Court File and Parties

COURT FILE NO.: CV-18-595214 DATE: 20190226

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

INDER GOYAL Plaintiff/Respondent – and – NOREEN ASGHAR, MIRZA CHAUDHARY, JACK FRYMER, 2425779 ONTARIO INC. and 2623559 ONTARIO INC. Defendants/Appellants

Counsel: Gregory M. Sidlofsky, counsel for the Plaintiff/Respondent Alan B. Dryer, counsel for the Defendant/Appellant, 2623559 Ontario Inc. Sandra L. Secord, counsel for the Defendant, Jack Frymer

HEARD: JANUARY 23, 2019

REASONS FOR DECISION

G. DOW, J.

[1] The defendant 2623559 Ontario Inc. (“2623559”) appeals the decision of Master Abrams, November 2, 2018 dismissing its motion to discharge a certificate of pending litigation on a parcel of land. The certificate was granted ex parte by Master Sugunasiri on April 4, 2018.

[2] 2623559 Ontario Inc. purchased the property from the other corporate co-defendant, 2425779 Ontario Inc. (“2425779”). 2425779 was the registered owner of a piece of rural land and was the following steps away from being it developed into an Esso gas station and with a Tim Horton’s fast food restaurant:

a) obtaining all necessary approvals and permits for development; b) the signing of lease agreements with the Esso and Tim Horton’s as tenants; and c) payment of the expenses of obtaining the necessary environmental and approval reports.

[3] The plaintiff is a fifty percent owner of 2425779 and alleges the sale to 2623559 was fraudulent. The other fifty percent owner of 2425779 is the defendant, Noreen Ashgar who is the spouse of the real estate agent that acted in the sale, being the defendant, Mirza Chaudhry. The defendant, Jack Freimer is the lawyer that handled the real estate transaction.

[4] Counsel for the 2623559 grounded its submissions on the fact that the order of Master Sugunasiri also provided alternative security for the cash portion of this 1.51 million dollar transaction. That is, payment of the $507,000.00 to 2425779 into court, representing the cash portion of the transaction and any payment on the vendor take back mortgage of $1,000,000.00 also being paid into court. The $507,000 has been paid into court. No payment has been made on the vendor take back mortgage. This submission was buttressed by the fact the plaintiff’s 50 percent interest was achieved by agreeing to buy all of the shares of 2425779 for $500,000.00, $350,000.00 of which was paid with the remaining $150,000.00 due when the site plan agreement was registered. As part of the purchase, the plaintiff agreed to assign 50 percent of the shares to Mr. Chaudhry’s spouse, Noreen Ashgar for nominal consideration.

Analysis

[5] Counsel for 2623559 accepted the standard of review of the Master’s decision to be that set out by Justice Low in the Divisional Court reasons of Zeitoun v. Economical Insurance Group, [2008] O.J. No. 1771 (at paragraph 40) “…the decision will be interfered with only if the master made an error of law or exercised his or her discretion of wrong principles or misapprehended the evidence such that there is a palpable and overriding error.” To this end, counsel for 2623559 submitted Master Abrams’ statement at paragraph 18 of her reasons, being the “test on a motion for leave to issue a certificate of pending litigation is the same as the test on a motion to discharge a certificate of pending litigation” was such an error.

[6] I do not agree with the submission of counsel for 2623559 that the statement by Master Abrams can be so restricted. The above quoted phrase is from the second sentence in paragraph 18. That paragraph begins with noting the source for certificates of pending litigation is Section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43. In particular, subsection 6 outlines when such a certificate may be discharged. Master Abrams states the subsection is “permissive”, no doubt a reference to the court’s authority to “impose such terms as to the giving of security or otherwise as the court considers just,” as stated at the end of this subsection.

[7] Master Abrams continued in paragraph 18 of her reasons quoting from Waxman v. Waxman, 1991 Carswell Ont. 3452, at paragraph 7 which contains the phrase “reasonable claim to the interest in the land claimed”. This appears to be quoting from subsection 103(6)(ii) of the Courts of Justice Act, supra. The quotation then indicates “to follow up with the consideration of the equities, in particular the eight factors as suggested in 572383 Ontario Inc. v. Dhunna, [1987] O.J. No. 1073. This quotation continues to correctly state the law, which is to examine the court’s discretion as a court of equity and look at all of the relevant matters between the parties in determining whether or not the certificate should be vacated.

