CITATION: KAZINAKIS v. EISSA, 2017 ONSC 6448 COURT FILE NO.: CV-17-580111-00CL MOTION HEARD: OCTOBER 26, 2017

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Konstantinos Kazinakis, applicant

v.

Osama Eissa in his personal capacity and carrying on business as “Eissa Group” and United Investors & Development Corporation, respondents

BEFORE: MASTER R.A. MUIR

COUNSEL: Osama Eissa in person, moving party Elizabeth Roberts for the applicant, responding party

REASONS FOR DECISION

[1] This is a motion brought by the respondent Osama Eissa (“Mr. Eissa”) pursuant to section 103(6) of the Courts of Justice Act, RSO 1990, c. C43 and Rule 42.02(1) of the Rules of Civil Procedure, RRO 1990, Reg. 194 for an order discharging a certificate of pending litigation (“CPL”). The CPL was obtained by the applicant on a without notice motion heard by Master Jolley on August 15, 2017.

[2] This is a commercial list application. Pursuant to the order of Justice Lederman of August 11, 2017, it was directed that the applicant’s CPL motion be heard by a master. I am satisfied that this direction would also apply to any motion to discharge the CPL. In any event, neither party raised any objection to this motion being heard by a master.

BACKGROUND

[3] The applicant and Mr. Eissa are business partners. A dispute arose between them in the spring of 2017 that has given rise to this application. The applicant initiated this proceeding as a complainant pursuant to the provisions of the Canada Business Corporations Act, RSC 1985, c. C-44 (the “CBCA”). The applicant seeks various relief pursuant to that statute, including leave to issue the CPL described above.

[4] It appears that in late 2015 the applicant and Mr. Eissa agreed to a form of joint venture with respect to the re-development of property located at Collinsgrove Road and Lawrence Avenue East in the City of Toronto (the “Project”). The applicant and Mr. Eissa incorporated United Bunkers Investors Corporation (“UBIC”) to carry out the joint venture. Mr. Eissa and the applicant are each 50% shareholders in UBIC.[^1]

[5] The Project involved seven separate properties which needed to be assembled in order for development to move ahead. Mr. Eissa was the owner of one of the properties, located at 4240 Lawrence Avenue East (the “Eissa Property”). The other six properties would have to be purchased as part of the parties’ joint venture. Arrangements were then made for the purchase, or at least attempts to purchase, the other six properties using various corporate subsidiaries of UBIC.

[6] The Eissa Property was to be sold to UBIC. To that end, Mr. Eissa and UBIC entered into an agreement of purchase and sale dated August 11, 2016, although there is a dispute over when it was actually signed (the “APS”).

[7] The APS appears to provide for a completion date of April 20, 2017. Mr. Eissa’s evidence is that the APS was initially scheduled to be completed in October 2016. The closing was then postponed to January and February 2017 and finally to April 20, 2017. However, all of the copies of the APS produced by the parties refer to a completion date of April 20, 2017.

[8] Mr. Eissa’s evidence is that the applicant failed to arrange for UBIC to close the transaction on April 20, 2017 and did not seek a further extension of the closing date. The applicant tells a different story. The applicant’s evidence is that prior to the closing date he requested detailed information from Mr. Eissa regarding site plan approval. The applicant states that this information was not provided. The applicant followed up with the city and learned that only general discussions had taken place. The applicant also alleges that it was Mr. Eissa who refused to close at that time unless the applicant provided him with a larger share of the potential profits from the Project.

[9] What happened next is not clear. There is correspondence in evidence to suggest that the closing date was moved to May 24, 2017. On that date, the purchaser’s lawyer wrote to Mr. Eissa’s lawyer stating that the transaction was scheduled to close that day but the vendor failed to close the transaction and was otherwise unavailable. Mr. Eissa’s lawyer responded the following day by stating that certain conditions remained to be satisfied before the APS could be finalized. That letter does not state what those conditions were. As well, the letter does not state that it was the purchaser that failed to close, was without funds or that the APS was no longer of any effect.

[10] In any event, the APS was not completed in May 2017 or since that date. Title remains in the name of Mr. Eissa. The applicant obtained the without notice CPL from Master Jolley on August 15, 2017. Mr. Eissa then brought this motion seeking an order discharging the CPL which was heard by me on October 26, 2017.

