COURT FILE NO.: CV-16-548869

DATE: 2022 03 11

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

MONSTER SNACKS INC.

Plaintiff/Respondent

And

SANDRA DAVID ALSO KNOWN AS SANDRA ALSAFFAWI-DAVID

Defendant/Applicant

BEFORE: Associate Justice Ilchenko

COUNSEL: Robert Karrass (“Karrass”) for the Applicant Sandra David also known as Sandra Alsaffawi-David (“Sandra” or the “Defendant”)

Gregory W. Bowden (“Bowden”) for Respondent Royal Bank of Canada (“RBC”) assignee of the Default Judgment obtained by the Plaintiff Monster Snacks Inc. (“Monster Snacks” or the “Plaintiff”)

HEARD: November 12, 2021, continued on second hearing date on December 17, 2021 and further written submissions filed by the Parties on December 21, 2021

RELEASED: March 11, 2022

E N D O R S E M E N T

I) Nature of Relief Sought by Plaintiff and Procedural History of Motion

[1] The Defendant Sandra has brought this motion to obtain an order setting aside the Noting in Default obtained by the Plaintiff on September 22, 2017 and the Default Judgment, in the Principal Amount of $301,949.58 issued January 13, 2017 (the “Default Judgment”) and an order setting aside any Notice of Garnishment, Writs of Seizure and Sale, and any other enforcement steps that may have been filed as a result of the Default Judgement.

[2] From the Ministry of the Attorney General Case History of this Action (the “Case History”), it appears that the Defendant Sandra initially personally appeared at a Case Conference before RSJ Firestone on October 29, 2019 to schedule a Motion to set aside the Default Judgment. RSJ Firestone transferred the matter to be scheduled to be heard before a Master.

[3] An initial return date for the hearing of the Motion was obtained for November 22, 2019. The motion was adjourned to November 27, 2019 and Master Short seized himself with the matter and established a timetable. Unfortunately, that timetable is not available to me and could not be located by Counsel.

[4] On November 27, 2019 Master Short set a Long Motion date for March 10, 2020.

[5] The Defendant retained Karrass in or around December 2019 to proceed with the motion on her behalf and formally retained him on January 10, 2020

[6] The March 10, 2020 date was adjourned to July 8, 2020. On July 2, 2020 it appears that a conference call occurred that suspended the Motion sine die, pending the lifting of COVID restrictions.

[7] From all of this activity in 2019 and early 2020 in the Case History, it does not appear that any Motion Materials were actually filed with the Motions Court Office. The first record in the Case History of the filing of actual court materials was a Motion Record of the Defendant that was apparently served by Karrass on counsel for RBC on October 9, 2020 according to an affidavit of service filed on this Motion, and the Case History records that a Motion Record was filed with the Court by Karrass on October 20, 2020.

[8] The Motion was scheduled again for December 2, 2020 before Master Short, but again on that date the Motion was withdrawn by the Motions Court office because it was not properly confirmed by counsel for the Moving Party. Master Short returned the documents he had in his chambers on this Motion on May 19, 2021 and retired in the summer of 2021, and as a result no Associate Justice remained seized with this Motion.

[9] A motion date of August 26, 2021 was obtained.

[10] On August 11, 2021 Associate Justice Abrams at a case conference vacated the hearing date for this motion of August 26, 2021 and booked September 21st for a Motion to Strike affidavits filed by Sandra by RBC for failing to answer questions at the cross-examination of Sandra (the “RBC Strike Motion”)

[11] The RBC Strike Motion before Associate Justice Josefo was withdrawn by the parties on September 21, 2021.

[12] Finally, this motion was set for hearing before me as an urgent Motion to be heard on November 12, 2021. Despite, again, counsel for the Moving Party not properly confirming the motion, I heard the motion on that date and adjourned the Motion so that further materials and compendia could be filed. I heard further oral argument on December 17, 2021 after the filing of these materials. After that hearing I allowed the Parties to file further written submissions by December 21, 2021.

[13] I will deal in greater detail with the events relating to the conduct of the Motion below.

Materials filed and requirement by the Court for Refiling Materials with Compendia

[14] For this motion the Applicant\Defendant Sandra has filed 696 pages of materials, while the Respondent RBC has filed approximately 3163 pages of materials, however some of these materials were refiled by counsel for RBC when it became apparent that the uploading of the motion materials to Caselines had stripped the RBC materials of their Adobe bookmarks.

[15] The cross-examination transcripts alone account for 185 pages for Sandra’s two cross-examinations and 168 pages for the cross-examination of the RBC witness Ammar Kailani, the principal of the Plaintiff Monster Snacks (“Kailani”).

[16] Originally this motion had been scheduled for a mere two hours, and was deemed withdrawn by the Motions Court Office and required my intervention to be heard as an urgent matter as a result of the failure of the Applicant’s Counsel, again, to confirm this Motion.

[17] Given the volume of materials, this matter should have been scheduled as a Long Motion, as was originally set by Master Short when he was seized with this Motion.

[18] At the end of the first day of hearings I raised certain issues with the parties that had not been dealt with in their materials, and adjourned the matter for further argument on December 17th, 2021.

[19] I also required fresh as amended hyperlinked facta to be filed, and compendia to be prepared, as due to the volume of materials, and the lack of ability to access them easily due to the materials being, in some cases, unbookmarked 333, 352 and 82 page PDF documents. This created a situation similar to that faced by Dunphy, J. in Basaraba v. Bridal Image Inc., 2021 ONSC 8038, where 7 parties represented by 4 sets of counsel had uploaded (a comparatively modest) 2000 pages of documents on multiple summary judgment motions:

“[7] The parties have lived with this case for five years at this point and the incident in question occurred two years before then. A judge hearing a summary judgment motion comes to the task with none of that history. He or she has the benefit of facta which are intended to walk the judge through a summary of the relevant evidence leading to the desired conclusion. Absent hyperlinks, the task of checking the actual evidence against the summary narrative of the factum is pretty much impossible in a record of this size and complexity. None of the parties hyperlinked the references to the evidence contained in their facta. Each such reference was to a motion record or transcripts with neither hyperlinks nor even a reference to the relevant Caselines page number.

[8] This failing alone is more than sufficient to warrant dismissal of this motion. We have been working with virtual hearings for almost two years at this point. The potential benefits in terms of cost, efficiency and access to justice are huge and will certainly outlive the pandemic. However, the system will grind to a halt if the parties do not shoulder their part of the burden seriously. The practice directions and notices to the profession have been highlighting the need for serious attention to be paid to the manner in which documents are uploaded to Caselines for a long time. Tabs do not survive uploading. Hyperlinks and, in appropriate cases, separate uploading of individual tabs or exhibits serve to make the task of navigating large volumes of documents feasible. That was simply not done here. The result was to drop a task in my lap akin to asking me to sort through an overturned bowl of spaghetti.

[26] I initially formed the view that there was no need to write and publish detailed reasons in this case. I have changed my view on the matter not from a desire to single out any of the counsel involved. They are in good company. The problem of parties failing to upload usable motion materials to Caselines is endemic. It will not improve if light is not shone upon it. The message needs to get out to the profession that these “motions in a box” are simply not going to work without more effort on the part of the parties. Properly hyper-linked motion records and facta are quite frankly the exception and not the rule these days.

[27] My closing comment would be to exhort ALL counsel to check back on their case after they have uploaded their documents to Caselines and verify that a judge reviewing it will be able to navigate through the evidence, case law and written argument in the way they would like. Hyperlinks in facta and motion records are a MUST. Separately loaded and clearly identified tabs should be considered. It must be usable.”

[20] On the December 17, 2021 return date, the Motion was deemed withdrawn, yet again, by the Motions Court Office, and yet again required my intervention to be heard as an urgent matter, as a result of, yet again, the failure of the Applicant’s Counsel to confirm this Motion.

[21] This time, Counsel for the Applicant tried on for size with the Motions Court Office the tall tale that I had “waived compliance” with the requirement for filing a confirmation form with the Motions Court Office within the required time periods, when my endorsement clearly had not. I disabused counsel for the Applicant of that notion at the hearing.

[22] As this was scheduled as an urgent motion before me, and as there was professed urgency by Sandra, the details of which I will deal with below, and to avoid inflicting this Motion on my fellow Associate Judges, I heard this motion to its conclusion, despite all of these issues. But all of these issues are relevant to my determination of costs on this Motion.

II) Factual Context in which the Motion is Brought

[23] A summary of the positions of the parties from their affidavits, and quotations from their specific respective positions taken on the issues to be determined on this Motion, are necessary to determine the issues on this motion.

[24] Given the bulk of the materials filed on this Motion, the parties disagree on most of the facts of the underlying dispute between Sandra and Kailani, and each has been extensively cross-examined. However, the factual background regarding the legal dispute behind the Default Judgment is necessary to determine many of the legal tests for the setting aside of the Default Judgment.

General Overview and Parties

[25] As a general overview, this Motion arises to set aside the Default Judgment obtained by the Plaintiff Monster Snacks, incorporated by Kailani, against the Defendant on January 13, 2017, arising out of a transaction to purchase by the Plaintiff the vending machine and other business assets of “Suddenly Soda Refreshments” (“Suddenly Soda”), from the Defendant on the alleged closing date of April 13, 2015.

[26] The Plaintiff alleges that Sandra was the sole proprietor of the Suddenly Soda business. Sandra vehemently denies this and states that her name was inadvertently put on the business records of this unincorporated business by her estranged husband Antony David (“David”), who she alleges ran the business, who Sandra alleges was abusive, and that David coerced her into signing the transaction documentation, which the Plaintiff contests.

[27] After allegedly receiving less than he bargained for in the transaction, the Plaintiff first initiated a complaint on October 15, 2015 (the “LSO Complaint”) with the Law Society of Ontario (the “LSO”) against Sandra, who is a lawyer, but was not his lawyer. This complaint was rejected for insufficient evidence on July 25th, 2016, but Sandra was cautioned.

[28] On March 16th, 2016 the Plaintiff issued a Statement of Claim (the “Statement of Claim”), and attempts to personally serve the claim by the process server Anthony Diaz (“Diaz”) on the Defendant were allegedly made on March 21, 2016, with alleged follow up phone calls made on April 4, 6 and 11, 2016 to arrange for service. The Plaintiff brought a Motion for Substituted Service in writing and Master Graham (as he then was) granted a Substituted Service Order on June 13, 2016 (the “Substituted Service Order”).

[29] The Plaintiff alleges that the Order and the Statement of Claim were mailed to the Plaintiff in compliance with the Substituted Service Order. The Defendant vehemently disagrees, stating that she only received a partial copy of the Statement of Claim of the first two pages and the Backing Page. The Defendant alleges that she wrote twice to Murray Maltz (“Maltz”) counsel for the Plaintiff indicating the non-compliance with the Substituted Service Order and asking for the complete Statement of Claim so she could defend the claim, by mail on August 3, 2016 and by Fax on September 2, 2016.

[30] Maltz allegedly never responded to this correspondence from the Defendant and filed a Requisition for Noting in Default and Default Judgment on September 22, 2016 (the “Requisition”), and the Default Judgment is ultimately issued on January 13, 2017. Maltz filed a requisition for Writs of Seizure and Sale against the Defendant on April 19, 2017 and registers a writ against Sandra in Toronto (the “Writ”). And then Maltz does absolutely nothing else to enforce the Default Judgment.

[31] RBC financed Monster Snacks in this transaction, and when the RBC loan allegedly went into default made demand on Monster Snacks and on Kailani under his Guarantee on November 14, 2017. The RBC commenced an Action (the “RBC Action”) against Kailani and Monster Snacks on January 3, 2018, by issuing a Statement of Claim (the “RBC Statement of Claim”) claiming against Monster Snacks and Kailani, inter alia, for forging and fraudulently presenting to RBC net worth information to obtain financing for the Suddenly Soda transaction. At some point in 2018 the RBC Action is allegedly settled and the Default Judgment is allegedly assigned to RBC under the alleged terms of this alleged settlement.

[32] On May 13, 2019 Bowden contacts the Defendant to arrange a Judgment Debtor examination on behalf of RBC as assignee of the Default Judgment, which the Defendant testifies is the first time she was advised there was a judgment against her, and that the Writ had been registered, and indicated she would be bringing a motion to set aside a default judgment. The proceedings leading up to this motion as summarized above, and in the chronology below, then ensue.

[33] As will be noted in the detailed chronology I have prepared below, this summary of the facts is not in any way complete in describing the details of this “overturned bowl of spaghetti” in Dunphy, J.’s words, but is not a determination of them. Given the amount of evidence, and to avoid repetition, I will deal with the specific evidence within the discussion of the constituent elements of the tests to set aside a Default Judgment.

The Evidence filed on this Motion

For Moving Party

[34] The Moving Party/Defendant Sandra is a family law lawyer, and a sole practitioner, licensed in the Province of Ontario. She was called to the Bar in 2014.

[35] Sandra swore an affidavit on October 8, 2020 in support of her motion (the “Motion”) to set aside the Default Judgement (the “Sandra Affidavit”) and also swore a Reply Affidavit on December 2, 2020 (the “Sandra Reply Affidavit”).

[36] Sandra was Cross-Examined on the Sandra Affidavit and Sandra Reply Affidavit on July 12, 2021 (the “Sandra July 12 Examination”) and the transcript of that examination was entered into evidence (the “Sandra July 12 Transcript”). Sandra’s cross-examination resumed on October 4, 2021 (the “Sandra October 4 Examination”) after the RBC Strike Motion was withdrawn on September 21, 2021, and the transcript of that resumed cross-examination was entered into evidence (“Sandra October 4 Transcript”).

Particular Evidentiary Issues for Sandra:

LSO Report

[37] The Sandra Reply Affidavit attaches as Exhibit “A” the Report of the Law Society Complaints Resolution Counsel, Rod Thibodeau (“Thibodeau”) dated July 25, 2016 on completion of the review of a Law Society complaint filed by Kailani on October 15, 2015 (the “LSO Report”).

[38] Kailani was cross-examined on the contents of the LSO Report. As I pointed out to counsel at the hearing, the factual findings made by Thibodeau in the report do not bind me, having been obtained on evidence that has not been specified, or filed as evidence on this Motion, after a summary investigation, with evidence presented not apparently under oath and not in a tribunal or Court proceeding.

[39] From the evidence before me it is not clear whether Maltz did or did not assist or participate with the preparation of the LSO Complaint, and whether Kailani ever provided to Maltz the LSO Report, prior to Maltz filing the requisition for Default Judgment. Counsel for Sandra does not appear to have asked the question at the Kailani Examination.

[40] It is clear however that from the Cross-Examination of Kailani, that he was aware of the contents of the report, and swore his affidavit with some contradictory statements, despite those findings.

[41] Also, the dates of the “pleadings” being filed with LSO by Kailani and Sandra for the purposes of the preparation of the report are very relevant to the issues in this motion, in the context of what was going on with respect to the issuance and service of the Statement of Claim and the obtaining of the Default Judgment.

[42] I am unable to determine with any certainty what submissions were made to Thibodeau. None of the submissions made by either Kailani or Sandra to Thibodeau are in evidence before me, for reasons I cannot fathom, given that Kailani appears to be making the same general factual allegations against Sandra as alleged owner of Suddenly Soda in the Statement of Claim, and swears to them in the Kailani Affidavit on November 25, 2020, that were made to Thibodeau, and seemingly rejected by Thibodeau in the LSO Report dated July 5th, 2016.

[43] These prior submissions could have been used to impeach the testimony of Kailani and Sandra on any contradictions in the sworn evidence on this motion. But apparently this was not done.

[44] Surprisingly, given the seriousness of the allegations apparently made by Kailani to LSO as detailed in the LSO Report, and the timing of the materials provided to LSO (as revealed in the chronology below), the existence of the LSO Report was not revealed until the swearing of the Sandra Reply Affidavit.

[45] Kailani failed to provide in his evidence the LSO Report, or any mention at all that:

i) he had commenced disciplinary proceedings with the LSO against Sandra 6 months prior to the issuance of the Statement of Claim and the commencement of the process surrounding the issuance of the Default Judgment, and

ii) that he and Sandra had both made responding and reply filings in response to the LSO Complaint CONTEMPORANOUSLY with the filing and service of the Statement of Claim by Maltz and the obtaining of the Substituted Service Order;

iii) based on whatever evidence was provided to him, Thibodeau had previously comprehensively rejected submissions by Kailani that were similar to the evidence presented by Kailani in the Kailani Affidavit on this Motion;

iii) that he proceeded to obtain the Default Judgement after Thibodeau had made these findings.

[46] I note that the Bill of Sale from the Suddenly Soda transaction that Thibodeau eviscerates in detail in the LSO Report, raising doubts as to its enforceability, was not placed into evidence on this Motion.

[47] I also note that on April 18, 2016 Maltz wrote a letter to Sandra accusing Sandra of evading service, and threating to make a(nother) Law Society complaint, three days before his client Kailani filed reply materials on April 21, 2016 to the response to Kailani’s complaint that Sandra had apparently filed with the LSO on March 12, 2016.

[48] So certainly Kailani, and possibly Maltz, were aware that Sandra was participating in defending that the LSO Complaint commenced by Kailani, while they were obtaining Substituted Service and then the Default Judgment.

David Affidavit

[49] Sandra also attaches as Exhibit “O” to the Sandra Affidavit the Affidavit of her allegedly estranged husband David sworn March 10, 2016 (the “David Affidavit”), that Sandra asserts was provided to Kailani in March or April 2016. In general terms the David Affidavit supports Sandra’s evidence in her affidavits actually filed for this Motion.

[50] It appears the David Affidavit was sworn on March 10, 2016, which is in proximity to March 12, 2016 the date on which Sandra filed with LSO her response to the LSO Complaint made by Kailani. It does not specifically appear from the text of the LSO Report that the David Affidavit had been provided to Thibodeau,

[51] Counsel for RBC objected to the use of the David Affidavit for the truth of the facts contained in it, I think properly, as it was his position that it had not been entered into evidence, and he had not been given the opportunity to cross-examine David on its contents.

[52] Counsel for Sandra took the position that the David Affidavit was filed to impeach the testimony of Kailani in the Kailani Affidavit (as defined below) which contradicts the testimony of David as to the ownership of the Suddenly Soda business and Kailani’s knowledge of it, and the fact that Kailani had received it.

[53] Ultimately after pages of discussion between counsel, the following questions were asked of Kailani with respect to the David Affidavit, without the objection of counsel for RBC:

“MR. KARRASS: The question that I've asked is not about the truth of the contents. The question that I've asked is whether or not Mr. Kailani had received this affidavit. It is a straightforward question. It does not require any discussion about the contents of this affidavit.

MR. BOWDEN: Ask away.

BY MR. KARRASS:

143. Q. So, Mr. Kailani, did you at any point receive this affidavit from Mr. David?

A. Can you define the time frame?

144. Q. I've said ever. Have you ever?

MR. BOWDEN: Well, Counsel, it's in your Motion Record. So the answer, of course, is yes. It must have been sometime before the motion was filed.

BY MR. KARRASS:

145. Q. Have you ever received it prior to receiving my client's Motion Record?

A. Yes.

146. Q. Is it true that you received it sometime between March and mid April of 2016?

A. I don't recall.”

[54] Given these strictures, I will consider the existence of the David Affidavit, and Kailani’s awareness of its contents, but will not be considering the contents of the David Affidavit for their truth to prove issues on this Motion.

[55] Justin Sugar, a lawyer with the firm of Karrass Law (“Sugar”) swore an Affidavit on September 3, 2021 (the “Sugar Affidavit”) that was responding to the RBC Strike Motion, but also referred to on this motion with respect to the chronology of the bringing of this Motion. Sugar was not cross-examined on the Sugar Affidavit.

[56] RBC brought the Strike Motion returnable on September 20, 2021 to strike out the Sandra Affidavit and the David Affidavit. As noted above this Motion was withdrawn.

Sandra’s evidence

[57] Sandra’s evidence in the Sandra Affidavit on the facts underlying the claim against her by Monster Snacks that resulted in the Default Judgment is as follows:

“47. The Statement of Claim presents an overly simplistic and, in my view, misleading, recitation of the events in question.

48. In the Statement of Claim, reference is made to a claim for payment on a purchase and sale agreement in the sum of $290,000, together with pre- and post-judgment interest on this amount, and costs.

49. The Statement of Claim continues by describing the parties, reciting the events which apparently transpired and then alleging, in a somewhat conclusory fashion, that the business was not viable, and that judgment should be given for the entire principal amount plus interest.

50. The Statement of Claim refers to a purchase and sale agreement having been entered into on or about April 13, 2015.

51. I dispute all of the claims made about me in the Statement of Claim, save and except for the fact that Tony David was my spouse. I was not the owner of Suddenly Soda Refreshments, nor did I have control over its assets. Additionally, Tony David was the original purchaser of Suddenly Soda Refreshments.

