Ghaffari v. Macaulay, 2017 ONSC 5076
MOTION HEARD: 20170823
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Bita Ghaffari and 2428552 Ontario Inc., Plaintiffs
AND:
Kerri Ann Macaulay, Money Gate Mortgage Investment Corp., Money Gate Corp., Morteza Katebian, Payam Katebian, 2450531 Ontario Inc. and Home Trust Company, Defendants
BEFORE: Master Jolley
COUNSEL: David Brooker, Counsel for the Moving Party Defendant 2450531 Ontario Inc. Yigal Rifkind, Counsel for the Responding Party Plaintiffs
HEARD: 23 August 2017
REASONS FOR DECISION
1The defendant 2450531 Ontario Inc. (“245”) seeks an order setting aside the order of Master Muir made 30 May 2017 without notice and discharging the certificate of pending litigation (“CPL”) obtained by the plaintiffs pursuant to that order.
Background
2This action involves a residential fourplex rental property located at 293 Euclid Avenue, Toronto (the “Property”). The Property is owned by the defendant 245. In support of her ex parte motion for the issuance of a CPL, the plaintiff filed an affidavit deposing that she was a 50% shareholder of 245.
3On the materials filed, Master Muir held that “I am satisfied for the purposes of this without notice motion that the plaintiffs have established a reasonable claim to an interest in the subject land by way of a 50% ownership in the corporate owner of the land.” (I note that while the ex parte motion record references “the plaintiffs” and the order granted references “the plaintiffs” in the preamble and gives leave to “the applicant” to obtain the CPL, it is the plaintiff Ghaffari alone who claims the interest in the Property and I shall use “the plaintiff” throughout as a result.)
4As noted, the plaintiff brought her motion ex parte on Wednesday 30 May 2017. Her counsel served counsel for 245 with a copy of the order and the motion record almost a week later, on Tuesday 5 June 2017.
245’s Motion to Discharge the Certificate of Pending Litigation
5245 brings this motion seeking an order discharging the CPL pursuant to section 103(6) of the Courts of Justice Act and Rule 42.02 of the Rules. 245 submits that the CPL should be discharged for four reasons:
(1) the plaintiff does not have a reasonable interest in land because she has no ownership interest in 245, the owner of the Property;
(2) the plaintiff failed to make full and frank disclosure on her ex parte motion;
(3) the plaintiff filed misleading evidence on her motion to obtain the CPL; and
(4) the equities favour a discharge of the CPL.
6The plaintiff submits that she has a reasonable claim to an interest in the Property, that the equities favour maintaining the CPL, and that she made full and frank disclosure on the ex parte motion.
Preliminary Issue
7On 26 June 2017 counsel for 245 advised plaintiff’s counsel that he had instructions to bring a motion to discharge the CPL.
8On 5 July 2017 counsel agreed that 245’s motion to discharge the CPL would be heard 7 weeks later, on 23 August 2017.
9245 agreed to serve the plaintiff with its motion materials by 25 July 2017 which it did. The motion record included two affidavits, one by Payam Katebian (“Payam”) and one by Morteza Katebian (“Morteza”), each sworn 25 July 2017.
10Counsel agreed that any cross examinations would be conducted the week of 8 August 2017.
11Despite correspondence from counsel for 245 following up on any proposed cross examination, the plaintiff chose not to cross examine either deponent on his affidavit.
12On 17 August 2017 plaintiff’s counsel advised 245’s counsel that he was preparing a supplementary motion record, factum and book of authorities and intended to serve it that day or the following day. Mr. Brooker objected to service of any further materials based on the agreed upon schedule.
13No materials were served on August 17 or on August 18 in any event.
14On 21 August 2017, two days before this motion, counsel for the plaintiff wrote to advise that he would be requesting an adjournment of the discharge motion as “we are not able to prepare in time and we are not comfortable proceeding without cross examinations, specifically in light of the accusations of fraud”.