[8] The remaining grounds of appeal dealt with Master Abrams’ approach in addressing whether the plaintiff, Inder Goyal:

a) had demonstrated a claim to an interest in land; b) whether Inder Goyal’s interest could be protected by a form of security; c) were the application of the “Dhunna factors” an error; and d) whether the irreparable harm could result from maintaining the certificate of pending litigation.

[9] In this regard, the Master agreed with Mr. Goyal and his position that an interest in land was an issue. The Master explained her reasoning in this regard noting that the action commenced by Mr. Goyal seeks to rescind the transfer of the land in question from the corporation of which he is a 50 percent shareholder to a corporation in which he has no interest. Further, Mr. Goyal alleges the sale was fraudulent and below the real value of the property.

[10] With regard to the allegation of fraud, the Master accepted and cited two cases which identified several badges of fraud and included:

a) the secret nature of the transaction, that is, the property was sold without it being listed or giving Mr. Goyal notice in advance; b) the execution of the transfer documents by 2425779 was by Ms. Asghar despite Mr. Goyal being a 50 percent owner and President of 2425779; c) the absence of a corporate or shareholder resolution sanctioning the sale of the corporation’s only asset; d) that the defendant, Mirza Chaudhary instructed real estate counsel, the defendant, Jack Frymer; e) the haste in completing the sale as well as the close and personal ties between Mr. Chaudhary and 2623559’s only shareholder, Mr. Bishay.

[11] With regard to the application of the “Dhunna factors”, the Master accurately considered at least five of the eight issues identified:

a) whether the plaintiff is a shell corporation – which Mr. Goyal is not; b) whether the land was unique or not bearing in mind any parcel of land has some special value to the owner – here the parcel was well suited for the plaintiff’s intended use and there was no evidence of a comparable parcel nearby; c) the claim for damages not being an alternative claim – here noting the absence of a commercial history for the property which may make damages difficult to quantify or not a satisfactory remedy; d) the presence or absence of another willing purchaser – here the Master considered that Mr. Bishay was a nominee for Mr. Chaudhary in respect of the property; and e) balancing the harm to the parities if the certificate is rescinded or is removed – here the Master concluding the balance “seems evenly tipped.”

[12] Finally, counsel for 2623559 relied on the approximately $507,000 paid into court as part of its submission that this somehow provided adequate alternative security on an investment by the plaintiff of only $500,000 of which only $350,000 had been paid by Mr. Goyal. This ignores the evidence of the potential value of Mr. Goyal’s investment and that Mr. Goyal submitted some evidence of what the land in question could be sold for after the property was developed, being $2.1 million. Mr. Goyal’s 50 percent interest in this would be $1,050,000 which is significantly larger than the $507,000 actually paid into court. I note this was not a motion to seek either payment out of court of funds currently held or discharge of the certificate of pending litigation by payment into court of an additional amount of funds so as to protect the potential value of Mr. Goyal’s investment.

Conclusion

[13] As a result, the Master did not misapprehend the evidence, exercise her discretion on wrong principles or make an error in law which requires any interference with her decision. The appeal is dismissed.

[14] Counsel provided me with their costs outline at the conclusion of their submissions. The appellant-defendant, 2623559 sought partial indemnity costs of $19,205.77 inclusive of fees and disbursements plus HST. Counsel for the respondent–plaintiff sought partial indemnity costs of $10,444.22 inclusive of fees and disbursements, plus HST.

[15] Counsel for the defendant, Jack Frymer filed no material and confirmed that it took no position on this appeal. It did wish to have noted, as contained in the reasons of Master Abrams that “nothing in the endorsement of Master Sugunasiri ought to be construed to mean that the parties are taking the position that Mr. Frymer engaged in fraudulent conduct or participated in a conspiracy to defraud.”

[16] The smaller amount claimed by the successful party appears to be well within that contemplated by the defendant 2623559. Although not directed to it by counsel, I am mindful of the statement of the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634, at paragraph 26 of the objective being “to fix an amount that is fair and reasonable for the unsuccessful party to pay in a particular proceeding.”

[17] The costs of this appeal are fixed in the amount of $10,444.22 inclusive of fees and disbursements plus HST of $1253.85 on the fees of $9,645 for a total of $11,698.07 payable by the defendant, 2623559 Ontario Inc., to the plaintiff, forthwith.

Mr. Justice G. Dow

Released: February 26, 2019