Court File and Parties

COURT FILE NO.: CV-17-578507 DATE: 20180921 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ROUHANGIZ MALEKZADEH Appellant – and – BARRON HOMES LTD., CRYSTAL GLEN HOMES (2000) INC., 2197616 ONTARIO INC., ROYAL VINTAGE HOMES AURORA INC., GENVIEW HOMES INC. and GENVIEW DEVELOPMENT CORP. Respondents

COUNSEL: Todd Robinson and Robyn Blumberg, for the Appellant Jack B. Berkow and Adam J Wygodny, for the Respondents

HEARD: June 22, 2018

Reasons for Decision

CAROLE J. BROWN, J.

[1] The appellant, Rouhangiz Malekzadeh (“the appellant”), appeals from the decision of Master Mills dated January 8, 2018 in which Master Mills granted discharge of a certificate of pending litigation (“CPL”). The CPL had originally been ordered by Master Pope on July 13, 2017, against development lands in respect of which the appellant had entered into an Agreement of Purchase and Sale (“APS”) for a lot in a proposed, unregistered plan of subdivision.

[2] It is the position of the appellant that Master Mills erred in discharging the CPL, making reversible errors of law or errors of mixed fact and law and errors of fact. The appellant maintains that the Master:

1. misapprehended “material” as opposed to “immaterial” non-disclosure;
2. failed to assess or apply relevant and binding jurisprudence placed before the court regarding assessment of the mischaracterized “no registration” clause;
3. incorrectly reversed the evidentiary onus applicable on a motion to discharge a certificate of pending litigation;
4. made findings of fact and determinations that were unsupported by the evidentiary record before the court, and in apparent disregard of uncontroverted evidence within that record;
5. drew improper inferences and formed conclusions that were not supported by the evidence before the court;
6. gave weight to irrelevant issues beyond the scope of the motion before the court, which were issues that had already been properly assessed and disposed of before Master Pope on the plaintiff’s prior ex parte motion to obtain the CPL;
7. made findings and determinations in conflict with those findings and determinations previously made by Master Pope, without seeking to reconcile them;
8. erred in her assessment of the Dhunna factors and in weighing the relative equities between the parties, including, inter alia, placing undue emphasis on perceived prejudice to the respondents’ ability to deal with the subject property, notwithstanding that such prejudice is both common and inherent in certificate of pending litigation matters and that there was no cogent evidence supporting alleged prejudice; and
9. failed to provide adequate reasons for her decision and the determinations made, including with reference to both the relevant law and the factual evidence before the court.

[3] Master Mills set aside the ex parte order of Master Pope on the basis of material non-disclosure at the time the appellant obtained the ex parte order.

[4] The property in question is an undeveloped parcel of land in the Town of Aurora that the landowner acquired in 2009. No plan of subdivision has been registered in relation to the property, nor have building permits issued. In 2009, the landowner agreed to sell a portion of the property to the defendant, Barron Homes Ltd., in trust, pursuant to an APS dated April 28, 2009. In 2011, the appellant purportedly entered into an APS with the defendant, Barron Homes Ltd., for construction of a single-family detached home, to be situated on a portion of the property after a plan of subdivision is registered against the property. The APS was conditional, in part, upon Barron Homes Ltd. obtaining compliance with the subdivision control provisions of the Planning Act.

[5] The APS contained, inter alia, a “no registration” clause, as follows:

The Purchaser acknowledges that registration against title to the Land of any notice or caution or other reference to this Agreement of his or her interest in the Land is likely to cause inconvenience and prejudice to the Vendor, for example, by impeding financing. If any such registration occurs, the Vendor may terminate this Agreement forthwith. Further, the Purchaser hereby irrevocably consents to a court order removing such registration and agrees to pay all costs of obtaining such order. Additionally, the Purchaser hereby irrevocably constitutes and appoints the Vendor or any of its authorized signing officers to be and act as his lawful attorney in the Purchaser’s name, place and stead for the purpose of removing any such registration from title.

[6] Prior to and at the time of the application for a CPL, the appellant had registered a caution against the property pursuant to section 128 of the Land Titles Act which, pursuant to ss.128(4) of the Land Titles Act, “…ceases to have its effect 60 days from the date of its registration and may not be renewed.” On July 13, 2017, with 22 days remaining before the caution expired, the appellant appeared ex parte before Master Pope to obtain a CPL. The CPL was granted and the order expressly required the appellant to forthwith serve the defendants with a copy of the said order, as well as the motion record, factum and brief of authorities. The appellant did not, however, comply with that order until August 9, 2017, when it served the ex parte order, after it had served the statement of claim in this action on the respondents.

