COURT FILE NO.: CV-15-530602
MOTION HEARD: 20181212
REASONS RELEASED: 20190328
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
Global Investment Holdings Inc.
Plaintiff
- and-
3071235 Canada Inc., Ram Chavali, Reddy Chavali
and Jagmohan Hayer
Defendants
BEFORE: MASTER D. E. SHORT
COUNSEL: Sharoon Gill for Global Investment Holdings Inc., f: 905-522-0855
For Plaintiff/Defendant by Counterclaim
Reddy Chavali in person, (self-represented) f: 416 467-7388
for himself and 3071235 Canada Inc.,
Plaintiff by Counterclaim
O. Vinton for Defendant Ram Chavali f: 647-560-4810
REASONS RELEASED: March 28, 2019
Reasons for Judgment
I. Background
[1] The plaintiff is a mortgage lender. It commenced this action to recover unpaid balances owing on a group of loans secured on various properties in Ontario.
[2] A sale of one of the properties resulted in a recovery to the plaintiff. Unfortunately, the fact that the mortgage involved was also secured on a second property on Broadview Avenue in Toronto, was overlooked. When a complete discharge of that security was inadvertently registered, the plaintiff had a problem.
[3] However, in my view the discharge of that collateral mortgage did not extinguish the related debt. Moreover, the plaintiff acquired the existing first mortgage on the Broadview property from another commercial lender, in the course of preserving the plaintiff’s interest in the subject land.
[4] At about that point in time, there was calculated to be an amount in the order of $1,900,000 owing by 3071235 Canada Inc. and Reddy Chavali to the plaintiff
II. Parties
[5] The key player in this matter is Mr. Reddy Chavali. He is an experienced litigant who in previous cases has been involved in asserting very substantial claims against law firms and lawyers. He asserts that he was defrauded in those cases. I pass no judgment on the situation in those earlier cases save to acknowledge that there apparently is a vexatious litigant ruling with respect to him that is more than a decade old and which is apparently presently outstanding.
[6] While this matter was under reserve by me, an order regarding this latter issue was made by Justice Kimmel, as set out in Appendix “A” to these reasons.
[7] Here, primarily for my purposes, Mr. Chevali is a defendant. He advises that he is unable to afford counsel and has been acting largely on his own behalf.
[8] His son is a respected heart surgeon in the United States and really seems to have had no direct involvement with the matters in issue. He has had separate counsel for some portions of this action but for present purposes, I am making no findings whatsoever with respect to his involvement or potential liability.
III. Statement of Claim
[9] The Statement of Claim in the present action includes claims for:
“(a) Payment by the Defendants, 3071235 CANADA INC., RAM CHAVALI and REDDY CHAVALI, of the sum of $992,677.75 due under the Charge, together with interest at the rate set out in paragraph 4 (the "Interest Rate") from January 23, 2017 until payment or Judgment;
(b) Further and/or in the alternative, possession of the Property legally described as PT LT 14 CON 2 FTB PT 2 PL 66R19914 CITY OF TORONTO, and municipally known as 1260 Broadview Avenue, Toronto, Ontario ("1260 Broadview");
(c) Rectification of title for 1260 Broadview as follows;
(i) An Order that the Discharge registered as Instrument No. AT4273304 on July 8, 2016 on title to 1260 Broadview is void ab initio;
(ii) An. Order that the Charge/Mortgage of Land, registered as Instrument No. AT3441483 on October 30, 2013 (the Charge") be reinstated as a second charge on 1260 Broadview;
(d) A Declaration that the Charge continues as a second charge on title to 1260 Broadview, in priority to the charge registered as Instrument Number AT4427940;
(e) In the alternative, an Order directing that the Charge be registered on title to 1260 Broadview, subsequent in priority to the charge registered as Instrument Number AT4427940·
(f) An Order that the Registrar shall forthwith issue and the Plaintiff, shall be at liberty to register a Certificate of Pending Litigation in respect of 1260 Broadview; ….”
IV. Settlement Trip
[10] In January of 2018, Reddy Chavali, (who is 78 years of age) and two friends drove from Toronto to Hamilton to meet with the lender’s counsel with a view to resolving the matter. He says that it was always clear in those discussions, that he was reserving his counterclaim in the main action.
