Court File and Parties

COURT FILE NO.: CV-20-2097-0000 DATE: 2020 08 11

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Sangeeta Khanna & Ashwani Mahajan Plaintiffs

P. Wadhwa, Counsel for the Plaintiffs

- and -

Manjit Singh & Suberina Bedi Defendants

J. Makori, Counsel for the Defendants

HEARD: June 18th (ex parte), June 29th and July 30th, 2020.

REASONS FOR DECISION

LEMAY J

[1] The Plaintiffs and Defendants have been friends, and there was a business association between them as well. The Defendants own the property at 19 Borland Crescent, as well as other assets. The Plaintiffs loaned the Defendants $50,000.00 that they allege was for the purchase of 19 Borland Crescent. This money has not been repaid. The Plaintiffs registered a Certificate of Pending Litigation (“CPL”) on the property in mid-June, and are asking to have that CPL remain on title until the issues advanced in their Statement of Claim can be tried. The Plaintiffs argue that they have claimed an interest in 19 Borland Crescent. The Plaintiffs also argue that the transfer in title of 19 Borland Crescent from both of the Defendants to the sole ownership of Suberina Bedi is a fraudulent transaction, justifying a CPL against the property.

[2] The Defendants oppose the continuation of the CPL on the basis that the test for granting a CPL has not been met. Specifically, the Defendants argue that the Plaintiffs do not have an interest, and have not claimed an interest, in 19 Borland Crescent. Further, the Defendants argue that, in any event, the equities favour their position and the CPL should be removed from title.

[3] Based on my review of the facts, there is a real question as to whether the Plaintiffs are claiming an interest in land within the meaning of section 103 of the Courts of Justice Act R.S.O 1990 Chapt. C.43. Even if an interest in land is claimed, however, the Plaintiffs have failed to meet the test for granting a CPL, as the land is not unique, the damages that the Plaintiffs have allegedly suffered are easily quantifiable, damages would be a satisfactory remedy and the Defendants have provided reasonable undertakings to protect the portion of the money allegedly owed to the Plaintiffs that has any relationship to the property. Finally, I am not persuaded that a CPL should be granted even under the test for granting a CPL where there is an alleged fraudulent conveyance. Therefore, I am ordering that the CPL be removed from the title for the reasons set out below.

Background Facts

a) The Parties

[4] The Plaintiff Sangeeta Khanna is the wife of the Plaintiff Ashwani Mahajan. The Defendant Manjit Singh is the husband of the Defendant Suberina Bedi. The Plaintiffs have known the Defendants since at least 2015.

[5] Mr. Mahajan and Mr. Singh were business partners, and it appears that the business was a furniture store. However, their business relationship ended towards the end of 2018. There is a dispute between the parties over the extent of the liabilities flowing out of this business relationship.

[6] The documents that I was provided with suggest that Mr. Singh, along with the other partner, a Mr. Varun Mahajan (not the Plaintiff), promised to pay money when the Plaintiff Mr. Mahajan transferred his shares in the company.

[7] Although the claim that the Plaintiff Mr. Mahajan is owed money by his two former business partners is provided as background information in the Statement of Claim, there is no claim to recover any money allegedly owing under the shareholder agreement that is being advanced in the Statement of Claim. Instead, the Plaintiffs are advancing a claim for repayment of the loan provided to the Defendants in respect of 19 Borland Crescent and for consequential damages relating to that loan.

[8] Given that there is no claim to recover the money allegedly owing under the shareholder agreement, I do not intend to explore the business dealings any further. However, given that there are two Mr. Mahajans involved in the business dealings, I should note that any further references to Mr. Mahajan in this decision is a reference to the Plaintiff Mr. Mahajan, and not the other business owner.

b) The Loan

[9] There is some dispute between the parties as to how the loan came about. However, the following facts are clear on the record:

a) The parties agree that the loan was advanced and that the money has to be paid back subject to the Limitations Act, 2002 S.O. 2002, C. 24 Sched B. issue I have identified below. b) There is no paperwork to document this loan, and nothing was registered directly on the title of any property when the loan was made. c) The loan was made by way of a bank draft dated April 9th, 2017 that was paid directly to the real estate company. The bank draft specifically references 19 Borland Crescent on the face of it. d) The loan has not been repaid.

[10] It appears that the money was advanced by the Plaintiffs prior to the Defendants purchasing a property, 19 Borland Crescent in 2019. It also appears that this money was advanced by the Plaintiffs to assist the Defendants with paying the deposit for the purchase of 19 Borland Crescent.

[11] On the evidence of the Plaintiff Ms. Khanna, the Defendants were to pay the money back before the closing of 19 Borland Crescent. However, that did not happen. The Plaintiffs then thought that the money would be paid back to them when the Defendants sold another property that they owned, at 67 Tufton Crescent. This property was not sold before the closing of 19 Borland Crescent.

