SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-20-644957

DATE: 20200928

B E T W E E N:

Chatham Street Realco (2012) Inc., Plaintiff

– and –

Diana Lalor et al., Defendants

BEFORE: F.L. Myers J.

COUNSEL: Carmine Scalzi, for the Plaintiff

Jide Oladejo, for the Defendant Diana Lalor

HEARD: September 25, 2020

endorsement

[1] The plaintiff is the assignee of three mortgages that matured in 2017 and remain unpaid. The defendant Diana Lalor is the sole titled owner of the mortgaged property. The property is located at 1552A Eglinton Avenue West in Toronto.

[2] The plaintiff has previously delivered notices of sale and appointed a receiver to take possession of the retail unit on the main floor of the mortgaged property. The receiver was attempting to sell the property.

[3] There are residential tenants living on the second floor of the mortgaged property. The plaintiff seeks to take possession of Ms. Lalor’s interest as landlord understanding that its right to physical possession of the residential unit will remain subject to the tenants’ rights under their lease.

[4] In furtherance of its enforcement efforts, the plaintiff attorned the tenants’ rents.

[5] Ms. Lalor has continued to take the rent paid to her by the residential tenants. She has not turned over the funds received to the plaintiff.

[6] Nothing in this motion affects the legal rights of the tenants. Accordingly, it was not necessary for the plaintiff to give them notice of this hearing.

[7] Ms. Lalor recently re-entered the ground floor retail unit and changed the locks to exclude the plaintiff and its receiver. By doing so, she prevented the closing of a sale under a signed agreement of purchase and sale that had been entered into by the receiver on behalf of the plaintiff. Ms. Lalor’s continued possession has prevented the plaintiff from re-listing the mortgaged property for sale.

[8] The plaintiff wishes to bring a motion to prohibit Ms. Lalor from interfering in its enforcement of its rights and to require Ms. Lalor to return possession of the mortgaged premises to the lender. The lender also seeks interim terms pending the return of the motion.

[9] Counsel for Ms. Lalor and the plaintiff appeared in Civil Practice Court on September 15, 2020 and then at a case conference on September 21, 2020 to schedule the plaintiff’s motion.

[10] I adjourned the case conference for a few days to require the plaintiff to particularize the relief that it is seeking on an interim basis as discussed in my decision reported at 2020 ONSC 5698.

[11] The plaintiff seeks on an interim basis:

a. Possession of the premises;

b. An order for Ms. Lalor to pay over to the plaintiff the rent that she has collected from the residential tenants after January 1, 2020 and all rent that she receives pending the hearing of the motion; and

c. An order that Ms. Lalor pay accruing carrying costs for the premises of $4,313.41 per month pending the hearing of the motion.

[12] For the hearing on September 25, 2020, Ms. Lalor’s counsel delivered an affidavit of his Assistant. It appends an agreement of purchase and sale entered into by Ms. Lalor two days earlier on September 23, 2020.

[13] The buyer identified in the agreement of purchase and sale is named Angela Smith. The purchase price is $985,000. Closing is set for October 30, 2020.

[14] Under the OREA standard form agreement, Ms. Lalor agreed that on closing, she will provide Ms. Smith with title free and clear of the plaintiffs’ mortgages. Ms. Lalor’s counsel has asked the plaintiff to provide a discharge statement and submits that there is no need for any interim terms since the agreement is a valid, legal obligation under which the plaintiff will be paid in full in one month’s time.

[15] Mr. Scalzi points out a few issues with the agreement:

a. The deposit is $5,000 or 0.5% of the purchase price;

b. The deposit is not payable until 72 hours after the agreement was signed. As it was signed two days before the hearing, the deposit is not due until the day after the hearing;

c. The agreement is conditional on the buyer being satisfied “in her sole and absolute discretion” with the contents of a report of a home inspector to be obtained by her;

d. The agreement is conditional on the buyer obtaining a new first mortgage on terms acceptable to her in her “sole and absolute discretion” and

e. The agreement is conditional on the buyer obtaining confirmation from an insurance agent of her choice that she can obtain homeowners’ insurance at a price and on terms acceptable to her.

[16] The last three conditions expire at 9:00 p.m. on the seventh business day following the acceptance of the offer by Ms. Lalor. If any of the conditions are not satisfied, the agreement becomes null and void and the deposit is to be returned to the buyer without deduction.

[17] While the plaintiff would be happy to be paid out in full on the sale closing, Ms. Scalzi takes no comfort in the terms of this agreement. The conditions make it little more than an option to purchase the property in the buyer’s favour. The buyer is free to walk away in 10 days’ time in her sole and absolute discretion.

[18] In addition, the deposit terms raised suspicions for the plaintiff. The amount is very low. Moreover, the plaintiff thought it might be more than coincidental that the deposit was not payable until the day after this hearing.