52. I never met, spoke to, or had any interaction with Mr. Kailani prior to his purchase of the business' assets. I do not dispute the advance of the sum or its receipt by the owner of Suddenly Soda Refreshments, Tony David.

53. The majority of the Statement of Claim details Mr. Kailani's relationship and interactions with Mr. David. At no point did Mr. Kailani have any direct or indirect communication with me. At all material times, the Statement of Claim describes Mr. Kailani's interactions with Mr. David, the owner and operator of Suddenly Soda Refreshments.

54. In addition to the assets of the business, the purchase and sale agreement provided for the purchase of the GMC van that Mr. David owned and used to operate the business. Mr. David alone had title of the vehicle. I could not have conveyed that asset.

55. The Statement of Claim purports that I refused to provide keys to the vending machines or to permit Mr. Kailani to attend at the machines, and that I was collecting funds from the vending machines. This would have been impossible for me to do as I was articling in a law office on a full-time basis during that time. Arguably, I physically could not have prevented Mr. Kailani from attending the locations, nor could I have serviced the machines in order to collect funds from them, while performing my work as an articling student.

56. Mr. Kailani indicates that he was finally given the keys, however he does not indicate by whom. I believe this is because he obtained the keys from Mr. David, the owner of the business and assets, and not from me, and to admit this in the Statement of Claim would demonstrate that I did not have control over the keys nor the ability to convey or withhold them.

57. I was initially contacted by Mr. Kailani in or about September 8, 2015, when he reached out to me via my former articling principal, having found one of my business cards in Mr. David's van, and subsequently asked me to telephone him via Facebook Messenger.

58. When I telephoned Mr. Kailani, he explained that he was having difficulty reaching Mr. David, that he was aware that Mr. David and I were estranged and had been for some time. He stated that he knew Mr. David still loved me and believed he would do anything to protect me and that he believed that by exerting pressure on me, that I would reach out to Mr. David, and in so doing facilitate communication between them.

59. Additionally, Mr. Kailani revealed to me that he and Mr. David had come to some kind of arrangement wherein Mr. David would continue to operate the business after the closing of the sale. He further revealed that he did not leave his employment to operate the business, and in fact only took it over in July 2015 because that is when he requested, and was approved for, a leave of absence from his employer.

60. Mr. David bought this business in July 2005. He was the sole owner and operator, and it was his sole source of income. Most of his locations were in businesses and offices, including a law firm downtown, and so necessarily, due to their hours of operation, he had to service the machines during regular business hours. If Mr. Kailani's intention was to operate this business, he would have had to resign from his employer at the time or would have at least arranged to take a leave of absence at the time of the closing. In the alternative, he could have moved the closing date, or detailed a timeline for training and turnover.

61. At the very least, if in fact I was preventing Mr. Kailani attending the vending machine locations or refused to turn over the keys to his assets, he would have had his lawyer at the time enforce the agreement. Mr. Kailani did not make any such complaint in for 5 months or attempt to enforce the agreement of purchase and sale, which defies reason. A reasonable person, acting reasonably, would have sought enforcement of such a large purchase at closing, not 5 months later.

62. Mr. David and I separated on or about June 26, 2014. It was a difficult separation for many reasons, including my religious faith, Mr. David's previous cancer diagnosis and treatment, and the abusive nature of our marriage.

63. I have not seen Mr. David in person in approximately five and a half (5.5) years, and I have limited my interactions with him as much as possible, particularly because of his verbal, emotional, and psychological abuse of me. It not only impacted me personally but had interfered with my studies in law school. I wanted nothing to do with Mr. David at all.

64. When Mr. David contacted me in early January 2015, he advised me that he was selling his business. He indicated that the buyer, who I later came to learn was Mr. Kailani, was insisting that I be named on the Purchase and Sale Agreement because I had been inadvertently listed on the Master Business Licence. I immediately refused; however, Mr. David became angry, verbally abusive, and threatening. He indicated that the buyer was insisting that I be named as the seller, and my refusal was putting the deal in jeopardy. He said that it was his business, he wanted to sell it and that I did not have a right to stand in his way. In order to put an end to the abuse, to be left alone, and because it was his business to do with as he pleased, I agreed to do as Mr. David directed.

65. I had been listed through inadvertence on the Master Business Licence ("MBL") as an owner, when I was meant to be the administrative contact. We did not discover this error at first, and when I later attempted to have my name removed from the MBL, my efforts were not successful due to the fact that Mr. David had outstanding taxes owing to the provincial government for his business.

66. On or about January 24, 2015, Mr. David forwarded me an email that originated from Mr. Kailani, based on the email thread, which included an attachment that was titled "Offer to Purchase (Business Asset Purchase)". I was directed to print it off, sign it, and return it to him as soon as possible.

67. The Offer to Purchase was signed at the end of January 2015 and the closing date was in mid-April 2015. There were approximately 11 weeks between the written offer to purchase and the closing of the sale, during which I would have expected, as any reasonable person would, that Mr. Kailani was conducting his due diligence. Certainly, I believed Mr. Kailani had conducted his due diligence by the time of closing, as no reasonable person would make a purchase valued at $290,000.00, and advance funds without verifying what they were purchasing and conveying funds for.

68. I did not benefit from the advance of $290,000.00 from the Plaintiff. I was directed by Mr. David to deposit the funds into a bank account that I was still listed on with Mr. David, and wherein he promptly removed the funds and disbursed them as he saw fit.

69. Neither Mr. Kailani, nor Monster Snacks Inc ., have made demand of Mr. David or sued him for a return of the monies advanced by them. Mr. Kailani is well aware that at all material times he was dealing with Mr. David, purchasing the assets of Mr. David's business, and that Mr. David was the only person in control of: 1) the keys to the vending machines, 2) the vehicle that was part of the asset purchase, and 3) all other assets of his business. He was the only person Mr. Kailani had ever seen service the machines at his workplace, and the only person who could train Mr. Kailani and show him the locations.

70. Despite Mr. Kailani's assertion that he allegedly did not know Mr. David was the sole owner and operator of this business and its assets, despite the fact that all of his interactions and conversations were with Mr. David, prior to his filing his Statement of Claim, an affidavit sworn by Mr. David on or about March 10, 2016 advising that he was the sole owner of the business, and that at best I was a bare trustee due to my being listed as an owner on the Master Business Licence, was provided to Mr. Kailani sometime between March 14, 2016 and mid-April 2016.

71. While I have been collecting these documents and looking for the Purchase of Sale Agreement for Suddenly Soda Refreshments wherein Tony David is the purchaser, I have now reached a point of urgency as I understand from Mr. Karrass that Mr. Bowden is intent on enforcing the erroneously obtained judgement.

72. I am upset and dismayed that I may lose my home due to the unethical actions undertaken by the plaintiff, or their counsel, in proceeding with the matter in the manner in which they did, when they were fully aware that they had not effected service of the Statement of Claim.

73. Unfortunately, given the highly acrimonious and complex civil litigation aspect of this matter, and the likelihood of losing my home and thereby threat to the security of my personal living circumstances as a result, coupled with my personal, and significant health concerns which have disabled me, I have been unable to move this matter forward in accordance with the timetable or my needs. I have thus taken steps to retain counsel in order to ensure that this matter is taken care of in an expeditious manner, to ensure my rights and interests are competently and appropriately represented.

74. In all the circumstances, accordingly, the following needs to be set out:

(a) I was never served with the Statement of Claim or the Judgment;

(b) I was never served with the Writ for Seizure and Sale;

(c) I first learned of the existence of the matter from Mr. Bowden, counsel for the assignee of this judgment in May of 2019;

(d) Thereafter, I have spent my time, in discussing the matter with Mr. Bowden, in obtaining documents, and in seeking a resolution of the matter;

(e) Contrary to the allegations set out in the Statement of Claim, I was never the owner of the business, nor did I have control over its assets, nor the ability to convey, or restrict access to the assets;

(f) It was well within the knowledge of the Plaintiff that Mr. David was the owner, the seller and the person making representations about the business to him;

(g) While the bank draft may have been deposited in a joint account between me and Mr. David, these monies were disbursed by Mr. David, the true and sole owner of the business and assets, at his own discretion and to his benefit;

(h) I did not benefit from this transaction;

(i) Mr. Kailani has neither sued, nor apparently made any claim to Mr. David about the business, the funds, or anything else to do with the purchase and sale;

(j) Accordingly, I verily believe that the full nature of the events in question have not been properly put before the court as reflected in the Statement of Claim;

(k) I further verily believe that the Plaintiff had an obligation to notify the Court that it never served me, and that Plaintiff's counsel, being in receipt of two letters from me advising of the incomplete and deficient service, ought to have properly effected service on me rather than simply proceeding to file for Default Judgment;

(1) I further verily believe that Plaintiff's counsel was required to provide me with appropriate notice that he intended to file for Default Judgment, no notice was provided whatsoever.

(m) Therefore, I believe that I have a genuine defence on the merits. I wish to have my day in Court so as to bring to light the various events in question, so as to apprise the Court of the totality of the circumstances and, more specifically, the fact that I was not the seller, nor did I have control over, or authority to convey, the assets, that I did not benefit, that in reality the Plaintiff was advancing money to Mr. David and not to me;

(n) I further verily believe that Mr. Kailani had made arrangements with Mr. David with regard to the transition of the business and the conveying of its assets, that Mr. Kailani had done his due diligence and was satisfied with his purchase, or in the alternative, purposely chose not to conduct his due diligence, and that he has critical documents in his possession which, when shown to the Court, will shed further light on the matter and the totality of its events;

75. At all material times I intended to Defend this matter.”

Kailani Evidence on Motion

[58] In response Ammar Kailani (“Kailani”) the sole shareholder and officer of the Plaintiff Monster Snacks, swore an affidavit on November 25, 2020 (the “Kailani Affidavit”) and a Supplementary Kailani Affidavit, sworn on November 26, 2020 (the “Supplementary Kailani Affidavit”). Kailani was Cross-Examined on July 8, 2021 (the “Kailani Examination”) and the transcript of that examination was entered into evidence (the “Kailani Transcript”).

[59] Kailani is by profession an engineer that graduated from university in 2012, and received his professional engineer designation in 2017.

[60] In addition, Dawna O’Neill (“O’Neill”) a legal assistant to the Counsel for RBC swore an affidavit on the RBC Strike Motion on August 5th, 2021 (the “O’Neill Affidavit”). O’Neill was not cross examined. The exhibits to the O’Neill Affidavit consisted of the Sandra July 12 Transcript, some emails between Bowden and Karrass, 117 pages of Sandra’s prior Tweets, and a link to what is alleged to be a 37 page Bank of Canada record retention policy, but as is discussed in detail below, is not.

Kailani Evidence on Background to the Monster Snacks Claim against Sandra

[61] The factual matrix for the claim by Monster Snacks against the Defendant Sandra that resulted in the Default Judgment is set out in the Kailani Affidavit and the Supplementary Kailani Affidavit.

[62] Kailani alleges in the Kailani Affidavit that:

“Purchase of Suddenly Soda by Monster Snacks Inc. in 2015

4. In 2014, I became interested in purchasing a vending machine business with a view to increasing my income. I spent quite some time researching the industry. On several occasions, I went to sites that had vending machine locations for sale, and had discussions with various individuals that were operating vending machine businesses and were interested in selling their accounts and their machines.

5. At some point in 2013, I made contact with a person named Tony David ("Mr. David"). He had a vending machine inside the lunch room at the Markham office of GHD, my employer at the time. On several occasions, I saw Mr. David restocking a vending machine, and on the third or fourth such occasion, I approached him. I asked him about the business, whether it was viable, how long he had been in the business and so on. He briefly outlined for me what kind of locations he had and what distinguished a good vending machine location from a bad one. He gave mc his name and phone number, and later I contacted him.

6. Mr. David came across as helpful and approachable. I told him I was interested in buying vending machines at various locations and he offered his expert advice any time I would need it.

7. My first discussion with Mr. David about buying his vending machine business was sometime in late 2013. At that time, Mr. David told me he was not interested in selling his business. From early to mid 2014, I became busy with my work and did not wish to pursue a business. In late 2014 (after approximately 6 months of no communications with Mr. David), I gave him a call to inquire about his business. At that time, Mr. David informed me that he was looking to sell the business because he had to undergo cancer treatment. I met him after work one day to discuss details. He told me that he earned over $10,000 per month after taxes from the vending machine business.

8. I engaged the services of a lawyer, Ranjeet Walia ("Mr. Walia"), to assist me with the asset purchase. The business Mr. David ran was called Suddenly Soda Refreshments ("Suddenly Soda"), and was a sole proprietorship owned by his wife, Sandra David, also known as Sandra Alsaffawi- David ("Ms. Alsaffawi").

9. My business, Monster Snacks Inc., ("Monster") was incorporated for the sole purpose of purchasing the vending machine business. I was the sole shareholder and officer of Monster. At the time of the transaction, I had no business experience.

10. In her affidavit sworn on October 8, 2020 ("Alsaffawi affidavit"), at paragraph 52, Ms. Alsaffawi claims that she had no interactions with me prior to my purchase of the business' assets. This is not the case. Before closing the deal, Mr. David and I held a conference call with myself and Ms. Alsaffawi, as she was the owner of the business. In that discussion, Ms. Alsaffawi confirmed that everything that I had been told by Mr. David was accurate and that I would get what I was purchasing.

11. The transaction was completed on April 13, 2015. The Offer to Purchase was signed back by Ms. Alsaffawi, as she was the owner of Suddenly Soda. She also initialled every page, including the multiple pages of Schedule A. Schedule A listed all of the vending machines at the various locations that I was purchasing. After the agreement was signed, I instructed my lawyer, Mr. Walia, to forward the funds to the vendor's solicitor, Jim Koumarelas ("Mr. Koumarelas""). Attached to this Affidavit and marked as Exhibit "B" is a copy of the email from Mr. Koumarelas regarding the closing.

12. At paragraph 64 of the Alsaffawi affidavit, Ms. Aslaffawi [sic] claims that I insisted the assets be purchased from her because of a master business license that named her as the owner. This is untrue as I only learned that Ms. Aslaffawi [sic] was listed as the owner of the business when Mr. David informed me prior to setting up the conference call mentioned above. I verily believe that neither Suddenly Soda nor Suddenly Soda Refreshments are registered business names. Attached to this Affidavit and marked as Exhibit "C" are the applicable searches for both those business names.

13. At paragraph 66 of the Alsaffawi affidavit, Ms. Aslaffawi claims that Mr. David had forwarded her the Offer to Purchase and had directed her to print it off, sign it, and return it to him as soon as possible. I verily believe that Ms. Aslaffawi [sic] as a lawyer and as the owner of the business, played a role in drafting the Offer to Purchase. Nick Bouzios ("Mr. Bouzios"), the Mortgage Broker, sent me and Mr. David a sample Offer to Purchase, Mr. David informed me that Ms. Aslaffawi [sic] will be editing and tailoring it for our purchase, since she was a lawyer and we should trust her. A true copy of the email from Mr. Bouzios, dated December 29, 2014, along with the sample Offer to Purchase is attached to this Affidavit and marked as Exhibit "D".

14. In any event, the deal closed, and through my lawyer, I forwarded Mr. Koumarelas the full purchase price of approximately $350,000. After I purchased the assets from Ms. Aslaffawi [sic], it was not long before I learned that many of the locations set out in Schedule A of the Agreement of Purchase and Sale were fictitious. Of the business locations mentioned in Schedule A to the Purchase and Sale Agreement, I was able to get access to only about 20 locations, I learned that in many cases, Suddenly Soda did not own any vending machines at the location. Instead, their only function was to repair someone else's machine. Other locations simply had no machine there. In the end, there are only about 29 machines that were in accordance with the bill of sale, and my income from those machines was approximately $5,000-6000 gross and approximately $2,500-3000 net (before taxes and not factoring in my loan payments). This was a far cry from the $10,000 net that I had been promised.

15. At paragraph 55 of the Alsaffawi affidavit, Ms. Alsaffawi claims that it was not possible for her to collect funds from the vending machines or provide keys to me as she was articling on a full-time basis. Even if it was not possible for her to physically deliver the keys to me, as the owner of the business, Ms. Aslaffawi [sic] could have made arrangements for the keys to be delivered to me. However, she did not do so. Ms. Astaffawi/Suddenly Soda [sic] continued to collect funds from the vending machines till July 13, 2015.

16. After three months, I received the keys from Mr. David. The plan was that I was supposed to hand in my notice to quit work as soon as the transaction closed. In April of 2015, Mr. David did not answer any of my phone calls. I kept calling almost every single day and texted him until he finally answered in July of 2015. He provided a number of excuses as to why he had not responded to any of my attempts to contact him.

17. At paragraph 61 of the Alsaffawi affidavit. Ms. Aslaffawi [sic] states that a reasonable person, acting reasonably, would have sought enforcement of such a large purchase at closing, not five months later. The reason it took me five months is that I kept giving Mr. David chances as he would seldomly respond to me and give me excuses such as "next week", Further, it took me two months to investigate the matter and I tried to visit most of the locations that Mr. David never showed me, until I finally realized I had been duped.

18. After I realized that I had not received what I paid for, I retained a lawyer, Murray Maltz ("Mr. Maltz"), to commence proceedings against Ms. Alsaffawi. On March 9, 2016, the Statement of Claim was issued and a copy of it is attached to this Affidavit and marked as Exhibit "E".

Contact with Ms. Alsaffawi

19. In her notice of motion, Ms. Alsaffawi claims that the matter first came to her attention in late July 2016 however at paragraphs 57-58 of the Alsaffawi affidavit, she acknowledges that I had contacted her and that we had a telephone conversation in September of 2015. A true copy of my facebook message, dated September 8, 2015 is attached to this Affidavit and marked as Exhibit "F"

20. I had a telephone conversation with Ms. Alsaffawi where I informed her that I had discovered that I had been "duped" and "screwed over". I also told Ms. Alsaffawi that I know that Mr. David and Ms. Alsaffawi had some issues but I was aware that they communicated regularly. 1 further informed her that I will be pressing charges and was going to take her to court. la response, Ms. Alsaffawi started hyperventilating and pleaded with me to not do anything because "this was not supposed to happen this way." I did ask her for her help to reach out to Mr. David since he disappeared on me after giving me some of the keys and he was not answering any of my calls. Near the end of the phone call, Ms. Alsaffawi told me to contact Tony and not to contact her anymore.

21. At paragraph 59 of the Alsaffawi affidavit, Ms. Alsaffawi states that I advised her of some kind of arrangement between Mr. David and I where Mr. David would continue to operate the business after the closing of the sale. I said nothing of the kind.

Ms. Alsaffawi's role at Suddenly Soda

31. I will also mention that i am rather surprised chat Ms. Aslaffawi's [sic] assertion that she had nothing to do with the business. From my discussions with Mr. David, I am aware that she serviced all of the vending machines at various locations while Mr. David was undergoing cancer treatment. During the time that Mr. David was training me, he frequently spoke about having recently been in contact with Ms. Aslaffawi, [sic] despite the latter's claim that they were estranged.

32. As for Ms. Aslaffawi's [sic] claim that she was "inadvertently" listed as the owner on a master business license, I do not understand how Ms. Aslaffawi [sic] could "inadvertently" have accomplished this. Mr. David had told me that Ms. Aslaffawi [sic] had insisted that he transfer Suddenly Soda to her name as it was her dream to own a business.

33. I know from my dealings with Mr. David that it was Ms. Aslaffawi [sic] who created invoices on behalf of the company and dealt with the accounts and books generally. Mr. David was clear to me that he was the manager of operations. This was listed on his business card which 1 have not been able to locate. Mr. David did the physical labour, purchased all the vending products, serviced the machines, restocked thein and deposited the cash.

34. Mr. David told me it was Ms. Aslaffawi who filed the taxes every year, and was, in effect, his business partner, although he did not use that exact term. I verily believe that Ms. Asiaffawi did all of the administrative work, including phone calls, invoicing, preparation of all invoices and submitting them, creating business balance sheets and income statement end had access to the bank account. She had full knowledge of the day to day operations of the business. Thus, it made sense to me that it was Ms. Aslaffawi, [sic] and not Mr. David, who signed on the bill of sale.

35. A number of the clients at the vending machine locations knew Ms. Aslaffawi [sic]. They knew her because she would occasionally come around to replenish the vending machines. At first, she attended with Mr. David, and when he was in cancer remission after his surgeries, she operated the business, on and off (between 2010-2015), by herself, I am also aware through Tony as well as other individuals that she occasionally had the assistance of her siblings who attended the various vending machine locations.

36. I believe that revenue from Suddenly Soda served as a financial source of Ms. Aslaffawi's [sic] law school expenses, and that she worked diligently to ensure that the business was successful.”

Evidence from Maltz and Diaz

[63] I note that there is no first person evidence provided by RBC on this Motion from Maltz, the lawyer for Kailani and Monster Snacks with carriage of the action against Sandra. No affidavit was obtained from Maltz.

