COURT FILE NOS.: CV-10-2999-00, CV-11-0987-SR, CV-11-0097-SR, and CV-11-0717-SR
DATE: 2021 01 06
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jaime Alcantara, Peter Aquilina, Ruth Bartel, Muriel Clarke, Rosanna De Santo, Ahmad-Shah Duranai-Khan, Robert Dzimbowski, Ronald Garland, Cameron Greig, Anna Greig, Peini Huang, Elisa Hui, Lai Nar Ip, Doug Johnson, Rajesh Kumar, Bruce Kupferschmidt, Anil Misir, Batdelger Regsuren, Gojko Roglic, Harpal Singh, Roopnarine Sugrim, Khanlaw Sugrim, Vaclav Trcka, Vlasta Trcka, Luke Watson and Crispina Watson, Plaintiffs
AND:
Sunil Rulsiani, Ravinder Tulsiani and Tulsiani Investments Inc., Defendants
BEFORE: Doi J.
COUNSEL: Alexander D. Wilkes, for the Responding Plaintiffs
Timothy M. Duggan, for the Moving Defendant, Ravinder Tulsiani
HEARD: December 15, 2020
ENDORSEMENT
Overview
[1] The Defendant Ravinder Tulsiani (“Ravinder”) seeks to set aside four default judgments that were obtained against him in 2011 (the “Default Judgments”).[^1]
[2] The Default Judgments were granted during a period when Ravinder had believed that his interests were being defended by a lawyer that his brother, the Defendant Sunil Tulsiani (“Sunil”), had engaged to defend them and the corporate Defendants, Tulsiani Investments Inc. (“Tulsiani Investments”) and Tulsiani Builders Inc. (“Tulsiani Builders”), in these actions.[^2] Unbeknownst to Ravinder, however, his lawyer did not defend him from being noted in default or from having the Default Judgments granted against him. Neither his lawyer nor Sunil notified Ravinder that he was in default as matters unfolded.
[3] For the reasons that follow, I am satisfied that the motion should be granted and the default judgments should be set aside so that Ravinder may defend the claims on their respective merits.
Background
[4] Ravinder is a defendant in four (4) actions, being CV-10-2999-00, CV-11-0987-SR, CV-11-0097-SR, and CV-11-0717-SR (collectively, the “Four Actions”). There is significant overlap with the respective parties to the various actions.
[5] Ravinder and Sunil are brothers. Ravinder has an undergraduate baccalaureate law degree, and previously worked in finance as a broker supervisor and as a chief compliance officer. From time to time since 2005, Sunil operated various different investment businesses including Tulsiani Investments and Tulsiani Builders. Beginning in or about April 2006, Ravinder participated in some of Sunil’s business activities, and was identified as the Chief Executive Officer of Tulsiani Investments in certain communications to clients or investors. There is a live dispute as to whether Ravinder co-founded Tulsiani Investments with Sunil.
[6] In or around September 2008, Ravinder and Sunil had a falling out. This led to Ravinder’s resignation from all of Sunil’s business activities as of December 19, 2008. Thereafter, Ravinder claims that he was not involved with Tulsiani Investments or Tulsiani Builders, or any of Sunil’s other business activities. At this time, Ravinder and Sunil purportedly have a strained relationship and are not on speaking terms.
[7] The plaintiffs in the Four Actions were former investors with Tulsiani Investments, which is a defendant in each of the Four Actions. Ravinder and Sunil are also defendants in each action. Tulsiani Builders is a defendant in CV-11-0097-SR. Vijai Sookhai, a defendant in CV-10-2999-00, is a lawyer who periodically held funds in escrow in respect of investments that were managed by Tulsiani Investments.
[8] During his cross-examination, Ravinder acknowledged being aware of certain publications or documents that were provided to investors in connection with Sunil’s businesses to promote business or investment opportunities through them. There is a dispute as to whether Ravinder had dealings with the Plaintiffs, and the nature and extent of his involvement, if any, with investment promotional materials that were provided to the Plaintiffs.