[19] The plaintiff therefore searched the title register. It discovered that the buyer, Angela Smith, is a co-owner with Ms. Lalor on title to Ms. Lalor’s home in Vaughan. In 2018, Ms. Lalor and an Errol Lalor sold the property to Ms. Lalor and Ms. Smith as tenants in common. Ms. Lalor owns 95.5% and Ms. Smith owns 0.5% of the property. (Apparently 4% of the home was not conveyed as these numbers are repeated in the land transfer tax affidavit.)

[20] Although Ms. Smith seems to have a very small percentage ownership of the Vaughan property, she appears to be a signatory on the two mortgages on the premises in the principal amounts of $980,000 and $300,000, respectively.

[21] Counsel for Ms. Lalor was counsel on the 2018 transaction and the $980,000 mortgage that accompanied the transfer to Ms. Smith and Ms. Lalor. He knew of their relationship.

[22] Confronted with these documents, Mr. Oladejo confirmed that Ms. Lalor and Ms. Smith have a pre-existing relationship. He argues that despite this fact, there is currently a valid agreement of purchase and sale that makes interim terms unnecessary.

[23] The failure to mention the pre-existing relationship between Ms. Smith and Ms. Lalor gave the agreement of purchase and sale an air of bona fides that its terms and timing suggest may be lacking. Counsel made submissions as if the agreement of purchase and sale is an answer to the plaintiff’s claims.

[24] Unfortunately, the agreement has all the markings of non-arm’s length sham. I am very troubled by counsel’s failure to disclose the parties’ relationship while adducing and relying upon his Assistant’s evidence that the property had been sold.

[25] Time will tell if the transaction evidenced by the agreement of purchase and sale closes. However, the actions of Ms. Lalor in putting forward this highly conditional, non-arm’s length agreement to further stall the plaintiff’s enforcement efforts satisfy me that the plaintiff is in need of protection pending the hearing of the motion.

[26] Ms. Lalor did not adduce any evidence that she has any defence to the plaintiff’s mortgage enforcement. I recognize that this is an interim motion. Ms. Lalor has known of the plaintiff’s request for interim terms since the lead up to counsels’ appearance in Civil Practice Court on September 15, 2020. Ms. Lalor did not deny, even through counsel’s Assistant, that she has illegally re-entered the premises to thwart the plaintiff’s efforts to sell the building. She has not denied interfering in the attornment of rent, failing to pay realty taxes to the tune of nearly $90,000, or the plaintiff’s evidence that its position is eroding. In my view, on the prima facie evidence of the plaintiff, its recovery of the mortgage loans is at risk.

[27] In addition, the plaintiff points to the very high burden on a mortgagor to prevent a mortgagee from enforcing its rights. See: Arnold v Bronstein, 1970 CanLII 245 (ON SC). There is no evidence undermining the enforceability of the plaintiff’s mortgages. Rather, the argument that the sale of the property is a solution to the plaintiff’s claim presupposes that the mortgages are valid and outstanding.

[28] In all, I am satisfied that absent interim relief, the plaintiff’s position will further erode due to Ms. Lalor’s deliberate acts. The plaintiff’s evidence is that it is near or beyond the point of being fully secured on its loans. Based on the plaintiffs’ appraisals and Ms. Lalor’s inability to refinance the property to date, I find that the value of the mortgaged property is likely insufficient to cover the full amounts secured by the mortgages. While this motion is pending, the plaintiff faces the likely prosect of suffering irreparable harm in damages that cannot be recovered.

[29] Ms. Lalor has had the plaintiff’s motion record since August 1, 2020. Counsel wishes to have until October 20, 2020 to deliver responding material. Unless Ms. Lalor is prohibited from interfering with the plaintiff’s attornment and required to pay accruing costs, the non-compensable price of Ms. Lalor’s three-month responding hiatus will be borne by the plaintiff. Ms. Lalor’s effort to create an appearance of an arm’s length sale convinces me that she will go to extraordinary lengths to frustrate the plaintiff’s legal rights unless restrained. The balance of convenience therefore favours the plaintiff.

[30] On consent of the parties, I order the following schedule for the hearing of the plaintiff’s motion for possession:

a. Ms. Lalor shall deliver responding material by October 20, 2020;

b. Reply evidence, if any, is to be served by October 27, 2020;

c. Cross-examinations, if any, will be held by October 30, 2020;

d. The plaintiff’s factum shall be served by November 5, 2020;

e. Ms. Lalor’s factum shall be served by November 15, 2020;

f. The motion will be heard for one-half day on November 26, 2020.