[64] The Affidavit of process server Diaz sworn April 27, 2016 (the “Diaz Affidavit”) that allegedly attempted to serve Sandra with the Statement of Claim, was only attached as part of the (possibly incomplete) motion record filed by Maltz to obtain the Substituted Service Order at Exhibit G to the Kailani Affidavit. Diaz was not cross-examined on that affidavit for this Motion, or at the time of the Substituted Service Motion.

Standing of RBC

[65] At the beginning of this hearing I raised with counsel the preliminary issue as to whether counsel for Sandra contested the ability of RBC to appear on this Motion, as alleged assignee of the Default Judgment under the terms of an alleged settlement. The only evidence of this alleged settlement or assignment of the Default Judgment to RBC before me is the following two paragraphs of the Kailani Affidavit:

“RBC's proceeding against me

29. As part of my purchase of Suddenly Soda, Monster had entered into a loan agreement with Royal Bank of Canada ("RBC") dated March 23, 2015, wherein Monster had borrowed the sum of $226,950.00 agreeing to repay the loan in monthly installments. While I, as the directing mind of Monster, had provided a Guarantee in writing, I found it impossible to make payments to RBC and fell into default. A true copy of the loan agreement is attached to this Affidavit and marked as Exhibit "K".

30. On January 3, 2018, RBC issued a statement of claim against inc. A true copy of the Statement of Claim, dated January 3, 2018, is attached to this Affidavit and marked as Exhibit "L". The litigation between Royal Bank of Canada and myself went on for some time. Eventually, I was able to settle with RBC. The settlement required that I assign to RBC the judgment I obtained against Ms. Alsaffawi. By the time I reached the settlement with RBC, the judgment against Ms. Alsaffawi was almost two years old and she had taken no steps to dispute it.”

[66] No assignment documents were attached to any of the Plaintiff’s evidence proving that the Default Judgment had in fact been assigned to RBC, and there is no evidence that Sandra was ever given notice of the assignment prior to Bowden contacting Sandra in June of 2019 to arrange a Judgment Debtor Examination.

[67] The Default Judgment at exhibit I to the Kailani Affidavit is still in the name of the Plaintiff Monster Snacks, as is the writ of seizure and sale at Exhibit J to the Kailani Affidavit.

[68] Exhibit K to the Kailani Affidavit is the RBC loan agreement signed by Monster Snacks, but no security agreement granting a security interest over the assets of Monster Snacks is provided in evidence, nor is any guarantee signed by Kailani.

[69] It does not appear from the Kailani Transcript that Kailani was examined on this issue.

[70] Counsel for Sandra did not raise this dearth of evidence on the assignment issue and did not raise as a legal issue whether RBC had actual standing to oppose his motion, and accordingly I permitted RBC to appear and make submissions and I will not be determining this issue on this Motion.

[71] However, the testimony of Kailani in paragraph 30 above also does not mention the nature of the claim that RBC brought against Monster Snacks and Kailani in the Statement of Claim issued January 3, 2018 (the “RBC Statement of Claim”).

[72] In the RBC Statement of Claim at Exhibit L:

7. In or about March, 2015, Ammar Kailani submitted to the Plaintiff a loan application on behalf of himself and Monster Snacks Inc. Ammar Kailani, was and is the directing mind of Monster Snacks Inc. Ammar Kailani represented to the Plaintiff that he was starting up a business and needed a loan to purchase expensive equipment for his company, Monster Snacks Inc. Ammar Kailani proposed to purchase equipment from Tony David and Sandra Alsaffawi-David, carrying on business as "Suddenly Soda Refreshments". Ammar Kailani asked for a loan pursuant to a government-sponsored program established under the Canada Small Business Financing Act. Under that statute, the Government of Canada will guarantee bank loans to small businesses, provided the loan meets certain criteria. Where a loan qualification for the program, a borrower is required to sign a personal guarantee for only a fraction of the amount of the loan, usually 25%. If the loan is not repaid, the Government of Canada is responsible for most of the balance of the loan. This program is commonly known as the "SBL program", and loans made pursuant to it as "SBLs".

8. The loan application submitted by Monster Snacks Inc., and Ammar Kailani was successful, and the Plaintiff entered into a loan arrangement with Monster Snacks Inc., the particulars of which are set out above.

SEED MONEY REQUIREMENT

9. The Plaintiff Kailani inject of his own into his new business, known in banking parlance as "seed money”. The Plaintiff also required that Kailani demonstrate that he possessed the necessary seed money before the Plaintiff would proceed further with the matter. Kailani gave the Plaintiff a forged bank statement showing that he was possessed of over $120,000 in savings to inject in the new business. Kailani knew that the Plaintiff would rely on the forged bank statement. The Plaintiff did rely on forged bank statement to its detriment and as a result was defrauded by Kailani.

10, The loan application was successful, and the Plaintiff entered into a loan arrangement with the Monster Snacks Inc., as described earlier in this Statement of Claim.

11. Had the Plaintiff known that Kailani's net worth was other than he represented, or that he had submitted a forged document in support of his loan application it would not have advanced funds to Keilani[sic].

[73] There is no evidence before me as to whether RBC as assignee has been paid:

1. any amounts to date under the SBL program; or

2. by Kailani and/or Monster Snacks under the terms of whatever settlement has been negotiated with RBC; or

3. whether RBC has realized any amounts from the sale of the assets of Monster Snacks, including the sale of any vending machines, under any security interests granted to the RBC by Monster Snacks;

[74] RBC has also provided no evidence as to what effect the possible setting aside of the Default Judgment will have on the ability of RBC to recover from the Federal Government under the SBL program.

[75] It does not appear that Kailani was cross-examined on these issues or whether the allegation of Fraud by RBC against Kailani was raised in the context of the Kailani testifying on behalf of RBC, given the number of times Kailani and Maltz accused Sandra of fraud, including with the LSO.

[76] However, given that the amount claimed by RBC in the RBC Statement of Claim against Kailani and Monster Snacks is in the principal amount of $243,417.10 as at January 8, 2018, and the Default Judgment obtained by Maltz was in the amount of $301,949.58 and $1,114 for costs as at January 13, 2017, one would have thought that RBC would have provided evidence on this issue to meet the test of the balancing of the prejudices between the parties.

Evidentiary issues with the Statement of Claim, Motion Record for Substituted Service and Requisition for Default Judgment

[77] Given that crucial factual issues on this motion are:

1. the circumstances of the service of the Plaintiff’s Statement of Claim;

2. the circumstances of the obtaining of the Substituted Service Order;

3. whether the version of the Statement of Claim served on Sandra under the terms of the Substituted Service Order was complete, or missing pages as alleged by Sandra;

4. the circumstances and state of communications between Sandra and Maltz at the time of the Noting in Default and the obtaining of the Default Judgment; and

5. whether there is a meritorious defence presented to the claims made in the Statement of Claim;

one would have thought that the Parties would have been careful to ensure that evidence crucial to proving these issues, LIKE A COPY OF THE ACTUAL ISSUED STATEMENT OF CLAIM, would be properly put before the Court.

[78] Astonishingly, after 3 years of litigation, and the filing nearly 4,000 pages of materials on this Motion, and cross-examinations spanning three days and nearly 400 pages of transcript, two days of hearings, and filing of Compendia in response to my request, neither the Plaintiff, nor the Defendant, have attached as exhibits to their numerous affidavits filed on this Motion (or noticed that they hadn’t) the complete Statement of Claim of the Plaintiff, as issued by the Court.

[79] At Exhibit E of the Kailani Affidavit, what purports to be the Statement of Claim of the Plaintiff is obviously not:

a) That document has no Court file number, is not issued by the Court Registrar or dated, and has no Court Seal;

b) The first page has FOUR paragraphs of text, but not including the “If you fail to defend this proceeding” statement;

c) There are 14 paragraphs, the text is not right justified and it is dated March 9, 2016;

d) The Claim is for “(i) Judgment in the sum of $214,000”; and

e) The last two pages of Exhibit E identified by Kailani as the “Statement of Claim” in the Kailani Affidavit appear to be a draft of the Notice of Motion for the Substituted Service Motion.

[80] Exhibit A to the Sandra Affidavit is also what appears to be (part of) a copy of the Statement of Claim by Monster Snacks against Sandra:

a) There is a Court file number, but this “Statement of Claim” also does not bear the Court Seal;

b) The first page of the Statement of Claim document has FIVE paragraphs, including the “If you fail to defend this proceeding” statement;

c) There are 13 paragraphs, the text is right justified, and it is dated March 16, 2016;

d) Sadly, only every other page of the documents included as Exhibit “A” were scanned, being pages 1, 3, and 5 of the Statement of Claim, despite Sandra advising in her affidavit that these were the complete documents she obtained from the Court File;

e) The wording of paragraph 12 of this exhibit is split between page 5 and the missing page 4, but enough wording is present to determine that the wording is different from paragraph 12 of the purported Statement of Claim at paragraph 12 of the “Statement of Claim” attached at Exhibit E to the Kailani Affidavit.

[81] With respect to the alleged Motion Record for Substituted Service;

1. At exhibit G to the Kailani Affidavit is what purports to be the Motion Record in writing for Substituted Service, when it clearly is not:

This Motion Record states that the Statement of Claim is documentary evidence that will be used on the motion in writing, but the Statement of Claim is not included in the Motion Record at Exhibit G to the Kailani Affidavit.

2. At Exhibit A to the Sandra Affidavit is also what appears to be a copy of the Motion Record for Substituted service:

Other than pages 1, 3 and 5 all other pages of this Motion Record are missing, because it appears to have been a two sided document where it was only scanned or copied on one side.

[82] I cannot determine whether having Kailani identify the document at Exhibit E to the Kailani Affidavit as the “Statement of Claim” when it cannot be, and the omission of that same document in the Motion Record for the Substituted Service Order, is intentional, or just an astonishing oversight, given how crucial this issue is to the opposition of RBC to the setting aside of the Default Judgment.

[83] I also note that the Kailani Affidavit attaches the Default Judgment as exhibit I, but not the Requisition, which is only found in the Sandra Affidavit at Exhibit A.

[84] Perhaps:

1. Maltz did not provide RBC with the complete Statement of Claim document, and the complete Motion Record filed to obtain the Substituted Service Order, or perhaps

2. RBC provided the only Statement of Claim they got from Maltz and did not include the complete Motion Record as exhibits to the Kailani Affidavit through sheer inadvertence,

but we will never know for the purposes of this Motion, because Maltz was never called as a witness on this Motion by counsel for Sandra.

Quantum of Default Judgment

[85] In addition, it appears that there may be a serious error with the quantum of Default Judgment itself, also arising out of which document is the actual issued “Statement of Claim”.

[86] Because:

1. the entire Statement of Claim is not present in any of the 4000 pages or so of materials before the Court, and

2. in the Kailani Affidavit, Kailani never actually states how much Monster Snacks actually sued Sandra for,

it appears that the evidence before me as to how much was claimed by Monster Snacks against Sandra in the Statement of Claim is the $214,000 amount in the document that Kailani identifies as the “Statement of Claim” at Exhibit E to the Kailani Affidavit, which as noted above, may not be the ACTUAL Statement of Claim issued by the Court in this Action.

[87] In the Sandra Affidavit she states the following, presumably referring to the copy of the Statement of Claim at Exhibit A to the Sandra Affidavit (although the actual term “Statement of Claim” in not defined in the Sandra Affidavit) which is not complete and does not have copied the page that contains the Prayer for Relief about how much was claimed:

“48. In the Statement of Claim, reference is made to a claim for payment on a purchase and sale agreement in the sum of $290,000, together with pre- and post-judgment interest on this amount, and costs.”

[88] Counsel for RBC asked the following question in the Sandra Examination regarding which pages of the Statement of Claim she received as a result of substituted service and it appears from the page references listed in the Sandra July 12 Transcript that he screen shared Exhibit E to the Kailani Affidavit, which may not ACTUALLY be the Statement of Claim issued by the Court, and which is also never actually identified as an exhibit to the Sandra July 12 Transcript:

“231. Q. All right. Do you see this document, ma'am?

A. I do.

232. Q. Monster Snacks Inc. Do you see that as the plaintiff?

A. Yes.

233. And do you see your name there as the defendants, correct?

A. Yes.

234. Q. Okay. We go a bit further down. We go to page 51 of the PDF, page 48 of the Motion Record. Do you see this? Claim -- the plaintiff claims judgment in the amount of 214, 000 and so on?

A. Yes.

251. Q. You got the next page that said you were being sued for $214,000, correct?

A. Yes.”

[89] It appears that “page 51 of the PDF, page 48 of the Motion Record” that Bowden is referring to is the document at Exhibit E to Kailani Affidavit at those pages in the Responding Motion Record of RBC, which, as noted above, is likely NOT the actual Statement of Claim issued by the Court in this Action.

[90] It does not appear that the version of the Statement of Claim in the Sandra Affidavit was ever put to her. There does not appear to be any indication that counsel for either party noticed the discrepancy regarding the competing versions of the Statement of Claim, neither of which may be the issued Statement of Claim.

[91] So counsel for the RBC appears above to be cross-examining Sandra on the WRONG DOCUMENT. However both counsel for RBC and Sandra agree in Sandra’s sworn testimony that the amount that Monster Snacks was suing Sandra for was $214,000, which is the only actual evidence before me as to the amount claimed by Monster Snacks against Sandra.

[92] It also appears that Sandra identified in that cross-examination, under oath, the document at Exhibit E to the Kailani affidavit (that cannot be the actual Statement of Claim) as the document that was served on her, which has serious implications on the issues on this motion, and in particular, WAS THE ACTUAL ISSUED STATEMENT OF CLAIM EVER SERVED ON SANDRA?

[93] Kailani in his cross-examination appears to not deny in this exchange that the amount claimed in the Statement of Claim is $214,000:

“418. Q. Okay. All right. So I've been having a little bit of difficulty with the numbers in general, when I was looking at this. Perhaps you could help me out. The Offer to Purchase, which we looked at, was for 290,000 and you previously confirmed that you paid 290,000. The affidavit, which you've now said might be an error, says 350,000. The Statement of Claim, which I can direct your attention to, if you require it, but I'm sure Mr. Bowden acknowledges and accepts that the Statement of Claim is not contentious, in terms of the fact that there are things written in the Statement of Claim, and I'm just referring to that, the Statement of Claim lists a principal amount for $214,000. Right? And I understand that the judgment that was obtained was for more than $300, 000. So I'm trying to understand what the actual amount here was. Can you please assist myself and the court in understanding how much was actually paid and what was transferred?

A. From what I recall, the amount that was paid was the amount on the Offer to Purchase.

419. Q. The 290.

A. Yes.

420. Q. Okay. So that means that the affidavit saying 350, the Statement of Claim for a principal amount of 214, the judgment for 301, none of those numbers are the number that you actually paid, which was 290, is that right?

A. I can't speak of the other numbers, but 290,000 was the price that the transaction closed at.”

[94] The Requisition for Noting in Default and Default Judgment is at Exhibit A to the Sandra Affidavit. It does not appear as an Exhibit to the Kailani Affidavit.

[95] In that requisition Maltz attests that the “Principal Sum Owing” is $290,000 not the $214,000 that appears in the document identified as the “Statement of Claim” at Exhibit E to the Kailani Affidavit, and agreed to by Sandra in the exchange above in the Sandra Transcript, and seemingly also agreed to by Kailani.

[96] If that $290,000 amount submitted by Maltz in the Requisition for Default Judgment was erroneous, then the Registrar SHOULD NOT have signed the Default Judgment, due to that obvious error in the Requisition submitted in writing by Maltz, if the Statement of Claim also submitted along with the Requisition was indeed for a Judgment in the principal amount of $214,000, as appears to be agreed to in sworn testimony by Sandra and Kailani, and in Exhibit E to the Kailani Affidavit.

[97] However that simple issue of “How much did the Plaintiff Claim” cannot be determined because the parties have failed to enter into evidence a complete copy of the actual Statement of Claim as issued by the Court, anywhere in the 4000 or so pages of documents they have filed on this Motion.

Sandra’s Sworn Bulk Sales Act Affidavit

[98] It is notable from the Exhibit B to the Sandra October 4 Examination that as part of this transaction Sandra allegedly swore an Affidavit under the (then in force) Bulk Sales Act RSO 1990, c B.14 on April 13, 2015 (the “Bulk Sales Act Affidavit”) that stated:

“SELLER'S AFFIDAVIT

BULK SALES ACT

STATEMENT AS TO SELLER'S CREDITORS

Statement showing names and addresses of all unsecured trade creditors and secured trade creditors of SANDRA DAVID of the City of Toronto in the Province of Ontario, c.o.b. as SUDDENLY SODA REFRESHMENTS and the amount of the indebtedness or liability due, owing, payable or accruing due, or to become due by them to each of them.

UNSECURED TRADE CREDITORS

NAME OF CREDITOR ADDRESS AMOUNT

NONE N/A NIL

SECURED TRADE CREDITORS

NAME OF CREDITOR ADDRESS AMOUNT NATURE OF SECURITY DUE

NONE N/A NIL NIL NIL

I, SANDRA DAVID, of the City of Toronto in the Province of Ontario, make oath and say:

1. That the foregoing statement is a true and correct statement

(a) of the names and addresses of all the unsecured trade creditors of the said SANDRA DAVID c.o.b. as SUDDENLY SODA REFRESHMENTS and of the amount of the indebtedness or liability due, owing, payable or accruing due or to become due and payable by the said SANDRA DAVID c.o.b. as SUDDENLY SODA REFRESHMENTS to each of the said unsecured trade creditors; and

(b) of the names and addresses of all the secured trade creditors of the said SANDRA DAVID c.o.b. as SUDDENLY SODA REFRESHMENTS and of the amount of the indebtedness or liability due, owing, payable or accruing due or to become due and payable by the said SANDRA DAVID c.o.b. as SUDDENLY SODA REFRESHMENTS to each of the said secured trade creditors, the nature of their security and whether they are or in the event of sale will become due and payable on the date fixed for the completion of the sale.

[99] The Jurat on the Bulk Sales Act Affidavit does not have a name of the Commissioner, only the signature. It appears from that exhibit that the Bulk Sales Act Affidavit was filed with the Court in Toronto by Monster Snacks’ lawyer Ranjeet Walia on April 16, 2015.

[100] I note that neither Sandra nor Kailani attached the Bulk Sales Act Affidavit to any of their Affidavits, and that it does not appear that Kailani or Sandra provided the Bulk Sales Act Affidavit to Thibodeau, as it is not specifically mentioned in the LSO Report.

[101] As I noted at the hearing, as it appears neither Kailani not Sandra appear to have provided a copy of the Bulk Sales Act Affidavit to Thibodeau, that may raise other issues regarding her level of cooperation with the LSO investigation.

[102] I also raised with the parties the implications of the Bulk Sales Act Affidavit being false or inaccurate, namely that, had Maltz moved under the Bulk Sales Act in 2015 to declare the Suddenly Soda transaction void, due to the alleged non-compliance of Sandra, prior to the repeal of the Bulk Sales Act on March 22, 2017, the transaction could have been rendered invalid, and an order returning the Sales Proceeds to Monster Snacks could have been granted. But Maltz did not take that route.

[103] The invalidity of the transaction for this reason would also have had the effect of invalidating any security granted by Monster Snacks to RBC, as after an order declaring the transaction invalid, Monster Snacks would have never had any rights in the collateral it allegedly purchased from Sandra, thus preventing the attachment of the RBC security to the Monster Snacks collateral.

[104] This was also not apparently considered by the parties in three years of litigation.

