COURT FILE NO.: CV-15-540006-00A1
DATE: 20180514
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Rita Persaud, Plaintiff
AND:
Chabiraj Persaud, Defendant
AND:
Kavita Persaud and Mohini Singh, Third Parties
BEFORE: Nishikawa J.
COUNSEL: Julia Brown, for the Plaintiff/Responding Party
Evan Moore, for the Defendant/Moving Party
No one appearing for the Third Parties
HEARD: May 2, 2018
ENDORSEMENT
Overview
[1] The Plaintiff, Rita Persaud, commenced a proceeding for a declaration of beneficial ownership in a property at 35 Hullmar Drive, Toronto, Ontario (the “Property”). The Defendant, Chabiraj Persaud, is the Plaintiff’s son. He is the registered owner of the Property and has brought a counterclaim for a declaration of beneficial ownership in the Property and repayment of the rental income from the Property. The third parties, Kavita Persaud (“Kavita”) and Mohini Singh (“Mohini”) are the Plaintiff’s daughters.
[2] The Plaintiff resides at the Property. The Defendant has never lived there.
[3] The Defendant brings this motion for payment into court of a fund under r. 45.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Specifically, the Defendant seeks an order requiring the Plaintiff to pay into court all rents received from the Property, as well as occupancy rent for herself, pending the outcome of this proceeding.
[4] For the reasons that follow, the motion is dismissed.
Factual Background
[5] The Property was purchased in 1994 by Kavita and Mohini. The Plaintiff’s evidence is that she paid for the down payment on the Property but was unable to obtain a mortgage. Kavita and Mohini obtained a mortgage and the Property was registered in their names. The Plaintiff and her daughters claim that Kavita and Mohini held the Property as bare trustees, and that the Plaintiff was the beneficial owner.
[6] After the purchase of the Property, the Plaintiff, Kavita, Mohini, and their brother, George, lived at the Property. The Plaintiff’s evidence is that they each paid her $400.00 per month in rent and that this amount was used to pay for the mortgage payments and utilities.
[7] By 2002, Kavita, Mohini and George had all moved out of the Property. In June 2002, the Defendant purchased the Property from Kavita and Mohini. The parties’ accounts of how this purchase came about differ significantly. The transfer document states that title to the Property was transferred from Kavita and Mohini to the Defendant for a sum of $120,000. The Plaintiff claims, however, that no money was paid to Kavita and Mohini. A mortgage was registered in the Defendant’s name for $120,000. The Plaintiff’s position is that when the Property was transferred to the Defendant, it was subject to the trust and she remained the sole beneficial owner of the Property.
[8] The current basement tenant is an arms’ length party who pays the Plaintiff $650.00 per month in rent. Kavita continues to pay the Plaintiff $400.00 per month to store her belongings in a room at the Property. The Plaintiff has always collected the rent, and used to hand the rent over to the Defendant to pay the bills associated with the Property, including the mortgage, utilities, and taxes. The Defendant claims, and the Plaintiff does not dispute, that she stopped handing the rent payments to him in October 2014. At that time, the Plaintiff discovered that the Defendant had placed a mortgage of $500,000 on the Property without her knowledge.
[9] The Defendant claims that the Plaintiff has not been putting any of the rental income toward the maintenance of the Property, and that as a result, the Property has fallen into disrepair. He seeks an order under r. 45.02 “so that there is a fund available to pay carrying costs, including any costs available for upkeep and maintenance of the property.”
[10] On this motion, the parties put forward evidence and arguments that are more relevant to the merits of the proceeding. My findings are strictly limited to the test under r. 45.02. As Master Muir noted in Retrocom Investment Management Inc. v. Davies Smith Developments Inc., 2014 ONSC 6128 (Master), at para. 10, a r. 45.02 motion is not a summary judgment motion and should not involve an extensive examination of all the matters at issue in the proceeding.
