Court File and Parties
COURT FILE NO.: CV-18-589868 DATE: 20230307 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: HARDEV SINGH RAI, Plaintiff AND: SURJEET SAHANAN and THE ESTATE OF PARAMJIT SAHANAN, Defendants
BEFORE: VERMETTE J.
COUNSEL: M. Gosia Bawolska, for the Plaintiff Howard L. Shankman, for the Defendants
HEARD: December 7, 2022
Endorsement
[1] The Defendants brought a motion for an order setting aside the default judgment of Stinson J. dated February 28, 2019.
[2] I heard the motion on December 7, 2022 and granted it with reasons to follow.
[3] My reasons for granting the motion are set out below.
A. Factual Background
1. The Action
[4] The Defendant Surjit (misspelled in the title of proceeding) Sahanan is a Defendant in her personal capacity and as the estate trustee of the estate of her late husband, Paramjit Sahanan (“Estate”). Mr. Sahanan passed away on February 18, 2017.
[5] The Plaintiff alleges that he lent money to Mr. Sahanan. On September 18, 2017, i.e. seven months after Mr. Sahanan passed away, the Plaintiff sent a letter to Ms. Sahanan asking for payment of $66,000 that he said he had “paid/loaned” to Mr. Sahanan after agreeing to Mr. Sahanan’s suggestion to invest some money in real estate (“September 18, 2017 Letter”).
[6] The Statement of Claim was issued on January 11, 2018. The only Defendant named was Ms. Sahanan. It appears from the endorsement of Kimmel J. dated November 1, 2018 (which was incomplete in the record before me) that the Plaintiff unsuccessfully sought to obtain summary judgment against Ms. Sahanan on August 1, 2018. The Plaintiff then attempted to remedy the defects noted by the Court on August 1, 2018 and sought summary judgment again on September 24, 2018, this time against both Ms. Sahanan and the Estate. However, the Plaintiff’s motion for summary judgment was dismissed on that date as he had unilaterally added the Estate without bringing the required motion to do so. Kimmel J.’s endorsement notes that Ms. Sahanan was present in Court on September 24, 2018.
[7] The Plaintiff subsequently brought a motion to amend the Statement of Claim and add the Estate as a party. Kimmel J. heard the motion on November 1, 2018 and granted it. The Amended Statement of Claim was filed on November 26, 2018. In it, the Plaintiff claims general damages in the amount of $100,000 and special damages in the amount of $40,000 for: breach of contract, missing funds, excessive aggravation, abuse of power causing damages, emotional and psychological intimidation, and character assassination.
[8] The crux of the Plaintiff’s claim against the Estate is contained in the following paragraph of the Amended Statement of Claim:
The Plaintiff Hardev Singh Rai provided an investment loan to the deceased in the value of over $97,000.00, and the deceased returned only 8% interest of that which is equal to $7,760.00. The last 2 interest payments from the deceased were $650.00, paid in [sic] August 8, 2016 and the other paid July 13, 2016, in the amount $3,250.00 for five months period. The funds were clearly paid by cheques and deposited into Plaintiff account.
2. Service of the Amended Statement of Claim
[9] There is a dispute as to whether Ms. Sahanan was properly served with the Amended Statement of Claim on behalf of the Estate.
[10] The Plaintiff has sworn an affidavit of service stating that he personally served the Amended Statement of Claim (as well as a Motion Record and the Order of Kimmel J.) on Ms. Sahanan on November 28, 2018. Sardar Ramzi Saadilla, a friend of the Plaintiff, was with him when the documents were served on Ms. Sahanan, and he has provided affidavit evidence confirming the Plaintiff’s version of events.
[11] Ms. Sahanan states in her affidavit that during the week of November 26, 2018, she was in Regina, Saskatchewan visiting her son. Her evidence is that while she was in Regina, she received a telephone call from her manager, Faisal Surti, advising her that someone had attended at her workplace and handed him a bundle of documents. When she returned to the office the following week, Mr. Surti handed those documents to her. Mr. Surti has provided affidavit evidence confirming Ms. Sahanan’s version of events.
[12] Ms. Sahanan states the following in her affidavit as to what she did after receiving the documents:
When I returned to my office the following week, Mr. Surti handed those documents to me. I did not understand what these documents were or what they meant. I had sought legal advice from my real estate lawyer, Yadvinder Toor, but he advised me that he did do [sic] this type of work.
