COURT FILE NO.: CV-20-635712

DATE: 2020 02 05

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: PAUL VAN EEDEN, Plaintiff

• and -

JITENDRA MADHA, VIJAY MADHA and SANJAY MADHA, Defendants

BEFORE: Master Todd Robinson

COUNSEL: A. DeParde, for the plaintiff

HEARD: February 5, 2020

REASONS FOR DECISION

[1] The plaintiff brings this ex parte motion pursuant to section 103 of the Courts of Justice Act, RSO 1990, c. C.43 (the “CJA”) and Rule 42.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) for an order granting him leave to issue a certificate of pending litigation (“CPL”) in respect of certain lands and premises known municipally as 161 Avenue Road, Newmarket, Ontario (the “Property”). This motion has been brought mid-afternoon on an urgent basis, since the real estate closing for the Property is scheduled for today, to close by no later than 6:00 p.m.

Background

[2] The defendants appear to be a father and two sons. All three are said to be the registered owners of the Property, although no parcel abstract is included in the motion materials. The defendants previously purchased it and performed renovations and/or construction in the house. The extent of construction/renovation work performed appears to be an issue in dispute.

[3] There is evidence supporting that the original intent was for Vijay Madha (who I understand to be the father) to reside at the Property once the house was constructed. As a result, on July 20, 2018, Tarion Warranty Corporation (“Tarion”) issued a letter of confirmation to the defendants confirming that Tarion had determined the house on the Property met the criteria of an owner built home. The defendants accordingly did not have to register with Tarion as a builder of a vendor in compliance with the Ontario New Home Warranties Plan Act, RSO 1990, c. O.31 (“ONHWPA”). The house on the subject Property was subsequently constructed.

[4] On January 5, 2020, the plaintiff entered into an agreement of purchase and sale with the defendants for purchase of the Property (the “APS”). The house was intended to be for the plaintiff’s elderly in-laws. The closing date was scheduled for February 5, 2020 by no later than 6:00 p.m. Evidence filed supports that an inspection of the Property occurred on January 16, 2020, and the plaintiff and his wife visited the Property on January 26, 2020. Some issues were identified that the plaintiff requested be addressed by the defendants prior to closing. The plaintiff swears, “As a result of these issues we were addressing with the construction and workmanship of the house, my wife and I turned our mind to the issue of a warranty and the protection we would have in the period following the Completion Date.”

[5] On January 31, 2020, the plaintiff’s real estate counsel made an inquiry to the defendants’ real estate counsel regarding whether or not the house was Tarion-warranted. Later the same day, a clerk from the office of defendants’ counsel confirmed that (i) the house was not registered with Tarion, (ii) the original intent was for one defendant to move in, but that another house was found and the defendants decided to sell the Property, and (iii) the work performed was in the nature of a renovation and the structure of the house was not changed.

[6] On February 4, 2020, the defendants’ real estate counsel confirmed that no Tarion warranty would be provided and that no HST would be collected and paid regarding the transaction. The plaintiff’s lawyer responded in short order, challenging the position of the defendants that a Tarion warranty was not required (and the HST issue, which was not argued as pertinent on the motion). Defendants’ counsel thereafter provided the above-noted letter of confirmation.

[7] On February 5, 2020, the plaintiff contacted Tarion directly to seek confirmation regarding whether or not the house on the Property was required to be Tarion warranted. A prompt reply was provided within 10 minutes, confirming as follows:

I have forwarded your information to our Licensing and Underwriting Department, who I believe issued the letter. I will follow up with them but this matter is not likely to be resolved today. If the home was never occupied then it should have been enrolled and the builder should have been registered with Tarion.

A home is not required to be enrolled to be covered under the warranty but the determination has to be made by Tarion that the home is eligible for coverage. That usually involves investigation and that is always more than one day.

From the information you have provided it would seem likely that the home is entitled to warranty coverage but I cannot confirm that to you right now. I will get back to you with more information as soon as possible.

You should contact your lawyer to discuss your options if you have any concerns.

[8] This motion was subsequently brought. There is no evidence of any request having been made to extend the closing date to allow additional time to resolve the warranty dispute.

