Court File and Parties

NEWMARKET COURT FILE NO.: FC-16-51697-00 DATE: 20200219 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LOUISE LU, Applicant (Moving Party) AND: KEVIN LU, Respondent (Responding Party)

BEFORE: The Honourable Justice V. Christie

COUNSEL: Louise Lu, Self-Represented (appeared by Teleconference) N. Warsi, Counsel for the Respondent (Responding Party)

HEARD: December 18, 2019 and February 19, 2020

Endorsement

Background Facts

[1] The parties separated in 2016, either in April, according to the Respondent, or in August, according to the Applicant. The court proceedings between these two parties commenced in September 2016. The Applicant, Louise Lu, has claimed for the following relief:

(1) A divorce; (2) Spousal support; (3) Child support; (4) Proportionate share of s. 7 expenses; (5) Custody of the three children; (6) Restraining / non-harassment order; (7) Equalization of net family property; (8) Exclusive possession of matrimonial home; (9) Sale of family property; and (10) Costs.

[2] The matter is not yet set for trial, and is currently in the Settlement Conference phase of the proceedings.

[3] The Applicant has brought this motion requesting that the court order that a certificate of pending litigation be registered on a property located at 119 Carrville Road, Richmond Hill, Ontario. The Applicant claims that, in May 2016, while they were still together, she and the Respondent invested $100,000 toward this property, which was later purchased by her husband, through a numbered company, 2514099 Ontario Ltd., for the total amount of $2.5 million. Included in the Applicant’s affidavit is a cheque to Express Realty in the amount of $100,000 and a receipt to Kevin Lu from Express Realty Inc. Brokerage for this amount. The receipt is dated March 22, 2016 and indicates “deposit for 119 Carville Rd. Listing agent: Kevin Lu.” The property at 119 Carville Road in Richmond Hill was transferred from Candice Pirali to 2514099 Ontario Ltd on May 12, 2016 for consideration of $2.5 million as evidenced by the parcel register.

[4] The Applicant claims that the $100,000 investment into this property was obtained from the refinancing of the matrimonial home, effectively doubling the mortgage on the matrimonial home, and therefore, she has a vested interest in the Carrville Road property, as without her approval to refinance, the purchase of the Carrville Road property would not have been possible. The Applicant further claimed that she asked the Respondent to put her name on the company documents for 2514099 Ontario Ltd., which was refused, but that the Respondent assured her that she would be part of the company and its profits. According to the Applicant, the Respondent has always been the owner and president of 2514099 Ontario Ltd., before during and after the purchase. Corporation profile documents from the company show Kevin Lu as the person authorizing filings in 2016 and 2017. It also shows Kevin Lu as one of the officers and directors beginning April 18, 2016.

[5] The Applicant submitted that the purported owner of the property, Jeff Liu, is not the true owner and in fact questions whether, in fact, Jeff Liu is a real person. The Applicant submitted that there is ample evidence that the Respondent is the true owner, including the fact that the Respondent made an application with the Town of Richmond Hill to get the property rezoned and approved for a mid-rise condominium building, he has been living at the property, and paying the expenses at the property.

[6] Further, the Applicant submitted that the Respondent has sold other property without providing full disclosure to her, and she is afraid that he will do the same with the Carville Road property. In March 2019, the Respondent listed the Carville Road property for sale for $6.5 million. According to the Applicant, this was without her knowledge or permission. The property did not sell and is no longer listed for sale. However, the Applicant submitted that a certificate of pending litigation for this Carville Road property is necessary, as she believes the Respondent is moving and hiding assets in this property, and the certificate of pending litigation will prevent an unfair dissolution and depletion of assets that they are trying to settle in their divorce proceedings, and will protect her ultimate equalization payment, at least until she has full disclosure of the circumstances. She states that her entitlement to equalization cannot be adequately protected by any other form of security.

[7] The Respondent submitted that this motion should fail. According to the Respondent, he was, at the time of this transaction, and still is, a realtor at Express Realty Inc. In August or September 2015, the Respondent claims that he listed the Carville Road property for sale on behalf of Candice Pirali. There were no valid offers and Ms. Pirali was considering taking the property off the market. The Respondent submitted that this would have been a major sale lost. Jeff Liu was the first potential buyer that showed interest in the property, and was offering to buy it around the asking price and was agreeable to using the Respondent as his agent. This would have resulted in approximately $75,000 in commission to the Respondent if the deal closed successfully, and it was hoped that this would establish a relationship for future business, as Jeff Liu was intending to develop the land, which was a condition for him to buy the property. The Respondent understood that if this sale went well, Jeff Liu would want him to act as the exclusive real estate agent for his developments.

