Court File and Parties
COURT FILE NO.: CV-21-4196-00 DATE: 2022 03 07 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
ALEXANDRA TANG, 2505006 ONTARIO CORPORATION and 2510516 ONTARIO LTD Plaintiffs
Adam Jarvis, for the Plaintiffs
- and -
XPERT CREDIT CONTROL SOLUTIONS INC. aka RIGHT CHOICE BUILDERS INC. aka XPERT CREDIT CONTROL and SAM JOSHI aka SANJIVE JOSHI, SHAN MANGAL, PYRAMID PROPERTIES MANAGEMENT & CONSTRUCTION INC., 2748236 ONTARIO INC., SHAYNA DALLAS aka SHAYNA NASCIMENTO aka SHAYNA KASH aka SHAYNA LAURENT aka SHAYNA LAUREN ELIZABETH DALLAS, 2697909 ONTARIO INC., BHALLA AJIT and GURPAL SINGH Defendants
RANDHAWA, Karanpaul Singh (for MANGAL, Shan; PYRAMID PROPERTIES MANAGEMENT & CONSTRUCTION INC.; 2748236 ONTARIO INC.; and SINGH, Gurpal) CHHINA, Samir (for DALLAS, Shayna and 2697909 ONTARIO INC.)
HEARD: February 23, 2022, via videoconference
Reasons for Judgment
P.A. DALEY J.
[1] The plaintiffs brought a motion for leave to register a Certificate of Pending Litigation (“CPL”) against the title to a property municipally known as 1073 Westmount Ave., Mississauga, ON (“the Property”) and as more particularly described in the statement of claim.
[2] The only defendants opposing the plaintiffs’ motion were the defendants Shayna Dallas and 2697909 Ontario Inc. (“the Dallas Defendants”).
[3] Having considered the evidentiary record adduced and the submissions of counsel, I granted the plaintiffs’ motion giving the plaintiff 2505006 Ontario Corporation (“250”) leave to register a CPL against the title of the Property by way of my endorsement dated February 24, 2022, with reasons to follow. These are those reasons.
Background & Evidentiary Record
[4] In the plaintiffs’ action they seek a wide variety of relief against several defendants including the defendants responding to this motion. One of the main forms of relief requested is a declaration that 250 is the owner of the Property. Other forms of relief sought include a declaration that there is an implied constructive or resulting trust in favour of 250 in respect of certain monies related to the charges registered against the Property’s title after August 26, 2020.
[5] The plaintiffs further claim in the action that a mortgage transaction entered into with the defendant Xpert Credit Control Solutions Inc. (“Xpert”), as mortgagee and 250 as mortgagor in respect of the Property was unconscionable and as such it is asserted that that mortgage must be set aside.
[6] It is also requested by the plaintiff’s that the court declare that all the defendants are jointly and severally liable to the plaintiffs for fraud, negligent misrepresentation as well as other torts including deceit.
[7] The following is a timeline of the significant events relating to the Property after August 27, 2020 in respect of which there is little or no dispute:
(a) August 27, 2020 – Xpert’s mortgage on the Property is assigned by it to 2748236 Ontario Inc. (“274”), with a face value of $640,000; (b) November 3, 2020 – 274 as vendor and 2697909 Ontario Inc. (“269”), as purchaser enter into an agreement of purchase and sale with total consideration of $700,000; (c) December 23, 2020 – power of sale transfer from 274 to 269 in respect of the Property for consideration of $700,000; (d) December 23, 2020 – 274 grants a vendor take back mortgage to 269 in the face value of $695,500 and the net value of $640,000; (e) December 31, 2020 – Loan from Bhalla Ajit (“Ajit”) to 269 in the amount of $424,000 with the net advance being $394,954 after fees; (f) April 12, 2021 – 274’s vendor take back mortgage is assigned to Gurpal Singh (“Singh”) with face value of $695,000; (g) April 12, 2021 – Singh loan to 269 in amount of $500,000; (h) April 13, 2021 – discharge of Ajit loan for unknown amount.
[8] Following the service of the within motion in December, 2021, the plaintiffs served upon the responding defendants a Request to Admit.
[9] The responding defendants did not serve a response to the Request to Admit and therefore they are deemed to have admitted the facts set out. As explained below, however, even absent those deems admissions, on the evidence adduced, I have concluded that the plaintiffs had met the requirements of section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and Rule 42.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and they were therefore granted leave to register on the Property’s title a CPL as requested. I have not taken into consideration the Request to Admit and the absence of a reply to it in reaching the conclusions I have with respect to the plaintiff's' entitlement to the equitable relief of being granted leave to register a CPL.
