COURT FILE NO.: CV-15-1493-00 DATE: 2017 01 11

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ELIZABETH SAMUEL T. Pochmurski, counsel for the Plaintiff Plaintiff

• and -

OMOTAYO ORE MUTI C. Yehia, counsel for the Defendant Defendant

J. Charland, counsel for the Non-party Mortgagee

HEARD: December 22nd, 2016

REASONS FOR JUDGMENT

LEMAY J

[1] This is a motion brought by the Plaintiff, Elizabeth Samuel, against the third party mortgagee, Wolfson Law Professional Corporation (“Wolfson Law”) for a certificate of pending litigation (“CPL”) to be registered against the property municipally known as 69 Pauline Crescent, Brampton Ontario.

[2] For the reasons that follow, the motion is granted, and a Certificate of Pending Litigation will issue against this property.

[3] I also note that the Defendant, Omotayo Ore Muti, brought a motion returnable on December 22nd, 2016 for security for costs against the Plaintiff. Given that the appearance on December 22nd, 2016 was on a regular motions list, the time limit for hearing the parties was one hour. Given the complexities of the CPL case, there was no way to address both motions in one hour. As a result, the security for costs motion was adjourned to January 13th, 2017 at 10:00 am.

Background Facts

a) The Parties to the Action

[4] The Plaintiff in this action is Ms. Elizabeth Samuel. She has lived at 69 Pauline Crescent in Brampton since at least 2009. She became the registered owner of the property on September 16th, 2009.

[5] In May of 2011, she transferred the property to the Defendant, Mr. Muti. Her explanation for this transaction was that she needed to restructure her finances so she could pay for her children’s university education. The Affidavit materials that the Plaintiff provided on this motion suggest that the Defendant did not provide any consideration for this transfer.

[6] The Plaintiff alleges that, at the time she transferred the property to the Defendant, she had an agreement with him (“the first agreement”) to repurchase the property at the fixed price of $364,000.00, less a loan that she had made to the Defendant in the sum of $33,387.30. By way of a Statement of Claim served in March of 2015, she sought enforcement of this agreement.

[7] The Plaintiff did not pursue her claim aggressively. Indeed, her counsel advised counsel for the Defendant, Wolfson Law (the same firm as the firm that holds the mortgage), that a Statement of Defence was not required, and that the Defendant would not be noted in default. Indeed, a defence was not delivered in this action until November 25th, 2016. In addition, the claim for a CPL respecting the property was not advanced until October of 2016.

[8] I have received correspondence showing that there was a dispute between the Plaintiff and the Defendant on the terms of the re-conveyance of this property. Specifically, there were issues related to a construction lien that the Plaintiff had registered against the property, the property tax arrears and the loan that the Plaintiff had allegedly made to the Defendant. The factual issues behind these issues cannot be resolved on this motion.

[9] In addition, the Plaintiff provided evidence on this motion that she had come to another agreement (“the second agreement”) with the Plaintiff to repurchase the property. This agreement was made after the correspondence between the parties in 2013 and 2014 addressing the issues set out in the previous paragraph. This agreement was scheduled to close in May of 2015. However, it did not close, and the Plaintiff claims that the failure to close the transaction was as a result of the Defendant’s failure to provide her with confirmation of his mortgage payments.

[10] There have been other allegations made about this second agreement. I cannot resolve those issues on this motion, as I do not have any evidence from the Defendant on those specific issues. I note that the Defendant was served with this motion, but has not filed any materials relating to this motion and his current counsel, Chad Yehia, did not participate in the argument, although he was present in Court.

[11] I also note that the Plaintiff is not seeking specific performance of the second agreement. Instead, she is seeking specific performance of the first agreement. However, there has been other litigation between the Plaintiff and the Defendant, and I will now review that litigation.

b) The Other Litigation Between the Plaintiff and the Defendant

[12] The Defendant attempted to evict the Plaintiff from the property sometime in 2013 and/or 2014. I was not provided with many details about this proceeding, but I understand that there was a Landlord/Tenant proceeding brought by the Defendant, which was unsuccessful.