I then attempted to obtain some legal advice from another lawyer that I had dealt with, Scott Rosen of the firm of Rosen Formstein LLP, but I discovered that he had passed away.
It was around this time that I was diagnosed with breast cancer and I was off work for an extended period of time while I received treatment.
I never heard anything further from the Plaintiff regarding the Amended Statement of Claim and I simply forgot about the matter during my recovery.
[13] The Plaintiff has adduced evidence that Mr. Scott Rosen passed away on December 18, 2020, i.e. almost two years after the alleged service of the Amended Statement of Claim on Ms. Sahanan.
3. Default Judgment
[14] On February 28, 2019, Stinson J. granted default judgment to the Plaintiff as against the Estate (“Default Judgment”). The Default Judgment reads as follows:
THIS COURT ORDERS AND ADJUDGES THAT The Estate of Paramjit Sahanan pay to the Plaintiff the sum of $97,000.00, plus prejudgement interest of $3,000.00, for a total Judgment $100,000.00.
THIS COURT ORDERS that the motion for Judgment as against Surjeet Sahanan, is hereby dismissed without prejudice to the Plaintiff bringing a future Motion for the same relief, based on proper allegations and poof [sic] that will support a Claim for liability as against her.
THIS COURT ORDERS AND ADJUDGES THAT the Defendant The Estate of Paramjit Sahanan pay to the Plaintiff costs fixed in the amount of $1,500.00.
[15] The motion materials that were before Stinson J. for the motion for default judgment were not before me. Counsel for the Plaintiff, who was not representing the Plaintiff at the relevant time, advised that she had been unable to obtain the evidence that was before Stinson J. Given that the Default Judgment does not refer to service on the Defendants, it is unclear whether the motion materials were served on the Defendants, in accordance with best practices: see Casa Manila Inc. v. Iannuccilli, 2018 ONSC 7083 at paras. 11-17. There is no evidence before me that the motion materials for the motion for default judgment were served on the Defendants.
4. Subsequent Events Leading to the Motion to Set Aside the Default Judgment
[16] On May 3, 2022, counsel for the Plaintiff sent a letter to the Defendants enclosing a draft Notice of Motion and asking the Defendants to advise of their availability for attending the motion. Various relief was sought in the Notice of Motion, including relief against Ms. Sahanan personally and against her property.
[17] Counsel for the Plaintiff did not hear back from Ms. Sahanan and sent a follow-up letter on May 13, 2022.
[18] Eventually, Ms. Sahanan was served with the Plaintiff’s motion record in early July 2022. Ms. Sahanan states the following in her affidavit with respect to the steps that she took after being served with the motion record:
On July 8, 2022 (it was the day of the Rogers outage), I received a copy of the Plaintiff’s Motion Record dated July 27, 2022. Again, I did not understand the nature or effect of the legal documents contained in the Motion Record and so I went to my lawyer, Yadvinder Toor, on July 11, 2022 and asked him what this meant.
Mr. Toor reviewed the Motion Record and advised me that a Default Judgment had been issued against the Estate of Paramjit Sahanan for the sum of $97,000.00 plus prejudgment interest of $3,000.00 for a total of $100,000.00. Mr. Toor also advised me that the Plaintiff had been attempting to obtain judgment against me personally.
This was the first time that I became aware of the Judgment against the Estate of Paramjit Sahanan.
I met with my present lawyer, Howard L. Shankman, on July 19, 2022 and showed him the Motion Record. Mr. Shankman wrote to the Plaintiff’s counsel, Gosia Bawolska, on July 28, 2022 indicating that he wished to bring a motion to set aside the Default Judgment against the Estate.
[19] Ms. Sahanan attaches to her affidavit a draft Statement of Defence on behalf of both Defendants. Among other things, the Defendants allege the following in the draft Statement of defence:
a. Ms. Sahanan had not been aware of any loan arrangement between the Plaintiff and her late husband and the Plaintiff has failed to provide her with any evidence of a loan agreement or debt to the Plaintiff in the sum of $97,000.00, as alleged;
b. Ms. Sahanan denies any negligence in the manner in which she discharged her obligations as estate trustee and further denies that she and the Estate have been unjustly enriched as alleged by the Plaintiff;
c. the Defendants take the position that the action was started after the two-year limitation period had run.
