Court File and Parties

COURT FILE NO.: 17-72642 DATE: 20180813 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JOVALYN TUITT and DERIAN TUITT, Plaintiffs/Defendants by Counterclaim AND AHMED ABOU-GABAL and VELIKA REALTY INC. Defendants/Plaintiffs by Counterclaim

BEFORE: Madam Justice H.J. Williams

COUNSEL: Craig O’Brien/Ludmilla Jarda, Counsel for the Plaintiffs/Defendants by Counterclaim John E. MacDonell, Counsel for the Defendants/Plaintiffs by Counterclaim

HEARD: August 8, 2018

Endorsement

H.J. Williams, J.

Overview

[1] Ahmed Abou-Gabal and Velika Realty Inc. are asking that certificates of pending litigation be issued and registered against properties at 182 and 184 Murray Street in Ottawa.

Background

[2] The Murray Street properties are owned by Jovalyn and Derian Tuitt.

[3] Mr. Abou-Gabal sold the properties to the Tuitts in 2013.

[4] Mr. Abou-Gabal and the Tuitts had agreed to participate in a joint venture involving the Murray Street properties. The details of the joint venture were not clear from the affidavits filed by the parties. The parties agree that the Tuitts were to own the properties and rent them to tenants. In her June 28, 2018 affidavit, Jovalyn Tuitt said that the Tuitts and Mr. Abou-Gabal were to share the operating costs equally and that Velika was to provide property management services. Ms. Tuitt also said that the properties were to be demolished and replaced after about five years.

[5] In her August 1, 2018 affidavit, Ms. Tuitt said that the parties had initially agreed on a $710,000.00 purchase price for 182 Murray Street and an $880,000.00 purchase price for 184 Murray Street. She said that Mr. Abou-Gabal suggested that he would take a mortgage against the properties “so that he can maintain an interest in the joint venture.” In his affidavit, however, Mr. Abou-Gabal said that the purpose of the mortgages was so that he could retain an interest in the properties. In her August affidavit, Ms. Tuitt said that the parties agreed to increase the price of 182 Murray Street to $930,000.00 from $710,000.00 and that Mr. Abou-Gabal would take a mortgage of $175,000.00. Ms. Tuitt said that the parties agreed to increase the price of 184 Murray Street to $1,150,000.00 from $880,000.00 and that Mr. Abou-Gabal would take a mortgage of $280,000.00.

[6] Agreements of purchase and sale for 182 Murray and 184 Murray reflecting the original $710,000.00 and $880,000.00 purchase prices were signed by the parties on September 9, 2013.

[7] Also on September 9, 2013, the parties signed amendments to the agreements of purchase and sale reflecting the increase in the purchase price of the two properties to $930,000.00 and $1,150,000.00 respectively and Mr. Abou-Gabal’s agreement to take mortgages back on the two properties in the amount of $175,000.00 and $280,000.00 respectively.

[8] Also on September 9, 2013, the parties signed mortgage commitment agreements for second mortgages against both properties. Although the mortgage commitment agreements were signed on September 9, 2013, the first page of each agreement is dated October 18, 2013. In his affidavit, Mr. Abou-Gabal said that the mortgages back “commenced” in October, 2013. The properties were not transferred to the Tuitts until early November, 2013.

[9] The transfers of the two properties from Mr. Abou-Gabal to the Tuitts, registered November 6, 2013, reflect the original, pre-amendment purchase prices of $710,000.00 and $880,000.00 and state that there were no mortgages given back to the vendor.

[10] The parcel registers for the properties indicate that on November 6, 2013, two mortgages in favour of Westboro Mortgage Investment Corp. were registered against 182 Murray Street and one mortgage in favour of Westboro Mortgage Investment Corp. was registered against 184 Murray Street. These mortgages were subsequently discharged and there was no evidence before me with respect to their principal amounts.

[11] There was no evidence of how much the Tuitts actually paid to Mr. Abou-Gabal for the two Murray Street properties.

[12] No mortgages in favour of Mr. Abou-Gabal were ever registered against the Murray Street properties.

[13] In his affidavit, Mr. Abou-Gabal explained that as a result of his past relationship with the Tuitts, he had treated his mortgages informally, that he had not wanted to encumber their title and that he had relied on his good faith negotiations with the Tuitts.

[14] Ms. Tuitt’s evidence is that the Murray Street properties operated at a loss for years and that the Tuitts cannot now afford to maintain them. Ms. Tuitt says that the properties were listed for sale in the spring of this year and that they have now received an offer to purchase 182 Murray Street.

[15] The parties’ Murray Street joint venture was not the first time they had done business together. They were also involved in a business venture in Greely, south of Ottawa. They had a falling out over that project. In May of 2017, the Tuitts started the legal action in which this motion was brought. The Tuitts’ statement of claim related to the Greely project only. Mr. Abou-Gabal and Velika counterclaimed for money owing under the two mortgage commitments relating to the Murray Street properties and two other smaller loans to the Tuitts.

