Thobani v Chahal, 2021 ABQB 919

Court of Queen’s Bench of Alberta Citation: Thobani v Chahal, 2021 ABQB 919 Date: 20211117 Docket: 2101 00052 Registry: Calgary Between: Sheni Thobani and Masood Thobani Applicants (Respondents) - and - Pardeep Chahal, Harmail Singh Chahal and Manjit Chahal Respondents (Applicants) _______________________________________________________ Endorsement of the Honourable Mr. Justice J.T. Eamon _______________________________________________________ [ 1 ] Pardeep Chahal, Harmail Singh Chahal and Manjit Chahal applied in morning chambers to set aside a final judgment granted April 30, 2021 in this matter.

There was not time in Chambers to hear and consider their application. Time was ticking in enforcement proceedings, so I agreed to receive additional submissions in writing and provide a decision. Mr Denis’ office objected to Mr Torres’ submission because it was a couple hours late. I considered both sides’ submissions. This endorsement provides my directions and reasons therefor. [ 2 ] The proceeding in which the judgment was made was bought by Sheni Thobani and Masood Thobani (the “lenders”).

They had applied by Originating Application filed December 21, 2020 for judgment against Pardeep Chahal (“borrower”) for judgment for a debt of $50,000 and for judgment against his parents Harmail Singh Chahal and Manjit Chahal (the “parents”) for the same amount based on a claim of unjust enrichment. [ 3 ] They claimed in their Originating Application that the borrower told the lenders he needed a “short term” loan to purchase a specific house for himself in Calgary (the “Calgary home”), that the Calgary home was transferred to the borrower’s parents, that the borrower misrepresented the purpose of the loan or who was to own the Calgary home, and his parents were unjustly enriched by receiving the

Calgary home. It was not alleged that the parents knew of any misrepresentation or even of the loan. [ 4 ] Their affidavit in support appended the promissory note for the loan dated April 1, 2016. The note is payable on demand and does not refer to the purpose of the loan.

The lenders deposed the loan was to enable the borrower to purchase the Calgary home, and that the borrower told them the purchase would close in one week or so and needed a one week loan. [ 5 ] The lenders further deposed they did not know the Calgary home was transferred to third parties (the parents), and the borrower consistently acknowledged he would repay the debt. The borrower eventually gave them some cheques for $600 each. The September 2019 cheque was returned NSF. The borrowers formally demanded the loan on September 25, 2019. [ 6 ] The borrowers deposed the parents knew of the loan.

They did not explain how they could know that to be true (eg, they did not say the parents made an admission against interest in a subsequent conversation), and it appears at best to be hearsay and may well be speculation. Hearsay is not admissible in a final application for judgment unless admissible under some exception to the hearsay rule. Rule 3.8(2).

No exception could possibly apply in the present case. [ 7 ] The lenders served the borrower’s parents personally with the Originating Application and affidavit. [ 8 ] Attempts to serve the borrower at the residential address provided in an Alberta government demographic search, being the Calgary home, were unsuccessful because he was not there. He was frequently out of Canada during the events and some evidence he had moved to India or had lengthy stays in India.

Master Farrington issued a substitutional service Order on April 16, 2021, permitting service of the application and supporting materials on him by leaving a copy at the Calgary home, emailing to a specific email address, and sending a copy to his facebook messenger inbox. The Order deemed service effective 3 days after completion of these steps. The lenders completed the steps on April 21 by sending the materials and a cover letter informing him of the April 30, 2021 hearing date. [ 9 ] The application for judgment was heard April 30, 2021. None of the borrower or his parents appeared.

Master Farrington granted judgment against all the respondents to the Originating Application for principal and interest. Eventually they started execution proceedings, and served notice of intention under Alberta’s civil enforcement laws to sell the parent’s Calgary home.

After that happened, the respondents obtained legal advice and brought the present application to set the judgment aside. [ 10 ] The parents acknowledge personal service but deposed to being confused by the document as English is not their first language and they have literacy issues. [ 11 ] The borrower deposed he was not aware of the application and did not become aware of the judgment until enforcement proceedings were filed against his parents’ home. [ 12 ] The judgment under consideration is not a default judgment under Rule 9.15(3), rather it is a judgment under Rule 9.15(1).

Notwithstanding the technical difference, both sides submitted the usual three part test to set aside default judgments applies. The three steps are set out in many cases, such as Kraushar v Kraushar , 2019 ABCA 186 at paras 5-6 , and the same test as the lenders cite from their extensive quotation of Atlantic (HS) Financial Ltd v Punjabi , 2017 ABQB 87 (MC). Reid and Poelman, Civil Procedure and Practice in Alberta (2021), pp 329-331 indicates the same or similar principles apply to an application under Rule 9.5(1).

The default judgment test does not require those applying to set aside a judgment to satisfy each part of the test. Rather, the Court must grant relief where fairness (as assessed in the framework of the test) requires it. See Krausher at paras 5-6. In the case of a non-trivial defect the test only requires the defendant act promptly ( ibid at para 5(a)). Notwithstanding these similarities, Rule 9.15(1) requires proof of insufficient notice or failure to appear through accident or mistake, and Rule 9.15(2) imposes a time limit to bring an application to which Rule 9.15(1) applies.

Arguable defence. [ 13 ] The applicants have arguable defences: (

a) Borrower . He would advance a limitations defence. This was a demand loan, said to be for a term of about one week, and the lenders’ affidavit shows a series of text messages soon after, asking repeatedly for payment. There is an arguable issue that the limitation expired by April or May 2018. Extensions to the basic limitation are governed by sections 8 and 9 of the Limitations Act , RSA 2000, c L- 12 .