[7] On January 8, 2018, the Master released her endorsement as regards setting aside the CPL. I set forth below portions of the endorsement which are relevant to this appeal.

[10] The APS contains a provision precluding any registrations against the property (the “No Registration” clause). It is an important provision for the purposes of this motion and reads as follows:

The Purchaser acknowledges that registration against title to the Land of any notice or caution or other reference to this Agreement of his or her interest in the Land is likely to cause inconvenience and prejudice to the Vendor, for example by impeding financing. If any such registration occurs, the Vendor may terminate this Agreement forthwith. Further, the Purchaser hereby irrevocably consents to a court order removing such registration and agrees to pay all costs of obtaining such order. Additionally, the Purchaser hereby irrevocably constitutes and appoints the Vendor or any of its authorized signing officers to be and act as his lawful attorney in the Purchaser’s name, place and stead for the purpose of removing any such registration from title.

[11] There is no evidence this provision was brought to the attention of Master Pope…

[12] The plaintiff does not deny that she failed to draw attention to the no registration clause in the APS at the return of the motion before Master Pope. The plaintiff maintains that it is not a “material” non-disclosure because there is no privity of contract between the moving party defendants and the plaintiff. Therefore, the moving parties could not have relied upon this provision to resist the issuance of the CPL, nor can they rely upon it on this motion seeking a discharge of the CPL.

[13] It is the position of the plaintiff that the vendor, Barron Homes Limited, was the only party entitled to rely upon the No Registration clause in the APS, and the only entity capable of acting upon the irrevocable consent of the plaintiff to a court order removing any such registration.

[14] Further, the plaintiff submits the No Registration clause is immaterial because the language of the provision is permissive in nature such that the plaintiff acknowledges any registration is “likely” to cause inconvenience and prejudice, and the vendor “may” terminate the agreement.

[15] Privity of contract and permissive language are not the fundamental issues with respect to the no registration clause. Rather, it is whether Master Pope would have granted a CPL, on an ex parte basis, in the face of this specific No Registration clause had it been disclosed.

[16] Of course we cannot know what might have been ordered in the circumstances, however, the failure to disclose the no registration clause of the APS at the motion seeking the CPL does constitute a material non-disclosure of an important fact. It cannot be said that the plaintiff provided full and fair disclosure of all material facts, as is required on an ex parte motion.

[17] In her Endorsement, Master Pope acknowledged a primary concern of granting a CPL over the entirety of the property and a secondary concern respecting whether the defendants ought to have been served with notice of the motion. In the end, the plaintiff was able to persuade Master Pope that the granting of a CPL was appropriate in the circumstances. I am not confident the outcome would have been the same had the No Registration clause been disclosed.

[18] On this basis, I am of the view the CPL must be discharged. There was not full and frank disclosure of a material fact on an ex parte motion. The plaintiff elected to bring the motion without notice and must now bear the consequences. It is only just to have the order granted by Master Pope set aside.

The Issue

[8] The issue to be determined on this appeal is whether the Master made a reviewable error in her application of the law as regards setting aside the CPL issued by Master Pope.

Standard of Review

[9] Appeals from a Master must be heard as appeals and not matters de novo. See Noranda Metal Industries Ltd. v. Employers Liability Insurance Corp., (2000), 49 C.P.C. (4th) 336 (Ont. S.C.), at para 7.

[10] Moreover, an appeal from a Master’s decision is not a re-hearing. On questions of fact and mixed fact and law, deference applies and the role of the reviewing court is limited. The appellate court cannot substitute its interpretation of the facts or re-weigh the evidence simply because it takes a different view of the evidence from that of the Master: Wellwood v. Ontario Provincial Police, 2010 ONCA 386, 102 O.R. (3d) 555, at para. 28. Further, an appellate court is not free to interfere with a factual conclusion that it disagrees with where such disagreement stems from a difference of opinion over the weight to be assigned to the underlying facts: Housen v. Nikolaisen, 2002 SCC 33, 2 S.C.R. 235, at para. 23.

[11] The record that was before the Master is the only evidence to be used on appeal.

