Court File and Parties
COURT FILE NO.: CV-19-630695
DATE: 20191211
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MUHAMMAD IRFAN KHAN, Applicant
AND:
MICHELLE DATUL COLOMA, Respondent
BEFORE: Kimmel J.
COUNSEL: Jasmeet K. Dara, for the Applicant
Jessica Kras, for the Respondent
HEARD: December 9, 2019
ENDORSEMENT
Overview
[1] The applicant is the respondent’s brother-in-law. The applicant and the respondent jointly owned a house at 65 Medford Avenue in Scarborough, Ontario (the “Property”) and lived in it together with the applicant’s brother/respondent’s husband Imran Khan and other family members, including the respondent’s three children and the applicant’s three children. The applicant and his brother were also in business together.
[2] Over the course of the past few months, there has been a breakdown in the family that has alienated the applicant from the respondent, his brother, and his three children. The applicant is seeking to continue the interim relief he sought and obtained on an urgent basis, which has tied up the respondent’s share of the net proceeds from the sale of the Property that the respondent says she needs to close the purchase of a new home (the “New Property”). The closing of the purchase of the New Property has been extended to December 12, 2019 but the vendor will not agree to extend beyond that.
[3] I am not satisfied that the applicant is entitled to the continuation of the interim relief he seeks on any of the grounds that he alleges (Rules 40, 45.02, or 66.03 of the Rules of Civil Procedure[^1] or s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43). The applicant has not satisfied various aspects of the tests under these Rules. Transcending all of them is that he has not satisfied me that the balance of convenience favours the continuation of any interim injunctive relief that will deprive the respondent of the ability to use her half of the net proceeds from the sale of the Property to purchase her New Property, in the absence of any demonstrated prejudice to the applicant beyond the normal inconvenience of having to enforce a judgment for recovery of the damages he claims if he is successful.
[4] I am also not satisfied that this is an appropriate case in which to exercise my discretion in favour of the applicant’s request on an interim injunction to give effect to his claim for unequal distribution of the sale proceeds, having regard to the complicated history of the relationship between the parties and having regard to the significant impact that granting this relief could have on the respondent if it prevents her from completing the purchase of the New Property.
[5] Accordingly, and for the more detailed reasons that follow, the applicant’s motion for the payment into court of the net proceeds from the sale of the Property (including his amended request for the payment of only the portion of those sale proceeds that he says represent what is owing to him by the respondent for carrying costs) is dismissed. The respondent’s cross-motion is granted to enable her to use her half of the net sale proceeds from the Property towards the purchase of the New Property.
The State of the Evidentiary Record Before the Court
[6] The December 3, 2019 scheduling order of Archibald J. made at Civil Practice Court when the urgent motions of both parties were scheduled allowed for the delivery of materials on December 6, 2019 and cross-examinations on December 7, 2019 for use at the hearing before me on December 9, 2019. The applicant did not ask to cross-examine on the materials filed by the respondent. The respondent did ask to cross-examine the applicant, but he was not available.
[7] There are points of divergence in their evidence, which primarily go to the merits of the ultimate claim against the respondent for payment of her half of amounts the applicant says he disproportionately paid in respect of the first mortgage, property taxes, and home insurance premiums for the Property, which total $65,305.09 based on the accounting he has provided. This accounting is challenged by the respondent for the reason, amongst others, that it is tied to a single Royal Bank of Canada account that does not paint a full picture of all funds received by the applicant from the respondent, from her husband and from the business that the two brothers carried on together, which the respondent claims was to be the primary source of funding for the carrying costs for the Property on behalf of both parties. The respondent was not able to cross-examine the applicant on his evidence about this.
[8] The respondent says that she and her husband did contribute their share of the carrying costs and says that they alone paid the two installments due under the second mortgage, totalling approximately $28,250.00. In addition to asserting that he also contributed to these second mortgage payments, a question has been raised by the respondent as to why the real estate solicitor withheld the second installment payment on this second mortgage from the sale proceeds from the Property if it had already been paid (as the cheque produced by the respondent suggests it was). There was no request to cross-examine the respondent on her evidence about these payments. The possibility that there has been a double payment of the second mortgage installments will need to be eventually addressed as part of the reconciliation.
