Court File No. CV-19-141743-0000 DATE : 20201217 ONTARIO SUPERIOR COURT OF JUSTICE
THE HONOURABLE JUSTICE ) THURSDAY, THE 17 th DAY S. J. WOODLEY ) OF DECEMBER, 2020
BETWEEN
AHMAD BEYGI, ELHAM BEYGI, MALIHEH RAFIEI HANJANI and THE ESTATE OF ALIREZA BEYGI, deceased, by its executor, Ahmad Beygi Plaintiffs
-and-
YOUSEF MAHMOUDZADEH, MOHAMMAD MAHMOUDZADEH, MAD BUILDERS LTD., SALOUMEH BAGHBANI NAJAFABAD, ALI REZA HAKIMI, ALIREA GOLNARAGHI GHOMI, ALIREZA MOHAJEL SADEGHI, AMIR HOSSEIN SALAMAT, ARAD AMANI, CHEHRAZ DADRAS, DARYL KING, DENIZ DIRIK, FARHAD RAD, FARSHAD SHIRVANIAN, HAMED SHAJARI, HOSSEIN RAHIMI, HOSSEIN SHAJARI, JANET CHRISTINE YATES, KAMRAN DARYUSHNEJAD, MEHDI KETABCHI HAGHIGHAT, MEHRANGIZ ATASHSOKHAN, MEHRDAD MIROSSINI, MONIR ATASHSOKHAN, NIMA ANDREW HAKIMI, NIMA BEHRAVESH, OMID PAKROH REZAEIE, ROUHOLAH ESKANDARI, SASAN SALAJEGHEH, SHADI JAHANFAR, SIAVASH RAD, and TABASOM EFTEKIHARI Defendants
REASONS FOR DECISION
Overview
The Plaintiffs seek leave to obtain a certificate of pending litigation against certain property municipally known as 24 Sanderson Cres., Richmond Hill, Ontario, and legally known as PCL 220-1, SEC M1591; LT 220, PL M1591, S/T LA554676; S/T LA492961E RICHMOND HILL (“the property”).
However, unlike most motions of this type, the Plaintiffs’ claimed interest in the property is admitted, the property has been sold with a closing date of December 21, 2020, and the Plaintiffs concede that the sale price is $239,000 above the fair market value of the property.
The Plaintiffs’ main complaint is that they did not participate in the marketing and sale of the property. They allege that as a 22.5% investor they were entitled to participate in the marketing and sale of the property – and as they did not participate - the pending sale should be disrupted despite the financial gain the sale will generate to all investors. Further, despite seeking to disrupt the pending sale, the Plaintiffs do not provide any undertaking as to damages in the event the CPL is granted.
Issues
The issues before me are whether a Certificate of Pending Litigation should be registered against the subject property, and if so, on what terms. If leave to issue a Certificate of Pending Litigation is not granted, should any alternative relief be awarded to secure the Plaintiffs’ interests while allowing the sale to proceed.
For the reasons that follow, I do not accept the Plaintiffs’ position. The facts of this case do not permit a CPL to issue nor do they permit the Plaintiffs to disrupt the pending sale. There shall be an Order, however, protecting the Plaintiffs’ interests, which is granted in accordance with the alternative submissions of the Defendants, as amended by me.
Facts
On May 17, 2015, a group of investors pooled funds together to purchase the subject property.
The investors consisted of the Plaintiff Ahmad Beygi, and the Defendants Yousef Mahmoudzadeh, Nima Behvaresh, Shadi Jahanfar, and Roullah Eskandari.
The property was purchased for the sum of $1,375,000.00 and title was registered solely in the name of Nima Behvaresh.
As a result of their individual investments and as per their verbal agreement, each investors’ beneficial interest in the subject property was agreed to be as follows: Ahmad 22.5% interest; Yousuf 22% interest; Nima 8.5% interest; Shadi 22% interest; and Rouhollah 25% interest.
In the spring of 2019, a disagreement arose between the Plaintiff Ahmad and the other investors in the property. Following this disagreement, the Plaintiffs commenced the within action.
By their Amended Statement of Claim, the Plaintiffs claim as against 24 Sanderson, inter alia : a. a declaration that 24 Sanderson is partnership property; b. an order for the sale of 24 Sanderson and distribution of its’ proceeds, and c. a full accounting.
