Court File and Parties

COURT FILE NO.: CV-17-588314

MOTION HEARD: 20210330

REASONS RELEASED: 20210620

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

RJM56 HOLDINGS INC. and 2589841 ONTARIO INC.

Plaintiffs

• and-

TREEMART FARMS INC., NEAR NORTH FAMILY CAMP GROUND LTD., ROBERT DAVID MCDERMOTT, KIRIT SHAH, REAL ESTATE EXCHANGE LTD., ROBERT DECAIRE, THOMPSON REAL ESTATE LTD., GEETABEN SHAH and 10305731 CANADA INC.

Defendants

BEFORE: MASTER M.P. McGRAW

COUNSEL: C. Wallis E-mail: cwallis@wallis-law.com -for the Defendant 10305731 Canada Inc.

C. Wetmore E-mail: cwetmore@srglegal.com -for the Plaintiffs

REASONS RELEASED: June 20, 2021

Reasons For Endorsement

I. Introduction

[1] This is a motion by the Defendant 10305731 Canada Inc. (“103”) to discharge the Certificate of Pending Litigation (“CPL”) registered against 700 acres of land located in Machar Township near Parry Sound (the “Property”). The Property was sold to 103 under power of sale while concurrently being sold by the Defendant owner/mortgagor Treemart Farms Inc. (“Treemart”) to the Plaintiff RJM56 Holdings Inc. (“RJM”). The sale to 103 closed, the sale to RJM did not and the Plaintiffs commenced this action and obtained the CPL.

II. Background

[2] At the time of the sales, Treemart was the registered owner of the Property and the mortgagor under two mortgages registered against the Property (the “Mortgages”). The First Mortgage in the principal amount of $30,000 with interest at 12% per annum was registered on April 16, 2009. The Second Mortgage in the principal amount of $30,000 with interest at 13% per annum was registered on March 12, 2010. The Defendant Geetaben Shah (“Geetaben”) was one of three mortgagees under the First Mortgage (the “Mortgagees”) and the sole mortgagee under the Second Mortgage.

[3] Geetaben’s husband is the Defendant Kirit Shah (“Kirit”). As set out below, Kirit played numerous central roles in the events leading to this action including acting as agent for Geetaben and the other Mortgagees. It is not disputed that Geetaben does not speak or read English beyond some basic words and is inexperienced with mortgages and commercial matters.

[4] As a result of alleged defaults by Treemart under the Mortgages, on October 12, 2016, Kirit prepared a Notice of Sale on behalf of Geetaben and the other mortgagees claiming $444,125.51 including $384,125 in interest, penalties, fees and charges (the “Notice of Sale”) based on his own calculations. On December 7, 2016, the Property was listed for sale under power of sale with the Defendant Robert Decaire (“Robert”), a real estate agent in the Parry Sound area through the Defendant Coldwell Banker Thompson Real Estate Ltd. (“TREL”). When this listing expired in March 2017, Robert listed the Property on behalf of Treemart through Robert David McDermott (“David”) a purported principal of Treemart who has since passed away. Robert’s evidence is that Kirit knew that Robert was listing the Property for sale by Treemart through David, had no objection and advised him that Kirit would remain arm’s length and refer potential buyers to Robert. On May 31, 2017, the Property was also listed under power of sale with Kirit through the Defendant Real Estate Exchange Ltd. (“REEL”) with disclosure that he was a non-arm’s length party.

[5] In late June 2017, Neal McCarthy (“Neal”), agent for the Plaintiffs, contacted Kirit to discuss a potential purchase of the Property. Neal’s evidence is that Kirit advised him that he could either deal with Kirit or Robert. Neal attended the Property and observed that Robert’s signs were posted. On July 4, 2017, RJM, a holding corporation, made an offer to purchase the Property for $150,000 through Kirit to the Mortgagees. The Mortgagees made a same-day counter-offer of $215,000 which RJM rejected.

[6] Neal claims that he was not satisfied working through Kirit due to numerous errors he made in the transaction documentation. Therefore, Neal contacted Robert who advised that he had authority to deal with the Property together with an additional 500-acre parcel (owned by Treemart and the Defendant Near North Family Camp Ground Ltd. (“Near North”)) which the Plaintiffs were also interested in purchasing. Kirit’s evidence is that he does not recall any of these discussions. Neal’s evidence is that both Kirit and Robert were open about the fact that they were both selling the Property.

[7] On July 6, 2017, 103, with Kirit acting as its agent, offered to purchase the Property for $180,000 which was accepted by the Mortgagees (the “103 Sale”). 103 waived its conditions and the 103 Sale closed on July 31, 2017.