[31] Pending the return of the motion, the schedule is subject to the following terms sought by the plaintiff:

a. Ms. Lalor shall not interfere with the plaintiff’s entitlement to attorn and receive rents from the residential tenants at the premises. The tenants’ rent shall be paid to the plaintiff. If the tenants pay Ms. Lalor, she shall immediately pay the funds to the plaintiff. Should the tenants fail to pay their rent to the plaintiff, the plaintiff is authorized to enforce the rights of the landlord under the lease to the residential unit;

b. Ms. Lalor is restrained and prohibited from interfering with the plaintiff’s right to take physical possession of the main floor retail unit at the premises. She shall provide possession to the plaintiff immediately. A writ of possession shall issue and may be enforced immediately if Ms. Lalor does not comply;

c. Ms. Lalor, anyone acting on her behalf or on her instructions, and anyone with notice of this order are restrained and prohibited from interfering with the plaintiff’s possession and its exercise of its rights under the three assigned mortgages in relation to the mortgaged property; and

d. Ms. Lalor shall pay the aggregate sum of $4,313.41 for interest, taxes, insurance, and utilities to the plaintiff on each of October 1, 2020 and November 1, 2020. In the event that Ms. Lalor fails to pay either amount on the date due, the plaintiff may move on 48 hours’ notice to strike Ms. Lalor’s pleadings and for default judgment;

[32] I have not ordered payment of arrears of rents received in apparent breach of the attornment or arrears of operating costs. The plaintiff will add those prior amounts to its claim if so entitled no doubt.

[33] Notwithstanding Rule 59.05, this Order is effective from the date it is made and is enforceable without any need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal Order need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this Order may nonetheless submit a formal Order for original signing, entry, and filing if so advised.

[34] The attached Directions for uploading material to an online folder apply to all hearings in this proceeding. At this time, Caselines is being tested in a pilot project in Toronto. It is only available on cases where the parties or counsel receive an email inviting them to upload their material to Caselines.  Until Caselines is rolled out formally, the attached Directions shall continue to be used as a backup even where Caselines is also made available for a hearing during the pilot project.

[35] Costs are reserved to the judge who hears the motion on November 26, 2020 or any motion prior to that time that finally disposes of the motion or the action.

F.L. Myers J.

Date: September 28, 2020

Delivery of Written Motion Materials to an Online Document Storage Folder at Sync.com

1. For the time being, all motion participants are required to upload their case documents onto Sync.com in addition to uploading their documents to the Justice Services Online Portal and Caselines (when they receive an email inviting them to use Caselines), as required in the Supplementary Notice to the Profession and Litigants in Civil and Family Matters – Including Electronic Filings and Document Sharing (Caselines Pilot) (August 5, 2020) that can be accessed at:

https://www.ontariocourts.ca/scj/notices-and-orders-covid-19/supplementary-notice/.

2. Documents that are not uploaded onto Sync.com may not be read for the motion or application.

3. Law firms shall assist self-represented parties to name and upload their documents if requested to do so. Any party may request a case conference to discuss any problems they encounter with these directions.

4. In addition to uploading documents to the Justice Services Online Portal and Caselines (after receiving an email inviting the matter to use Caselines), all parties (or the party directed by the Triage Judge, if any) shall provide an online document storage folder at www.sync.com in which all documents will be uploaded and organized for the judge.

5. There is to be only one folder on Sync.com for each proceeding. All parties’ materials are to be uploaded to the same folder. See: Mann v. Chac-Wai, 2020 ONSC 3428, <http://canlii.ca/t/j813w>

6. The Sync.com folder shall contain a separate sub-folder for material filed by each participating party. Each sub-folder will be labelled with the filing party’s name only. Parties may upload material to their own sub-folder only and may not alter any material uploaded by any other party unless directed to do so by the court or on consent.  

7. As soon as the moving party uploads its motion record to Sync.com, it shall forthwith provide the URL or link to the opposing parties so they can access the moving party’s material and upload their own material to the folder.

8. At least one week prior to the date set for the motion, the parties will email Motion Confirmation Forms to the Motions Coordinator including the URL or link to the Sync.com folder for use by the judge to  CivilUrgentMatters-SCJ-Toronto@ontario.ca.

9. Each document uploaded to Sync.com shall be named with the same name required for Caselines (if an email has been received inviting the matter to use Caselines) as set out in the Supplementary Notice to the Profession and Litigants above.

10)Pages shall be numbered sequentially within each document if practicable.

11)All documents other than factums and the draft order sought shall be uploaded to the Sync.com site in OCR searchable PDF format.

12)Factums and all draft orders sought shall be uploaded to Sync.com in WORD format. 

13)No Books of Authority containing the full text of authorities may be uploaded to the Sync.com site. Citations to all authorities relied upon are to be provided in each party’s factum to by hyperlinks to a publicly available free website such as org.

14)Where oral argument has been scheduled for the motion, all parties are required to upload to the Sync.com folder a document labelled “Participants Sheet”, setting out (a) the names of all person who will be attending at the hearing for the party; (b) the names of counsel or the party who will be making oral submissions; (c) time estimates for each person making oral arguments; and (d) email addresses and telephone numbers for all participants which the court can access on the day or and during the hearing if necessary. If a participant cannot be contacted on the day of the scheduled hearing, they may miss changes to the hearing time and have no way to provide documents to the court or to see documents provided by others, if any.

15)Each of the parties shall deliver a “Compendium” containing just the brief portions of the cases and the brief portions of the evidence to which each intends to refer during the hearing. Where portions of cases are included in the Compendium, the name of the case, citation, and the headnote from each case should be included as well. Where portions of the evidence are included in the Compendium, the first page of the document and identification of where it may be found in the record should also be provided.