[9] When the Four Actions were commenced, Sunil apprised Ravinder of the proceedings and advised that A.C., a lawyer, would defend him along with the other Defendants in the proceedings.[^3] On or about March 8, 2011, A.C. filed notices of intent to defend on behalf of Ravinder and the other Defendants in at least two (2) of the actions (CV-11-0097-SR and CV-11-0717-SR).
[10] Ravinder apparently did not communicate directly with A.C. in respect of the Four Actions. After purportedly ceasing to have any involvement with Sunil’s business activities by the end of 2008, Ravinder claims that he had no further association with the businesses, including Tulsiani Investments and Tulsiani Builders. In turn, Ravinder apparently was content to leave his defence of the actions in the hands of A.C., who also was to defend Sunil and the corporate Defendants.
[11] Ravinder was noted in default on November 4, 2010 in CV-10-2999-00, and on April 13, 2011 in CV-11-0097-SR, CV-11-0717-SR and CV-11-0987-SR (the “Notings of Default”). He claims that he was unaware of his defaults as they unfolded because his lawyer did not inform him.
[12] The Default Judgments were granted on July 22, 2011 (CV-11-0097-SR and CV-11-0717-SR), September 6, 2011 (CV-11-0987-SR), and October 3, 2011 (CV-10-2999-00), after the Plaintiffs moved for default judgment without notice. Subsequently, by letter dated February 3, 2012 and sent by regular mail, the Plaintiffs forwarded the Default Judgments to the Defendants and demanded payment on them. Although addressed to him and the other Defendants, Ravinder claims that the Plaintiff’s letter did not come to his attention when initially mailed because it went to the corporate address where Sunil operated his businesses, and was not forwarded on to him. Ravinder claims that he was unaware of the Default Judgments around that time.
[13] In or about early November 2018, Ravinder sought to refinance the mortgage on his home. After his bank performed an execution search, he apparently learned for the first time of five (5) judgments against him, namely the Default Judgments and a further default judgment. He then obtained a copy of the February 3, 2012 letter, which Plaintiffs’ counsel gave to the lawyer who was helping Ravinder to refinance the mortgage on his home.
[14] Upon discovering the Default Judgments, Ravinder immediately contacted Sunil and learned, apparently for the first time, that A.C. had not defended him or the other Defendants in the Four Actions because their legal fees had been unpaid.
[15] Ravinder took steps to explore his options. He spoke with a trustee in bankruptcy and a bankruptcy lawyer about a possible assignment in bankruptcy. Thereafter, he retained Mr. Duggan to set aside the Default Judgments against him.
[16] On April 15, 2019, Mr. Duggan served the Plaintiffs with his notices of appointment in the Four Actions and advised them of his instructions to move to set aside the Default Judgments. He took steps to obtain a copy of the court files in the Four Actions, which was arranged by June 2019. On August 15, 2019, Mr. Duggan canvassed the Plaintiffs for a motion return date.
[17] In or about mid-September 2019, Mr. Duggan’s office obtained a copy of A.C.’s file, which apparently does not have any content that sheds any further light on this matter beyond the above-mentioned information. As a result, Ravinder claims to not know why A.C. did not defend him, why he came to be noted in default, why the Default Judgments were obtained against him, or why this occurred without any warning or notice to him, apart from what Sunil has told him.
[18] On or about September 13, 2019, Justice Faieta made a consent order to set aside the other default judgement against Ravinder in the fifth action (CV-16-557884).
[19] Ravinder flatly denies any fault, wrongdoing or liability in connection with the allegations against him in the Four Actions. More specifically, he denies making any misrepresentations or inducements to any of the Plaintiffs about investments pertaining to any of the Four Actions while he was involved with Sunil’s businesses. According to Ravinder, he simply had nothing to do with the events underlying the claims to the Default Judgments.