[20] Ms. Sahanan has not been noted in default. None of the affiants were cross-examined.
B. Discussion
1. Preliminary Evidentiary Issue
[21] The Defendants objected to the use of the affidavit of Mr. Saadilla on the motion as it did not comply with the Rules of Civil Procedure and the Notice to the Public and the Legal Profession of the Ministry of the Attorney General, Court Services Division, dated April 27, 2022. Among other things, the affidavit was not signed by Mr. Saadilla. Instead, his name was typed on the signature line. Further, the Plaintiff’s responding motion record, which contained Mr. Saadilla’s affidavit and another affidavit, was only served seven days before the motion, which did not allow for the irregularity to be addressed.
[22] In response, the Plaintiff relied on section 46 of the Evidence Act, R.S.O. 1990, c. E.23 and Rule 2 of the Rules of Civil Procedure. Counsel for the Plaintiff noted that the affidavit was commissioned by an associate in her office.
[23] After hearing submissions, I ruled that the affidavit would be considered, but that the irregularity would be factored into the weight to be given to Mr. Saadilla’s evidence, in light of all the circumstances.
2. Test to Set Aside Default Judgment
[24] 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. On such a motion, the Court must consider the following factors:
a. whether the motion was brought promptly after the defendant learned of the default judgment;
b. whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules of Civil Procedure;
c. whether the facts establish that the defendant has an arguable defence on the merits;
d. the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and
e. the effect of any order the motion judge may make on the overall integrity of the administration of justice.
See Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at paras. 47-49 (“Mountain View”).
[25] 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 their default. Among other things, 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 their defence has an air of reality. See Mountain View at paras. 50-51.
[26] The principles set out above apply to a case where default judgment was properly obtained. Where the judgment is irregular, it is not necessary that the defendant establish an arguable defence. In such cases, the default judgment will typically be set aside, provided that the irregularity is more than a technical defect that the court might cure under Rule 2.01. See Bodzan v. 1226619 Ontario Inc., 2010 ONSC 103 at para. 18.
3. Application to This Case
[27] Two motions were returnable before me at the same time: (1) the Plaintiff’s motion for various relief, including relief against Ms. Sahanan personally and against her property; and (2) the Defendants’ motion to set aside the Default Judgment, which was brought as a cross-motion. Because of its potential impact on the Plaintiff’s motion, the motion to set aside the Default Judgment was heard first. For the purpose of determining the motion, I have considered the entirety of the evidence before me, i.e. the evidence filed on both motions. I note that counsel referred to the evidence filed on both motions in their argument.
[28] Based on the evidence before me, and after considering the factors set out in Mountain View, I conclude that this is a case where the Court’s discretion should be exercised to set aside the Default Judgment. Consequently, I do not need to decide whether Ms. Sahanan was properly served with the Amended Statement of Claim and whether the Default Judgment is irregular.
[29] I now turn to the factors set out in Mountain View.
[30] Whether the motion was brought promptly after the defendant learned of the default judgment. The Defendants’ motion to set aside the Default Judgment was brought promptly after they learned of the Default Judgment. There is no evidence before me that the Plaintiff took any steps to bring the Default Judgment to Ms. Sahanan’s attention at any time between February 28, 2019 and July 2022. [1] Ms. Sahanan became aware of the Default Judgment when she was served with the Plaintiff’s motion record for various relief in early July 2022 (either July 7 or 8, 2022). The motion record contained a copy of the Default Judgment. The Plaintiff consulted a lawyer and subsequently retained litigation counsel who communicated with the Plaintiff’s counsel before the end of July. The Defendants’ Notice of Motion to set aside the Default Judgment is dated August 15, 2022, i.e. approximately one month and one week after Ms. Sahanan became aware of the Default Judgment. In my view, Ms. Sahanan acted promptly after becoming aware of the Default Judgment, and the motion to set aside was brought promptly, especially considering the fact that Ms. Sahanan needed to retain litigation counsel.