Analysis
[11] Rule 45.02 of the Rules of Civil Procedure states:
SPECIFIC FUND
45.02 Where the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just.
[12] The parties agree that the test under r. 45.02 requires that the moving party, usually the plaintiff, but in this case the Defendant, establish that:
(i) The moving party claims a right to a specific fund;
(ii) There is a serious issue to be tried regarding the moving party’s claim to the fund; and
(iii) The balance of convenience favours granting the relief sought by the plaintiff.
Sadie Moranis Realty Corp. v. 1667038 Ontario Inc., 2012 ONCA 475, 111 O.R. (3d) 401, at para. 18, adopting the test from News Canada Marketing Inc. v. TD Evergreen, a Division of TD Securities Inc., [2000] O.J. No. 3705 (S.C.), at para. 14.
[13] The Court of Appeal has stated that relief under Rule 45 is exceptional, and that caution must inform the application of the test: Sadie Moranis, at para. 17. The Court further stated:
Rule 45.02 is part of Rule 45 which, as its title suggests, provides for the interim preservation of property pending litigation. The Rule is a limited exception to the law’s deep-seated aversion to providing a plaintiff with execution before a trial.
Sadie Moranis, at para. 17.
Does the Defendant Claim a Right to a Specific Fund?
[14] The parties differ on the threshold issue of whether the rent payments constitute a specific fund within the meaning of r. 45.02.
[15] As noted by Belobaba J. in 3Genius Corp. v. Locationary Inc., 2016 ONSC 4092, at para. 11, the requirement of a specific fund has two elements: (i) there must be a reasonably identifiable fund of money; and (ii) the plaintiff must be claiming a legal right to that fund and not just making a claim for damages. The requirement is satisfied if the plaintiff shows that a specified and differentiated sum of money exists under the control of the defendant or a third party. Where the court has found a specific fund to exist, there has generally been a fund of money in a trust account, bank account or in the form of an identified receivable: Retrocom Investment, at para. 11.
[16] The rents paid by the basement tenant and Kavita are not a specific fund within the meaning of r. 45.02. This Court has held that anticipated revenues are not monies currently in existence and do not constitute a specific fund: Nazar v. Nazar, 2014 ONSC 1563, at para. 20. While the rents appear to be reasonably identifiable in the sense that there is a steady flow of income from the Property of $1,050.00 per month, they do not constitute a “specified and differentiated sum of money” because the order sought is for future revenues over an indefinite period of time.
[17] The Defendant relies upon Kuleshnyk v. Kuleshnyk, 2017 ONSC 2696, to argue that future rental income can constitute a specific fund. In that case, however, the plaintiff sought preservation of four mortgage payments for specific amounts. The sum of money to be paid into court was specified. In this case, the funds that the Defendant seeks to have paid into court are future revenues, and not a specified sum of money.
[18] Moreover, as the Plaintiff submits, the rents are uncertain because there is no written lease or agreed term with the basement tenant. Both the tenant and Kavita could end the arrangement at any time. As Croll J. stated in Toronto Port Authority v. Canada Auto Parks-Queenpark Ltd., [2000] O.J. No. 4297 (S.C.), at para. 5: “I am not satisfied that the anticipated rent revenue is a specific fund as contemplated by the Rules. There is no certainty as to the monthly revenue that will be generated.”
[19] With regard to occupancy rent from the Plaintiff, the question of whether and how much the Plaintiff paid in occupancy rent in the past is in dispute. The Defendant’s evidence is that the Plaintiff was paying “inconsistent and nominal rents” which ranged from $200.00 to $600.00 per month. The Plaintiff has claimed rental expenses of varying amounts on her tax returns. As there is no specified amount of rent that the Plaintiff was paying, no reasonably identifiable fund exists. Moreover, the very issue in this proceeding is whether the Plaintiff is the sole beneficial owner of the Property. If she is successful, she would not have had to pay occupancy rent to the Defendant. An order for payment into court of occupancy rent would be an example of “execution before a trial” that the case law cautions against: Sadie Moranis, at para. 17.
[20] The rental income and occupancy rent do not constitute a specific fund over which preservation can be ordered under Rule 45.02. As the threshold element has not been satisfied, the motion cannot succeed. In case my finding on the existence of a specific fund is mistaken, however, I consider the remaining elements below.
