Court File and Parties

COURT FILE NO.: CV-19-614347 MOTION HEARD: 20200218 REASONS RELEASED: 20200530 SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

WESSAM ELKHOLY Plaintiff

- and -

ARA MARGOS, HARANT MARCOS, SELPHA WANEES and AHMED JADALLAH Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: Wessam Elkholy, Plaintiff (Moving Party) wessam.elkholy@hotmail.com Wendy Greenspoon-Soer, for the Defendants Margos, and Wanees wgreenspoon@garfinkle.com

REASONS RELEASED: May 30, 2020

Reasons for Decision

I. Overview

[1] These proceedings relate to the difficulties encountered by an individual following a matrimonial action with her spouse whereby she retained the equity in matrimonial home, in exchange for a payment to the husband of approximately $90,000.

[2] I understand that the plaintiff who is trained as a dentist, encountered health difficulties which required treatment for cancer which prevented her from working full-time or generating sufficient income to carry the existing, agreed mortgage costs on the property.

[3] When the property came up for mortgage renewal her credit rating, as an individual, was insufficient to support the outstanding balance and she needed to find a different method of financing of the property.

[4] Apparently due to the difficulties with the matrimonial matter and other causes her credit rating was such that no one was prepared to loan her funds at a reasonable rate.

[5] Apparently, as consequence, she endeavored to try to list the house for sale. The materials filed before me suggested that at least three brokers were consulted, and short-term listing agreements may have been entered into.

[6] Ultimately, she had discussions with the defendant Ara Margos (“Ara”) who is a licensed real estate broker. The arrangements actually agreed upon between the parties remain a matter of significant dispute between them.

II. The Plan

[7] What she sought at the time was to create an extended period of time to permit the raising of funds or otherwise getting to a position to effectively deal with the existing indebtedness against the property.

[8] Given the then existing Toronto real estate market, it would seem that there might have been some hope for an appreciation in value.

[9] At least from some perspectives it could have been anticipated that the value could potentially reflect a relatively significant increase in the available equity.

[10] It would seem that eventually the proposed plan was for the plaintiff to sell her home as an investment property to a purchaser, who would then rent the property back to her for a period of perhaps one year or 18 months. Her hope was that the property would appreciate in value such that there would be less difficulty in refinancing the existing mortgage after the end of the rental period.

[11] The Statute of Frauds requires documents involving the ownership or entitlement to land to be in writing for good reason. Here the plaintiff asserts that the broker obtained an agreement from the purchasers that they would sell the property back to the plaintiff at the end of one year. (or perhaps 18 months). Which of either of these choices was agreed upon (if anything was) is unclear to me at this point in time. Certainly, there does not appear to be any clear contemporaneous written agreement supporting this plan in the materials I have reviewed.

[12] Subsequently it was learned that the named purchasers of the property were in fact related to the real estate agent who sold the plaintiff’s property.

[13] Again, there does not appear to be any contemporaneous documentation disclosing their relationship with the problem property; nor the fact that the broker, who was acting for both sides of the transaction, was also acting on behalf of his relatives, the registered purchasers.

[14] Moreover, after a number of months apparently the agent’s niece and nephew, the registered owners, sold the property to the real estate broker for price of $900,000 as compared to the purchase the year before of the property for $670,000.

III. Interim Activity

[15] I am not satisfied that there was adequate evidence filed before me to establish what was the “real” value of the property at any particular point in time.

[16] Each side has found appraisers to give a number of various valuations. An additional problem, arising through this situation, is that the plaintiff fell into this significant default with respect to the payment of rent on the premises, which she had been seeking to buy from her landlord.

[17] Inasmuch as she lived in the property for a number of years, she clearly ought to have recognized that a solution needed to be found or she would risk losing the property. She asserts that there were problems with the property and that, in her capacity as tenant, she apparently sought to not pay the rent either because she was unable to do so or because she had reasons arising out of deficiencies in the property, which she may have believed validated her decision not to pay rent.

[18] That led to an application to the Ontario Landlord and Tenant Board by the real estate agent (and now owner) based upon his to unpaid rent claims. At the time this motion was before me that issue had not yet been resolved.

[19] It is against this background that the present motion brought by the defendants seeking the removal of the Certificate of Pending Litigation issued on February 28, 2019, came to be addressed.

IV. Considerations

[20] In coming to a decision, the balance of convenience is one item that is of some importance.

[21] Here, we have a real estate broker who bought an investment property which based on general knowledge in the Toronto region at this point in 2020, would suggest that the property had been appreciating since the transfer of title to him.

[22] The present registered owner clearly intends to resell the property and has no interest in moving into it. There is at least a reasonable chance that a new purchaser will want to knock down the property and build a more modern structure.

[23] Conversely, the plaintiff asserts that there were numerous understandings and agreements with respect to her entitlements to the property. However, she is unable to point to any written documentation that was contemporaneous with the purchase. Moreover, there is nothing indicating at what price she would be able to recover the property. In the course of argument before me she seemed to indicate that she would be content to buy the property for the current market value of the property, as determined by independent appraisers. At other points, it seemed that she was seeking to acquire the property, based upon a lower price, identified at an earlier valuation date.