[12] The standard of review for Masters' orders is the same standard of review that applies to appeals of judges' orders. For questions of law, the appellate court applies the correctness standard. For questions of fact and mixed fact and law, the court should apply a more deferential standard and not intervene unless there is a palpable and overriding error: In-Store Products Ltd. v. Zuker, 2013 ONSC 7091, at para. 3.

[13] The standard of review on a question of law is correctness: Zeitoun v. Economical Insurance Group, (2008), 91 O.R. (3d) 131.

[14] Appellate interference will be warranted “only if the Master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error”: Zeitoun, at para. 40.

[15] As regards findings of fact, the appellate court will not interfere with a Master's decision unless there has been a palpable and overriding error. This same standard applies to inferences of fact. Where there is some evidence upon which the Master could have relied to reach a conclusion, the appellate court will not interfere. It is not the role of the reviewing court to verify that inferences of fact can be reasonably supported by the findings of fact of the Master, but rather to determine whether the Master made a palpable and overriding error in coming to a factual conclusion based on accepted facts, which implies a stricter standard. Further, where evidence exists to support an inference, an appellate court will be hard-pressed to find a palpable and overriding error: Housen at paras. 1, 6, 10, 19, and 21-23.

The Law

[16] Where a CPL is obtained pursuant to an ex parte order, without notice, it may be set aside by attacking the order permitting the issuance of the CPL on the grounds that the party obtaining the said order failed to make full and fair disclosure to the court; and/or by attacking the CPL itself pursuant to section 103(6) of the CJA.

[17] As regards the first prong of the test, namely setting aside an ex parte order obtained in the absence of full and frank disclosure, there is significant jurisprudence. In 830356 Ontario Inc. v. 156170 Canada Ltd. [1995] O. J. No. 687 at 17-19, Chadwick J stated:

[17] … The test is not whether the certificate would or would not have been issued had the omitted disclosure been made but rather whether the omitted facts might have had an impact on the original granting of the order.

[18] Ex parte applications are a very serious matter. The court relies upon full and proper disclosure of all relevant facts in the supporting affidavit material. There is a heavy onus on counsel to make sure that all relevant facts are before the court. This is the reason for rule 39.01(6) where it states:

“Applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient grounds for setting aside any order obtained on the motion or application.

[19] This rule is not designed just for applications for certificates of pending litigation but applies to all ex parte motions. The effects of ex parte orders can be devastating to the absent responding party, even if the order is only for a short period of time.

[18] In Parallel Medical Services Ltd. v Ward, [2002] O.J. No. 1498, Stinson J, as regards the importance of full and frank disclosure when seeking ex parte relief, stated:

[16] It is scarcely necessary to recite the duty imposed upon a party and his or her counsel where the court is asked to make an order without notice to a person or party who will be affected by the order sought. Rule 39.01(6) makes this clear:

39.01(6) Where motion or application is made without notice, the moving party or applicant 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.

As was said by Winkler J in Yang v Mao, supra, at 476:

In the case of motions for injunctive relief and other extraordinary remedies, it is trite that the applicants must meet the highest standard of candour and disclosure to the court.

[18] The importance and necessity of making full and fair disclosure to the court of all material facts when seeking injunctive relief without notice to the party affected, cannot be overemphasized. It is incumbent upon counsel to stress this requirement when taking instructions from the client and, indeed, to cross-examine the client and take other appropriate steps to determine the veracity and reliability of the information that counsel will be presenting to the court. It is not sufficient for counsel for the plaintiff merely to accept at face value all that the client says and then to incorporate that information in an affidavit that is subsequently presented to the court to obtain injunctive relief. A judge hearing such a motion (not to mention the absent party who will be affected by any order granted) is at the mercy of counsel for the moving party and must expect and rely upon counsel’s proper discharge of this important obligation. That obligation extends to fairly stating the case against granting the relief sought, and this can only be done where appropriate steps have been taken to verify the reliability of the information provided by the client and to determine what the defendant would likely say if given the opportunity to argue against the granting of the order.

[19] Pursuant to Rule 39.01(6), failure to make full and frank disclosure on an ex parte motion is, in itself, sufficient for setting aside the ex parte order granted.

[20] The importance of full and frank disclosure on an ex parte motion is made clear by the above passages. It is fundamentally important to the court, the party against whom the ex parte order is made and, indeed, to the proper administration of justice that a party seeking an ex parte order ensures that full and fair disclosure is made.

