Xin Li v. Wei Li and Yan Zhang
COURT FILE NO.: CV-19-627063
MOTION HEARD: 20201106
REASONS RELEASED: 20201126
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
XIN LI Plaintiff
- and-
WEI LI and YAN ZHANG Defendants
BEFORE: MASTER M.P. McGRAW
COUNSEL: C. Sparling E-mail: christopher.sparling@sympatico.ca -for the Plaintiff
M. Magonet E-mail: m@magonetlaw.com -for the Defendants
REASONS RELEASED: November 26, 2020
Reasons For Endorsement
I. Introduction
[1] The Plaintiff, Xin Li (“Cindy”) brings a motion for leave to issue a Certificate of Pending Litigation (“CPL”) with respect to the property located at 138 Alamo Heights Drive in Richmond Hill (the “Property”). This action arises from Cindy’s aborted purchase of the Property from the Defendant Wei Li (“Wei”).
II. Background
[2] Cindy is a retired practitioner of Chinese medicine. She and her husband, Xiao Geng Liang (“Xiao”) are citizens of China who reside in Ontario on Visitors’ Visas. Their 11-year old son attends school in Ontario on a Student Visa. Wei and his wife, the Defendant Yan Zhang (“Jane”) are permanent residents and long-time friends of Cindy and Xiao who met in China. Jane is a licensed real estate agent in the Richmond Hill area. Cindy and Wei have the same surname but are not related.
[3] Cindy and her family visited Canada for the first time in August 2016. During their visit, they stayed with Wei and Jane and Xiao made 3 offers to purchase investment properties in Richmond Hill. All of the offers were signed by Cindy as his spouse. Pursuant to Representation Agreements, Jane acted as Xiao and Cindy’s real estate agent on all 3 offers, preparing all documentation and making all necessary arrangements including financing. Xiao ultimately purchased the property located at 176 Felix Road in Richmond Hill (“Felix Road”) without he or Cindy ever viewing it. Cindy authorized Jane to manage her bank account after she returned to China and Felix Road was rented out. Previously, Jane invested in and/or purchased at least 5 properties in China, 4 of which were used for corporate purposes and Xiao purchased a cottage in China as an investment property.
[4] Cindy returned to Canada on August 6, 2017 and obtained a Student Visa for her son. Cindy lived with Jane temporarily and requested her assistance in finding a house to rent or purchase. Jane suggested that Cindy purchase the Property from Wei. In 2016, Wei entered into an agreement to purchase the Property from the builder. The Property was still under construction at the time with Wei’s purchase scheduled to close on November 28, 2017. With Jane as her agent, Cindy rented a condominium in Toronto in the interim.
[5] On August 26, 2017, Cindy entered into an Agreement of Purchase and Sale (the “First Agreement”) to purchase the Property from Wei (the “Sale”). As the Sale was considered a private transaction, Cindy and Jane did not execute a Representation Agreement. However, Jane prepared all necessary documentation similar in form and content to previous transactions.
[6] Although the First Agreement was signed on August 26, 2017, it was dated November 28, 2017 to reflect the anticipated closing date of Wei’s purchase of the Property from the builder. To further accommodate Wei’s purchase, the closing date in the First Agreement was November 29, 2018. The purchase price was $1,980,000 with $300,000 paid to Wei upon acceptance, $400,000 payable by December 30, 2017 (together the total payments of $700,000 are referred to as the “Deposits”) and the balance payable upon closing. Cindy alleges that the purchase price was based on Jane’s misrepresentation that the market value of the Property was $2,000,000. The words “in trust” were struck and initialed in reference to the payment of the Deposits.
[7] Wei closed his purchase of the Property from the builder on December 21, 2017. He paid a purchase price of $1,177,177 and obtained a mortgage of $831,900 from CIBC. Before Cindy returned to China on December 26, 2017, Jane advised her that Sale could not be closed on time and that an amended agreement was necessary. Prior to her departure, Cindy and Wei executed a second Agreement of Purchase and Sale dated December 28, 2017 (the “Second Agreement”, together with the First Agreement, as amended, the “Agreements”) which was substantially the same as the First Agreement except that the closing date was extended to January 16, 2019. Cindy returned to Canada on January 12, 2018 and paid the second Deposit of $400,000 by cheques in the amount of $260,000 on January 18, 2018 and $140,000 on January 26, 2018.
