Lajevardi v. Lajevardi, 2020 ONSC 1937

Court File and Parties

COURT FILE NO.: CV-18-596552 REFERENCE HEARD: 20191211, 20191212, 20200127 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Seyed Mohammadreza Lajevardi, Plaintiff AND: Peiman Lajevardi, Defendant

BEFORE: Master Jolley

COUNSEL: Terry Corsianos, Counsel for the Moving Party Defendant Bruce Baron, Counsel for the Responding Party Plaintiff

HEARD: December 11 and 12, 2019 and January 27, 2020

Reasons for Decision on Reference

Overview

1On 27 February 2019 I ordered, on consent, that property municipally known as 65 Highgrove Crescent, Richmond Hill, Ontario (the “Property”) and registered in the name of the defendant Peiman Lajevardi (“Peiman”) be sold, the proceeds held to the credit of this action and the competing claims of Peiman and the plaintiff Seyed Mohammadreza Lajevardi (“Seyed”) to the funds determined by way of reference. The closing took place on 20 November 2019 and net proceeds of $424,539.29 (the “net proceeds”) are presently held in trust, pending this determination of entitlement.

2Seyed seeks an equal split of the net proceeds, being 212,269. Peiman seeks $362,045.65 of the net proceeds, with Seyed receiving $52,493.64 and the sum of $10,000 being held in reserve to deal with capital gains tax.

3Seyed submitted the following affidavits which formed part of the record on this reference:

1. Affidavits of his son Seyedamirmohammad Lajevardi (“Amir”) sworn 2 May 2018, 30 November 2018 and 15 November 2019;
2. His own affidavits sworn 2 May 2018, 19 December 2018 and 15 November 2019; and
3. Affidavit of Terry Nikkel sworn 20 February 2019 attaching transcripts of the parties’ cross examinations and their undertakings and refusals.

4Peiman submitted affidavits sworn 29 October 2018, 27 November 2018, 27 September 2019 and 27 November 2019. In addition, he submitted a damages quantification report prepared by Tom Tsiokos, CPA, CA, CBV dated 24 September 2019.

5In addition to their affidavit evidence, Seyed, Amir and Peiman testified in court at the reference, as did Mr. Tsiokos.

Background

6Peiman and Seyed are first cousins who enjoyed a close relationship. Peiman moved to Canada in 2007, while Seyed remained in Iran. Amir lived with Peiman for his first four months in Canada when he enrolled at York University in 2014.

7When Seyed’s family decided to move to Canada, Peiman suggested that he and Seyed buy a property together. It would be an investment for Peiman and a family home and investment for Seyed. Peiman had a home in mind that was close to his own home and was being sold by a friend. After Amir toured the Property with Peiman and showed it to his parents by video, Seyed agreed to purchase the Property in partnership with Peiman.

8The parties agree that on 1 February 2016 Peiman and Amir attended at the Property and Peiman made an offer to purchase for $1,221,000, which was accepted. The agreement required a $50,000 deposit, which Peiman provided on 2 February 2016. Seyed transferred the equivalent of Cdn $26,923 to Peiman on 16 February 2016 as his share of the deposit.

9Peiman advised Seyed that they each needed to come up with $125,000 for closing. Seyed paid the balance of his $125,000 by instalments of $57,251 on 23 February 2016, $34,000 on 2 March 2016 and $6,826 on 3 March 2016, well in advance of the 15 March 2016 closing.

10The parties fundamentally disagree on whether it was a condition of their agreement that Seyed obtain a mortgage for one half the amount needed to close or whether the condition was that Seyed pay one half of the costs of the mortgage that Peiman would obtain.

11Seyed and Amir testified that it was agreed that Peiman would purchase the Property in his name, apply for mortgage financing and hold a 50% interest in the Property in trust for Seyed. They testified that Peiman said that they would not be able to obtain mortgage financing if Seyed were on title, so title had to be in Peiman’s name alone. Despite what title showed, Seyed would be responsible for paying 50% of all expenses, including his share of the borrowing costs. Any rental income, including rent paid by Seyed’s family to live in the home, would be shared.

