Monster Snacks Inc. v. David

CITATION: Monster Snacks Inc. v. David, 2022 ONSC 1647

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.

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[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]

[5]

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

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 21^stfor 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

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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

17^th, 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.

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[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

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[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 25^th, 2016, but Sandra was cautioned.

[28] On March 16^th, 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.

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[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

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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

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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,

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[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

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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.

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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.

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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

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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;

- 14 -

(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

- 15 -

[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.

- 16 -

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.

- 17 -

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 -

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.

- 19 -

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

- 20 -

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

- 21 -

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.

- 22 -

[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;

- 23 -

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.

- 24 -

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.

- 25 -

[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

- 26 -

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.

- 27 -

[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

- 28 -

NAME OF CREDITOR ADDRESS

NONE N/A

SECURED TRADE CREDITORS

AMOUNT

NIL

NAME OF CREDITOR ADDRESS AMOUNT

NATURE OF SECURITY DUE

NIL

NONE N/A 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.

- 29 -

[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, Maltz demand letter to Sandra alleging civil and criminal fraud and breach of

2015 Rules of Professional Conduct

- 30 -

September 22, Sandra writes to Maltz, without prejudice advising she would be responding

2015

October 7,

2015

to the Maltz September 15, 2015 demand letter

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

March 12,

2016

Sandra Tweet regarding defective Bosch dishwasher

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

- 31 -

April 12, 2016 No evidence that further attempts at service were made by Maltz

– June 13,

2016

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

July 18, 2016

July 25, 2016

Substituted Service Order entered by the Court Office

Sandra interviewed by LSO Complaints Resolution Counsel, Thibodeau

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

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.

End of July

2016

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.

Sandra Tweet regarding Cineplex contest

August 7,

2016

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, Maltz signs Requisition in the amount of $290,000

2016

September 22, Maltz files Requisition

2016

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

- 32 -

November 14, RBC makes demand on Kailani and Monster Snacks

2017

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

October 29,

2019

Bowden provides September 10, 17, 24 and 27 as available dates

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, Initial Motion date set, adjourned to November 27, 2019 and Master Short

2019 seizes himself of the Motion

November 27, Master Short sets a Long Motion date for March 10, 2020 and establishes a

2019

case timetable:

Moving Party to deliver an Affidavit by January 3, 2020

RBC to deliver responding materials on January 31

Karrass approached by Sandra regarding bringing the Motion to Set Aside

Default Judgment

December,

2019

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

- 33 -

March 16,

2020

COVID Emergency Practice Directions implemented

March 2020 to Sandra testifies that Karrass closed his office due to pre-existing risk issues

August 2020

July 2, 2020

September,

2020

October 9,

2020

with COVID

COVID conference call adjourns the motion sine die

Sugar testimony that Karrass and Bowden discuss schedule for exchange of

materials and cross-examinations after reopening of Karrass’ practice

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

July 12, 2021

August 11,

2021

Kailani cross-examined

Sandra first Cross Examination

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, RBC Motion to Strike before Associate Justice Josefo withdrawn by parties

2021

October 4,

2021

Second Sandra Cross-Examination

November 12, First hearing date of motion, 3 hours heard and adjourned for further

2021 materials and further argument to December 12, 2021

December 12, Second day of Hearing of Motion completed, further written submissions on

2021

Strathmillan v Teti to be filed by December 20, 2021

III) Law and Analysis

- 34 -

[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]

[108]

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.

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;

- 35 -

(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

- 36 -

(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.

- 37 -

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,

- 38 -

(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.

- 39 -

[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.

- 40 -

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.

- 41 -

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] O.J. No. 1106 (QL) (“Morgan”) and

- 42 -

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

- 43 -

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 (S.C.J.), 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.

- 44 -

[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.

- 45 -

[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)

- 46 -

[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.”

- 47 -

[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.”

- 48 -

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:

- 49 -

“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 31^stEmail”):

“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.

- 50 -

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 10^th2020 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 9^th, 2020, one month

after he reopens his office after COVID.

