ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-45078
DATE: 2015/07/02
BETWEEN:
Rosaline Trang
Plaintiff
– and –
Ha T. Nguyen and Quoc Dung Tran
Defendants
– and –
Michael Hebert, for the Plaintiff
Tamara Sugunasiri, Stephanie Lauriault, Andrew Kinoshita, for the Defendant, Her Majesty the Queen in right of Canada (Canada Revenue Agency)
Canada Revenue Agency
Defendants
HEARD: June 2, 2015
reasons for decision
Justice patrick smith
[1] The Plaintiff, Rosaline Trang brings this motion seeking, inter alia:
• an order for partial summary judgment and partial default judgment against the Defendants granting the Plaintiff an equitable mortgage in the amount of $250,000.00 against the property owned jointly by the Defendants, Ha T. Nguyen and Quoc Dung Tran, described municipally as 46 Epson Avenue, in the City of Ottawa and 58 Granton avenue, in the City of Ottawa in priority to the lien registered on title by the Defendant, Canada Revenue Agency, on the same terms and conditions as the $250,000.00 line of credit on the Plaintiff’s home located at 738 Parkdale Avenue;
• an order that the Plaintiff’s equitable mortgage be registered on title to 46 Epworth Avenue in the City of Ottawa and 58 Granton Avenue in the city of Ottawa;
• in the alternative, an order for partial summary judgment and partial default judgment against the Defendants granting the Plaintiff an equitable interest in the proceeds of sale of 46 Epworth Avenue and 58 Granton Avenue, in the City of Ottawa in priority to the liens registered on title by the Defendant, Canada Revenue Agency.
Factual Overview
[2] The Plaintiff is the sister of the Defendant, Quoc Dung Tran (“Alex”). The Defendant, Ha T. Nguyen (“Carolyn”) is Alex’s spouse.
[3] In December of 2003, the Plaintiff, together with her nephew, Philip Tran, purchased 738 Parkdale Avenue in the City of Ottawa from Alex and Carolyn for the sum of $438,000.
[4] Philip Tran transferred his interest in the property to the Plaintiff on May 23, 2006.
[5] On December 2, 2003 Alex and Carolyn used the proceeds of the sale of 738 Parkdale Avenge to purchase 58 Granton Avenue in the city of Ottawa for the sum of $430,000.00.
[6] On July 29, 2003, Alex and Carolyn purchased 46 Epworth Avenue in the City of Ottawa for the sum of $267,000.00. The Plaintiff submits that to fund the purchase, Carolyn and Alex borrowed $250,000.00 against a line of credit advance by the Canadian Imperial Bank of Commerce and secured by a mortgage registered against title to 738 Parkdale Avenue.
[7] At the time that 738 Parkdale Avenue was purchased, the Plaintiff states that she agreed to allow the mortgage securing the line of credit to remain registered on title. The line of credit had been fully advanced by Carolyn and Alex to fund the purchase of 46 Epworth Avenue.
[8] Further, the Plaintiff submits that the monies advanced by her to purchase 738 Parkdale Avenue were used by Alex and Carolyn to purchase 58 Granton Avenue rather than discharge the line of credit registered against 738 Parkdale Avenue.
[9] A written agreement was entered into stipulating that the line of credit would remain registered against 738 Parkdale Avenue and be discharged from the proceeds of the sale of 46 Epworth Avenue.
[10] The agreement provided:
The sum of $438,000.00 was transferred by Philip Tran and Rosaline Trang to Dr. Dung Tran to Dr. Dung Q. Tran and Ha T. Nguyen prior to the registration of the deed/transfer of land for 738 Parkdale Avenue, Ottawa;
The parties have agreed that the personal line of credit between Dr. Dung Q. Tran and the CIBC and registered on 738 Parkdale Avenue shall not form part of the consideration of the transfer but shall remain registered on title;
The parties agree that upon the sale of 46 Epworth Avenue, Dr. Quoc Dung Tran and Ha T. Nguyen shall discharge the CIBC personal line of credit registered on Parkdale Avenue; and
The parties agree that prior to the sale of 46 Epworth Avenue and the discharge of the CIBC line of credit Dr. Quoc Dung Tran and Ha T. Nguyen are responsible for making the ongoing payments on the line of credit.
[11] The Plaintiff maintains that although it was intended that she be granted security by the registration of mortgages on title to 46 Epworth Avenue and 58 Granton Avenue to secure Alex and Carolyn’s obligations under the agreement, no mortgages were ever registered.
[12] On April 12, 2005 Alex’s income tax liability was reassessed by Canada Revenue Agency (“CRA”) and, as a result of the reassessment a claim for lien in the amount of $180,840.87 was registered against his properties including 58 Granton Avenue and 46 Epworth Avenue.
[13] CRA later determined that Alex owed an additional tax liability and, on May 11, 2007 registered a second claim of lien in the amount of $1,184,242.25 against Alex’s properties including 58 Granton Avenue and 46 Epworth Avenue.