12Peiman testified that the parties agreed that they would each obtain a mortgage for $455,250. To that end, on 29 February 2016 Peiman sent Seyed’s driver’s licence, Iranian passport and Canadian Permanent Resident card to a mortgage broker along with his and his wife’s driver’s licences and Canadian passports. The next day, Peiman sent the broker pay stubs from his employer, along with Equifax credit reports for himself and his wife and various banking information.

13According to Peiman’s affidavit, Seyed had no employment, banking or borrowing history in Canada and there was nothing to submit to the mortgage broker for him other than his personal identification. Seyed does not contest this and, in fact, relies on it to demonstrate that it made no sense to think that he would be approved for a mortgage in Canada. Seyed did not necessarily disagree with Peiman trying to obtain mortgage financing for him but took the position that, if that application was not successful, it would not impact their agreement. He would still pay his half of the financing costs to Peiman and have a half interest in the Property.

14In anticipation of the closing, on Friday 4 March 2016, Seyed and Peiman went to their lawyer’s office, where they signed a Direction re Title directing that Peiman alone would take title to the Property. Seyed had no problem with that, as long as his interest was protected. To that end, the lawyer also prepared a Trust Declaration in which Peiman declared that he held a half interest in the Property in trust as bare trustee for Seyed. In the companion Indemnity signed by Seyed, Seyed agreed that, in consideration of Peiman holding the half interest in trust for him, he would save Peiman harmless from any liabilities relating to the Property for which he was liable as a trustee. As Seyed was returning to Iran before the closing, he also signed a general Power of Attorney in favour of Peiman permitting him to sign any required closing documents on his behalf.

15Seyed testified that he signed the Trust Declaration along with all the other documents on March 4 in the lawyer’s office. While Peiman was unsure whether the Trust Declaration was signed at the lawyer’s office on Friday March 4 or when he and Seyed were together on Sunday 6 March, he was clear that when it was signed, the mortgage broker had not yet called with the news that Seyed’s mortgage application had been rejected and the original agreement was still in place that each would to take 50/50.

16Around noon on March 6, Peiman and Seyed met at Amir’s house. Seyed, Peiman and Amir all agree that Seyed and Peiman had signed the Trust Declaration and Indemnity by the time they arrived. Amir “witnessed’ Seyed’s prior signature on the Indemnity and added the date of “March 6” to the Trust Declaration. Peiman wanted his wife to witness his signature on the Trust Declaration (even though he had already signed it) and return it to their lawyer to notarize (as both agree their lawyer had directed them to do). So, after taking a photo of the completed Trust Declaration/Indemnity, Seyed and Amir left the signed document with Peiman and Seyed flew back to Iran later that day.

17From time to time, Seyed asked Peiman for a copy of the signed and notarized Trust Declaration. Each time, Peiman said that he would ask the lawyer for a copy until he took the position in May 2017 that Seyed did not have an interest in the Property.

18Not surprisingly, Seyed was not approved for a mortgage. Peiman swore an affidavit that stated he was advised “on or about March 7, 2016” that Seyed did not qualify and that he and Seyed then “mutually agreed that the Trust Declaration/Indemnity would be revoked. This was done through the physical act of ripping up this document in the presence of both Seyed and myself.” While Peiman originally suggested that this occurred March 7 or 8, this could not have been so as Seyed flew back to Iran the afternoon of March 6. While Peiman later testified that he was unsure of the date he ripped up the Trust Declaration, it could only have occurred in the short window between noon and midday on March 6.

19On 16 March 2016 the Property closed. Peiman took title in his name alone and signed a mortgage in favour of TD Bank for $910,500. Seyed’s family moved in the basement of the home either in June, according to Peiman, or in September, according to Amir. I find September to be the more likely date, given it marked the start of the university year. Seyed paid 50% of the agreed upon rent to Peiman as his share and contributed to the mortgage, renovation costs and other Property expenses. In December 2016, Seyed’s wife came to Canada and the family moved to the main floor and paid 50% of the new agreed upon rent of $2,500 to Peiman. Seyed continued to travel back and forth between Iran and Canada.