Analysis
[20] Rule 19.08 (Setting aside default judgment) provides as follows:
19.08 (1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just.
(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge on such terms as are just.
(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the noting of default under rule 19.03.
[21] In determining a motion to set aside a default judgment, the court must consider whether the interests of justice favour granting the order based on the following factors:
(a) whether the motion was brought promptly after the defendant learned of the default judgment;
(b) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
(c) whether the facts establish that the defendant has an arguable defence on the merits;
(d) the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent 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.
Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at paras. 47-49.
[22] The foregoing are pertinent factors to consider, but are not rigid rules. The particular circumstances of each case are considered in determining whether it is just to relieve the defendant from the consequences of his or her default: Mountain View at para. 50. For instance, the presence of an arguable defence on the merits may justify the court exercising its discretion to set aside the default judgment, even if the other factors are unsatisfied in whole or in part: Mountain View at para. 51. The court’s ultimate task on a motion to set aside a default judgment is to decide whether the interests of justice favour granting the order: Mountain View at para. 47.
[23] Based on the Mountain View factors, I find that Ravinder should be relieved of his default in this matter.
[24] From the record, I find that Ravinder promptly took steps to set aside the Default Judgments once he became aware of them in November 2018. He immediately made inquiries with Sunil, obtained relevant professional advice regarding his options, and retained Mr. Duggan who brought this motion with reasonable diligence.
[25] The Plaintiffs argue that Ravinder likely knew of the Default Judgments much earlier than he claims, and well-before November 2018. They assert that a copy of the letter from Plaintiffs’ counsel dated February 3, 2012 enclosing the Default Judgments was sent to Ravinder’s home by regular mail, which likely brought the judgments to his attention around that time. However, the envelop used to send the letter to Ravinder incorrectly set out the postal code for his home address. Ravinder and his wife, who reside together in the same household, deny having received the letter and claim that it would have come to Ravinder’s attention had it actually been delivered. In light of this evidence, I am persuaded that the February 3, 2012 letter and the Default Judgments likely did not come to Ravinder’s attention around then.
[26] The Plaintiffs submit that Ravinder is not a credible witness, and refer to other parts of his evidence to suggest that his account is self-serving and not believable. Ravinder initially stated in an affidavit that he could not recall whether he was properly served with the statements of claim in the Four Actions, and then stated under cross-examination that he did not receive information about the claims at his home. However, the Plaintiffs claim that he was personally served with the statement of claim in CV-10-2999-00 at his home on September 22, 2010, and that his wife was served with the statement of claim in CV-11-0987-SR at their home on April 25, 2011. I accept that some discrepancies may arise from this. But given the qualified nature of his initial statement that he did not recall being served, and his later statement under cross-examination that he had reviewed the statements of claim when they had been forwarded to him, I am not persuaded from the totality of the record that the Plaintiffs have succeeded in impeaching Ravinder’s credibility.
[27] The Plaintiffs also note that Ravinder claims that he never had any direct communications with A.C. with respect to the Four Actions, although an email from A.C. to Plaintiffs’ counsel dated February 9, 2011 indicates that A.C. met with the Tulsiani brothers the previous evening to confirm his retainer to represent them in at least two of the actions. While the Plaintiffs strongly asserted this point in submissions, I am unprepared to find that Ravinder lacks credibility based on this hearsay statement and without further evidence to explain the context to A.C.’s email. I also have reservations with the reliability of A.C.’s emailed statements to Plaintiffs’ counsel, as explained by the following.