Chronology

[105] Given the number of dates of events relevant to this Motion over a 17 year period, a chronology chart (the “Chronology”) is helpful for the analysis that follows:

Date	Event
June 23, 2005	Agreement of Purchase and Sale signed by Lynne Pearlman and Erica Goodman and by “Antony David in Trust for a Company to be incorporated”
July 4, 2005	Bill of Sale for purchase of Suddenly Soda Refreshments assets from Lynne Pearlman and Erica Goodman signed by David
July 13, 2005	Non-Competition Agreement and Joint HST Election signed by Lynne Pearlman and Erica Goodman and by Tony David
January 25, 2015	Offer to Purchase by Monster Snacks signed back by Sandra on behalf of Suddenly Soda Refreshments
March 23, 2015	Kailani signs limited guarantee of Monster Snacks indebtedness to RBC in the amount of $56,737
March 23, 2015	Monster Snacks signs a loan agreement with RBC, secured by a Chattel Mortgage purporting to grant a security interest in the assets listed at Schedule A to the RBC Statement of Claim to secure the amount of $226,950 advanced by RBC with the full balance of the loan payable on March 23, 2017
April 13, 2015	Monster Snacks Inc. transaction closes regarding sale of the Suddenly Soda assets
September 8, 2015	Facebook message from Kailani to Sandra stating that “this is the last day I have to make a decision about the business loan for the vending machines I bought from you”
September 15, 2015	Maltz demand letter to Sandra alleging civil and criminal fraud and breach of Rules of Professional Conduct
September 22, 2015	Sandra writes to Maltz, without prejudice advising she would be responding to the Maltz September 15, 2015 demand letter
October 7, 2015	Sandra writes to Maltz, without prejudice, denying allegations in Maltz September 15, 2015 demand letter
October 15, 2015	Kailani files complaint with Law Society of Ontario against Sandra apparently alleging fraud
March 2016	Sandra testifies that was involved in a motor vehicle accident
March 9, 2016	Kailani testifies Monster Snacks issues statement of claim in action against Sandra on this date
March 10, 2016	David swears David Affidavit
March 11, 2016	Sandra Tweet regarding defective Bosch dishwasher
March 12, 2016	Sandra Files response to Law Society Complaint
March 16, 2016	Actual date of issuance of Statement of Claim in MAG Case History, with request for Judgment in the amount of $214,000 in the version of the Statement of Claim at Exhibit E to the Kailani Affidavit
March 21, 2016	Diaz attends at virtual office for Sandra and attempts personal service
April 11, 2016	Sandra testifies that she received phone call from process server, takes his number and arranges to call him the following week to arrange for service
April 16, 2016	Sandra suffers a heart attack and is admitted to the Cardiac Intensive Care Unit at Sunnybrook Hospital
April 18, 2016	Maltz, counsel for the Plaintiff, sends correspondence accusing Sandra of evading service, threatens Law Society complaint
April 21, 2016	Kailani files reply comments with Law Society with respect to his complaint against Sandra
April 27, 2016	Anthony Diaz swears Affidavit of Attempted Service of Claim on Sandra
May 4, 2016	Sandra faxes a responding letter stating that she received Maltz’s April 18, 2016 letter, advises him that she is not evading service but has had a car accident and a concussions and had recently released from hospital after suffering a major heart attack and will contact him to arrange service when she is well enough to do so.
May 10, 2016	Maltz sends correspondence questioning Sandra’s honesty and renews his request that she make herself available for service.
May 17, 2016	Sandra Tweet regarding John Tory Raptors tweet
May 19, 2016	Sandra Tweet regarding her Rogers TV Toronto interview
May 25, 2016	Carla Reid swears Affidavit for Substituted Service Order, enclosing May 4 Sandra and May 10 Maltz letters
May 26, 2016	Maltz files substituted service Motion as ex parte Motion in Writing
April 12, 2016 – June 13, 2016	No evidence that further attempts at service were made by Maltz
June 9, 2016	Sandra Tweets regarding work life balance and branding
June 13, 2016	Master Graham issues Order for Substituted Service
June 14, 2016	Sandra files final response to Law Society Complaint
June 23, 2016	Sandra Tweet regarding artificial assistant technology
July 7, 2016	Substituted Service Order entered by the Court Office
July 18, 2016	Sandra interviewed by LSO Complaints Resolution Counsel, Thibodeau
July 25, 2016	LSO Complaints Resolution Counsel, Thibodeau issues letter on completion of review of Kailani complaint- finds insufficient evidence for Kailani complaint but does caution Sandra for signing Bill of Sale
End of July 2016	Sandra testifies that she received a partial Statement of Claim (first three pages and the back page), and a copy of Master Graham’s June 13, 2016 Order.
August 3, 2016	Sandra testifies that she writes to Maltz, advising him that service of the Plaintiff’s Statement of Claim was incomplete and therefore deficient, and requesting that he properly and completely serve the Claim so that she may defend and suggesting he initiate a claim against Mr. David, the true owner of the business. Sandra testifies no response was received.
August 7, 2016	Sandra Tweet regarding Cineplex contest
August 10, 2016	Sandra Tweet regarding Just Eat contest
August 17, 2016	Sandra Tweet regarding Ford Fusion contest
September 2, 2016	Sandra sends a second letter to Maltz, by fax, reiterating her position that service was incomplete and deficient, and renewing her request that he provide service of the full Statement of Claim, along with other missing documents. Sandra testifies no response was received.
September 5. 2016	Sandra Tweet regarding internet research and legal advice
September 6, 2016	Sandra Tweets regarding Best Buy laptop warranty issues
September 20, 2016	Maltz signs Requisition in the amount of $290,000
September 22, 2016	Maltz files Requisition
January 13, 2017	Default Judgment is issued by Registrar. Sandra testifies it was never served on her
March 23, 2017	Full RBC loan amount due and payable by Monster Snacks
April 19, 2017	Maltz files requisition for Writs of Seizure and Sale
November 14, 2017	RBC makes demand on Kailani and Monster Snacks
January 3, 2018	RBC commences action against Monster Snacks and Kailani, inter alia, for fraud in the amount of $243,417.10 and to recover its loan and against Kailani under the limited guarantee
Unknown date	Default Judgment allegedly assigned to RBC
May 13, 2019	Bowden contacts Sandra advising that RBC had been assigned the Monster Snacks judgment and to schedule Judgement debtor examination
May 13, 2019	Sandra responds to Bowden and asks for Bowden’s available dates for a motion to set aside the Default Judgment to canvass with the Court, starting in June and requests copies of court documents, that Bowden does not agree to provide
May 28, 2019	Sandra emails Bowden in response to email of May 27, 2019 and again asks for his availability, as she states she had been in trial
May 29, 2019	Sandra again emails Bowden in response to Bowden’s email of May 27, 2019 and again asks for his availability for the motion to set aside the Default Judgment
May 30, 2019	Sandra testifies she attends at Court House and obtains the complete Statement of Claim, and Substituted Service Motion materials
May 31, 2019	Sandra again emails Bowden and again asks for his availability for the motion to set aside the Default Judgment
June 3, 2019	Bowden provides September 10, 17, 24 and 27 as available dates
October 29, 2019	Sandra appears at a Case Conference before RSJ Firestone to schedule a Motion to set aside the Default Judgment – adjourned to Masters Court for scheduling
November 22, 2019	Initial Motion date set, adjourned to November 27, 2019 and Master Short seizes himself of the Motion
November 27, 2019	Master Short sets a Long Motion date for March 10, 2020 and establishes a case timetable: Moving Party to deliver an Affidavit by January 3, 2020 RBC to deliver responding materials on January 31
December, 2019	Karrass approached by Sandra regarding bringing the Motion to Set Aside Default Judgment
January 10, 2020	Karrass formally retained by Sandra
January 22, 2020	Karrass advises that as a result of his retention he will need time to get up to speed and that the Timetable will need to be adjusted
January 5, 2020	After discussion, Karrass advises Motions Court office that the March 10, 2020 was being adjourned
February 12, 2020	Due to death in Karrass family Case Conference with Master Short adjourned
March 10, 2020	Motion adjourned by Master Short to be heard July 8, 2020
March 16, 2020	COVID Emergency Practice Directions implemented
March 2020 to August 2020	Sandra testifies that Karrass closed his office due to pre-existing risk issues with COVID
July 2, 2020	COVID conference call adjourns the motion sine die
September, 2020	Sugar testimony that Karrass and Bowden discuss schedule for exchange of materials and cross-examinations after reopening of Karrass’ practice
October 9, 2020	Karrass serves Motion Record to set aside Default Judgment
November 5, 2020	Sugar testimony that initial Cross-Examination date adjourned at request of RBC
November 5, 2020	Responding Motion Record of RBC and Kailani Affidavit sworn
December 2, 2020	Motion scheduled before Master Short, was deemed withdrawn due to failure to confirm
December 9, 2021	Cross-Examinations adjourned to due to Karrass illness
April 9, 2021	Cross-Examinations adjourned to due to Bowden scheduling issues
April 27, 2021	Cross-Examinations adjourned as Kailani unavailable
May 19, 2021	Cross-examinations adjourned due to disagreement amongst counsel on whether examinations proceeding
May 19, 2021	Master Short returns the Motion Materials he had in his chambers on this Motion on May 19, 2021 and then retires
July 8, 2021	Kailani cross-examined
July 12, 2021	Sandra first Cross Examination
August 11, 2021	Associate Justice Abrams vacates August 26, 2021 Motion date at a case conference and books September 21st for the RBC Motion to Strike affidavits filed by Sandra
September 21, 2021	RBC Motion to Strike before Associate Justice Josefo withdrawn by parties
October 4, 2021	Second Sandra Cross-Examination
November 12, 2021	First hearing date of motion, 3 hours heard and adjourned for further materials and further argument to December 12, 2021
December 12, 2021	Second day of Hearing of Motion completed, further written submissions on Strathmillan v Teti to be filed by December 20, 2021

III) Law and Analysis

[106] Rule 19.01 sets out rules regarding Noting a Defendant in Default. The relevant parts of the Rule to this Motion are:

Where no Defence Delivered

19.01 (1) Where a defendant fails to deliver a statement of defence within the prescribed time, the plaintiff may, on filing proof of service of the statement of claim, or of deemed service under subrule 16.01

(2), require the registrar to note the defendant in default.

[107] Rule 19.03 sets out rules regarding Setting aside a Noting Default:

Setting Aside the Noting of Default

19.03 (1) The noting of default may be set aside by the court on such terms as are just.

[108] Rule 19.04 sets out rules for a Plaintiff, having properly noted a Defendant in default, in obtaining Default judgment:

By Signing Default Judgment

Where Available

19.04 (1) Where a defendant has been noted in default, the plaintiff may require the registrar to sign judgment against the defendant in respect of a claim for,

(a) a debt or liquidated demand in money, including interest if claimed in the statement of claim (Form 19A);

(b) the recovery of possession of land (Form 19B);

(c) the recovery of possession of personal property (Form 19C); or

(d) foreclosure, sale or redemption of a mortgage (Forms 64B to 64D, 64G to 64K and 64M).

Requisition for Default Judgment

(2) Before the signing of default judgment, the plaintiff shall file with the registrar a requisition for default judgment (Form 19D),

(a) stating that the claim comes within the class of cases for which default judgment may properly be signed;

(b) stating whether there has been any partial payment of the claim and setting out the date and amount of any partial payment;

(c) where the plaintiff has claimed prejudgment interest in the statement of claim, setting out how the interest is calculated;

(d) where the plaintiff has claimed post judgment interest in the statement of claim at a rate other than as provided in section 129 of the Courts of Justice Act, setting out the rate; and

(e) stating whether the plaintiff wishes costs to be fixed by the registrar or assessed.

Registrar may Decline to Sign Default Judgment

(3) The registrar may decline to sign default judgment if uncertain,

(a) whether the claim comes within the class of cases for which default judgment may properly be signed; or

(b) of the amount or rate that is properly recoverable for prejudgment or postjudgment interest.

(3.1) If the registrar declines to sign default judgment, the plaintiff may,

(a) move before a judge for judgment under rule 19.05; or

(b) in the case of a claim referred to in subrule (1), make a motion to the court for default judgment.

Where Claim Partially Satisfied

(4) Where the claim has been partially satisfied, the default judgment shall be confined to the remainder of the claim.

Postjudgment Interest

(5) Where the registrar signs default judgment and the plaintiff has claimed postjudgment interest in the statement of claim at a rate other than as provided in section 129 of the Courts of Justice Act, the default judgment shall provide for postjudgment interest at the rate claimed.

Costs

(6) On signing a default judgment, the registrar shall fix the costs under Tariff A to which the plaintiff is entitled against the defendant in default and shall include the costs in the judgment unless,

(a) the judgment directs a reference; or

(b) the plaintiff states in the requisition that he or she wishes to have the costs assessed,

in which case the judgment shall include costs to be determined on the reference or on assessment.

[109] R.19.08 sets out the test for the setting aside of a Default Judgment:

Setting Aside Default Judgment

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.

[110] The relevant portions of Rule 37.14 setting out the procedure for setting aside a Registrar Order state:

37.14 (1) A party or other person who,

(a) is affected by an order obtained on motion without notice;

(b) fails to appear on a motion through accident, mistake or insufficient notice; or

(c) is affected by an order of a registrar,

may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion.

(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.

Order Made by Registrar

(3) A motion under subrule (1) or any other rule to set aside, vary or amend an order of a registrar may be made to a judge or associate judge, at a place determined in accordance with rule 37.03 (where motions to be brought).

[111] I am also guided by R.1.04 which states:

Interpretation

General Principle

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

Matters Not Provided For

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.

(3) Revoked

“Party and Party” Costs

(4) If a statute, regulation or other document refers to party and party costs, these rules apply as if the reference were to partial indemnity costs.

“Solicitor and Client” Costs

(5) If a statute, regulation or other document refers to solicitor and client costs, these rules apply as if the reference were to substantial indemnity costs.

[112] Rule 2.01, 2.02 and 2.03 dealing with irregularities with pleadings reads:

Effect of Non-Compliance

2.01 (1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court,

(a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute; or

(b) only where and as necessary in the interest of justice, may set aside the proceeding or a step, document or order in the proceeding in whole or in part.

(2) The court shall not set aside an originating process on the ground that the proceeding should have been commenced by an originating process other than the one employed

Attacking Irregularity

2.02 A motion to attack a proceeding or a step, document or order in a proceeding for irregularity shall not be made, except with leave of the court,

(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity; or

(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity.

Court May Dispense with Compliance

2.03 The court may, only where and as necessary in the interest of justice, dispense with compliance with any rule at any time.

[113] I am also guided by the Court of Appeal in Finlay v Passen 2010 ONCA 204 (“Finlay”), (at Para. 14) issued in the context of a Motion to set aside a Registrar’s administrative order dismissing an action for delay under R.48.14:

“Rule 1.04(1) and rule 2.01 are intended to do away with overly "technical" arguments about the effect of the Rules and orders made under them. Instead, these provisions aim to ensure that the Rules and procedural orders are construed in a way that advances the interests of justice and ordinarily permits the parties to get to the real merits of their dispute.” (emphasis added)

1) General Principles for setting aside Default Judgments

Chitel v. Rothbart , 1987 CarswellOnt 458. [1987] O.J. No. 661, 20 C.P.C. (20) 46 1988 appeal allowed CarswellOnt 151, [1988] O.J. No. 1197, 29 C.P.C. (2d) (C.A.) (“Chitel v. Rothbart”)

[114] In argument Counsel for RBC stated that he was relying on the “three part test” in Chitel v. Rothbart to support his opposition to the relief sought by the Moving Party.

[115] However in his fresh as amended Factum (the “RBC Factum”), the only actual reference to Chitel v. Rothbart is:

“The court took this fact into account when it applied the three-part Chitel v. Rothbart test.”

[in dealing with the ruling in Luciano v. Spadafora which RBC was also citing, and which I will deal with separately below]

Nowhere in the RBC Factum does counsel for RBC actually cite the “three part test” in Chitel v. Rothbart, although copies of the two Chitel v. Rothbart cases are attached to the RBC Factum.

[116] In Chitel v. Rothbart, Houlden, J. writing on behalf of the Court of Appeal stated:

“In deciding whether or not to set aside the default judgments, the learned Weekly Court Judge set out the correct rules to be applied in such an application. Unfortunately, however, in exercising his discretion, he applied the rules as if they were rigid rules. This was wrong. Having found that the appellant had a defence on the merits and that the motion to set aside the judgment was brought in a reasonable time and that the judgments amounted to almost $900,000, we are all of the opinion that notwithstanding the fact that the appellant's explanation for the delay was unsatisfactory, the learned Judge should have set aside the judgments and permitted the appellant to defend the counterclaim. However, as the explanation for the delay was unsatisfactory, we believe that the appellant should be put on strict terms.” (emphasis added)

[117] In Weekly Court, Anderson J. set out these “correct rules” approved by Houlden, J. at the Court of Appeal (at Para. 6):

“6 The elements which must be shown by a moving party on a motion such as this are not really in dispute between the parties. They are enunciated in the moving party's factum and in slightly different terms in the respondent's factum. Taking them for the moment as they are in the respondent's factum, which I think puts them in slightly more accurate form, they are:

... Mrs. Chitel must show:

(a) that the default was unintentional and provide a valid reason for default;

(b) that the Motion to set aside the Judgments was served forthwith after the Judgment came to her attention; and,

(c) that a valid defence on the merits exists.

These were the classic tests under the old R. 526 and would appear to be still applicable according to the jurisprudence which has appeared since the new rules came into effect. Reference may be made, for example, to C.I.B.C. v. 486163 Ont. Ltd, a report of which is in 2 C.P.C. (2d) 101 (Ont. Master). That is a decision of Master Peppiatt, and it is sufficient to read one paragraph from the headnote at p. 102:

“The exercise of the Court's discretion under r. 19.01(1) is to be guided by the same principles as applied to motions under former R. 526. The defendants were required to show that the motion to set aside the judgment had been made as soon as possible, to explain the circumstances under which the default arose, and to disclose a defence to the action on the merits.”

With respect, I agree with that conclusion of the learned Master. The moving party must satisfy all three of these tests in order to succeed. There is now an added consideration by reason of the provision that affidavits may be used upon the motion for judgment. Since that is a motion made in the absence of the opposite party, there is the customary obligation on the moving party to make full disclosure of material facts.”

[118] Houlden, J.A. changed the last portion of this test by Anderson, J. namely that the moving party has to satisfy all three of the tests in order to succeed, adopting a more flexible contextual test in granting the Order setting aside the default judgment as, notwithstanding the fact that the appellant's explanation for the delay was unsatisfactory, the Anderson, J. should have set aside the judgments and permitted the appellant to defend the counterclaim.

[119] For factual context in Chitel v. Rothbart from Para. 3 of Anderson, J.’s reasons:

The action was instituted in January 1982 and gave rise to a counterclaim.

Chitel applied for and obtained ex parte Mareva injunction.

The motion to continue that injunction was referred to the Court of Appeal and was dismissed.

By order in the spring of 1984, Chitel's claim was dismissed by Master Sandler for failure to make production as required by consent order.

In June 1985 an appeal was taken to the Divisional Court from Master Sandler's order and that appeal was dismissed.

In September 1985, leave to appeal to the Court of Appeal from the Divisional Court was refused.

In June 1986 a notice to examine Chitel for discovery was served, the examination to take place in September.

At that time her solicitors were Messrs. McCarthy and McCarthy, and in August 1986 an order was made removing them from the record.

On October 2, 1986, Master Clark struck out the reply and defence to counterclaim of Chitel for failure to attend on discovery.

On October 28 Chitel was noted in default.

On November 7 default judgment was signed by the Registrar for a portion of the claim, and on December 9 a judgment was made on motion by Mr. Justice O'Driscoll.

Chitel learned of the judgment sometime in December. The record does not clearly disclose the date upon which that information came to her.

In January 1987 the solicitors now representing Chitel were retained and instructed.

Notice of their retainer was given by telephone on January 15 to the solicitors for the defendants, and on January 27 that telephone conversation was followed up by a letter.

On March 27, 1987, Chitel's affidavit in these proceedings was sworn and in April the motion was launched.

[120] Accordingly in Chitel v. Rothbart, the Defence was struck out on October 2, 1986, the Noting in Default was October 28, 1986 the Default Judgement was obtained for the totality of the relief by motion on December 9 1986 and Chitel learned of the judgement at some point in December, 1986, a period of 3 months.

[121] Counsel for the Judgement Creditor learned of the intention to set aside in January 1987, and the Motion brought in April a period of approximately 4 months. The motion was actually heard by Anderson J. on June 17, 18 and 19, 1987. The total period from Judgment to hearing of approximately 7 1/2 months.

[122] Both Anderson J. and Houlden J.A. found in Chitel v. Rothbart concluded that the Motion was brought in a reasonable time, being approximately 4 months from the date that Chitel learned of the default Judgment.

[123] Where they differed is whether the explanation for the delay, which both levels of Court determined to be inadequate, which on a contextual approach rather than a rigid approach Houlden, J. found could be remedied by putting the defendant on a strict timetable of attending examinations for discovery, which non-attendance was the reason the defence was struck in this case. In addition, Houlden, J.A. ordered Chitel to pay within 2 months $27,000 in costs thrown away by the Respondent.

Morgan v. Toronto (City) Police Services Board, 2003 14993 (ON CA), [2003] O.J. No. 1106 (QL) (“Morgan”) and

Mountain View Farms Ltd. v. McQueen (2014) 119 O.R. (3d) 561, 2014 ONCA 194 (“Mountain View Farms”)

[124] The Moving Party Sandra proceeds from a different perspective in the RBC’s Factum, namely that “It is respectfully submitted that the issue to be determined on this motion is whether it is just and appropriate for this Honourable Court to set aside the Noting in Default.”

[125] However on the general principal of “The factors that are to be considered in deciding whether to exercise the discretion to aside [sic] a noting in default and/or default judgement” the Defendant cites Morgan and Mountain View Farms for setting the general tests.

