Court File and Parties

Court File No.: CV-23-697408 Date: 2023-06-02

Superior Court of Justice - Ontario

Re: CASAPLATA INC., Plaintiff And: MOHAMMAD TAIYAB ALI, KASPHY TAIYAB and SUB-PRIME MORTGAGE CORPORATION, Defendants

Before: Associate Justice Todd Robinson

Counsel: M.A. Razzak, for the plaintiff G.E. Cohen, for the defendant, Sub-Prime Mortgage Corporation

Heard: June 1, 2023 (by videoconference)

Reasons for Decision (Leave for Certificate of Pending Litigation)

[1] The plaintiff brings this urgent motion seeking leave to issue a certificate of pending litigation (CPL) against the property at 3 Piper Street, Brampton (the “Brampton Property”). The Brampton Property is owned by the defendants, Mohammad Taiyab Ali and Kasphy Taiyab (the “Owners”). The Owners are alleged to be debtors to the plaintiff arising from a mortgage given by the Owners in favour of the plaintiff against another property at 7432 Magistrate Terrace, Mississauga (the “Mississauga Property”).

[2] The Mississauga Property has been sold under power of sale by the defendant, Sub-Prime Mortgage Corporation (“Sub-Prime”). Sub-Prime held two mortgage charges against the Mississauga Property. The legitimacy of one of those mortgages is disputed by the plaintiff. In the statement of claim, the plaintiff claims that the mortgage was a sham intended to frustrate the loan given by the plaintiff. As set out in the statement of claim, a CPL is sought against the Brampton Property on the basis that, if not granted, the Owners may sell the property and frustrate the plaintiff’s claim. Cautions were registered by the plaintiff against both the Mississauga Property and the Brampton Property.

[3] Sub-Prime is also one of the mortgagees on the Brampton Property by way of a transfer of charge registered in 2021. It opposes this motion. The Owners have not responded, but had limited notice of this hearing.

[4] I am unconvinced by the plaintiff’s arguments for why I should grant leave for a CPL. The plaintiff has been candid that it seeks a CPL to prevent dealings with the Brampton Property in order to secure it while this action remains pending. However, the Brampton Property was not and is not security for the plaintiff’s mortgage. Put simply, the plaintiff is trying to preserve the Owners’ only known asset so that it remains available for enforcement of the plaintiff’s prospective future judgment. That is not the purpose of a CPL.

[5] I am dismissing the plaintiff’s motion. The record does not support any reasonable claim by the plaintiff to an interest in the Brampton Property. Accordingly, a CPL is not appropriately granted. If the plaintiff wishes to prevent disposition of the Brampton Property by the Owners, then it must pursue a more appropriate remedy.

Analysis

Purported Urgency and Notice of this Motion

[6] This motion came before me as an urgent motion on notice. The plaintiff made two separate urgent motion requests. In both instances, the basis for urgency in the plaintiff’s requisition was indicated to be two-fold: the pending expiry of the plaintiff’s caution and a statement that “the borrowers” ( i.e., the Owners) were “trying to [sell] the subject pro[p]erty so as to frustrate the interest of the plaintiff as the chargee.” The motion was approved for an urgent hearing both times.

[7] Having now heard the plaintiff’s submissions, my view is that this motion is not and never was urgent. The purported basis of urgency is not borne out by any of the evidence filed or the arguments made on this motion.

[8] All of the defendants were short-served with the plaintiff’s motion materials: a single document comprising the plaintiff’s notice of motion and a supporting affidavit, which has been inaccurately described in the affidavits of service as a “motion record” despite evidently not complying with subrule 37.10(2) of the Rules of Civil Procedure. The Owners were, at best, deemed served the day before the hearing. I am told that the Owners were also served with a prior version of the motion materials. Only Sub-Prime has formally responded to the motion. Plaintiff’s counsel advised that he has heard nothing from the Owners or anyone on their behalf. However, the unrepresented Owners were not extended the courtesy of being provided with the Zoom credentials for this hearing.

