COURT FILE NO.: CV-20-639297 DATE: March 15, 2021
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Lina Mao v. Mario Ignacio Rossi Diaz-Munoz;
BEFORE: MASTER C. WIEBE
COUNSEL: Dennis Van Sickle for Mario Ignacio Rossi Diaz-Munoz; Stephen M. Werbowyj for Lina Mao;
HEARD: March 5, 2021.
Reasons for Decision
[1] The defendant, Mario Ignacio Rossi Diaz-Munoz (“Mr. Rossi”), brings this motion to set aside an ex parte order of Master Graham dated April 17, 2020 authorizing the registration of a certificate of pending litigation on the title to a residential condominium unit owned by Mr. Rossi, Unit 205, 33 Bay Street, Toronto (“the Unit”). Ms. Mao resides in the Unit. She commenced this action on April 8, 2020 claiming a declaration that Mr. Rossi holds the Unit under a constructive trust in favour of Ms. Mao on certain terms. In the action, she also claims a certificate of pending litigation.
Background
[2] The following facts are not in dispute.
[3] Mr. Rossi, a Telus employee, began seeing Ms. Mao in 2011. Mr. Rossi was married to another woman at that time, but that marriage was falling apart. There was eventually a divorce in 2016. Ms. Mao was and remains a sex worker and was a student at that time.
[4] In 2013 Ms. Mao wanted to move out of her existing apartment. Mr. Rossi alleges that the two were considering moving in together; Ms. Mao denies that statement. The two looked for a residential premise. A realtor was retained who found the Unit, which is 559 square foot in size and near Mr. Rossi’s workplace downtown.
[5] Mr. Rossi purchased the Unit (in his name as sole owner) on May 15, 2013 for a purchase price of $355,000. Later a storage unit was added. With taxes, the total cost was $380,000. Mr. Rossi financed most of the down payment. He financed the remainder of the purchase price with $282,000 from a bank line of credit of $350,000 secured by a mortgage on the Unit.
[6] Mr. Rossi did not move in with Ms. Mao. Instead, Ms. Mao’s mother arrived from China and stayed. There was then extensive discussion between the two about Ms. Mao purchasing the Unit. Mr. Rossi prepared two spreadsheets. These discussions ended in September, 2013. At that time Ms. Mao started paying a monthly amount of $1,700. The motion record has a chart prepared by Mr. Rossi that shows that his monthly running costs were and are higher.
[7] In February and April, 2014 Ms. Mao emailed Mr. Rossi with her thoughts about a rent-to-own plan. Ms. Mao sent Mr. Rossi some template rent-to-own agreements. These discussions went nowhere.
[8] On July 11, 2014 Ms. Mao sent an email to Mr. Rossi wherein she stated that “this is a rental now.” She complained in the email about having paid interest to Mr. Rossi as a part of the monthly charge “since it is not my property.”
[9] In December, 2014 the two signed a document called a “Residential Tenancy Agreement.” The document specified that Ms. Mao was to pay “rent” of $1,700 per month over a yearly term commencing September 1, 2014. Ms. Mao initialed three pages of the document but did not sign the signature page. Mr. Rossi initialed the same three pages and signed the signature page.
[10] On September 25, 2015 Mr. Rossi emailed the property manager for the condominium with the subject line: “Lina Mao’s status.” The email stated that “Lina Mao is my tenant in Unit 205, 33 Bay St.” This email was copied to Ms. Mao. On September 28, 2015 Mr. Rossi sent another email to the property manager with the same subject line stating, “Ms. Mao has been my tenant for more than 2 years, and she doesn’t plan to move in the foreseeable future.” This email was also copied to Ms. Mao.
[11] On May 14, 2017 the parties discussed Ms. Mao purchasing half of the Unit. Mr. Rossi put down terms in a handwritten document. One of the stated terms was that Ms. Mao would buy half of the Unit at a price of $190,000, namely half of $380,000, the original purchase price four years earlier. Both signed this document.
[12] Ms. Mao approached Mr. Rossi with demands about Unit repairs. On January 13, 2015 she emailed about a thermostat problem. In February, 2018 she emailed about a leaking faucet. On May 28, 2018 she emailed about a water leak. In October, 2018 she emailed about a malfunctioning refrigerator. On December 31, 2019 she emailed about a toilet problem. Mr. Rossi dealt with these problems.