APPLICABLE LAW

[11] The test to be applied on a motion to discharge a CPL is well settled. In Perruzza v. Spatone, 2010 ONSC 841 (Master), Master Glustein concisely sets out the factors the court is to apply. At paragraph 20 of Perruzza, Master Glustein identifies those considerations as follows:

(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., 2007 CarswellOnt 756 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. - Comm. List) 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 CanLII 6832 (ON CA), 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, 1987 CarswellOnt 551 (S.C. - Mast.) 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., 1991 CarswellOnt 460 (Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CanLII 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).

[12] Perruzza was cited with approval by Master MacLeod in his decision in Interrent International Properties Inc. v. 1167750 Ontario Inc., 2013 ONSC 4746 (Master). At paragraph 15 of Interrent Master MacLeod summarized this law as it applies to a proceeding where a party is seeking specific performance:

The following principles may be distilled from the case law:

•The first question is whether or not the claim for specific performance has merit. On an ex parte motion the threshold is low. The court must simply be satisfied that the claim is plausible and there is sufficient evidence to show that there is a serious issue.

• On a contested motion, the court will review all of the evidence put forward by both parties and determine on the totality of the evidence before it whether or not there is a triable issue.

• In making this determination the court need not accept the pleadings or the affidavit evidence uncritically but will examine all of the evidence after cross examination to determine whether or not the claim has a reasonable prospect of success.

• Reasonable prospect of success means not only a reasonable prospect of proving breach of contract but also succeeding in obtaining the equitable remedy of specific performance. Thus the court must be satisfied that damages would not be an appropriate remedy.

• Even if the plaintiff has a potential case for specific performance the court may still refuse the CPL if it would be unjust to order it. The court must consider the equities of granting this form of interim relief. This is not a mechanical application of a test but an exercise of discretion to achieve a just result.

• Factors the court may consider include the strength of the case, the uniqueness of the land, the adequacy of damages as a remedy, whether the CPL appears to be for an improper purpose, and the balance of convenience.

• The court may impose terms whether it grants or withholds a CPL.

[Footnotes omitted]

[13] These are the factors and principles I have considered and applied in determining the issues on this motion.

ANALYSIS

[14] I am satisfied, for the purposes of this motion, that the applicant has established a triable issue to a reasonable claim to an interest in the Eissa Property. The applicant seeks specific performance of the APS. The applicant is a 50% shareholder of UBIC, the purchaser of the Eissa Property pursuant to the APS. The applicant seeks various remedies related to UBIC pursuant to the CBCA. The applicant has an interest in the Eissa Property based on the APS, his interest in UBIC and the overall joint venture agreed to by the parties.

[15] The reason for the failure of the parties to complete the closing of the APS remains unclear. Mr. Eissa takes the position that the applicant simply failed to cause UBIC to complete the transaction in April 2017 and thereafter failed to request an extension of the closing date. Mr. Eissa suggested that the applicant did not have the necessary funds available at the time of the scheduled closing. However, there is at least some evidence that the applicant had made some arrangements for financing for the purchase. This evidence is in the form of what appear to be mortgage commitment letters from two mortgage lenders.

[16] Mr. Eissa’s position on this motion is also inconsistent with his lawyer’s letter of May 25, 2017 which stated that the transaction did not close because certain conditions needed to be satisfied before the agreement could be finalized. That letter does not mention the inability of the applicant or UBIC to fund the transaction. At no point did either side take the position in writing that the APS was at an end.

[17] The applicant has stated that the transaction did not close because Mr. Eissa was demanding a greater share of the profits from the proposed development. However, there is little evidence to support this assertion other than the applicant’s statements to that effect.

[18] No cross-examinations were conducted in connection with this motion. The court is left with two very different stories with little documentary evidence to assist in determining which version of events is most accurate. For these reasons, I have concluded that there exists a triable issue with respect to whether the APS remains extant and therefore whether the applicant has a reasonable claim to an interest in land. To put it simply, the dispute involving the APS cannot be determined on the basis of the paper record before the court on this motion.

[19] It is also important to note that both sides have described the Eissa Property as unique. It is apparently crucial to the development of the Project as a whole given its location. The applicant seeks specific performance of the APS. Given the position taken by both parties, it appears that there exists a potential for the applicant to obtain the equitable remedy of specific performance in these circumstances. The applicant is seeking this remedy rather than damages.