[12] After the purchase of 19 Borland Crescent, the Defendants take a different position on the loan. The Defendants state that there were no conditions on the loan of $50,000.00. Therefore, the Defendants argue that this action is out of time under the Limitations Act 2002 S.O. 2002 c. 24, Sched. B.

[13] The Defendants added the Plaintiff Mr. Mahajan onto the title for 67 Tufton Crescent. Mr. Mahajan was given a 1% interest in the property. The Plaintiffs say that Mr. Mahajan was added to the property only to placate him. The Defendants say that Mr. Mahajan was given a 1% interest in 67 Tufton Crescent as consideration for the $50,000.00 loan. The Plaintiffs assert that this has to be incorrect as 1% of the value of 67 Tufton Crescent is not nearly $50,000.00. It is not necessary to resolve this factual dispute, except to note that a 1% interest in 67 Tufton Crescent provides the Plaintiffs with some protection, especially given the undertaking that the Defendants are now bound to.

[14] I also note that Mr. Mahajan has stated that being a part owner of 67 Tufton Crescent has adversely affected his credit rating. I reject this assertion for two reasons. First, there is no evidence to support it. Indeed, the evidence that I do have shows that the mortgage on 67 Tufton Crescent is in good standing. Second, it is very difficult to see how the ownership of a residential property without any debts or other obligations in relation to that property can adversely affect someone’s credit rating.

[15] After Mr. Mahajan was placed on title, an agreement was made to sell 67 Tufton Crescent, and the Plaintiffs expected to have their loan repaid out of either the deposit that was put on the property or from the sale proceeds. The agreement has not been completed, and the property is still owned by Mr. Mahajan and the Defendants.

[16] The Plaintiffs argue that the deposit of $45,000.00 that was provided by the prospective purchaser of 67 Tufton Crescent should be used to repay their loan, and that the Defendants have improperly withheld that money from the Plaintiffs. The Defendants state that the deposit is being held until the prospective purchaser, who is the tenant at 67 Tufton Crescent, can obtain the financing for the mortgage. Given my conclusions on this matter, it is not necessary to resolve any factual dispute over this point.

[17] The Plaintiffs also make claims that they have not been provided with any of the rents from 67 Tufton Crescent, although they own a portion of the property. I note that the action before me does not make any claim for rent on 67 Tufton Crescent. Therefore, I am not reaching any conclusions on the issue of any amounts that may be owing in respect of this property.

[18] There is also a factual dispute between the parties as to whether the Plaintiffs have ever asked for the loan to be repaid prior to the service of the Statement of Claim. As part of their materials, the Plaintiffs have included an unsworn statement from a friend of theirs (and of the Defendants) that requests to repay the money were made. This unsworn statement was only filed in reply materials and, in any event, is an unsworn document that cannot be given significant weight as evidence on a motion. In any event, on this motion my role is not to determine all of the factual disputes in this case and it is not necessary to resolve this factual dispute to dispose of this motion.

[19] The 19 Borland Crescent property was originally in the names of both Defendants. However, in January of 2020, the property was transferred to the name of Ms. Bedi as the sole owner, at least according to the Plaintiffs.

[20] Finally, I understand that the property at 19 Borland Crescent has been listed for sale by the Defendants, but that it has not yet been sold. There was no indication in the materials as to when the property was likely to be sold.

c) The Procedural History

[21] A Statement of Claim was issued by the Plaintiffs and served on the Defendants. The Defendants have completed their Statement of Defence. Other than this motion, I am not aware of any other steps having been taken to move this matter forward.

[22] This matter came before me as a result of a referral from Daley J. who was acting as the triage judge for urgent matters during the week of June 15th, 2020. I made a prima facie finding that this matter might be urgent, and scheduled an ex parte hearing on June 18th, 2020. At that time, I issued the CPL, and directed that the matter return to Court on June 29th, 2020. I also directed the Plaintiff to serve the materials, including my June 19th, 2020 endorsement, on the Defendants.

[23] The Defendants duly retained counsel, and the parties appeared before me by way of teleconference on June 29th, 2020. At that time, Defendants’ counsel advised me that he was seeking an adjournment of the hearing so that he could prepare and file responding materials. There was no objection from Plaintiffs’ counsel to that request. I provided the parties with a timetable for the filing of materials, and directed that a teleconference hearing was to take place on July 31st, 2020.

[24] During the course of the teleconference on July 31st, 2020, Defendants’ counsel advised that his clients were content with an order that, pending the adjudication of this case, no further encumbrances will be placed on 67 Tufton Crescent and the property will not be sold without the consent of the Plaintiffs unless the $50,000.00 is paid.