[8] The agreement of purchase and sale, dated March 13, 2016, shows the buyer as “Jeff Liu in trust of a company to be incorporated”, and the seller as Candice Pirali. The purchase price was stated as $2.5 million and the deposit was $100,000. The agreement stated, “Buyer submits upon acceptance one hundred thousand dollars by negotiable cheque payable to Express Realty Inc. “Deposit Holder” to be held in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion. “Upon acceptance” is explained in the agreement as “the Buyer is required to deliver the deposit to the Deposit Holder within 24 hours of the acceptance of this Agreement”. The agreement demonstrates that Kevin Lu, the Respondent, was representing both the buyer and the seller in this transaction. One of the conditions in the agreement of purchase and sale was as follows:

This Offer is conditional on the Buyer obtaining verification from the Town of Richmond Hill on building townhouses on the subject land….

[9] According to the Respondent, Jeff Liu, the buyer, was in China at the time the agreement of purchase and sale was being negotiated, and therefore, could not arrange the $100,000 deposit within the 24 hour time period. Jeff Liu asked the Respondent if he could provide the deposit on his behalf. The Respondent claims that he spoke to the Applicant about this, as he did not want to lose this substantial commission. According to the Respondent, the Applicant agreed that they could pay the $100,000 deposit.

[10] The deal closed and the Respondent received his commission of $75,000.

[11] As for the corporation, the Respondent submitted that he was included in the corporate documents and made the application to the Town for re-zoning because, if it were approved, and if condos were built, Jeff Liu agreed to give him exclusive rights to sell them, which would have been extremely profitable. The Respondent provided a sworn affidavit from himself and Jeff Liu regarding the condominium application filed with the town of Richmond Hill, and Jeff Liu is noted as the owner.

[12] The Respondent stated that he has been renting the Carville Road property since he was forced from the matrimonial home. The $100,000 deposit has been held to cover rent. The Respondent submitted that he does not pay any of the expenses on the property.

[13] Finally, the Respondent submits that a certificate of pending litigation will have a significant negative impact upon his relationship with Jeff Liu. As for the prejudice to Jeff Liu, it is unclear at this point, as he has not been served and has not participated in these proceedings.

Analysis

[14] Rule 42 of the Rules of Civil Procedure provides as follows:

ISSUING OF CERTIFICATE

Court Order Required

42.01 (1) A certificate of pending litigation (Form 42A) under section 103 of the Courts of Justice Act may be issued by a registrar only under an order of the court. R.R.O. 1990, Reg. 194, r. 42.01 (1) .

Claim for Certificate to be in Originating Process

(2) A party who seeks a certificate of pending litigation shall include a claim for it in the originating process or pleading that commences the proceeding, together with a description of the land in question sufficient for registration. R.R.O. 1990, Reg. 194, r. 42.01 (2) .

Motion Without Notice

(3) A motion for an order under subrule (1) may be made without notice. R.R.O. 1990, Reg. 194, r. 42.01 (3) .

Order to be Served Forthwith

(4) A party who obtains an order under subrule (1) shall forthwith serve it, together with a copy of the notice of motion and all affidavits and other documents used at the hearing of the motion, on all parties against whom an interest in land is claimed in the proceeding. O. Reg. 219/91, s. 4.

[15] The Respondent submitted that this motion should be dismissed on the basis of the legislation itself, specifically that the Applicant did not claim for the certificate of pending litigation in the originating process or pleading that commenced the proceeding. Further, there was no mention of the Carville Road property in her financial statement.

[16] In Chilian v. Augdome Corp. (1991), 2 O.R. (3d) 696 (C.A.), the court stated that entitlement to a certificate of pending litigation does not necessarily require that the interest in the land in question be claimed directly by the plaintiff for itself; it being sufficient that an interest in land is otherwise in question.