[8] Cindy took occupancy of the Property on May 31, 2018. Jane obtained a mortgage with a preferable rate. From May 2018 to July 2019 Cindy paid monthly occupancy fees to Wei towards the carrying costs of the Property. Cindy claims that she paid $94,500 (equivalent to $5,250 per month). Wei acknowledges receiving occupancy fees but disputes this amount.
[9] In September 2018, Cindy advised Jane that she was experiencing difficulties transferring funds from China due to capital outflow controls. Cindy claims that Jane advised that she was concerned about the carrying costs of the Property and suggested that Cindy and Xiao sell the Felix Property. The Felix Property was listed for sale with Jane as listing agent. Cindy alleges that Jane advised her soon after that the Felix Property could not be sold due to the depressed real estate market resulting from Non-Resident Speculation Tax (“NRST”). The NRST came into effect on April 21, 2017 and requires individuals who are not Canadian citizens or permanent residents to a pay a tax equivalent to 15% of the purchase price for properties located in certain areas of Southern Ontario including Richmond Hill.
[10] Cindy alleges that she was unaware of the NRST and Jane did not advise her about it. Jane disputes this, referring to WeChat messages dated July 8, 2017 to which Cindy attached an article regarding the depressed real estate market which referenced the NRST. Cindy and Jane did not specifically discuss the NRST in these messages. Cindy further alleges that this was the first time that she realized that the NRST applied to the Sale and the Agreements.
[11] Cindy also alleges that Jane advised her that the NRST was temporary and that it would be cancelled. Therefore, Cindy claims that in order to buy time until the NRST was rescinded and because Jane could not otherwise find Cindy a mortgage, they agreed to further extend the closing date. Pursuant to an Amendment to the Second Agreement dated December 6, 2018, the closing date of January 19, 2019 was extended by another year to January 20, 2020. The NRST remains in effect.
[12] Cindy claims that in March 2019 some friends expressed surprise at the purchase price for the Property. This prompted her to contact Peter Lu, a real estate agent with experience in Richmond Hill. Mr. Lu advised that the market value of the Property in August 2017 was approximately $1.4 million-$1.5 million. Cindy retained counsel in May 2019 who obtained a title search which revealed that Wei paid $1,177,177 for the Property. Cindy says that this is the first time she learned how much Wei paid. Three appraisals arranged by Cindy estimate the market value of the Property at $1,500,000 (as at August 2017), $1,540,000 (as at September 2019) and $1,490,000 (as at July 2020).
[13] Cindy subsequently advised that she would not complete the Sale and commenced this action by Statement of Claim issued on September 10, 2019 (the “Original Claim”). Cindy seeks rescission of the Agreements and the return of $775,000 comprised of the Deposits and $75,000 in occupancy fees less reasonable compensation of $40,000 representing $3,000 rent per month for 14 months (as set out above, Cindy now estimates this amount to be $94,500 however her counsel suggested that she is no longer claiming occupancy fees). In the alternative, Cindy claims damages of $775,000 for breach of fiduciary duty and negligent or fraudulent misrepresentation. Cindy amended the Original Claim on February 28, 2020 to seek the CPL; a declaration that the Defendants have been unjustly enriched; an equitable tracing of all funds paid to Wei; an order declaring that Cindy has a purchase money resulting trust, resulting trust or, in the alternative a constructive trust; and punitive damages.
[14] Cindy alleges that Jane, as Xiao and Cindy’s regular real estate agent, friend and one who stood to benefit from the Sale by her spouse, owed a fiduciary duty to Cindy, who does not speak English or understand the Ontario real estate market, which Jane breached by: misrepresenting the value of the Property; not disclosing that Wei was making a significant profit on the Sale; not advising that the Deposits were non-refundable and not a down payment; failing to advise that the Deposits were payable to Wei personally and not being held in trust; failing to advise her about the NRST; and promising Cindy that she would find financing and advising her to delete the financing condition in the Agreements.
[15] In their original Statement of Defence and Wei’s Counterclaim (the “Original Defence”) the Defendants alleged that Wei paid approximately $1.4 million for the Property with “upgrades and taxes”. In a Fresh As Amended Statement of Defence and Counterclaim dated March 2, 2020 the Defendants allege that Wei’s cost of acquiring the Property (coupled with taxes, appliances and upgrades) was significantly greater than $1,177,177. In his Counterclaim, Wei claims vacant possession of the Property; a declaration that the Deposits have been forfeited due to Cindy’s breach of the Agreements; and damages for unpaid carrying costs and any losses and costs related to the re-sale of the Property.
