COURT FILE NO.: C-167/18

DATE: 2019-02-04

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2422823 ONTARIO INC. and RIMA CHRISTINA STERRETT, Creditors

AND:

6847188 CANADA INC., Debtor

AND:

2391318 ONTARIO INC. o/a FLAIR CLEANERS, Garnishee

BEFORE: Mr. Justice Stephen E. Firestone

COUNSEL: Ben V. Hanuka and Anthony Pugh, for the Moving Party, 2519920 Ontario Inc. Todd Christensen and Regan Christensen, for the Responding Parties, 2422823 Ontario Inc. and Rima Christina Sterrett Idan Erez, for the Responding Party, 2391318 Ontario Inc. Kelly Zarif, for the Debtor 6847188 Canada Inc. Steven Graff and Miranda Spence, for Halleh Mousavi Nikou

HEARD: In Writing

ENDORSEMENT

I. Introduction

[1] 2519920 Ontario Inc. (“251”), who is not a named party in application number C-167/18 (“Sterrett Application”), which was commenced in Kitchener, brings this motion for an order transferring “this proceeding” from Kitchener (Central South Region) to the Toronto Region pursuant to Rule 13.1.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] The Consolidated Provincial Practice Direction, at part III(B), effective July 1, 2014 (“Practice Direction”) deals with the transfer of a civil proceeding in the Central East, Central West, Central South, and Toronto Regions under Rule 13.1.02. Pursuant to the Practice Direction, motions to transfer are to be brought in writing at the court location to which the moving party seeks to have the proceeding transferred. These motions are to be heard by the Regional Senior Judge, or his or her designate. The Regional Senior Judge has delegated the responsibility for deciding this motion to me in my capacity as civil team lead - Toronto Region.

[3] For the reasons that follow this motion is dismissed.

II. Procedural History and Chronology

[4] Prior to October 2015, 2422823 Ontario Inc. (“242”) was a franchisee operating under the Dove Cleaners and Flair Cleaners brands. 242’s franchise agreement was with the franchisor 6847188 Canada Inc. (“684”). Rima Christina Sterrett was the indemnifier (Rima and 242 are collectively referred to as “Sterrett”.) 684’s principals were Danny Zarif (“Danny”),[^1] Kelly Zarif (“Kelly”),[^2] Hassan Ghanei (“Ghanei”), and Amir Ohadi (“Ohadi”).

[5] On October 13, 2015, Sterrett delivered a Notice of Rescission for breach of the franchise agreement against 684, Danny, Kelly, Ghanei, and Ohadi.

[6] On May 16, 2016, Halleh Mousavi Nikou (“Nikou”) took possession of the Dove/Flair Cleaners franchise system as secured creditor in satisfaction of loans she gave to entities involved in the Dove/Flair Cleaners franchise system.

[7] On May 25, 2016, Nikou incorporated 251 and transferred the assets of the Dove/Flair Cleaners franchise system to 251. Nikou asked Shermin Zarif, who is related to Danny and Kelly, to serve as the sole director and officer of 251. 251 employed Danny and Kelly on a part-time basis to assist in the operation of the franchise system, and employed Ghanei on a full-time basis.

[8] On June 20, 2016, Kelly (with a title of “Executive Director & CAO of Dove Cleaners” in her email signature) sent an email to Dove Cleaners franchisees that all franchise agreements would be held in 251 as of May 25, 2016. Kelly directed the franchisees to make sure all weekly cheques were written to 251 effective July 1, 2016.

[9] On January 26, 2017, Sterrett obtained an arbitration award on consent against 684, Danny, Kelly, Ghanei, and Ohadi in Toronto.

[10] On February 8, 2018, Sterrett commenced an application C-167/18 against 684, Danny, and Kelly to enforce the arbitration award in Kitchener.

[11] On March 15, 2018, Broad J. granted the order against 684, Danny, and Kelly (the “Broad Order”). This order declared that Sterrett validly rescinded the Franchise Agreement and that the respondents were jointly and severally liable for the sum of $222,660.14, pre-judgment and post-judgment interest, plus costs of $11,464.32. This order fully and finally disposed of the Sterrett Application.