[24] To my mind either number would only amount to an amount based upon “an agreement to agree” and not being in writing, would be difficult, at best, to enforce.

[25] The plaintiff asserts that she has challenged the propriety of the realtor, Ara’s actions as a licensed broker and that there may be issues between the parties in that regard. However, those allegations are not pleaded in the plaintiff’s pleading, as it stands now. In this case the Statement of Claim was apparently drafted and filed by the plaintiff as an in-person litigant. Nowhere in the claim for relief, does she seek possession of the home. Rather there is a claim for damages in the amount of $270,000 together with a claim for a Certificate of Pending Litigation. Inasmuch as the claim was not prepared by a lawyer, it might be arguable that the pleading contained an implicit claim to entitlement to the property, either in the alternative or as an additional claim over and above the sum claimed in the prayer for relief.

V. Courts of Justice Act

[26] This motion was brought under Section 113 of the Courts of Justice Act, with a view to setting aside the Order previously made, because of a meaningful failure of the plaintiff, to disclose a number of relevant factors, at the original ex parte hearing in February 2019.

[27] Section 113 deals with applicable relating to the obtaining and removal of Certificates of Pending Litigation. It reads, in part, as follows:

Certificate of pending litigation

103 (1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).

Registration

(2) Where a certificate of pending litigation is issued under subsection (1) it may be registered whether the land is registered under the Land Titles Act or the Registry Act.

Liability where no reasonable claim

(4) A party who registers a certificate under subsection (2) without a reasonable claim to an interest in the land is liable for any damages sustained by any person as a result of its registration.

Recovery of damages

(5) The liability for damages under subsection (4) and the amount thereof may be determined in the proceeding in respect of which the certificate was registered or in a separate proceeding.

[28] The present motion turns on my interpretation of the following subsection (with my emphasis added):

Order discharging certificate

(6) The court may make an order discharging a certificate,

(a) where the party at whose instance it was issued,

(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,

(ii) does not have a reasonable claim to the interest in the land claimed, or

(iii) does not prosecute the proceeding with reasonable diligence;

(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or

(c) on any other ground that is considered just,

and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.

[29] I interpret these provisions as giving the Court a broad discretion to reach a fair disposition, suited to the circumstances of this particular and somewhat unique case. In that light I turn to specific considerations of an appropriate approach to the resolution of this motion.

VI. Approach to Resolution

[30] A difficulty, in a case such as this, arises from weighing the relevance flowing from the plaintiff dealing with her own cancer and at the same time was dealing with the deterioration of her mother’s health (which regrettably resulted in her passing away two days before the matter first came before me). I had no hesitancy in adjourning the motion at that time. However, I expected on the return date that there would be more persuasive material which could help to clarify the overall situation.

[31] Ms. Greenspoon-Soer, on behalf of the defendants, asserts that there never was an agreement to transfer the property back to the plaintiff. However, she has indicated that, if an amount relatively equal to the present fair market value of the property were tendered, her client might well be willing to take that sum in exchange for the property.

[32] In that event, the plaintiff would end up keeping the property to which she appears to be highly attached. I have looked at the photographs of the house and it appears to be a somewhat “run-of-the-mill” Toronto single-story bungalow brick bungalow with no apparent unique qualities. Nevertheless, the plaintiff has lived in the house for a number of years and if she wants it, she perhaps should be entitled to get it, but on appropriate terms.

[33] In the result, I am satisfied that the plaintiff ought to be given one “last chance” to arrange for purchase the property.

[34] Given the problems with the property to date and the history of the matter, I am not sure whether a conventional first mortgage will be available at the optimal market interest rate. However, that does not need to be established for present purposes. Rather a reasonable potential purchase price ought to be established, to facilitate a possible purchase by the plaintiff.

VII. Interim Steps

[35] It seems to me that when the Certificate of Pending Litigation was granted there were enough ambiguities that it was appropriate to maintain the status quo pending further development.

[36] Regrettably the plaintiff has since encountered a number of health problems along the way which may perhaps have contributed to her inability to move more promptly towards a complete resolution of this matter. However, I am satisfied that the CPL cannot tie up this property indefinitely.

[37] Moreover, I am confronting this dispute in what amounts to a most novel situation in Canadian and global society as a result of the COVID-19 pandemic.

[38] Clearly circumstances alter cases. Between the time when this motion was argued and when these reasons are being delivered it has become clearer and clearer that we are dealing in a very different legal and economic environment. It would seem that, at the moment, there is great uncertainty as to how far Toronto housing prices might move in the coming year.

[39] Ultimately a trier of fact may need to determine what were the actual components of the original “deal”. I have some doubts as to whether or not the conduct of the real estate broker was in keeping with all the appropriate requirements regarding disclosure etc. However, those matters can be dealt with elsewhere or at trial. For the moment I am treating these issues as needing eventual resolution; but ones that militate for some degree of accommodation for Ms. Elkholy, at present.