[16] By letter from counsel dated December 9, 2019, Wei offered to permit Cindy to close the Sale on a without prejudice basis so that Cindy could purchase the Property and continue this litigation. By email from counsel dated January 13, 2020, Cindy declined. By email dated January 14, 2020, Wei’s counsel noted Cindy in anticipatory breach of the Agreements and claimed forfeiture of the Deposits, damages and legal fees. Cindy recently vacated the Property voluntarily and the Property is currently listed for sale.
[17] On April 2, 2020, in response to a complaint filed by Cindy on October 3, 2019, the Real Estate Council of Ontario (“RECO”) sent a warning letter to Jane with respect to the Sale. In the letter, RECO states that it appears that the paperwork related to the Sale was not filed with Jane’s brokerage, notes that there was no Representation Agreement and recommends that she review a professional article regarding helping family members or friends buy and sell houses (which are still subject to the Real Estate and Business Brokers Act 2002 (Ontario)) so that she “can avoid similar situations in the future”.
[18] This motion was scheduled during a telephone case conference held on October 1, 2020.
III. The Law and Analysis
[19] The court’s discretion to grant leave to issue a CPL is set out in section 103 of the Courts of Justice Act (Ontario) with the procedure in Rule 42. The law with respect to CPL motions brought on on notice in the context of constructive trust claims was recently considered in Saggi v. Grillone, 2020 ONSC 4140; Huntjens v. Obradovic, 2019 ONSC 4343; and Sun Rise Elephant Property Investment Corporation v. Luu, 2018 ONSC 5247. The Defendants rely on all 3 cases.
[20] The factors which the court must consider on a CPL motion were set out by Master Glustein (as he then was) in Perruzza v. Spatone, 2010 ONSC 841 at para. 20:
“(i)The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL (Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (S.C. - Mast.) ("Homebuilder") at para. 1);
(ii)The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. - Comm. List) at para. 62);
(iii)The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 6832 (ON CA), 2002 CarswellOnt 219 (C.A.) at para. 20);
(iv)Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (S.C. - Mast.) at paras. 10-18); and
(v)The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).” (Saggi at para. 29)
[21] The first issue is whether Cindy has advanced claims that raise a triable issue about whether she has a reasonable claim to an interest in the Property sufficient to support the issuance of a CPL (Saggi at paras. 31 and 55). A claim for a constructive trust is a claim for ownership which may give rise to a proprietary interest in land in accordance with s. 103 of the Courts of Justice Act and will support a claim for a CPL (Sun Rise at para. 3; Huntjens at paras. 37-38). Perell J. summarized the availability of a CPL with respect to constructive trust claims in Boal v. International Capital Management Inc., 2018 ONSC 2275:
“65 A constructive trust arising from a breach of fiduciary duty or a constructive trust associated with a claim for unjust enrichment will support a claim for a certificate of pending litigation.
66 A constructive trust is a proprietary remedy that may be available in two general circumstances of restitutionary claims: first, a constructive trust may be available in cases in which the defendant has been unjustly enriched at the expense of the plaintiff; and, second, a constructive trust may be available in circumstances where the defendant has committed a breach of a duty in equity and in good conscience he or she should not keep any ill-gotten gain.”
[22] The evidentiary threshold on a CPL motion is low (Saggi at paras. 45 and 62). It is not the court’s role to determine whether Cindy’s constructive trust claim will likely succeed at trial, but whether she has raised a triable issue or prima facie case that the remedy of constructive trust is available to her or is a possible remedy at trial (Sun Rise at para. 10).
[23] In determining whether there is a triable issue on a CPL motion, the court should not assess credibility or decide disputed issues of fact (Huntjens at paras. 20-21). Rather, the court must examine the whole of the evidence after cross-examination and, without deciding disputed issues of fact and credibility, consider whether on the whole of the evidence the plaintiff’s case constitutes a reasonable claim to the interest in land claimed (Huntjens at para. 21).
[24] For the reasons set out below, I conclude that the Defendants have not discharged their onus to demonstrate that there is no triable issue with respect to whether Cindy has a reasonable claim to an interest in the Property. On the whole of the evidence before me, I conclude that there is a triable issue that the remedy of constructive trust may be available to Cindy at trial.
[25] There are 2 circumstances in which a constructive claim may arise: i.) a constructive trust associated with a claim for unjust enrichment; and ii.) a constructive trust arising from a claim for breach of fiduciary duty (Boal at paras. 65-66).