- 51 -

[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”.

- 52 -

(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

- 53 -

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 (CanLII). 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

(d).

[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.

- 54 -

[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:

- 55 -

“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,

- 56 -

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.

Whatever the veracity of the statements made in the David Affidavit, which I am

[178]

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.

- 57 -

[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.

- 58 -

[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.”

…

- 59 -

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.

- 60 -

[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.

- 61 -

[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.”

- 62 -

[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]

that:

There was doubt, cast by Sandra. Sandra’s evidence in the Sandra Affidavit was

“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

- 63 -

not checking emails, faxes, or messages, I did not see his letter until sometime in June

2016.

…

31. 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.

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

33. 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.”

34. 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

- 64 -

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?

- 65 -

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:

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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;

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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;

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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 (CanLII):

“[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 CanLII 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.).

- 69 -

[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 CanLII 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)

- 70 -

[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.

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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 CanLII 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

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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 CanLII 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.

- 73 -

[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 CanLII 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 (CanLII) 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 CanLII 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:

- 74 -

[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 13^thof 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 tocollectthe funds fromthe 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.

- 75 -

[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

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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

- 77 -

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.”

- 78 -

[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.

170. 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

- 79 -

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.

- 80 -

A. Correct.

This exchange leads to two issues:

[274]

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

- 81 -

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

- 82 -

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 presumably was meant to be

some kind of evidence for this Motion that Sandra was some form of serial scofflaw and must

have been evading service by Maltz 4 years earlier in the spring of 2016, necessitating the

obtaining of the Substituted Service Order.

[286]

Those efforts provided no useful evidence for me on this Motion other than pages

of pointless argument between counsel, but, as a karmic by-product, this examination did provide

the following evidence from Sandra :

“463. Q. Let's go to the next part of the Motion Record. Ma'am, I'm taking you to page 12

of the Motion Record and it's a Statement of Claim, where TD is the plaintiff and you're

one of the defendants. You agree that TD Bank is suing you, correct?

A. Yes, I agree that TD has sued.

464. Q. And they sued you on a mortgage, right?

A. Yes.

465. Q. And you're defending that action, correct?

- 83 -

A. Yes”

Having been provided this evidence I find for the purpose of balancing the

[287]

prejudices of RBC and Sandra, that Sandra has a serious risk of being unable to refinance the TD

Mortgage on her property as a result of the presence of the Writ, and that TD has commenced

power of sale proceedings and the TD Mortgage Action for possession of Sandra’s home.

Prejudice to RBC

1) Settlement with Kailani

[288]

The totality of the position taken by RBC in its Factum on the issue of prejudice is

as follows:

38. The case law directs the court to consider prejudice to the parties if it sets aside or

leaves in place a judgment obtained by default. Superficially, such an analysis always

favours the defendant; the defendant is presumably seriously prejudiced by the judgment,

whereas if the judgment is set aside, the Plaintiff can still pursue the matter and seek

judgment provided the court leaves in place any writs that were filed. But this simplistic

view of prejudice and it was rejected in CIBC v. Petten, 2010 ONSC 6726:

6. The analysis of relative "prejudice", then, is seen in the context of the overall

goal of orderly and efficient processing of cases, and not just the immediate impact

on the parties to the dispute. An atomistic analysis of the "prejudice" to the moving

party and to the responding party will almost always favour the moving party: if

the motion is dismissed, the moving party will have lost the case and be liable for

the claim. If the motion is allowed, the responding party will be delayed but may

yet obtain and enforce its judgment, if it succeeds on the merits. Where it can be

shown that a responding party's position may deteriorate if the motion is allowed,

this may be addressed by terms, for example: expediting the trial, securing a

potential judgment, or preserving evidence. Thus if the over-arching principle

under Rule 19.08 is "relative prejudice", the "principles established by the

authorities", the three-part test, would be rendered largely nugatory. This concern

arises in this case: the defendants will be prejudiced if the order is not granted, in

that judgment will remain against them without a decision on the merits.

