Court File and Parties

COURT FILE NO.: CV-18-00008077-0000 DATE: 2019-06-20

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Capital Direct Lending Corp. Responding Party/Plaintiff

– and –

Masoud Ghorbani Moving Party/Defendant

James Riewald, for the Plaintiff

Dhiren Chohan, for the Defendant

HEARD: June 14, 2019

REASONS FOR DECISION

GAUTHIER, J.

The Motion

[1] The moving party (“Ghorbani”) seeks the following relief:

a. an order setting aside the default judgment dated March 21, 2019;

b. an order to stay the execution of default judgment;

c. an order to stay the execution of the writ of possession dated May 21, 2019;

d. an order to stay the enforcement of the notice to vacate; and

e. an order re-opening the pleadings to allow the defendant, Masoud Ghorbani, to deliver a statement of defence.

[2] The motion is opposed by the plaintiff (“Capital”).

Facts

[3] The case involves a charge dated October 4, 2016, made between the parties. Ghorbani was the mortgagor. The charge secured a principal sum of $70,000. The charge was registered on the title to the residential property being 131 Shappert Avenue in Sudbury.

[4] Default in payment under the charge occurred on September 15, 2018, and is ongoing. The mortgage matured on September 15, 2018, as well.

[5] Capital issued a notice of sale under charge on November 9, 2018.

[6] A statement of claim was issued on December 20, 2018. Attempts to effect personal service on Ghorbani were ineffective, and Capital brought a motion for an order for substituted service by ordinary and registered mail on January 11, 2019. Included in the evidence on that motion, was evidence that Capital had been advised by Ghorbani, via email, that he was “overseas” and that his daughter was living at the mortgaged property.

[7] On February 6, 2019, Kurke J. made an order for substituted service on Ghorbani by prepaid registered mail and prepaid ordinary mail and by electronic mail. The order further provided that service would be effective on the fifth day after it was mailed.

[8] The statement of claim, as well as the Order of February 6, 2019, were mailed as required on February 19, 2019. It was also provided to Ghorbani by e-mail in accordance with the Order of February 6, 2019.

[9] There were email communication between Ghorbani and Capital, beginning in December 2018 to discuss the default under the charge and the legal steps being taken by Capital.

[10] On March 7, 2019, Capital advised Ghorbani, again by email, that it would be requisitioning default judgment on March 19, 2019, to which Ghorbani replied that he was hopeful about paying out the charge by mid-April.

[11] Default judgment in the amount of $75,371.20 was obtained on March 21, 2019.

[12] In addition to the default under the charge, there are outstanding municipal taxes in excess of $6,000, up to the end of 2018. The taxes for 2019 have likewise not been paid.

[13] There were further back and forth communications between Capital and Ghorbani between March 25 and April 17, 2019. Ghorbani’s last email to Capital referred to the “amount of the court judgment”, which is a reference to the default judgment.

[14] Also, on April 17, 2019, Capital received a notice of intent to defend from Ghorbani’s counsel.

[15] Capital sought a writ of possession and obtained same on April 23, 2019. Capital’s counsel corresponded with Ghorbani’s counsel on April 24, April 30, and May 3, 2019, advising counsel that a writ of possession had been issued, and been sent to the Sheriff for enforcement, and that an eviction had been scheduled.

[16] Ghorbani’s counsel requested a consent to setting aside the default judgment. Capital did not comply.

[17] On May 7, 2019, Capital’s counsel corresponded with Ghorbani’s counsel setting out the history of the communications between the parties.

[18] There was no further communication from Ghorbani’s counsel, and, on May 21, 2019, Capital took possession of the subject property.

[19] Ghorbani’s motion to, among other things, set aside the default judgment, was brought on June 6 and argued on June 14, 2019.

Applicable Principles on a Motion to Set Aside a Default Judgment

[20] A motion to set aside a default judgment is brought pursuant to rule 19.08 of the Rules of Civil Procedure, R.R.O. 1990 Reg. 194.

[21] The jurisprudence which has developed under this rule establishes that, on such motions, the court considers the following five major factors:

a. Whether the motion has been brought promptly after the defendant has learned of the default judgment;

b. Whether the defendant has a plausible excuse of explanation for the default;

c. Whether the defendant has an arguable defence on the merits;

d. The potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff should the motion be allowed; and

e. The effect of any order the court might make on the overall integrity of the administration of justice.

See Intact Insurance Co. v. Kisel, 2015 ONCA 205, 383 D.L.R. (4th) 130, at para. 14.

Ghorbani’s Position

[22] Firstly, Ghorbani argues that he ought to have been afforded up to and including April 24, 2019, to deliver a statement of defence, as he was out of the country at the time of service. Capital was aware in advance of service of the statement of claim that Ghorbani was “overseas.”

[23] Ghorbani submits as well that the within motion has been brought promptly after he found out about the default judgment. He explains further that he was unable to comply with the rules and serve a statement of defence within the time prescribed as he was not given the required 60 days within which to do so.

[24] Ghorbani suggests that he had a settled intention to satisfy the debt (thereby conceding the default under the charge), which is an arguable defence to the claim, on the merits, and, in any event, the determination of whether or not he has an arguable defence on the merits is only one factor to be considered on the within motion.