[26] A constructive trust claim for unjust enrichment is comprised of 3 parts: i.) an enrichment of the defendant; ii.) a corresponding deprivation to the plaintiff; and iii.) an absence of juristic reason for the enrichment (Huntjens at para. 39). In order to support a constructive trust claim for unjust enrichment, there must be a “sufficient” or “close” connection between the property over which the constructive trust is sought and the misappropriated funds, improper benefit bestowed on or wrongfully acquired by the defendant (Huntjens at paras. 41 and 44; Boal at para. 67). Cindy does not have to prove at this stage of the proceedings that any funds from the Deposits were used by Wei to purchase the Property from the builder, however, to raise a triable issue she must have some evidence to enable an inference that it might have occurred (Saggi at paras. 45 and 62).
[27] The Defendants’ primary submission is that Cindy has not established that there is a triable issue with respect to a reasonable claim to an interest in the Property because there is no “nexus” between the Deposits and Wei’s purchase of the Property from the builder. More specifically, the Defendants submit that there is no direct evidence that the Deposits were used by Wei to purchase the Property. The Defendants argue that “virtually” all of the applicable cases have a nexus or direct connection. The Defendants rely on Kimmel J’s reasons in Saggi:
“62 While the evidentiary threshold is low at this stage of the action, and I appreciate that the plaintiffs do not have access to the plaintiffs' financial records, to simply allege that the plaintiffs' loan monies were used to fund improvements to the Dickson Park Property is not enough. The plaintiffs do not have to prove at this stage that this in fact occurred, but they need to have some evidence to enable an inference to be drawn that it might have occurred in order to raise a triable issue. In that regard, they fall short.
63 The only possible connection between the plaintiffs' loan monies and improvements to the property that I could infer would be for the $12,000.00-bathroom renovation. However, even for that, the authorities require something more than the mere fact that the renovation took place after the plaintiffs' loan monies were advanced.
64 I agree with the moving defendant that this case is distinguishable from the constructive trust cases relied upon by the plaintiffs. In those cases, unlike this case, there was some evidence of a direct connection between the funds and the property at issue, and/or some misconduct or knowledge of misconduct by, and unjust enrichment of, the owner of the property at issue. Royal Bank; Albaroudi v. Tarakji, 2013 ONSC 1204, Century Services Inc. v. New World Engineering Corp, 2009 44410 (S.C.J.), at paras. 13, 16-19, 23, HarbourEdge Mortgage Investment Corporation v. Community Trust Company, 2016 ONSC 448, at paras. 45, 56-57, Huntjens v. Obradovic, 2019 ONSC 4343, paras. 35-36, 40-45, B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15, [2009] 1 SCR 504 at para. 85), Soulos v. Korkontzilas, 1997 346 (SCC), [1997] 2 S.C.R. 217, paras. 34-36.
65 In this case, the connection depends upon inferences, which, even if established, are not the types of circumstances that have grounded triable constructive trust claims in the authorities cited. A basis (aside from speculation) to connect the plaintiffs' loan monies to the Dickson Park Property in a way that establishes some enhancement to the property or implicates the landowner (who in this case has only ever been Ms. Gatto) is lacking. Some basis for that connection is essential to ground a claim for constructive trust and equitable tracing. See Boal v. International Capital Management Inc., 2018 ONSC 2275, at paras. 93-94. I am concerned about setting a precedent (absent some authority for doing so) that the mere fact that funds from a spousal joint bank account were used to fund household expenses and a minor renovation, without anything more, is enough to create a triable claim of an interest in land to justify the continuance of a CPL over that land in favour of a lender to the business of one of the spouses.”
[28] I disagree with the Defendants for numerous reasons. It is true that unlike Huntjens, there is no evidence of a direct connection between the Deposits and Wei’s purchase. Similar to Saggi, the connection in the present case depends upon inferences. The connection between the Deposits and Wei’s purchase must not be too remote and there must be some basis aside from speculation to draw this inference (Saggi at paras. 45 and 65). I am satisfied that there is.
[29] The present case is distinguishable from Saggi in numerous respects. In Saggi, the plaintiffs made business loans to one defendant for his law firm. One of the properties at issue was the family home which was purchased prior to the advance of the loans and registered in the name of the lawyer’s wife, also a defendant. The plaintiffs alleged that the defendants used the loans to fund their lifestyle and to pay for the mortgage, taxes and home improvements. Kimmel J. held that the only possible connection between the loan monies and the family home was a $12,000 bathroom renovation. Kimmel J. concluded that there was no basis aside from speculation to connect the loan monies to the property in a way that established an enhancement to the property or implicated the wife as registered owner and that something more than the mere fact that the renovation took place after the loans was required to draw an inference.