39. The court also concluded that if the failure to defend is in part based on stress and

anxiety (as suggested or implied by the medical evidence filed by the defendant in the case

at bar): . .. there does not have to be an oblique motive. Indeed, the court may pile insult

on top of misery in making such a finding where, as is often the case, debtors fail to defend

because of stress and anxiety. There is an objective standard of reasonableness to be applied

to the totality of circumstances giving rise to the default, and any delay in moving to set

the default aside. Where a defendant has not acted reasonably, the court should not set aside

the default, even if the court cannot determine why the defendant has proceeded as he did.

(at paragraph 9)

- 84 -

40. In the case at bar, there is actual prejudice to the Plaintiff. As mentioned in earlier in

the facts portion of this factum, Royal Bank and Kailani settled the dispute between them,

and as part of the settlement Kailani transferred his judgment against Alsaffawi to the bank.

He has lost the benefit of it, and Royal Bank in exchange dropped its own lawsuit against

him. (emphasis added by me)

41. Royal Bank of Canada v. Datanet et al 2013 ONCA 706 (and Royal Bank of Canada

v. Datanet et al, 2013 ONSC 2246 37) is another case dealing with actual prejudice to a

Plaintiff, where the defendant moved to set aside a default judgment. In this case the

defendant's explanation for the default was that she had left the defence to another

defendant (her brother) and that he had let her down. She delayed four months in moving

to set aside the default judgment, and this delay told against her. The bank was suing to

recover funds, and as in the case at bar, those funds were proved to have been sent to the

defendant. This fact seriously undermined her defence on the merits. Lastly, on the issue

of prejudice, the court wrote, ". . . the respondent had compromised its claims against, and

hence its ability to recover its judgment from, certain of the other key defendants. This,

too, was a factor that told against granting the discretionary relief sought by the appellant."

(at paragraph 11).”

[289]

There is a reason that RBC in its Factum has to use the following underlined

awkward word formulation:

“As mentioned in earlier [sic] in the facts portion of this factum, Royal Bank and Kailani

settled the dispute between them, and as part of the settlement Kailani transferred his

judgment against Alsaffawi to the bank. He has lost the benefit of it, and Royal Bank in

exchange dropped its own lawsuit against him.”

[290]

The “As mentioned in earlier in the facts portion of this factum” reads:

“1 d) During the years that the Plaintiff delayed, there was a settlement in related litigation.

As part of the settlement, Royal Bank of Canada compromised its own claim against

Monster Snacks, and received in exchange an assignment of the default judgment against

the Defendant;

e) The Defendant refused to preserve financial records that, if revealed, would bear directly

on her proposed defence on the merits. Because the Defendant delayed so long in bringing

her motion, those records are now being automatically destroyed by her bank. If the default

judgment is set aside, the Defendant will benefit from having allowed the destruction of

her banking records and her failure to preserve same;

…

- 85 -

22. On January 3, 2018, RBC issued a statement of claim against Monster Snacks and

Kailani. The claim settled, and RBC accepted an assignment of the judgment against

Alsaffawi as payment. By the time this settlement was reached, the judgment against Ms.

Alsaffawi was almost two years old and she had taken no steps to dispute it.

[291]

That awkward word formulation in the RBC Factum had to be used, to be clear,

because there is absolutely no evidence whatsoever provided by Kailani in the Kalani Affidavit

of the Supplementary Kailani Affidavit regarding prejudice to RBC. None.

[292]

RBC.

No actual RBC Banker filed Affidavit Materials about the possible prejudice to

[293]

The only evidence of a settlement with RBC provided by Kailani is the following

in the Kailani Affidavit:

“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.”

[294]

No settlement documents were attached to the Kailani Affidavit, or as exhibits to

the Kailani Examination. The only questions that Karass asked Kailani on this issue was as

follows:

“616. Q. All right. And then after this judgment was obtained, I understand you had some

litigation with RBC. Is that right? A. Yes.

617. Q. And that pursuant to that litigation, you assigned the judgment over to RBC as, I

assume, some sort of -- a part of a resolution.