20In May 2017 Peiman advised Seyed that he disputed his claim to a 50% interest in the Property. Peiman’s position is that the arrangement between him and Seyed was intended to be a joint venture, but it did not come to fruition. Peiman pleaded that he and Seyed intended to purchase the Property as equal owners, with each party being responsible for 50% of the associated costs. When, and because, Seyed failed to qualify for a mortgage, Seyed acknowledged that full legal and beneficial ownership would vest with Peiman. Once Peiman was compensated for his disproportionate contribution to the Property, he was prepared to split the net proceeds equally with Seyed.

Areas of Dispute

21The five areas of dispute that account for the difference in the parties’ positions are:

1. Lost opportunity cost claimed by Peiman;
2. Small claims court action costs claimed by Peiman;
3. Property management fees claimed by Peiman;
4. General contractor fees claimed by Peiman; and
5. Payment differential claimed by Peiman.

Each is addressed below.

1. Lost Opportunity Cost Claimed by Peiman

22Peiman claims damages for breach of contract equal to the interest he would have earned on Seyed’s portion of the mortgage that he was required to assume. This head of damages turns on whether the parties agreed that Seyed would obtain a mortgage or whether they agreed that he would pay half the costs of the Property, including half the payments on the mortgage that Peiman would obtain.

23Peiman argues that as a result of Seyed’s failure to obtain his mortgage, he had to obtain a mortgage for the entire $910,500. Had he been required to take on a mortgage of only $455,250, he would have privately lent the other $455,250 to third party borrowers and made a profit. He stated on cross-examination that Seyed agreed to compensate him for this loss, something Seyed unequivocally denies.

24In his damages report, Mr. Tsiokos calculated Peiman’s damages within a range of $75,000 to $113,000 with the mid-point of $94,000 being adopted and sought as part of the equalization payment. In coming to that conclusion Mr. Tsiokos made the following assumptions. First, there was an agreement between Seyed and Peiman that each would secure $455,250 needed to close. Second, Peiman could have borrowed money on his line of credit at prime plus 0.50%. Third, he would have charged between 8% and 10% interest per annum on a four year loan to a third party borrower and would have paid an initial origination fee of 2-3% to the originating mortgage broker. Fourth, over the four year life of the loan, Peiman would have received gross investment income between $139,000 and $177,000 at an interest cost to him of $64,000 for a net return of between $75,000 and $113,000. While Seyed quarreled with the assumptions behind the report, he did not challenge the figures themselves.

25Contrary to Seyed’s argument, this claim was clearly raised in Peiman’s amended statement of defence and counterclaim as follows:

19. As previously stated, Seyed was required to contribute 50% of the mortgage financing for the purpose of completing the purchase. Since Seyed failed to qualify for such mortgage financing, Peiman was required to fill in the void and thus come up with the entire mortgage financing for Seyed, amounting to $455,000. As a private loan, Peiman has very conservatively charged an annual interest rate of 7%, which yields over the two-year period accrued interest of $63,700. Accordingly, Peiman seeks payment from Seyed in this amount as compensation for the private loan that he made to him.”

26The court in Berry v. Pulley 2015 ONCA 449 set out the applicable test to be met on a claim for loss of chance as follows:

70. A two-step framework applies when a plaintiff alleges injury consisting of the loss of the change to achieve a benefit or avoid a loss. Folland v. Reardon (2005), 74 O.R. (3d) 688 (C.A.), at para. 73, outlines the four criteria the plaintiff must meet at the first step:

First, the plaintiff must establish on the balance of probabilities that but for the defendant’s wrongful conduct, the plaintiff had a chance to obtain a benefit or avoid a loss. Second, the plaintiff must show that the chance lost was sufficiently real and significant to rise above mere speculation. Third, the plaintiff must demonstrate that the outcome, that is, whether the plaintiff would have avoided the loss or made the gain, depended on someone or something other than the plaintiff himself or herself. Fourth, the plaintiff must show that the lost chance had some practical value.

72. If these four criteria are met, the court proceeds to the second step and will award damages equal to the probability of securing the lost benefit (or avoiding the loss) multiplied by the value of the lost benefit (or the loss sustained): see Wong v. 407527 Ontario Ltd. (1999), 179 D.L.R. (4th) 38 (Ont. C.A.), at para. 27.

