Court File and Parties
Court File No.: CV-19-617365 Date: 20200716 Superior Court of Justice - Ontario
Re: Liping Zhao and Fenglai Gao, Plaintiffs And: 8657181 Canada Inc., Christine (Liping) Tan, Xiaoquan Sun, Nan Zhang, Jason (Yicai) Zhu, 8014973 Canada Inc. o/b H&C Immigration Services Ltd., Hao Bei (Howard), Defendants
Before: Pollak J.
Counsel: Letitia Lee for the Plaintiffs Paul Starkman, for the Defendants 8657181 Canada Inc., Christine (Liping) Tan, Xiaoquan Sun, Nan Zhang and Jason (Yicai) Zhu
Heard: January 21, 2020
Endorsement
[1] This action is an appeal of a Master’s decision to grant a Certificate of Pending Litigation (“CPL”) for the enforcement of an alleged personal guarantee made by the Appellants/ Defendants, Ms. Liping Tan (“Ms. Tan”) and others, securing the Respondents/ Plaintiffs’ equitable interests in Ms. Tan’s Property.
[2] After granting the Plaintiffs a CPL against Ms. Tan’s Property, the Master dismissed the Defendants’ motion to have the CPL set aside and to discharge the CPL. This is an appeal of that order.
[3] On the motion to discharge the CPL (“Discharge Motion”), the Defendants’ grounds were:
i. Failure to make full and fair disclosure on the ex parte motion to obtain the CPL as required by Rule 39.01(6) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194;
ii. The Plaintiffs misrepresented the facts as set out in the affidavit that William Lu (“Lu”), who is a non-party, and friend, of the Plaintiffs, swore on April 9, 2019 (the “Lu Affidavit”), to obtain the CPL. Lu had no dealings with the Appellants/ Defendants and therefore his affidavit was not based on personal knowledge, but hearsay and double hearsay evidence; and
iii. The Plaintiffs have not demonstrated a reasonable claim to an interest in the Property.
[4] The Defendants appealed the decision of the Master on the grounds that the Master made errors of law with respect to:
Not discharging the CPL for non-disclosure and non-compliance under Rule 39.01(6) of the Rules of Civil Procedure; and
Not discharging the CPL on the basis that the Plaintiffs have no reasonable claim in the Property.
[5] The Respondents/ Plaintiffs’ position is that the Master properly applied the law to the facts and properly dismissed the Defendants’ Discharge Motion pursuant to the law. They submit that this appeal should be dismissed.
[6] The parties agree that this court can grant this appeal if I find that the Master made an error of law, exercised his or her discretion on the wrong principles, or misapprehended the evidence such that there is a palpable and overriding error. This appeal is not a re-hearing. I cannot substitute my fact finding unless the Master made a palpable and overriding error, such that the findings are clearly wrong or can properly be characterized as unreasonable and unsupported by the evidence. A palpable error is characterized as an error that is obvious, plain to see, and clear.
[7] An “overriding” error is characterized as an error that goes to the root of the finding of fact such that the fact cannot stand as a result of that error.
Analysis
[8] The Appellants submit that the Master conflated the test under Rule 42.01(6) with the general test for the issuance of a CPL, which requires that the Respondents demonstrate that they have a reasonable claim to an interest in the Property.
[9] The statutory authority with respect to granting a CPL is in s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, and Rule 42.01 of the Rules of Civil Procedure. The court must be satisfied that there is a triable issue with respect of the moving party’s claim to an interest in the land. I agree that the requirement to be met on a motion to discharge a CPL pursuant to s. 103(6) of the Courts of Justice Act is the same as a motion to grant a CPL.
[10] Additionally, in Perruzza v. Spatone, 2010 ONSC 841, Master Glustein, as he then was, helpfully set out the following principles regarding the issuance and discharge of a CPL, at para. 20 [emphasis added]:
i. 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;
ii. The threshold in respect of the “interest in land” issue in a motion respecting a CPL is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed;
iii. 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”;
iv. 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; and
v. 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. [citations omitted]
[11] The issue before the Master on the Discharge Motion was whether there is a triable issue with respect of the Plaintiffs’ claim to an interest in Ms. Tan’s Property. The issue was not, as the Appellants submit on this appeal, whether the Plaintiffs had “a reasonable claim to the interest in the land”. This is an issue to be resolved at the trial of the action.
[12] Considering the factors above, I find that the Master properly considered these submissions regarding factors the court can consider on a discharge motion:
i. The Plaintiffs were not acquiring Ms. Tan’s home. There is no written contract between the Plaintiffs and Ms. Tan;
ii. The Plaintiff (Zhao) has a claim arguably for damages against 865 Canada but not against Ms. Tan, based on the evidence referred above;
iii. The damages are potentially against 865 Canada and are easily calculated under the Sparrow Lakes Agreement;
iv. In the circumstances, the Plaintiff (Zhao) only has a claim against 865 Canada and has no claim against Ms. Tan. The Plaintiff (Gao) has no claim at all against any of the Defendants;
v. The harm to Ms. Tan is substantial in the circumstances outlined above; and
vi. The Refund Agreement is not enforceable.
[13] For the reasons that follow, I find that there was sufficient evidence to support a finding of a triable issue with respect to the Plaintiffs’ interest in Ms. Tan’s Property. I cannot find that the Master made any “palpable and overriding error”. Upon reviewing the Master’s reasons, I agree that the Appellant failed to demonstrate the lack of a triable issue with respect to the Plaintiffs’ claim to an interest in Ms. Tan’s Property.
