (Ont. C.A.) at p. 165,
A consent judgment is final and binding and can only be amended when it does not express the real intention of the parties or where there is fraud. In other words, a consent judgment can only be rectified on the same grounds on which a contract can be rectified.
[29] Further, in McCowan v. McCowan, [1995] O.J. No. 2245 (Ont. C.A.) at para. 19, the Ontario Court of Appeal stated,
[A] consent judgment may be set aside on the same grounds as the agreement giving rise to the judgment. These grounds go to the formation of the agreement.
[30] In the present case, the Minutes of Settlement were reviewed by Hanan with her lawyer. Negotiations as to the precise terms were conducted between Hanan’s lawyer and the lawyer for HBC. There was no fraud. There is no suggestion of duress, coercion, unconscionable conduct, or any other element that may affect the formation of the agreement. Thus, this court must presume that the Minutes of Settlement express the real intention of the parties, including Hanan.
[31] I find that Hanan has not provided sufficient evidence to support her request that the Minutes of Settlement be set aside. If the Minutes of Settlement are not set aside, then the Judgment based on the Minutes of Settlement should not be set aside.
[32] The next issue is Hanan’s submission that the portion of the Judgment that states that Hanan’s liability is “for breach of trust” cannot stand because HBC did not plead sufficient particulars to support such a statement.
[33] I agree that the references to breach of trust in the statement of claim are sparse. In paragraph 1(a), the plaintiff claims damages for breach of trust and refers to s.39(5) of the Construction Lien Act. I accept that s.39(5) of the Construction Lien Act does not have any application to Hanan in these circumstances.
[34] The only other reference in the statement of claim to breach of trust is at paragraph 21 which reads, “The Defendants are liable to the Plaintiff for Breach of Trust. The Plaintiff pleads and relies upon the provisions of the Construction Lien Act and, in particular, subsections 8(1), 8(2), 13, and 39.”
[35] I accept that s.8 and s.13 of the Construction Lien Act may apply to Hanan as an officer and director of Ottawa if the corporation has engaged in conduct that amounts to a breach of trust. However, I find that there are no particulars of the alleged breach of trust contained in the pleadings. That is, from the pleadings one cannot discern how Hanan or Ottawa is alleged to have breached a trust.
[36] In my view, the lack of particulars regarding breach of trust would create a difficulty for the plaintiff if this were a default judgment. Specifically, if a motions judge were faced with such a lack of particulars on a default proceeding, the motions judge would likely either dismiss the motion, or would require evidence on the breach of trust issue.
[37] I find that this difficulty does not exist with respect to a consent judgment. If a plaintiff in the pleadings makes a general allegation of breach of trust pursuant to s.8 and s.13, it is open to a defendant to admit to this allegation without defining the particulars of the breach. Hanan acted in precisely that manner in the present case. Therefore, in my view, the lack of particulars of the alleged breach of trust is not a reason to set aside this consent judgment.
[38] The final issue is Hanan’s submission that, given Hanan’s bankruptcy, it may be important for a court to identify the particulars of Hanan’s breach of trust. Counsel for Hanan suggested that this was a valid reason to set aside the Judgment and permit the parties to litigate the issue.
[39] I disagree. The parties have chosen to terminate the litigation in this court by way of a consent that did not identify the particulars of the breach of trust. Thus, this part of the litigation is complete. The litigation was resolved, on consent, without specific findings on that issue. If the particulars of the breach of trust are important to Hanan’s bankruptcy, there are mechanisms available to the parties in the Bankruptcy Court to determine the matter.
Conclusion
[40] For all of these reasons, Hanan’s motion to set aside the Judgment dated November 23, 2017 is dismissed.
[41] If the parties cannot resolve the issue of costs, I direct that the party seeking relief shall deliver written submissions to the trial co-ordinator at St. Catharines within 20 days of the release of this decision, with responding submissions to be delivered within 10 days thereafter. If no submissions are received within this timeframe, the parties will be deemed to have settled the costs issue as between themselves.
J.R. Henderson J. Released: September 19, 2018