[9] There are also several other mortgages registered against title to the Brampton Property. Notice of this motion was not given to any of the mortgagees other than Sub-Prime. In my view, given the nature of the plaintiff’s claimed interest in the Brampton Property and the impact of a CPL on all persons with a registered interest in it, all of the mortgagees are affected by the order sought.

[10] Although formally on short notice to the Owners, I have treated this as a motion without notice to them. They were served with the motion materials by regular mail, despite the alleged urgency and the decision to proceed on notice, and plaintiff’s counsel failed to provide them with the Zoom credentials. Nothing before me supports that the Owners have actual notice of this motion or this hearing, had any meaningful opportunity to retain counsel or file responding submissions, or were given any notice of how to appear at this remote hearing on their own behalf.

Relevant Test for a CPL

[11] My authority for granting leave to issue a CPL is found in s. 103 of the Courts of Justice Act, RSO 1990 c C.43 and rule 42.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). The applicable two-part analysis is undisputed. I must first determine if the plaintiff has demonstrated that it has a triable claim to an interest in the Brampton Property. If so, since granting leave for a CPL is discretionary, I must then consider all relevant factors between the parties, including whether damages would be a satisfactory remedy, and balance the interests of the parties in exercising my discretion: Rahbar v. Parvizi, 2022 ONSC 1104 at para. 20.

[12] Typically, in assessing the equities, the court considers what are referred to as the Dhunna factors, namely: (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 from the CPL: Rahbar, supra at para. 23. These factors are non-exhaustive.

Triable Claim to an Interest in Land

[13] As set out in s. 103(1) of the Courts of Justice Act, entitlement to a CPL requires that there be an interest in land in question in the proceeding. On this motion, the plaintiff has the burden of showing a triable claim to an interest in the Brampton Property: Rahbar, supra at para. 21. The plaintiff has failed to establish any claim to an interest in the Brampton Property, let alone a reasonable or triable one.

[14] I agree with Sub-Prime that neither the statement of claim nor the supporting affidavit on this motion support any question as to an interest of the plaintiff in the Brampton Property. It has no interest beyond that of any unsecured creditor in the assets of a debtor. In my view, the plaintiff is attempting to have the court grant new security for its now-unsecured loan without any agreement of the Owners to provide such security.

[15] The plaintiff has commenced this proceeding to enforce payment of the mortgage debt allegedly owing by the Owners from the plaintiff’s mortgage against the Mississauga Property. The Owners are alleged to have defaulted on that mortgage. Based on the parcel abstract before me for the Mississauga Property, the plaintiff’s mortgage stands in fourth position. Sub-Prime appears to hold mortgages in third and sixth positions. The latter mortgage (which appears to rank behind the plaintiff’s mortgage) is the mortgage alleged by the plaintiff to be a sham. The Mississauga Property has been sold under power of sale by Sub-Prime, but an accounting of sale proceeds has not yet been provided to the plaintiff.

[16] The majority of the plaintiff’s arguments in support of a claim to an interest in the Brampton Property focus on dealings with the Mississauga Property. In my view, they are immaterial on this motion.

[17] The plaintiff’s evidence and argument fails to establish any connection between the two properties beyond common ownership by the Owners at material times. For example, there is no allegation or evidence supporting that equity from the Mississauga Property was somehow extracted and used in the Brampton Property.

[18] A debtor-creditor relationship between parties on one property does not itself create an interest for the creditor in another property owned by the debtor. More is required. There may be legitimate disputes between the plaintiff, the Owners, and Sub-Prime about the circumstances under which the Owners and Sub-Prime agreed to a mortgage in August 2021, including whether the Owners were seeking to somehow defeat the plaintiff’s mortgage through a subsequent ranking mortgage. The plaintiff may also have legitimate challenges to the power of sale proceedings or accounting of sale proceeds. None of that has anything to do with the Brampton Property.