[30] By contrast, here the Deposits totaled $700,000 and were paid by Cindy directly to Wei, the registered owner of the Property for the Sale of the same Property that Wei was purchasing from the builder. Further, the timing of Wei’s purchase was coordinated with the closing of the Sale and Cindy paid the first Deposit of $300,000 before he completed his purchase. Unlike Saggi, where the plaintiffs advanced business loans unrelated to the family home and the lawyer’s wife as the registered owner, the Deposits here were paid directly to the registered owner and all of the dealings were with respect to the same Property. In my view, taken together, these undisputed facts are sufficient on the low evidentiary threshold to establish a sufficiently close connection or nexus between the Deposit and Wei’s purchase which enables me to draw an inference, based on more than speculation, that Wei might have used funds from the Deposits to purchase the Property from the builder. In light of these facts and the material differences between the circumstances in Saggi and the present case, the Defendants’ concern that to find a connection here would establish some kind of unfortunate precedent is unfounded. In any event, whether there is a sufficient connection must be decided based on the circumstances and context of each case.
[31] Although the Defendants bear the onus on this motion, they did not file any affidavit evidence. When asked if Wei used any funds from the Deposits to purchase the Property from the builder, Defendants’ counsel advised that the Defendants’ position is that there is no nexus because there is no evidence on the record of one while acknowledging that there is no denial on the record either because the Defendants have not been asked. While this is not determinative of the motion and I am not requiring the Defendants to prove a negative nor am I drawing an adverse inference, it is not helpful to their position. This is also distinguishable from Saggi where the defendants filed affidavit evidence, were cross-examined and explicitly denied that the loans were used for home renovations and expenses.
[32] I also reject the Defendants’ assertion that there is no triable issue regarding a constructive trust because Cindy executed the Agreements and therefore cannot establish that there is a lack of juristic reason for the enrichment. In my view, there is sufficient evidence with respect to what was and/or may have been represented to Cindy and what she understood at the relevant times (including as a result of her inability to speak English) to conclude that there is a triable issue with respect to the circumstances surrounding the execution of the Agreements and in turn whether there is a lack of juristic reason. I am also satisfied that Cindy has raised a triable issue regarding unjust enrichment given Wei’s receipt of the Deposits. Therefore, I conclude that a constructive trust based on unjust enrichment is a possible remedy available to her at trial.
[33] Even if I had not concluded that there is a triable issue with respect to a reasonable constructive trust claim based on unjust enrichment, I am satisfied that there is one with respect to a constructive trust claim related to breach of fiduciary duty. Breach of fiduciary duty includes non-disclosure of material facts, taking a secret profit, knowing assistance and knowing receipt (Boal at paras. 66, 68-71). In my view, there is a triable issue with respect to whether Jane owed a fiduciary duty to Cindy due to their close relationship, Jane’s formal representation as agent on all other transactions and Cindy’s inability to speak English and whether Jane breached it by misrepresenting the market value of the Property, not disclosing the profit that Wei made on the Sale and not advising her about the NRST and that the Deposits were non-refundable. I reject the Defendants’ submission that there is no triable issue because there are no allegations of breach of fiduciary duty against Wei as registered owner of the Property and Jane is not on title or a party to the Agreements. The allegation is that Jane stood to gain from the Sale as Wei’s spouse and that she made misrepresentations, prepared all documentation and the RECO letter, while not determinative, suggests that there may be issues related to Jane’s actual role and conduct related to the Sale notwithstanding the fact that no Representation Agreement was executed. Although no allegations of breach of fiduciary duty have been made against Wei, he received the Deposits and holds title to the Property. In my view, all of this is sufficient to establish that there is a triable issue with respect to a reasonable claim for a constructive trust based on a breach of fiduciary duty and this remedy may be available at trial.
[34] Saggi similarly provides that evidence of a direct connection is not the only way to establish that there is a triable issue regarding a reasonable claim based on a constructive trust. At paragraph 64, Kimmel J. states that in the cases cited by the plaintiff “there was some evidence of a direct connection….and/or some misconduct or knowledge by, and unjust enrichment of, the owner of the property at issue” (Saggi at para. 64). As set out above, I have concluded that there is some evidence here of misconduct and unjust enrichment sufficient to establish a triable issue and support a CPL.