[9] For purposes of this motion, these examples of conflicts that arise from the evidentiary record illustrate why it is not possible for me to determine the dispute between the parties about how much they each paid on account of the carrying costs for the Property over the more than three years that they owned it, and who owes what to whom. Since it is relevant to certain aspects of the tests to be applied in my consideration of the relief that the applicant seeks, it is fair to say that the record does demonstrate that there is a serious issue to be tried to determine this ultimate accounting. However, that is not determinative of the issues before me on these motions.
Background and Chronology
[10] Many of the other facts that I have considered are not controversial. Some have been sourced from the respondent’s affidavits. These are facts that are not directly challenged by the applicant’s affidavits or challenged on cross-examination although the respondent said she would make herself available. Some of these facts come from the applicant’s affidavits. These facts include:
a. The parties purchased the Property as joint tenants on February 4, 2016 and equally contributed to the cost of its purchase.
b. The parties agreed that the mortgages, property taxes, insurance payments, and utility bills would be shared equally, with the applicant paying half of the total costs and the respondent and her husband paying the other half. They agreed to equally share the assets and liabilities of the Property.
c. The company through which the brothers operated their joint business paid the utility bills for the Property directly.
d. The parties decided to sell the Property and listed it for sale in April of 2019, entered into an agreement of purchase and sale to sell the Property to a third party on October 3, 2019, and that sale closed on November 28, 2019.
e. There was a falling out between the applicant and his brother that caused Imran Khan (the respondent’s husband) to leave the business in or around August of 2019.
f. On September 30, 2019 as part of a process initiated by the Children’s Aid Society the applicant agreed to a temporary custody order to place his three children in the care of the respondent and her husband/the applicant’s brother.
g. On October 9, 2019, before this application was commenced, the respondent and her husband entered into an agreement of purchase and sale to purchase another home (the “New Property”), that was originally scheduled to close on December 5, 2019. That closing has been extended to December 12, 2019 pending the outcome of these motions. The vendor of that New Property has advised that the closing date will not be further extended.
h. The applicant learned sometime after October 9, 2019 that the respondent and her husband had reported his treatment of his children to the Children’s Aid Society.
i. The applicant commenced this proceeding on November 7, 2019 for the partition of the Property and an unequal division of the net sale proceeds to account for what the applicant claims were his disproportionate payments in respect of certain carrying costs for the Property, and various interim relief including the payment of all the net sale proceeds into court.
j. The net proceeds from the sale of the Property totalling $237,564.17 are being held in trust by the real estate solicitor jointly appointed by the parties pursuant to the endorsement and direction of Faieta J. made on November 22, 2019 and continued by me on December 2, 2019, to allow the respondent an opportunity to respond to the applicant’s motion for the payment of those sale proceeds into court.
k. Each party claims that the other agreed to pay any amounts owing on account of their respective share of the carrying costs for the Property out of the net proceeds from the sale of the Property. Neither admits that they owe anything to the other or that they agreed to pay anything they do owe out of the net sale proceeds.
l. Both parties have given an undertaking as to any damages the other may suffer as a result of the orders they each seek.
Relative Prejudice or Inconvenience
(i) The Prejudice to the Respondent in Not Being Able to Close the Purchase of the New Property
[11] The respondent deposes that she was counting on her half of the net proceeds from the sale of the Property to complete this pending purchase of the New Property and denies that the applicant has disproportionately covered the carrying costs for the Property. She intends to fund the agreed upon purchase price of $650,000.00 for the New Property with her half of the sale proceeds from the Property ($118,782.09), $32,500.00 in cash, and a mortgage of $487,500.00. Those contributions add up to $638,782.09 which leave, by my math, $11,217.91 that the respondent and her husband still need to source to close their purchase of the New Property on December 12, 2019.
[12] Although the respondent does not explain in her affidavits where this remaining balance of the money will come from to complete the purchase (an omission which appears to be inadvertent and is understandable given the time pressures that she was under to complete her responding material), she does attest that she and her husband intend to close and that without access to her half of the net proceeds of sale from the Property they are at risk of defaulting and losing their $25,000.00 deposit and $6,000.00 in fees already paid to the broker for this purchase, and face the non-monetary risk losing this house which is ideally located for the six children and within their budget. She was not cross-examined on any of this evidence.
[13] The respondent and her husband have their own three children to look after and also have temporary custody of the applicant’s three children pursuant to a temporary custody order made following a process commenced by the Children’s Aid Society.[^2] All six children have friends and go to school in the school district where the New Property is located, close to the Medford Property. They are currently living in an Airbnb with all six children, the respondent’s mother and a family friend who assists in taking care of the children.