[14] On March 14, 2005, CRA obtained a Writ of Seizure and Sale against Tran from the Federal Court in Court File No. GST-1463-05. On March 11, 2011, the Federal Court ordered that the Writ of Seizure and Sale against Tran be extended for a further period of six years.
[15] On May 11, 2007, the CRA registered the certificates with the Ontario Land Titles Registry Office, creating a charge on Tran’s properties, including:
(a) 58 Granton Avenue, Ottawa, ON
Instrument No. OC717473 registered May 11, 2007 for $ 1,184,242.25
Instrument No. OC450984 registered April 12, 2005 for $ 180,840.87
(b) 46 Epworth Avenue, Ottawa, ON
Instrument No. OC717473 registered May 11, 2007 for $ 1,184,242.25
Instrument No. OC450984 registered April 12, 2005 for $ 180,840.87
(c) 1340 Wellington Street West, Ottawa, ON – owned by TRAN
Instrument No. OC717473 registered May 11, 2007 for $ 1,184,242.25
Instrument No. OC450984 registered April 12, 205 for $180,840.87
[16] When CRA’s charges were registered against the properties on May 11, 2007, there were no other instruments registered in priority to CRA’s charges.
[17] On February 26, 2009, Tran pleaded guilty to tax evasion charges for the undeclared income and GST. As a result of his guilty plea and conviction, he was required to pay a $250,000 fine.
[18] On May 21, 2009, CRA received notice of the Plaintiff’s claim for an equitable mortgage.
[19] On June 15, 2010 the CRA filed the Writ with the Sheriff in the City of Ottawa and instructed the Sheriff to seize and sell Tran’s equity of redemption in 1340 Wellington Street West.
[20] On July 15, 2010, the Plaintiff issued a Statement of Claim against Tran in a separate action under Court File No. CV-10-48973.
[21] On August 18, 2010, the Plaintiff obtained a default judgment against Tran in Court File No. CV-10-48973.
[22] On September 28, 2010, Nguyen obtained a Certificate of Pending Litigation from the Family Court Branch regarding her Family Law claim and registered it against 1340 Wellington Street West.
[23] The Certificates of Pending Litigation on title effectively prevent CRA from selling any of the properties.
Summary of the Issues
[24] CRA acknowledges that prior equitable mortgages take priority over liens registered subsequently pursuant to section 223 of the Income Tax Act.
[25] The central issue before this court is whether the Plaintiff has met the legal test to establish an equitable mortgage.
[26] In the alternative, if the Plaintiff does not have an equitable mortgage the issue is whether she has an equitable interest in the proceeds of sale of the subject properties and, if so, whether her equitable interest is payable in priority to the CRA’s claims for lien.
Rule 20 - Summary Judgment
[27] Rule 20 of the Rules of Civil Procedure provides that summary judgment shall be granted where the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or a defence. [Rules of Civil Procedure, RRO 1990, Reg. 194, as amended, Rule 20.04]
[28] The onus is on a Plaintiff to establish that there is no triable issue with respect to its claims or any defence raised with respect to those claims. Anderson v. Cardinal Health Canada Inc., 2013 ONSC 5226
[29] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 [Hryniak], the Supreme Court of Canada discussed summary judgment under Rule 20. Writing for the unanimous court, Justice Karakatsanis called for balance and recognition “that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial” (at para 27).
[30] According to the Court, achieving balance in the justice system,
requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible — proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure. (at para 28)
[31] In keeping with these principles, the test for when summary judgment should be granted is:
There will be no genuine issue requiring trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. (at para 49).
[32] At para 66, Justice Karakatsanis set out a roadmap for motion judges in summary judgment proceedings:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) a.nd (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[33] The overarching issue to be answered is “whether summary judgment will provide a fair and just adjudication” (ibid, at para 50). Justice Karakatsanis added that “the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” (ibid).
[34] The new fact-finding powers under Rule 20.04(2.1)—which allow motion judges to weigh evidence, evaluate credibility and draw inferences—are presumptively available; judges are allowed to exercise them unless it is in the interests of justice that they only be exercised at trial (ibid, at para. 45). Whether it is against the interest of justice to use these new powers will generally coincide with whether there is a genuine issue requiring trial (ibid, at para. 59).
[35] It is also necessary however, to consider the context of the litigation as a whole – in cases of partial summary judgment, exercise of these powers may be inappropriate if there is a risk of duplicative proceedings or inconsistent findings of fact (ibid, at para. 60). By contrast, the ability to resolve significant issues may justify the use of these powers (ibid, at para. 60).
[36] Under Rule 20.04(2.2), trial judges are permitted to hear oral evidence. The Supreme Court held that “in tailoring the nature and extent of oral evidence that will be heard, the motion judge should be guided by” the principles of “proportionality, timeliness and affordability,” and keep in mind “that the process is not a full trial on the merits, but is designed to determine if there is a genuine issue requiring trial” (ibid, at para 65).