[13] I also understand that the Defendant brought an Application in Court File No. CV-14-3639-00. While I do not have all of the information about that application, I am aware that Skarica J. made an Order on September 23rd, 2014 directing the Plaintiff to pay the Defendant the sum of $2,000.00 per month in rent for the property, as well as $5,000.00 in costs. I am aware that this Order continued in effect.

[14] Wolfson Law, the Mortgagee, advises that the Plaintiff has failed to make the payments required under this Order. Indeed, the records filed by the Mortgagee show that there is in excess of $38,000.00 still to be paid on account of this Order. I also acknowledge that the Plaintiff has made payments towards fulfilling the Order of Skarica J., either personally or through garnishment, in excess of $20,000.00. I do not know whether this money has been provided to the Defendant, or whether it remains in the trust account of Wolfson Law. The Order certainly envisioned it being paid into Wolfson Law’s trust account.

[15] This brings me to the question of Wolfson Law’s mortgage. Wolfson Law represented the Defendant in these various actions, and was counsel for the Defendant when he received the Statement of Claim in March of 2015. The firm is also the Mortgagee in this case.

c) The Mortgage and the Alleged Progress of the Litigation

[16] The Defendant entered into a mortgage agreement with his then law firm, Wolfson Law in June of 2015. This mortgage was registered against the property after the Plaintiff had served her Statement of Claim on the Defendant, and after Wolfson Law was aware of the claim. There is no direct evidence before me of the value of the mortgage or of the terms of this mortgage. The Affidavit that Mr. Wolfson filed on this motion simply states that “[the Defendant] had incurred significant accounts, which remained outstanding.” The only other information I have is the parcel register for the property, which shows that the mortgage is registered for $50,000.00.

[17] On August 10th, 2015, the Mortgagee obtained a default judgment against the Defendant, with his consent. The Plaintiff filed this default judgment as evidence on this motion, and it is for an amount of $20,062.16, plus costs and two (2) percent interest per year. It also gives Wolfson Law possession of the property. Based on that judgment, Wolfson Law then served the Plaintiff with a Notice of Possession. I find that the value of Wolfson Law’s mortgage is no more than $20,062.16. Had it been more than that amount, Mr. Wolfson’s affidavit would have disclosed that fact.

[18] The Plaintiff challenged this Notice of Possession, and sought an ex-parte Order staying her eviction indefinitely. That Order, which was sought in the mortgage proceedings between the Defendant and Wolfson Law (Court File No. CV-15-3475-00) was granted by Bielby J. on December 17th, 2015.

[19] Wolfson Law moved to set aside this Order before Barnes J. Ultimately, Barnes J. lifted the stay imposed by Bielby J., on the basis that the Plaintiff, Ms. Samuel, had not made full and fair disclosure to the Court. In particular, she had failed to disclose to the Court, inter alia, the fact that Skarica J. had made an Order respecting rent, and that the Plaintiff was not in compliance with that Order.

[20] The Plaintiff then sought to appeal this decision to the Ontario Court of Appeal, and sought an extension for the time limits to advance that appeal. She was granted this relief by Benotto J.A. in an endorsement dated March 23rd, 2016.

[21] As one of the terms for a stay of the Order of Barnes J., Benotto J.A. ordered that the Plaintiff pay the monies owing under the Skarica Order within fourteen (14) days. The Plaintiff failed to make these payments, and the Court of Appeal quashed her appeal as being moot on September 16th, 2016.

[22] The Court of Appeal also ordered costs against the Plaintiff and payable to Wolfson Law in the sum of $15,000.00 inclusive of HST and disbursements. These costs have not been paid.

d) The Notice to Vacate and Subsequent Events

[23] Once the Court of Appeal released its decision in September of 2016, the Mortgagee, Wolfson Law, moved to sell the property, and delivered a notice to vacate to the Plaintiff dated October 11th, 2016. That notice to vacate was effective October 28th, 2016. I understand that the Plaintiff is no longer living in the property.

[24] As a result of this notice, the Plaintiff brought a motion for a CPL before Master Wiebe on October 27th, 2016. That motion was served on the Defendant, but not on the Mortgagee.

[25] Master Wiebe determined that this motion should be heard on notice to the Mortgagee, but also directed that a caution be registered on title until the hearing of this motion. At the conclusion of argument, I directed the parties that the caution should continue to be registered on title until I rendered my decision.