[8] Meanwhile, on July 7, 2017, Neal, on behalf of RJM, made an offer to purchase the Property for $182,000 through Robert to Treemart with David as Vendor, with conditions and a closing date of August 15, 2017, which was accepted on July 14, 2021 (the “RJM Sale”). On August 11, 2017, RJM waived its lawyer’s approval condition and requested a new closing date. By letter dated September 19, 2017, Treemart’s counsel advised that Treemart was agreeable to proceeding with the RJM Sale and sale of the additional 500 acres, proposing a closing date of October 5, 2017. However, on September 26, 2017, Treemart’s counsel advised that he had just learned about the 103 Sale and the RJM Sale did not close. Robert’s evidence is that he advised Kirit about the RJM Sale at the offer stage and during the legal review of the transaction. Kirit’s evidence is that he does not remember if he had any such discussions. David passed away on February 10, 2019.

[9] The Plaintiffs commenced this action on December 13, 2017 and brought an ex parte motion for the CPL on December 14, 2017. By Order dated December 14, 2017, Master Jolley granted the CPL. In their Amended Statement of Claim issued on January 18, 2019, the Plaintiffs claim as against Near North, David, Geetaben and 103, among other things, specific performance of the Agreement of Purchase and Sale between RJM and David as Vendor dated July 7, 2017 with respect to the RJM Sale and Judgment setting aside the 103 Sale. The Plaintiffs also claim damages and punitive damages of $5,000,000 as against Kirit, REEL and TREL and $5,000,000 in general damages against Robert only and allege that Geetaben or Kirit prepared a false Notice of Sale and that the 103 Sale is a fraudulent transfer.

[10] The parties first appeared before me for a telephone case conference on September 17, 2018, scheduling this discharge motion for December 18, 2018. However, it was adjourned at a subsequent telephone case conference on October 11, 2018 as the parties agreed to complete examinations for discovery. The motion was adjourned to February 15, 2019 and then again to June 14, 2019, but did not proceed. On September 19, 2019, I heard a motion by the Plaintiffs to compel Kirit and Geetaben to answer refusals which was largely resolved by case management and directions. This matter did not come back before me again until a telephone case conference on October 26, 2020 to schedule today’s motion.

III. The Law and Analysis

CPL Motions Generally

[11] The court’s jurisdiction to grant leave to issue a CPL is set out in section 103 of the Courts of Justice Act (Ontario). Master Glustein (as he then was) summarized the factors which the court must consider on a CPL motion 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).”

[12] The court must first determine if there is a triable issue with respect to the Plaintiffs’ claim to an interest in the Property which would support the granting of a CPL (Saggi v. Grillone, 2020 ONSC 4140 at paras. 31, 55 and 67; Zhao v. 8657181, 2020 ONSC 2864 at paras. 9 and 11; G.P.I. Greenfield at para. 20; Saggi at para. 67; Boal v. International Capital Management Inc., [2018] O.J. No. 1954 at para. 64). The “triable issue” threshold has been described as whether the remedy sought by the plaintiff, here, specific performance, is a possible remedy at trial or one which may be available to the plaintiff at trial (Sun Rise Elephant Property Investment Corporation v. Luu, 2018 ONSC 5247 at paras. 10-11). The party opposing the CPL bears the onus to show that there is no triable issue (Boal at para. 64).

[13] It is not the court’s role to determine whether the plaintiff’s claim will likely succeed at trial (HarbourEdge Mortgage Investment Corp. v. Timbercreek Mortgage Investment Corp. (Trustee of), [2016] O.J. No. 265 at para. 56; Sun Rise at para. 10). In determining if there is a triable issue, the evidentiary bar is low and the court is not to assess credibility or decide disputed issues of fact (Huntjens v. Obradovic, 2019 ONSC 4343; Sunrise at para. 10; Saggi at paras. 45 and 62; Bains v. Katri, 2019 ONSC 1401 at para. 36). Rather, the court must examine the whole of the evidence and, without deciding disputed issues of fact and credibility, consider whether the plaintiff’s case constitutes a reasonable claim to the interest in land claimed in the action (Huntjens at para. 21; Boal at para. 64).

[14] A triable issue as to a reasonable interest in land is a gateway requirement for a CPL (Sun Rise at para. 12). If this threshold is met, the court must then consider whether it is just and equitable based on all of the circumstances to exercise its discretion to grant or maintain a CPL by considering and balancing the equities including the list of factors set out in 572383 Ontario Inc. v. Dhunna, [1987] O.J. No. 1073 (Sun Rise at para. 12; Tribecca Development Corp. v. Danieli, 2015 ONSC 7638; Huntjens at para. 48).

