Court File and Parties

COURT FILE NO.: CV-17-00581907-0000 DATE: 20190712 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: DANIEL REIHANI and NINA TATARI Plaintiffs – and – MOHAMMAD GOUDARZI, MARYAM GOUDARZI and HARVEY KALLES REAL ESTATE LTD. Defendants – and – MOHAMMAD AMIN MORSHEDI Third Party

Counsel: Nathan I. Lean, Counsel for the Plaintiffs Bryan Fromstein, Counsel for the Defendants, Mohammad Goudarzi, Maryam Goudarzi No one appearing for the Defendant, Harvey Kalles Real Estate Ltd. and Third Party, Mohammad Amin Morshedi

HEARD: July 2, 2019

G. DOW, J.

Reasons for Decision

[1] The plaintiffs, Daniel Reihani and Nina Tatari seeks summary judgment from the defendants, Mohammad Goudarzi and Maryam Goudarzi arising from the purchase of a residential home in 2017 which the Goudarzi defendants were unable to complete.

Background

[2] Daniel Reihani is a real estate agent, an independent contractor with Harvey Kalles Real Estate Ltd. The co-owner of the property in question, known municipally as 110 Kimbark Boulevard, Toronto is Daniel Reihani’s mother.

[3] The property was not actually listed but was acknowledged by Daniel Reihani to be an investment. Before listing the property, Daniel Reihani admits he made it known to “other real estate agents at the Brokerage” to see if they had clients who would be interested in purchasing the Property” (paragraph 6 of Reihani’s affidavit sworn February 22, 2019).

[4] On February 20, 2017, Daniel Reihani received an offer to purchase in the standard form Agreement of Purchase and Sale from the defendant Mohammad Goudarzi in the amount of $1,880,000.00 open until February 22, 2017 at 11:59 pm. The agreement was to close June 30, 2017 with no condition as to financing. The agent for Mohammad Goudarzi was identified on page 5 of the Agreement of Purchase and Sale to be Mohammad-Amin Morshedi, also of Harvey Kalles Real Estate Ltd. This was not the agent Daniel Reihani had spoken to about sharing the commission to be paid. Daniel Reihani accepted the offer on February 22, 2017. With the delivery of the accepted Agreement of Purchase and Sale, Daniel Reihani also provided a “Registrant’s Disclosure of Interest” acknowledging his position as a sales person with Harvey Kalles Real Estate Ltd. and being the listing agent as well as the seller.

[5] Mohammad Goudarzi admits purchasing the property with the intention of renovating it to resell it at a profit. Mohammad Goudarzi also required financing and secured permission from Daniel Reihani to begin renovating in advance of the closing. He estimated spending about $100,000.00 replacing flooring, windows, hardware on doors and painting. As part of Mohammad Goudarzi’s efforts to obtain financing, he also requested the Agreement of Purchase and Sale be amended to add his sister, Maryam Goudarzi as a purchaser. Daniel Reihani and Nina Tatari agreed and the amendment was signed and dated May 19 and May 20, 2017.

[6] Mohammad Goudarzi did not obtain an appraisal prior to making the offer to purchase. When he did so, the property was appraised at $1,600,000.00 which made it impossible for him to obtain financing and close the agreement.

[7] Daniel Reihani had his lawyer tender on Mohammad Goudarzi’s lawyer on June 17, 2017 with the real estate lawyer for Mohammad Goudarzi handwriting on the index of documents provided stating “confirm satisfied with materials”. It should be noted that because financing was not obtained, a registered discharge was not delivered. Counsel for Daniel Reihani relied on clause 12 in the Agreement of Purchase and Sale that “Buyer agrees to accept Seller’s lawyer’s personal undertaking to obtain, out of the closing funds, a discharge in registerable form and to register same, or cause same to be registered, on title within a reasonable period of time after completion”.

[8] The efforts began to resell the property including an exchange of texts on August 22 between Daniel Reihani and Mohammad Goudarzi in which Daniel Reihani advises that he would sell the property to Mohammad Goudarzi for “1.6 – 1.65” presumably million dollars.