The Law

[26] Section 103 of the Courts of Justice Act permits the Court to direct that a Certificate of Pending Litigation be registered against land when a proceeding has been commenced claiming an interest in that land. Section 103(6)(a) sets out some of the statutory factors that a Court will consider in determining whether a CPL should be discharged, as follows:

Order discharging certificate

(6) 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.

[27] There are also common-law factors that apply when considering CPL’s. In Perruzza v. Spatone, 2010 ONSC 841, Master Glustein (as he then was) succinctly set out the factors that the Court is to apply in deciding whether to discharge a CPL (at paragraph 20):

(ii) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber at para. 62);

(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CarswellOnt 219 (C.A.) at para. 20);

(iv) Factors the court can consider on a motion to discharge a CPL include (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 if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna at paras. 10-18); and

(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc.; Clock Investments Ltd. v. Hardwood Estates Ltd. at para. 9).

[28] The test to be applied on a motion brought on notice to issue a CPL is the same as the test that is applied on a motion to discharge a CPL. (180 University Residential Limited Partnership v. Yours Asia Corp., 2014 ONSC 1761)

[29] I will now analyze the relevant facts in this case.

Analysis

[30] In considering this motion, I start with the first question which is whether there is an issue in land. To satisfy this test, all the Plaintiff must demonstrate is that there is a triable issue. As noted in Kalia v. Landmortgage Corp. (Master MacLeod, as he then was)):

The plaintiff must demonstrate that there is a substantial issue to be tried and the equities favour registration of the plaintiffs’ claim pending trial or other disposition of the action.

[31] In this case, specific performance is a remedy that the Court could award to the Plaintiff if she was successful in her claim. It may or may not be a likely outcome, but it is certainly a possible outcome. As a result, this portion of the test is satisfied. I note that Wolfson Law argues that specific performance will not be possible because the Defendant cannot redeem the equity of redemption in the property. I reject that argument for reasons set out in my analysis of the equities, below.

[32] This brings me to the statutory and common law factors that I must consider. First, there is the issue of the Plaintiff’s failure to prosecute the proceeding with reasonable diligence. I agree with Wolfson Law that the Plaintiff’s failure to move this action forward is a concern. This concern formed a significant part of the reasons that Barnes J. lifted the stay of the eviction that Bielby J. had granted to the Plaintiff. This is clearly a factor that supports the denial of a CPL in this case.

[33] However, it must be remembered that the prejudice that Wolfson Law would suffer with the Plaintiff remaining in the property is greater than the prejudice that Wolfson Law would suffer now that it has quiet enjoyment of the property.

[34] This brings me to the other factors to consider. First, it is clear that the Plaintiff is not a shell corporation. However, there are concerns about the Plaintiff’s failure to comply with the Order of Skarica J. and the costs endorsement of the Court of Appeal. Those factors raise some concerns about the Plaintiff’s ability to pay any award that is made against her. Again, this is a factor that supports Wolfson Law’s position that the CPL should be denied.

[35] This brings me to the question of whether the property is unique. Related to this factor is the nature of the transaction between the parties and whether there is a reasonable claim in damages. In analyzing this part of the test, I am not required to resolve the question of whether the Plaintiff should be entitled to specific performance. Rather, all I need to determine is whether the Plaintiff can establish whether there is substantive issue to be tried issue that may entitle the Plaintiff to that remedy (see Kalia v. Landmortgage Corp., supra, at paragraph 4). In this case an issue exists.

[36] The granting of specific performance is a case-by-case determination. In this case, the Plaintiff may be able to claim specific performance based, inter alia, on her long history with the property. Even if there are other similar properties, the Plaintiff may be successful in her argument that she should have possession of this property. However, it is not for me to determine this issue, except to note that this is a factor that favours the granting of the CPL.

[37] This brings me to the equities between the parties. Related to this question is the issue of what harm will each party suffer if the CPL is or is not granted.

[38] In the case of the Plaintiff, the harm that she will suffer if the CPL is not granted is quite clear. Wolfson Law will move to sell the property to a third party and the Defendant will not take any steps to stop the sale. In other words, her ability to claim specific performance to obtain possession of the home she lived in for the last seven years will be irretrievably lost. This is a factor that favours the granting of a CPL.

