Court File and Parties

COURT FILE NO.: CV-18-596030 MOTION HEARD: 29 August 2018 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Sun Rise Elephant Property Investment Corporation, Plaintiff AND: Peter Luu and Adrienne Eunyin Wong, Defendants

BEFORE: Master Jolley

COUNSEL: Brad Vermeersch, Counsel for the Moving Party Plaintiff Kelly Hou, Counsel for the Responding Party Defendants

HEARD: 29 August 2018

Reasons for Decision

[1] The plaintiff brings this motion pursuant to section 103 of the Courts of Justice Act, R.S.O. 1990, c.C.43 and Rule 42.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for an order granting it leave to issue a certificate of pending litigation on two properties, one, 9 Stollery Pond Crescent, Suite 501, Markham, Ontario (“Unit 501”), owned by the defendant Peter Luu (“Luu”) and the other, Unit 301 in the same development (together, the “Units”), owned by the defendant Adrienne Wong (“Wong”).

[2] The factors the court is to consider when deciding a motion brought on notice seeking leave to issue a certificate of pending litigation are found in Perruzza v. Spatone 2010 ONSC 841 at paragraph 20, 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 in 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. Lst) at para. 42);

(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 as “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 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 (9311473 Ontario Ltd. v. Coldwell Banker Canada Inc. 1991 CarswellOnt 460 (Gen. Div.) Clock Investments Ltd. v. Hardwood Estates Ltd., , 1977 CarswellOnt 1026 (Div.Ct.) at para.9.

Issue 1: Has the plaintiff established a triable issues as to an interest in land?

[3] Case law is clear that a claim for a constructive trust over property may give rise to an interest in land. (See First Leaside Wealth Management Inc. v. Phillips 2012 ONSC 5443 at paragraph 36)

[4] In its original statement of claim, the plaintiff did not claim an interest in the Units. Its claim was for damages against Wong in the amount of the deposit the plaintiff allegedly paid for Unit 301 and damages against Luu in the amount of the deposit for Unit 501.

[5] The plaintiff then had issued a Second Fresh as Amended Statement of Claim. In this amended pleading, it claims a declaration that Wong and Luu hold the “money improperly acquired” [i.e. the deposits paid by the plaintiff] pursuant to a resulting and/or constructive trust due to conversion of or unjust enrichment relating to Unit 301 [and 501 for Luu].” It claims in the alternative “an order tracing, accounting and for disgorgement of the funds and assets improperly acquiring by Wong and Luu”. Finally, it claims a certificate of pending litigation against each of the Units.

[6] The plaintiff alleges in its Second Fresh as Amended Statement of Claim that it used nominee purchasers to purchase several pre-construction condominiums in the Stollery Road development from the developer. The nominees signed the agreements of purchase and sale and held the units in trust for the plaintiff pursuant to a separate trust agreement. The plaintiff paid the deposits for the Units, which total the amounts it now claims from the defendants.

[7] The claim goes on to allege that starting in August 2016 Wong occupied Unit 301 and Luu occupied Unit 501. Each paid $2,000 a month in rent. The plaintiff alleges that it paid a monthly fee as well. In November 2016, it is alleged, the nominees, without the knowledge or consent of the plaintiff, assigned the agreements of purchase and sale they had signed to Wong and Luu. Although the claim alleges that this was in breach of the fiduciary duties owed by the nominees to the plaintiff, the nominees have not been named as defendants. The plaintiff alleges that the defendants knew or were wilfully blind to the fact that the nominees held the Units in trust for the plaintiff.

[8] The closing occurred on 17 December 2016, to the knowledge of the plaintiff. The plaintiff alleges that it met with the defendants before closing and the defendants that they would repay the deposit moneys to the plaintiff. When the plaintiff followed up after closing, the defendants refused to repay the deposit funds or sign a promissory note that they allegedly had agreed to in favour of the plaintiff to secure the repayment.

[9] As noted in Cambone v. Okoakih 2016 ONSC 792 at paragraphs 172-4:

Where money to purchase an asset is furnished by one person, but the asset is placed in the name of another, the doctrines of resulting trust and constructive trust come into play. Resulting trusts can arise in a number of ways, but of relevance here is where an asset is purchased by one person and placed in the name of another. In that situation, it is presumed that the recipient holds his or her interest in trust for the person who purchased the asset and provided the funds for it, unless it was intended that there be a gift….. A constructive trust can also arise in a number of ways, but fundamentally it has been applied to prevent unjust enrichment, which arises where there has been enrichment of one party; corresponding deprivation to another; and no juristic reason for the enrichment and corresponding deprivation: see Waters, at pp 534-540.