A. I assigned over the judgment over to RBC.

618. Q. Okay. All right. I'm going to ask to go off the record. I just need to look through

my notes.”

[295]

I have been unable to find any evidentiary substantiation for the above statements

made in the RBC Factum about the terms of the settlement, other than the acknowledgement by

Kailani of the assignment of the Default Judgment as a term of the settlement.

[296]

There is therefore no evidence whatsoever before the Court:

1) Kailani was released by RBC and on what terms;

- 86 -

2) whether there were any terms of the settlement that maintain Kailani’s liability to RBC

if the Default Judgment is set aside;

3) whether the RBC obtained payment from the SBL program of any shortfalls or even

applied for it;

4) whether RBC was repaid any amounts from the realization on the security that it held

over the assets of Monster Snacks including the vending machines, and whether this was

factored into the terms of any alleged settlement with Kailani;

5) whether Kailani was released specifically with respect to his alleged obtaining of credit

from RBC by fraud and false pretences by forging net worth documentation, as alleged in

the RBC Statement of Claim;

6) what representations Kailani and Maltz made for the enforceability of the Default

Judgment to RBC at the time of the negotiation of the settlement and what due diligence

RBC undertook to ensure that those representations were in fact correct, and why RBC did

not identify any of the many many serious issues regarding the possible enforceability of

the Default Judgement, evident on the questionable quality of Maltz’s documentation

alone, prior to allegedly releasing Kailani.

[297]

All of these facts would be of great importance in making a determination in

weighing of prejudices between the parties, but none have been put into evidence by RBC.

[298]

In particular, the following statement in the RBC Factum:

“As part of the settlement, Royal Bank of Canada compromised its own claim against

Monster Snacks, and received in exchange an assignment of the default judgment against

the Defendant”

is utterly unsupported by any evidence put before the Court by RBC. None.

[299]

For this aspect of the prejudice test, RBC cites the decision of Spence, J. in RBC v

Datanet Wireless Inc., (2013) ONSC 2246 (the Court of Appeal decision affirming the decision

not dealing with the issue of prejudice on the appeal) where Spence, J. states the following:

“Prejudice

[43] If the judgment is not set aside, Ms. Nelson will continue to be liable under it.

[44] If the judgment is set aside, the Bank will be obliged to go to trial. After the SOD was

struck, the Bank reached a full and final settlement with the Defendant Cook and his 39

company VirtuallyAnywhere Inc ., accepting a payment from those Defendants and giving

a full and final release in exchange, dated February 15, 2012, about three months before

RBC was contacted by counsel for Ms. Nelson.

- 87 -

[45] Consequently, if the judgment were to be set aside, the Bank would not be able to

proceed with its claim against Cook and his company.”

[300]

From the above statements made by Spence, J. it appears that the terms of the

settlement in that case had been put into evidence before him, to permit Spence, J. to evaluate

the terms and balance the prejudices.

[301]

Here none of the terms of the settlement were put into evidence, and some of the

more salacious issues with the conduct of Kailani were only discoverable by this Court by

reviewing the RBC Statement of Claim. It does not appear that Karrass examined Kailani on the

issue of the terms of his settlement or his alleged obtaining of credit from RBC based on forged

net worth documentation, which could lead, as noted above, to serious issues with the credibility

of Kailani as a witness.

[302]

Consequently, as RBC has not put evidence before the Court on the terms of the

settlement, how is the Court to determine that RBC would be prejudiced because the Bank

“…would not be able to proceed with its claim against Cook and his company” as found by

Spence, J. Accordingly I find RBC v. Datanet distinguishable on the evidentiary record before

me.

[303]

not:

There is no evidence before me if the Default Judgment is set aside that RBC could

1) continue to pursue Kailani on his guarantee;

2) pursue him for the misrepresentation and false pretences claim, which could be an un-

dischargeable debt under s.178 of the Bankruptcy and Insolvency Act, or

3) obtain payment in full from the SBL program.