[25] Finally, given that the monies were loaned in 2017, counsel for the Defendants has raised a Limitations Act issue as described above. The motion before me does not require me to adjudicate this question, and nothing in this decision should be taken as commenting on the merits of this argument.

Issues

[26] The foregoing facts raise two issues for me to consider, as follows:

a) Whether the Plaintiffs are claiming an interest in the property? b) If the Plaintiffs are claiming an interest in the property, then is the test for continuing a CPL meet?

[27] I will address each issue in turn.

Issue #1 - Are the Plaintiffs Claiming an Interest in Property?

[28] During the course of argument, I asked counsel for the Plaintiffs to identify where in the Statement of Claim either an interest in property was claimed or a remedy was claimed that granted his clients an interest in property. Counsel for the Plaintiffs directed my attention to paragraphs 1 and 3 of the Statement of Claim, which read as follows:

1. The Defendants, pay the Plaintiffs, damages in the amount of $250,000.00 as Plaintiff’s share in the equity, located at 19 Borland Crescent, Caledon in Ontario, because Plaintiffs could not buy their own house due to unreturned loan given to the Defendants;
2. The Defendants return the deposit of $50,000.00 belonging to the Plaintiffs, which the Plaintiffs contributed while making initial deposit to Real Estate Brokerage at the time of purchase of property located at 19 Borland Crescent, Caledon in Ontario in 2017 by the Defendants:

[29] The question to be answered in deciding this issue is whether there is a triable issue in respect of whether the Plaintiffs have a reasonable claim to an interest in land. The onus is on the Defendants, as the parties opposing the CPL, to demonstrate that there is no such triable issue. See Sun Rise Elephant Property Investment Corporation v. Luu, 2018 ONSC 5247 at para 2 and G.P.I Greenfield Pioneer Inc. v Moore, [2002] O.J. No. 282 (C.A.) at para 20.

[30] The question I have to determine is only whether there is a triable issue, and not whether the Plaintiffs actually have a reasonable claim to an interest in the land. It is not a high test for the Plaintiffs to meet.

[31] However, in this case, it is doubtful whether the test is actually met. There was a loan from the Plaintiffs to the Defendants for $50,000.00 that was used to purchase 19 Borland Crescent. However, the Statement of Claim makes no claim of a trust interest in 19 Borland Crescent, and does not claim any appreciation in the value of the property as a remedy. Instead, the Statement of Claim simply claims repayment of the monies that were loaned as well as an equity interest in the property and damages. As I understand the claim for an equity interest and damages, it is based on the lost opportunities for the Plaintiffs to have invested the $50,000.00 in the purchase of their own property, rather than any increase in value in 19 Borland Crescent.

[32] Although it is not clear to me that there is an actual interest in the land being claimed in this case, I will address the test for the continuation of a CPL as if the Plaintiffs were claiming an interest in the land.

Issue #2 - The Test for Continuing a CPL

[33] The factors that are considered in exercising the discretion to discharge a CPL are set out in 572383 Ontario Inc. v. Dhunna (1987 CarswellOnt 551 (Master)). These factors, and their application to this case, are as follows:

a) Whether the Plaintiff is a shell corporation. The Plaintiff is not a shell corporation. This is a factor that favours granting a CPL. b) Whether the land is unique. There is no real claim that this land is unique. I asked counsel for the Plaintiffs in argument how the land was unique, and his response was to say that every property is unique. This is not the test for uniqueness that the Courts will apply. Instead, the Courts consider whether the property is unique to the extent that its substitute is not readily available (see John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2001) 56 O.R. (3d) 341 at paras. 57 to 60). In this case, the Plaintiffs are not seeking to own the property. Instead, they are seeking the money that they loaned the Defendants back. The property is not likely to be unique and this is a factor that favours removing the CPL from the property. c) The intent of the parties in acquiring the land. The Plaintiffs were not directly involved in acquiring the land, and it does not appear that the Plaintiffs ever intended to own the land. Again, this is a factor that favours removing the CPL from the property. d) Whether there is an alternative claim for damages. As noted above, the primary claim in this case is for damages for the amount loaned to the Defendants, along with interest. An alternative claim for damages clearly exists. Again, this factor favours removing the CPL from the property. e) The ease or difficulty in calculating damages. In my view, the damages in this case would appear to be easy to calculate. It would simply be a question of repaying the $50,000.00 plus whatever interest or other damages the Courts decided was appropriate. The calculation of damages, of course, would be dependent on the evidence at trial so I cannot be certain that it will be easy to calculate the damages. However, on the material I have, it certainly appears that the calculation will be relatively straightforward. Therefore, this factor favours removing the CPL from the property. f) Whether damages would be a satisfactory remedy. Given that the Plaintiffs are only seeking damages and that they appear to be easily calculated, damages would clearly be a satisfactory remedy. Again, this factor favours removing the CPL from the property. g) The presence or absence of a willing purchaser. At this point, there is no potential purchaser involved in this transaction, although the property is listed for sale. h) The harm to each party if the CPL is or is not removed with or without security. The Plaintiffs argue that their interests will be adversely affected if the CPL does not remain on the property and that they will not be able to recover the funds that they gave the Defendants from the proceeds of sale of 19 Borland Crescent. The Defendants argue that, because of the current pandemic, they are unable to maintain the property and they need to sell it. They argue that the CPL would prevent them from selling the property. The CPL is a substantial interference on the Defendants’ ability to manage their interest in their property, while there are other ways that the Plaintiffs can seek to recover money from the Defendants. Therefore, on this point, the balance of convenience favours the Defendants.