[31] Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules of Civil Procedure. I find that Ms. Sahanan does not have a plausible excuse or explanation for the Defendants’ default in complying with the Rules of Civil Procedure. [2] Her evidence on this point is sparse, inconsistent with other evidence (e.g. the evidence regarding Mr. Rosen’s death) and does not reflect a real effort to respond to the Plaintiff’s claim. However, contrary to the allegations of counsel for the Plaintiff, I see no evidence in this case that Ms. Sahanan took a “calculated risk” in not defending the claim or was trying to “game the system”. I accept that Ms. Sahanan had health issues during the relevant period (although the evidence on this point is also sparse), and I note that she did attend in Court in this matter on September 24, 2018. I also note that there is no evidence before me of any communications from the Plaintiff to Ms. Sahanan after the service of the Amended Statement of Claim.
[32] Whether the facts establish that the defendant has an arguable defence on the merits. In my view, this is the most important factor in this case. I find that the facts establish that the Estate has an arguable defence on the merits. Among other things, I conclude that the Estate’s defence based on the limitation period has an air of reality. I note the following:
a. The September 18, 2017 Letter to Ms. Sahanan suggests that the money paid by the Plaintiff to Mr. Paramjit may have been to invest in real estate and not a loan.
b. The evidence before me is that the Plaintiff paid $66,000 to Mr. Sahanan, not $97,000. This is corroborated by the September 18, 2017 Letter.
c. The funds were paid over a long period of time, some in 2007 ($6,000), 2008 ($10,000), 2009 ($30,000) and 2013 ($20,000).
d. There is no evidence of any agreed-upon interest rate.
e. There is no evidence of any “interest payment” before 2016 and there is no corroborating evidence that the two cheques that are alleged to be interest payments were for the purpose of paying interest.
f. The last cheque relied upon as interest payment is dated August 8, 2016. The Estate was added as a party more than two years later, i.e. on November 1, 2018.
[33] Potential prejudice to the moving party should the motion be dismissed, and potential prejudice to the respondent should the motion be allowed. The Plaintiff has not adduced any evidence of prejudice. Counsel for the Plaintiff referred to the Plaintiff’s advanced age during argument, but this is insufficient to establish prejudice. I note that the Plaintiff obtained the Default Judgment on February 28, 2019 and did not subsequently take any steps until May 2022. Even taking into account the COVID-19 pandemic, this long period of inaction undermines any suggestion of prejudice on the part of the Plaintiff. As for prejudice to the Estate, it is my view that the dismissal of the Estate’s motion to set aside the Default Judgment would be prejudicial to the Estate, not only because it would have a judgment against it, but because the Estate would not have had the opportunity to test the Plaintiff’s evidence, which, as set out above, raises many questions.
[34] The effect of any order the motion judge may make on the overall integrity of the administration of justice. For the same reason, I conclude that the interests of justice favour setting aside the Default Judgment given that the basis for the Default Judgment appears to be uncertain.
[35] While the Estate may not have a plausible excuse or explanation for its default, all the other factors favour the Estate. Ultimately, in light of the circumstances of this case, it is my view that it is just to relieve the Estate from the consequences of its default, particularly given the presence of an arguable defence on the merits.
C. Conclusion
[36] The Defendants’ motion to set aside the Default Judgment is granted.
[37] As a result of the setting aside of the Default Judgment, the Plaintiff’s motion for various relief as against the Defendants that was returnable on the same date was adjourned sine die. The parties are to attend at Civil Practice Court to set a new date for the motion if the Plaintiff decides to proceed with the motion in the future.
[38] If costs cannot be agreed upon, the Defendants shall deliver submissions of not more than three pages (double-spaced), excluding the costs outline, by March 21, 2023. The Plaintiff shall deliver his responding submissions (with the same page limit) by April 4, 2023. The Defendants can deliver reply submissions of not more than two pages by April 14, 2023. The submissions of all parties shall also be sent to my assistant by e-mail and uploaded onto CaseLines.
Vermette J. Date: March 7, 2023
[1] While the correspondence from counsel for the Plaintiff sent to Ms. Sahanan in May 2022 enclosed a draft Notice of Motion which referred to the Default Judgment, the Default Judgment itself was not included and there is no evidence that it was sent to Ms. Sahanan before she was served with the Plaintiff’s motion record in July 2022. The letter enclosing the draft Notice of Motion did not mention the Default Judgment and only asked about the Defendants’ availability for attending the motion.
[2] While there is a dispute as to whether the Estate was properly served, there is no dispute that Ms. Sahanan received a copy, and was aware, of the Amended Statement of Claim in early December 2018, at the latest. Further, she was already a Defendant in her personal capacity.