[9] Daniel Reihani had relisted the property after June 17 for $1,788,000.00 and then $1,580,000.00 but did not receive any offers until September 5, 2017. The offer was for $1,370,000.00 which was accepted. The agreement closed on October 31, 2017. It should also be noted Daniel Reihani tendered an expert appraisal for this motion dated February 26, 2019 which valued the property as of September 18, 2017 at $1,400,000.00.

[10] This matter first appeared before me on January 11, 2019 and, in response to my concerns about the adequacy of the materials, was adjourned to March 12, 2019. A chamber’s appointment was held on March 11, 2019 and the matter further adjourned until July 2, 2019. In the interim, the defendants, Mohammad and Maryam Goudarzi third partied Mohammad-Amin Morshedi for contribution and indemnity alleging he was negligent and had breached his fiduciary duty to them. Pleadings have been exchanged but no examinations for discovery held in either in the main action or the third party action (a Second Supplementary Motion Record dated June 24, 2019 contains the transcripts of the cross-examination of Daniel Reihani and Mohammad Goudarzi which proceeded April 9, 2019).

[11] The lawyer for Harvey Kalles Real Estate Ltd. in the main action is also representing Mohammad Amin Morshedi in the third party action. She filed an affidavit deposing the third party claim raised issues of credibility requiring a trial. That counsel also deposed she took no position on the plaintiff’s motion for summary judgment and did not attend on July 2, 2019.

Analysis

[12] The essence of the plaintiff’s position is that the main action clearly falls within the parameters established under Rule 20 of the Rules of Civil Procedure and Hryniak v. Mauldin, 2014 SCC 7. That is, there is no genuine issue for trial with regard to the parties having reached an agreement. The Goudarzi defendants breached the agreement and the quantum of damages can be ascertained. The evidence is available for me to make the necessary findings of fact, apply the law and be a “proportionate, more expeditious and less expensive means to achieve a just result (at paragraph 49 of Hryniak v. Mauldin, supra). The plaintiff’s counsel attempted to distinguish a recent Court of Appeal decision, Butera v. Chown, Carins LLP, 2017 ONCA 783 where the court analyzed the area of partial summary judgments and the problems of “duplicative or inconsistent findings at trial” and whether such a process “was advisable in context of the litigation as a whole” (at paragraph 28). The court concluded partial summary judgment should be a “rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner” (at paragraph 34).

[13] In September, 2018 and January, 2019, Justices McKelvey and Cavanagh respectively addressed similar situations in Miller v. Wang, 2018 ONSC 7668 and Zou v. Sanyal, 2019 ONSC 738. Both were law suits “arising out of a very hot real estate market in the spring of 2017 which was followed by significant slowdown and a decline in home prices” (Miller v. Wang, supra at paragraph 1).

[14] The defendants in those actions brought third party actions against their real estate agent. Both actions addressed the merits of the plaintiffs’ claim and whether the defendants were entitled to a stay of any judgment against them until final disposition of the third party claims. Justice Cavanagh, who had the benefit of Justice McKelvey’s reasons, addressed the overlap in the issues between the main action and the third party claim and the prejudice to the plaintiff if a stay was granted. Both decisions concluded there was a clear breach of the Agreement of Purchase and Sale and Justice Cavanagh weighed the “potential prejudice of non-payment” (at paragraph 65) which militated against a stay of enforcement.

[15] My concern is with regard to the fact both Daniel Reihani, as vendor, and the agent for the Goudarzi’s, work for the same company, the defendant Harvey Kalles Real Estate Ltd.

[16] The defendant Mohammad Goudarzi deposed Mohammad Morshedi “had an arrangement whereby upon the sale of the Property, Daniel agreed to pay Morshedi and an associate of the latter the sum of $80,000.00” (at paragraph 8 of the Goudarzi affidavit sworn February 5, 2019). On cross-examination, this was determined to be triple hearsay, that is, an individual named Fatimah told Goudarzi’s mother this information. No direct evidence was tendered by either individual. However, that evidence was met with Daniel Reihani detailing what contact he had with other agents about the kind of referral fee he was prepared to pay for referring a potential buyer (at paragraphs 8 and 9 of the Reihani affidavit sworn February 22, 2019).