15He then emailed lengthy responding materials to counsel for 245 the evening of 22 August 2017.
16At the outset of the motion, the plaintiff requested an adjournment to permit her to file these responding materials and conduct cross examinations. 245 objected to the adjournment as (a) the Property had been tied up by the CPL for almost 3 months at this point (5 months if the caution, discussed below is taken into account); (b) the parties had agreed on a schedule for any cross examinations, which the plaintiff had not followed; and (c) it would suffer prejudice in the event of an adjournment as the first mortgage on the Property, to the knowledge of the plaintiff, was due next week and could well be adversely impacted by the continued registration of the CPL.
17I denied the plaintiff’s request for an adjournment, accepting the arguments set out above. The plaintiff sought and obtained an ex parte remedy of the court in May 2017. There was no evidence tendered as to why the responding materials could not have been delivered in the timeframe agreed (which was more than 2 months after the CPL order was obtained). The plaintiff cannot effectively unilaterally extend the life of the CPL by advising two days before this motion that she now intends to conduct cross examinations. The time for doing so, as was agreed, was the week of August 8.
18The plaintiff then requested leave to file the responding materials that she served on 245’s counsel by email the evening before the motion and to present Mr. Brooker with a hard copy at the hearing. I denied this request. 245 had not seen these materials and would have been put in the position of seeking an adjournment, which it did not want for the reasons outlined above, or arguing on the basis of materials it had not seen.
19The motion proceeded on the basis of the motion record of 245 served on the plaintiff on 25 July 2017 and on the record that was before Master Muir on the ex parte motion on 30 May 2017.
Issues on the Discharge Motion
20The following issues are before me on this motion:
(1) has 245 demonstrated that there is no triable issue with respect to the plaintiffs’ claim to an interest in the Property;
(2) should the CPL be discharged due to material non-disclosure at the ex parte motion;
(3) should the CPL be discharged due to misleading evidence advanced at the ex parte motion; and
(4) if there is a triable issue, should the court exercise its discretion to discharge the CPL.
Law and Applicable Test to Discharge a CPL
21Sections 103(1) of the Courts of Justice Act is the statutory authority for granting a CPL. Subsection 103(6) grants the court discretion to discharge a CPL in certain circumstances:
103(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.
22Subsection 103(6) confers a broad discretion upon the court to discharge a CPL and requires an examination of the equities between the parties. In exercising its discretion, the court is to examine all of the relevant matters between the parties in determining whether or not the CPL should be vacated (Bhandari v. Barrett [2004] O.J. No. 4856 at para 22).
Issue 1: Has 245 demonstrated that there is no triable issue with respect to the plaintiff’s claim to an interest in the Property?
23The plaintiff’s claim to an interest in the Property is through her claim to be a shareholder of 245.
24On her ex parte motion, the plaintiff asserted in four instances in her affidavit either that she was a “50% shareholder”, “still a shareholder” or “a shareholder” of 245. She did not provide any documentary support for those statements – no emails, correspondence, resolutions, share subscription agreements, etc.
25The plaintiff does not allege that she provided funds for her shares or that she assisted in the negotiations for the purchase or in the financing of the Property. In short, nowhere in her materials does she explain when she obtained her shares, what the consideration was for the 50% interest (whether money or sweat equity), or even where or with whom the discussions took place about her becoming a shareholder.
26245 denies that the plaintiff was ever a shareholder. It acknowledges that she was a director for the period February 2015 to April 2016.
27Payam deposes that the husband of the then owner of the Property approached him to see if he was interested in purchasing the Property. Payam outlines the discussions he had with his father Morteza about the arrangements to finance and carry the Property and the purchase negotiations with the then owner. He states that he and his father made all payments under the purchase agreement for the Property.
