Court of Appeal for Ontario

Date: 20211118 Docket: C69048

Fairburn A.C.J.O., Roberts J.A. and Van Melle J. (ad hoc)

BETWEEN

Ronak Ebrahimpour and Mohammad-Mehdi Mollaei Applicants/Respondents by Cross-Application (Appellants)

and

Farhad Askari Respondent/Applicants by Cross-application (Respondent)

Counsel: John A. Howlett, for the appellants Danny M. Bertao, for the respondent

Heard and released orally: November 12, 2021 by video conference

On appeal from the order of Justice Michael R. Gibson of the Superior Court of Justice, dated December 22, 2021.

Reasons for Decision

[1] The appellants appeal an order made under rule 45.02 of the Rules of Civil Procedure, that the amount of $550,000 be paid into court pending the resolution of the parties’ dispute.

[2] This appeal arises out of a house building project between the appellants and the respondent. The respondent loaned funds and worked on the project. The parties had a falling out. The respondent says that the appellants failed to repay the monies owing to him under a promissory note, pay him his share of the profits from the project, and compensate him for his services.

[3] Without advising the respondent, the appellants sold the house for $3,250,000. When the respondent learned of the sale, he registered a caution on the property. On the eve of closing, the parties agreed through their lawyers that the caution would be removed in exchange for the appellants providing an irrevocable direction that $550,000 of the net proceeds of sale would be held in trust pending resolution of the parties’ respective claims.

[4] The respondent then commenced an action claiming an equitable charge against $465,000 of the net proceeds from the house sale for the debt under the promissory note; a claim for a constructive trust or equitable charge over 25% of the net profit of the project; and a claim for a constructive trust or equitable charge over $72,000 of the net sale proceeds for alleged unpaid wages. The appellants dispute the respondent’s claim and counterclaim for damages.

[5] The appellants brought an application to set aside the irrevocable direction and for a declaration that the caution was invalidly registered in the first place. They sought an order releasing to them all of the proceeds of sale held in trust. The respondent brought a cross-application under rule 45.02 to have the proceeds of sale paid into court. The application judge dismissed the appellants’ application and allowed the respondent’s application.

[6] The appellants repeat on appeal the submissions that were rejected by the application judge. They say the application judge erred by failing to find that: 1) had the caution not been deleted, it would have been set aside because the respondent did not satisfy the test for a certificate of pending litigation; 2) the irrevocable direction was unenforceable because it was procured by economic duress caused by the invalid registration of the caution; and 3) the test under rule 45.02 had not been met.

[7] We see no error in the application judge’s decision.

[8] Context is important in answering the first two objections on appeal. The withdrawal of the caution was based upon a negotiated agreement reached between the parties where both were represented by counsel. While initially rejecting respondent’s counsel’s suggestion of the irrevocable direction that all funds be held in trust, the appellants’ counsel subsequently counter-proposed that $468,148.28 be held in trust and then agreed the next day that $550,000 would be held in trust. This context belies any suggestion that a certificate of pending litigation would not have been available or that there was a “coercion of [the appellants’] will” sufficient to set aside the irrevocable direction: see Taber v. Paris Boutique & Bridal Inc., 2010 ONCA 157, at para. 9.

[9] Finally, the application judge’s determination that the respondent satisfied the criteria for an order under rule 45.02 as set out in Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., 2012 ONCA 475, at para. 18, is amply supported by the record:

• The appellants concede that the respondent claims a right to a specific fund, namely, the net sale proceeds held in trust;
• The respondent’s evidence of the parties’ agreement that the loan would be repaid, the profits shared, and his wages paid from the sale of the property raises a serious issue to be tried regarding the respondent’s claim to that fund by way of the remedies of constructive trust or equitable charge; and
• The balance of convenience favours granting the relief sought by the respondent. There is no evidence that the appellants suffered any prejudice from the monies having been held in trust or will suffer any if the monies remain in court. There is no dispute that the respondent borrowed the loaned funds from his home equity line of credit; he will suffer substantial prejudice if the funds are dissipated before the parties’ dispute is resolved.

[10] Accordingly, the appeal is dismissed.

[11] The appellants shall pay to the respondent costs of the appeal in the agreed upon amount of $6,000, inclusive of disbursements and applicable taxes, within 30 days.

“Fairburn A.C.J.O” “L.B. Roberts J.A.” “Van Melle, J. (ad hoc)”