On September 4, 2020, the registered owner of 24 Sanderson, Nima Behvaresh, entered into an Agreement of Purchase and Sale to sell 24 Sanderson to Farshad Behvaresh for $1,369,000.00, which purchase price is acknowledged by the Plaintiffs to be $239,000 above the current appraised value.
After receiving information that the property had been sold, the Plaintiffs brought this motion seeking a CPL to be registered on title to the property despite asking that the property be sold in the Amended Statement of Claim. By this motion the Plaintiffs seek to prevent the sale to the named purchaser for reasons that remain unclear to the Court, excepting that the Plaintiffs did not participate in the choice of the purchaser.
The facts summarized in the materials before the Court indicate that the subject property is not unique in any way to the Plaintiffs. On cross-examination, the Plaintiff Ahmad Beygi, could not remember if he ever visited the property, acknowledged it was always rented, and admitted that it was part of 11 or 12 other properties that were part of a business scheme to demolish, build and resell properties.
On cross examination, the Plaintiff Mr. Beygi could also not clarify what was harmful about the current sale. Both Mr. Beygi and his counsel re-iterated that the Plaintiffs’ primary concern was that the Plaintiffs (as 22.5% investors) did not participate in the marketing and sale of the property and they seek to set aside the sale so that they may so participate.
At the hearing of the motion, the Plaintiffs did not back down from their position that the sale should be disrupted, even though: a. The property has been sold for $239,000 above the fair market value; b. The property has been sold using two realtors, one of whom is at arms length; c. The Plaintiff Mr. Beygi advised during cross-examination that there is no problem with Shadi Jahanfar, one of the other investors, acting as the realtor on the sale or the fact that she was getting a commission; d. There is no problem with the purchaser, Farshad Shirvanian, other than he works in close proximity to Yousef Mahmoudzadeh; e. The property is currently vacant; f. None of the investors, including the Plaintiffs, are contributing or paying any funds for the upkeep or the mortgage on the property; g. The mortgage registered on the property has fallen into arrears; and h. The sale is approved by 77.5% of all investors in the property (i.e. all investors save the Plaintiffs).
The Law
The Courts of Justice Act, R.S.O. 1990, c. C.43, at section 103 (6) provides the following in relation to discharge a certificate of pending litigation (“CPL”):
(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.
The test on a motion for leave to issue a CPL made on notice is the same as the test on a motion to discharge a CPL (See Homebuilder Inc. v. Man-Sonic Industries Inc. (1987) 22 C.P.C. (2d) 39).
The factors that a court is to consider when deciding a motion brought on notice seeking leave to issue a certificate of pending litigation are found in Perruzza v. Spatone, 2010 ONSC 841, as follows: a. The threshold for finding an "interest in land" on a motion respecting a CPL is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed; b. 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 as "a reasonable claim to the interest in the land claimed"; c. 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 d. 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 (9311473 Ontario Ltd. v. Coldwell Banker Canada Inc. 1991 CarswellOnt 460 (Gen. Div.) Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CarswellOnt 1026 (Div.Ct.) at para.9.
Even if the moving party has a reasonable claim to an interest in land, the court must still review and balance the equities between the parties, based on the Dhunna factors.
In Tribecca Development Corp. v. Danieli, 2015 ONSC 7638, Master Muir refused to grant leave for a certificate of pending litigation in a case with similar circumstances. At paragraph 12 he stated:
Despite my finding that the plaintiff has satisfied this initial threshold [of reasonable claim to an interest in land] I have concluded that a consideration of the other applicable factors favours the defendants' position on this motion.
Similar to Tribeca, in the present case, I find the following factors as determinative for not granting leave for the CPL: a. The land in questions is not unique. It was used as a rental property and was not used by the Plaintiffs as their residential premises; b. The land was acquired entirely for investment purpose, with a view to earning a profit; c. The damages can be easily calculated through a simple accounting involving the cost of purchase, redevelopment, renovations, repairs, maintenance, taxes, insurance, utilities, management fees, mortgage fees and any other applicable capital or ongoing expenses, subtracting the rentals, reimbursements, and other income received and the ultimate sale price, and quantifying the plaintiff’s contributions; and d. The Amended claim includes an alternative claim for damages, and it is not the role of the court on a CPL motion to renegotiate the terms of the bargain made by the parties.