[10] In support of their motion for the CPL the plaintiffs rely upon the affidavit evidence of the plaintiff Alexandra Tang and Jeff Hanna, agent for the corporate plaintiffs. Further, the plaintiffs rely upon the cross-examination evidence of the defendant Shayna Dallas.
[11] The evidence shows that the closing of the sale of the Property from 274 to 269 was to have been on November 10, 2020, however, as acknowledged by Shayna Dallas in her affidavit of February 2, 2022, at paragraph 45, there had been, according to her evidence, a “technical error” with respect to 274’s notice of sale of the Property which was allegedly issued as a result of the plaintiffs’ default in payment of the mortgage initially granted to Xpert. As a result the closing date was extended to December 23, 2020.
[12] Ultimately the Property was sold by 274 to 269 and a transfer registered against its title accordingly.
Positions of the Parties
Plaintiffs’ Position
[13] It is asserted on behalf of the plaintiffs that it is entitled to leave to register a CPL against the Property as it is asserting an ownership interest in the Property based on the unconscionable mortgage granted by 250 to the defendant Xpert which it asserts must be set aside. It is further asserted on behalf of the plaintiffs that valid title to the Property has not been conveyed to the other parties and now defendants. Specifically, the plaintiffs assert that Dallas and 269 are not bona fide purchasers for value without notice and that those defendants conspired with others to defraud the plaintiffs and specifically 250.
Dallas Defendants’ Position
[14] It is submitted on behalf of the defendants that Dallas and 269 were bona fide purchasers for value, without notice of any question as to the title to the Property and as such they dispute the plaintiffs’ alleged interest in the Property and in particular the title interest being asserted by the plaintiff 250.
[15] The defendants further submit that the plaintiffs have failed to meet the legal requirements in order for the court to exercise its equitable jurisdiction in granting leave to register a CPL against the title to the Property.
Legal Framework
[16] The purpose of a CPL as to give non-parties notice of a claim of an interest in land, permitting the party registering the CPL to protect their claim against the land pending the determination of their action: Rahbar v. Parvisi, 2022 ONSC 1104, at para. 19.
[17] A two-part test must be considered by the court in determining whether or not to exercise its equitable jurisdiction in accordance with section 103 (1) of the Courts of Justice Act. Firstly, the court must determine whether the plaintiff has a triable claim to an interest in land. Secondly, the court must consider all relevant factors between the parties including whether damages would be a satisfactory remedy, and balance the interests of the parties in the exercise of discretion regarding whether to grant leave for the issuance of the CPL: Rahbar, at para. 20.
[18] As to the first part of the test, the burden is on the moving party to show a triable claim to an interest in land. Courts have held that in an action involving even a failed real estate transaction, the evidence to overcome this burden is not high.
[19] The assessment of whether there is a triable issue as to an interest in land does not require that the plaintiff established that its claim will succeed: Perruzza v. Spatone, 2010 ONSC 841, at para. 20.
[20] The second part of the test calls for the court to look at all the relative matters between the parties in considering whether to exercise its discretion to grant leave for the issuance of a CPL: Khan v. Taji, 2020 ONSC 6704, at para. 51.
[21] The factors that will guide a court’s assessment of whether to exercise its discretion to grant leave for the issuance of the CPL include the following:
(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 registered: Rahbar at para. 23.
Analysis
[22] The evidence adduced on behalf of the plaintiffs is that at no time did they receive a notice of sale with respect to the Property.
[23] Following the sale of the Property to 269, the plaintiffs undertook an investigation with respect to the circumstances surrounding the sale of the Property commencing in approximately February 2021.
[24] During the course of the investigation conducted on behalf of the plaintiffs, it was discovered that there was another action, namely action number CV-21-1352, involving the defendant Shan Mangal (“Mangal”), the defendant Dallas and 269 as defendants in respect of a failed loan from a plaintiff Linda Anand. In that action the defendants filed a statement of defence wherein they assert that the Property had a value of $870,000 at the point in time while the defendants were attempting to arrange financing prior to the closing of the transaction in December 2020.
[25] Although the recorded purchase price as paid by 269 on the acquisition of the Property was $700,000, in fact $60,000 of that amount related to unexplained fees and as such the net consideration on the actual sale of the property was $640,000.
[26] Having declared in their statement of defence in the related action that the property had a value of $870,000, when in fact the transaction that resulted in 269 acquiring title to the Property involved net consideration of $640,000, prima facie it appears that the Dallas Defendants acquired title to the Property at far less than fair market value.