Analysis

[9] The oft-cited applicable test for granting leave to issue a CPL is set out by Master Glustein (as he was then) in Perruzza v. Spatone, 2010 ONSC 841 at para. 20, as follows:

(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 CanLII 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 CanLII 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).

[10] These are the factors I have applied and considered in respect of the facts before me in determining whether to grant leave to issue the CPL.

[11] As stated above, the overriding test on a motion for leave to issue a CPL is for the court to exercise its discretion in equity and look at all relevant matters between the parties in deciding whether to grant leave to issue a CPL. The plaintiff submits that application of the Dhunna factors (which are set out above in the excerpt from Perruzza) to the facts presented on this motion leads to the conclusion that it is appropriate that leave be granted to issue the CPL. I do not agree.

[12] In my view, the equities of this case favour denying the plaintiff leave to issue a CPL in respect of the Property. I say this for the following reasons:

(a) There is no evidence of any reasonable belief by the plaintiff that there would be any warranty in entering into the APS. The APS contains no provision for a warranty, and no representation regarding the construction of the house on the Property having been Tarion-warranted. This issue of warranty appears to have arisen solely on the eve of closing. As already outlined above, the plaintiff’s evidence is that, “As a result of these issues we were addressing with the construction and workmanship of the house, my wife and I turned our mind to the issue of a warranty and the protection we would have in the period following the Completion Date.”

(b) There appears to be a triable issue on the extent to which the defendants are obliged to provide a warranty under ONHWPA. The plaintiff swears that he is “ready, willing and able” to close. However, notwithstanding the submissions of counsel, I am not satisfied that there will be any change in the plaintiff’s ability to pursue the same relief regarding providing a Tarion warranty or alternative security after the closing. In my view, on the evidence before me, the plaintiff is ready and able to close, but not willing until the last-minute condition is addressed.

(c) I agree with the plaintiff that there is sufficient evidence to support that the Property is unique for the plaintiff’s purposes and that the plaintiff has a specific intent in acquiring this specific Property. However, I do not agree that damages are not a satisfactory remedy or would be difficult to calculate. The substance of the disputed warranty is only realized in the event of a warranty claim being advanced. There is no evidence before me to support that the defendants are unwilling to correct any defects or deficiencies that arise after the Completion Date and no evidence that the defendants lack the financial wherewithal to satisfy a judgment if an action was required in respect of unremedied defects or deficiencies.

(d) This motion was brought ex parte in the afternoon of the closing date, with no evidence for why the defendants’ were not given notice of the motion (or intention to seek a CPL) and more significantly with no evidence of any attempt to request an extension in closing until the dispute regarding the warranty could be disclosed. I agree with the plaintiff that a motion for leave to issue a CPL may be brought ex parte, but the fact of this motion being brought ex parte and the timing of the motion, combined with the lack of any request to extend closing, has been a factor in my consideration of the equities.

(e) Although it is alleged that the defendants have relisted (or at least intend to relist) the Property for sale, the only evidence of that intent is a double (or perhaps triple) hearsay statement from the plaintiff in his affidavit. I give it no weight.

(f) In considering the harm to each party if the CPL is or is not granted, I have determined that the harm to the defendants is significantly greater. If the CPL is not granted, the plaintiff may still close and pursue the remedies in the underlying action, namely that the defendants provide a Tarion warranty or alternative warranty security. The plaintiff is also entitled to sue for any unremedied defects/deficiencies that arise, which may otherwise be warranted. Further, it is not clear to me that Tarion will not warrant the house. The email from Tarion’s representative suggests that it would likely be warranted regardless of registration. Conversely, a CPL in the context of the relief sought, namely that closing be deferred until 14 days after a Tarion warranty is provided or security posted, would result in an indefinite inability of the defendants to sell the Property until the conclusion of litigation (or settlement). If the plaintiff is successful, then the defendants will be required to close at the 2020 price, even though litigation may not complete for years, when the sole disputed issue is the availability of a right entirely contingent on speculative warranty claims arising. If the plaintiff is unsuccessful, the harm to the defendants is more pronounced.

Order

[13] For the foregoing reasons, I dismiss the plaintiff’s motion.

MASTER TODD ROBINSON

DATE: February 5, 2020