[15] For the reasons set out below, I decline to exercise my discretion to discharge the CPL. There is a triable issue with respect to whether the Plaintiffs have a reasonable claim to an interest in the Property and it is just and equitable in all of the circumstances to maintain the CPL. Further, I am not satisfied that there was any material non-disclosure on the ex parte motion to obtain the CPL.

There Is A Triable Issue

[16] In my view, 103 has not discharged its onus to demonstrate that there is no triable issue with respect to whether the Plaintiffs have a reasonable claim to an interest in the Property. I am satisfied that the remedy of specific performance may be available to the Plaintiffs at trial.

[17] Given the circumstances surrounding the concurrent sales and Kirit’s multiple roles as agent for the Mortgagees, spouse of one of the Mortgagees, 103’s agent and listing agent, there are numerous disputed issues which cannot and should not be determined at this stage of the litigation. Accepting 103’s arguments would require me to make numerous findings of disputed material facts and credibility which should be left to the trial Judge to determine on a complete evidentiary record.

[18] There are multiple layers of issues starting with the alleged defects in the Notice of Sale. There are triable issues with respect to the form (including the combining of the Mortgages) and delivery of the Notice of Sale and more prominently, the amounts claimed. The Mortgagees are claiming an aggregate principal amount of $60,000 plus $384,125 in interest, penalties, fees and charges. While these additional amounts are set out in mortgage statements, they were and are disputed by Treemart. There are no provisions in the Mortgages for these amounts which are based on an alleged oral agreement which Kirit claims to have made with the late Gerald McDermott (“Gerald”), Treemart’s principal at the time the Mortgages were signed, who passed away before the RJM Sale. It must also be determined whether the additional amounts contravene the Interest Act (Ontario) as the Plaintiffs claim (P.A.R.C.E.L. v. Acquaviva, 2015 ONCA 331).

[19] Kirit’s roles as agent for both the Mortgagees and 103 also raises triable issues with respect to 103’s defence that if the Notice of Sale is defective, it is a bona fide purchaser for value without notice such that the 103 Sale cannot be impeached (Land Titles Act (Ontario), s. 99; Mortgages Act (Ontario), ss. 35-36). To the extent to which Kirit, who prepared the Notice of Sale including the calculations, had actual knowledge of any defects in the Notice of Sale, it may be imputed to 103 (Stanbarr Services Limited v. Metropolis Properties Inc., 2018 ONCA 244 at paras. 26-32). This, together with the Plaintiffs’ fraudulent conveyance claim, is an issue for trial which requires a full evidentiary record and is not properly decided on this motion.

[20] 103 also submits that Treemart had no authority to sell the Property to RJM once the Notice of Sale was issued, that it only had a right of redemption which terminated before the RJM Sale when the Mortgagees accepted 103’s offer (Re Heller-Natofin (Ontario) Ltd. and Gross et al, 1978 1645 (ONSC); Attalia v. Moody, 2017 ONSC 1971 at para. 53; Birchcliffe Core-Habour Inc. v. Pinnock, 2018 ONSC 5805 at para. 70). This ignores the triable issues with respect to the Notice of Sale and Robert’s evidence that Kirit, as agent of the Mortgagees, authorized Robert to sell the Property on behalf of Treemart and that Kirit was aware of the RJM Sale all of which Kirit does not recall and has not contradicted. For similar reasons, there is no basis to 103’s submission that specific performance will not be available to the Plaintiffs at trial because the Mortgages remain in default and the Plaintiffs’ purchase price of $182,000 is insufficient to pay the amounts allegedly owing. 103 also claims that specific performance is not available because Treemart lacked authority given that David was listed as the seller, not Treemart, and David was not an officer or director, Gerald was the sole officer and director and both are deceased. All of these issues require determinations of disputed facts and credibility and are properly decided at trial.

[21] I also do not accept 103’s submission that the Plaintiffs are not entitled to a CPL because the RJM Sale was conditional. 103 relies on 2011582 Ontario Ltd. v. Gino Testa Construction Ltd., [2004] O.J. No. 3047. On the record before me, the correspondence suggests that all conditions had been waived, however, I make no such finding and at the very least, there is a triable issue. Gino Testa is also distinguishable as the court ultimately decided that the defendant would suffer greater prejudice if the CPL remained on title pending trial given its development plans for the property while the plaintiff could be compensated for with costs. There are also limited facts and none explaining why the court concluded that the sale was conditional. 103’s assertion that specific performance is not available because the additional 500 acres is no longer available is also without basis, largely because there is no definitive evidence on the record that this is the case.