[126] In Morgan in 2003 the Court of Appeal allowed an appeal and set aside a default judgment after a damages assessment that followed a noting in default, on the basis of the following test:

“[19] However, I disagree with the motion judge’s failure to exercise his discretion under rule 19.08(2) which enables the court to set aside a judgment against a defendant who has been noted in default. The motion judge referred to the judgment of Nordheimer, J. in Karas v. Geigos, supra. The Karas case refers to the factors the court should consider in exercising its discretion to set aside a default judgment:

(a) the motion must be brought without undue delay;

(b) the circumstances which led to the default must be explained; and

(c) the defendant must present a triable defence on the merits.”

[127] This test is essentially identical to the Chitel v. Rothbart test. In Morgan the Statement of Claim was served in March 1999, the Defendant did not defend, and was noted in default in March, 1999. Counsel for the Plaintiff took no steps for 14 months, then proceeded to a damages assessment in September 2000, with no service on the Defendant as a result of the Noting in Default. Garnishment proceedings were then taken 4 months later in January 2001, when the Defendant learned of the judgement against him and retained counsel, who first attempted to extend time to appeal the judgement in June of 2001, was instead sent to Superior Court to set aside the default judgment, which motion was heard in November 2001. In Morgan the Motion was brought 6 months after discovery of the Default Judgment and heard 11 months after discovery.

[128] The Court of Appeal in Morgan in setting aside the default judgement stated:

“With all due deference to the motion judge, the record before the Court indicates that once Mr. Rydygier learned of the default judgment, he took steps to retain counsel and deal with the matter. While it may be that if Mr. Rydygier and his counsel had first contacted counsel for the plaintiff, rather than attempting on their own to piece together what happened, the motion would have been brought on more promptly. However, I see nothing in the record which would suggest that they did not move with reasonable dispatch. There is certainly nothing in the record which would suggest that there was any undue or deliberate delay on their part.

I am also satisfied that the circumstances of the default are reasonably explained. Although Mr. Rydygier was not under a disability in the sense that leave was required to note him in default, his medical condition at the time provides sufficient evidence to permit the court to exercise its discretion in his favour under rule 19.08(2). I am satisfied that a review of the evidence of the psychiatrist together with the evidence of Mr. Rydygier discloses a person who, at the relevant time, was sufficiently distracted by his medical condition that he failed to take the appropriate steps to defend this action brought against him.” (Emphasis added)

[129] In Mountain View Farms, Gillese, J.A. states (at Para. 47):

“ [47] The court's ultimate task on a motion to set aside a default judgment is to determine whether the interests of justice favour granting the order. The approach to be taken to this determination has been considered numerous times by this court. The following draws heavily on the summary of the principles in those cases by Perell J. in Watkins v. Sosnowski, [2012] O.J. No. 2971, 2012 ONSC 3836, at paras. 19-20 and 23-24.

[48] The court must consider the following three factors:

(a) whether the motion was brought promptly after the defendant learned of the default judgment; [page568]

(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 that the defendant has an arguable defence on the merits.

[49] To this list, I would add the following two factors the court should have regard to, as set out in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. (2007), 87 O.R. (3d) 479, [2007] O.J. No. 1685, 2007 ONCA 333, at para. 2:

(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 motion judge may make on the overall integrity of the administration of justice."

[50] These factors are not to be treated as rigid rules; the court must consider the particular circumstances of each case to decide whether it is just to relieve the defendant from the consequences of his or her default.

[51] 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. In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.” (emphasis added)

[130] Despite how the RBC Factum and the Defendant’s Factum were organized, at the hearing in practical terms, the Parties argued this Motion on these 5 factors from Mountain View Farms, and did not dispute that a contextual, rather than a rigid approach was required.

[131] I do not discern a conflict jurisprudentially between the approach of Houlden, J.A. in Chitel v. Rothbart in 1988 and Armstrong J.A. in 2003 in Morgan and Gillese, J.A. in Mountain View Farms in 2014, and accordingly I will deal in these reasons with this 5 part test as being applicable.

[132] For factual context in Mountain View Farms, from the headnote:

“The plaintiff provided crop services to the defendant, an elderly farmer, for a number of years. When the defendant failed to fully pay for the services, the plaintiff had him sign an invoice to acknowledge the outstanding amount. Pre-printed words on the bottom of the invoice stated that interest would be charged on overdue accounts at the rate of 24 per cent per year. The plaintiff later sued the defendant for the unpaid amount plus interest at an annual rate of 24 per cent. The plaintiff obtained default judgment. Six years later, the defendant moved to set aside the default judgment. The motion judge found that there had been inexplicable delay in bringing the motion and that the plaintiff would suffer prejudice from that delay. He found that the defendant had an arguable defence with respect to the interest rate. He was not satisfied that the defendant had even impliedly agreed to pay interest at the rate of 24 per cent per annum. He ordered that the default judgment be varied only in respect of the rate of interest, with an annual rate of 5 per cent being substituted for 24 per cent. The plaintiff appealed.”

[133] In Mountain View Farms the defendant was in his late 80s and had a grade three education. He was served with the Statement of Claim, but did nothing to defend.

[134] Like this case (prior to RBC having been assigned the Default Judgment), the Plaintiff took no enforcement steps after obtaining the Default Judgement in August 2005 other than registering writs of seizure and sale in November 2005 and renewing them after 6 years in November 2011.

[135] The property was transferred to the Respondent’s son in 2010, subject to the writs, so at that point the Defendant was aware of the writs. Finally, in April 2012 the Defendant brought a motion setting aside the Default Judgment obtained by the Plaintiff, almost 7 years earlier, admitting the principal owing, but challenging the interest charged.

[136] The Court of Appeal allowed the appeal in part on the basis that the Motions Court Judge should not have varied the rate of interest in his judgement setting aside the default judgement, but permitted the order that the 24 per cent interest provision in the default judgment be set aside, permitted the respondent to file a defence, and allow the matter to proceed on the rate of interest. The Court also Ordered costs in favour of the Plaintiff.

[137] In permitting the setting aside of the Default Judgment, despite the passage of 6 years and the determination of prejudice against the Plaintiff by the Motions Judge, Gillese, J. A. stated:

[53] However, the motion judge was satisfied that the respondent had raised an arguable defence in respect of the interest rate that applied to the principal debt. There was evidence before him, including evidence led by the appellant, which called into question whether the respondent had agreed to pay interest at the rate of 24 per cent per annum.

[54] Having found that there was an arguable defence, it was open to the motion judge to find that the interests of justice favoured setting aside the default judgment. It is not, as the appellant would have it, that the motion judge failed to give adequate weight to the unexplained delay and prejudice to the appellant. Rather, in the exercise of his discretion, after duly considering the factors, the motion judge concluded that the [page569] respondent's arguable defence on the matter of the applicable interest rate weighed most heavily and caused the interests of justice to favour setting aside.(emphasis added)

[138] On the facts before the Motions Court Judge on the test of inexplicable delay, Gillese, J.A. states:

“[31] He found that there had been "inexplicable delay" in the respondent's bringing of the motion to set aside the default judgment. The respondent must have been aware of the writ (and, therefore, the default judgment) no later than June 2010, when he transferred his properties to his son. No reasonable explanation had been given for the delay between then and when he brought the motion in 2012.

[32] The motion judge noted that while it had been argued that the respondent was growing more forgetful over time owing to his advanced age, no evidence of medical incapacity had been presented on the motion. He added that the respondent was still driving in 2010 and had managed to transfer his properties to his son that year without requiring a power of attorney.

[33] The motion judge acknowledged that the appellant would suffer prejudice from the respondent's delay in seeking to set aside the default judgment. The prejudice consisted of the following: the process server who served the statement of claim on the respondent had died; many of the original invoices had been destroyed; the respondent's mental competence was now in issue; and at least three of the respondent's properties had been conveyed since the default judgment was obtained. But, in the motion judge's view, the prejudice could be addressed in costs.” (emphasis added)

[139] Below I have changed the Order of the tests from Mountain View Farms, as I apply these tests to avoid having to deal with the same evidence twice, when it is common for two tests:

a) Was the motion by Sandra brought promptly after the defendant learned of the default judgment?

[140] There is no evidence before me that Sandra knew of the Default Judgement prior to May 13, 2019 when Bowden emailed her, 28 months almost to the day that the Default Judgment was issued.

[141] Nothing in the Sandra Cross-examinations contradicted that, and if RBC had evidence of an earlier date that Sandra actually knew of the Default Judgement, it has not provided any evidence to support that assertion.

[142] From the chronology of the evidence before me it appears that Sandra’s last communication with Maltz was on September 2, 2016. Maltz filed the Request for Noting in Default and Requisition for Default Judgment on September 22, 2016 without responding to that correspondence, the Judgment was actually issued on January 13, 2017 and Maltz filed a Requisition for Writs of Seizure and Sale on April 19, 2017, and apparently took NO further steps, of any kind, to enforce the Default Judgment.

[143] I also note that as RBC has (other than the Statement of Claim) provided no details of the chronology of its litigation with Monster Snacks and Kailani, or its alleged settlement or its terms, there is an unexplained 754 day gap in the evidence between the date that the Writ was issued and May 13, 2019 when Bowden contacted Sandra, that cannot be attributed to Sandra. RBC or Kailani could have provided evidence of what occurred but chose not to.

[144] The position of RBC on this issue by RBC in it’s factum is as follows:

“34. Ms. Alsaffawi asserts that she did not know that there was a judgment against her until a copy was emailed to her in May of 2019. Her motion was filed in October, 2020. Thus the Defendant is required to explain a delay of about 17 months in bringing her motion. Her explanation is:

a) She was looking for documents

b) She had significant health issue

35. We submit that the first excuse is less than adequate to explain a delay of almost a year- and-a-half. As for the second excuse, the Defendant has declined to put forth medical evidence to support her claim that her health problems were sufficient to excuse her from defending or taking steps. But given that she knew that she had been sued and had in her hands an order for substituted service, these excuses are not strong.”

[145] From the evidence submitted by Sandra and RBC, and as set out in the chronology I was forced to prepare to sort out the “overturned spaghetti”, these submissions misstate the actual facts.

[146] From the email correspondence (in particular Exhibit L to the Sandra Affidavit), and the Case History regarding hearings in this matter, it appears on this issue that the time periods were:

a) Bowden emails Sandra on May 13, 2019 at 1:59 PM stating:

“I act for Royal Bank of Canada, the assignee of the attached judgment against you. I would like to arrange a judgment debtor examination of you. Please send me your available dates. If I do not hear from you by close of business tomorrow, I will choose a convenient date and serve you with a notice.”

b) Sandra responds 28 minutes later:

“Kindly forward me a copy of the court file. I have no knowledge of this matter and confirm that this is the first correspondence I have received from you about this matter. In fact, I was completely unaware of the judgment until your email today.”

c) Bowden responds 12 Minutes later:

“My apologies, but I don't have a copy of the court file. If you intend to dispute the judgment, let's schedule a date for the motion. I ask that you proceed expeditiously, because our plan is to enforce the judgment promptly if you do not move to set it aside.”

d) Sandra responds 5 minutes later:

“Kindly provide me with your available dates for a motion in June. I will canvass the court for dates and advise you accordingly.”

e) Bowden responds 2 minutes later:

“I don't think June will quite do. I'm pretty well booked up, and I doubt we can get a date for that month in any event. Perhaps July would work. I have the following dates in July:

9, 11, 12, 16

We'd also need to get materials from you pretty early on so that we can do your cross-examination and get the transcript filed in time for the motion.”

f) After some exchanges on the propriety of Bowden obtaining a credit report for Sandra, on May 16, 2019 Bowden writes:

“We have many judgments and it is not unusual that the defendant moves to set aside the default judgment. Nonetheless, we are entitled to take the usual enforcement steps (running bureaus, filing writs and so on) unless we have undertaken not to do so. In this case, I am in a position to start forced sale proceedings of properties you own as well as serving a notice of garnishment. I do not plan on taking these steps so long as I am satisfied you are moving promptly to set aside the default judgment. If I believe you are not moving promptly enough, I will let you know. However, I will take other steps to protect our client, such as filing writs (if I find properties in other counties, for instance).”

g) On May 27 Bowden writes:

It's been a while since we traded emails. As I mentioned earlier, we will hold off enforcing the judgment for now, but only if you moving diligently to set aside the default judgment. Thus far you have not even consulted me about a return date for you motion. I will hold off until the end of the month. If by then I don't see signs of progress I will start enforcing the judgment.

h) On May 28, 2019 Sandra writes:

“I emailed you on May 13, 2019 asking you for your dates, and you never responded to my question. I am attaching the email here for your ease of reference.

I have been in trial last week, continuing this week, and likely into next week for closing arguments. I am moving diligently on this matter, but I still need more than four dates in July from you in order to properly canvass the court for dates, and allow for time for examinations.

Kindly give me the benefit of the doubt, given that I have responded in a timely fashion to all of your correspondence, have advised that I was unaware of this judgment and had asked you for a copy of the file.

If I was seeking to avoid you or not deal with this matter, I would not have been so prompt in my correspondence, nor so forthcoming.

Kindly provide your dates, and I will canvass the court for an available date for my motion. If I do not hear from you by May 31, 2019, I will select a convenient date and advise you of same.”

i) On May 29, 2019 Sandra writes:

“Kindly acknowledge receipt of my email to you yesterday, which I include below for your ease of reference. Kindly respond with your availability for a motion date in July, August and September, keeping in mind that you will need to set aside time to conduct cross-examinations with me prior to the motion date.”

j) On May 30, 2019 Sandra attends at the Court House and testifies that she obtains the Statement of Claim and Substituted Service Motion materials, that Bowden did not provide her, despite her request.

k) On May 31, Sandra writes (the “May 31st Email”):

“I note from your out of office message that you have been out of the office. Could you kindly provide me with your availability for a return date of this motion? I will wait until next week to hear from you. However, if I have not received possible dates from you for August and September (as you have already given me four dates in July) by June 7. 2019, I will do my best to set a return date in July, however if they are not available and I do not have any other dates from you, I will select one and advise you accordingly.

I can confirm that I have obtained a copy of the court file, and was never properly served by Mr. Maltz, and several of the Plaintiff's claims are untrue.

To give you a sense of what will be in my motion materials, I have an affidavit from Mr. Tony David, commissioned by his lawyer, wherein he states I was never the owner of the business, and that it was his business.

I will also be presenting a copy of the first page of Mr. David's Purchase and Sale Agreement from when he purchased the business from the previous owners. I am not a party to that purchase and sale. I was never an owner of this business.

The Plaintiff, Ammar Kailani, never had any dealings with me, never met me, never spoke with me, and never once was told I was the owner of the business. It is my understanding and belief that at all material times, Mr. Kailani was fully aware he was purchasing the business and assets from its owner, Tony David, including Mr. David's GMC van.

I am confident that the court will set aside the judgment, and I will be seeking a summary dismissal given that the Plaintiff, through his own admissions, never dealt with me, and from his actions, appears not to have intended to take over the business, or at the very least operate it. He did not conduct the due diligence of the business and assets, he did not service the accounts, not when the sale close, and not in the months following. In fact, I am aware of one location that attempted to have him service the account, to which he repeatedly ignored their requests for services. He abandoned his equipment there.

I am happy to speak with you on the phone about this should you have further questions, but this is unfortunately a case where I have been targeted due to my choice in marital partner, and not through any actions or inaction on my part.”

l) On June 3, 2019 Bowden replies:

“I have dates in September: 10, 17, 20, 24, 27”

[147] Accordingly, the first 4 ½ months of alleged delay by Sandra to the end of September 2019 in not having “brought” the Motion to set aside the default judgment can be explained by Bowden’s schedule and Sandra having to obtain from the Court Office the “Court File” that Bowden claimed not to have.

[148] On that issue, I have no evidence before me whether Bowden did or did not have the “Court File”. If he did have the Statement of Claim, the Substituted Service Motion and the Requisition for Default Judgment, he should have provided it to Sandra at her request. He did not, and she had to obtain it from the Court.

[149] If he did not have these documents prior to seeking to enforce the Default Judgement, the question arises as to what due diligence RBC did prior to settling with Kailani and having the Default Judgment assigned to RBC, and what documentation was provided by Kailani or Maltz to RBC to assist in the enforcement of this Judgment, and when.

[150] On October 29, 2019, it appears from the Case History, that Sandra attended at a Case Conference before RSJ Firestone to schedule a Motion to set aside the Default Judgment which was adjourned to Masters Court for scheduling. No mention of this attendance by Sandra is made in either party’s materials, although it is very significant given the timeline. I can only conclude that no dates for the Motion were available in September and October.

[151] From the Case History, on the initial motion date of November 22, 2019 Master Short seized himself with this motion, adjourned the Motion to November 27, 2019 and on that date set a long Motion to hear the motion date for March 10, 2020 and established a case timetable.

[152] No party was able to provide me with any endorsements of Master Short regarding timetabling, compliance with timetables, or determinations made by Master Short in the conduct of this Motion. I have no evidence before me that Sandra was in violation of the terms of those timetables, or the results of the Case Management imposed by Master Short.

[153] Karrass was retained in January to argue the Motion, and the March 10th 2020 date was adjourned. Then COVID ensued and the parties started scheduling dates again in September when Karrass reopened his office and serves the Motion Record on October 9th, 2020, one month after he reopens his office after COVID.

[154] I have no evidence before me that contradicts Karrass’s statement that he had comorbidities that required the closing of his office, and in any event, this Motion would not have been an “urgent motion” requiring hearing during COVID, given that the Default Judgment was dated from 2017.

[155] I note that throughout the period between the end of September 2019 when the last dates are provided for Bowden, to the October Case Conference with RSJ Firestone, to the initial return dates, there is no evidence before me complaining about delay.

[156] After Master Short became seized with this motion and began case managing, I can only conclude on the basis of the dearth of evidence before me, that he made no findings of delay on the part of Sandra. Had there been issues with Karras delaying the Motion during COVID by closing his office, I would have expected some endorsement from Master Short in that regard. Having been presented with none, I can only conclude it was not an issue raised with Master Short.

[157] After the serving of the Motion by Sandra on October 9, 2020 counsel engaged in a prolonged dance of scheduling and canceling cross examinations, with much acrimony and finger pointing. Eventually, outlasting Master Short’s long and illustrious judicial career, AJ Abrams scheduled this motion on an urgent basis before me.

[158] There is abundant evidence before me that this motion was “brought promptly”. At Sandra’s apparent instigation this Motion was assigned to Master’s Court by RSJ Firestone, Master Short became seized with this motion and had established a case timetable 198 days after Bowden first contacted Sandra on May 13, 2019, and without the benefit of specialist counsel being retained by Sandra for this Motion.

[159] Of those 198 days, the Motion could not have been heard within the first 137 days from May 13 to September 27, 2019 due to Bowden’s schedule, and likely not at all due to the lack of hearing dates.

[160] Sandra set out in the May 31, 2019 Email to Bowden a concise summary of her position on this Motion that was argued before me 896 days later, without the benefit of Karrass’ assistance. Given that counsel on this Motion have struggled to bring this Motion to a hearing date, and only by filing massive materials, Sandra cannot be blamed for seeking assistance from Karrass.

[161] COVID also played a major role in the alleged delay from the date of discovery of the Default Judgement on May 13, 2019 to the actual hearing.

[162] For this factor I find that this motion was “brought promptly”.

(b) What is the effect of any order made on this Motion on the overall integrity of the administration of justice.

[163] Unlike most motions to set aside Default Judgment, there are serious issues raised by the evidence filed on this Motion on the overall integrity of the administration of justice.

Conduct of Kailani and Maltz

[164] The case of Strathmillan Financial Limited v. Teti, 2021 ONSC 7603, Myers, J. was drawn to my attention on the morning of the December 17, 2021 hearing and was not dealt with in either parties materials. I permitted the parties to make further written submissions relating to the case. In this case Myers, J. stated:

“[3] When counsel are involved for both sides and are having a disagreement about pleadings, timing, or otherwise, it is not appropriate to take default proceedings to enforce the plaintiff’s position. There may be a technical default as described in the Rule. But the Rule is inapplicable in the circumstances.

[4] If counsel have a disagreement on process matters that they cannot sort out themselves despite reasonable efforts and compromise, a case conference is available under Rule 50.13 (1). This rule promotes settlement of issues in the interests of an efficient and affordable resolution of the action on its merits.

[5] Using the default judgment rules for tactical advantage just sets the parties down the path of unnecessary motions to set aside the default. This is the opposite of ensuring the efficient, affordable, and fair resolution of the civil dispute on the merits.

[29] The plaintiff then opposed the motion to set aside the noting in default completely ignoring Justice Molloy’s words from McNeill Electronics:

Motions to extend the time for delivery of pleadings and to relieve against defaults are frequently made and are typically granted on an almost routine basis. Usually opposing counsel will consent to such relief as a matter of professional courtesy. Where there is opposition to a motion of this kind, it is usually related to additional terms which are sought as a condition to the indulgence being granted or to issues of costs…It is not in the interests of justice to strike pleadings or grant judgments based solely on technical defaults. Rather, the Court will always strive to see that issues between litigants are resolved on their merits whenever that can be done with fairness to the parties.