[13] On November 24, 2017 the two discussed Ms. Mao’s purchasing the whole Unit with a down payment of $100,000 and financing the remainder of the purchase price with a vendor-take-back mortgage. In January, 2018 the two discussed another version of the same idea. Neither of these discussions lead to an agreement. On January 22, 2018 Mr. Rossi emailed Ms. Mao stating that “I consider these conversations concluded. I’d appreciate if in future you contact me only regarding our tenant/landlord relationship, preferably by email.”
[14] Mr. Rossi remarried another woman on March 10, 2017. They live in an apartment in Mississauga. They decided to move downtown. On or about February 22, 2020 Mr. Rossi served Ms. Mao with a Notice to End your Tenancy (Form N12). The notice stated that the reason for the notice was that the landlord, Mr. Rossi, and his spouse intended to move into the Unit and occupy it for at least one year. The notice did not specify that a sale had taken place. The notice required vacancy on April 30, 2020.
[15] In mid-March, 2020 the Ontario Government halted residential tenancy evictions due to the COVID-19 pandemic until further notice.
[16] On March 30, 2020 with the assistance of lawyer Richard Worsfold, Ms. Mao wrote Mr. Rossi a letter. The letter stated that it was written “without prejudice” in order to encourage open discussion. Ms. Mao asserted in the letter that “I am an owner of this property, not a tenant.” She then made a proposal for the purchase of the Unit. One of the proposed terms was that the parties “recognize and document” the agreement whereby Mr. Rossi holds the Unit in trust for Ms. Mao. At the end of the letter, she gave Mr. Rossi five days to respond failing which she threatened to retain her lawyer which she said would lead to increased cost for both. The letter was sent to Mr. Rossi’s personal email account. He did not see it.
[17] On April 8, 2020 Ms. Mao commenced this action claiming a declaration of a constructive trust in the Unit and a certificate of pending litigation. On April 17, 2020 she moved ex parte before Master Graham for a certificate of pending litigation claiming that Mr. Rossi’s failure to respond to the March 30, 2020 letter made her concerned that he was selling the Unit. Ms. Mao had Mr. Rossi’s cellphone number and email address. She used neither to alert him. The order was granted.
[18] Mr. Worsfold emailed Mr. Rossi copies of the Amended Statement of Claim, the motion record and the order of Master Graham by letter dated April 22, 2020. Mr. Rossi did not see this either. Finally, on April 29, 2020 Mr. Worsfold telephoned Mr. Rossi, and he learned about the proceedings.
Issues
[19] Having reviewed the motion material and heard submissions, I conclude that the following issues to be addressed:
a) Should the ex parte motion have been brought without notice? b) Did Ms. Mao make full and fair disclosure on her ex parte motion? c) Has Ms. Mao established a reasonable claim to an interest in the Unit? d) Did Ms. Mao prosecute this motion with reasonable diligence?
Analysis
a) Should the ex parte motion have been brought without notice?
[20] Rule 42.01(3) of the Rules of Civil Procedure allows motions for certificates of pending litigation to be brought without notice. But it is well established that ex parte motions should be avoided unless there is such urgency that the notice cannot practically be given or there is a real risk that, if notice is given, the defendant would act in such a way so as to defeat the plaintiff’s rights; see United States of America v. Friedland, [1996] O.J. No 4399 at paragraphs 159 and 160. The onus to prove this urgency and this risk rests on the moving party in the ex parte motion.
[21] In this case, Ms. Mao’s affidavit in her ex parte motion gave one reason for moving without notice. She stated in paragraph 29 of her affidavit that Mr. Rossi’s lack of response to Ms. Mao’s March 30, 2020 letter caused her “to be concerned that he may transfer title to this property to a third party without notice to me.”
[22] The evidence on this motion shows that there was no reasonable basis for this statement and that Ms. Mao did not meet her onus as described above. The N12 Notice from Mr. Rossi that she referred in her affidavit (but did not produce) in fact stated that Mr. Rossi and his spouse intend to move into the Unit and occupy it for at least a year. Ms. Mao did not disclose that fact in her affidavit. Mr. Van Sickle confirmed that a landlord is bound by this statement in an N12 notice at law, a proposition that was not opposed.