As noted by Master Muir in Tribeca, a CPL is intended to protect an interest in land in situations where other remedies would be ineffective. It is not intended to be an instrument to secure a claim for damages. I completely agree with Master Muir’s conclusions in this regard and find them entirely applicable to the present circumstances.
In Bains v Khari, 2019 ONSC 1401, Justice Doi of the Ontario Superior Court in 2019 dismissed a motion for CPL on very much the same reasoning:
There is no evidence that the subject property is unique to the moving Plaintiffs. Their evidence is clear that they acquired the property as an investment to earn a profit. In the circumstances, damages can be easily quantified based on the cost of purchasing the property against costs incurred. Their statement of claim also includes a claim for damages, such that an award of damages would appear to be readily calculated and offer an adequate remedy. I also find that the balance of convenience favours the Defendant. While the registration of a certificate of pending litigation may inconvenience the Defendant and complicate any future sale of the subject property that may be contemplated, the certificate may be discharged when future sale proceeds are paid into court. To the extent that the moving Plaintiffs seek a certificate of pending litigation as a form of security for their claim, it bears noting that the Defendant is not a shell corporation but an individual who testified during his cross-examination that he is employed. Should the moving Plaintiffs have concerns about the dissipation of assets, it is open for them to seek relief by way of a Mareva order. A certificate of pending litigation is intended to protect an interest in land in situations where other remedies would be ineffective.
For all of the foregoing reasons, the motion for leave to issue a certificate of pending litigation is dismissed.
In the present circumstances, none of the items identified by the Plaintiffs justify a CPL and the balance of convenience entirely favours the Defendants.
If a CPL were ordered to be registered on the property, as requested by the Plaintiffs, the following are the reasonably foreseeable consequences: (i) the current sale of the property will be jeopardized and/or fail; (ii) as the property has sold for $239,000 above the appraised value, any future sale will unlikely generate the same sale profit for the investors; (iii) expenses relating to the property will continue thus negatively affecting any future profit regardless of the ultimate sale price; (iv) as no investors are contributing to the property’s expenses, the property may become subject to a Power of Sale by the lender; (v) regardless of any direction provided by the Court it is unlikely that the Plaintiffs will agree with the remaining investors as to the future marketing and sale of the property thus forestalling any future sale; and (vi) the remaining 77.5% investors who approved the sale will have cause to claim against the Plaintiffs for any losses, including any loss of profits, any increased expenses and interest, and all accompanying legal fees.
None of the above noted reasonably foreseeable consequences will be encountered provided the sale is permitted to continue. Further, even if the mortgage was not currently in a state of arrears, there is no guarantee that if this sale collapses because a CPL was granted that a subsequent sale will occur, in a timely manner, or at a similar or better price, and that such future sale price would be offset by the increased expenses that any delay will necessarily involve.
Frankly, if a CPL is granted in the current circumstances, the reasonably foreseeable result is that ALL investors in the property will suffer immediate and serious negative financial consequences.
A CPL is not justified in the present circumstances and the Plaintiffs are not entitled to utilize a CPL to subvert a binding agreement for the sale for the subject property.
Determination and Order
- For the reasons outline above, this Court Orders as follows: i. The Plaintiffs’ request for a Certificate of Pending Litigation to be registered against the subject property and for alternative relief that the Court order a sale of the property on such terms as are just, be and is hereby dismissed; ii. In order to secure the Plaintiffs’ unregistered interest in the subject property, 22.5% of the net proceeds of sale together with a further $22,500 (being 22.5% of the vendor take back mortgage) shall be paid into Court to the credit of the action on the closing of the pending sale of the subject property; and iii. Subject to any offer to settle that may affect costs, as the Court has accepted the Defendants’ alternate position on the motion, the Defendants are entitled to their costs. The Defendants shall file costs submissions with a Bill of Costs attached, no longer than 5 pages (plus the Bill of Costs) and shall serve and file the submissions within 14 days. The Plaintiffs shall file their response with a Bill of Costs attached, no longer than 5 pages (plus the Bill of Costs) and shall serve and file the submissions within 28 days. Any reply by the Defendants is limited to 2 pages to be served and filed within 30 days.
Justice S. J. Woodley