Adams v. Adams, 2016 ONSC 1934

CITATION: Adams v. Adams, 2016 ONSC 1934 COURT FILE NO.: CV-15-522655 MOTION HEARD: November 4, 2015

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NISHA ADAMS v. CALEB ADAMS, SUSAN CAROL NEEDLES, IRA GEORGE NEEDLES, CLAYTON EDWARD ADAMS, TORONTO POLICE SERVICES BOARD, WILLIAM BLAIR, CHERYL JONES, ALEXANDRA READ, GERALD HEANEY, TOMMY CORNETT and DAVID PARTRIDGE

BEFORE: Master Lou Ann M. Pope

COUNSEL: Gordon McGuire, Adair Barristers LLP, Counsel, for the plaintiff Ted Frankel, Cassels Brock & Blackwell LLP, Counsel, for the defendants, Caleb Adams, Susan Carol Needles and Ira George Needles

REASONS FOR DECISION

[1] The defendants, Susan Carol Needles and Ira George Needles seek an order vacating the certificate of pending litigation (“CPL”) obtained by the plaintiff on an ex-parte basis on March 31, 2015. The plaintiff is agreeable to discharge the CPL with terms regarding sale of the property and payment into court or to the trust account of either the plaintiff or the defendant, Caleb Adam’s, lawyer in the family proceeding, of the sale proceeds pending further order of this court. The issue to be determined is whether the order should contain such terms.

[2] Further, the plaintiff consents to an order granting leave to the defendants to amend their statement of defence and counterclaim.

Background

[3] The plaintiff, Nisha Adams (“Nisha”), and the defendant, Caleb Adams (“Caleb”), married in 2005. They have four children. They separated on June 23, 2014 and remain separated.

[4] During the marriage, Nisha worked as a school teacher earning approximately $50,000 until sometime in 2011 when she was unable to continue working due to a health issue. Thereafter she received disability benefits. Caleb worked as a personal support worker earning approximately $30,000.

[5] The defendant, Susan Carol Needles (“Susan”), is Caleb’s mother and the spouse of the defendant, Ira George Needles (“George”), who is Caleb’s step-father. Susan and George are joint owners of the property located at 123 Berner Trail, Scarborough, Ontario, on which the CPL was registered on title.

[6] The rest of the defendants were sued arising out a domestic dispute involving Nisha, Caleb and Susan in June 2014 when the police attended at Nisha and Caleb’s home. Those claims are not relevant to the issues on this motion.

[7] From October 2005 to their separation on June 23, 2014, Nisha, Caleb and their children resided at the home on Susan and George’s property on Berner Trail. In October 2005, Susan and George moved out of the property and allowed Nisha, Caleb and their growing family to reside there. George’s evidence is that Nisha and Caleb had expressed an interest in purchasing the property but they did not have the money to do so. Susan and George were depending on their equity in the property as their retirement fund.

[8] In October 2005 George drafted a one-page document which set out the terms of an agreement which the four parties signed (“2005 Agreement”). It is entitled “Transfer of 123 Berner Trail agreement as discussed on Sunday, Oct. 16, 2005”. The agreement essentially provided that in June 2006, the maturity date of the mortgage, Nisha and Caleb would have the option to purchase the property from Susan and George. In the meantime, Nisha and Caleb were responsible to pay the mortgage, interest, municipal taxes and utilities. If they purchased the property in June 2006, they would get credit for their mortgage payments by the amount they reduced the mortgage. The agreement also set out the amount that Susan and George were entitled to be paid for their equity in the property if sold to Nisha and Caleb.

[9] Nisha and Caleb continued to live in the house and honoured the terms of the agreement by paying all monthly carrying costs of the home and had by March 2009 reduced the mortgage balance by about $47,000. In addition, it is Nisha’s evidence that she and Caleb undertook substantial renovations to the property in this period, which is set out in part, in the subsequent agreement entered into by the parties on March 1, 2009.

[10] Nisha and Caleb did not exercise their option to purchase the property in June 2006.

[11] Nisha’s evidence is that in early 2009 she and Caleb discussed purchasing the property; however, it was at that time that Caleb learned that Nisha was on title to her mother’s home. Her evidence is that initially in 2003 she agreed to co-sign on her mother’s mortgage in order for her mother to be able to purchase a home. A few years later when her mother was re-negotiating the terms of her mortgage, Nisha agreed to be on title to her mother’s home so that her mother could obtain advantageous borrowing terms. Her further evidence is that she agreed with her mother that she would have “no ownership interest in the home” and her mother would remove her from title as soon as her credit would allow. Nisha made no mortgage payments on her mother’s mortgage and she received no sale proceeds when the property was sold in December 2009.