27In order to succeed on this claim, there must first be “wrongful conduct”. Seyed argued that there should be no compensation for this head of damages as his failure to obtain a mortgage was not wrongful conduct, as that was never a term of their agreement. He did not object when Peiman asked him for his driver’s licence to include him in the mortgage application process, but he testified that Peiman told him at the time that he likely would not qualify. According to Seyed, Peiman subsequently told him that, when he tried to submit an application for him, the mortgage broker told Peiman that Seyed could not apply as he was not working in Canada. Peiman testified that he did proceed with a mortgage application for both of them. Right after the broker called him on or after 6 March 2016 to say that Seyed’s application was rejected, he ripped up the Trust Declaration in front of Seyed as they both agreed their deal was off.

28Seyed does not deny that he was responsible for making 50% of the mortgage payments and he argues that he did so. He paid those funds to Peiman directly, rather than to the mortgagee, with the result that Peiman was only ever paying 50% of the mortgage payments. Peiman argues that, even accepting this, which he disputes, Seyed’s breach of their agreement left him unable to access $455,250 of equity in his home to make private mortgage loans.

29I find that the agreement that Seyed and Peiman would jointly own the Property was conditional on Seyed agreeing to paying for half the mortgage and other Property costs. It was not conditional on him being approved for mortgage financing. I say this for three reasons.

(i) The Documents Do Not Support a Mortgage Obligation by Seyed

30An analysis of the documents Peiman and Seyed signed does not support a finding that Seyed was required to obtain a mortgage as part of their agreement.

31Peiman argued that once the parties learned that Seyed could not keep his end of the bargain by getting a mortgage, they agreed that Peiman alone would own the Property. Seyed’s execution of the Direction re Title was evidence of his admission that he had breached their agreement and his acknowledgement that he was relinquishing his interest in the Property. Peiman argued that, had he not admitted his breach, Seyed would have insisted that title be taken in accordance with the amending agreement of 23 February 2016 which included him as a purchaser.

32The difficulty with this theory is that the Direction re Title was signed on 4 March 2016 at the lawyer’s office, before the date Peiman said the broker called to advise that Seyed’s mortgage application had been declined. Importantly, it also ignores that the parties signed the companion Trust Declaration at the same time they signed the Direction re Title. This demonstrates that, before they learned of the fate of Seyed’s mortgage application (according to Peiman), they had already agreed that Peiman would take title to the Property in his name alone and agreed that he would hold half in trust for Seyed. The Trust Declaration assumed that Seyed would not be on title and that his interest would be protected through this trust mechanism. Had Seyed been on title, the Trust Declaration would have been unnecessary.

33This is consistent with Seyed’s testimony, which differs from Peiman’s on the date the mortgage issue came to light. Seyed testified that Peiman called him while he was still in Iran and told him that he had not been approved for a mortgage. Seyed was not surprised as Peiman he had already told him that there was a good chance his application would be rejected. Peiman told him this meant that he could not go on title, as was contemplated in the amending agreement and his interest would have to be protected some other way. This was the catalyst for Seyed and Peiman going to the lawyer on March 4, to ensure that title to the Property would now be in Peiman’s name alone, but with him holding the half interest in trust for Seyed.

(ii) The Parties Would Reasonably Have Known that Seyed Would Not Qualify

34Peiman, being a sophisticated businessman, would reasonably have known that it was very unlikely that Seyed would qualify for a mortgage when he had no credit history in Canada, was not employed in Canada and had no assets in Canada. One simply needs to contrast the information that Peiman filed with the mortgage broker for his own application with the material that he filed for Seyed. The Equifax credit report filed for Peiman set out all of his credit information including his credit facilities with Scotialine, his ScotiaBank mortgage, his employment information, his “excellent” credit score, his CRA notice of assessment detailing his income, his bank statements demonstrating his monthly balances and all deposits and withdrawals for the three months pre-dating the application. No financial information was filed for Seyed.