[28] Relying on an email exchange between A.C. and their former counsel on May 27, 2011, the Plaintiffs claim that Ravinder likely was aware of the prospect of default judgment being granted against him because A.C. had advised their former counsel that: a) he was in the process of getting off the record on all matters; b) he would forward the email sent by Plaintiffs’ counsel earlier that day warning of his intention to note the Defendants in default in one proceeding by June 6, 2011 without further notice unless they delivered a proper pleading; and c) he would obtain the consent of Sunil and Ravinder to share their contact information with Plaintiffs’ counsel. However, there is no indication in the record that A.C. ever took appropriate steps to be removed as counsel of record, ever forwarded the email from the Plaintiffs’ former counsel to Ravinder or Sunil, or ever took steps to share their contact information with the Plaintiffs so the parties could communicate directly. Having obtained and reviewed a copy of A.C.’s file, Ravinder states that it shines no further light on any of these points. In these circumstances, I accept that Ravinder was not apprised of the above-mentioned events as they unfolded and, therefore, was unaware of the risk that default judgments would be sought and awarded against him.
[29] From the record before the court, I am satisfied that Ravinder has a plausible explanation for his failure to comply with the timelines under the Rules as he reasonably believed that his counsel, A.C., would be defending his interests in the Four Actions. In my view, Ravinder has plausibly shown that he relied on A.C. to defend him in the litigation. By delivering at least two notices of intent to defend, A.C. clearly took some steps to defend Ravinder’s interests. However, given A.C.’s apparent failure to keep him apprised, Ravinder remained unaware of his default or that A.C. would no longer defend him.
[30] Despite the passage of time, Ravinder apparently did not follow-up with A.C. or Sunil about the litigation. On this point, I accept the Plaintiffs’ submission that Ravinder acted in a rather naïve or imprudent fashion. That said, I find on the record that Ravinder maintained a belief that A.C. would defend his interests alongside the other Defendants until he advised otherwise. By the time the actions were brought in 2011, Ravinder had not worked with Sunil or had any dealings with the business activities at issue for several years. As he believed that his involvement in the businesses was peripheral to the claims, and that his interests were aligned with those of Sunil and the corporate Defendants, I find that Ravinder entrusted A.C. to defend him along with the other Defendants in the proceedings. In turn, I accept that Ravinder developed a mindset that further attention to the actions was not required.
[31] Despite their prior falling out, I find from Ravinder’s essentially unchallenged evidence that he believed his brother, Sunil, would arrange for A.C. to defend him along with the other Defendants in the litigation. I also accept that Ravinder relied on A..C. to defend his interests. There is no evidence to suggest that Ravinder had any reason to suspect that Sunil or the corporate Defendants lacked funds to pay for A.C.’s legal fees, or that A.C. would be unwilling to act for him in the litigation. Although A.C. advised Plaintiffs’ counsel on May 27, 2011 of his intention to be removed from record, there is no evidence that A.C. took any steps to be removed or to advise Ravinder that he would no longer act as his lawyer. Although the record is not entirely clear, I am satisfied that a key reason for why Ravinder came to be in default can be attributed to A.C.’s failure to properly apprise him of the proceedings, and the improper manner by which A.C. stopped acting for him. The law ordinarily does not allow an innocent client to suffer an irrevocable loss of the right to proceed due to the inadvertence of his or her counsel: H.B. Fuller Company v. Rogers (Rogers Law Office), 2015 ONCA 173 at para. 27; Labelle v. Canada (Border Services Agency), 2016 ONCA 187 at para. 36; Chiarelli v. Wiens, 2000 CanLII 3904 (ON CA), [2000] OJ No 296 (CA) at para. 9. In my view, A.C.’s failure to update Ravinder on the status of the Four Actions and his improper withdrawal as his counsel of record favour reinstating the action.