[17] In Carey v. Almuli, 2013 ONSC 6976 (S.C.J.), Justice Kiteley dealt with issuing a certificate of pending litigation in a family law context. In that case, it was suggested that the motion should fail because the moving party had not asserted a claim for an interest in land. It was conceded that no such claim had been asserted based on constructive trust principles, but it was submitted that there was such a claim for an interest in land based on the equalization claim. Relying on the analysis in Nash v. Gilbert, [1993] O.J. No. 177 (UFC), Justice Kiteley found that:

20 On the basis of Nash v. Gilbert, the Applicant has brought into question an interest in the land by asserting a claim for an equalization of net family property, for a vesting order pursuant to s. 9(1)(d) and for an order pursuant to s. 12. The respondent has not met the burden to set aside the order.

[18] In the case at bar, there is a claim for equalization of net family property, however, there was no request for a vesting order or an order for preservation.

[19] In this case, the Applicant claims for equalization of net family properties and the sale of family property. Further in the facts supporting her claim, she referred to the fact that the Respondent and his partner purchased the Carrville Road property for the purchase price of $2.5 million and that the Respondent invested $100,000 towards the purchase of the property. The Applicant further referred to the refinancing of the matrimonial home, in part, to obtain this $100,000 investment. Immediately, after these paragraphs in the originating application, the Applicant stated that she was seeking an order for the sale of family property and equalization of the parties’ Net Family Property. In my view, the Applicant, while not explicitly referring to a certificate of pending litigation in relation to this property, certainly made a claim for equalization and specifically referred to this property and the $100,000 payment made toward this property. In my view, the motion should not fail on this basis.

[20] Further, with respect to notice, the legislation makes it clear that notice is not required. Also, it is the Applicant’s position that there is no Jeff Liu and that the Respondent is the owner and directing mind of the corporation, and therefore, the true owner of the property. This court would not dismiss this motion on the basis of lack of service on the company and on Jeff Liu personally.

[21] Having dispensed with these procedural issues, this court must determine whether the certificate of pending litigation should be placed on the property in this case.

[22] As stated in 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003, relying on Interrent International Properties Inc. v. 1167750 Ontario Inc., [2013] O.J. No. 3385 (S.C.J.), “The Court may only grant leave to register a CPL where it is satisfied that there is a triable issue in respect of the moving party’s claim to an interest in the land.” In Kim, Justice Petersen was satisfied that there was a triable issue with respect to the Applicant’s claim to an interest in the land. However, the court went on to consider other relevant factors, before ultimately concluding that it would not be just to grant leave to register the certificate of pending litigation. The court stated:

31 A distillation of the case law and review of s.103(6) of the Courts of Justice Act establish that the following are relevant factors for consideration on a contested Motion for leave to issue a CPL: (i) whether the land in question is unique, (ii) whether there is an alternative claim for damages, (iii) the ease or difficulty of calculating damages, (iv) whether damages would be a satisfactory remedy, (v) the presence or absence of a willing purchaser, (vi) the balance of convenience, or potential harm to each party, if the CPL is or is not granted, (vii) whether the CPL appears to be for an improper purpose, (viii) whether the interests of the party seeking the CPL can be adequately protected by another form of security and (ix) whether the moving party has prosecuted the proceeding with reasonable diligence. This is not an exhaustive list.

[23] Fairly recently in the case of Guz v. Olszowka, 2019 ONSC 5308, Justice Broad discussed the ordering of a certificate of pending litigation in the context of an estate matter. The court stated as follows:

27 The principles which have application on a motion to discharge a CPL were succinctly summarized by Master Glustein (as he then was) in Perruzza v. Spatone, 2010 ONSC 841 (Ont. S.C.J.) at para. 20 as follows: (i) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL (Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (Ont. S.C.) ("Homebuilder") at para. 1); (ii) The threshold in respect of the "interest in land" issue on a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C. 43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (Ont. S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Ont. Gen. Div. [Commercial List]) at para. 62); (iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CarswellOnt 219 (Ont. C.A.) at para. 20); (iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (Ont. S.C.) at paras. 10-18); and (v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Ont. Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CarswellOnt 1026 (Ont. Div. Ct.) at para. 9).

28 In determining the question of whether there is a triable issue as to an interest in land on a motion to discharge or issue a CPL, the court does not assess the credibility of deponents or decide disputed issues of fact (see HarbourEdge Mortgage Investment Corp. v. Community Trust Co., 2016 ONSC 448 (Ont. S.C.J.) at para. 45).