[12] Subsequently on May 17, 2018, after Sterrett submitted a Requisition for Garnishment to the Kitchener registrar, the registrar issued a Notice of Garnishment naming 2391318 Ontario Inc. (“239”), a Flair Cleaners franchisee located at 3300 Bloor St. W., Etobicoke, as garnishee, pursuant to Rule 60.08(6). Sterrett served the Notice of Garnishment and demand letter on 239.

[13] On May 28, 2018, 239, whose franchise agreement was alleged to be with 251, brought a motion for a garnishment hearing, interpleader order, and order for the payment into court of specific funds paid by 239 to 251 under Rules 43.02, 45.02, and 60.08(16) (the “Garnishment Hearing”) seeking an order to, inter alia, determine its rights and responsibilities with respect to 684 and Sterrett with the debts alleged by Sterrett in its Notice of Garnishment and an order that neither 684 nor Sterrett could take action against 239 for complying with any terms of the requested order. Sterrett supported 239’s motion to hold the Garnishment Hearing.

[14] While 251 alleges that it was “brought in as a non-party”, Rule 60.08(16) allows the mover of a motion for a garnishment hearing to allege that the debt of the garnishee to the debtor has been assigned or encumbered, and the court can order the assignee to appear and state the nature and particulars of the claim, and the court can also determine the rights and liabilities of the assignee.

[15] On May 30, 2018, Glithero J. made an order declaring that, inter alia, until further order of the court, the debts owing by 239 to 684 and 251 were subject to the Notice of Garnishment and ordered 684 and 251 to fulfill their obligations to 239 under the Franchise Agreement, failing which 239 or any other party could make a motion for relief. Glithero J. also ordered that 684 and 251 pay into court the sum of $1,978.29. Glithero J. adjourned the motion to June 7, 2018.

[16] On June 4, 2018, 251 moved to have Glithero J.’s order set aside on the grounds that 239’s motion was heard on short notice and that 251 did not have adequate time to respond.

[17] By way of order dated June 7, 2018, Gordon J. set aside the order of Glithero J. and ordered, inter alia, that counsel should immediately schedule and attend with the deponents for cross-examination of affidavits, and that until further order of the court, 239 should make all further payments required of it under the Franchise Agreement to 251.

[18] On October 11, 2018, Braid J. ordered that 251 pay $18,000 in costs to 239, and that Sterrett shall bring the matter back before the court for further determination of any issue remaining between the parties and shall provide the affected parties and court with notice of a draft Notice of Motion by October 25, 2018, setting out the relief they sought in “this garnishment process” and a formal Notice of Motion once cross-examinations were complete. Braid J. also ordered that cross-examinations be completed by January 31, 2019.

[19] On October 25, 2018, Sterrett delivered a draft Notice of Return of Motion naming 251 as assignee. Sterrett also named Nikou, a former secured creditor of 684, as encumbrancer. The motion requested an order declaring the rights and liabilities of 684, 239, Nikou, and 251 with respect to the amount set out in the Notice of Garnishment and an order against 251 and Nikou jointly and severally for payment to Sterrett of the amount set out in the Notice of Garnishment.

[20] On November 14, 2018, 251 brought this motion to transfer.

[21] On November 20, 2018, Sterrett applied by letter to Arrell R.S.J. for a direction under Rule 37.15(1) that all motions in the Garnishment Hearing and 251 Action (defined below) be heard by Braid J.

[22] On November 26, 2018, Arrell R.S.J. declined to assign a particular judge to hear the motions until this current motion to transfer has been decided.

[23] On September 6, 2018, 251 commenced an action against Sterrett in Toronto (the “251 Action”) for damages arising out of Sterrett’s allegedly threatening demand letters to the Fair Cleaners franchisees. 251 alleged that Sterrett induced 251’s franchisees to breach their licence agreements, resulting in damage to the goodwill of the Flair Cleaners franchise system.