[11] I am not certain whether that was the case, but there is at least some evidence that is consistent with that view. Nevertheless, Mr. Chavali who was, and appears still to be an astute businessman, did not see fit to add any stated reservation regarding that counterclaim to the written settlement documents. However, that day, he did not choose to place that limitation in the document that he chose to sign.
[12] What he did obtain by virtue of his signature was a mortgage debt reduction of an amount in excess of hundred thousand dollars, if timely payment was made.
[13] He now seeks to set aside that mortgage settlement document saying it was procured somehow through duress. Notwithstanding that he drove to Hamilton, negotiated and signed the document and had his signature witnessed by his travelling companion friends.
V. Minutes of Settlement
[14] For completeness, I set out in full the terms of the agreement that Mr. Chavali signed:
THERE being no party to this action affected by these Minutes of Settlement who is under any legal disability as defined by the Rules of Civil Procedure R.R.O. 1990, Reg 194, and the Courts of Justice Act, R. S. 0. 1990, the Plaintiff, through its lawyer and the Defendants, 3071235 Canada Inc. and Reddy Chavali, agree to settle this matter as follows:
The Defendants, 3051235 CANADA INC. and REDDY CHAVALI (the "Defendants"), shall pay to the Plaintiff, GLOBAL INVESTMENT HOLDINGS INC. (the "Plaintiff'), the sum of $950,000.00 (all inclusive), by certified cheque or bank draft made payable to Burns Associates, in trust, on or by March 19, 2018;
The Defendants, 3051235 CANADA INC. and REDDY CHAVALI (the "Defendants"), shall pay to the Plaintiff’s Lawyer, Burns Associates, the sum of $20,000.00 (all inclusive), by certified cheque or bank draft on or by March 19, 2018 with respect to the Plaintiffs costs;
The Defendants shall consent to a judgment on the following terms and in the form attached hereto as Schedule “A”, which consent shall be held in escrow on the terms set out in paragraph 4 herein:
a. The defendants shall pay to the plaintiff the sum of $970,000, forthwith with post judgment interest accruing at the rate of 15.00% per annum;
b. The Defendants shall forthwith deliver to the Plaintiff, or as the Plaintiff may direct, possession of the Property (as defined in Schedule "A"), or such part thereof as may be in the possession of the Defendants;
c. The Plaintiff shall be at liberty to issue a writ of possession against the Property; and
The consent to judgment in the form attached hereto as Schedule "A" and provided by the Defendants to the Plaintiff in accordance with paragraph 3 above, shall be held in escrow by counsel for the Plaintiff. In the event the Defendants fail to make the payments set out in paragraphs 1 and 2 herein on or by March 19, 2018, the escrow over the consent to judgment shall be lifted and the Plaintiff shall be at liberty to obtain judgment, without notice, against the Defendants in accordance with the consent signed by the parties hereto, and the Plaintiff may exercise any and all rights available to it pursuant to the Rules of Civil Procedure, or otherwise, to enforce the said judgment;
In the event the payments set out in paragraph 1 and 2 herein are paid on or by March 19, 2018 by the Defendants, the Plaintiff shall provide to the Defendants, forthwith, with its consent to the dismissal of the within action on a without costs basis, together with all documentation required to discharge its mortgage on the mortgaged property (1260 Broadview Avenue, Toronto, Ontario). Furthermore, the consent executed in accordance with paragraph 3 herein shall be destroyed and/or returned back to the Defendants.
IN WITNESS WHEREOF the parties have affixed their hand and seals below.
DATED AT Hamilton, Ontario this 18th day of January, 2018
VI. Litigation to Date
[15] It is undisputed that the payments contemplated by paragraphs 1 and 2 of the Minutes of Settlement to be paid by March 19, 2018 were not made.
[16] Based on everything I have heard and seen with respect to this case I am satisfied that the minutes of settlement were entered for good consideration and for the purposes of reducing the exposure of Mr. Chavali.