(iii) The Parties’ Conduct Does Not Support a Mortgage Obligation

35The parties’ conduct does not support such an obligation or an agreement by Seyed to otherwise forfeit his interest in the Property. I provide three examples.

36First, Seyed transferred $125,000 to Peiman before the closing for his share of the closing costs. This runs contrary to any suggestion that Seyed had surrendered his interest in the Property. While these transfers pre-dated the date when Peiman testified he learned that Seyed would not qualify for a mortgage, Peiman did not offer to return those funds to Seyed and Seyed did not ask for them back.

37Even after that date he said he ripped up the Trust Declaration, Peiman was still looking to Seyed to pay half the $284,229.80 that was due on closing. According to Peiman, Seyed owed another $46,690 for his share, after accounting for expenses to date. Peiman testified that, because of the shortfall in Seyed’s contribution, he had to obtain an emergency loan of $90,000 from a friend to make up the difference. Seyed testified that Peiman had run a spreadsheet setting out what they needed for closing and told Seyed that he needed to contribute $125,000. Seyed had ensured that he had paid that amount to Peiman well in advance of the closing. As the closing approached, according to Seyed, Peiman realized he had miscalculated the amount needed and urgently requested further funds from Seyed. Seyed flew back to Iran and obtained the funds and provided them to Peiman shortly after closing. If Seyed had no interest in the Property, it is unclear why he would still be equally contributing to the closing costs or why Peiman would be looking for his contribution.

38Second, both parties testified that the seller gave Peiman a $41,000 rebate on the purchase price in March 2016. Peiman credited Seyed with half of that amount, which I take as evidence of his acknowledgement of Seyed’s half interest. The parties similarly shared the $1,250 monthly basement rent from an arm’s length tenant from February 2017 to August 2017.

39Third, the evidence, even on Peiman’s figures, is that Seyed paid $308,962 toward the Property, including rent, the amount of which is in dispute. Even using Peiman’s figure of $129,850 for rent, it is difficult to reconcile Seyed paying that significant amount for a property in which he had no beneficial ownership.

40I find that it was not a term of the parties’ agreement that Seyed obtain a mortgage. Based on the documents they signed and their conduct for some years, I find that the agreement was that Peiman would obtain the mortgage and Seyed would pay him half of the mortgage payments and all other Property-related expenses. As it was contemplated that Peiman would be the sole mortgagor of the $910,500 mortgage, his house equity would already be fully committed to this investment and would not have been available to generate profit. I find that Peiman has suffered no loss of opportunity as a result.

Lost Opportunity Cost Claim in the Alternative

41Peiman testified that he was entrepreneurial, with a strong business sense. He deposed that “with a Master’s degree in Electrical Engineering and thus a strong technical foundation to properly quantify a potential business opportunity, I am always on the look-out for such opportunities. And, when I do find such an opportunity, I will generally avail myself accordingly.” He determined that the most opportune business venture for him in March 2016 was private lending, which he would have pursued.

42I accept that there was sufficient equity in Peiman’s home to undertake third party lending, as evidenced by the fact that he was able to obtain a mortgage for the full $910,500. However, Peiman had had significant equity in his home for some time and there is no evidence in the record that he had acted as a private lender of this magnitude before. He did not mention any private lending activity during his examination in chief. On cross-examination, he testified that he had provided $75,000 in bridge financing to a friend for a month. I find it would go beyond reasonable supposition to speculation to find that Peiman would have decided to use not only $455,250 for the first time to invest in the Property but also a second $455,250 to lend privately to others.

43This conclusion is bolstered by Peiman’s own evidence that the $910,500 mortgage he did obtain maxxed him out. He testified that because of the size of the mortgage, he was turned down for lease financing for a car. He was upset that Seyed had caused him to be in such a position because he hadn’t agreed to take on that level of debt. Accepting this to be the case, it does not reconcile with him voluntarily and willingly taking on debt of that magnitude, half for the Property and half to use as a private mortgage lender.

44The evidence under this head of damages falls short of establishing on a balance of probabilities that Peiman would have taken the chance to obtain a benefit from acting as a private mortgage lender.