[19] Although claiming a CPL against the Brampton Property, the statement of claim discloses no claim to any interest in it. The plaintiff’s mortgage is not secured by the Brampton Property. There is no evidence that the plaintiffs and the Owners discussed any security for the loan other than the Mississauga Property. The only allegation in the statement of claim about the Brampton Property is that it and another property (which is not the subject of this motion) are held by the Owners. The plaintiff asserts, at para. 25, that “[u]nless these properties are subject to [a] CPL order, the Defendants may also sell the properties to frustrate the claim of the Plaintiff.” These allegations are not sufficient to ground a claim to an interest in the Brampton Property.

[20] A brief supporting affidavit from the plaintiff’s director was filed on this motion. The affidavit has limited evidentiary value. It does not comply with subrules 4.06(2) and 39.01(4) of the Rules of Civil Procedure. Rather, it consists almost entirely of unattributed hearsay, speculation, innuendo, and scandalous allegations of illegality that are entirely unsubstantiated by any facts or documents. The affidavit does little to assist the plaintiff.

[21] Like the statement of claim, the supporting affidavit similarly fails to assert any claim to any interest in the Brampton Property. Rather, the affiant baldly asserts that the plaintiff has “reasonable concern” that the defendants will “abuse the process and subvert the payment” of the plaintiff’s loan. The affiant goes on to state that “the Plaintiff intends to stop any further dealings regarding the [Brampton Property] pending the determination of this matter.”

[22] In oral submissions, the plaintiff argued that the Brampton Property is the sole known asset of the Owners. Given the plaintiff’s concerns about dealings on the Mississauga Property and that the proceeds of sale will be insufficient to repay the mortgage debt, the plaintiff requires a CPL to secure its interests. The plaintiff submits that it will suffer irreparable loss if the Owners are not precluded from dealing with the Brampton Property, since the plaintiff will have nothing from which to recover on a judgment.

[23] I am not persuaded by the plaintiff’s arguments. No authority has been provided where leave to issue a CPL was granted in similar circumstances. To the contrary, case law has consistently held that a CPL is not intended to be an instrument to secure a damages claim: Rahbar, supra at para. 40; 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003 at para. 38. In my view, securing the Brampton Property for enforcement purposes is clearly not the type of interest in land that a CPL is intended to protect.

[24] The foregoing is sufficient to dismiss the plaintiff’s motion. I thereby need not consider Sub-Prime’s additional procedural argument that I should also deny relief because this action has been improperly commenced in Toronto contrary to subrule 13.1.01(3) of the Rules of Civil Procedure. That subrule requires mortgage actions to be commenced in the region of the mortgaged property. The plaintiff appears to concede that this action ought to be transferred to Brampton.

Assessment of Equities

[25] Given my finding above, there is no need to move to the second stage of the analysis and assess the equities. However, I would have found that they do not favour the plaintiff in the circumstances of this case. Without going through all of the equitable considerations in detail, I wish to comment on three matters.

[26] First, the plaintiff is plainly seeking to prevent the Owners from disposing of the Brampton Property so that any judgment obtained in this action may be enforced against it. That is fundamentally at odds with the purpose of a CPL. A CPL is intended is to protect an interest in land in situations where other remedies would be ineffective: Rahbar, supra at para. 40; 2254069 Ontario Inc., supra at para. 38. Although not cited by the parties, I have previously commented that case law supports a CPL ought not to be used to achieve pre-judgment execution on what is fundamentally a damages claim if the extraordinary remedy of a Mareva injunction would not be available on the merits: Sachkov v. Ilnitskaya, 2021 ONSC 5495 at para. 29. No convincing argument was made for why an injunction is not more appropriate relief in the circumstances of this case and why one has not been or cannot be sought.

[27] Second, with respect to calculation of damages, the materials do little to assist me in assessing the validity of the plaintiff’s claim or the ease or difficulty of calculating damages. The only calculation of the mortgage debt is found in the statement of claim. The plaintiff’s affiant does not cogently address the amount advanced and owing under the mortgage. The plaintiff has not tendered a copy of the mortgage and its terms, any statements or documents evidencing any actual loan advance, support for the alleged additional fees and costs identified in the statement of claim calculation, or even a payout statement.