[24] In its Statement of Defence in the 251 Action dated October 31, 2018, Sterrett denied the allegations and indicated that it intends to bring a motion to have the action stayed or dismissed.

[25] On November 7, 2018, 251 stated that it intended to bring a motion for an order consolidating the Garnishment Hearing and 251 Action, to vary the order of Braid J. in the Garnishment Hearing to set aside the requirement that cross-examinations be completed by January 31, 2019, and an order requiring Sterrett to deliver an amended statement of defence.

[26] On November 15, 2018, in the 251 Action, 251 brought a motion to consolidate the Sterrett Application, Garnishment Hearing, and 251 Action. At that time, the Sterrett Application had been fully and finally determined by the Broad Order.

[27] On December 8, 2018, the parties agreed to delay the scheduling of any consolidation motion pending the determination of this motion.

IV. ANALYSIS

[28] The Sterrett Application and Garnishment Hearing bear the same court file number. However, they are not part of the same proceeding. 251 treats these identically and seeks to transfer everything relating to the Sterrett Application and Garnishment Hearing to Toronto.

[29] Rule 1.03 provides as follows:

• “action” means a proceeding that is not an application and includes a proceeding commenced by,
  • statement of claim,
  • notice of action,
  • counterclaim,
  • crossclaim, or
  • third or subsequent party claim
• “application” means a proceeding commenced by notice of application
• “hearing” means the hearing of an application, motion, reference, appeal or assessment of costs, or a trial
• “judgment” means a decision that finally disposes of an application or action on its merits and includes a judgment entered in consequence of the default of a party
• “order” includes a judgment; and
• “proceeding” means an action or application.

[30] 251 is precluded from bringing this motion to transfer for the following two reasons:

1. 251 is not a party to the Sterrett Application. The court can only transfer a proceeding “on any party’s motion”: Rule 13.1.02 and Niras v. John Doe, 2018 ONSC 5839.
2. The Broad Order fully and finally disposes of the Sterrett Application on its merits. There is nothing in the Sterrett Application left to transfer.

[31] The Garnishment Hearing is an attempt to enforce the Broad Order, which is permissible under Rule 60.02(1)(b). The Garnishment Hearing is not a “proceeding”. It is not brought by an action or application. Rather, it is brought by way of a motion: Rule 60.08(16).

[32] Furthermore, a notice of garnishment is commenced administratively by filing with the registrar where the proceeding was commenced a requisition for garnishment, a copy of the order as entered, any other evidence necessary to establish the amount awarded and the creditor’s entitlement, and an affidavit. This is confirmed by Watson & McGowan: “the procedure does not require an initial court application for a garnishment order: the procedure begins with the administrative act of the registrar issuing a notice of garnishment”: Derek McKay & Michael McGowan, Watson & McGowan’s Ontario Civil Practice 2019 (Toronto: Thomson Reuters Canada, 2018), at Rules of Civil Procedure Commentary, Rule 60.

[33] 251 seeks to transfer the Garnishment Hearing to Toronto. However, Rule 13.1.02(2) only applies to proceedings. A garnishment hearing is commenced by a motion, not by an action or application. The moving party is at liberty to seek leave to bring its motion in a different location under Rule 37.03.

[34] For the following reasons, 251’s motion is dismissed. I encourage counsel to agree on the issue of costs. If they cannot agree within the next ten days, I may be contacted in order to set a timetable for the receipt of cost submissions. Should I not hear from the parties within fifteen days, I will deem the issue of costs to have been settled.

Firestone J.

Date: February 4, 2019

[^1]: a.k.a. Shahram Danny Zarif, Shahram Zarif, Shahram Z Karimi, Shahram Zarif Karimi, and Shahram Zarif-Karimi. [^2]: a.k.a. Shadi Kelly Zarif, Shadi K Zarif, Shadi Zarif, Shadi Z Karimi, Shadi Zarif Karimi, and Shadi Zarif-Karimi.