45An adjustment for this head of damages is denied.

2. Small Claims Court Action - $6,218.09

46Peiman commenced a small claims court action against the two real estate agents who were involved on his behalf in the purchase of the Property. He sued for return of 2.5% of the commission that he argued the agents had agreed to forego. He was unsuccessful at trial and ordered to pay costs of $6,503.58. In addition, he incurred his own legal fees in the amount of $5,932.60 for a total cost to him of $12,436.18. He seeks half of that amount, or $6,218.09 from Seyed.

47Seyed argued that Peiman took this action on his own, without his consent, and should bear the costs he incurred.

48I do not accept Seyed’s position for three reasons. First, Seyed, through his son Amir, was aware that Peiman had brought the action and did not raise any objection. In September 2017, albeit after the small claims court action had commenced, Amir drafted a letter and sent it to Peiman for use in the litigation expressing support for Peiman’s position.

49Second, as was clear on the cross-examination of Peiman, Seyed would have insisted on his share of any recovery had the action been successful. It would be unfair to expect to share in the upside but be protected from any downside.

50Third, the action, while ultimately unsuccessful, was taken for the benefit of the parties’ joint enterprise and should properly be an expense that is jointly shared.

51An adjustment for this head of damages is allowed.

3. Property Management Fees - $3,425

52Peiman seeks compensation for his time spent managing the Property. He testified that he deposited rent cheques from the tenant, paid the bills associated with the Property, did maintenance work on the Property and did all the record keeping. He deposed that Amir did no maintenance or property management work, although he lived in the house and Seyed did none of the work, as he continued to live primarily in Iran. He seeks $200 per month for the period 15 March 2016 to 31 March 2018 and $100 per month from 1 April 2018 to 20 November 2019 for a total claim of $3,425.00. He based these amounts on his internet investigation of the fees charged by property management companies. He stated that he undertook these duties with the expectation of being compensated for his time and further testified that Seyed agreed he would compensate him for this work once he sold his house in Iran.

53Seyed argued that any work that Peiman did was modest and that there was no agreement or expectation that Peiman he would be paid for it. In the alternative, he argued that his son Amir lived in the Property and undertook the same kind of work on his behalf without charge. Amir testified that he was the only person who cut the lawn and, after December 2017, he paid all the bills for the Property. He had direct contact with the contractors who worked on the Property and he showed the basement to prospective tenants.

54Given Peiman’s interest in the Property, at least half the work he did would have been for his own benefit. At best, his claim could be for one half of the property management charge, or $1,712.50.

55There is no evidence before me that Peiman provided any more property management services than Seyed provided through Amir.

56Alternatively, I find it would be unfair to require Seyed to pay for these services now, when Peiman did not tell him at the time that he was going to charge him a fee. If he had been given the option, Seyed may have had Amir take over all maintenance and management of the Property earlier than December 2017, as he was living there on site full time.

57An adjustment for this head of damages is denied.

4. General Contractor Fees - $9,900

58Peiman argued that he both undertook and supervised substantial renovations to the Property. He prepared the building permit application and obtained the permits to renovate the Property. He then acted as a general contractor in supervising the construction undertaken and also did some of the renovation work himself.

59To quantify the value of his services, he used an estimate he had obtained from a contractor that quoted the labour charges to carry out certain work. Peiman then created a chart outlining the renovation work he did and valued that work based on the figures in that quote. He came to a total of $19,800, half of which he seeks from Seyed.

60Peiman deposed that it was never his intention to provide this work gratuitously and that he expected to receive fair and reasonable compensation. He stated that he and Seyed had in fact agreed that he would be compensated fairly for these services, with the quantum and timing left to be determined. He argued that, to refuse this compensation would be to give Seyed a windfall at his expense.

61Seyed testified that he already paid $25,000 for this renovation work on Peiman’s representation that the work cost $50,000. He stated that he learned after the fact that the work was only worth $29,000 and that he was overcharged. Whether or not this was the case, that $50,000 cost related to third party service providers and was largely for the purchase of materials. Those figures are unrelated to the work Peiman did and the suggestion of overpayment is not a relevant defence to this particular head of damages.