[28] It is also unclear from the record that the plaintiff will not be made whole, or substantially whole, from the sale of the Mississauga Property. I have limited evidence on the state of mortgages against that property beyond the parcel abstract submitted. However, on the face of that parcel abstract, it appears that there ought reasonably to be proceeds of sale payable to the plaintiff.

[29] The parcel abstract indicates that the Mississauga Property was sold for $950,000. Only three mortgages appear to rank ahead of the plaintiff’s mortgage: two mortgages in favour of The Toronto-Dominion Bank (“TD”) and a mortgage now held by Sub-Prime. The total registered security for those three mortgages is $732,000. Although the record supports that the plaintiff has been provided with payout statements from TD, those statements have not been tendered. They are directly relevant to assessing the plaintiff’s position that it may recover nothing from the Mississauga Property. Instead, only Sub-Prime’s payout statement has been tendered, capturing both of its two mortgages (one of which ranks behind the plaintiff’s mortgage). However, there is no evidence of any efforts to ascertain which portions of the amounts claimed by Sub-Prime are asserted to have priority over the plaintiff’s mortgage.

[30] I am simply not satisfied from the record that the plaintiff has legitimate concerns that it will be left with nothing from sale of the Mississauga Property. The record before me does not support it. That undermines the plaintiff’s plea that I exercise my discretion in equity to protect its interests. The extent of any actual damages is unclear and, in any event, nothing supports that damages will be an unsatisfactory remedy. I am satisfied that damages ought to be readily calculatable.

[31] Third, the balance of prejudice militates against a CPL. If the CPL is not granted, the plaintiff will be in the same position as it is now: it will still have no remaining security for its damages claim. Conversely, a CPL would effectively create a new interim security interest for the plaintiff in the Brampton Property. The result will be significant interference with the Owners’ ability to deal with their own property, such as selling or refinancing it, in circumstances where there is no evidence that the Owners ever agreed or intended to provide security for their debt to the plaintiff in the Brampton Property.

[32] Existing mortgagees will also be prejudiced. The plaintiff would be granted a type of interim priority over their mortgages, despite those mortgages having priority over any judgment that may be obtained by the plaintiff in this action. For example, in the event of a mortgage default by the Owners, the mortgagees will be precluded from enforcing their mortgages without court intervention, presumably at additional cost that may otherwise not have been required.

[33] Accordingly, even if I had found a triable claim to an interest in land, I would have exercised my discretion and denied leave to issue a CPL.

Costs

[34] Prior to reserving my decision, I heard the parties’ costs submissions in either outcome of the motion. There were no offers to settle. Since Sub-Prime has been entirely successful in its opposition, it is entitled to its costs of opposing the motion.

[35] Sub-Prime seeks its substantial indemnity costs in the amount of $8,418.58, including HST and a nominal disbursement, plus a further hour for additional attendance time beyond what was estimated in Sub-Prime’s costs outline. The plaintiff requests that any adverse costs award be reduced as much as possible. It submits that I should have regard to the fact that the plaintiff is a small company with limited funding and is in financial crisis as a direct result of the Owners’ mortgage default and the mortgage remaining unpaid.

[36] I am not persuaded by the plaintiff’s arguments. There is no evidence before me of the plaintiff’s size or financial circumstances. The plaintiff elected to bring this motion and made decisions about what evidence to tender. The motion was, in my view, ill-conceived and the evidence tendered to support it was woefully insufficient. When parties in civil litigation bring motions, they do so with the reasonable expectation that they will be subject to an adverse costs award if the motion is dismissed.

[37] It was not unreasonable for Sub-Prime to oppose this motion, particularly given the plaintiff’s specific allegations against Sub-Prime in the statement of claim, the reply and defence to counterclaim, and the affidavit. Also, Sub-Prime’s own interest in the Brampton Property would be impacted by a CPL. In these circumstances, the plaintiff ought reasonably to have expected Sub-Prime to oppose the motion. I thereby find no basis to limit the plaintiff’s costs exposure.