[25] Ghorbani contends, as well, that there is potential prejudice to him if he is not granted the relief sought, as his personal property contained in the subject property, including pets, is at risk of being disposed of improperly. He also submits that any potential risk to Capital if the motion is granted is adequately addressed by the interest provisions in the charge. As a last suggestion, Ghorbani offers that Capital would be free to bring a motion for summary judgment if no defence is disclosed in the statement of defence he intends to deliver.

Capital’s Position

[26] Capital argues that service of the statement of claim was properly effected in accordance with the Order of Kurke J. and default judgment was properly obtained.

[27] Ghorbani was aware as early as April 17, 2019, as is evidenced by the email sent from him to Capital that day, that a judgment had been obtained against him, and he was made aware, as early as March 7, 2019, that Capital would be requesting a default judgment from the court.

[28] The within motion was not brought until three months after Ghorbani was advised of the impending default judgment, and some two months after being made aware of the actual obtaining of the default judgment. The within motion was therefore not brought “promptly” as is required.

[29] Ghorbani has offered no plausible excuse or explanation for the delay in bringing the motion. I am asked to consider the fact that Capital reached out to Ghorbani’s counsel on three occasions without response before finally hearing from opposing counsel. It is suggested that the reason the motion was finally brought was because Ghorbani’s attempts to secure financing to satisfy the debt were unsuccessful.

[30] Capital submits that the stated intention to pay off the debt is not an arguable defence to an action on the covenant and there is no evidence whatsoever of any real arguable defence.

[31] There is real potential prejudice to Capital if the motion is granted. The evidence suggests a property value of $110,000. The amount owing on the mortgage, as of May 31, 2019, is $78,280.98, bearing per diem interest of $20.54. The mortgagee has incurred some $10,000 of legal fees, and there are outstanding municipal taxes in the amount of $6,404 up to and including 2018. The taxes due for 2019 would be added to this latter figure. In addition, there will be closing costs and real estate commissions incurred. There is a very real risk that Capital will not be able to recoup what it is actually owed, if there is further delay in proceeding to a sale of the property.

[32] Any potential prejudice to Ghorbani in relation to his personal property is hypothetical in nature. There is no evidence on which to rest the allegation of possible improper disposition of personal property. Therefore, there is no merit to the submission about potential prejudice to Ghorbani.

[33] Capital points out as well that the default judgment has been enforced. The writ of execution was issued and enforced, and Capital is in actual possession of the property. In addition to the court sanctioned act of taking possession of the property, the terms of the mortgage gave Capital a private right to possession. Therefore, there is nothing to “stay”.

[34] An order setting aside the default judgment will not, Capital suggests, result in possession being returned to Ghorbani.

Analysis and Conclusion

[35] Firstly, I note that there was no attack on the manner of service of the statement of claim, until the bringing of the within motion. No step was taken to set the February 6, 2019, Order for substitutional service aside.

[36] The February 6, 2019, Order was properly made on the evidence before the judge. It is clear that Capital had satisfied the burden of proving that: (a) it was impractical to attempt to serve Ghorbani personally, as he was “overseas”; and (b) the statement of claim was likely to come to his attention if mailed to Ghorbani’s residence, which Ghorbani himself advised was occupied by his daughter, with whom he was in contact. It was further likely to come to Ghorbani’s attention by way of email to the email address from which he had been communicating with Capital since either December 2018 or January 2019.

[37] Default judgment was properly sought and obtained after the 20 day period after the effective date of service had elapsed.

[38] I turn now to the factors to be considered on the motion to set aside the default judgment.

[39] There was a two-month delay between Ghorbani having actual knowledge of the existence of the default judgment and the motion to set it aside. Although this is not a lengthy delay, it is arguable whether or not it satisfies the first part of the test to be applied. After some consideration, I conclude, albeit somewhat reluctantly, that the motion was brought promptly, in the circumstances.

[40] Likewise, given Ghorbani’s counsel’s litigation schedule, I will accept the explanation for the delay as not being unreasonable.

[41] The third factor to be considered, however, is highly problematic for Ghorbani. The evidence on the motion does not disclose an arguable defence to Capital’s claim. I agree with Capital that attempts to satisfy the debt do not constitute a proper defence to the action on the charge. And while I am aware that the factors are not “rigid rules”, and that the issue is whether in the particular circumstances of the case it is just to relieve Ghorbani from the consequences of the default (see Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194), the absence of an arguable defence is critical to the success of the motion.

[42] In addition, I find as a fact that there is real potential prejudice to Capital if the motion is granted, in view of the amounts owed to Capital, and the modest value of property.

[43] Ghorbani has not met the test to be applied on motions to set aside default judgment and the motion shall be dismissed.

[44] With regard to the balance of the claims for relief, I agree with Capital’s position that “there is nothing to stay”. The issues raised by those claims for relief are moot.

[45] The motion is dismissed.

[46] If the parties are unable to agree on costs, they are to communicate with the trial coordinator within 20 days to set a time and date to argue costs, failing which they will be taken to have reached agreement on costs.

The Honourable Madam Justice Louise L. Gauthier

Released: June 20, 2019

COURT FILE NO.: CV-18-00008077-0000 DATE: 2019-06-20

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Capital Direct Lending Corp. Plaintiff/Respondent

– and –

Masoud Ghorbani Defendant/Moving Party

REASONS FOR DECISION

Gauthier J.

Released: June 20, 2019