[17] The Goudarzi’s pleadings, both the cross-claim and third party claim, allege negligence, breach of fiduciary duty and conflict of interest against both Harvey Kalles Real Estate Ltd. and Mohammad Morshedi. The fact the plaintiff-vendor was a real estate agent with the same company as the defendant real estate agent was not part of the factual matrix in either Miller v. Wang, supra or Zou v. Sanyal, supra decisions.

[18] More recently, Justice Kimmel addressed this issue in Mir v. Brandt, 2019 ONSC 2056. Again, this was a summary judgment motion in a failed residential real estate transaction from 2017 when a third party claim had been commenced against the defendants’ realtor. On the basis that the plaintiff realtor would reasonably be a witness at the trial of a third party action and that evidence would overlap with matters covered in the summary judgment motion, there became a risk of different (or inconsistent) findings. As such, it was not in the interests of justice to grant summary judgment in the main action.

[19] I have those same concerns, particularly given both Daniel Reihani and Mohammad Morshedi worked at Harvey Kalles Real Estate Ltd. I am cognizant of the evidence from Reihani that “Prior to the transaction for the Property I had never met or spoken to Morshedi” (at paragraph 10 of Goudarzi’s affidavit sworn June 15, 2018). That evidence has not been corroborated by Morshedi in the material before me. What I had was an affidavit from counsel for both Morshedi and Harvey Kalles Real Estate Ltd. that “there should be no findings of fact made against Harvey Kalles or Morshedi that would bind Harvey Kalles or Morshedi in terms of the interactions between Morshedi and the defendants Goudarzi” (at paragraph 9 of the affidavit of Sareena Rosenberg sworn November 7, 2018).

[20] As stated by Justice Kimmel this “is a red flag for a concern about partial summary judgment in a case like this one where a derivative third party action that is not part of the motion will continue if the plaintiff succeeds on a summary judgment motion” (at paragraph 33). I also agree with Justice Kimmel that the “suggestion that findings could be made on the summary judgment motion that would not be binding in the third party action is not only highly impractical but legally unsustainable” (at paragraph 43).

[21] I am reinforced in this conclusion by the even more recent comments of the Court of Appeal in Vandenberg v. Wilken, 2019 ONCA 262 (released April 3, 2019) where the court set aside a summary judgment decision in a failed commercial farm real estate transaction noting the allegation of unconscionability was “inextricably intertwined with and therefore affect the determination of the validity of the agreement of purchase and sale. Moreover, the motion judge made numerous findings of credibility concerning the appellants and their relationship with their real estate agents that are at the core of the counterclaim and third party claim. The motion judge’s findings will either constrain the trial judge or lead to the risk of inconsistent findings on the same issues at trial” (at paragraph 13).

Disposition

[22] As a result, I decline to award the plaintiffs’ summary judgment and dismiss the plaintiffs’ motion. In the circumstances, the Supreme Court of Canada in Hryniak v. Mauldin, supra at paragraph 78 directs I consider whether there are any compelling reasons that I not remain seized of the matter. I conclude that the purpose behind the Supreme Court’s direction would not be well served in the circumstances. I have not made any findings on the evidence presented beyond my finding that there may be genuine issues for trial and my noted concern that a finding in favour of the plaintiff may be inconsistent with a possible result in the third party claim and crossclaim. Similarly, there does not appear to additional findings or limitations of issues that would be appropriate. Therefore, I decline to remain seized of the matter or make any other findings.

Costs

[23] Each party provided and exchanged their Costs Outline. The plaintiffs included all costs of the action in the event of their success totaling $19,987.34 inclusive of fees, HST and disbursements on a partial indemnity basis. The Goudarzi defendants sought $17,199.10 inclusive of fees, HST and disbursements on a partial indemnity basis in response to the motion. Neither party submitted the amount sought by the other was excessive. Given the concerns raised by the Goudarzi defendants have not been determined, I am not prepared to make the usual order that they recover their costs. Rather, I order the costs of this motion be reserved to the judge that determines the issues in the main action.

Mr. Justice G. Dow Released: July 12, 2019