[32] The Plaintiffs submit that a motion to set aside a default judgment should be denied where the moving defendant acted irresponsibly by relying on a co-defendant to defend him or her, and compounded this irresponsible conduct by failing to ensure that the co-defendant actually defended the action as apparently promised. On this point, the Plaintiffs rely on the reasoning in Signature Realty Inc. o/a Royal Lepage Signature Realty v. Fallico, 2020 ONSC 1117 at paras. 54 and 64. But the moving defendant in Signature Realty did not retain a lawyer, and instead dealt directly with a co-defendant who did not defend the action as promised: Signature Realty at paras. 38 and 54-55. This scenario is distinguished from the facts in this case, in which Ravinder entrusted A.C., his counsel of record, to defend his interests in the litigation. Here, the evidence also shows that A.C. did not apprise Ravinder of the litigation, or notify Ravinder before discontinuing his legal representation. In Signature Realty, the court also held (at paras 56-58) that the moving defendants had no arguable defence on the face of the record. In contrast, as further explained below, I find that Ravinder has shown an air of reality to support an arguable defence to the claims against him.
[33] In my view, this matter is also distinguishable from others in which a defendant chose to abandon a litigation matter by deliberately placing it into abeyance for a lengthy period of time: Marché d’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd., 2007 ONCA 695 at para. 30-33. On the record before me, I see no deliberate or wilful delay by Ravinder. Rather, I find that Ravinder ended up in default due to a failure by his counsel of record to take reasonable steps to either defend the case, report on the litigation, or advise him that services would be discontinued.
[34] I am persuaded that Ravinder has an arguable defence on the merits. He claims that he did not make any misrepresentations or inducements to any of the Plaintiffs for any investments related to the Four Actions while he was involved with Sunil’s businesses. Although he dealt with certain promotional information and information sessions, Ravinder states that his involvement dealt only with other investment activities that are unrelated to those at issue in the Four Actions. According to Ravinder, it was only Sunil who was involved in promoting the investment schemes and projects that underpin the Four Actions. In light of this, I find that Ravinder has shown an air of reality to his defence on the merits. On this point, I observe that he is not required to show that his defence will inevitably succeed, but only that his defence has an air of reality: Mountain View at para. 51.
[35] In their materials and submissions, the Plaintiffs described at some length the key factual issues in dispute and the evidence supporting the claims, and invited the court to make factual and credibility findings to assess whether Ravinder’s anticipated defence would succeed. However, in determining the “arguable defence” branch of the Mountain View test, the court does not make findings of fact and assess whether the defence will succeed: Zeifman Partners Inc. v. Aiello, 2020 ONCA 33 at para. 34. Rather, the issue to decide is whether the defence has an air of reality: Zeifman at para. 32-34; Mountain View at para. 51. To this end, I find that Ravinder’s defence is viable, is not outlandish or implausible, and thus carries an air of reality.
[36] In balancing the potential prejudice that either side will face, I am satisfied that this factor weighs in favour of setting aside the Default Judgments. Without doubt, the Plaintiffs will face some prejudice as the memories of witnesses likely have faded over time. However, it remains to be seen whether this case may turn more on records and less on viva voce evidence in addressing the investments at issue. Although there is no indication that any of the Plaintiffs’ records are unavailable, it appears that some of Ravinder’s relevant documents are missing, including those that he purportedly gave to A.C. to prepare his defence. In any event, any prejudice to the Plaintiffs is outweighed, in my view, by the significant prejudice that Ravinder would face if the Default Judgments are not set aside. He is facing a multi-million dollar judgment, which is a serious factor to weigh against any prejudice to the Plaintiffs that is caused by a delay in the proceedings. Although the delay in this case is not insignificant, default judgments have been set aside in other cases where judgment was granted roughly six and seven years earlier, which approximates the timeframes in this case: Mountain View at para. 4; Nu-Fish Import Export Ltd. v. Sunsea Import Export Ltd., 1997 CanLII 12270 (ON SC), [1997] OJ No 3109 (Gen Div) at para. 4. Moreover, the Plaintiffs will be entitled to interest if they ultimately are successful in the Four Actions.