[30] I asked Mr. Mitchell how the plaintiff’s insistence on the filing of the pleading in a court file on the day it was served and noting the defendants in default for not filing it with the court until the next day promoted the most efficient, affordable resolution of the claim on the merits. He responded that enforcement of a parties’ rights under the Rules does just that.

[31] I agree that the Rules, timetables, and schedules ought to be enforced. See K.J. v The Regional Municipality of Halton, 2021 ONSC 7055. But context matters. The plaintiff is not enforcing the Rules. The Rules try to promote the efficient, affordable, and fair resolution of actions on their merits. The plaintiff misused the Rules out of some sense of need for counsel to display his resoluteness. The proof of the pudding is that it is now late 2021 and this action remains mired in a pleadings motion over a $7,500 costs award. The cost of this motion approaches the amount in issue. An efficient, affordable process towards a fair resolution of the action would have seen discoveries completed and the action set down for trial by now.

[32] Mr. Mitchell submitted that sometimes counsel fail to file pleadings and that can lead to procedural problems down the road. That is true. An action cannot be set down for trial before pleadings are properly closed. That risk is hardly a basis to note a represented, defending defendant in default however. Once again, if counsel do not cooperate on process matters, such as filing their pleadings, a case conference can readily solve that issue. See for example: Innocon Inc. v. Daro Flooring Constructions Inc., 2021 ONSC 7558, at para. 86.

[33] Mr. Mitchell required “delivery” of pleadings as a condition of the plaintiff granting an extension of time. But the plaintiff had no valid basis to note the defendants in default the day after the defence was delivered. Had the plaintiff granted the extra week extension requested by Mr. Wainstock, the delivery would have been completed in time. Instead the plaintiff created a race to the registrar’s office for no purpose at all.

[34] Overall, there was a three week extension of time on the delivery of the defendants’ statement of defence. Practically speaking this is a very modest extension of time causing no prejudice at all to the plaintiff.

[35] The Case Management Master’s handwritten endorsements did not include detailed findings of fact. Nor are little handwritten endorsements on standard matters intended to do so. But the Case Management Master left no doubt as to his chain of reasoning. The salient piece of his Endorsement dated March 18, 2020 says:

I accept the bulk of the factum of counsel for the defendants. Rule 1.04 directs that the goal is generally to have matters resolved on the merits. I can see no justification for the approach taken by counsel for the plaintiff on this motion.

[165] In Strathmillan counsel for the Plaintiff adhered strictly to a time line he had given opposing counsel, and instructed a process server to Note in Default the same day. The Defence was filed the next day. Plaintiff’s counsel refused to consent to the setting aside of the Noting in Default. Motions ensued.

[166] Counsel for Sandra cited the decision of Kristjanson, J. in 2289878 Ontario Inc. v. Gourmet Gringos Ltd. 2016 ONSC 6204, where again, a default judgment obtained by aggressive counsel notwithstanding an clear expressed intention from counsel to defend, was set aside.

[167] In this case the conduct of Maltz was much, much, worse. The failure to obtain affidavit evidence from Maltz on this motion speaks volumes.

[168] As noted previously, Sandra has been quite consistent in her general defence of the claim by Kailani in her correspondence with Kailani, Maltz and Bowden, as well as apparently the position that she took with Thibodeau based on the findings in the LSO Report.

[169] In the September 15, 2015 demand letter from Maltz (the “Maltz Demand Letter”) at exhibit G to the Kailani Affidavit as an exhibit, sent on a without prejudice basis, states:

“Further, it is my understanding that despite receiving the proceeds from the sale on or about the 13th of April 2015 you chose not to release the keys to the vending machines or allow Mr. Kailani to attend at the locations as Mr. David was still actively working the business and collecting the money from the vending machines on your behalf. This is a clear misappropriation of third party funds und could be considered as criminal in nature.

I would suggest that any judge this matter appears before will not be pleased with this conduct of a member of the Law Society of Upper Canada nor would the Law Society be pleased with your conduct in that it is clearly in breach of the Rules of Professional Conduct.

This perfunctory letter which has been sent to you with the hope that this matter can be settled without the need to proceed to court. In that regard my client wishes the return of the sum of $230,000.00 in full and complete satisfaction of this matter. In turn Mr. Kailani will relinquish any interest he has in the business and machines that in fact do exist. You will have suffered no loss as all parties will be returned to the status quo prior to these heinous actions taking place. In light of the severity of your actions we require a reply within one week commence a legal action against you without further notice”

[170] To be crystal clear, in this letter Maltz, in the context of making a demand and an offer to settle, on a without prejudice basis, threatens Sandra with both professional and criminal sanctions in the context of a civil proceeding, ironically himself possibly committing a professional misconduct offence by doing so, and the wording used by Maltz in this letter may not fit within the saving provisions of the provisions of s.346(2) of the Criminal Code RSC 1985, c C-46. Then Maltz reveals his own explicitly “without prejudice” settlement correspondence as an exhibit to the Affidavit of Carla Reid sworn in support of the Substituted Service Motion.

[171] In an explicitly “without prejudice” response on September 22, 2015 Sandra states:

“I am in receipt of your letter dated September 15, 2015. I am in the process of preparing a response. I expect to have it to you by September 30, 2015, if not sooner. Your patience is appreciated.”

Maltz again reveals this explicitly “without prejudice” correspondence from Sandra in the affidavit of Carla Reid sworn in support of the Substituted Service Motion.

[172] In an explicitly “without prejudice” response on October 7, 2015, Sandra in detail sets out the specific defences she has subsequently stated in 2020 in the Sandra Affidavit and the Supplementary Sandra Affidavit and the Draft Statement of Defence in her motion materials. In summary, she states that David was the operator of Suddenly Soda, that Kailani only dealt with David and generally denying ownership of the assets. With respect to the allegations of professional misconduct Sandra states in this letter:

“Finally, I take issue with you raising the Law Society and the Rules of Professional Conduct, My involvement in this transaction was as a mere bare trustee to assets owned by my estranged husband, Tony David. Mr. David at all times managed, controlled and solely benefited from such assets. At no time did I act as a lawyer in the sale of this transaction. Your client meanwhile was legally represented throughout this transaction by his own lawyer, Accordingly, my position is that the Rules of Professional Conduct are inapplicable.”

[173] Maltz, yet again, revealed this explicitly “without prejudice” correspondence from Sandra in the affidavit of Carla Reid sworn in support of the Substituted Service Motion.

[174] From the LSO Report, it appears that Kailani filed his complaint with LSO less than a week after this letter from Sandra on October 15, 2015. Despite the threat of commencing immediate proceedings in the Maltz Demand Letter, Maltz apparently did absolutely nothing with respect to the threatened civil action for 6 months, and issued the Statement of Claim on March 9, 2016.

[175] Again, based on the dates in the preamble of the LSO Report, it appears that at least Kailani was aware that Sandra was actively defending the allegations made by Kailani to LSO. It is apparent from the same source that Sandra sent a response to these allegations on March 12, 2016.

[176] Also, during this time period David swore the David Affidavit on March 10, 2016 supporting Sandra’s version of the story. Sandra testified she sent the David Affidavit to Maltz.

[177] So from October 15, 2015 on, it is undeniable from the evidence before me that Kailani, and perhaps Maltz as well, knew prior to approving the issuance of the Statement of Claim:

1. the substance of Sandra’s defence,

2. that she was replying to Kailani’s substantially similar complaints to LSO;

3. that David had provided an affidavit corroborating her version of the facts.

[178] Whatever the veracity of the statements made in the David Affidavit, which I am not deciding, it is a fact found in the evidence on this motion that Kailani was aware that David was supporting Sandra’s version of the facts of the transaction that was opposite to the factual assertions being made in the Statement of Claim.

[179] Perhaps coincidentally, perhaps not, according to the Case History, on March 16, 2016 Maltz issued the Statement of Claim, 4 days after the date of Sandra’s sent her response to LSO.

[180] As noted above, on April 18, 2016 Maltz wrote another letter to Sandra accusing Sandra of evading service, and threating to make yet another Law Society complaint, three days before his client Kailani filed reply materials on April 21, 2016 to the response to Kailani’s complaint that Sandra had apparently filed with the LSO on March 12, 2016.

[181] In this letter Maltz writes:

“My Process Server on repeated occasions has contacted you attempting to arrange service of the Statement of Claim concerning the above noted matter. To put it simply you have been evading service. Should you not arrange to be served I will bring the necessary Motion for substituted service and advise the presiding Master that you are a member of the Law Society of Upper Canada and that your conduct is contrary to the Rules of Professional Conduct and ask for costs on a substantial indemnity basis including that of my Process Server.

It is my opinion and I am sure you will agree that the presiding Master will not look favorably on your conduct. I also think that once the Order is granted it would be appropriate for me to consider whether your conduct should be reported to the Law Society of Upper Canada.

I would suggest that the above can easily be avoided by you simply contacting the writer and arranging to accept service of the Statement of Claim.”

[182] I don’t know whether Master Graham looked favourably on Sandra’s conduct or not. I do note that he failed to award Maltz costs of any kind, much less the substantial indemnity costs Maltz was threatening Sandra with in this letter.

[183] For those keeping score, this was the second time, along with the Maltz Demand Letter, that Maltz had threatened Sandra IN WRITING with professional sanctions in the context of advancing a client’s civil proceeding, ironically possibly committing a professional misconduct offence himself, yet again. Again, the wording used by Maltz in this latest letter may also not fit within the saving provisions of s.346(2) of the Criminal Code RSC 1985, c C-46.

[184] I also note that 3 days after this missive from Maltz, on April 21, 2016 Kailani filed reply comments with Law Society with respect to his LSO Complaint against Sandra, responding to the response Sandra had filed with Thibodeau on March 12, 2016.

[185] I find as a fact that Kailani was aware that Sandra was disputing his version of the facts relating to the Suddenly Soda transaction that he had complained to LSO about as early as March 12, 2016, well before the date that Diaz was attempting to serve the Statement of Claim.

[186] Sandra responded to Maltz in another explicitly “without prejudice” letter May 4, 2016 that Sandra faxed to Maltz stating:

“I am in receipt of your letter dated, April 18, 2016.

I have not been evading service as you allege.

I was in a car accident and have been suffering from a concussion among other injuries, I spoke only once with your process server but as a result of may injuries, did not recall where I wrote his phone number down. I have since had a major heart attack.

I have only just recently been released from the hospital and am still recovering. I am quite ill and must avoid stress.

You are well aware that I was not involved in this transaction in my capacity as a lawyer, but as a private citizen who was a bare trustee. As such, the Rules of Professional Conduct do not apply, and you are well aware that the 1 aw Society complaint process is not the appropriate venue for your client's allegations.

Your continued insistence an assuming the worst and encouraging improper complaints through the Law Society is unbecoming of a fellow licensee. The Law Society is not to be used as a stick or a tool to threaten. Considering your years as a licensee, I would think you would have better regard for the Law Society and the true purpose of the complaint process.

This is the second time you have threatened a Law Society complaint. If you continue to use the Law Society complaint process es e way lo bully and harass me, I will file my own complaint against you.

I suggest you carefully consider your continued threats and insistence an impugning my character without foundation

When I have recovered and am able to resume my normal life duties, I will contact you to arrange service.”

[187] Maltz, yet again, revealed this explicitly “without prejudice” correspondence from Sandra as an exhibit to the affidavit of Carla Reid sworn in support of the Substituted Service Motion.

[188] Given that Maltz had done absolutely nothing between the Maltz Demand Letter in September 15, 2015, and this flurry of activity in March and April 2016, why was it so urgent for Maltz not to wait to arrange service, especially when Sandra had advised him, IN WRITING, THAT SHE HAD SUFFERED A HEART ATTACK? He could have waited to get the “hospital report” confirming that Sandra had, in fact, SUFFERED A HEART ATTACK. We will never know on this Motion because no evidence was obtained from Maltz.

[189] Counsel for RBC challenged Sandra in cross-examination with respect to the veracity of her health diagnosis, and her ability to defend the Statement of Claim given that she had tweeted twice in this time period, in these unseemly exchanges relating to the above letter from Maltz:

“289. Q. Mr. Maltz said in the second sentence, that to put it simply, you have been evading service. Do you agree or disagree?

A. I disagree.

290. Now, that was followed in Mr. Maltz's letter, by demand, that you make arrangements to be served, correct?

A. Could you point me to where you're referring sir?

291. Q. It's the third sentence, which reads, quote, "Should you not arrange to be served, I will bring the necessary motion for substituted service and advise the presiding Master that you are a member of the Law Society of Upper Canada and that your conduct is contrary to the Rules of Professional Conduct and ask for costs on a substantial indemnity basis, including that of my process server," close quote. But what I asked you was, did you notice that Mr. Maltz was demanding that you make arrangements to be served with the claim?

A. Yes, I noticed that he was demanding I make arrangements while I was in the hospital, two days after my heart attack.

292. Q. On April 18th, 2016?

A. My heart attack was on April the 16th and this was sent on April the 18th, correct.

293. Q. So the next question, of course, should be, when did this letter of April 18th, 2016 come to your attention?

A. I believe that it would have been on May the 4th, when I responded.”

337. Q. Right. And I suggest to you that you were, you know, more or less, back in the saddle by May 17th, 2016? Capable of receiving a claim and responding to it. Would that be fair?

A. Excuse me?

338. Yes. I'm suggesting to you that by May 19th, 2016, you were, more or less, capable of responding to a Statement of Claim and that you could have made arrangements to be served at that time?

A. No.

[190] In another letter dated May 10, 2016, Maltz cartoonishly responds:

“This is quite simple, provide us with a place and time to serve you with the Statement of Claim.

I would also like to see copies of your hospital report. We have been trying to serve you during the period of time that you were not in the hospital and simply put, you have avoided service.

I simply have my concerns about the honesty of your position.”

[191] To determine for the purposes of this motion what cardiac condition Sandra suffered from, as no party bothered to actually put into evidence a specific definition, the pre and post-operative Sunnybrook Chart for Sandra dated April 16, 2016 diagnosis for Sandra at Exhibit F to the Sandra Affidavit, states:

“However, she had severe chest pain that evolved in the emergency department with clear evidence of an evolving ST elevation anterior myocardial infarction. As such, code STEMI was activated.

[Large redacted area] Her clear culprit vessel is her LAD, which is proximally thrombotically occluded.”

[192] From that statement for the purposes of evaluating Sandra’s evidence on this Motion, I take Judicial Notice of the meaning of this diagnosis was that Sandra’s left anterior descending artery (LAD), being the largest coronary artery, was “Thrombotically Occluded” meaning blocked by a blood clot, and she had suffered a “myocardial infarction” or a “Medical term for heart attack, the sudden death of part of the heart muscle from lack of oxygen.” as defined in the Harvard Medical School “Medical Dictionary of Health Terms”. I accept from this evidence that, for the purposes of this Motion, Sandra did indeed suffer a heart attack on April 16, 2016.

[193] No contrary medical evidence was filed on this Motion. With respect to the 117 PAGES of Sandra’s Tweets filed as an exhibit to the O’Neill Affidavit, which I read, only 4 individual tweets were in any way germane to the issues on this Motion, being in the time period of the heart attack. Presumably they were filed in an attempt to cast doubt on Sandra’s story of the heart attack and explanations as to why she did not arrange service with Maltz’s process server Diaz. I find the 117 pages of Tweets filed on this motion by RBC, which I read, to be of minimal probative value.

[194] It should be noted that the sum total of attempts at service revealed in the Diaz Affidavit were one attempt at personal service at Sandra’s office on March 21, 2016, followed by a discussion with Sandra and Diaz followed by two voicemails from Diaz, over a period of 21 days ending April 11, 2016. The Statement of Claim had only been issued on March 9, 2016. No attempt was made to locate her home address. There was no risk of a limitation period elapsing.

[195] I also note that there was nothing in the Carla Reid Affidavit sworn on May 25, 2016 in support of the ex-parte Substituted Service Motion that would have drawn the specific attention of Master Graham to the fact that Sandra claimed to have suffered a car accident and a heart attack, both of which have been proven to my satisfaction on this Motion, 6 years later. The only statement made by Carla Reid with respect to Sandra’s May 4 response is the following:

“Sandra David also known as Sandra Alsaffawi-David then responded to the letter of Murray Maltz on the 4th of May 2016 again using the same address as she has done in past attached hereto as Exhibit “E”.

I find that to be a material omission.

[196] Sandra does not respond to the May 10, 2016 Maltz letter. Her testimony was that she was not fully recovered, and despite acrimonious cross-examination Sandra was not moved off this position. This was not a wise choice by Sandra, but in the circumstances can be explained, BY THE HEART ATTACK.

[197] Despite knowing that:

1. Sandra had been responding to him to arrange service, and

2. having been told, but not provided with medical evidence that Sandra had suffered a heart attack, and

3. in the midst of his client Kailani contemporaneously providing answers to the LSO responding to Sandra’s defence of the complaint by Kailani to the LSO arising out of the similar set of facts as plead in the “Statement of Claim”,

Maltz proceeds to file the Motion Record to obtain the ex-parte Substituted Service Order on May 26, 2016.

[198] Master Graham issues the Substituted Service Order on June 13, 2016 and it appears from the Case History that the order was entered in the Court Office on July 7, 2016. At some point in July materials related to the Substituted Service Order were sent to Sandra by Maltz.

[199] I also note that in this time period, on July 25, 2016 Kailani received the letter from LSO Complaints Resolution Counsel, Thibodeau finding insufficient evidence for the Kailani LSO Complaint, but does caution Sandra for signing Bill of Sale.

[200] I say “at some point in July” because again, incredibly in all of the “spaghetti”, there is no affidavit of service provided by Kailani, as an exhibit to the Kailani Affidavit or otherwise, that provides evidence that Sandra was ever served in accordance with the terms of the Substituted Service Order. WHICH IS THE ENTIRE SUBJECT MATTER OF THIS MOTION.

[201] The Kailani Affidavit goes straight from exhibit H the Substituted Service Order to Exhibit I, the one page Default Judgment without providing any evidence that Sandra was ever served under the terms of the Substituted Service Order and with what, and what materials were provided to obtain the Default Judgment. There is no direction by RBC to this crucial evidence the Factum or Compendium filed by RBC.

[202] The only actual evidence of the service of the Statement of Claim in accordance with the Substituted Service Order is the following statement by Kailani in the Kailani Affidavit:

“25. There is no doubt at all that Ms. Alsaffawi received the Order of Master Graham as well as the Statement of Claim. However, she did not defend the action.

26. I received what Mr. Maltz advised me was all the correspondence between him and Ms. Alsaffawi in this matter. Absent from that correspondence is the hand-written letter dated August 3, 2016, found at "Exhibit J" of Ms. Alsaffawi's Motion Record. Ms. Alsaffawi claimed she sent another letter dated September 2, 2016, found at "Exhibit K" of her Motion Record. In each of the letters, she claims pages are missing from the Statement of Claim. I contacted Mr. Maltz, who has informed me and I verily believe that neither of these letters are in his file. He believes he did not receive them.”

[203] The Requisition for Default Judgment itself is also not in Kailani’s evidence but at Exhibit A to the Sandra Affidavit. The Requisition for Default Judgment states the following:

“1.The Defendant Sandra David also known as Sandra Alsaffawai-David [sic] was served the statement of claim by substituted service in accordance with the order of Master [sic] dated the Andrew Graham [sic] dated 15th of June 2016 by regular mail and registered mail on 18th of July 2016.

2. The Defendant Sandra David also known as Sandra Alsaffawai-David [sic] has not served or filed a Statement of Defence.”

[204] I confirm that this key sentence of the Requisition filed by Maltz contains the horrible typographical errors “Sandra Alsaffawai-David [sic] was served …in accordance with the order of Master dated the Andrew Graham dated 15th of June 2016”- that is verbatim from the actual Requisition in the materials. I also confirm that the actual date that Master Graham signed the Substituted Service Order was June 13, 2016, not June 15, 2016 as stated in the Requisition for Default Judgment. Those were ALL grounds for rejection of the Requisition for Default Judgment on an ex-parte in-writing basis by the Registrar.

[205] No affidavit of service was referred to in the request for Noting in Default and Requisition for Default Judgment. Rule 19.01 states:

Noting Default

Where no Defence Delivered

19.01 (1) Where a defendant fails to deliver a statement of defence within the prescribed time, the plaintiff may, on filing proof of service of the statement of claim, or of deemed service under subrule 16.01 (2), require the registrar to note the defendant in default. R.R.O. 1990, Reg. 194, r. 19.01 (1); O. Reg. 113/01, s. 3.

