Court File and Parties

COURT FILE NO.: 1930/20 DATE: 2020-10-26 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nima Safarloo and Phan Ni Thai, Plaintiff/Moving Parties AND: COR-C Corporation and Majid Sarkar-Tavakoli aka Majid Sakar Tavakoli, aka Maj Tavakoli, aka Majid Tavakoli, Defendants/Respondents

BEFORE: Kurz J.

COUNSEL: Matthew Tubie, for the Plaintiff Sam De Caprio and Richard MacGregor, for the Respondents

HEARD: October 21, 2020

ENDORSEMENT

[1] This is a motion for a certificate of pending litigation (“CPL”) against three separate real properties. In its responding materials, the defendants consented to a CPL against one such property, municipally described as 2047 St. John’s Road, Innisfil Ontario (“property no. 2”). The Plaintiff withdrew its claim to a CPL against the municipally described as 1635 Innisfil Road, Innisfil, Ontario (“property no. 3”). That led the bulk of the argument in this matter to the issue of the propriety of the relief claimed against the property municipally described as 876 Innisfil Road, Innisfil, Ontario (“property no. 1”).

[2] For the reasons that follow, I grant a CPL against property no. 2, on consent. I dismiss the claims with regard to property no. 3 (on consent) and no. 1 (not on consent).

Background

[3] The plaintiffs reside in Toronto and are occasional investors in real estate. The personal defendant, Majid Sarkar-Tavakoli (“Majid”), is a real estate agent. His father, Hassan Sarkar-Tavakoli (“Hassan”) is the sole officer, director and shareholder of the corporate defendant (“COR-C”). Cor-C is the owner of property no. 1.

[4] The facts of how the Plaintiffs entered into and then out of an agreement to purchase shares in the company that owned property no. 1 are murky and in dispute. They originally worked with Majid to make an offer to purchase a property adjacent to property no. 1 (880 Innisfil Road, Innisfil, Ontario), but were unable to complete the transaction. Their $30,000 deposit was returned to them.

[5] After some further discussions, they agreed instead to attempt to purchase property no 1, which was owned by COR-C. To do so, they signed a share purchase agreement (“SPA”) to buy Hassan’s shares of CORC-C, the legal owner of property no. 1. They paid a $250,000 non-refundable deposit towards the purchase price. They also agreed to assume an existing $105,000 first mortgage and to grant a $325,000 vendor take-back mortgage, for a total purchase price of $680,000. The agreement was signed on or about September 29, 2016 and the transaction closed October 10, 2016.

[6] After the closing the Plaintiffs were dissatisfied with the arrangement and sought their $250,000 deposit money back. By then, the deposit funds had been distributed. They were unwilling to refund it.

[7] There was much discussion between the parties and their counsel over the following months regarding the Plaintiff’s dissatisfaction with the SPA arrangements. Ultimately, the parties reached an agreement, whereby the Plaintiffs would obtain an interest in property no. 2 rather than property no.1. Title to property no. 2 was held by Majid’s aunt, Fatemeh Ahoochashm. However, she held title as a bare trustee for Majid, the beneficial owner.

[8] The parties set out the terms of their agreement in a written release (“the Release”). Under the terms of the Release, the Plaintiffs and Defendants agreed to mutually release one another of any and all claims each may have had against each other at that time. In particular, the parties released each other over any claims regrading the $250,000.00 non-refundable deposit that was paid to COR-C Corporation on September 30, 2016 and/or with respect to the SPA.

[9] The further terms of the Release included the following:

(a) The Plaintiffs would be paid $30,000.00

(b) The Plaintiffs would be paid $162,000.00 by way of receipt of 100% of Majid’s beneficial interest in Property 2. That interest was assigned to the Plaintiffs by way of a trust agreement, the equity of which was established to be $162,000.00 at that time;

(c) The Plaintiffs would be paid $29,000.00 no later than May 30, 2018;

(d) The Plaintiffs would be paid $29,000.00 less any adjustments or set-offs as of the date of the actual transfer of ownership of Property 2, or no later than three days after Property 2 is sold to a third party;

(e) As of March 1, 2018, the Plaintiffs acknowledged that all costs whatsoever relating to Property 2, including liabilities to CIBC for the mortgage, CMHC insurance, mortgage discharge penalties, property taxes, property insurance, water tank rental, and general maintenance of Property 2 would be the responsibility of the Plaintiffs.

[10] The Defendants say that the release represents a complete defence to any claims that the Plaintiffs may have regarding property no. 1. They add that in any event, this case is statute barred in that it comes more than four years after the original share purchase agreement and over two years after the parties settled with the release.

[11] The Plaintiffs deny that the release prevents them from bringing this action. They state that the Defendants have breached the release by failing to transfer Majid’s interest in property no. 2 to them. They assert that the whole arrangement was effectively a scam (although they do not use that word). They brought this action when they discovered that the defendants were attempting to sell property no. 2. They placed a caution on title, which effectively prevented the sale.

[12] In his oral arguments, the Plaintiff’s counsel added a claim that his clients lacked independent legal advice when signing the release. He further asserted that there was no equity in property no. 2 because there were two mortgages on title whose face value was higher than the value of the property.

[13] In reply, the Defendants deny that they acted in any dishonest way. They point out that they have attempted to re-transfer title to property no. 2 but the Plaintiffs refused to cooperate. They still refuse to accept title to the property. The Defendants say that Majid only attempted to sell the property because the Plaintiffs refused to accept the transfer of title. As a result, Majid was forced to pay all of the carrying costs of property no. 2 from March 2018 onward, costing him thousands of dollars. That is why he tried to sell it.