[17] There is no doubt that monies were borrowed from a number of sources and were not repaid in full. I am not sure whether there is a comparable term to “buyer’s remorse” but it seems to me that what we have here is a clear case of “settler’s remorse”.
[18] Mr. Chavali asserts that he always intended to preserve his right to maintain the counterclaim that he had asserted in this action.
[19] At no time have I taken the position that his counterclaim has been abandoned. However, I am not satisfied that, given his failure to make any notation in the minutes of settlement which were clear on their face, regarding the preservation of his rights to seek further compensation from the plaintiff.
[20] This is a 2015 action relating to the plaintiffs attempt to recover monies owing to it with respect to mortgages placed on a number of properties by various of the defendants.
[21] The Case History reflects that at least 10 different judges have touched this file to this point in time.
[22] In particular, Mr. Justice Dunphy in February 2017, while indicating that he was not seized of a motion regarding the CPL that was sought by the plaintiff, nevertheless ultimately held that the plaintiff shall be at liberty to register a Certificate of Pending Litigation on the Broadview property.
[23] Throughout 2018, it appears that various judges convened case conferences and ultimately it would seem that a Master’s motion to enforce the settlement is the subject matter of this motion that was scheduled.
[24] The case history indicates that the motion was “withdrawn by the parties not proceeding.” Ultimately on July 10, 2018, the matter came before me. That hearing was subsequently adjourned with my annotation reading:
“I am not interfering with judge’s motion of August 20, 2018. Mr. Vinton has yet to be fully retained. It would be helpful if Ram Chavali attended on August 20 as his participation in a settlement seems essential”
VII. August Return Date
[25] That motion of August 20 did not proceed. The Case history reflects that on August 14 it “was treated as withdrawn having not been properly confirmed”.
[26] The matter again came before me on September 18 and then ultimately was adjourned, in the midst of the argument on that occasion, because of Mr. Chavali encountered a health problem that required an ambulance team in the courtroom and urgent hospital attention.
VIII. November and December Return Dates
[27] Madam Justice Pollak convened a hearing on November 13, as well again indicating that a motion had been brought by Reddy Chavali which she was noted as having been :
“… Adjourned December 21, 2018 [90 minutes] to permit moving party to file and serve better materials.”
[28] Apparently that hearing was adjourned for a two-hour motion to be heard by me on November 15, 2018. At the same time, for whatever reason the motion seems to have been placed before a regular motions judge on November 23, 2018 and adjourned on consent. That motion seems to have been brought by Mr. Chavali, as a self-represented defendant.
[29] Ultimately, the matter came back before me on November 15, 2018 my endorsement on that occasion provided that one of the defendants Mr. Jagmohan Hayer was to be let out of the action on consent. My endorsement continued as follows:
“… Property may be listed for sale after March 31, 2019. This endorsement is subject to amendment by me following the return of this motion on December 12/18, --peremptory to the defence. At that time I will address the matter’s impact of the motion adjourned by Pollak J. made November 13, 2018. All facta and materials to be filed by noon December 10 with court staff. Otherwise motion to be confirmed in usual way. This includes any cross-motion now being brought.”[my emphasis]
[30] Ultimately on December 12, 2018, I convened a further attendance with the parties including counsel who had been retained in the interim with respect to the son of Mr. Chavali who it appears has never been served with the statement of claim in this action. At that time I did not alter my direction in my November 15 endorsement, supra.
IX. Attendance before Justice Kimmel
[1] Thereafter Madam Justice Kimmel dealt with the matter on January 25, 2019. On that occasion her endorsement read in part:
Both parties are seeking an adjournment today, albeit for different reasons. Because the file was denoted at the motion's office "do not vacate - must go", the parties were advised that they must attend before a judge today for any adjournment request. Master Short heard a motion by the plaintiff and cross-motion by the other two defendants on December 12, 2018 and that decision is under reserve. Counsel for Global Investment advises that Master Short indicated he might address matters that were raised in the motion originally before Pollak J.
