Bromberg et al v. World Finance et al

COURT FILE NO.: 3440/09

DATE: 2013-03-26

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: WORLD FINANCE CORPORATION, HISTORY HOMES CORPORATION, METROPOLIS PROPERTY CORPORATION, ARAMISS MOTORSPORTS CORPORATION, WORLD CORPORATION INC. and NIMA KHORREMDEL VAHID

Applicants

AND:

SVITLANA LISOVSKA, ALLA PAVLOVSKAIA, 1793522 ONTARIO LIMITED, MARLIN BETNOVIN, VADIM TSATSKIN, IRENE BROMBERG, RAMIN BETNOVIN aka TONY BETNOVIN, ENIGMA LAND LTD., AMERICAN INTERNATIONAL COMPANIES, KAHUNA CUSTOM CYCLE INC., c.o.b. as KAHUNA POWERSPORTS and JOE LINARDI

Respondents

AND BETWEEN:

IRENE BROMBERG, VADIM TSATSKIN and 1793522 ONTARIO LIMITED

Counter-Applicants

AND:

WORLD FINANCE CORPORATION, HISTORY HOMES CORPORATION, METROPOLIS PROPERTY CORPORATION, ARAMISS MOTORSPORTS CORPORATION, WORLD CORPORATION INC., NIMA KHORREMDEL VAHID, ARASH MISSAGHI, also known as ARA MISSAGHI, ATLAS CAPITAL CORPORATION, INTERNATIONAL IMMOBILIARE CORPORATION, WORLD IMPORTS CORPORATION, WORLD IRON CORPORATION, ENIGMA LAND LTD., CANADA CAPITAL CORPORATION, ALLA PAVLOVSKAIA, SVITLANA LISOVSKA, 2172962 ONTARIO INC., 2165751 ONTARIO INC., 2176506 ONTARIO INC., MISCO HOLDINGS INC., BENDIX FX CORPORATION, PARICHEHR MISSAGHI, JANODEE INVESTMENTS LIMITED, BEAVER POND INVESTMENTS LIMITED, MEADOWSHIRE INVESTMENTS LTD., REGARD INVESTMENTS LTD., THE CANADA TRUST COMPANY, WORLD FOODS CORPORATION, HOSSEIN MISSAGHI, GARFINKLE BIDERMAN LLP, NORMAN SILVER, CHARLES ASHTON, CANADA INVESTMENT CORPORATION, WORLD PROPERTIES CORPORATION, 527540 ONTARIO LIMITED, 2294105 ONTARIO INC. and CROWN CAPITAL CORPORATION

Respondents to Counter-Application

BEFORE: MURRAY J.

COUNSEL:
Ron Aisenberg, Counsel for the Respondent and Counter-Applicant, and Counter-Applicants 1793522 Ontario Limited, Irene Bromberg and Vadim Tsatskin

Wendy H. Greenspoon-Soer, Counsel for the Respondents to the Counter-Application

HEARD: March 5, 2013

ENDORSEMENT

[1] This motion brought by the counter-applicants relates to a commercial property municipally known as 4342 Steeles Ave. W. in Vaughan, Ontario (hereinafter referred to as “the Steeles Avenue property”).

[2] The counter-applicants seek the following relief:

a) an order vacating the CPL obtained by the applicants and registered as instrument number YR1314910 on title to the Steeles Avenue property;

b) an order granting leave to have a Certificate of Pending Litigation issued in favour of the counter-applicants to be registered on title to the Steeles Avenue property; or, alternatively

c) a continuation of the injunction granted by Justice Fitzpatrick, dated September 25, 2012, prohibiting the applicants World Finance Corporation et al from transferring, encumbering or disposing of the Steeles Avenue property, whether under power of sale or otherwise.

The Evidence Before the Court

[3] Since 2006, the registered owner of the property has been and continues to be Enigma Land Ltd. According to the affidavit of Irene Bromberg, a counter-applicant and sole director and officer of the counter-applicant 1793522 Ontario Limited, there are currently six mortgages registered on title. The first mortgage, in favour of 2294105 Ontario Inc., is in the principal amount of $1,250,000. Ms. Bromberg's corporation, 1793522 Ontario Limited, is the registered holder of four mortgages on the property ranked in second, fourth, fifth and sixth positions in the amounts of $250,000, $206,258, $57,000 and $600,000, respectively. There is a third mortgage in favour of Crown Capital Corporation in the principal amount of $125,000. According to the material filed, outstanding real estate taxes owed to the City of Vaughan amount to in excess of $181,000 as of February 4, 2013.