[20] Mr. Eissa also argued that the CPL should be discharged on the basis of material non-disclosure. I agree with Mr. Eissa that material non-disclosure may, by itself, be grounds to discharge a CPL. However, I see no evidence of such non-disclosure on the motion before Master Jolley.

[21] Mr. Eissa pointed to changes apparently made by the applicant to the corporate structure of various subsidiaries of UBIC. He made reference to tax and utility bills being altered, to mortgages being improperly placed on other joint venture properties by the applicant, to past misrepresentations, to improper withdrawals from UBIC bank accounts and misleading statements about who hired the architect to assist with the Project. The applicant’s responding affidavit purports to explain these actions. However, in my view, it is not possible to determine the propriety of these actions on this motion based on the competing affidavit evidence, especially without cross-examinations.

[22] More importantly, however, I do not view any of these allegations as material to the question of whether the without notice order would have been made by Master Jolley if she had been aware of these matters. They are certainly relevant to the issues raised in the application as a whole but I do not view them as material to the issue of whether the applicant has made out a reasonable claim to an interest in the Eissa Property. In my view, that question turns on the narrow issues involving the APS for the Eissa Property and the failure of the parties to complete the transaction as scheduled.

[23] Mr. Eissa also argued that the applicant had altered a copy of the APS to insert his name as purchaser rather than UBIC. The copy of the APS before Master Jolley did have the applicant’s name added to the area of the APS setting out the name of the purchaser. The applicant stated in his evidence that he simply wrote his name on his copy of the APS. It does appear to be an unusual place for the applicant to write his name if he was simply marking the copy as belonging to him. However, Master Jolley would not have been misled by that alteration of the document as the affidavit from the applicant that was before her was clear in describing UBIC as the purchaser of the Eissa Property.

[24] Mr. Eissa also submitted that there has been delay on the part of the applicant in terms of advancing this application. No date has been set for the hearing of the application. However, I do not view the delay as particularly lengthy in the circumstances of this proceeding. The notice of application was issued on August 2, 2017. The CPL order was obtained on August 15, 2017. The applicant’s lawyer was in communication with a lawyer consulted by Mr. Eissa between August 21, 2017 and August 31, 2017. Mr. Eissa was served with the without notice motion materials on September 10, 2017. I do not view this brief delay as sufficiently lengthy to support a discharge of the CPL.

[25] Finally, there is no evidence of prejudice to Mr. Eissa if the CPL remains in place pending the hearing of this application. I note that Mr. Eissa advised the court that he has no intention of selling the Eissa Property. During the course of argument, Mr. Eissa suggested that the CPL was affecting his credit and banking relationships. Mr. Eissa also stated that the CPL was causing difficulty with respect to mortgage financing on the Eissa Property. However, none of that information was properly placed in evidence. Mr. Eissa simply made these statements as part of his submissions and then attempted to hand up copies of documents. I refused to accept this evidence. I appreciate that Mr. Eissa is not a lawyer. However, fairness requires at least some level of formality. If Mr. Eissa intended to rely on additional evidence it should have been provided to the applicant and the court in the form of an affidavit and in advance of the hearing rather than in the middle of argument.

CONCLUSION

[26] For these reasons, I have concluded that it is just in the circumstances of this proceeding that the CPL remain in place pending the hearing of this application.

[27] Mr. Eissa’s motion is therefore dismissed. If the parties are unable to agree on the issue of the costs of this motion they shall provide the court with brief submissions in writing by no later than November 27, 2017. These submissions shall be filed with masters’ administration, 393 University Avenue, 6th Floor, Toronto.

October 27, 2017

Master R.A. Muir

[^1]: UBIC is not a party to this application. One of the respondents is identified in the title of proceedings as “United Investors and Development Corporation”. This would appear to be a misnomer as the body of the notice of application makes several references to the “respondent UBIC” and seeks various relief in respect of that corporation. No relief is sought in respect of United Investors and Development Corporation. It appears that United Investors and Development Corporation is an Ontario corporation and may be a wholly owned subsidiary of UBIC. In any event, this apparent misnomer was not raised by Mr. Eissa in his written materials or in his oral submissions.