[34] When all of these factors are considered, I am of the view that the CPL should be removed from the property. This is clearly a case where the Plaintiffs can be compensated by damages, and those damages appear to be relatively easy to quantify.

[35] This brings me to the Plaintiffs’ argument that they require security for both the $50,000.00 loan and for the other claims that have been made against the Defendants. There are two problems with this argument.

[36] First, the CPL is not security for damages. The Court has a separate power under section 103(6) of the CJA to grant security, including as a term of the discharge of the CPL.

[37] Second, in this case, the Defendants have essentially offered security for the protection of the $50,000.00 that was loaned by the Plaintiffs for the purchase of the property at 19 Borland Crescent. This money, which is the only amount directly related to 19 Borland Crescent, is now secured against 67 Tufton Crescent by the undertaking I have set out at paragraph 24, above.

[38] This brings me to the Plaintiffs other claims against the Defendant. First, there is the assertion that, if a CPL is not registered against 19 Borland, the Plaintiffs will never get the money owed to them from 19 Borland. This assertion has not been proven. Indeed, the Defendants continue to own real property (67 Tufton Crescent) in Ontario, and there is now an undertaking that the equity in that property will be preserved pending the adjudication of this claim or agreement of the parties. In light of that undertaking, it would appear to me that the CPL is a form of execution before judgment, which the Plaintiffs are not entitled to.

[39] Then, there is the allegation that title in 19 Borland was transferred from both Defendants to Ms. Bedi in order to “evade the liability of paying back our money” as Ms. Khanna put it in her Affidavit. There are two problems with this argument. First, the loan was made to both Defendants. It is difficult to see how transferring the title to one of the Defendants would allow the Defendants to avoid liability for this debt. The debt is still claimed against both Defendants. Second, the Defendants have provided the undertaking I have described at paragraph 24. This undertaking provides some protection to the Defendants, while making it more difficult for the Plaintiffs to argue that there is an intention on the part of the Defendants to make themselves “judgment proof” or otherwise defraud the Plaintiffs.

[40] In support of their position, the Plaintiffs refer to the decisions in Grefford v. Fielding ((2004) 70 O.R. (3d) 371 (S.C.J.)), Transmaris Farms Ltd. v. Sieber ((1999) 30 C.P.C. (4th) 369 (Ont. Gen. Div.)). The Grefford case clearly sets out the test for granting a CPL when there is a potential fraudulent transaction. One of the essential elements of that test is that evidence is required to show that the transfer was intended to defeat the creditors. I have no evidence that the transfer of this property was intended to defeat Mr. Singh’s creditors, and particularly not the Plaintiffs in this action. Indeed, as far as this action is concerned the evidence suggests the opposite. As a result, the Plaintiffs cannot meet the test for granting a CPL on the basis that the transfer was a fraudulent transaction.

[41] For these reasons, even if an interest in property is being claimed, I am exercising my discretion to remove the CPL from the property because of the consideration of the Dhunna factors, and because of the fact that the Defendants have adequately protected the money that was used to purchase 19 Borland.

Conclusion

[42] For the foregoing reasons, the CPL is to be removed from the property forthwith upon issuance of these reasons. I also confirm that the Defendants are bound by the undertaking set out at paragraph 24 of these reasons.

[43] The parties are encouraged to agree on the costs of this motion. Failing agreement, each party shall have ten (10) calendar days from the issuance of these reasons to deliver their costs submissions. Those submissions are to be no longer than three (3) double-spaced pages, exclusive of case-law, bills of costs and offers to settle.

[44] Each party shall have seven (7) calendar days from the receipt of these reasons to provide reply costs submissions. Those submissions are to be no longer than two (2) double-spaced pages, exclusive of case law.

[45] The deadlines for costs submissions may not be extended, even on consent, without my agreement. If I do not receive either a request for an extension or the submissions within the timelines set out above, then there will be no costs of this motion.

LEMAY J

Released: August 11, 2020