[27] Therefore, on this record, I conclude that the Dallas Defendants and in particular the defendant 269 was, in all probability, not a bona fide purchaser for value given the very substantial difference of $230,000 between the declared value of $870,000 and the net purchase price of $640,000 which was allegedly paid on closing at the time the property was conveyed to 269.
[28] Contrary to the position as to the value of the Property set forth in the above referenced statement of defence, in the defendant’s pleading filed in this action the defendants assert the value of $700,000 for the Property.
[29] While the evidentiary burden clearly rests with the plaintiffs to adduce evidence that they are entitled to leave to register a CPL, I must address the evidence adduced in response to the motion on behalf of the Dallas Defendants.
[30] Based on the evidence from the cross-examination of Shayna Dallas, it is beyond doubt that she has little or no personal knowledge of any of the issues at stake in this litigation and certainly has not offered any cogent evidence based on personal knowledge in response to the plaintiffs’ motion seeking leave to register a CPL.
[31] Although this defendant has held herself out as a real estate investor, when cross-examined on her affidavit, she acknowledged that she left the day-to-day issues concerning the Property up to her builder, the defendant Mangal, and her lawyer. She was unable to answer even the most basic questions as to the transactions whereby 269 obtained title to the Property.
[32] By way of examples, this defendant was unable to provide information and answers to the following questions:
(1) what deposit was to be paid in the transaction between 269 and 274? (2) was the $10,000 deposit called for in the APS paid? (3) did Mangal and his corporation have a financial interest in 269? (4) did she have a lawyer review the APS before she signed it? (5) did 269 have any funds in hand when the APS was executed? (6) when was a building permit applied for and did she pay for it? (7) when was building scheduled to commence on the vacant Property? (8) what lawyer did she use for the purchase of the Property and for the Ajit loan and where was her lawyer’s office located? (9) what harm would occur if a CPL was granted? (10) while Ms. Dallas alleges that she is an investor in the Property she was unable to state how much money she had invested.
[33] The defendant Dallas further acknowledged in cross-examination that she verbally delegates tasks to Mr. Mangal, her supposed contractor.
[34] Prior to the scheduled closing date this defendant acknowledged that she was aware of a “technical error” in respect of the notice of sale.
[35] Furthermore, the uncontradicted and unexplained evidence is that the defendant Dallas signed two sets of documents relating to the title to the Property, on behalf of corporations when she had no authority to do so.
[36] Firstly, this defendant is shown as the signing authority on behalf of 274 in completing the Transfer of Charge from 274 to Gurpal Singh, dated December 23, 2020 which was to be registered in Land Titles as against the Property. There is no dispute by the defendant that she had no authority whatsoever to execute documents on behalf of 274.
[37] Next, on December 24, 2020 the defendant Dallas signed a charge to be registered against the Property purporting to be a duly authorized signing authority for 250, wherein she is also identified as a guarantor. Again, it is acknowledged that this defendant had no authority whatsoever to sign that charge or the Acknowledgement and Direction that related to it, which she also executed on behalf of 250.
[38] No cogent, admissible, and clear evidence has been offered on behalf of the defendants explaining how and why the defendant Dallas executed these documents. By way of double hearsay only, an email from a solicitor purporting to have been involved in the transactions relating to these documents indicates that they were signed in error. This is of no value in terms of evidence. I am left to draw a negative inference as against the defendants for their failure to adduce any admissible evidence concerning the execution of these documents, when clearly that evidence was called for in the circumstances and must be available.
[39] Counsel for these defendants described the most questionable execution of these documents as simply “misnomers”, again, in the absence of any admissible and cogent evidence as to the circumstances under which these documents were signed by the defendant Dallas.
[40] On this record I conclude that the defendant Dallas probably knew, prior to the closing of the transaction whereby the Property was conveyed to 269, that there was a question as to whether a proper and effective notice of sale had been served, as required, and therefore I conclude that she was probably not a purchaser without notice of the potential defect in title.
[41] Turning to the applicable legal test, and firstly the threshold question of whether there is a triable issue with respect to 250’s claim to an interest in the Property, I have concluded that there is. It need not be established by the Plaintiffs on a motion like this that they will likely succeed in their claim but rather that they have a reasonable claim to an interest in the land on all the evidence adduced. I have concluded that the plaintiffs have discharged that onus.