[304]

RBC could have provided that evidence of the terms of the settlement and the state

of repayment of RBC under its loan and security documentation to the Court, as it appears they

did in RBC v. Datanet. It chose not to.

[305]

Accordingly I cannot find on the evidence before me that there would be actual

prejudice to RBC if the Default Judgment is set aside as a result of the impact of the alleged terms

of the settlement with Kailani that are not properly before the Court.

2) Possible destruction of Sandra TD banking records:

[306]

In addition on the issue of defence on the merits RBC took the following position

in the RBC Factum in the “air of reality” to the defence section that really is a prejudice issue:

- 88 -

“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.”

[307]

The transcript excerpt cited in the RBC factum for this alleged “refusal” by Sandra

at the July 12 Sandra Examination is as follows:

“103. Now, ma'am, fortunately, we are still in time to get records from the TD account that

you had jointly with your husband, so we can look at the income that was coming in from

those machines. Would you contact TD Bank, today, and ask them to send you whatever

statements they can retrieve for that account?

MR. KARRASS: I'm sorry, Mr. Bowden, as I've advised last week, there's no obligation to

provide any type of financial disclosure or any other type of disclosure in cross-

examinations on an affidavit. With that said, assuming that this matter, if a default

judgment is set aside, then there will obviously be a discovery process and in the context

of that, I'm sure my client will need to provide all of those documents.

MR. BOWDEN: But I'm asking that question to the premises of motion that's scheduled to

set aside the default judgment.

MR. KARRASS: Yes. There's no documentary productions during cross-examinations on

affidavits.

MR. BOWDEN: So that is a refusal, is it? You have refused to a fundamental obligation -

-..

MR. KARRASS: It's not a valid request, It's not. a refusal. It's that you don't have a right

to request ..

MR. BOWDEN: So it's your position, Counsel, just so I'm clear, that I cannot ask your

client for any documents that she has not already produced, during this examination?

MR. KARRASS : Correct. Because I was not able to ask your client for any documents,

which, if this was an examination for discovery, I would have asked your client for many

things, but I could not. As this is a cross-examination on an affidavit and motions being

based on affidavit evidence only, there's no opportunity to provide further and additional

documentation or affidavits after examinations have already taken place.”

- 89 -

[308]

That was not a “her refusal to obtain banking records”, it was a refusal by Karrass

at a Cross-Examination to what he believed was an improper question in the context of a motion

to set aside default judgement, where the question was more relevant to a motion to preserve

records.

[309]

There is no evidence before me that Sandra, or David for that matter, has destroyed

any of her or their own TD banking records. The issue, as I believe it is framed by Bowden in

this question, is a request that Sandra obtain from her alleged TD joint account with David

banking information relating to moneys going in and out of the account that would tend to show,

or not, whether Sandra was, or not, involved in the operation of Suddenly Snacks, and the

disposition of the monies paid by Kailani after they were allegedly deposited in the joint account

held with David.

[310]

It is not apparent to me how this refusal was dealt with. An answer either way does

not appear before me in evidence. I do not know whether this refusal was settled as a result of

the withdrawal of the RBC Strike Motion

[311]

The sole evidence for the statement “As set out in the Plaintiff's responding motion

record and uncontested by Alsaffawi, her banking records are destroyed after six years” in the

RBC Factum is this statement from the O’Neill Affidavit filed in support of the Strike Motion

that was withdrawn:

“6. Our law firm, Lee Bowden Nightingale LLP, works solely for financial institutions,

and our clients, including the Defendant's bank, routinely keep banking records for seven

years, after which typically such records are unavailable unless a specific request has been

made to retain them. This practice is endorsed by the Bank of Canada, as set out in its

website at the following URL: : https://www.bankofcanada.ca/about/contact-

information/atip/info-source/ .A copy of this document is attached to this Affidavit and

marked as Exhibit "D".”

[312]

[313]

O’Neill, stated in the O’Neill Affidavit:

“1. I am a legal assistant with the law firm of Lee, Bowden, Nightingale LLP, lawyers for

the Plaintiff in respect of this matter, and as such, have knowledge of the matters to which

I depose.”