[14] The applicant’s speculation during oral argument that the respondent could secure additional mortgage financing to make up for the disputed funds (at some additional cost) is not persuasive in the absence of any evidence of a lender willing to grant this financing or evidence that the respondent could afford the additional monthly cost of a further mortgage. This suggestion that the amount of the disputed funds that the respondent had ear marked for the purchase of the New Property could be financed through other means was not put to the respondent in cross-examination.
(ii) The Prejudice to the Applicant in Having to Collect on a Judgment
[15] The only prejudice the applicant claims is in having to wait to collect on any judgment he may be awarded against the respondent if he ultimately proves that she failed to contribute her share of the carrying costs for the Property and he no longer has access to her share of the sale proceeds to satisfy his judgment.
[16] While there is some suggestion in the applicant’s affidavit that he will be prejudiced if the sale proceeds are released in equal shares because his share in the Property is more than 50%, there is nothing in the record that supports a conclusion that a disproportionate contribution to the carrying costs would lead to a finding that the applicant’s share of the Property was more than 50% , nor is a declaration to that effect sought in his application. The Notice of Application simply seeks repayment of the amounts he claims to have contributed to the carrying costs for the Property on account of the respondent’s share (that amounts to $65,305.09 based on the applicant’s calculations). The respondent points out that there is no trust claim.
Analysis
[17] I will deal with each of the three grounds relied upon by the applicant in support of his motion and request for payment into court of the amount he claims to have paid for the respondent’s share of the carrying costs for the Property ($65,305.09).[^3] Namely:
a. For a Mareva injunction to freeze the disputed funds pursuant to s. 101 of the Courts of Justice Act and Rule 45;
b. For an order for payment into court of a specific fund pursuant to Rule 45.02; and
c. For an order for the disproportionate distribution of the net proceeds from the sale of the Property pursuant to the Partition Act and Rule 66.03.
(i) Mareva Injunction
[18] A Mareva injunction restrains the dissipation or transfer of assets. Typically, there is a concern that there is a genuine risk that assets will be dissipated or removed from the jurisdiction and taken out of the reach of the court. The Supreme Court of Canada has long cautioned against granting relief that constitutes pre-trial forms of execution or security for judgment. (see Aetna Financial Services Ltd. v. Feigelman, 1985 55 (SCC), [1985] 1 S.C.R. 2, at 37) The interference with the respondent’s assets must be justified, by satisfying all three of the requirements for an interlocutory injunction set out in the case of RJR-McDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, by demonstrating that:
a. There is a serious issue to be tried;
b. The moving party will suffer irreparable harm if the injunction is not granted; and
c. The balance of convenience favours one of the parties.
[19] The moving party must also give an undertaking as to damages. The respondent contends that the applicant cannot meet any of the requirements for an injunction, and she may be right about that, even though the threshold on the first requirement of a serious issue to be tried is low. Although not argued, I note that the threshold for a Mareva injunction may be higher, requiring the applicant to demonstrate a strong prima facie case, for a Mareva to freeze the sale proceeds from the Property.
[20] However, rather than analyzing each element (some of which overlap with elements that are discussed in respect of the other grounds raised), in the interests of expediency since I have been asked to release my decision quickly and before the December 12, 2019 closing of the respondent’s intended purchase of the New Property, it is sufficient for purposes of this expedited analysis that the applicant has not put forward any evidence or argument to satisfy the court that he will suffer any irreparable harm if the order he seeks is not granted.
[21] The Supreme Court of Canada in RJR-McDonald defined irreparable harm (at p. 341) to be: harm that “cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other” in the sense that there is concern that the party will suffer permanent and irrevocable damages or will be beyond the reach of the court. There needs to be some doubt as to the adequacy of damages as a remedy.
[22] In this case, that doubt does not exist where the concern is that the respondent is going to use the funds that the applicant seeks to freeze to buy real property in her name (she is a purchaser under the agreement of purchase and sale) situated in the Greater Toronto Area. The fact that the applicant might have to pursue normal means to enforce any judgment he may obtain against the respondent is not the type of irreparable harm that is contemplated to satisfy this prerequisite for an interlocutory injunction.