The lenders rely on the borrower’s text messages sent before the limitation would have expires that they say acknowledge the loan, but texts might not be sufficient because the Limitations Act , s 9 requires acknowledgments to be written and signed. It is arguable that the $600 payments were made after the limitation expired. If so, they would not suffice to extend the limitation under s 8 of the Limitations Act . (

b) Parents . The Originating Application did not allege facts in support of the unjust enrichment claim except the borrower transferred the Calgary home to the parents. There was no allegation or admissible evidence that the parents knew of the loan or the alleged misrepresentation of the purchaser of the Calgary home. Even if the parents knew of a loan, the mere fact that a parent knows a child borrowed money to help fund them would not normally give rise to an obligation to repay the loan.

The possible absence of juristic reason for the enrichment is that the lenders did not seek security in their contractual relationship or lack of knowledge by the parents of any of the arrangements between borrower and lender.

In reality, the lenders are asserting a tracing claim to money but that is not what they pled or what was before the Court on their application for judgment, nor do they allege sufficient facts to assert a tracing claim, nor is there any evidence of the arrangements among parents and child for acquisition of the Calgary home or of the circumstances under which the parents came to acquire it. Some cross-examination evidence indicates the parents bought the Calgary home from a builder. If their son helped them do so, that does not necessarily mean they are liable for his debts.

Whether default deliberate and excuse for default. [ 14 ] The parents did not intend to allow a judgment to go by default, and they failed to appear because of mistake or accident. They claim they did not seek translation or help with respect to documents formally served on them. That alone is not a sufficient excuse.

Although various failures to check mail boxes or read Court documents are not sufficient ( Hammond v Hammond , 2019 ABQB 522 at paras 13-14 ), having read the cross-examinations and the apparent inability of the parents to meaningfully respond, I am satisfied their cross-examination evidence takes them to the exceptional category where they did not appear because of mistake or accident under Rule 9.15(1). [ 15 ] I am skeptical of the borrower’s evidence that he was not aware of the fact proceedings were commenced.

The borrower says he did not access the email account or facebook messenger mentioned in the affidavit for substitutional service, and he had someone assisting him in social media efforts who would access these accounts. This evidence isn’t implausible by itself. This was not the borrower’s only email account. There is little evidence that he used facebook. Historically it appears the lenders communicated with him through other electronic means (a texting app) and had not previously used either facebook or this email address to contact him.

Yet, he responded promptly through the same email address in September 2021 when a private investigator emailed the account with a contrived inquiry to see if the borrower would respond. [ 16 ] Regardless of my suspicion of the borrower’s evidence, I am also mindful that (1) he was travelling or living outside Canada during the times in question and there is some evidence his parents did not give him the package left at the Calgary home in a timely way, (2) it is implausible he would have failed to appear through the Court’s easily accessible video conference facilities to help his parents if he had known of the adjourned hearing date, (3) he may well have accessed his social media account and the email address in question only intermittently and he did not clearly admit in his cross-examination that this particular account was or was not somehow forwarded or linked to his gmail account, (4) service was shorter than the period prescribed under Rule 3.9 and was likely insufficient if he was only intermittently accessing the email account in question.

I am not satisfied he intended to allow the judgment to go by default. I am satisfied he failed to appear due to insufficient notice under Rule 9.15(1). Prompt response to judgment. [ 17 ] The defendants acted reasonably promptly. When they learned of the writ of enforcement they took quick steps to find a lawyer to apply to set aside. Considering the borrower’s cross-examination evidence, any delay was likely due to the task of finding advice and not to avoid what had obviously become an emergency issue for the borrower and his parents.

Their counsel asked that the judgment be set aside voluntarily before filing his application. The application was not filed within the time prescribed by Rule 9.15(2) but the lenders had notice the judgment would be challenged well before counsel filed the application to set aside. [ 18 ] Given the nature of the defences, the excuses for failing to appear on the scheduled hearing day, and the reasonably prompt response to the judgment, it is necessary to set aside the judgment to do justice.

This is particularly so in the parents’ case, because the allegations and evidence against them were so clearly and obviously inadequate to support a judgment against them or expose them to losing their home. I would also extend the time under Rule 9.15(2) to do so. If the lenders are concerned for dissipation of assets, interim attachment remedies are available. [ 19 ] This claim should have been started by statement of claim (Rule 3.2(2)(a)). I can correct this error (R 3.2(6)).

The borrower will then have an opportunity to claim immunity under the Limitations Act , as would be required if he wishes to assert that defence. [ 20 ] Accordingly, I direct: (1) the judgment of April 30, 2021 is set aside; (2) the Originating Application is deemed a statement of claim, the Plaintiffs may file and serve an amended statement of claim if desired by November 29, 2021, and the Defendants must file and serve a statement of defence or demand of notice by December 10, 2021; (3) for greater certainty, the Defendants have attorned to this court’s jurisdiction and their address for service in this action shall be Guardian Law Group LLP unless and until that is changed in compliance with the Alberta Rules of Court. [ 21 ] The parties can speak to costs by letter.

They can each deliver to the Court and exchange their letters within 15 days of this endorsement and rebut the other’s letter within 7 days thereafter. No letter to exceed 4 pages. Heard on the 15 th day of October, 2021 and written submissions October 19, 2021. Dated at the City of Calgary, Alberta this 17 th day of November, 2021. J.T. Eamon J.C.Q.B.A. Appearances: J Denis, QC, for the borrower and parents

F Torres, for the lenders