[37] Turning to the overall integrity of the administration of justice, I recognize that Ravinder’s decision to not pay attention to the Four Actions during the earlier course of the proceedings was imprudent. However, Ravinder had left Sunil’s business activities several years earlier and had been entirely uninvolved with them when the actions were brought. Apparently believing that he had only a limited or peripheral role in the matter, I accept that he chose to rely on his counsel to defend his interests along with those of the other Defendants in the litigation. Importantly, his counsel did not update him on the proceedings, and did not give notice before withdrawing his services. Given these apparent errors or oversights by counsel, who effectively abandoned the file, the court’s preference to not leave a client in default without a remedy by allowing a determination on the merits is particularly fitting in this case: H.B. Fuller at para. 27; Marché D'Alimentation at paras. 27-28. An overarching goal of our civil process is to ensure “the just, most expeditious and least expensive determination of every civil proceeding on its merits,” with outcomes based on technical failings being exceptions to this general principle: Rule 1.04(1); Zeifman at para. 47. In light of all this, I am satisfied that the overall integrity of the administration of justice is best maintained by granting the motion.
[38] Based on the foregoing, I conclude that the Default Judgments against Ravinder should be set aside in the interests of justice.
[39] Having regard to the circumstances of this case, I also find that the Notings of Default against Ravinder should be set aside under Rule 19.03(1). In my view, the nature and value of the claims, the conduct of his counsel that gave rise to the delay which led Ravinder to be noted in default without being apprised, and the other factors related to balancing the potential prejudice to the parties and the overall administration of justice, as set out earlier, weigh in favour of setting aside the Notings of Default: Intact Insurance Company v. Kisel, 2015 ONCA 205 at para. 13.
Outcome
[40] Accordingly, I would set aside the Default Judgments and the prior Notings of Default against Ravinder in the Four Actions, along with any writs or executions taken to collect the judgments against him. If Ravinder wishes to continue with the litigation, then he must deliver a statement of defence to the actions within 30 days of the release of these reasons, failing which each default shall be reinstated.
[41] If the parties are unable resolve the issue of costs, Ravinder may deliver written costs submissions of up to 2 pages (excluding any costs outline or offer to settle) within 15 days, and the Plaintiffs may deliver their responding submissions on the same terms within a further 15 days. Reply submissions shall not be delivered without leave.
Doi J.
Date: January 6, 2021
COURT FILE NOS.: CV-10-2999-00, CV-11-0987-SR, CV-11-0097-SR, and CV-11-0717-SR
DATE: 2021 01 06
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jaime Alcantara, Peter Aquilina, Ruth Bartel, Muriel Clarke, Rosanna De Santo, Ahmad-Shah Duranai-Khan, Robert Dzimbowski, Ronald Garland, Cameron Greig, Anna Greig, Peini Huang, Elisa Hui, Lai Nar Ip, Doug Johnson, Rajesh Kumar, Bruce Kupferschmidt, Anil Misir, Batdelger Regsuren, Gojko Roglic, Harpal Singh, Roopnarine Sugrim, Khanlaw Sugrim, Vaclav Trcka, Vlasta Trcka, Luke Watson and Crispina Watson, Plaintiffs
AND:
Sunil Rulsiani, Ravinder Tulsiani and Tulsiani Investments Inc., Defendants
BEFORE: DOI J.
COUNSEL: Timothy M. Duggan, for the Moving Defendant, Ravinder Tulsiani
Alexander David Wilkes, for the Responding Plaintiffs
ENDORSEMENT
Doi J.
DATE: January 6, 2021
[^1]: Default Judgment against Ravinder Tulsiani was granted on July 22, 2011 in CV-11-0097-SR and CV-11-0717-SR, on September 6, 2011 in CV-11-0987-SR, and on October 3, 2011 in CV-10-2999-00.
[^2]: The use of the individual Defendants’ first names is for clarity, and no disrespect is intended.
[^3]: The statements of claim were issued as follows: CV-10-2999-00 was issued on August 12, 2010, CV-11-0097-SR was issued on January 11, 2011, CV-11-0717-SR was issued on February 17, 2011, and CV-11-0981-SR was issued on March 6, 2011.