[21] The above caselaw further makes clear that it is not necessary that the undisclosed evidence may have been decisive to the motion.

Positions of the Parties

Position of the Appellant

[22] It is the position of the appellant that the non-disclosure in this case was not material, but rather immaterial, as the no registration clause which was not brought to the Master’s attention on the ex parte motion was not the normal no registration clause, but rather a permissive clause which did not preclude registrations. It is the position of the appellant that the clause is not even relevant. As such, it was not material. The appellant further argues that there is no privity of contract between the respondents and the appellant.

[23] Further, it is the position of the appellant that, in setting aside the ex parte order, Master Mills improperly applied and weighed the Dhunna factors, and further reversed the onus of satisfying the Master that there were no triable issues on the Dhunna factors.

Position of the Respondent

[24] It is the position of the respondent that the Master properly applied the law to the facts and, pursuant to the law, properly set aside the ex parte motion pursuant to Rule 39.01(6) for failure to make full and frank disclosure. It is the position of the respondent that there was not full and frank disclosure as required pursuant to the rules of court and as made clear in the relevant jurisprudence.

[25] The appellant submits that privity of contract is not relevant to the instant appeal as the respondents did not seek to enforce the no registration clause. Indeed, enforceability of the no registration clause is not relevant to this appeal. In fact, the issue before the Master, as before this Court, is whether the no registration clause, which the appellant admits was not brought to the attention of the ex parte Master, was material to whether or not the ex parte order should issue.

[26] As regards the Dhunna factors, the respondent agrees that the Dhunna factors apply when moving to set aside a CPL under section 103(6) of the Courts of Justice Act “CJA”. In this case, of course, Master Mills set the ex parte order aside pursuant to Rule 39.01(6), and observed that she need not consider the substantive test for discharging a CPL pursuant to section 103(6) of the CJA, but thereafter went on to assess and balance the factors raised as being of importance on the motion, in the event that she was wrong in her finding of material non-disclosure.

Analysis

[27] Pursuant to Rule 39.01(6), where an order has been obtained ex parte and the applicant has failed to make full and frank disclosure, such failure is sufficient to set aside the ex parte order.

[28] In this case, the failure to make full and frank disclosure involved the existence in the APS of a “No Registration” clause as above set forth. While the appellant argues that the clause is not material or relevant, the issue is whether it may have had an impact on the original granting of the order. The test is not whether the certificate would or would not have been issued had the omitted disclosure been made but rather whether the omitted facts might have had an impact on the original granting of the order.

[29] The Master properly analyzed the issue of non-disclosure at paragraphs 16 through 18 of her endorsement.

[30] As set forth in the non-disclosure clause, should notice or caution or other reference to the APS of the purchaser’s interest in the land be registered, the vendor may terminate the APS and, further, the purchaser, (in this case, the appellant) irrevocably consents to a court order removing such registration and agrees to pay all costs of obtaining such orders. Indeed, I find this caused to be relevant and material. Master Mills properly analyzed the clause and found it to be material.

[31] As regards privity of contract, I do not accept the argument of the appellant. This is not an issue of enforceability of the clause between parties. This is an issue of an ex parte order which was made without full and frank disclosure. The Master properly analyzed this issue in making her decision.

[32] As regards application of the Dhunna factors, as the Master herself indicated:

[19] In the circumstances, I need not consider this test for discharging a CPL pursuant to section 103(6) of the Courts of Justice Act, however in the event I am wrong in my finding of a material non-disclosure, I will address the issue.

[33] She thereafter went on to address the factors that had been raised on the motion as being of importance. Pursuant to the Rules, the failure to disclose was sufficient to set aside the ex parte order. There was no need to go on to analyze and balance the Dhunna factors. Nevertheless, for completeness, and out of an abundance of caution, she did go on to analyze and balance those factors. Although it was not necessary, given that she had found the non-disclosure to be material, I do not find her analysis of the factors, to be incorrect or in error. Again, there is no basis on which this appellate Court could intervene.

[34] Based on all of the material before this Court, including the appeal record, the decisions below, the facta, caselaw, and the submissions of counsel, I am satisfied that the Master has made no reversible error which would permit this appellate court to intervene in this case. The Master’s order discharging the CPL is upheld.

Costs

[35] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown, J.

Released: September 21, 2018