[12] By early 2009 Nisha and Caleb had not purchased the property and Nisha’s title interest in her mother’s property was discovered. Therefore, George drafted a new agreement entered into by the parties on March 1, 2009 (“2009 Agreement”). The first paragraph of the 2009 Agreement summaries the terms of the 2005 Agreement. The following is an excerpt:

It was agreed at that time that the amount that Caleb and Nisha brought down the principal amount of the mortgage (which stood at $88,000) from October 2005 until the next mortgage renewal date would be theirs in cash as would any value added to the property through renovations or improvements made by them. George and Sue had a stake of $150,000 in the property at 123 Berner Trial on October 2005 which George and Sue would be taking in cash upon the sale of the property.

[13] The next paragraph sets out that the 2005 Agreement was amended in 2007 to account for the annual cost of living index and renovations paid for by Susan and George.

[14] The third and fourth paragraphs set out the crux and the reason for the new agreement. It states:

On March 1, 2009 the house was still not sold and Caleb and Nisha were found ineligible to purchase the property due to Nisha having co-signed for a property in Brampton, Ontario. With this it was decided by George and Sue to stop the existing agreement whereby the amount that Caleb & Nisha were paying down the mortgage principal from $88,000 would be stopped at the March, 2009 principal amount of $41,000. Caleb and Nisha had brought down the mortgage by the amount of $47,000 on March 2009. While residing at 123 Berner Trail Caleb and Nisha have renovated the laundry room in the basement and added a three piece washroom there. They have also replaced the front walkway, added a short fence/wall along the perimeter of the walkway and replaced the front door of the house.

From March, 2009 the amount that the principal gets paid down from $41,000 by Caleb and Nisha while residing at 123 Berner Trail and paying the mortgage, property taxes and utilities as before will not be theirs. George and Sue upon the sale of their property, 123 Bern trial, will receive in cash the following:

$15,000 + $3,000 (2006) + $3,000 (2007) + $3,000 (2008) + $3,000 (2009) + $4,300 (spent on roof) + the amount the principal gets paid down from March 2009. (emphasis added)

[15] In March 2011, Nisha was diagnosed with myasthenia gravis, a chronic autoimmune neuromuscular disease characterized by weakness of the skeletal muscles. Nisha and Caleb continued paying the mortgage and other carrying costs of the home and eventually paid off the remaining $41,000 mortgage balance.

[16] Nisha and Caleb separated on June 22, 2014. On that day, there was a domestic dispute involving Nisha, Caleb and Susan which culminated in criminal charges being made. Nisha and the children continued to live at the home following the incident. Shortly thereafter, Susan and George applied to the Landlord and Tenant Board to have Nisha evicted. In October 2014, their application was dismissed on the basis that there was no landlord and tenant relationship. Despite that ruling, Susan and George changed the locks to the house while Nisha was not home. They took possession of the property and gave Nisha 72 hours to remove her personal belongings. Nisha secured new accommodation for her and the four children. The eviction occurred while Nisha was recovering from open chest surgery on September 2, 2014.

[17] It was Nisha’s evidence when she swore her affidavit on March 30, 2015 filed in support of her motion for a CPL that she learned from the children that the property was vacant and that Susan and George were fixing up the home in order to sell it. It was also her evidence at that time that Susan and George had not acknowledged that she had a beneficial interest in the property, nor had they paid her any amount toward her interest in the property.

[18] At the hearing before Justice Zisman on December 31, 2014 in Nisha and Caleb’s family proceeding, Caleb deposed that Susan and George intended to sell the property and use the proceeds for their retirement. Justice Zisman granted custody of the children to Nisha and ordered Caleb to pay child support.

This Action

[19] Nisha commenced this action by statement of claim on February 24, 2015 seeking among other things damages for breach of the 2009 agreement, a declaration of a beneficial interest in the property, a CPL, and an order for the sale of the property.