This was an attempt to introduce opinion evidence by O’Neill, manifestly not an

expert in the field of record retention practices of financial institutions in general, and specifically

TD. Even if RBC had obtained evidence of this nature from the personal knowledge of an RBC

Banker, there is no guarantee that TD follows the same practices, so that banker could testify as

to his first hand knowledge of the record retention practices that he knew about for RBC, but

could not provide expert evidence for the practices of TD, unless properly qualified.

[314]

Dawna O’Neill, a legal assistant swearing an information and belief affidavit and

attaching a internet link to an alleged document retention policy for the Bank of Canada, where

- 90 -

it is not clear whether it even applies to TD or whether TD follows a similar policy, as the basis

for that information and belief, cannot provide such expert opinion evidence.

[315]

In addition the statement made in the RBC Factum “…her banking records are

destroyed after six years” does not recite O’Neill’s actual evidence that banks ”...routinely keep

banking records for seven years, after which typically such records are unavailable unless a

specific request has been made to retain them”

[316]

It also does not accurately reflect the “practice endorsed by the Bank of Canada”

that O’Neill purports to put into evidence on this motion as exhibit D to her Affidavit. That

alleged “policy” is not a “policy”, but is instead a 36 page website printout entitled “Info Source:

Sources of Federal Government and Employee Information” for the purposes of the making of

Access to Information requests of the Bank of Canada under the Access to Information Act and

the Privacy Act.

[317]

As there was no page or parenthetical reference in the RBC Factum to where the

“policy” referred to is buried in this 37 page document, I searched through information regarding

unconfirmed bank balances, and mutilated bank notes, and access to Bank of Canada press

releases, and to hours of operation of the Currency Museum, and where to make access to

information requests of the Bank of Canada.

[318]

This document appears to provide policies for the BANK OF CANADA, not

CANADIAN BANKS. It is of no probative value whatsoever on this motion, and certainly does

not provide evidence for the proposition that O’Neill states it does in the O’Neill Affidavit, or

the even greater overreach stated in the RBC Factum.

[319]

As far as I can tell from the transcripts of the Sandra Examinations, this document

was never put to the witness.

[320]

To summarize, the RBC has failed to provide any evidence on this Motion, expert,

non-expert, admissible or not, that:

1) there is a document destruction policy by TD Bank:

2) “that requires routinely keep banking records for [seven years- O’Neill Affidavit][6

years RBC Factum], after which typically such records are unavailable unless a specific

request has been made to retain them”;

3) that Sandra or David have destroyed any alleged TD Bank Records, or do not have

available to them the alleged TD Bank Records;

4) that those TD Bank records are not in the possession of Sandra or David;

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5) that those TD Bank records have not been preserved as documents in any of the myriad

of litigation that David and/or Sandra have been involved in, including with the TD Bank,

that the RBC helpfully produced as Exhibit N to the Kailani Affidavit.

[321]

I also note, that given that the basis of Sandra’s defence of the allegations in the

Statement of Claim is that she had no involvement in the business of Suddenly Snacks, TD Bank

Records proving that David did the banking, and she did not, would likely be as or more

beneficial to her defence as to the RBC claim.

[322]

Accordingly, with respect to the alleged destruction of TD Documents as a result

of an alleged policy, I find that RBC has not proven any actual prejudice, that creates a substantial

risk that a fair trial of the issues will not be possible as a result of any failure by Sandra to preserve

and obtain this evidence.

[323]

In conclusion, for the reasons set out above, in view of the entire contextual

environment, the nature of the claim and the overall conduct of the parties, on balancing the

interests of Sandra and RBC, I find that the RBC would not suffer non-compensable prejudice

if the Default Judgment was set aside based on the above findings.

[324]

As a result, I find that this Factor favours Sandra.