[23] For reasons which I will elaborate upon in my analysis of the next two grounds, I would also do not find the balance of convenience to favour the applicant’s request for an injunction in this case. The applicant has not satisfied the test for an interlocutory injunction to freeze any or all of the disputed sale proceeds.
(ii) Specific Fund Under Rule 45.02
[24] Rule 45.02 allows a party whose right to a specific fund is in question to apply to the court for an order that the funds be paid into court or otherwise secured on terms that are just.
[25] The respondent challenged in her factum whether the applicant could seek this relief in respect of the proceeds of sale of the Property, arguing that while there may be a fund (in the sense of a pool of identifiable funds), the applicant’s right to that fund is not in issue. He is entitled to half of this pool of funds as a joint owner of the Property and his claim to a portion of the respondent’s entitlement to those funds is nothing more than a claim in damages for her share of the expenses.
[26] In the case of Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., 2012 ONCA 475, 294 O.A.C. 308, the Court of Appeal stated (at para. 21) that the test for an order under Rule 45.02 “…will not be met where the plaintiff’s claim is for damages … even if a specific fund is identifiable in the factual matrix of the litigation, because a claim for damages is not a claim to a legal right to that fund.”
[27] The applicant’s claim in this case is for damages for the respondent’s alleged failure to live up to her agreement to pay her share of the carrying costs. She disputes that she has not satisfied her obligations in this regard. The fact that each party has asserted that the other agreed to pay them back for carrying costs that they funded for each other out of the proceeds from the sale of the Property does not change the character of their respective claims, which are for damages.
[28] I find the applicant’s attempt to characterize this as some sort of constructive trust arising in the context of a family relationship to be unpersuasive where both parties describe their agreement and understanding to be that they were equally responsible for the expenses associated with the Property and whoever paid less would have to pay the other back. This does not amount to a claim to a specific fund, which is one of the requirements under the test for payment into court under Rule 45.02 outlined by the Ontario Court of Appeal in Sadie Moranis (at para. 18), that:
a. The plaintiff must claim a right to a specific fund; and
b. There must be a serious issue to be tried regarding the plaintiff’s claim to that fund; and
c. The balance of convenience must favour granting the relief sought by the plaintiff.
[29] In oral submissions, the respondent focussed on the last requirement. The balancing exercise requires there to be something compelling on the applicant’s side, such as a real concern that the respondent will dissipate the specific fund, to outweigh the respondent’s freedom to deal with her property (see Sadie Moranis at paras. 20 and 21). In this case there is no evidence that the respondent intends to move her share of the sale proceeds out of the jurisdiction or out of the reach of the court, nor any basis on which to infer that she will (see Chitel v. Rothbart, 1982 1956 (Ont. C.A.) at 24-25). The evidence is exactly to the contrary, that the proceeds will be used by the respondent to buy an asset that will remain in the jurisdiction.
[30] The respondent’s intended use of the disputed funds is to apply them towards putting a roof over the head of her family, including the applicant’s children who are currently in her care. The applicant does not point to any immediate need that he has for these funds. Since the applicant has not demonstrated any prejudice, and his only concern is that he will have to endure the inconvenience of delay while he proves his claim and then the inconvenience of having to enforce any judgment he receives, the balance of convenience clearly favours the respondent and her right to freely deal with her assets, including her 50% share of the net proceeds from the sale of the Property.
[31] Thus, without having to get into the merits, the applicant fails on both the first and third requirements under Rule 45.02.
(iii) Payment into Court under Rule 66.03
[32] Rule 66.03 provides for the payment into court of all money realized in partition proceeds from the sale of land and that the money may be distributed only pursuant to a court order or by agreement. A judgment for partition or sale must be made in a specific form. No such judgment has been made, nor could it have been given that the applicant commenced that application in early November of 2019, after the Property had already been sold under an agreement of purchase and sale voluntarily signed by the parties in October of 2019.
[33] The Partition Act, R.S.O. 1990, c. P.4 is concerned with compelling an unwilling vendor to sell property, or allowing part of a property to be sold, or authorizing a sale of property where one of the owners is absent. Neither this Act nor Rule 66 which implements the mechanics of any sale so ordered appear to apply in this case.