[35] The doctrine of constructive trust in respect of property also includes the right to trace funds and may give rise to an interest in land (Huntjens at para. 42; Saggi at para. 65). Where funds are obtained through wrongful means and can be traced to the acquisition or improvement of land, the court may impose a remedial constructive trust sufficient to sustain a CPL and the claim for tracing itself may justify an equitable charge on land for the purposes of supporting a CPL (Huntjens at paras. 42-43). Based on my conclusions above, I am satisfied that the tracing remedy sought by Cindy may also be available to her at trial and is sufficient to support a CPL.
[36] The additional difficulty with the Defendants’ submissions is that they are asking me to make numerous findings of credibility and fact. Among other things, the Defendants argue that Cindy’s allegations have no merit and there is no triable issue of a reasonable claim because, among other things: Cindy was a sophisticated, experienced purchaser of investment properties; she had the opportunity to obtain independent legal advice and translation; she knew about the NRST; she signed and understood previous offers, agreements and the rental agreement; she understood that the Sale was private and that Jane was not acting as her agent; Wei’s purchase price from the builder was a matter of public record; and she has not provided the names of the friends who told her she overpaid for the Property. These are all issues and findings for the trial or summary judgment motion Judge to consider. To draw these conclusions on a CPL motion would be inappropriate and contrary to the court’s role at this stage of the proceedings.
[37] However, the analysis does not end with the conclusion that there is a triable issue. The plaintiff’s obligation to establish a triable issue as to a reasonable interest in land is a gateway requirement for a CPL (Sun Rise at para. 12). Although I have concluded that Cindy has met this requirement, I must consider whether it is just and equitable based on all of the circumstances to exercise my discretion to grant leave (Sun Rise at para. 12). This requires a consideration of the non-exhaustive list of factors set out in 572383 Ontario Inc. v. Dhunna, [1987] O.J. No. 1073, which is not a code: (a) whether the plaintiff is, or is not, a shell corporation; (b) whether the land is, or is not, unique; (c) the intent of the parties in acquiring the land; (d) whether there is an alternative claim for damages; (e) the ease or difficulty of calculating damages; (f) whether damages would be a satisfactory remedy; (g) the presence or absence of another willing purchaser; and (h) the harm done to the defendant if the certificate is allowed to remain, or to the plaintiff if the certificate is removed, with or without the requirements of alternative security (Dhunna at paras. 10-18; Boal at para. 74); Saggi at para. 28; Sun Rise at paras 12-17; Huntjens at para. 49).
[38] Having considered all relevant factors, I conclude that it is not just and equitable to grant leave to issue a CPL based on all of the circumstances.
[39] Cindy refused to close the Sale and is no longer interested in purchasing the Property. Cindy’s counsel also advises that she agrees that the Property can be sold. She acknowledges that the Property is not unique and that her claim is primarily for damages, an adequate remedy in the circumstances which has already been largely calculated as it is substantially comprised of the Deposits. All of these factors militate against the granting of a CPL.
[40] The actual relief underlying Cindy’s request for a CPL is security for her damages claim. To grant a CPL in these circumstances would be contrary to the principle that a CPL should not be used as an instrument to secure a claim for damages (Sun Rise at para. 16; Bat-Amy v. Aribi, 2010 ONSC 1272 at para. 18; Tribecca Development Corp. v. Danielli, 2015 ONSC 7638 at para. 20). I further conclude that the balance of harm favours not granting leave given that a CPL would interfere with and possibly prevent the sale of the Property. This would be contrary to both parties’ stated wishes and the equities in the circumstances generally.
[41] Dhunna provides that the court may consider alternative forms of security on a CPL motion and counsel acknowledged that I have this discretion. However, having considered all of the relevant factors and circumstances, I am not prepared to order an alternative form of security at this time. Consistent with the parties’ wishes, the Property should be sold and if the parties cannot otherwise agree upon a form of security pending trial or a summary judgment motion, Cindy may bring the issue back before me prior to the release of any proceeds of sale. As I have offered to remain available to provide case management going forward to ensure that this action proceeds efficiently and the parties have accepted, counsel may bring this issue back before me as appropriate.
III. Disposition and Costs
[42] Order to go dismissing the Plaintiff’s motion without prejudice to her right to seek an alternative form of security pending trial.
[43] If the parties cannot agree on the costs of this motion they may file written costs submissions with me, not to exceed 3 pages (excluding Costs Outlines) on a timetable to be agreed upon by counsel. If counsel cannot agree on a timetable, they may schedule a telephone case conference with me to speak to one.
Released: November 26, 2020
Master M.P. McGraw