What is Required to Establish an Equitable Mortgage?
[37] The Plaintiff argues that the Agreement is the source of her equitable mortgage on 46 Epworth Avenue and that an equitable mortgage can be created in cases where a mortgagor has not executed an instrument sufficient to transfer legal estate in the subject property.
[38] Falconbridge On Mortgages (5th ed) summarizes the attributes of an equitable mortgage as follows:
An agreement in writing duly signed, however informal, by which any property is made a security for a debt or a present advance, creates an equitable charge upon the property.
[39] In Luscombe v Luscombe, Wells J. of the Newfoundland Supreme Court referred to the following passage from Anger and Honsberger, Law of Real Property:
An essential feature of an equitable mortgage is a common intention that the property be made security for a debt due or for future advances. If that intention is lacking, no equitable mortgage can be created.
46 Epworth Avenue
[40] As noted above, on a summary judgment motion a judge must first determine if there is a genuine issue requiring a trial based only on the evidence before the court without using the expanded fact finding powers of Rule 20.
[41] The essential position of the Plaintiff is that the Agreement is proof of her equitable mortgage for 46 Epworth Avenue.
[42] In my view, the Agreement is deficient in that it fails to establish two essential requirements of an equitable mortgage: the existence of a debt and a charge securing the debt.
[43] The Agreement does not provide satisfactory evidence that the parties contemplated the creation of a debt. I agree with the argument of the Defendant that “paragraph 2 of the Agreement states that Tran’s CIBC line of credit “shall not form part of the consideration of the transfer [of Parkdale] but shall remained (sic) registered on title”. The parties therefore intended that the debt would remain owing from Tran to CIBC, even if that was not the legal effect of the property transfer.” [Defendant’s Factum, para. 58]
[44] The evidence submitted by the Plaintiff to support the requirement that she advanced her own money is contained in her affidavit which states that it came from her savings and from an inheritance. The Plaintiff does not provide any corroborating documentary evidence to prove her assertion. The circumstances surrounding the drafting, translation and signing of the affidavit do not provide me with sufficient confidence to give it much weight.
[45] The evidence of the source of the funds provided by CRA, on the other hand, is detailed and thorough and concludes that the funds very likely came from cash deposits from Tran’s acupuncture business. If this is the case, it was Tran and not the Plaintiff that purchased Parkdale and provided funds for Granton. This is a serious issue of credibility and one which requires a trial with viva voce evidence.
[46] Further, nothing in the Agreement suggests that the parties intended to charge the Epworth property as security for the debt.
[47] At best, the Agreement constitutes that Tran would at some time in the future sell Epworth and use the proceeds of sale to pay his line of credit with CIBC.
58 Granton Avenue
[48] The basis for the Plaintiff’s claim that she has an equitable mortgage over 58 Granton Avenue is not based on the Agreement but on the fact that Tran and Nguyen used proceeds from the sale of the Parkdale property to purchase Granton Avenue.
[49] This fact alone without proof of a written agreement, signed by the parties and evidencing a mutual intention to charge a property as security for a debt is not sufficient evidence to grant the Plaintiff’s claim.
[50] As mentioned above, there is a genuine issue for trial. The evidence provided by CRA is significant and tends to show that Tran and not the Plaintiff was the source of the funds to purchase Granton Avenue. A trial will allow the court to hear and assess the evidence of the parties and is critical in deciding the issue of credibility.
Does the Plaintiff have an Equitable Interest in the Proceeds of Sale of the Epworth and Granton Properties?
[51] With respect to 46 Epworth Avenue, in addition to the comments set out above regarding the evidence provided by the Applicant, the Agreement upon which the Plaintiff relies to support her claim that she has an equitable interest in the proceeds of sale may only prove that she has a contract upon which she can sue along with the usual contractual remedies.
[52] With respect to the Granton Avenue property, the basis of the Plaintiff’s claim of an equitable interest rests upon the fact that Tran used funds from the sale of Parkdale to purchase Granton. This fact is hotly contested and comes down to a matter of credibility which a court will only be able to resolve by conducting a trial.
Conclusion
[53] Based upon the evidence before me I find that there is a genuine issue requiring a trial.
[54] There are numerous contested facts and issues of credibility that can only be fairly assessed by a judge hearing viva voce evidence.
[55] Further, I do not believe that this is a case where use of the expanded fact finding powers provided for in Rule 20 are of assistance in that they will not serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
Disposition
[56] For the reasons set out above, the Plaintiff’s motion is dismissed.
[57] In the event that the parties are unable to resolve the issue of costs, they may file written submissions within 45 days of the release of my decision.
Patrick Smith J.
Released: July 2, 2015
COURT FILE NO.: CV-09-45078
DATE: 2015/07/02
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Rosaline Trang
Plaintiff
– and –
Ha T. Nguyen
Defendants
REASONS FOR JUDGMENT
Judge
Released: July 2, 2015