[23] There were other facts that Ms. Mao did not highlight in her ex parte motion. There was the fact (not mentioned at all in Ms. Mao’s affidavit) that the Ontario Government had halted residential tenancy evictions in mid-March, 2020 due to the COVID 19 pandemic. There was also the fact that Ms. Mao’s March 30, 2020 letter contained no demand that Mr. Rossi confirm he was not selling the Unit. Without such a demand in the letter, Mr. Rossi’s non-response would have led a reasonable person simply to make further inquiries of Mr. Rossi about the proposal in the letter, nothing more. Finally, I note that Ms. Mao had Mr. Rossi’s cellphone number, one that she used regularly, and could have called him up verbally at any time to make such follow-up inquiries. She chose not to do so. She did not include those facts in her ex parte motion material.
[24] I find that the motion should have been brought on notice.
b) Did Ms. Mao make full and fair disclosure on her ex parte motion?
[25] Rule 39.01(6) of the Rules of Civil Procedure states that “where a motion . . . is made without notice, the moving party . . . must make full and fair disclosure of all material facts, and failure to do so is itself sufficient ground for setting aside any order obtained on the motion . . .”
[26] Courts vigorously enforce this rule as a check on the conduct of the moving party. In the leading case of Chitel v. Rothbart, (1982) 39 O.R. (2d) 513 (Ont. C.A.) at page 11, the Court of Appeal in referring to an ex parte interim injunction, stated that, “the plaintiff must, in securing an ex parte interim injunction, make full and frank disclosure of the relevant facts, including facts that make plain the position of the defendant if known to the plaintiff. If there is less than this full and accurate disclosure in a material way or if there is a material misleading of the court on material facts in the original application, the court will not exercise its discretion in favour of the plaintiff and continue the injunction.”
[27] In Friedland, op. cit., paragraph 175, Justice Sharpe, referring to an ex parte Mareva injuction stated that, “[where] there has been material nondisclosure or misstatement, the injunction must be set aside as a matter of right, without regard to whether the injunction might be sustainable on the basis of a corrected record, and a litigant who fails to make full and frank disclosure forfeits whatever right it may have had to the Mareva injunction.”
[28] These principles have been applied consistently to ex parte motions for certificates of pending litigation. In Goldberg v. Galluzzo, [2019] O.J. No. 2936 (ONSC) Master Brott set aside an order granting a certificate of pending litigation stating in paragraph 18, that “a CPL will be discharged where there has been serious non-disclosure, even if the plaintiff may otherwise have been entitled to a Certificate.” In discussing what “material” nondisclosure means in the context of an ex parte motion for a certificate of pending litigation, Justice Kerr in 790668 Ontario Inc. v. D’Andrea, [2003] O.J. No. 741 (ONSC) stated in paragraph 31 that “the test is whether the omitted (or misstated) fact would have made the order doubtful.” He also reiterated in paragraph 30 that such nondisclosure is itself enough reason to set aside the certificate.
[29] In the motion before me I have reached the conclusion that there was such serious nondisclosure by Ms. Mao in her ex parte motion.
[30] First, and most importantly, Ms. Mao failed to disclose that she and Mr. Rossi signed a document in December, 2014 called a “Residential Tenancy Agreement.” In this agreement Ms. Mao is expressly described as the tenant and Mr. Rossi the landlord. Ms. Mao initialed three pages of this agreement. Her $1,700 monthly payments to Mr. Rossi in this agreement are called “rent.” The term is stated to be a yearly one starting in September, 2014.
[31] In her responding affidavit in this motion, Ms. Mao admits to this “Lease Agreement,” but asserts that it was essentially a sham document prepared to satisfy the condominium’s concerns about her status “if needed.” In fact, there were emails from Ms. Mao to Mr. Rossi which show that she was the one pressing for the lease agreement. She wanted the security of a lease. On December 16, 2014 she emailed Mr. Rossi stating, “there should be a penalty for ur late agreement.”