62Seyed argued that Peiman never requested payment at the time or even raised the issue, let alone provided him with his estimate of value for service. That would have provided Seyed with the opportunity, should he have chosen, to have the work done by a contractor whose business it was to do renovations.

63Amir deposed that he did the renovation work with Peiman “side by side” for which neither he nor Seyed seeks compensation. They made equal contributions for their joint benefit.

64There is insufficient evidence before me to demonstrate that Peiman contributed more time renovating the Property than did Seyed and Amir. However, there is evidence that Peiman prepared all the work for the building permit, which he valued at $4,000. There was no breakdown of the work involved but Peiman did prepare the building permit application and the drawings on which the city issued the permit. There is a notation in the file that the information submitted was inadequate to perform a complete review and that Peiman’s drawings had to be redrafted by a qualified designer, architect or engineer before any further review could take place. Nonetheless, I accept that Peiman added some value to the building permit process and I set that amount at $2,000, half of which is to be paid by Seyed.

65An adjustment for this head of damages is partially allowed.

5. Payment Differential regarding Operating Costs/Income of the Property - $41,233

66Peiman argued that Seyed paid $67,000 less than he did toward the Property expenses and he seeks an equalization of $33,500. He also seeks $7,733 in interest owing on late payments for a total payment of $41,233.

A. Payment Differential

(i) Rent Owing

67$17,500 of this payment differential is comprised of rent Peiman claims for Seyed’s use the basement of the Property. From September to November 2016 Amir and his sister lived in the basement of the Property and paid Peiman 50% of the agreed upon rent of $1,200. The family moved to the main floor in December 2016 when Seyed’s wife arrived and they paid Peiman 50% of the agreed upon rent of $2,500.

68Peiman argued that, commencing in July 2017, Seyed’s family used the entire home, including the basement, even though they paid rent for only the main floor. Peiman never agreed that Seyed could use the basement for free and argued that $625 per month was a fair amount for Seyed to pay as it objectively represented Peiman’s share of the rental loss, as the prior tenant had paid $1,250 per month for the basement space. Peiman has claimed a total rental loss of $17,500 (28 months x $1,250/2).

69Peiman testified that Seyed and his family had exclusive use of the basement to the point that Seyed had locked him out of that area, a charge Seyed disputes. Amir testified that he and family did not live in the basement. They had no furniture downstairs. He agreed that his sister used the basement bathroom but said that was because one of the upstairs bathrooms did not work. Peiman never complained about Amir’s sister’s use of the basement bathroom or told them he was going to charge them any rent for using the washroom, let alone half of $1,250 a month. In any event, while they had access to the basement, so did Peiman, who used it to store personal items.

70There is no satisfactory evidence that Seyed’s family used the basement exclusively or even any more than Peiman used the basement for storage. I do not find that Seyed owes rent for the use of the basement. Even if I had, I find it would be unfair for Peiman to never request rent for the space or even complain about the use for more than two years and then retroactively charge rent of $17,500.

(ii) Payment Shortfall

71Peiman’s chart setting out the history of payments and expenses concludes that Seyed underpaid by $32,192. It is difficult to parse the chart as it includes the disputed basement rent charges. Without adjusting for rent and simply adding the contributions on Peiman’s chart shows that Peiman paid $234,791 and Seyed paid $308,962. Backing out half the rental payments owed by Seyed (4 months x $1,250 + 38 months x $2,500 = $100,000/2), Seyed’s net contribution was $258,962, marginally more than Peiman’s contribution.

72Seyed’s affidavit indicates that he paid $333,212 toward the Property, $185,558 of which was a capital investment. His chart indicates that he paid $329,462 toward the Property expenses which, after adding his share of the basement rental income (+$3,750) and subtracting half his rent owing (-$50,000), totals $283,212, again more than Peiman’s contribution.

73While the figures of both parties diverge and, in some cases are even internally inconsistent, on the evidence before me, the most reasonable interpretation of each party’s calculations supports that Seyed did not underpay his required equal contribution.