[14] The Appellants then submitted that many of the statements in the supporting affidavit before the Master were stated as facts but were not supported by the documents that were attached as exhibits to the affidavit.
[15] The Appellants also argued that the Master should have “assessed the credibility of the evidence and the validity of the appeal arguments and decided on the disputed issues in the action”.
[16] Considering this submission, the Master held:
I would not and do not presume that the Master relied solely on the affidavit presented without reviewing the attached exhibits and making her own conclusions about whether there was a reasonable explanation for any discrepancies between the affidavit and the exhibits and about whether the Plaintiffs had met the test of demonstrating that there was a triable issue as to their interest in the land in question.
[17] This shows that the Master considered these arguments and applied the proper legal test, which I have set out above.
[18] The Appellants submit that the Plaintiffs’ claim, at its highest, is based on an alleged oral guarantee that is unenforceable against Ms. Tan. They argue that the Master erred in failing to address the law with respect to the enforceability, if any, of the oral guarantee the Plaintiffs rely upon.
[19] The Appellants further submitted that the Master failed to consider that there is no consideration for the Refund Agreement and that it is therefore unenforceable.
[20] It is also argued that the Master further erred in law by failing to consider the legal definition of Promissory Note and that there is no document in the Plaintiff’s April 8, 2019 Motion Record that could constitute a Promissory Note.
[21] Additionally, it is submitted that the Plaintiffs failed to make full and fair disclosure of, and misrepresented, a significant number of material facts:
There is no evidence in the Plaintiff’s Motion Record of a written guarantee from Ms. Tan as alleged at paragraph 13 of the Lu Affidavit;
The Refund Agreement is between the Plaintiff, Zhao (Party A) and the Defendant, 865 Canada (Party B). The Plaintiff, Gao and Tan are not parties to the Refund Agreement. There is no Promissory Note included in the Refund Agreement.
Paragraph 15 of the Lu Affidavit is a complete misstatement of the terms of the Refund Agreement.
Tan is not a party to the Refund Agreement. There is no provision in the Refund Agreement that Tan provide a mortgage to the Plaintiffs. There is no provision that the payment is due May 31, 2017 as alleged; the obligation of repayment remains with 865 Canada.
Tan did not provide a personal guarantee or a Promissory Note to the Plaintiffs under the Refund Agreement.
The Plaintiffs are not holders in due course of any Promissory Note.
Gao is not a party to any agreement and has no claim against the Defendants, including Ms. Tan.
The Refund Agreement is unenforceable, as there is no consideration for said agreement.
[22] I agree that the facts regarding the Sparrow Lake Agreement and the Refund Agreement are in dispute and cannot be characterized as “material facts”, but are, instead, factual disputes that will need to be resolved at a trial.
[23] On review of the record, I find that the Plaintiffs did not misrepresent the facts or failed to disclose material facts, as those issues are disputed. Rather, the Plaintiffs made submissions based on the theory of their case.
[24] The test to set aside an ex parte CPL order based on misrepresentation or non-disclosure of the moving party has been summarized as:
a. There must be full and fair disclosure of all material facts when an ex parte motion is brought, pursuant to Rule 39.01(6).
b. Material facts are those of which the court must be made aware in arriving at a decision, non-disclosure of which may affect the outcome of the motion.
c. Failure to inform the court of information or allegations that would not have impacted on the ultimate decision to grant the motion issuing the CPL was not required. Thus, the issue for the court is whether Plaintiff’s counsel neglected to advise me of anything material, that is, that may have influenced my approach to the motion when it was initially heard.
d. The non-disclosure or misstatement must be such as was material to the decision and either would have made the decision doubtful or may have affected the outcome of the motion.
e. In making full and frank disclosure of the relevant facts, the Plaintiff must include facts that may explain the Defendant's position, if known to the Plaintiff.
f. It is insufficient for a Plaintiff to simply append a document as an exhibit without highlighting in the body of the affidavit itself any important clauses or portions of the exhibits.
g. The onus on the Plaintiff to make full and complete disclosure is not discharged by disclosing only what is the most limited basis of information that may be relevant. Full disclosure may and often will require a Plaintiff to advise the court of matters of both fact and of law which form the position of the other side.
[25] In applying this test, the non-disclosure must be substantial and go directly to the substance of the Plaintiffs’ claim against Ms. Tan and the other Defendants. As stated above, I do not find that the Plaintiffs failed to make full disclosure and misrepresented the facts as alleged. Rather, the Plaintiffs made submissions.
[26] In summary, for the reasons set out above, I cannot find any error of law or exercise of the Master’s discretion or that the Master misapprehended evidence such that there is a palpable and overriding error.
Costs
[27] The parties have reached an agreement on costs at the hearing of this matter. The successful party, the Respondents/ Plaintiffs, is awarded costs on a partial indemnity basis equal to $3,000, to be paid by the Appellants/ Defendants, in accordance with the agreement of the parties.
[28] Notwithstanding Rule 59.05, this Order is effective from the date it is made, and is enforceable without any need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal Order need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this Order may nonetheless submit a formal Order for original signing, entry, and filing when the Court returns to regular operations.
Pollak J. Date: July 16, 2020