[10] It is not the role of the court on this motion to determine whether the plaintiff will succeed at trial in its claim for a constructive trust. On this motion, the plaintiff must demonstrate that it has a prima facie case or has raised a triable issue that the remedy of a constructive trust is available.

[11] On the basis of the record before me, there is sufficient evidence to allow me to conclude that there is a triable issue with respect to an interest in the Units on the basis of a resulting and/or constructive trust. I am further satisfied that a declaration of a constructive and/or resulting trust and a tracing of funds are possible remedies at trial.

Issue 2: Relevance of the Equity Factors

[12] The plaintiff argued that, once it had established that there was a triable issue with respect to an interest in land, the inquiry ends and it should be granted leave to issue a certificate of pending litigation; that is there is no subsequent inquiry concerning the Dhunna factors or the equities. I disagree. The obligation to establish a triable issue as to an interest in land is the gateway requirement for a motion for a certificate of pending litigation. If that hurdle is met, as it has been here, the court is then required to determine, based on the overall circumstances of the case including the non-exhaustive factors set out in paragraph 2 above, whether it is just and equitable for the court to exercise its discretion to grant leave to issue a certificate of pending litigation.

[13] This two-part approach was taken by Lane, J. in Waxman v. Waxman, 1991 CarswellOnt 3452. In that case, the plaintiff sought certificates of pending litigation on two properties. Lane, J. first looked to determine whether the plaintiff had a reasonable claim to an interest in the land. Then he went on to consider the equities, in particular the Dhunna factors. The court commenced its analysis as follows:

Principles to be applied

6 Section 116(6) of the Courts of Justice Act provides that an order discharging a certificate may be made based on a number of factors. These include whether the claimant claims a sum of money in place of or as an alternative to the interest in the land; whether the plaintiff has a reasonable claim to the interest in the land; whether the proceedings have been prosecuted with reasonable diligence; whether the interests of the plaintiff can be adequately protected by another form of security and any other ground that is considered just. These considerations have been elaborated on in certain cases, in particular Sandhu v. Braebury Homes Corporation et al. (1986) 8 C.P.C. (2d) 22 at 26 and 572383 Ontario Inc. v. Dhunna (1987), 24 C.P.C. (2d) 287. The test for granting a certificate is the same as the test on a motion to discharge one: Home Builder Inc. v. Man-Sonic Industries Inc. (1987), 22 C.P.C. (2d) 39.

7 It is appropriate to begin with a consideration of the requirement that the claimant have a "reasonable claim to the interest in the land claimed", and to follow up with a consideration of the equities, in particular the 8 factors suggested in 572383 Ontario Inc. v. Dhunna, supra. At the end of the day, the governing test will be that set out by the Divisional Court in Clock Investments Ltd. v. Hardwood Estates Ltd. (1977), , 16 O.R. (2d) 671 where Steele J. said:

...the governing test is that the judge must exercise his discretion in equity and look at all of the relevant matters between the parties in determining whether or not the certificate should be vacated.

[14] This was also the approach followed by Sutherland, J. in 931473 Ontario Ltd. v. Coldwell Banker Canada Inc. 1991 CarswellOnt 460. In that case the plaintiff pleaded that the defendants held certain property in trust for it. It obtained a certificate of pending litigation on motion without notice. The motion to discharge the certificate was heard by Sutherland, J. His Honour noted that “the finding of a reasonable claim to an interest in the land did not end the matter in Waxman, contrary to what is urged here on behalf of the respondent plaintiff.” Sutherland, J. confirmed that the court must exercise its discretion in equity and look at all the relevant factors between the parties in determining whether or not the certificate should be vacated and went on to consider the Dhunna factors.