[20] Nisha pled in the statement of claim that she and Caleb performed their obligations under the 2009 agreement and they increased the value of the property through renovations and other improvements. She further pled that Susan and George failed to pay her interest in the property in breach of the 2009 agreement, more particularized at paragraph 16 of the statement of claim. Further, she claimed to be entitled to an order for the sale of the property and one half of the sale proceeds after paying Susan and George their interest of $207,300. In the alternative, she sought damages of one half of the fair market value of the property after paying out Susan and George’s interest. In the further alternative, she alleges the basis for a claim for a declaration of an interest in the property held in trust for her by Susan and George.

The CPL Motion

[21] In support of Nisha’s CPL motion heard on March 31 2015, she filed a motion record that contained a notice of motion and her affidavit sworn on March 30, 2015, a factum and book of authorities.

[22] The following summarizes the contents of Nisha’s 44-page affidavit. Nisha set out the background of the relationship between she and Caleb, the facts that gave rise to the two agreements including the fact that Susan and George owned the property where she, Caleb and the children lived. A copy of the relevant parcel register for the property was attached to her affidavit as an exhibit. The terms of the 2005 agreement were summarized; however, a copy of the agreement was not included in her affidavit. She stated that she and Caleb reduced the mortgage principal by $47,000 from October 2005 to March 2009. She stated that she signed the 2009 agreement that amended the 2005 agreement and summarized the terms. A copy of the 2009 agreement was attached as an exhibit. All the parties understood and agreed that the property would ultimately either be sold to her and Caleb or sold to a third party in which case the proceeds would be distributed according to the 2009 agreement. The intended plan was that she and Caleb would eventually take over the property from Susan and George. The property was their matrimonial home since 2005 and she and Caleb invested significant time and money into the property over the years. They made the mortgage payments from their joint account, albeit indirectly to Susan and George, from October 2005 to January 2014 and continuing after the mortgage was discharged. Nisha and Caleb’s financial arrangements changed after Nisha became unable to work which were more particularly set out. Particulars of the home improvements were set out. Further, the material facts were set out surrounding the domestic incident on June 22, 2014 followed by the Susan and George’s eviction of her and the children from the home including the landlord and tenant proceeding and Justice Zisman’s order made in the family proceedings. Lastly, she provided evidence regarding the risk that the property would be sold.

Law

[23] A CPL may be obtained on an ex-parte basis under rule 42 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, by including a claim for a CPL in the originating process and a legal description of the land.

[24] Pursuant to 103(6)(a)(ii) of the Court of Justice Act, R.S.O. 1990, c. C.43, a court may discharge a CPL where it is satisfied that the party at whose instance it was issued does not have a reasonable claim to an interest in the land claimed.

[25] Section 103(6) of the Court of Justice Act states:

The court may make an order discharging a certificate,

(a) where the party at whose instance it was issued,

(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,

(ii) does not have a reasonable claim to the interest in the land claimed, or

(iii) does not prosecute the proceeding with reasonable diligence;

(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or

(c) on any other ground that is considered just, and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.

[26] Recently, the court in Regalcraft Homes Inc. v. Salvador, 2014 ONSC 6990, at paras 54-55, set out succinctly the law with respect to discharging a CPL. The court followed the reasoning of the Ontario Court of Appeal in G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CanLII 6832 (ON CA), 58 O.R. (3d) 87, paras. 15-17, and the court in JDM Developments Inc. v. J. Stollar Construction Ltd., [2004] O.J. No. 4572, at paras. 31-34, which stated that s. 103(6) confers a broad discretion on the court to discharge a CPL and, depending on the circumstances, to impose appropriate terms. The onus is on the party seeking to discharge the CPL to persuade the court that its discretion ought to be exercised in favour of the discharge on any of the grounds contained in the subsection. The Court of Appeal went on to state that the practical effect of a CPL is similar to that of an interlocutory injunction restraining dealing with the land. To discourage abuse of obtaining a CPL on an ex parte basis, s. 103(4) imposes liability for damages resulting from the registration of a CPL where the registrant is “without a reasonable claim to an interest in the land”.