[32] This lease agreement provides compelling corroboration for Mr. Rossi’s position that Ms. Mao was in fact his tenant from at minimal September, 2014 and remains one. The evidence on this motion shows that the trust alleged by Ms. Mao is not documented by any formal trust document. Indeed, there is no mention of a trust relationship between the parties in any of the documents that predate Ms. Mao’s letter to Mr. Rossi dated March 30, 2020. That means that the only document that looks like a legally enforceable agreement between the parties is a lease, not a trust. None of this was put before Master Graham.
[33] Second, and almost as important as the first, is the fact that Ms. Mao misled Master Graham on this point. In paragraph 23 of her affidavit in the ex parte motion, Ms. Mao stated that Mr. Rossi “has asserted that we now have a landlord and tenant relationship. I never accepted that and we never signed a lease ” (my emphasis). Ms. Mao now admits that in fact there was a lease agreement concerning the Unit. This is an egregious misrepresentation of the material facts.
[34] Third, there was the email that Ms. Mao sent to Mr. Rossi on July 11, 2014, five months before the lease agreement was signed, wherein Ms. Mao states the following: “ This is a rental now , I don’t supposed to cover whole unit expenses, Right? By the way, I should take back the interest $220/month I have paid to u in the past months, I shouldn’t pay that interest since it is not my property ” (my emphasis). Ms. Mao asserted throughout her affidavit in her ex parte motion that the Unit really belonged to her and that Mr. Rossi was holding the Unit in trust for her. This July 11, 2014 email from Ms. Mao directly contradicts that position and corroborates Mr. Rossi’s position. In this email Ms. Mao admits that the Unit does not belong to her and that she occupies it only as a tenant. This email was not put to Master Graham.
[35] Fourth, there were the emails that Mr. Rossi sent to the condominium manager on September 25 and 28, 2015, copied to Ms. Mao, which described “Lena Mao’s status” as being that of a tenant of over two years. This was also not put before Master Graham.
[36] Fifth, there are the many emails that Ms. Mao sent to Mr. Rossi from 2015 to 2019 demanding that he perform Unit repairs, all of which he did. This is not the conduct of a person who owns the Unit. It is the conduct of a tenant demanding that the landlord repair the property that he owns and that she occupies. None of these were put before Master Graham.
[37] Sixth, as noted above, Ms. Mao did not put the actual N12 notice before Master Graham. The N12 notice expressly states that Mr. Rossi, the landlord, and his spouse intend to move into the Unit and occupy it for at least a year. The notice document has a separate option for another reason to require vacancy, namely to have a purchaser of the Unit occupy it. That was not filled out by Mr. Rossi. What this notice shows is that Mr. Rossi was acting as a landlord in giving a formal eviction notice and that he was not selling the Unit. This corroborates Mr. Rossi’s position and undermines Ms. Mao’s alleged concern about a sale of the Unit.
[38] Seventh, Ms. Mao stated in her ex parte affidavit that her $1,700 monthly payments covered the common expenses, mortgage costs and property taxes, and that thus “the defendant’s equity in the property has been diminishing.” This was not accurate. Ms. Mao did not refer to Mr. Rossi’s down-payment loan costs which formed a significant part of Mr. Rossi’s running costs and which he paid out of his own pocket. These costs were shown on the spreadsheets Mr. Rossi shared with Ms. Mao in 2013. Furthermore, the spreadsheets, which were purchase plans, showed the monthly running costs of the plans as being consistently above $1,700. Also Ms. Mao did not disclose that Mr. Rossi paid the entirety of the carrying costs for the first three months of his ownership of the Unit in 2013.
[39] Had these omissions and misleading statements not been made, in my view, it is doubtful Master Graham would have given his order. Had the Master been aware of the lease agreement between the parties, Ms. Mao’s desire to have the lease agreement, her email confirmation of the rental arrangement between the parties, and her email admission that she did not own the Unit, the ex parte motion would probably have gone in a different direction.
[40] In the ex parte motion Ms. Mao relied heavily on the many discussions that parties had about Ms. Mao purchasing the Unit from Mr. Rossi on favorable terms. These discussions occurred in 2013, 2014, 2017 and 2018. Placed against the backdrop of the underlying tenancy, these discussions appear to be nothing more than what a landlord would discuss with a tenant of limited means with whom he has had a longstanding romantic relationship and to whom he is considering selling the Unit on favorable terms as a result. There is no evidence that any of these discussions resulted in a binding agreement that the parties acted on. This is Mr. Rossi’ version of the events. The evidence shows that Mr. Rossi in fact brought these discussions to an end in January, 2018 and decided to move into the Unit in early 2020 exercising his legitimate rights as a landlord to do so.