[4] The material before the Court contains an affidavit of Irene Bromberg sworn June 17, 2009. In the affidavit, Bromberg sets out the factual basis of her belief that she has been defrauded by Arash Missagai in the amount of approximately $2 - $3 million. According to Bromberg, she and her husband loaned significant sums to Missagai pursuant to representations by him to them that their money would be invested safely in mortgages on various properties that he or his corporations owned or controlled. Bromberg learned that mortgages were not registered to secure monies advanced to Missagai or to his corporations. She became very concerned that her loans to Missagai were not properly secured and that she was at risk. According to Bromberg, her suspicions led her to a confrontation with Missagai, which in turn resulted in threats by Missagai against Bromberg and her husband. According to Bromberg, Missagai is well-known to law enforcement authorities.

[5] In her effort to obtain security for her loans, Bromberg asserts that three mortgages which were registered by World Finance Corporation (a Missagai owned and controlled corporation) against the Steeles Avenue property were assigned by World Finance Corporation to Bromberg's company 1793522 Ontario Limited. The $600,000 sixth mortgage on the property was granted directly by Enigma Land Limited as security for advances that were made by Bromberg and her husband to companies related to Missagai.

The Applications

[6] The applicants commenced their application on May 1, 2009. The controlling mind of the applicant corporations is said to be Arash Missagai. In the application, the applicants sought, inter alia, to set aside the mortgages granted or assigned to the Bromberg's company, the respondent 1793522 Ontario Limited and registered against the Steeles Avenue property.

[7] On May 6, 2009, Justice Bielby of this court made an ex parte order in favour of the applicants for leave to issue Certificates of Pending Litigation on a number of properties, including the commercial property municipally known as 4342 Steeles Ave. W. in Vaughan, Ontario - the property that is the subject matter of the motion before the Court.

[8] The counter-application was commenced by the respondents to the application. In the counter-application, the counter- applicants sought, inter alia, declarations that the various mortgages in favour of 1793522 Ontario limited registered against the Steeles Avenue property are valid or, alternatively, an order granting 1793522 Ontario Limited equitable mortgages over various properties, including the Steeles Avenue property. The counter-applicants also sought a declaration that the first mortgagee on the Steeles Avenue property currently holds the first mortgage as constructive trustee for the counter-applicants.

[9] The principal respondents were cross-examined in 2009 and 2010 and complied with undertakings in 2010. The application was last scheduled to be heard on May 3, 2010 and was adjourned sine die on that date.

[10] In April of 2012, the applicants brought a motion to discharge the CPL (initially obtained by them and placed on title at their request) in order that Canada Investment Corporation (an assignee of the first mortgage and a company controlled by Missagai) could sell the property pursuant to power of sale. The counter-applicants objected to the vacating of the CPL and alleged that the sale was a sham. The sale did not close and the motion to vacate the CPL was abandoned and the CPL remains registered against the property. The counter-applicants were then and remain of the view that this proposed sale was a sham orchestrated by Missagai and designed to extinguish the rights of the counter-applicants as subsequent encumbrancers of the Steeles Avenue property.

[11] On June 14, 2012, a transfer of charge was registered on title to the property showing Bromberg's company, 1793522 Ontario Limited, as transferor and World Finance Corporation, a Missagai company, as transferee with respect to the second mortgage on the Steeles Avenue property. This transfer was executed without the knowledge of Bromberg by individuals who had no authority to act on behalf of 1793522 Ontario Limited. Immediately thereafter, on June 15, 2012, the day following the first fraudulent transfer, a second fraudulent transfer of the second mortgage was registered on title to the property showing World Finance as transferor and a numbered company as transferee. On August 23, 2012, Madam Justice Seppi rendered judgment declaring that the two mortgage transfers were fraudulent and invalid.

[12] Since September 25, 2012, an order made by Justice Fitzpatrick of this court has been registered against title of the Steeles Avenue. Fitzpatrick J.'s order prohibits the applicants or anyone acting under their authority from transferring, encumbering or disposing of the Steeles Avenue property, whether under power of sale or otherwise, until March 5, 2013, the return date of this motion by the counter-applicants. I extended this injunction pending my decision on this motion.

[13] On January 9, 2013, by order of Justice Hourigan, the Application and the Counter-Application were converted to an action and counterclaim.

Analysis

[14] In my view, the counter-applicants have established a reasonable claim to an interest in the Steeles Avenue property. The counter-applicants assert that they lent money to Missagai and to his corporations and were promised that they would be provided with mortgages on various properties as security for their loans. According to the counter-applicants, they were defrauded by Missagai who did not provide them with mortgages as security for their loans until they complained. After complaining, Bromberg's company, 1793522 Ontario Limited, was assigned the four mortgages currently registered against the Steeles Avenue property. As mentioned above, the counter-applicants also seek a declaration that the first mortgage currently held by a Missagai controlled company is held in trust for them.