[27] The Court of Appeal held that the governing test to discharge a CPL is that the court must exercise its discretion in equity and look at all of the relative matters between the parties. In JDM Developments, the court held that in exercising its discretion, the court should consider all of the circumstances, including:

(a) whether the plaintiff is, or is not a shell corporation; (b) whether the land is, or is not unique bearing in mind that in the sense any parcel of land has some special value to the owner; (c) the intent of the parties in acquiring the land; (d) whether there is an alternative claim for damages; (e) the ease or difficulty of calculating damages; (f) whether damages would be a satisfactory remedy; (g) the presence, or absence of another willing purchaser; and (h) the harm done to the defendant if the certificate is allowed to remain, or to the plaintiff, if the certificate is removed, with or without the requirement of alternative security. (Regalcraft Homes, at para. 55)

[28] When dealing with the issue of material non-disclosure, the courts have long held that the plaintiff must make full and frank disclosure of the relevant facts, including facts which may explain the defendants’ position if known to the plaintiff. If there is less than this full and accurate disclosure in a material way or if there is a misleading of the court on material facts in the original application, the court will not exercise its discretion in favour of the plaintiff and continue the CPL. (Bank of Nova Scotia v. Rawifilm Inc. 1994 CarswellOnt 4186, at para 20, citing Chitel v. Rothbart (1982), 1982 CanLII 1956 (ON CA), 39 O.R. (2d) 513, at p. 519 (O.C.A.))

[29] The court in 547CC Investments Inc. v. Colozza, 2009 CarswellOnt 7991 (Ont. Master), at para. 5, held that failure to include a material fact was one which could have been relevant to the decision of the court to order the ex parte CPL.

[30] In Allen v. Process Matters, 2006 CarswellOnt 1513, at para 37, Master Haberman addressed the issue of the responsibility of counsel for the moving party on the CPL motion. She reiterated the law that the court is only presumed to have read those aspects of the record to which counsel refer. The onus is on counsel to highlight in a factum or argument those aspects of an exhibit he relies on. Regarding the opposing party’s position, at paragraph 37, Master Haberman cited the decision of Molloy J. in L’Unita Development Corp. v. 505369 Ontario Ltd., [2001] O.J. No. 3581 (Ont. S.C.J.):

Fair disclosure of facts relevant to the opposing party’s position must be expressly set out in the body of the factum. It is not sufficient to append as exhibits to the affidavit, documents which contain such relevant information. The existence of the information must be highlighted in the affidavit itself.

Motion to Vacate the CPL

[31] The grounds to vacate the CPL without terms are that Nisha did not provide the court at the hearing of the CPL motion with full and fair disclosure of all material facts. Susan and George submit that Nisha was less than forthright on her CPL motion with respect to the following:

a. the primary objective of the 2005 agreement was to facilitate a purchase of the property by the Nisha and Caleb; b. the 2005 agreement was voided due to Nisha having seriously misrepresented her financial position; c. Nisha was in a precarious financial position in 2005 due to her co-signing a mortgage for her mother’s property in Brampton; d. Nisha’s duplicitous conduct in owning another home between 2005 and 2009 while holding herself out as the expected purchaser of Susan and George’s home was not known to Caleb, Susan and George until 2009; e. both written agreements were accompanied by terms agreed to orally; f. all arrangements were made “as family does” and were no longer applicable if Nisha and Caleb separated or divorced.

[32] I will now deal with each submission.

Alleged Failure to Disclose Primary Objective of the 2005 Agreement

[33] George’s evidence is that Nisha and Caleb expressed an interest in purchasing their property but did not have the money to do so at that time. George and Susan could not afford to gift the property to Nisha and Caleb because they were depending on using the equity as their retirement fund. They wanted Nisha, Caleb and their children to have a nice house to live in while at the same time being fair financially to all concerned.

[34] In her affidavit sworn March 30, 2015, Nisha clearly set out details of the relationships among the parties and the fact that Susan and George owned the property where she and her family had resided from some nine years from 2005 to 2014. In addition, she included as an exhibit a copy of the parcel register for Susan and George’s property to evidence their ownership. She summarized the terms of the agreement at paragraph 6 of her said affidavit and outlined what the respective interests of the parties would be upon the sale of the property. However, she did not produce a copy of the 2005 agreement. Coincidentally, George was unable to produce a signed copy of that agreement. At paragraphs 11 and 12 of his affidavit where he attached an unsigned copy, he states that he was unable to locate the signed version.

[35] For the above reasons I find that it would have been clear to the court the purpose of the 2005 agreement; however, I further find that the objective of the agreement as described in George’s evidence was not a material fact that Nisha ought to have disclosed to the court. In other words, had Nisha included evidence in her affidavit similar to what is contained in George’s affidavit referred to above, it would not have been relevant to court’s determination of whether Nisha was entitled to an order for a CPL on the basis that she had a reasonable claim to an interest in land. Any evidence regarding the purpose or objective of the agreement was merely peripheral evidence that was not material to the issue on the motion.