[14] During the course of argument, the Defendants’ counsel obtained and filed an up-to-date copy of a parcel register for property no. 2. It showed that the second mortgage that the Plaintiffs complained of had been removed from title before this action commenced. They assert that the property has an equity of over $100,000, at least.

[15] With regard to the claim of lack of independent legal advice, the Defendants point to the correspondence regarding the drafting of the Release, in which the Plaintiff’s counsel, Alex Zivkov, clearly played an active role in negotiating its terms.

[16] The Defendants adds that even if, as the Plaintiffs assert, the Defendants breached the terms of the release by failing to transfer title to property no. 2, that does not mean that the remainder of the release is void. Rather, the route open to the Plaintiffs is to sue to enforce the terms of the release.

[17] The Defendants concede that the Plaintiffs have an interest in property no. 2, which is why they consent to a CPL against it. In fact, they would consent to an order that the property be immediately transferred to the Plaintiffs. It is the Plaintiffs, who seek a CPL against that property as well as property no. 1, who refused to accept title.

[18] With regard to property no. 1, the Plaintiffs say that if the release is set aside, they can advance a claim to an interest in property no. 1 based on the SPA and their $250,000 deposit. They say that their loss was not discoverable until recently, when they learned that Majid was attempting to sell property no. 2.

[19] The Defendants respond that even if the release is set aside, the alleged breaches of each of the SPA and the release occurred more than two years before this action was commenced and that there is no argument of delayed discoverability. In any event, the Plaintiffs make no claim that property no. 1 is unique. Their loss can be compensated through damages of no more than $250,000, the amount of their deposit, less any payments made under the release.

Law

[20] The jurisdiction to grant a CPL is found in s. 103(1) and (2) of the Courts of Justice Act, which states:

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 CPL is issued by the court and the certificate is registered in the proper land registry office under subsection (2).

Registration

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

[21] Under r. 42.01(1) of the Rules of Civil Procedure, a CPL under s. 103 of the Courts of Justice Act may be issued by a registrar only under order of the court.

[22] As Peterson J. stated in 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003, at para. 21: “[t]he Court may only grant leave to register a CPL where it is satisfied that there is a triable issue in respect of the moving party's claim to an interest in the land… The threshold test to be applied in a contested Motion for a CPL is the same as if it were a Motion to discharge a CPL under s.103(6) of the Courts of Justice Act, namely whether the party seeking the CPL has a "reasonable claim to the interest in the land". [Citations removed]

[23] Even if the moving party demonstrates a reasonable claim to an interest in the land, the court has the discretion, in considering the equities, to refuse to grant the CPL under s. 103(6). Peterson J. set out a non-exhaustive list of factors to consider in the granting of a CPL in 2254069 Ontario Inc. v. Kim at para. 30. They include:

i) whether the land in question is unique,

ii) whether there is an alternative claim for damages,

iii) the ease or difficulty of calculating damages,

iv) whether damages would be a satisfactory remedy,

v) the presence or absence of a willing purchaser,

vi) the balance of convenience, or potential harm to each party, if the CPL is or is not granted,

vii) whether the CPL appears to be for an improper purpose,

viii) whether the interests of the party seeking the CPL can be adequately protected by another form of security, and

ix) whether the moving party has prosecuted the proceeding with reasonable diligence.

(See: Interrant International Properties Inc. v. 1167750 Ontario Inc., [2013] O.J. No. 3385, at para. 15).

Application of the Test for a CPL to the Facts of this Case

[24] Here, there is no question of the Plaintiff’s entitlement to a CPL on property no. 2. They have an equitable interest in title to the property. However that is not the case with regard to property no. 1. I say this because:

a. They signed a release four years ago regarding their claims arising out of their attempt to purchase an interest in property no. 1.

b. The limitation period with regard to any claim with regard to property no. 1 is likely expired;

c. There is no evidence that property no. 1 is unique;

d. The essence of the Plaintiff’s claim is a return of a deposit that was given over four years ago. It is not for specific performance;

e. In any event, the Plaintiffs make a claim for those damages as an alternative to a certificate of pending litigation.

f. The equities do not favour a second CPL in regard to what is in essence one set of transactions, where the claim regarding property no. 1 was transferred to a claim regarding property no. 2. The Plaintiffs are already entitled to a CPL in regard to property no. 2., a property in which there is at least $100,000 in equity.

Conclusion

[25] For the reasons set out above, I grant a CPL regarding property no. 2 but dismiss the balance of this motion.

Costs

[26] If the parties are unable to resolve the issue of costs on their own, the Defendants may submit their costs submissions of up to three pages, double-spaced, one-inch margins, plus and bill of costs/costs outline and offers to settle within 14 days of release of this endorsement. They need not include the authorities upon which they rely so long as the authorities are found in the commonly referenced reporting services (i.e. LexisNexis Quicklaw, or WestlawNext) and the relevant paragraph citations are included. The Plaintiff may respond in kind within a further 14 days. No reply submission will be accepted unless I request it. If I have not received any submissions within the time frames set out above, I will assume that the parties have resolved the issue and make no costs order.

“Marvin Kurz J.”

Electronic signature of Justice Marvin Kurz,

Original will be placed in court file

Date: October 26, 2020