[3] Mr. Chavali was only present for part of the hearing before Master Short and was not represented by counsel for the co-defendants, Orlando Vinton, at that time but advises that he has consulted with Mr. Vinton and would like to retain Mr. Vinton to represent him on this motion. While it would be preferable for the court to have Master Short's decision before this motion is heard I think, given the history of this matter, it would be prudent to set a new return date and schedule for this motion. If it needs to be adjourned to await Master Short's decision the parties can make that request in advance of the next hearing date. My order today is as follows:
This motion by Mr. Reddy Chavali is adjourned to April 3, 2019.
Mr. Chavali is to serve and file his original motion record (before Pollak J.) and any supplementary record he wishes to rely upon by February 15, 2019.
Global Investment shall serve and file any responding material by March 8, 2019.
Any cross-examinations are to be completed by March 20, 2019
Mr. Chavali shall deliver his factum by March 27, 2019
Responding factum by April 1, 2019.
[31] Ultimately on February 11, 2019 Madam Justice Kimmel spoke directly to the issues concerning the counterclaim. That supplementary endorsement is set out as appendix A to these reasons.
[32] As noted above, it is my understanding that the certificate pending litigation was obtained. However it is unclear to me whether it is still in place.
[33] As outlined above, the first item claimed is a minor money debt totalling almost $1 million. Interest has continued to run on that sum since the action was commenced some years ago and because of the nature of the loans, the rates of interest have been of some significance.
[34] As well there are issues about whether various penalties flowing from defaults have been included or not.
[35] Just over a year ago, Mr. Chavali and two friends drove from Toronto to the Hamilton office of the plaintiff’s counsel and met with amongst other individuals Mr. Gill who is the counsel of record on this motion for the plaintiff.
[36] Mr. Chavali seeks, in my view, to resile from the bargain he made at that time. His signature was witnessed by his friends who travelled with him. There was no evidence filed from them regarding any duress or other reason why Mr. Chavali did not mean to enter into the agreement filed before me.
X. My Conclusions
[37] It is undisputed that the payments contemplated by March 19, 2018 were not made.
[38] Based on everything I have heard and seen with respect to this case, I am satisfied that the minutes of settlement were entered for good consideration and for the purposes of reducing the exposure of Mr. Chavali.
[39] Mr. Chavali asserts that he always intended to preserve his right to maintain the counterclaim that he had asserted in this action.
[40] At no time have I taken the position that his counterclaim has been abandoned. However I am satisfied that he is bound by the document, given his failure to make any notation in the Minutes of Settlement which were clear on their face, regarding the preservation of his rights to seek further compensation from the plaintiff.
[41] Following my hearing of the several days of submissions, I was satisfied that the plaintiff ought to prevail to a degree.
[42] My endorsement on December 12 read, in part, “…following argument I determined to reserve both the motion for judgment on the settlement and the motion to amend the claim and counterclaim.”
[43] In my endorsement, I indicated that I had an appraisal from the plaintiff with respect to the subject property on Broadview Avenue and that I was providing an opportunity to Mr. Reddy Chavali to provide a responding appraisal if he saw fit. No such appraisal has been filed with me. Having reviewed the endorsements of Justice Pollack and Justice Kimmel I am satisfied that it would be inappropriate for me to interfere with the determination of the propriety of the counterclaim.
[44] What I have determined is that it is however appropriate to resolve the question of liability for the principal amounts outlined in the Statement of Claim and as addressed in the minutes of settlement at this time.
[45] I therefore determined that the plaintiff is entitled to proceed after April 30, 2019 with the sale of the subject property. However I am directing that the funds realized are to be held in escrow, in an interest-bearing form, until such time as the manner of dealing with the counterclaim has been resolved by the parties or the court.
[46] In the event the counterclaim is abandoned or struck out, then the proceeds can be credited to whatever the outstanding balance on the global judgment contemplated by the minutes of settlement turns out to be.
[47] The Defendants shall still have the normal rights available to mortgagors to challenge the quantum of costs of realizing on the various mortgage securities involved in this matter. Those rights shall continue to be available to the defendants, as well as any residual rights flowing from the Minutes of Settlement.
[48] In the materials filed in the supplementary motion record in December before me, there was an appraisal of the Broadview property. One of the advantages to both parties is that Toronto real estate prices continue to be relatively high. The appraisal obtained on a “drive-by” basis suggests the property might well have a value (as of December 2018) ranging between 1.3 to $1.5 million.