See also Marmak Holdings Inc. v. Miletta Maplecrete Holdings Ltd. et al., 2019 ONSC 4630.

[24] In this case, the Applicant alleged that the Respondent is the real owner of the Carville Road property despite attempts to cover that up. This could be analogized to a fraudulent conveyance. In the case of Jodi L. Feldman Professional Corporation v. Foulidis, 2018 ONSC 7346, Justice Diamond discussed the placing of a certificate of pending litigation in this context. The court stated:

[10] Traditionally, when a fraudulent conveyance is alleged, title to a property is brought into question. In Keeton v. Cain, Justice Scott held that a creditor need not have a personal interest in a property, but merely “need to claim title”. As long as there are more than bare allegations supporting a fraudulent conveyance, a sufficiently reasonable claim to an interest in land will exist and warrant the issuance of a CPL.

[11] The jurisprudence has since adapted to situations like the one before the Master, namely where a plaintiff is not yet a judgment creditor of the defendants who has alleged to have participated in a fraudulent conveyance. Where a plaintiff has yet to obtain a judgment in the underlying / main action, the test for a CPL is set out in the decision of Justice Smith in Grefford v. Fielding: a) has the plaintiff satisfied the Court that there is a high probability that it will successfully recover judgment in the underlying / main action? b) has the plaintiff introduced evidence demonstrating that the impugned transaction was made with the intent to defeat or delay creditors? c) has the plaintiff demonstrated that the balance of convenience favours the issuance of the CPL in the circumstances of the case?

See also Szymanski v. Lozinski, 2019 ONSC 6968.

[25] Having reviewed the law and the evidence in this case, it is the view of this court that this motion cannot succeed for the following reasons:

(1) This court is not satisfied that there was anything fraudulent or deceitful about the purchase of the Carville Road property. The evidence would suggest that Kevin Lu was the real estate agent for both the buyer and the seller, and that Kevin Lu paid the $100,000 deposit. There is no evidence that Kevin Lu actually purchased the property, through a company or otherwise. (2) The Applicant has not demonstrated an interest in the property. All of the documents suggest that the $100,000 was a deposit paid on the purchase of the property. The draft net family property statement includes the $100,000 deposit on the Carville Road property. This $100,000 deposit would be the Applicant’s only interest, and would not give her a complete interest in a property valued at several million dollars, justifying a basis for a certificate of pending litigation to be placed on that property. The Applicant has not contributed in any way toward this property. (3) The Applicant has not demonstrated that she is owed anything by way of equalization. The only net family property statement prepared in this case was that drafted by Kevin Lu for a motion in August 2018, which concluded that the Applicant must pay the Respondent $399,651.54. The Applicant stated that her calculation of net family property is very different, yet does not provide this court with a net family property statement. It is incumbent on the Applicant to demonstrate that she is in fact the party owed the equalization payment and post-separation date adjustments, and that the equity is not sufficient for meeting those payments. She has not done so. (4) The Applicant has not explained why her claim cannot be quantified in terms of damages. A certificate of pending litigation should not be used where other remedies, such as damages, would be available. (5) According to the draft net family property statement that has been prepared, there are significant assets available. For example, the matrimonial home was valued at $1.63 million. The “James property” under business interests is valued at $2.12 million. Even if the Applicant could establish some interest in the Carville Road property, which this court finds she has not, there is sufficient equity in the other properties to cover any interest that she could possibly have in the Carville Road property. (6) There is nothing unique about this property. Even according to the Applicant, it is simply another asset to liquidate for equalization. The real issue here is about money and the division of that money after the break down of a marriage. (7) The Applicant has no intended use for this property. (8) This court is satisfied that there will be prejudice to the Respondent if the certificate of pending litigation is placed against this property, given his work as a real estate agent.

[26] For all of the foregoing reasons, the motion is dismissed.

[27] If the parties are unable to agree as to costs of this motion, the court will accept written submissions on costs, which shall be no more than three pages in length, excluding supporting documentation, and which shall be provided to the court office in hard copy or by email no later than February 28, 2020.

Final Decision

The Honourable Justice V. Christie Date: February 19, 2020