[41] Indeed, I have also concluded that had these omissions and misleading statements not been made, Master Graham would probably have insisted that the motion be brought on notice, at a minimum. There has indeed been an abuse of the ex parte motion process.
[42] As a result, due to Ms. Mao’s gross lack of full and fair disclosure at the ex parte motion, I have decided to grant the motion, set aside the order of Master Graham, and discharge the certificate of pending litigation.
c) Has Ms. Mao established a reasonable claim to an interest in the Unit?
[43] The question of whether Ms. Mao has established a triable issue for a claim to an interest in the Unit came up in argument but was not dwelt upon. In addition to the factual issues already discussed, Mr. Van Sickle raised the argument that the alleged trust pleaded by Ms. Mao in the statement of claim is not legally enforceable. He argued that there cannot be an oral trust agreement concerning land pursuant to the Statute of Frauds. He also argued that the usual way to avoid the requirement in the Statute of Frauds for written agreements concerning land is to prove part performance. He pointed out that part performance requires proof of consideration flowing to Mr. Rossi in the alleged agreement, and that there was no evidence of such consideration in this case.
[44] Because of my conclusion about Ms. Mao’s lack of full and fair disclosure, I do not have make a formal finding on this point and I will not do so. I will say though that as a purely factual matter, the reasonableness of Ms. Mao’s claim to an interest in the Unit was put in serious doubt by the signed lease agreement and her email admissions that “this is a rental now” and that she did not own the Unit. That is why I find that there would probably would have been a different result in the ex parte motion had this come out at that time.
d) Did Ms. Mao prosecute this motion with reasonable diligence?
[45] Section 103(6)(a)(iii) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) states that a court may discharge a certificate of pending litigation where the party at whose instance the certificate was issued “does not prosecute the proceeding with reasonable diligence.”
[46] This motion was originally scheduled by me on July 30, 2020 to take place on November 25, 2020. Ms. Mao caused this motion schedule to be adjourned. On October 16, 2020 Mr. Worsfold, Ms. Mao’s lawyer at the time, emailed Mr. Van Sickle advising that Ms. Mao was under doctor’s orders to stay at home until November 2, 2020. Mr. Worsfold was replaced in early November, 2020 by Mr. Werbowyj. This all led to a teleconference with me on November 16, 2020 at which time I rescheduled the motion to take place on March 5, 2021.
[47] During the argument on November 16, 2020 Mr. Werbowyj advised that he believed there was a doctor’s note in Mr. Worsfold’s file substantiating Ms. Mao’s medical issues at that time. On March 5, 2021 Mr. Van Sickle argued that he had never been provided with a copy of that note and that therefore there is an issue as to whether Ms. Mao was just delaying this motion.
[48] Again, because of my conclusion about Ms. Mao’s lack of full and fair disclosure, I do not have to make a finding on this point and do not do so. Furthermore, I note that I did not order the production of the doctor’s note. Finally, I note that I ordered costs thrown away in favour of Mr. Rossi due in part to Ms. Mao’s failure to corroborate her medical condition. Therefore, I consider this issue moot in any event.
Conclusion
[49] For the reasons stated above, I grant the motion, set aside the order of Master Graham dated April 17, 2020 and discharge the certificate of pending litigation.
[50] As to costs, both sides uploaded costs outlines on March 9, 2021 as ordered. The costs outline of Mr. Rossi showed a total of $30,742.42 in partial indemnity costs, $45,103.32 in substantial indemnity costs and $50,847.68 in full indemnity costs. The costs outline of Ms. Mao showed a total of $9,898.64 in partial indemnity costs and $13,358.70 in substantial indemnity costs.
[51] If the parties cannot agree on costs, Mr. Rossi must electronically deliver written costs submissions of no more than two pages on or before March 22, 2021. Ms. Mao must electronically deliver responding written costs submissions of no more than two pages on or before March 29, 2021. Mr. Rossi must deliver reply written costs submissions of no more than one page on or before March 31, 2021.
DATE: March 15, 2021
MASTER C. WIEBE