28Further, 245 produced portions of its minute book confirming that Payam and Morteza were and are the only two shareholders of 245. While plaintiff’s counsel advised orally that he had been attempting in the last month or two to obtain information from Ms. Macaulay, the individual who signed the resolution allotting the shares to Payam and Morteza, it was open to the plaintiff in support of her ex parte motion to contact Ms. Macaulay then and obtain the shareholders’ register and ledger and any resolutions for the issuance of shares. She then would either have had proof of her share interest or could have advised that court why she believed her name did not appear in the corporate records even though she was a shareholder.
29The court is provided with no explanation about how, when or why the plaintiff became a 50% shareholder in 245 and is left with only a bald assertion that such is the case and minute book excerpts that directly contradict that statement.
30As noted in Dynacorp Canada Inc. v. Curic, 2010 ONSC 2603 at paragraph 15, in determining whether there is a reasonable claim to an interest in land, the court must not simply rely on pleadings or accept affidavits uncritically. It is required to examine the whole of the evidence and determine whether a reasonable claim to an interest in land has been made out.
31There is nothing in the record to support the plaintiff’s assertion that she is a shareholder of 245 and, as such, has an interest in the Property. In fact, the record before me demonstrates that the plaintiff is not a shareholder of 245.
32I find that 245 has met the onus of demonstrating that the plaintiff does not have a reasonable claim to an interest in the Property. On this basis, the order of Master Muir should be set aside and the CPL discharged.
Issue 2: Should the CPL be discharged due to material non-disclosure at the ex parte motion?
33The plaintiff swore her affidavit in support of the motion on 1 May 2017. A month passed before she brought her motion ex parte on 30 May 2017.
34On the ex parte motion the plaintiff tendered as an exhibit a parcel register for the Property. I note that the parcel register was prepared on 20 March 2017, even though the affidavit was sworn 1 May 2017. It was more than a month out of date when it was appended as an exhibit to the plaintiff’s affidavit and was more than two months out of date by the time the ex parte motion was heard. The last entry on the parcel register submitted by the plaintiff is a charge dated 27 September 2016.
35As part of its motion to set aside the CPL, 245 filed its own parcel register. This one was prepared 4 July 2017. It demonstrates that the parcel register filed by the plaintiff on her ex parte motion was inaccurate on the date she filed it with the court.
36Without apparently disclosing it to the court, on the motion, on 31 March 2017 the plaintiff had registered a caution over the Property. The plaintiff did not mention anywhere in the materials before Master Muir that she had obtained this caution or explain the basis she alleged for obtaining it.
37On the one hand, the plaintiff argued before me that nothing turned on the caution and, therefore it did not need to have been disclosed on the ex parte motion and, on the other hand, argued that the caution had the same effect as a CPL, effectively tying up the Property for 60 days, from 31 March 2017 to 30 May 2017.
38This also explains the plaintiff’s leisurely pace in attending in court to argue the CPL motion after having sworn the affidavit a month earlier as she was of the view that she was protected by the undisclosed caution until May 30.
39Had it been brought to the court’s attention on May 30 that the plaintiff already had registered a caution on the Property to protect her interest, it is very likely that the court would not have allowed the plaintiff to proceed ex parte. Had it been told of the caution, the court may well not have accepted the plaintiff’s statement in support of proceeding ex parte that she “believes that if [the defendants] are put on notice of the motion for a certificate of pending litigation they will sell the Property without notice”. This was not in fact the view of the plaintiff, who took the position that the caution served the same purpose as a CPL, protecting the plaintiff for 60 days. There was plenty of time between March 31 and May 30 for the plaintiff to bring her motion on notice.
40On ex parte motions, the court relies on full and proper disclosure of all relevant facts in the supporting affidavit material such that there is a heavy onus on counsel to ensure all relevant facts are before the court (830356 Ontario Inc. v. 156170 Canada Ltd., [1995] O.J. No. 687 (Ont. Ct. Gen. Div.), at para 23).
41Further, Rule 39.01(6) requires that on an ex parte motion "the moving party shall make full and fair disclosure of all material facts and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.”