The Issue

[16] The issue is whether CPLs should be registered against the Murray Street properties.

Analysis

[17] CPLs are governed by s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C. 43 and Rule 42 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[18] Section 103(1) of the Courts of Justice Act says that the commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a CPL is issued by the court and the certificate is registered in the proper land registry office.

[19] The test for leave to issue a CPL was reviewed recently by Master Jolley in Avan v. Benearroch, 2017 ONSC 4729:

The Test for Leave to Issue a Certificate of Pending Litigation

(1) The purpose of a Certificate of Pending Litigation is to give non-parties notice of a proprietary claim, thereby permitting a party to protect its claim pending the determination of the alleged interest on its merits. It does not, in and of itself, create a right or interest in the land. (Ambassador Electric Inc. v. Fernwood Builders (London) Ltd. 2014 ONSC 3738 at para 7).

(2) The decision of Master Glustein, as he then was, in Perruzza v. Spatone, 2010 ONSC 841, paragraph 20 sets out the following legal principles which I have considered and which are applicable on a motion for leave to issue a certificate of pending litigation:

(a) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL ( Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (Ont. Master) ("Homebuilder") at para 1 );

(b) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C. 43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed ( 1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Ont. Gen. Div. [Commercial List] at para 62);

(c) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CarswellOnt 219 (Ont. C.A.) at para 20);

(d) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security ( 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (Ont. Master) at paras 10-18 ); and

(e) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Ont. Gen. Div.), 1977 CarswellOnt 1026 (Ont. Div. Ct.) at para 9).

[20] It is evident from s. 103(1) of the Courts of Justice Act that when determining whether a CPL would be appropriate, the starting point is whether a proceeding has been commenced in which “an interest in land is in question”.

[21] In their counterclaim, in respect of each of the Murray Street properties, Mr. Abou-Gabal and Velika request a specific amount of money as principal plus interest in an amount to be particularized. Although they have pleaded that the principal and interest they are seeking is “based on a mortgage of” each of the Murray Street properties and that the Tuitts are in default of mortgages, Mr. Abou-Gabal and Velika do not request foreclosure or sale of the Murray Street properties. Mr. Abou-Gabal and Velika plead that the parties signed mortgage commitments relating to the Murray Street properties but do not plead that any consideration ever passed from Mr. Abou-Gabal to the Tuitts. They do not plead that mortgages in favour of Mr. Abou-Gabal were registered against the Murray Street properties [1] or that they have equitable mortgages.

[22] I find that although the counterclaim of Mr. Abou-Gabal and Velika makes reference to mortgages and defaults, as pleaded, it falls short of putting an interest in land in question.

[23] My conclusion is reinforced by s. 103(6)(a)(i) of the Courts of Justice Act and the cases that have interpreted it, including Avan, above, which state that the court may either discharge or refuse to issue a CPL, as the case may be, “where the party at whose instance it was [or would be] issued claims a sum of money in place of or as an alternative to the interest in the land claimed.” The counterclaim of Mr. Abou-Gabal and Velika does not claim a sum of money in place of or as an alternative to the interest in the land claimed, it claims a sum of money and nothing else.

[24] I find that there is no basis for ordering a CPL to be issued because the counterclaim does not place an interest in land in question.

[25] If the counterclaim of Mr. Abou-Gabal and Velika had put an interest in the Murray Street properties in question, or if I am wrong in concluding that it does not, I would refuse to issue the CPL on the basis that there was no evidence that the Murray Street properties are in any way unique and that, given the manner in which the counterclaim was pleaded, damages appear to be an adequate remedy for Mr. Abou-Gabal and Velika.

[26] I would also refuse to issue the CPL on the basis that the evidence of the parties on this motion raised a number of questions about the transfer of the Murray Street properties, including questions about the purchase price and how much was paid. Mr. Abou-Gabal and Velika, who were asking me to exercise my discretion in equity in their favour on this motion, could have answered these questions in their evidence but did not.

[27] The motion is dismissed.

Costs

[28] The parties exchanged and filed costs outlines at the outset of the hearing of the motion.

[29] They were given an opportunity to agree on costs but said that this would not be possible and that they would like to make written submissions.

[30] The Tuitts may deliver written submissions of no more than three pages in length within 14 days of the date of this decision.

[31] Mr. Abou-Gabal and Velika may deliver written responding submissions of no more than three pages in length within 14 days of the date of receipt of the later of the Tuitts’ submissions.

[32] The Tuitts may deliver any reply submissions of no more than three pages in length within seven days of the date of receipt of the Mr. Abou-Gabal and Velika’s responding submissions.

[33] The costs submissions may be filed by sending them to me, care of the trial coordinator.

Madam Justice H. J. Williams Date: August 13, 2018

Footnotes

[1] As noted above, mortgages in favour of Mr. Abou-Gabal were not registered against the Murray Street properties.