74Lastly on this point, Seyed ceased all payments after 1 August 2019, leaving the entire mortgage and insurance costs until closing of $11,436 to be borne by Peiman alone. Seyed testified that he stopped his payments once he discovered that he had been overcharged for the renovations by $11,000. Even if this were correct, which it is not, it was not appropriate for Seyed to cease his contribution when he knew that the mortgage payments continued and would otherwise be borne solely by Peiman.

75However, based on the calculations before me, the cessation of payment did not result in an underpayment on Seyed’s part. An adjustment for this head of damages is denied.

B. Late Payments

76Peiman argued that he should receive a 1% per month interest on Seyed’s late payments for a total late payment charge of $7,733. While Peiman concedes that Seyed never agreed to pay a 1% penalty, neither did Peiman agree to effectively lend Seyed his share of the payment obligations interest-free whenever Seyed was late.

77Peiman deposed that Seyed was consistently late in paying his share of the monthly mortgage and other payments. Peiman paid the entire amounts when due, effectively fronting Seyed’s payments until he paid.

78A review of Seyed’s payments demonstrates that he did make monthly payments. He knew from Peiman that the expenses were around $4,200 a month. Most months he paid $3,000 or $3,350 but some months he paid $8,500 or $4,500. By May 2017 Seyed had paid more than Peiman. Thereafter, he fell into what Peiman characterized as a deficit position because of Peiman’s inclusion of an additional $1,250 in rent.

79To the extent that Seyed’s payments were late, Peiman would have known that Seyed’s funds were in Iran. He knew that Seyed was a physician there and had ample financial resources to buy a home in Canada but would have challenges transferring money in light of the economic sanctions imposed on Iran. Amir and Seyed deposed that Peiman knew that Seyed’s payments would be delivered in chunks and over time as a result of the political situation in Iran. There is no evidence that Peiman ever disputed when and how Seyed made his payments or ever told Seyed that he was going to start charging interest if he did not deliver the mortgage and other payments by their due date. This supports a finding that Peiman was aware the payments might not always be timely and it suggests that the parties’ conduct was in accordance with what they had agreed to all along.

80I also note that some of the interest charges stem from Seyed’s alleged late payment of the down payment funds. Given Peiman’s miscalculation and late call to Seyed for further funds, that amount could not realistically be the subject of a late interest charge, even if one were applicable.

81In hindsight, over time Peiman may have started feel put upon or taken advantage of by having to cover the Property expenses sometimes before he got money from Seyed. But the payment structure was consistent with what he and Seyed had agreed to at the outset and something he never expressed concern over or sought to amend.

Tax Implications

82Peiman attached a chart to one of his affidavits entitled Future Cost for Tax, which estimated capital gains tax of $10,106 and sought one half that amount, or $5,053 from Seyed. This chart is the only reference to capital gains. The issue was not argued by either side before me and I have not made any adjustment for it. If the parties cannot resolve this issue, they may make short submissions within 30 days of release of this decision on whether an adjustment is necessary and how it is to be taken into account. This time may be adjusted if counsel advise they need more time in these circumstances.

Costs

83Seyed has largely been successful on the reference and is entitled to his costs on a partial indemnity basis. Each party submitted a bill of costs, Peiman’s in the amount of $38,346.43 on a partial indemnity scale and Seyed’s in the amount of $64,288.92. The materials were significant and the matter required four days of court time and two days of cross examinations. I have reduced Seyed’s bill of costs to account for the fact that it includes almost 60% more hours than Peiman’s, recognizing however that some of that time was spent by a junior lawyer and a law clerk.

84Considering all the circumstances of the case, I find the sum of $50,000 to be a fair and reasonable amount for Peiman to pay for costs on a partial indemnity basis. Both parties agreed that costs should be dealt with as part of the distribution of the net proceeds.

Order

85I order the net proceeds of $424,539.29 to be divided as follows:

	Seyed	Peiman
One half net proceeds	$212,269.65	$212,269.65
Small claims court adjustment	- $6,218.09	+ $6,218.09
“Contractor” fees	- $1,000.00	+ $1,000.00
Costs	+ $50,000.00	- $50,000.00
Total	$255,051.56	$169,487.73

Master Jolley