[40] Before me Ms. Elkholy described a number of potential financing sources including obtaining proceeds from the sale of a property in Egypt (or elsewhere). As well she asserted that who she believes that a relative in Ontario will be to be prepared to assist in a significant way to the funding of her repurchase of her home.

[41] In the result I have determined that the time has come for the plaintiff to establish whether funding of a repurchase is or is not available.

VIII. Last Chance Valuation

[42] Between the argument of this motion in February and the virtual shutdown of the entire country there is no reliable source for establishing an appropriate value for this property now.

[43] Given the developments that have happened in the interim I am inclined to give a very “last chance” opportunity to play to demonstrate that she has access to the appropriate and necessary financial resources that would permit her to obtain the necessary financing to acquire the property for what is established to be its current market value.

[44] As noted above Section 103 of the CJA sets out in subsection 6 the Court’s power with regard to discharging of a certificate “on terms.” In recent decisions I have returned to a phrase apparently coined by Justice Haliburton over 170 years ago, namely that “circumstances alter cases”. This is clearly one such case. see JAL Developments Inc., 2020 ONSC 2222.

[45] I am therefore directing that each party select a qualified individual to provide an appraisal of the subject property on the basis of a possible sale in the current real estate market in Toronto. Each individual is to provide an appraisal for an “all cash”, “as is”, purchase of the property. Unless the parties agree otherwise, they shall each retain an appraiser by June 21 (i.e. 3 weeks from the release of this decision).

[46] The appraisers shall have 21 days to provide their appraisals to their retaining party and the parties will simultaneously exchange their written appraisals as to the present value of the property.

[47] If the lower appraisal price is within 10% of the higher evaluation, then the plaintiff, Ms. Elkholy, shall have 20 days to submit a binding offer to purchase, on a cash basis, for sale price which is to be the average of two quotations obtained.

[48] Unless the parties are able to agree otherwise, if the difference between the two quotations is more than 10% then the two appraisers shall be asked to identify a mutually acceptable third independent appraiser, who is to fix an amount that he or she deems to be the most reasonable valuation for this property, which is equal to either previous appraisal or is an amount established by the third appraiser at an amount which falls between the two original appraisals.

[49] Once the sale price has been established by the foregoing process, Ms. Elkholy shall have 15 days to enter a binding agreement of purchase and sale for this property. Upon signing of the agreement by both parties the purchaser shall provide a deposit of $20,000 to be held in trust by the vendor’s counsel.

[50] Unless the parties agree otherwise, the sale transaction shall close within 30 days of the deposit being delivered. Time is of the essence and any failure of the plaintiff to meet with the provisions set out above, shall entitle the remaining defendants to apply for a declaration that Ms. Elkholy has forfeited any and all entitlement to acquire the subject property.

[51] While I will remain seized of this matter to the extent of being kept advised of the progress of the parties in light of the foregoing directions, the parties are free to bring motions to any appropriate judicial officer.

IX. Terms of Order

[52] I am satisfied that they plaintiff has been given a significant number of indulgences and extensions that justify my making it clear at this point that she is being given one “last chance” opportunity to structure a repurchase of the property. If she is unable to put together a financial package as outlined above, then the existing Certificate of Pending Litigation will be discharged by virtue of an order made by me, in accordance with these reasons.

[53] The plaintiff’s action for damages and other relief, as presently set out in the Statement of Claim (or any properly amended version thereof) shall continue unless the parties agree otherwise and any issues regarding financial elements other than the sale of the property shall be reserved for the trial judge.

[54] In the result, (and subject to any amendments that may be agreed upon by both sides) I am requiring compliance with my above directions. If the plaintiff is unable to assemble the necessary documentation and proof of enforceable financial commitments to complete the acquisition of the subject property by September 30, 2020, I am indicating that my present intention is to order that the CPL is to be withdrawn, upon application to me, at any time following that date, on at least ten days written notice to the plaintiff.

X. Conclusion

[55] In coming to my conclusion, I have been guided by and have sought to apply the guidance of Rule 1.04 of the Rules of Civil Procedure in an environment that was unlikely to have been imagined by the drafters of the present Rules:

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

Matters Not Provided For

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.

[56] I have considered these principles in the context of the facts before me on this motion. In my view, it is just in the circumstances of this action that the plaintiff be granted a last chance to retain her present residence.

[57] Because of the various steps outlined above, and their various potential denouements, I am reserving the determination of an appropriate Costs award, if any, until after the establishment of whether any sale to the plaintiff, will proceed, in accord with the provisions set out above.

[58] I will then address the costs issues, if requested by either side, through my Assistant Trial Co-ordinator.

[59] Lastly, in the current restricted environment, I am establishing June 30, 2020 as the last date for filing any appeal of this decision.

Released: May 30, 2020

Master D. E. Short R. 308/DS