[38] Based on its own costs outline, the plaintiff incurred actual fees of $6,000.00 (seemingly excluding HST) to bring this motion. Although the plaintiff would not have sought costs against Sub-Prime had it been successful, the plaintiff’s costs outline remains relevant in assessing its reasonable expectations. Sub-Prime’s costs outline is not out-of-step with the costs incurred by the plaintiff on this motion, particularly when factoring in the experience of Sub-Prime’s counsel. The hours and rates claimed by Sub-Prime were not challenged by the plaintiff and are reasonable and proportionate given the importance of the issues.

[39] I agree with Sub-Prime that substantial indemnity costs are warranted in this case. The Court of Appeal has held that substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766 at para. 8. This is precisely such a case.

[40] In my view, this motion was meritless. It has resulted in both a waste of judicial resources and unnecessary costs being incurred by Sub-Prime.

[41] Significantly, the plaintiff misrepresented the urgency of this motion to the court not once, but twice. The plaintiff’s first urgent motion requisition was submitted on May 17, 2023. After being triaged for urgency, the motion was approved to be heard on May 30, 2023. That date was vacated when the plaintiff failed to confirm the motion. The plaintiff then immediately submitted a further urgent motion requisition, but without noting the prior urgent motion approval or explaining the circumstances by which the prior motion date had been vacated. The motion was re-triaged and again approved for this urgent hearing before me. Both of the plaintiff’s two requisitions were the same, identifying urgency on the basis that the Owners were trying to sell the property and the plaintiff’s caution would soon expire.

[42] Notwithstanding those two unequivocal representations to the court that the Owners were seeking to dispose of their property, there is no such evidence anywhere in the motion materials. The Mississauga Property had already been transferred under power of sale when this motion was originally requisitioned. There is no evidence supporting any actual or potential sale of the Brampton Property nor any indication that the Owners had or have any intention of selling it. The supporting affidavit does not even allege that the plaintiff believes a sale is pending or will occur. There is simply no evidentiary foundation whatsoever for a concern that the Brampton Property may be sold.

[43] The only real “urgency” to this motion is therefore expiry of the plaintiff’s caution. However, that too is not a genuine matter of urgency. I agree with Sub-Prime that the caution was improperly registered. The plaintiff does not claim to have an interest in the Brampton Property. It follows that the plaintiff was not entitled to register a caution under s. 128(1) of the Land Titles Act, RSO 1990, c L.5., which permits only “a person claiming to have an interest in registered land or in a registered charge of which the person is not the registered owner” to register a caution. Moreover, the caution registered against the Brampton Property states, in part, that the Owners “may transfer title to a third party so as to frustrate the claim of the cautioner in respect of the property as a mortgagee.” As already noted, no such evidence has been filed on this motion.

[44] I need not decide the legitimacy of the plaintiff’s concerns that it may not realize on its mortgage debt from the power of sale of the Mississauga Property. Even if that concern is well-founded, it does not justify misrepresenting a basis of urgency that is entirely unsupported by any evidence to secure an early motion date ahead of other matters. In the context of the ongoing pandemic-related civil backlog across Ontario, including Toronto Region, unnecessary or unreasonable motions must be discouraged. As noted in cases such as Nicholas v. Ogniewicz, 2021 ONSC 4442, urgent motions are heard at a cost to other cases waiting to be heard, case conferences that may have to be deferred, and reserved decisions that may otherwise be written during that hearing time.

[45] Apart from judicial resources being wasted, Sub-Prime was also forced to incur the expense of urgently responding to a meritless motion, with limited notice, supported solely by a bare affidavit containing unfounded allegations of illegality against the Owners and collusion by Sub-Prime with the Owners to “subvert” the plaintiff’s loan. These are serious assertions of misconduct by the defendants. The failure to substantiate them with any cogent evidence turns them into nothing more than unfounded, scandalous allegations. That further supports a heightened costs award.

Disposition

[46] For the foregoing reasons, the plaintiff’s motion is dismissed. The plaintiff shall pay to Sub-Prime its substantial indemnity costs of this motion, fixed in the amount of $8,950.00, including HST and disbursements, payable within thirty (30) days. Order accordingly.

ASSOCIATE JUSTICE TODD ROBINSON DATE: June 2, 2023