[34] The applicant relies on the case of Curtis v. Curtis, 2019 ONSC 1527, 303 A.C.W.S. (3d) 347, at paras. 22-25 in which Rule 1.04 was applied, in conjunction with Rule 66, to justify the court’s jurisdiction to deal with an application for partition and sale and give directions concerning the dissemination of the proceeds from the sale of a property that occurred after the application was brought but before it was argued rendering it unnecessary for an order for partition and sale to be made. The court in that case applied by analogy the same principles applied in the exercise of a court’s discretion in deciding whether to order partition and sale to the question of how the proceeds of sale should be distributed (at paras. 3-41).
[35] I am not convinced that this Rule should be applied at all in a case such as this one which is even one step further removed from the application of the Partition Act, where the request for partition and sale in this application was made after the parties had already entered into a binding agreement to sell the Property. This is not a case of events having overtaken a pre-existing application for partition and sale but rather is a case where an application was brought appears to have been a nullity from the outset.
[36] Even if I were to entertain the application of the principles applied in the context of an application for partition and sale, the starting point in the cases is that there is a prima facie right to an order for distribution in accordance with the title holding, which is then subject to the exercise of the court’s discretion (see Curtis at para. 41). The exercise of that discretion requires a contextual analysis to determine whether:
a. The applicant has clean hands;
b. There is oppression or hardship;
c. The proceeding is vexatious; and
d. The moving party is using the Partition Act to avoid contractual obligations.
[37] The focus in this case is on the oppression or hardship that the respondent will suffer if the court’s exercise of its discretion is applied to disturb the prima facie right of the parties who hold title as joint tenants to an equal distribution. The applicant has not satisfied me that Rule 66.03 applies, or that the court should exercise its discretion to interfere with the presumptive distribution of the sale process in equal. This comes back to the same considerations that informed the balance of convenience that so very clearly favours the respondent in this case, for reasons indicated previously in the analysis of Rule 45.03.
Disposition and Costs
[38] The applicant has not met the tests under any of the grounds for the relief he seeks for the payment of the disputed portion of the respondent’s share of the net proceeds from the sale of the Property into court. The applicant’s motion is dismissed. The respondent’s request for the court to direct the release of her half of the net proceeds of sale of the Property (being held by the real estate lawyer in trust pursuant to prior directions of this court) is granted so that she can use them to assist in the purchase of the New Property.
[39] The real estate lawyer who is currently holding the net sale proceeds from the Property is also the respondent’s real estate lawyer on the purchase of the New Property. Mr. Imtiaz Ahmad is directed to pay 50% of the net proceeds from the sale of the Property that he is currently holding in his trust account to the applicant and apply the other 50% towards the respondent’s purchase of the New Property. He is further directed to provide an updated and final trust ledger statement in respect of the sale of the Property.
[40] Both parties sought approximately $10,000.00 in costs for this motion. The applicant on a full indemnity basis (without any authority or Rule 49 offer to support a higher scale of costs) and the respondent on a partial indemnity basis. The difference in the actual or full indemnity amounts claimed by the two lawyers is largely attributable to more time having been spent by the respondent’s counsel on the review and preparation of materials. I am not suggesting any criticism of the time spent on what was an important matter that had to be litigated under significant time constraints, but the significantly higher number of hours of billable lawyer time is a consideration in the analysis.
[41] While the application may continue in respect of the damages claimed, the injunctive relief has been dismissed and it is appropriate to deal with the costs of this step in the proceeding now. In the exercise of my discretion under s. 131 of the Courts of Justice Act and having regard to the factors under Rule 57, in particular, the importance of the funds at issue to the respondent, the principle of indemnity and the reasonable expectations of the parties that appear to be aligned in terms of the amount, even if not in respect of the scale, of costs, I am fixing the respondent’s partial indemnity costs of this motion in the amount of $8,000.00 (inclusive of all fees, disbursements and taxes) and ordering that the applicant pay those costs forthwith out of his share of the net proceeds from the sale of the Property.
Kimmel J.
Date: December 11, 2019
[^1]: R.R.O. 1990, Reg. 194. [^2]: Counsel for the applicant advised in court that the next hearing date in respect of the Temporary Custody Order is in February of 2020. [^3]: The applicant revised the relief he was seeking in the December 6, 2019 factum filed on his behalf to limit it to this disputed amount to be paid into court plus an additional 25% or $16,326.72 for security for costs, rather than the entire proceeds from the sale of the Property that he was originally seeking be paid into court on this motion. In oral submissions it was conceded that there was nothing in the record, and no authorities had been provided, to support the request for security for costs and that request was abandoned.