Alleged Misrepresentation and Non-Disclosure of her Interest in Brampton Property

[36] This section encompasses subparagraphs (b), (c) and (d) above.

[37] George submits that the 2005 agreement was voided due to Nisha’s non-disclosure of the fact that she had co-signed on her mother’s mortgage and therefore was “seemingly ineligible for a mortgage” in order to purchase their property. He alleges further that Nisha was in a precarious financial position in 2005 due to her co-signing on her mother’s mortgage, and that she was on the verge of bankruptcy. He alleges further that Nisha misrepresented her financial position to the defendants.

[38] The body of Nisha’s affidavit sworn March 30, 2015 does not specifically disclose the fact that sometime in 2003, prior to entering into the 2005 agreement with Susan and George, she had co-signed on her mother’s mortgage; however, the preamble of the 2009 agreement does state that “due to Nisha having co-signed for a property Brampton”, Nisha and Caleb were found eligible to purchase the property. Presumably the 2009 agreement was brought to my attention on the motion; however, there is no evidence that plaintiff’s counsel brought to my attention the reason for Nisha and Caleb bring ineligible for a mortgage in order to purchase the subject property and that that fact is what precipitated the 2009 agreement. Furthermore, Nisha’s evidence does not include information regarding her financial situation.

[39] I find that Nisha’s non-disclosure of her interest in her mother’s property being the reason for likely not qualifying for a mortgage to purchase the subject property, and non-disclosure of her financial position, are not material facts that are relevant to her motion to obtain a CPL. It is uncontroverted evidence that Nisha and Caleb paid down George and Susan’s mortgage by some $88,000 over some nine years, as well as doing significant renovations to the property to maintain its value at their expense, which ultimately benefited George and Susan being title owners. This is the basis for Nisha’s claims.

Alleged Oral Terms of the Agreements

[40] This section relates to subparagraphs (e) and (f) above.

[41] George’s evidence includes allegations that both agreements included oral terms and “understandings”, such as:

(a) that Nisha and Caleb would be entitled to a specified sum of money on the sale of the property only as long as they remained living together in the home as husband and wife. In addition; (b) that the primary objective of the agreement was to pave the way for Nisha and Caleb to purchase the property outright; (c) that both Nisha and Caleb were financially solvent, were saving money for a home, wished to purchase the property in the near future, were not carrying any major debt, and they would be an acceptable credit risk to the bank.

[42] The oral terms alleged by George to have been part of the agreements are just that – they are his allegations which have not been proven. Clearly, they were not included in the written agreements which, notably, were drafted by George. Thus, Nisha submits that the defendants will be met with the argument based on the doctrine of contra proferentem at trial. In my view, it is unreasonable to expect that Nisha would include in her evidence on the CPL motion that it is the defendants’ position that there were oral terms to the agreements. In fact, the defendants had not delivered their statement of defence when the CPL motion was heard; therefore, Nisha was unaware of the defendants’ legal position to her claim.

[43] For the above reasons, I find that the alleged oral terms are not material facts that are relevant to the motion to obtain the CPL.

Whether to Discharge the CPL with Terms

[44] The defendants have not met their onus of demonstrating that Nisha failed to make full and frank disclosure of the relevant facts on the CPL motion. However, all parties agreed prior to the hearing of this motion to discharge the CPL with the only issue being whether the court should impose terms as to the giving of security.

[45] In my view, Nisha has established that she has a reasonable claim to an interest in the land. Nisha did not contend that the subject property was unique in any respects; however, there is ample evidence that George and Susan intend to sell the property and use the proceeds to support their retirement. I find that there is a real risk that George and Susan may sell the property and dissipate the proceeds of sale such that if Nisha is successful on her claim, she will not be able to collect on the judgment.

[46] For those reasons, I impose the following conditions on the order discharging the CPL:

1. when the subject property is sold, the net proceeds of sale, after paying any encumbrances and legal expenses, shall be paid into court to the credit of this action;
2. any party is at liberty to move for the release of some or all of the proceeds.

[47] I am not prepared to order the sale of the property as suggested by Nisha because I am not satisfied that I have the authority to do so and further, counsel did not make fulsome submissions on this issue, nor are there any submissions in the factums.

Costs

[48] Nisha shall be entitled to her costs on a partial indemnity basis fixed in the amount of $7,500.00, payable within 30 days.

(original signed)_____

Master Lou Ann M. Pope

Released: March 18, 2016