[15] The respondents to the Counter-Application now allege that the four mortgages assigned to 1793522 Ontario Limited were assigned without authorization and as a result of threats by Bromberg to person employed by Missagai who signed the necessary documentation under duress. The respondents to the Counter-Application challenge the validity of these four mortgages held by1793522 Ontario Limited. Notwithstanding this challenge to the validity of the four mortgages, and the evidence on which it is based, the respondents to the Counter-Application have not demonstrated there is no triable issue with respect to the claim by the counter-applicants that they have an interest in land.

[16] It cannot be overlooked that the second mortgage held by the counter-applicant 1793522 Ontario Limited as mortgagee and registered against the Steeles Avenue property was - prior to this motion - fraudulently conveyed twice in an effort to deprive the counter-applicants of their registered security interest in the property. On August 23, 2012, Madam Justice Seppi rendered judgment declaring that the second mortgage transfers were fraudulent and restoring the position of 1793522 Ontario Limited as the registered second mortgagee .

[17] Furthermore, there is reason to believe, based on the material filed, that in April, 2012 the first mortgagee planned to sell the property pursuant to a purported exercise of the power of sale and that the purported sale was a sham sale orchestrated by Missagai to extinguish the rights of subsequent mortgagees.

[18] As noted above, in addition to any other efforts to defeat the rights of the counter applicant 1793522 Ontario Limited as mortgagee, the applicants have challenged the validity of the 4 mortgages registered to 1793522 Ontario Limited as mortgagee.

[19] In short, the counter-applicants have good reason to believe that the four mortgages registered in the name of 1793522 Ontario Limited as mortgagee against the Steeles Avenue property will not be sufficient to protect their interests.

[20] The counter-applicants are entitled to an order granting leave to issue a Certificate of Pending Litigation against the Steeles Avenue property.

[21] With respect to the motion by the counter-applicants to vacate the CPL granted by Justice Bielby in 2009, while I agree that the applicants have not prosecuted with diligence its action against the respondents (applicants in the Counter-Application), that delay in the prosecution litigation can lead to the vacating of the CPL in appropriate circumstances is well-established. Decisions such as that of Mr. Justice Grange in Kentish v. Karasy et al. (1977), 1976 593 (ON SC), 14 O.R. (2d) 519 are support for the proposition that failure to diligently prosecute an action may lead to a Court vacating a certificate. As Justice Grange said:

I am not suggesting there is not merit in the action, but if he were serious about it and wished to obtain the benefit of a lis pendens, in my view, he must proceed with the action expeditiously and if he does not and there is no adequate reason for such failure he must forfeit the right to a lis pendens.

[22] There are numerous cases which indicate that a prosecution of the action with due diligence is required and absent such due diligence, a certificate can be discharged. See 791715 Ontario Inc. v. Gary Robinson, 1989 4331 (ON SC), 49 C.P.C. (2nd) 158 and the cases referred to therein.

[23] While I am concerned about delay, I am not prepared to vacate the CPL at this stage notwithstanding the lack of due diligence in the prosecution of the applicants’ claim against the respondents to the application. This application and the Counter-Application are now converted into an action by virtue of the order of Mr. justice Hourigan referred to above. Apparently documentary discovery is to be completed soon and, if necessary, the parties can ask the Court to impose a timetable for the litigation in the event of further delay.

[24] If the existence of the CPL becomes a practical problem, for example, in circumstances of the potential sale or refinancing of the Steeles Avenue property, nothing in this decision is intended to preclude an application to the Court to vacate the CPL when terms may be either agreed to or imposed as informed by the facts at the time.

Decision

[25] The counter-applicants are granted leave to issue a Certificate of Pending Litigation against the property municipally known as 4342 Steeles Ave. W., Vaughan, Ontario, and more particularly described as:

PT LT 1 CON 6 VAUGHAN AS IN R379547: S/T R27085 VAUGHAN; PIN 10509 – 0224 (LT) Land Registry Office for the Land Titles Division of York Region (no. 65).

[26] The motion by the counter-applicants for an order vacating the CPL obtained by the applicants and registered as instrument number YR1314910 on title to the Steeles Avenue property is dismissed subject to the rights of the counter-applicants to bring a motion to vacate the CPL if circumstances warrant revisiting this issue.

Costs

[27] If the parties are not able to agree on costs, I am prepared to entertain brief written submissions from counsel with respect thereto. Counsel for the counter-applicants should file brief submissions by April 15, 2013 and brief responding submissions should be filed by counsel for the respondents to the Counter-Application by no later than April 30, 2013.

MURRAY J.

Date: March 26, 2013