[39] I now turn to Wolfson Law’s argument that they will suffer “irreparable harm” if a CPL is granted without security. I acknowledge that Wolfson Law will be inconvenienced by a CPL. However, there is very little evidence of any actual prejudice in this case. In that respect, I note the following:

a) There is no indication of any carrying costs that Wolfson Law is having to bear. While I am sure there are carrying costs, I cannot find that the absorption of those carrying costs is an irreparable harm when I have no evidence of what those costs are

b) There is no evidence of the actual value of the house as compared to the debts secured against it. In other words, there is no evidence that the mortgagee in possession of the house will not be able to recover any expenses that it incurs in managing the house out of the proceeds of sale when the house is eventually sold.

c) Wolfson Law claims, and the Defendant supports, the view that the Defendant cannot redeem the equity of redemption in the house. However, there is no direct evidence of this fact in the materials before me. I have no information, other than that provided by Wolfson Law, of the Defendant’s financial circumstances.

[40] In addition, it is clear that Wolfson Law knew of the Plaintiff’s claim for the property when it took and registered the mortgage. To that end, I note that Wolson Law claims that “at law, [Wolfson Law] was only put on notice of Samuel’s claim for an interest in land upon her motion to register a CPL in October of 2016.” That is, technically, correct. However, Wolfson Law was well aware of this claim as it received a copy of it, and Mr. Wolfson corresponded with the Plaintiff’s counsel about it before Wolfson Law took out its mortgage. While at law Wolfson Law did not become aware of the Plaintiff’s claim until October of 2016, in fact Wolfson Law and its principal were well aware of this claim before registering the mortgage.

[41] One of the concerns I have in this case is the nature and timing of the transaction that resulted in Wolfson Law obtaining possession of this property. Shortly after being sued for enforcement of an agreement to transfer property to the Plaintiff, the Defendant grants his lawyer a mortgage, and then consents to default judgment. The Mortgagee law firm then claims that the Defendant cannot redeem the equity of redemption, which has the effect of putting the property claimed by the Plaintiff out of her reach as a result of what may be a non-arms-length transaction.

[42] As Barnes J. noted in his endorsement in this matter:

I am concerned that the Defendant is in effect using a debt secured to his former lawyers, to in effect, evict the non-party occupant. The Defendant has tried to evict the non-party occupant in the past but was unsuccessful.

[43] In light of these concerns, and my concern that the mortgage may not be an arms-length transaction, I do not view the explanations provided by Wolfson Law for this transaction as being sufficient, standing on their own.

[44] More generally, the materials filed by both sides are unsatisfactory, in that neither side has provided the Court with a complete picture of the events in this case. The Plaintiff failed to provide all of the details of her unsuccessful appeal in this matter to the Court. Wolfson Law failed to provide any direct evidence of the value of the mortgage, the reasons for the mortgage, or the potential losses that Wolfson Law would suffer if the CPL were granted.

[45] In the circumstances, I cannot be certain as to what is occurring between these parties. However, in my view the concerns about the Plaintiff’s rights to the property and the nature of the transaction between the Defendant and his then law firm, outweigh the problems with the timing of the Plaintiff’s request for a CPL and any prejudice that Wolfson Law might suffer if a CPL was granted in this case.

[46] As a result, a CPL will be registered against the property.

Disposition and Costs

[47] A CPL is to be registered against the property known municipally as 69 Pauline Crescent, Brampton Ontario.

[48] The Plaintiff is to provide her costs submissions for the costs of the motion within seven (7) days of the release of these reasons. Those costs submissions are not to exceed two (2) double-spaced pages, exclusive of offers to settle, case-law and bills of costs.

[49] The Mortgagee is to provide its reply costs submissions within seven (7) days of receiving the Plaintiff’s submissions. Again, those costs submissions are not to exceed two (2) double-spaced pages, exclusive of offers to settle, case-law and bills of costs.

[50] In the event that the Plaintiff is seeking costs against the Defendant as well for this motion, then her submissions are to be included in the submissions set out above, and no extra pages are permitted. The Defendant will have the same time to reply to the submissions as the Mortgagee, and will be limited to the same page length.

[51] There shall be no reply submissions on costs without my leave.

LEMAY J

Released: January 10, 2017