[15] Master Muir considered the test for the granting of a certificate of pending litigation in two 2015 cases, Nabizadeh v. Manifar 2015 ONSC 5503 and Tribecca Development Corporation v. Danieli 2015 ONSC 7638. In both cases, the plaintiff claimed in an interest in land based on an oral agreement with the defendant that the parties would operate a joint venture whereby the defendant would take title to the property and the Nabizadeh plaintiff would contribute his construction expertise and the Tribecca plaintiff would assist with project management duties and arranging financing. Master Muir held in each case that, on the evidence before him, there existed a triable issue with respect to the plaintiff’s claim to an interest in the property based on the alleged oral joint venture-type agreement. Master Muir then went on in each case to consider the Dhunna factors including whether the property was unique, whether it was acquired for investment purposes, whether damages were easily calculable and whether the statement of claim contained an alternative claim for damages. After that analysis he held that “Despite my finding that the plaintiff has met the initial threshold, I have concluded that a consideration of all the other applicable factors favours the defendant’s position on the motion” and the plaintiff’s motion in each case was dismissed.

[16] In both of those cases, Master Muir noted that a certificate of pending litigation was not to be used as an instrument to secure a claim for damages. This is particularly relevant in the case at bar where the plaintiff states in its factum that if leave to issue a certificate of pending litigation is not granted, “Sun Rise would have no means of realizing on a judgment. The defendants are individuals and their evidence makes clear that they do not have significant assets….”

[17] I do not read Master Muir’s earlier decision of Roseglen Village for Seniors Inc. v. Doble 2010 ONSC 3239 as removing the Dhunna factors from consideration where the plaintiff’s claim to an interest in land is based upon a constructive trust claim. In that case, Master Muir held at paragraph 15 that the “overriding test, on a motion such as this, is for the court to exercise its discretion in equity and look at all relevant factors between the parties in deciding whether to grant leave to issue a CPL.” He considered the factors, determined that some were not applicable and made his decision based on the equities of the case. On appeal, the court affirmed that the decision properly considered the equities, found that the equities favoured the plaintiff and that the conclusion reached was supported by the evidence (2010 ONSC 2680 at paragraph 11).

Application of the Equity Factors

[18] There is no evidence as to whether the plaintiff is a shell corporation. What is known is that it is a real estate investment corporation.

[19] As to the parties’ intention in acquiring the land, the plaintiff real estate investment company purchased several pre-construction condominium units in the development and it intended at all times to sell the Units on closing to the public. In fact, it agreed that the Units be sold to the defendants provided the defendants agreed to repay the deposits and provided security for that repayment by way of a signed promissory note.

[20] There is no evidence the Units are unique to the plaintiff. In any event, the plaintiff did not intend to keep either Unit. It purchased the Units for the sole purpose of reselling them on closing. It mattered not to the plaintiff whether Wong and Luu bought the Units or some other purchaser bought the Units, as long as it recouped its deposits.

[21] The plaintiff has made an alternative claim for damages in the amount of the deposit and a claim for pre- and post- judgment interest on that amount. Its damages are easily calculable as the funds it seeks are particularized in the Second Fresh as Amended Statement of Claim.

[22] As for damages being a satisfactory remedy, I note that, at the outset of the litigation, this claim was strictly a claim for monetary damages for the deposits. When its statement of claim is closely analyzed, it is at its heart a claim for repayment of the money it advanced. Paragraph 1(a) of the Second Fresh as Amended Statement of Claim for Wong and paragraph 1(c) for Luu seeks a declaration “that all money improperly acquired by Wong/Luu is held pursuant to a resulting and/or constructive trust”. Paragraphs 1(b) and (d) seek an order tracing, accounting and for disgorgement of the funds and assets improperly acquired by Wong/Luu. Paragraph 1(e) seeks damages against Wong and Luu in the amount of the respective deposits on their Units and unpaid monthly occupancy fees.

[23] It is telling that the closings took place on 17 December 2016. There was no action by the plaintiff as a result of that closing as it had an agreement in place, it alleges, to be repaid its deposits. It was only when the promissory notes were not provided in January 2017 and the deposits were not repaid – and then many months after – that the plaintiff commenced this action in April 2018.

[24] I find the issue of prejudice to be a neutral factor. The plaintiff argues that it is owed money from the defendants. It will not be able to secure the Units through a certificate of pending litigation if the motion is denied, but that is not the purpose of a certificate of pending litigation in any event.

Conclusion

[25] For these reasons, I have concluded, on balance, that the equities on this motion favour the defendants. I decline to exercise my discretion to grant leave to issue the certificates of pending litigation. The plaintiff’s motion is dismissed.

[26] The parties are encouraged to come resolve the issue of costs. If they are unable to do so by 28 September 2018, they may each submit a costs submissions of no more than three pages in length and a costs outline by 9 October 2018.

Master Jolley Date: 6 September 2018