[42] Furthermore, I also have concluded that the Dallas Defendants have failed to demonstrate that there is no triable issue having regard to the plaintiffs’ claim to an interest in the Property.
[43] The well-established principles as to the factors to be considered by the court in exercising their equitable jurisdiction on a motion like this were clearly set out by Master Glustein, as he then was, in Perruzza, as referenced above at para 24.
[44] In concluding that the plaintiffs have established a triable issue, the following evidence leads me to that decision:
(1) in the Dallas Defendants’ statement of defence it is admitted that 274 notified 269 that there had been a technical error in 274’s notice of sale and that the transaction could not close; (2) on all of the evidence, the defendant Dallas knew or ought to have known that the power of sale proceeding instituted by 274 was probably unlawful; (3) even though the defendant Dallas was aware that the Property was worth $860,000, as she has stated in her statement of defence, she and her co-defendants, on the face of the evidentiary record available, probably engaged in improvident sale of the Property from 274 to 269; (4) the defendant Dallas has admitted that she did not have authority to execute the title documents relating to the Property and no cogent or admissible evidence has been adduced explaining how those documents came to be signed by her; (5) the evidence adduced by the plaintiffs as to the unconscionable mortgage transaction involving the defendant Xpert is entirely uncontradicted.
[45] As to the Dhunna Factors which were established by Master Donkin in his decision in 572383 Ontario Inc. v. Dhunna, [1987] O.J. 1073, I have concluded that on the whole after considering those factors, the evidentiary record favours the granting of the plaintiffs’ motion.
[46] I will consider the factors in order.
[47] Is the Plaintiff a Shell Corporation? – the plaintiffs admit that 250 is a corporation incorporated for the purpose of developing and reselling properties, however the plaintiff Tang has provided a personal undertaking to satisfy any award of damages that may be sustained by 269. Thus, this factor favours the plaintiffs.
[48] Is the Land Unique? – the land is not unique and is a vacant lot. However, 250 states that it has invested significant time, money, and resources with plans to develop the property.
[49] Is There an Alternative Claim for Damages? – There is an alternative claim for damages, however there is no evidence of 269 having any liquid assets. However, advancing a claim for an alternative remedy is not a bar to a CPL.
[50] Is the Calculation of Damages Easy or Difficult? – I find as a fact that the calculation of damages would be difficult in that they would require an assessment of the loss of invested labour and materials as well as the loss profit with respect to the Property.
[51] Would Damages Be a Satisfactory Remedy? – While it is disputed by the Dallas Defendants that 269 is insolvent, apart from the equity, if any, held in the subject Property, there is no evidence as to its solvency and accepting the evidence on behalf of the plaintiff as to its level of investment, I have concluded that damages, and all the circumstances may not be a satisfactory remedy.
[52] Is There a Willing Purchaser? – I conclude that there is no willing purchaser as the land is still vacant and there is no evidence that a building permit has been obtained to allow for the development of the property since purchased in December 2020.
[53] The Harm to Each Party Resulting from the Granting or Denial of a CPL – although it has been asserted by the defendants that the Singh mortgage will go into default if a CPL is granted, there is no evidence whatsoever with respect to the Singh mortgage and its status nor as to what funds have been advanced or repaid by the borrower. The defendant Dallas was unable to offer any evidence as to payments made under this mortgage nor as to the present indebtedness. Although the defendant Dallas asserts that the registration of a CPL will delay the development of the Property there is no cogent evidence as to what, if any development has been undertaken by the Dallas Defendants. Some evidence was offered with respect to architects that may have been consulted or retained by these defendants, however that evidence is well out of date and is not supportive of any conclusion that there is active development of the property ongoing. Again, there is no evidence of a building permit having been obtained or applied for.
[54] It is the position of the plaintiffs, that they are victims of fraud perpetrated by the Dallas Defendants along with the other defendants as stated in the statement of claim.
[55] Apart from the factors considered above, it is also notable that the Dallas Defendants have failed to respond to a request to inspect documents, and as noted earlier, the defendant Dallas was unable to offer even the most fundamental evidence regarding her investment in the Property.
[56] As stated above, the plaintiffs’ motion was granted in accordance with the endorsement released by me, following which I signed a draft order allowing for registration of a CPL on the title to the Property.
[57] As to the costs of this motion, counsel for the plaintiffs shall serve and file submissions as to costs of no longer than two pages along with a costs outline within 15 days from the date of release of these reasons, with similar submissions to be served and filed on behalf of the Dallas Defendants within 15 days thereafter.
__________________________ DALEY J.
DATE: March 7, 2022