[206] After three years of litigation, could it be possible that Sandra was noted in default by the Registrar, and the Default Judgment obtained improperly, on a flawed Requisition for Default Judgment, filed without proof of service under the Substituted Service Order also being filed? We will never know for the purposes of this Motion because, incredibly, there is no contemporaneous evidence on this issue filed in evidence, including proof that the Registrar was actually provided with the Affidavit of Service proving service under the Substituted Service Order.

[207] So, to summarize, the only evidence filed on this motion that Sandra was ever served, at all, in accordance with the specific terms of the Substituted Service Order, and that Sandra was properly Noted in Default, and Default Judgment properly requisitioned, with proper proof of service, is this statement by Kailani:

“25. There is no doubt at all that Ms. Alsaffawi received the Order of Master Graham as well as the Statement of Claim.”

[208] There was doubt, cast by Sandra. Sandra’s evidence in the Sandra Affidavit was that:

“28. I was advised by my doctors that engaging in any stressful activities could lead to prolonged recovery, complications including another heart attack, and potentially even death. I therefore shut down my practice and focused on my health.

29. On or about May 10, 2016, Mr. Maltz wrote to me, asked me to make myself available for service, asked for my medical records, and questioned my honesty. Given that I was not checking emails, faxes, or messages, I did not see his letter until sometime in June 2016.

30. At the end of July, 2016, I received a copy of Master Graham's Order and a portion of the Plaintiff's Statement of Claim, specifically the first 3 pages and the back page. On or about August 3, 2016, I wrote to Mr. Maltz, and advised that service of his client's claim was incomplete and deficient, that it was my position that I had not yet been served, that the claim was improperly brought against me, and to serve me with the entire claim so that I may file a defence, or ideally they should bring a claim against the appropriate party, Tony David, my estranged spouse who was the true owner of the business and assets.

31. I did not receive a response from Mr. Maltz.

32. On or about September 2, 2016, I again wrote to Mr. Maltz, advising of his deficient service of his client's claim, asking for copies of the Notice of Motion, the affidavits of Anthony Diaz and Carla Reid, and advising of my position that I had not been served with his client's Statement of Claim and that he had not effected service of the same.”

33. Mr. Maltz did not respond to my second letter, and I never heard from him or his client again. I believed that they had abandoned the claim against me.”

[209] Sandra stated in the September 2, 2016 letter:

“I am in receipt of Master Graham's Order of June 13, 2016 on Court File No. CV-16-548869 for substituted service, and the first four (4) pages of your client's Statement of Claim on the same court file that you mailed by registered and ordinary mail.

Please provide me with a copy of the Notice of Motion, and the affidavits of Anthony Diaz and Carla Reid. I note that you only provided the first four (4) pages of the Statement of Claim.

As such, you have not yet served me with the Statement of Claim and have not effected service of your client's claim. To be clear, I have not been served with your client's claim and you have not effected service of same.”

[210] Sandra was not moved off these positions in any appreciable way in cross-examination, namely that:

1. she only received a partial Statement of Claim, missing pages,

2. that service under the terms of the Substituted Service Order was deficient, and

3. therefore she had taken the position with Maltz that legally she had not been served in accordance with the Rules and the terms of the Substituted Service Order, and

4. that she had requested the complete Statement of Claim, as well as the Motion Record used to obtain the for Substituted Service Order from Maltz, and

5. Maltz did not respond to her letters on August 3 and September 2, 2016, and instead proceeded to note her in default and requisition the Default Judgment.

[211] As noted above, there is no actual evidence filed by RBC on this Motion whether the Statement of Claim, complete or otherwise, was served in accordance with the terms of the Substituted Service Order or otherwise, and whether any Affidavit of Service was filed along with the Requisition for the Default Judgement that service under the Substituted Service Order was properly completed.

[212] No first person evidence was obtained from Maltz or Carla Reid as to what was in the envelope that was allegedly mailed to Sandra, so there is no actual evidence before me that the Statement of Claim was ever properly served on Sandra.

[213] At its best, the only evidence there is from Kailani, was that “there was no doubt” Sandra received the “Statement of Claim”, and the information and belief assertions of Maltz that he had never received either of Sandra’s letters.

[214] Kailani’s testimony on this issue was disastrous:

“597. Q Right. So after the motion for substituted service, you would agree with me that Mr. Maltz made an effort to serve by regular mail.

A. I don't remember.

598. Q. Okay. Now, if I were to suggest to you that the document that my client received was actually missing pages, would you have any knowledge of that?

A. He -- I remember Mr. Maltz mentioning that that was a statement in a letter from Ms. David.

599. Q. Okay. So you have a recollection, after Mr. Maltz has reportedly sent the claim by mail, you have a recollection of Mr. Maltz advising you, that my client had said she had not received the whole claim and that pages were missing.

A. Yes, I have a recollection.

600. Q. Okay. But do you have any knowledge, one way or the other, whether or not pages were actually missing?

A. I don't know.

601. Q. Okay. So if my client takes the position that pages were missing, you wouldn't be able to say anything, one way or the other, to confirm or deny that.

A. Just, can you ask the question in a different way?

602. Q. Mr. Kailani, your answer to my previous question about any actual knowledge of whether there were pages missing was you didn't know, so I rephrased the question and asked it again, which was, to your knowledge, you have no way of confirming, one way or the other, whether or not the document received by my client was missing pages.

A. Just, can you ask the question in a different way?

602. Q. Mr. Kailani, your answer to my previous question about any actual knowledge of whether there were pages missing was you didn't know, so I rephrased the question and asked it again, which was, to your knowledge, you have no way of confirming, one way or the other, whether or not the document received by my client was missing pages.

A. I don't know.

603. Q. You don't know whether it was missing pages or you don't know whether you have information one way or the other?

A. The latter.

604. You don't know whether you have information one way or the other.

A. Yes, I don't know.

[215] In his testimony Kailani therefore made admissions that he had no actual knowledge whether the Statement of Claim sent to Sandra was complete or not, and also refuted his own testimony at paragraph 26 of the Kailani Affidavit that Maltz told him the contents of Sandra’s letters that the Statement of Claim she received was incomplete, thus admitting that Maltz had received Sandra’s letters, despite swearing in the Kailani Affidavit that Maltz had told him he had not.

[216] Given Maltz’s consistent errors, such as failing to spell his own client’s name right when defining it in the “Statement of Claim” at Exhibit E to the Kailani Affidavit, along with other half dozen or so typographical errors in that document, and the butchering the first and second paragraphs of the Requisition for Default Judgment, I find it entirely plausible that Maltz did not send the complete Statement of Claim to Sandra.

[217] Accordingly I find that, on the evidence before me, that:

1. Sandra did not receive the complete Statement of Claim,

2. that Maltz had received the letters from Sandra advising him that she had not been properly served with the complete Statement of Claim, and that he had failed to serve her in accordance with the provisions of the Substituted Service Order; and notwithstanding these deficiencies that he had been advised of, in writing,

3. Maltz proceeded to Note Sandra in Default and Requisition the default Judgment.

[218] As I have found on the evidence before me that Sandra was not served with the complete Statement of Claim, then the Substituted Service Order was not complied with and Sandra was not properly served.

[219] I therefore find on the evidence before me that the Noting in Default could not have been properly obtained, as either:

1. the affidavit of service filed with the Requisition stated that the Statement of Claim was properly served in accordance with the Substituted Service Order, when it could not have been if it was missing pages; or

2. the Noting in Default and Default Judgment were obtained without filing an Affidavit of Service, which would have violated R.19.01 and should not have been issued by the Registrar.

[220] Also, given the testimony of Sandra at the Sandra July 12 Examination excerpt noted above, that she identified the “Statement of Claim” document at Exhibit E to the Kailani Affidavit as the “Statement of Claim” that had been served on her, there is a distinct possibility, given the identification of that particular exhibit in sworn testimony document by both Kailani and Sandra as being the Statement of Claim, when it is definitely not the issued Statement of Claim, that Maltz had never served Sandra with the actual issued Statement of Claim, at all.

[221] In addition, given the confusion over the versions of the “Statement of Claim”, if the prayer for relief in the actual Statement of Claim is the same as in Exhibit E to the Kailani Affidavit, then that amount is $214,000 not the $290,000 amount in the Requisition filed by Maltz. As a result the Registrar should have rejected the Requisition for Default Judgment given all of the apparent errors.

[222] In terms of Myers, J. ruling in Strathmillan, I find that Maltz’s behaviour approached and eclipsed the behaviour of counsel in that proceeding, where Myers, J. held that:

a. Default proceedings are not to be used for tactical purposes;

b. Default proceedings lie when a defendant does not participate in a lawsuit;

c. That when the parties are disagreeing about the pleadings, timing, or otherwise default proceedings are not the appropriate course of action;

d. That while the Rules, timetables, and schedules ought to be enforced, the Rules try to promote the efficient, affordable, and fair resolution of actions on their merits; and

e. It is a misuse of the Rules for counsel to commence default proceedings as a display of counsel's resoluteness.

[223] To summarize it appears from the evidence before me that the Default Judgment was obtained by Maltz in the following factual circumstances:

1. Maltz made two separate written threats to invoke professional misconduct complaints in the context of advancing a civil proceeding, and one threat of invoking criminal sanctions while discussing a settlement in a civil proceeding, all possibly in violation of the saving provisions of s.346(2) of the Criminal Code RSC 1985, c C-46;

2. Kailani made a similar threat of criminal and professional misconduct sanctions in the same civil context, actually made the LSO Complaint sharing a similar factual basis to the allegations made in the Statement of Claim, having knowledge that Sandra defended that LSO Complaint because he filed a response, and having had the LSO Complaint rejected, on whatever unknown evidence that Kailani and Sandra provided, instructed Maltz to obtain the Default Judgment;

3. Maltz attached as exhibits to the Carla Reid Affidavit in support of the Substituted Service Order THREE explicitly “without prejudice” letters from Sandra;

4. I have found that the “Statement of Claim” served by Maltz was missing pages;

5. I have found that no complete “Statement of Claim” was served on Sandra, thus violating the specific wording of the Substituted Service Order;

6. the “Statement of Claim” at Exhibit E to the Kailani Affidavit that was identified by Sandra as the “Statement of Claim” that was served on her was not the issued Statement of Claim in this Action therefore there is the possibility Sandra was never actually served with the actual Statement of Claim, in whole or in part;

7. the Requisition for Noting in Default and Default Judgement was improperly drafted, does not on the evidence before me appear to have been supported by an affidavit of service, and therefore the Default Judgment should not have been granted by the Registrar;

8. the amount claimed in the Requisition for Default Judgment is incorrect if the “Statement of Claim” at Exhibit E to the Kailani Affidavit is correct, and therefore the Registrar should not have issued the Default Judgment;

9. Maltz and/or Kailani knew from correspondence sent by Sandra, and the David Affidavit, and the apparently successful responses by Sandra to the inquiries by Thibodeau on behalf of LSO that Sandra would be defending the allegations made in the Statement of Claim, as she had laid out substantially those defences to them on at least 3 separate written occasions prior to the obtaining of the Substituted Service Order, and the Default Judgment;

10. Maltz knew that Sandra had claimed in two different pieces of correspondence to have received less than all of the “Statement of Claim” and was taking the position that the Substituted Service Order had not been complied with and yet Maltz did nothing to provide her with the full “Statement of Claim” or the Motion Record for the Substituted Service Order.

11. Maltz persisted in obtaining the Substituted Service Order after Sandra had advised him she had not been evading Diaz, because she had SUFFERED A HEART ATTACK, which I have found to be true;

12. Maltz cannot have it both ways, threatening professional misconduct sanctions against Sandra because of her status as lawyer, but treating her as a regular defendant and ignoring her correspondence when she wrote to him requesting the Statement of Claim and the Motion Record for the Substituted Service Order, and I note that failing to respond to communications from counsel may also be another possible Professional Misconduct offence.

[224] For all of these reasons, and on all of these facts, I cannot condone or excuse the behaviour of Maltz and Kailani as set out above, and I find that for all of the reasons set out by Myers, J. in Strathmillan, that Maltz misused, by both wilful act and incompetent error and omission, the default provisions of the Rules.

[225] Courts have previously found that where a default judgement is irregularly obtained it will normally be set aside in the interests of justice, as in Maillis v. Mirage Resorts Inc., 2013 ONSC 1556:

“[26] When using an alternative to personal service, the plaintiff takes the risk the statement of claim will not come to the defendant’s notice, in which case any step taken as a result of the defendant’s default will in all probability be set aside due to the absence of due process. See Royal Trust v. Dunn, (1991), 1991 7227 (ON SC), 6 O.R. (3d) 468 (Ont. Gen. Div.).

[27] When judgment is irregularly obtained, such as by lack of service, it will normally be set aside as of right and the writ of execution vacated. This differs from the situation of valid service but where the defendant seeks to defend and the court has a discretion to allow such, often on terms. See Royal Trust v. Dunn, supra, and Dawson’s Marina Ltd. v. Telfer (2005), 38 C.P.C. (6th) 43 (Ont. S.C.J.).

[28] The court’s inherent jurisdiction, along with Rule 1.04, Rules of Civil Procedure, permit setting aside the default judgment, even without a motion, in the interests of justice. I choose not to do so given the specific submission of Mr. Quinlan in this regard.

[29] Without service, the judgment, as Mr. Quinlan argues, is a nullity. Mirage cannot rely on the steps it took.”

[226] Counsel for Sandra cites Richetti, J. in Farhat v Kular 2009 363308 (Ont SC) where the Court set aside default judgement where there were serious issues regarding service, including whether the Statement of Claim served may have been missing pages:

“[26] I disagree. The first issue is whether there was proper service. If there is serious doubt about the personal service on which the default judgment was obtained, this court should set aside the default judgment and permit the matter to be heard on the merits. It is only if I am satisfied service was properly effected in accordance with the Rules of Civil Procedure that I should go on to consider the test for setting aside default judgments, which in this case the sole issue is whether the Defendants have provided an explanation for the default.

[27] I am not satisfied that the service of the Statement of Claim was proper and in accordance with the Rules. If I accept the Plaintiff's first affidavit of service, there was clearly defective personal service on the Defendants and the default judgment should be set aside. The Plaintiff argues that the first affidavit of service was defective and it was corrected in the second affidavit of service. The wording at issue in the first affidavit of service was due to "language issues".

[28] I disagree. The first affidavit of service was handwritten by the Plaintiff. The Plaintiff clearly wrote that only served 4 pages of the Statement of Claim. How can there be any confusion or language issue regarding the number of pages which he served? Clearly the Plaintiff did not serve the entire Statement of Claim. I am satisfied that the Plaintiff simply changed the affidavit of service in his second affidavit to satisfy the court officers to allow the default judgment to issue and not because he all of a sudden realized he has served all 7 pages of the Statement of Claim. That defies logic.

[29] While it appears that the Plaintiff may have been attempting to "serve" something on the Defendants when the conversation was taped, the tape is not clear as to what was being "served". There is conflicting evidence as to what "it" was from the parties. However, both parties clearly have an interest in the version of the events they swear to.

[30] I am satisfied that, if there is any serious doubt as to the proper service of the Statement of Claim, this court should err on the side of setting aside the noting in default and permit the issues between the parties to be dealt with on the merits. In this case, there appear to be very good defences which may be asserted to be determined by this court in a proper manner.” (emphasis added)

[227] I find that on the facts that Farhat v Kular is clearly applicable and binding on me, as in this case there was less than the entirety of the Statement of Claim served, aggravated by the fact that, unlike Farhat, in this case there was also the Substituted Service Order that was not complied with by the service of the partial “Statement of Claim”.

[228] I find that for the purposes of the Mountain View Farms test, and in my discretion balancing the positions of the parties, that the upholding the Default Judgment, obtained in the factual circumstances and by the conduct set out above, would negatively effect the overall integrity of the administration of justice.

[229] As noted in Finley, the provisions of the Rules, and particularly as stated in R.1.04 is “…to ensure that the Rules and procedural orders are construed in a way that advances the interests of justice and ordinarily permits the parties to get to the real merits of their dispute”, and in my discretion I find that R.1.04 in these circumstances should be construed to allow the parties to get to the real merits of the dispute which I shall discuss below, and that this favours the setting aside of the Default Judgment.

[230] As I noted at the hearing, RBC and Bowden were obviously not there at the time that Maltz and Kailani did these things, but as assignee of the Default Judgment after whatever due diligence that RBC conducted into the circumstances of the obtaining of the Default Judgment, they wear the consequences of how the Default Judgement that they are seeking to enforce was obtained.

(c) Is there is a plausible excuse or explanation for the defendant's default in complying with the Rules?

[231] RBC states the following in its Factum with respect to this part of the Chitel v Rothbart/Mountain View Farms test:

“24. As mentioned above, Ms. Alsaffawi admits receiving the order for substituted service and the claim, but alleges that the copy she received was missing paragraphs 10 through 14.

29 However, even if the court were to conclude that the claim Ms. Alsaffawi received was missing a page, the pages Ms. Alsaffawi admits receiving told her that:

a) she was being sued;

b) the plaintiff was Monster Snacks;

c) She was being sued over the Suddenly Soda sale to Monster Snacks;

d) Various other details concerning the surrounding circumstances to show her involvement in the dispute.

25. Ms. Alsaffawi knew that she had been sued, who was suing her, and why. But she did not defend, and when asked why she did not defend, she gave the following answer

"I did not receive the full claim, so I was not properly served, so I did not know that I was being sued."

Ms. Alsaffawi said much else besides this when examined, but it amounted to the same thing: she made a conscious decision not to defend because she claimed she was not properly served.

26. There is a considerable body of case law addressing those instances where a defendant knows about a claim, but chooses not to defend. As will be set out below, the courts do not generally look with favour upon defendants who elect not to defend. In cases where the court is satisfied that a defendant knew about the claim but chose not to defend, the courts generally give little regard to the defendant's arguments about the alleged problems with service, even where the court is satisfied the problems with service are genuine. Instead, the courts focus on this question: did the claim come to the defendant's attention? If the answer is in the affirmative, then this seriously undermines the defendant's attempts to explain away their reason for failing to defend.”

[232] I disagree. The facts as indicated above, and in particular the fact that Sandra, having successfully defended herself from the LSO Complaint, specifically and in detail advised Maltz the issues with only receiving part of the Statement of Claim, and that he was in breach of the terms of the Substituted Service Order, and requesting the full Statement of Claim, and the Motion Record used to obtain the Substituted Service Order.

[233] Sandra specifically told Maltz in the August 3, 2016 letter “…please send me the entire Statement of Claim so that I can file a defence”. Maltz sent her neither and proceeded to Requisition Default Judgment. Then, other than obtaining the Writ, Maltz did absolutely nothing until Bowden emailed Sandra in 2019.

[234] Counsel for RBC argued that Sandra, being faced by such an aggressive counsel should have gone to the Court office to obtain these documents instead of waiting for Maltz. I disagree.

[235] Maltz was counsel for the Plaintiff that had obtained the Substituted Service Order that stated precisely how and when service would be affected. Sandra pointed out to Maltz that he had not served her properly in accordance with the terms of the COURT ORDER, and Maltz ignored her, twice. Here we are, 6 years later.

[236] Counsel for RBC cites Select Acoustic Supply Inc. v. College of Physicians & Surgeons (Ontario), 2008 26668, but in that case the Divisional Court overtured Master Polika who found that there had not been compliance with service requirements under the Construction Lien Act, and found that service had actually been affected in accordance with the Rules and the CLA, and that the claim likely came to the attention of the defendant. I find this case to be completely distinguishable.

[237] Counsel for RBC also cites Luciano v. Spadafora, 2004 34510, but that is also clearly distinguishable on the facts as in that case the Court found:

“[2] The defendants acknowledge that they were aware of the proceedings and that the defendant Antonio Spadafora consulted a solicitor but they decided not to participate. They hoped the action would go away and focussed on other pressing matters in their lives.”

[238] In this case I have found that Maltz had failed to affect service in accordance with the strict terms of the Substituted Service Order, and compounded that error by failing to respond to Sandra by simply sending her the Statement of Claim at her request so that she could defend the claim. She had just completed successfully defending the LSO Complaint that Kailani made.

[239] I cannot see how Sandra:

1. by insisting on obtaining the complete Statement of Claim for the stated purpose of defending the claim, and

2. By pointing out that deficiency out to Maltz, twice, in writing, as soon as she got the incomplete “Statement of Claim”,

can somehow be construed as “choosing not to defend”.

[240] She did not “choose not to defend”. Maltz though error:

1. failed to provide her the complete Statement of Claim, thus

2. failing to comply with the Substituted Service Order, then, when this was pointed out,

3. made the deliberate choice to compound those errors,

4. by failing to provide the complete Statement of Claim when requested by Sandra, twice,

5. after his client Kailani was aware that Sandra was successfully defending Kailani’s LSO complaint AT THE SAME TIME that Maltz was obtaining the Substituted Service Order and the Default Judgment.