XI. Costs of Motions
[49] I am reserving the question of costs of the numerous motions before me until after the counterclaim’s future status has been clarified.
Released: March 28, 2019
Master D. E. Short
DS/ R262
Appendix “A”
SUPPLEMENTARY ENDORSEMENT
[1] This endorsement supplements my endorsement of January 25, 2019 in this matter, in light of new information that has come to my attention since then.
Background to the January 25, 2019 Appearance
[2] Prior to this matter coming before me on January 25, 2019, Mr. Reddy Chavali appeared before Pollak J. on November 13, 2018 on this motion and it was adjourned to allow him to revise his factum and to put the plaintiff on notice of the motion. Mr. Reddy Chavali had prepared and filed, in the interim, a revised factum for his motion, as he had been directed to do by Pollak J. I did not have any material before me except for Mr. Reddy Chavali’s revised factum, but from what I could discern, he appears to be seeking default judgment on the counterclaim in this action.
[3] Mr. Reddy Chavali indicated in his factum before me that it was submitted on behalf of himself and 3071235 Canada Inc., in their capacities as plaintiffs by counterclaim. Much earlier in these proceedings (in September of 2016) Dunphy J. had granted leave to Mr, Reddy Chavali to represent the numbered company.
The January 25, 2019 Adjournment Request
[4] Mr, Reddy Chavali appeared on January 25, 2019 seeking a further adjournment of his motion and he indicated that he intended to consult with counsel who represents the other defendants in the main action, Mr. Orlando Vinton.
[5] It was not clear from the material before me on January 25, 2019 whether the numbered company is represented by Mr. Vinton for all or only limited purposes in this action, however he did not appear. In light of Dunphy J.’s prior order, I allowed Mr. Reddy Chavali to speak to the adjournment on behalf of both himself and the numbered company.
[6] I was advised that Master Short has a decision under reserve on a motion by the plaintiff and cross-motion by the other two defendants that he heard on December 12, 2018. The adjournment request before me on January 25, 2019 was supported by the plaintiff because, among other reasons, plaintiff's counsel thought it would be preferable for the court to have Master Short's decision before this motion is heard.
[7] On January 25, 2019 I adjourned Mr. Reddy Chavali's motion to April 3, 2019 and set a schedule for delivery of materials, but left open the prospect of a further adjournment in the event that Master Short's decision has not been released as the next hearing date approaches. A transcription of my handwritten in-court endorsement dated January 25, 2019 is attached as Schedule 1 hereto.
New Information
[8] Since writing my endorsement on January 25, 2019, it has come to my attention that Mr, Reddy Rajagopal Chavali and other family members, including his late wife Reddy Krisbnaveni Chavali and their son Reddy Venkatasubbarami Chavali, have been declared a vexatious litigants under s. 140 of the Courts of Justice Act, R.S.O. 1990 c. C-43, as amended (the "CJA"). The order declaring them as such dates back a number of years but, as far as I can tell, it remains in effect. (See reference to that order in: Chavali v. Law Society of Upper Canada, 2005 CanLII 13827 (ON S.C.)) That order does not prevent the Chavali's from defending themselves in this action, however, Mr Reddy Chavali did need leave to commence and continue a counterclaim and he needs leave to bring a motion for judgment on the counterclaim, which is what I understand his motion that has been adjourned to April 3, 2019 to be for.
Supplementary Direction and Order
[9] Accordingly, I am supplementing my previous endorsement of January 25, 2019 to direct that Mr, Chavali is required, before taking any further steps in connection with his pending motion or in his counterclaim in this action, to first bring an application in writing under s. 140 of the CJA and Rule 38.12 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for leave to continue his counterclaim in this action. This endorsement (including the attached transcription of my January 25, 2019 endorsement) should be included in any application materials filed by Mr. Reddy Chavali. If Master Short's decision on the other motion has been released, that should also be included in the application materials.
[10] Any s.140 CJA in-writing leave application pertaining to the counterclaim in this action should be brought before me.