The Equities Favour the Plaintiffs

[22] Having considered and balanced the equities, I conclude that it is just and equitable in all of the circumstances for the CPL to remain on title to the Property.

[23] In arriving at this conclusion, I have considered the equities as between the parties including the non-exhaustive list set out in Dhunna: (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; Saggi at para. 28; Sun Rise at paras 12-17; Huntjens at para. 49; Bat-Amy v. Zribi, 2010 ONSC 1272 at paras 21-22). To the extent not covered by the relative harm to the parties, I have also considered the balance of convenience (Bains at para. 37).

[24] 103 made limited submissions with respect the equities. In my view, the only factor which favours 103 is the fact that RJM is a holding company and the Plaintiff 2589841 Ontario Inc. was incorporated solely to take title of the Property. Otherwise, there is no dispute that the Property is unique and although the Plaintiffs are claiming damages I am satisfied that this is a neutral factor given that the primary relief they seek is to set aside the 103 Sale and obtain specific performance of the RJM Sale.

[25] In my view, the most important factor favouring the Plaintiffs is the relative harm and balance of convenience. If the CPL is discharged, 103 would be free to encumber or dispose of the Property before the Plaintiffs’ claims can be determined at trial. At the same time, 103 concedes that it still has no immediate plans to develop the Property and has allowed over 3 years to pass since the CPL was granted. Examinations for discovery have been completed, the parties have committed to moving this action to trial as quickly as possible and any prejudice to 103 can be compensated for with costs.

There Was No Material Non-Disclosure

[26] I also reject 103’s claim that the CPL should be discharged due to the Plaintiffs’ failure to disclose material facts when they obtained the CPL. Although the Plaintiffs served 103 with their motion materials on the night before the motion, 103 did not have sufficient time to respond or arrange for an attendance. Therefore, I am proceeding on the basis that the motion was brought ex parte.

[27] All evidence put before the court on an ex parte CPL motion must be accurate and complete and the failure to disclose any material facts will result in the CPL being discharged (JDM Developments Inc. v. J. Sollar Construction Ltd., [2004] O.J. 4572 at paras. 31 and 43). In making this determination, I must consider whether Master Jolley received an inaccurate and incomplete picture such that she would have probably refused to grant the CPL had all the facts been properly disclosed (JDM Developments at para. 36; Harbour Edge at paras. 71-75). In addition, Rule 39.06(1) provides 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 in itself sufficient ground for setting aside any order obtained on the motion.

[28] In her Endorsement dated December 14, 2017, Master Jolley held as follows:

“The RJM56 plaintiff and the owner of the property Treemart Farms Inc. entered into an agreement of purchase and sale for the property on 14 July 2017. The parties through their lawyers worked toward an October 5 closing until September 26, when the vendor’s lawyer wrote to advise that he had just learned the property had been sold under power of sale on 1 August 2017.

The plaintiff used the services of the defendant Kirit Shah as real estate agent; a subagent of the Caldwell Banker agent noted on the agreement of purchase and sale. Upon investigation the plaintiff learned that the wife of Mr. Shah, Geetaben Shah, was the mortgagee and had sold the property under power of sale. Mr. Shah appears to have acted for his wife as vendor and for the purchaser 10305731. The plaintiffs will argue that this purchaser is fixed with the knowledge of its agent Mr. Shah and that the property was already sold and, as a result, is not a bona fide purchaser for value without notice.”

[29] In my view, there is no basis to conclude that Master Jolley was misled or did not have an accurate picture of the circumstances. While the record has evolved over the 3-plus years since the CPL was granted, Master Jolley was focused on and live to the material issue of Kirit’s roles as agent for the Mortgagees (including his spouse) and 103 and its connection to the Plaintiffs’ assertion that 103 was not a bona fide purchaser for value without notice.

[30] 103’s submission that the Plaintiffs failed to disclose that the RJM Sale was conditional presumes that it was conditional and ignores the reference in Master Jolley’s Endorsement to the parties working towards the extended closing date and the inclusion of the relevant correspondence. I am also not satisfied that the fact that Neal’s affidavit does not expressly refer to the offer and counter-offer on July 4, 2017 would have changed the result particularly since this is set out in the exhibits to Neal’s affidavit. I also reject 103’s submission that the Plaintiffs’ failure to explicitly state that the MLS listing information regarding the 103 Sale was available to the Plaintiffs’ real estate agent was necessary or would have changed the result in all of the circumstances.

III. Disposition and Costs

[31] Order to go dismissing 103’s motion.

[32] 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 to speak to one.

Released: June 20, 2021

Master M.P. McGraw