[241] Counsel for RBC also cites McCann v. Yalda, 2019 ONSC 5684 as also being applicable. However in that case it is clear that Goodman, J. prime basis for not setting aside default judgment is that there was no viable defence. He validated the errors made in attempts at service on the defendants, because the claim came to the attention of the defendant. In this case, as I analyzed in painful detail above, the issue is not whether the existence of the “claim” came to the attention of Sandra, it did.

[242] But I have found that the complete Statement of Claim, in the form issued was never properly served on Sandra in accordance with the terms of the Substituted Service Order. In this case Sandra requested that Maltz comply with the terms of the Substituted Service Order and provide her with he complete claim, and he ignored that request. Because of this behaviour I cannot validate Maltz’s errors as Goodman, J. did in McCann v Yalda. I do not see how McCann v Yalda is applicable.

[243] Similarly in Martosh v Horton 2005 43517 (ON SC), also cited by counsel for RBC, the Dambrot J. refused to set aside default judgment primarily on the basis there was no defence at all filed in the Defendants materials, rejected the defendants argument that the substituted service order in that case should never have been obtained, and did nothing in the face of the service of the lawsuit claiming in sworn testimony that he did not receive the claim at the office, and sent it back because it was personal business at the office, but not before looking in the envelope, creating a credibility issue. Dambrot, J. found that the defendant had no explanation at all to not defending the claim. Those are not the facts here.

[244] Counsel for RBC also cites Central Painting v Central Painting Inc. v. TDCI Bracebridge Inc., 2013 ONSC 4405 where the defendant failed to provide evidence that the failure to defend was allegedly the fault of his solicitor that allegedly fell ill, and where Eberhard, J. found no intention to defend,

[245] Counsel for RBC also cites H-Net. Com Inc. v. Jackson, 2004 11220 (ON CA) and reference to paragraph 13, but the entirety of the Court of Appeal decision linked to the factum reads and there is no link to the Motions Court decision:

“We agree with the motions judge that the appellants did not meet the test to set the default judgment aside. The appeal is dismissed with costs fixed at $7,500.00.”

[246] I find that Strathmillan to be far more applicable here, as this Noting in Default and Default Judgment by Maltz is factually more applicable to Strathmillan, than the cases cited by counsel for RBC.

[247] For the reasons set out, repetitively, above I find that Sandra did not “choose not to file a defence”. I find that there is a plausible excuse or explanation for the defendant's default in complying with the Rules: Maltz failed to properly serve the complete “Statement of Claim”, failed to comply with the terms of the Substituted Service Order, and upon being confronted with that error by Sandra in correspondence indicating that she wished to have the compete statement of claim to defend the claim, twice, did not provide Sandra with a copy of the complete issued Statement of Claim, and proceeded to obtain the Default Judgment.

(d) Do the facts establish that the defendant has an arguable defence on the merits?

[248] For this part of the test, Gillese, J.A. in Mountain View Farms states:

[51] 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. In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.” (emphasis added)

[249] During argument, I asked counsel for RBC, only partly in jest, “Defence to what, exactly?”

[250] The “Statement of Claim” attached at Schedule A of these Reasons, being the “Statement of Claim” at Exhibit E to the Kailani Affidavit (the evidentiary issues regarding the authenticity of I have discussed above in great detail) is, even if genuine, abysmally drafted.

[251] Other than a recitation of alleged facts, these are the only paragraphs that appear to touch on an actual cause of action being plead:

“8 ., It was found latter [sic] that the representations of Tony David as to the number and type of vending machines and the profit was not true and this was [sic] substantial loss of different types of vending machines as represented in the agreement of purchase and sale.

11. Despite the transaction closing on the 13th of April 2015 and Monster paying Suddenly the sum of $290,000.00 Sandra or her representative, refused to provide keys to the vending machines or permit him to attend at the machines. Sandra or Suddendly [sic] continued to collect the funds from the vending machines till the 13th of July 2015.

12 Finally Monster was given the keys and Ammar Kailani attended at the locations as

listed in the bill of sale. It was found that there were only 29 machines that were in accordance with the bill of sale. It was also found that the profit of Suddenly as represented by Tony David was false.

13. Do [sic] to the lack of income from the business it was found that that the business was not viable and did not have sufficient cash flow. Ultimately the business could not pay the loan which Monster and Ammar Kailani took from the Royal Bank of Canada and closed.

14. In order to obtain the loan from the Royal Bank of Canada Tony David provided various information including the number of vending machines and their gross and net profit all of which latter [sic] was found to be false.”

[252] I note that the Bill of Sale cited in the “Statement of Claim” and eviscerated by Thibodeau in the LSO Report as likely unenforceable, based on whatever evidence was put before him, was not filed as an exhibit on this Motion, for reasons unknown.

[253] I asked counsel for RBC at the hearing what the actual cause of action was and what relief was being sought in this Statement of Claim: Breach of Contract, Restitution, Fraudulent Misrepresentation, Negligent Misrepresentation? After some discussion between counsel it appeared to settle on Breach of Contract. It appears (as I discussed above) the amount being sought is “(a) Judgement in the sum of $214.000.00;”

[254] In the RBC Factum, the following argument is made with respect to the factual merits of the defences argued by Sandra:

36. Ms. Alsaffawi's proposed defence is found at page 133 of her motion record. In essence, Ms. Alsaffawi says that her ex-husband is responsible for the Plaintiff's loss, and not her. This defence does not have an air of reality to it. Ms. Alsaffawi signed the contact and other documents associated with the sale, on behalf of a sole proprietorship. As mentioned earlier in this factum, it is not a controversial statement to say that a person who signs on behalf of a sole proprietorship assumes personal liability. A recent example of this is Bearss v. Scobie, 2013 ONSC 5910 at paragraph 20, where the court wrote,

"It is clear in law that an individual carrying on business in Ontario does so in his or her personal capacity whether or not they use a business name and whether or not the name is registered. The legal world consists of individuals and artificial legal entities such as corporations, partnerships and limited partnerships. Though a sole proprietorship may adopt a business name and may in some instances sue and be sued in the business name it is still ultimately the individual sole proprietor who carries all legal liability. A sole proprietorship is not a separate legal entity from the owner."

37. In addition to signing the contract and related documents, Ms. Alsaffawi also received the purchase price from the Plaintiff. She claims that thereafter the purchase money found its way to her husband. We submit that this is not really a defence, but more of an explanation for where the funds went. In any event, Alsaffawi refused to provide copies of her bank records showing where the funds went. As set out in the Plaintiff's responding motion record and uncontested by Alsaffawi, her banking records are destroyed after six years. As we are now six years after the transaction, and her refusal to obtain banking records means that the records which would confirm or deny her evidence now no longer exist. Ms. Alsaffawi has rendered them unavailable to the court.

(emphasis added)

[255] In argument, counsel for RBC argued quite strenuously that as Sandra had signed all of the documentation on the suddenly Soda transaction that there was no “air of reality” to her defence because as a “sole proprietor” she was entirely responsible.

[256] The Bearrs case cited by RBC was a misnomer case where the correction was being sought after the expiry of a limitation period. The context was that one Scobie Brother, James, installed a leaking oil tank, and different Scobie brother, Ken, inspected it. A statement of Claim was issued naming “James Scobie c.o.b. as Scobie Heating” but Ken was not initially sued and his existence only came to light at discovery. For further confusion, the process server never served James Scobie with the Statement of Claim, but rather mistakenly served Ken Scobie, who not noticing that his brother James was the Defendant, called his own insurer who filed a defence, never sorting out which interchangeable Scobie should be filing the defence.

[257] The quote from the case used in the RBC Factum is from this context, and that to increase the complexity, James Scobie never registered his sole proprietorship under the Business Names Act, and an argument was made that the entirety of the claim against him was invalid as the “c.o.b. as Scobie Heating” was incorrect as having been issued and served on an entity that did not exist.

[258] RSJ MacLeod (as he now is) stated in the paragraph after the paragraph quoted in the RBC Factum:

“[21] A sole proprietor who adopts a business name is supposed to register it under the Business Names Act R.S.O. 1990, c. B.17. Scobie Heating is not registered as a sole proprietorship by either James Scobie or Ken Scobie. Subsection 2 (2) of the Act makes it an offence to carry on business under a business name without registering it and also renders an individual who carries on business in violation of the Act incapable of maintaining an action in connection with that business except with leave of the court. The reality of course is that many people are either ignorant of the Act, ignore the requirement, or in the case of a name like “Scobie Heating” which utilizes the surname of the proprietor, may believe that it does not apply. So it is common for individuals to have unregistered business names.

[22] The Rules of Civil Procedure recognize this fact. The prohibition in the Business Names Act prevents the proprietor who has not registered from suing in the name of the unregistered business but it does not protect such a business from being sued. Rule 8.07 permits a sole proprietor who uses a business name other than his or her own name to be sued using the business name. The main purpose of this is to ensure that if a person has a claim against a business it may sue the business and obtain judgment against the individual as well as any assets held in the business name. As a consequence if James Scobie had been carrying on business as Scobie Heating then pursuant to Rule 8.07 he could have been sued as Scobie Heating or as James Scobie c.o.b. Scobie Heating but in any of those instances it would have remained a claim against him in his personal capacity.”

[259] I note that, unlike Bearss, in this case it is the testimony of Kailani at Paragraph 12 of the Kailani Affidavit that:

“12. At paragraph 64 of the Alsaffawi affidavit, Ms. Aslaffawi claims that I insisted the assets be purchased from her because of a master business license that named her as the owner. This is untrue as I only learned that Ms. Aslaffawi was listed as the owner of the business when Mr. David informed me prior to setting up the conference call mentioned above. I verily believe that neither Suddenly Soda nor Suddenly Soda Refreshments are registered business names. Attached to this Affidavit and marked as Exhibit "C" are the applicable searches for both those business names.”

[260] That is the context in which RSJ MacLeod in Bearrs writes the cited paragraph, namely that not being registered under the Business Names Act does is not a barrier for a sole proprietor being sued. James Scobie was indeed a sole proprietor on the facts of Bearss, whether or not he registered the business name or not.

[261] In this case, the crux of this case and the Sandra defence is: “Is Sandra the “sole proprietor”?” I appears from the wording of the “Statement of Claim” alone that David, AS PLEAD BY KAILANI, was:

“Tony David was managing Suddenly and commenced discussing the vending machine business.”

which leads to the inevitable question “how does someone other than the sole proprietor manage the sole proprietorship”.

[262] It appears from the “Statement of Claim” alone that David made all of the alleged representations that allegedly induced Kailani to purchase the Suddenly Soda assets in the guise of “representing Sandra”, the Sole Proprietor.

[263] From the evidence in the Kailani Affidavit Kailani allegedly only spoke to Sandra, the alleged sole proprietor, once on a conference call before the transaction closed, a fact that Sandra hotly denies, her evidence being that there was no conference call, and the first time that she spoke to Kailani is when he phoned her in September 2015.

[264] Not surprisingly, the substance of Sandra’s Draft Defence (attached at Schedule B to these reasons), similar to the Sandra Affidavit, is a general denial that she was the “sole proprietor” of Suddenly Soda, denying she made any representations to Kailani, denying that she drafted any transaction documents, and that David was the “true and beneficial owner” of Suddenly Soda, that he had purchased from Lynne Pearlman and Erica Goodman.

[265] This defence is consistent with the David Affidavit and the letter that Sandra wrote to Maltz on October 7, 2015 in response to the Maltz Demand, 6 1/2 years ago.

[266] The crux of this defence is the following statement at paragraph 7 of the Draft Sandra Defence:

“7. With respect to paragraph 9, the Defendant admits that the transaction appears to have completed on April 13, 2015, but does not recall what documents, if any, beyond the Offer to Purchase were signed by her. If any documents were signed by her, the Defendant pleads that it was done at the direction of Mr. David, the true and beneficial owner of SSR.”

[267] In her cross-examination and in the Sandra Affidavit Sandra testified that she was in an abusive relationship with David, and David through intimidation induced her to sign the documents. Counsel for RBC questioned in the examinations, and at the hearing, as to whether what Sandra described properly fit within a defence of duress, but there was no substantive argument, and no factum or jurisprudential support for these arguments at the hearing.

[268] Specifically at the October 8 Sandra Examination:

“160. Q. And yet you took no steps to notify Mr. Kailani that you found it objectionable that you were being held out as one of the owners of Suddenly Soda, right? A. I was not aware that I was being held out as one of the owners of Suddenly Soda. My understanding was that when the master business license was provided to Mr. Kailani's lawyer, so that they could something about the retail tax, that it was at that time that his lawyer decided or demanded, that I be named as the seller on the documents. And despite my refusal. I underwent significant verbal, emotional and financial abuse, and as a way to survive, I consented to do as I was directed, to make it stop.

167. Q. Were you under duress when you signed the Agreement of Purchase and Sale.

A. When I signed the Offer?

168. Q. Yes. A. Yes, I was subject to significant abuse.

169. Q. Were you compelled by threats, to sign that document, ma'am?

A. Yes. 173.

Q. Now, do you have any evidence to show that Mr. Kailani knew that you claimed you were acting under duress, when you signed the agreement?

A. I believe that Mr. Kailani knew that there were challenges in my marriage, because he indicated so in his conversation to me, in September of 2015 and in his affidavit.”

[269] Ultimately, the underlying dispute in this Action is a “Sandra said/Kailani said/David said” dispute where each one of these parties, and their credibility, would need to be evaluated to make a determination whose testimony would be preferred. Deciding those issues is not the test on this motion and would be improper.

[270] However, the evaluation on the evidence on this motion is relevant to the “air of reality” test. I note that Sandra has issues related to the admitted fact that she apparently signed the transactional documentation as the owner of Suddenly Soda, including the “Master Business License”, another key transactional document that was not entered into evidence by anyone.

[271] Of particular importance, is Sandra, as a lawyer, swore the Bulk Sales Act Affidavit in the name “Sandra David c.o.b. Suddenly Soda Refreshments”. A tryer of fact would need to determine the credibility of these issues and the claim that she was induced into executing these documents by David, who in 2016 supported Sandra’s defence in the David Affidavit, other than the alleged abuse allegations, but it is now 2022.

[272] Other corroborating witnesses could be needed, such as Ranjeet Walia, the lawyer for Monster Snacks and Kailani, and Jim Koumarelas the lawyer for Suddenly Soda, allegedly for Sandra and/or David as well, as to the facts of the transaction, the level of due diligence conducted by Kailani, and in particular, who was providing Koumarelas with instructions.

[273] On the issue of due diligence, the testimony of Kailani was particularly disastrous:

427. Q. Prior to the purchase, what steps did you take, between the January date, January 23rd and 25th signatures on the Offer to Purchase and the April 13th, 2015 date, which was the closing date, what steps did you take to confirm that these machines listed at Schedule A, were actually present at the locations that are listed?

A. I visited three locations with Tony, the only locations he would allow me to visit, and I hired a lawyer to verify all the information.

428. Q. So I'm just looking at the Offer to Purchase right now and I count more than thirty locations, between thirty and forty locations, in that list. Is that correct?

A. I believe so.

429. Q. Okay. And you say that you visited three.

A. Those were the only three I was allowed to visit.

430. Q. I understand. But regardless of why, you only visited three.

A Yes.

431. Q. And you say you hired a lawyer and tasked him with the job of verifying this.

A. Yes.

432. Q. Did you feel at the time that it was odd, that Mr. David would only allow you to visit three locations?

A. Yes.

433. Q. Did you demand to see more locations?

A. Yes.

434. Q. And you were not given access to those locations.

A. Correct.

[274] This exchange leads to two issues:

1. It appears that factually Kailani did virtually no due diligence on a key issue in his claim, supporting the defence of Sandra, and possibly reducing the strength of his claim against Sandra due to his own failure to conduct due diligence;

2. Kailani may have had a possible claim against his lawyer Ranjeet Walia, again that could have mitigated his loss, for failing to do proper due diligence, but it does not appear any such claim was made in 2015 by Maltz.

[275] Additionally, and extremely importantly, is whether the following allegations made in the RBC Statement of Claim against Kailani and Monster Snacks have any evidentiary basis, which evidence is not before me:

“9. The Plaintiff required that Kailani inject his own [sic] into his new business, known in banking parlance as "seed money?. The Plaintiff also required that Kailani demonstrate that he possessed the necessary seed money before the Plaintiff would proceed further with the matter. Kailani gave the Plaintiff a forged bank statement showing that he was possessed of over $120,000 in savings to inject in the new business. Kailani knew that the Plaintiff would rely on the forged bank statement. The Plaintiff did rely on forged bank statement to its detriment and as a result was defrauded by Kailani.

10, The loan application was successful, and the Plaintiff entered into a loan arrangement with the Monster Snacks Inc., as described earlier in this Statement of Claim.

11. Had the Plaintiff known that Kailani's net worth was other than he represented, or that he had submitted a forged document in support of his loan application it would not have advanced funds to Kailani.”

[276] This has two very serious implications for determination of this test:

1. that Kailani as star witness for RBC may have serious credibility issues;

2. that if the forgery allegation can be substantiated, the entirety of the claim by Kailani against Sandra as a result of the alleged misrepresentations by David, may be undermined by the allegation if proven that Kailani’s damages were occasioned by the completion of the Suddenly Snacks transaction, which was only made possible by Kailani obtaining the financing from RBC by Kailani uttering forged documents to obtain the financing, thus creating his own loss.

Weighing all of this evidence, and taking into account the Mountain View Farms test, that “In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.” and the provisions of R.1.04 that “These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” I find that Sandra has shown that her defence has an air of reality, and therefore find in favour of Sandra on this factor.

(d) What is the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed?

Prejudice to Sandra

[277] Counsel for Sandra made in argument the claim that the particular prejudice to Sandra of not setting aside the Default Judgment (besides simply being subject to a judgement in excess of $300,000) was that the Writ made refinancing the TD Mortgage on her home impossible, and therefore there was imminent danger that Sandra would lose her home as of result of power of sale proceedings by TD, and an action for possession as Mortgagee by TD.

[278] The only evidentiary support for this claim of prejudice, is stated at paragraph 73 of the Sandra Affidavit, but attaches no corroborating evidence as to what proceeding could cause Sandra to lose her home:

“73 Unfortunately, given the highly acrimonious and complex civil litigation aspect of this matter, and the likelihood of losing my home…”

[279] RBC inadvertently provided that evidence. In its zeal to prove that Sandra and David were familiar with the process of defending lawsuits, RBC submitted as exhibit N to the Kailani Affidavit 235 pages of pleadings for other lawsuits involving Sandra and David, which I read, which are essentially irrelevant to the issues of this case, as presented in the evidence actually filed on this motion, rather than as allegations made in pleadings by complete strangers to this Action.

[280] It appears that David, in particular, sues and gets sued, a lot.

[281] At Tab 6, at the 9 pages between A1419 to A1427 of Exhibit N to the Kailani Affidavit is the Statement of Claim and Defence of Sandra and David to the Claim by the TD Bank in CV-20-00636611 commenced on February 20, 2020 which is the only claim of the 7 Tabs at Exhibit N involving Sandra (the “TD Mortgage Claim”). The other 225 pages in Exhibit N, which I read, exclusively deal with David’s litigation with other parties, and do not involve Sandra at all.

[282] The TD Mortgage Claim is for:

“1. THE PLAINTIFF CLAIMS:

(a) Payment by the Defendant(s), Sandra Alsaffawi-David also known as Sandra Khalid Alsaffawi and also known as Sandra David and also known as Sandra Emad Alsaffawi and Tony David of the sum of $124,856.08 now due under the Mortgage (as hereinafter defined), together with interest thereon at the rate of 3.04% per annum (the "Interest Rate") from February 12, 2020 to the date of payment or judgment;

(b) Post judgment interest at the Interest Rate or, in the alternative, pursuant to the provisions of the Courts of Justice Act, R.S.O. 1990, c. C.43;

(c) Possession of the Property (as hereinafter defined);

(d) Costs of this action on a substantial indemnity basis; and

(e) Such further and other relief as to this Honourable Court may seem just.”

[283] So this TD Mortgage Claim is a claim by TD on the covenant in the TD Mortgage and for possession in the Power of Sale proceedings for the condominium municipally known as 1730 Eglinton Avenue East, Suite 306, Toronto, Ontario, M4A 2X9, which is apparently the home that Sandra was attempting to refinance when she discovered the Writ registered by Maltz that prevented refinancing of the TD Mortgage.

[284] For reasons unknown Sandra did not herself provide this evidence of prejudice in the Sandra Affidavit, but as a result of this filing, it was inadvertently provided by RBC in the Kailani Affidavit.

[285] Counsel for RBC examined Sandra on this issue in the Sandra October 4 Examination, apparently for the purpose of attempting to obtain admissions that since TD in this action had to obtain a Substituted Service Order in 2020, then this