42I find that the plaintiff failed to fully and fairly disclose all the material facts on her ex parte motion. On that basis alone, I would discharge the CPL (Bat-Amy v. Zribi 2010 ONSC 1272 at para 12).
Issue 3: Should the CPL be discharged due to misleading evidence advanced at the ex parte motion?
43The plaintiff argued on her ex parte motion that Payam and/or Morteza, whom she described as her “fellow shareholders”, had refused or neglected to pay the Home Trust mortgage. She stated that she had “received phone calls from Home Trust Company” and believed that there was a risk that Home Trust would commence power of sale or foreclosure proceedings against the Property as a result of the mortgage default.
44The plaintiff gave no evidence of when these calls took place, what the content of the conversations were, with whom she had spoken, whether she had anything in writing from Home Trust, etc.
45What she did tender in support of her motion was a letter from her lawyer to Home Trust dated 20 April 2017 stating that “We understand that the above noted mortgage … against the Property is in power of sale. A copy of the registered charge is enclosed hereto. Please provide our office with a payout statement as my client is prepared the above noted charge [sic] by way of an assignment.” The plaintiff did not indicate whether Home Trust responded to the letter, whether she followed up or what occurred in the intervening six weeks between the date of that letter and her court attendance.
46On this motion, Payam deposed that the Home Trust mortgage has been in good standing since the time it was registered on title. He provided correspondence from Home Trust dated a few days after his lawyer was given a copy of the order granting the CPL confirming that the Home Trust mortgage was “in good standing and paid as agreed”. The Home Trust letter also indicates that the payments were made by pre-authorized cheque, that the past due amount was $0.00 and that the mortgage was paid through the most recent payment date of 1 June 2017.
47I have two concerns with the plaintiff’s position concerning Home Trust. First, her bald statement that the Home Trust mortgage is in default and that there is a risk of power of sale proceedings is not borne out by the facts.
48Second, the plaintiff relied on this alleged default as a ground of urgency to bring the motion ex parte. It is more likely that the “urgency” of the motion had nothing to do with the Home Trust mortgage and everything to do with the fact that the plaintiff’s undisclosed caution was going to expire the day of the motion, May 30.
49I find that the plaintiff put misleading evidence before the court on the ex parte motion concerning both the Home Trust mortgage and the reason she said the motion was urgent and on that basis, I would discharge the CPL.
Issue 4: If there is a triable issue, should the court exercise its discretion to discharge the CPL?
50If I am incorrect in my finding that there is no triable issue with respect to the plaintiff’s interest in the Property, in considering the Dhunna factors (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (Ont. S.C.), I would exercise my discretion to discharge the CPL.
51The Home Trust mortgage is due 1 September 2017. This was known to the plaintiff who included a copy of the mortgage instrument in her materials.
52I accept that if the CPL remains on title, it may adversely impact 245’s ability to renew the mortgage or refinance elsewhere. There is greater harm to 245 if the CPL remains than to the plaintiff if the CPL is removed.
53Further, there is nothing in the plaintiff’s materials to demonstrate that damages would not be an adequate remedy if she were to succeed. This was an investment property with rental units, whose rental income was used to pay the mortgage. There is also nothing particularly challenging in calculating the damages of fourplex residential rental income property in Toronto.
Conclusion
54In conclusion, 245 has satisfied me that there is no triable issue as to whether the plaintiff has a reasonable claim to an interest in the Property. Had she had a reasonable interest in the Property, I would have exercised my discretion in equity to discharge the CPL. Further, I find the plaintiff obtained her ex parte CPL order on the basis of omissions and misrepresentations and, on that basis, the CPL should be discharged as well (Bat-Amy v. Zribi 2010 ONSC 1272 at para 12).
55For these reasons, I hereby set aside the order of Master Muir made 30 May 2017 and discharge the CPL on the Property.
56If the parties are unable to agree on costs, they may file costs outlines along with written submissions on costs no more than three pages in length within 10 days of this order.
Master Jolley
Date: 25 August 2017