Is There a Serious Issue to be Tried?
[21] The serious issue to be tried must be with respect to the moving party’s claim to the fund: Retrocom Investment, at para. 10. In this case, the claim to the rental income is closely linked to the main issue in the proceeding of who is the beneficial owner of the Property. This element of the test has been met.
Does the Balance of Convenience Favour Granting the Relief Sought by the Moving Party?
[22] The Defendant argues that the Plaintiff will dissipate the rental income, and points to evidence that the Plaintiff has been drawing down her bank account continuously, making large withdrawals and leaving little cash in the account at the end of the month.
[23] The Plaintiff’s tax returns show that her income over the past number of years has consistently been less than $20,000 per year. While the Defendant complains that the Plaintiff is dissipating the rent on a monthly basis, there is also evidence that supports the Plaintiff’s position that since the Defendant has stopped paying the bills, she is using this income to pay for utilities and other expenses associated with the Property.
[24] The parties’ evidence as to who paid for the mortgage, utilities and other bills associated with the Property is diametrically opposed. It appears that each paid for utilities and other costs at various times. Both the Plaintiff’s and the Defendant’s evidence suggests that irrespective of who was paying for these expenses, it was generally the rental income that was used to pay these expenses. Unless the Plaintiff has access to the rental income, it is unclear how she would pay for the costs associated with the Property. The balance of convenience thus weighs against granting the relief sought.
[25] The Defendant further argues that if the rental income is not paid into court, the Property will continue to fall into disrepair and there will be no funds available to undertake essential maintenance at the end of the proceeding.
[26] This argument does not assist the Defendant in demonstrating that the balance of convenience weighs in his favour. First, payment into court of the rental income will not necessarily prevent the Property from falling into further disrepair. The funds will not be available to either party to maintain the Property. Second, the purpose of r. 45.02 is to preserve the specific fund at issue. In this case, the fund is the rental income, and not the Property that is the subject matter of the proceeding. The r. 45.02 motion is not a means for the Defendant to set aside funds to preserve the Property itself, in the event that he is ultimately successful.
[27] The Defendant has failed to demonstrate “something compelling” on his side of the scale sufficient to outweigh the Plaintiff’s freedom to deal with the rental income: Sadie Moranis, at para. 20. The Defendant’s arguments on the balance of convenience do not favour granting the relief sought.
Conclusion
[28] Based on the foregoing, the Defendant has not satisfied the elements of the test for payment into court of a specific fund under r. 45.02. The motion is dismissed.
[29] The Plaintiff seeks costs of the motion. The fact that the Plaintiff is represented by a community legal clinic under the Legal Aid Services Act, 1998, S.O. 1998, c. 26, does not affect her entitlement to costs: Legal Aid Services Act, s. 46; Cordeiro v. Sebastiao, 2012 ONSC 2291.
[30] Pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1), the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the issue of costs.
[31] Counsel for both parties submitted costs outlines which were very close in amount, approximately $4,500.00 on a partial indemnity basis, including disbursements and HST. I have considered the applicable factors, as well as the principle of proportionality in r. 1.04(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice. I fix costs at $4,000.00, inclusive of disbursements and HST, payable by the Defendant, Chabiraj Persaud, to the Plaintiff, Rita Persaud, within 30 days of the date of this order.
[32] On a final note, this motion was within the jurisdiction of a Master: r. 37.02(2) of the Rules of Civil Procedure. Paragraph 11 of the Consolidated Practice Direction for Civil Actions, Applications, Motions and Procedural Matters in the Toronto Region requires that motions within the jurisdiction of a Master be brought before a Master. Given that the motion was based on a concern about a potential dissipation of funds, I heard this motion in order not to delay the matter by requiring the parties to find another motion date. However, the Practice Direction should normally be followed, as it respects Masters’ jurisdiction and expertise, and promotes efficiency in the overall allocation of judicial resources.
Nishikawa J.
Date: May 14, 2018