Finality Principle

[325]

In making a determination in this case, taking into consideration the factors set out

in Mountain View Farms that guide the court’s choice whether to set aside the Default Judgment,

require me to resolve the tension between two underlying policies:

a) the first is that civil actions should be decided on their merits; and

b) the second principle being that civil actions should be resolved in a timely and efficient

manner in order to maintain public confidence in the administration of justice.

[326]

Taking into consideration the entire contextual environment in determining the

finality principle, and given my findings that Sandra did move promptly to set aside the Default

Judgment after being belatedly informed of its existence by Bowden in June 2019, more than two

years after it had been obtained by Maltz, who took no steps whatsoever in those two years to

advise Sandra of the Default Judgment or to actually enforce it, other than registering the Writ, I

find that after applying the tests in Mountain View Farms:

1) it would not be just that the principle of finality and RBC’s reliance on the security of

its position should nonetheless prevail, and

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2) I find after balancing of the interests of the Sandra and RBC that it would be just that

the Default Judgment be set aside.

[327]

Accordingly, I do not find that the Default Judgment must be maintained on the

basis of the finality principle that civil actions should be resolved in a timely and efficient manner

in order to maintain public confidence in the administration of justice.

Just Result Principle

[328]

R. 1.04 requires:

“(1) These rules shall be liberally construed to secure the just, most expeditious and least

expensive determination of every civil proceeding on its merits.”

[329]

Finlay (Para. 14) has interpreted this Rule as follows in the context of motions to

set aside an administrative dismissal 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.”

[330]

After undertaking a contextual review, and considering all of the circumstances of

the Action, and after reviewing all of the evidence before me, and balancing the interests of the

Sandra and RBC, I arrive at the conclusion that the “just result” on this Motion, and in this

Action, is that the Default Judgment be set aside to permit Sandra and RBC to determine this

Action on the real merits of this dispute, as that would advance the interests of justice in this

Action.

Summary

[331]

With respect to the Mountain View Farms Factors I have found as follows:

1) Was the motion by Sandra brought promptly after the defendant learned of the default

judgment?;

Yes –favours Sandra

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2) Is there is a plausible excuse or explanation for the defendant's default in complying

with the Rules?;

Yes –favours Sandra

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

Yes –favours Sandra

4) Balancing the potential prejudice to the moving party should the motion be dismissed,

and the potential prejudice to the respondent should the motion be allowed;

Favours Sandra

5) The effect of any order on the overall integrity of the administration of justice.

Strongly Favours Sandra

6) Finality Principle:

I do not find that the Default Judgment must be maintained on the basis of

the finality principle that civil actions should be resolved in a timely and

efficient manner in order to maintain public confidence in the

administration of justice.

7) Just Result Principle:

I arrive at the conclusion that the “just result” on this Motion is that the

Default Judgment be set aside to permit RBC as assignee and Sandra to

determine this Action on the real merits of this dispute, as that would

advance the interests of justice in this Action.

IV) Summary of Order Granted

[332]

For these reasons, I have concluded that, after applying the evidence properly

before me to the tests set out in Mountain View Farms, and after balancing all of the interests,

the Defendant has satisfied the onus pursuant to Rules 19.03 and 19.08 and it is just for me to

exercise my discretion under those Rules, as well as under R.1.04, to grant the relief requested

by Sandra, and therefore I grant the Order requested by Sandra setting aside the Noting in Default

and the Default Judgment in this Action dated January 13, 2017, as well as any Notices of

Garnishment and Writs of Seizure and Sale, or other enforcement remedies issued with respect

to the Default Judgment.

COSTS

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[333]

If the parties cannot agree on the disposition of the costs of the motion, they may,

after paying very, very close attention to the 332 preceding paragraphs of these reasons, the

provisions of R.1.04(2) and after having frank discussions with their clients and obtaining their

informed instructions, make written submissions, not exceeding three pages each, Sandra within

20 days and RBC within 40 days.

___________________________

Associate Justice Ilchenko

Superior Court of Justice

March 11, 2022

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Schedule A

STATEMENT OF CLAIM

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Schedule B

SANDRA STATEMENT OF DEFENCE