Court File and Parties
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Divya Jegasundaram and Rupasundar Jegasundaram v. Krish Kumar Vadivale
BEFORE: Justice Dennison
COUNSEL: Amandeep Sidhu, for the Plaintiffs Joshua D.A. Laplante, for the Defendant
HEARD: June 4, 2021
E N D O R S E M E N T
1The plaintiffs and the defendant dispute who is the beneficial owner of 15 Matagami Street in Brampton, Ontario. This dispute has been ongoing since 2018.
2The defendant is the named owner of 15 Matagami Street. The plaintiffs claim that the defendant holds the property in trust for them. There are three mortgages on the property. The second mortgage ("Malhotra mortgage") is in default and Malhotra Holdings ("Malhotra") who holds the Malhotra mortgage wishes to sell the property. Malhotra brought a claim at the Landlord and Tenant Board ("LTB") to have the plaintiffs evicted. The LTB found that the plaintiffs were tenants and ordered their eviction. The plaintiffs appealed and the eviction was stayed pending the appeal to the Divisional Court. Malhotra brought a motion before a single judge of the Divisional Court to have the appeal summarily dismissed that was heard on June 4, 2021, the same day this motion was heard.
3The plaintiffs filed a Statement of Claim on January 3, 2020, in the Superior Court of Justice. The plaintiffs claim they are the beneficial owners of the property. On May 26, 2021, the plaintiffs filed an urgent motion in the Superior Court seeking to change title of 15 Matagami into their names pending the litigation to determine who is the beneficial owner of the property. The plaintiffs submit that this is the only way they can refinance and put the second mortgage in good standing and not be evicted from their property. The title in the property would have to remain in their names until the litigation between the plaintiffs and the defendant is settled, because the plaintiffs plan to refinance all three mortgages into one new mortgage.
4There are several issues the court must determine on this motion. Should the court:
Set aside the noting of default as it relates to the defendant's counterclaim?
Grant an order vesting title of 15 Matagami Street to the plaintiffs until the litigation in Superior Court is complete?
Issue a Certificate of Pending Litigation ("CPL") against title of the property?
Find that this motion is a collateral attack on the LTB's decision to evict the plaintiffs?
Background Facts
Purchase of 15 Matagami Street
5On April 25, 2015, the plaintiff, Divya Jegasundaram ("Divya"), entered into an agreement of purchase and sale for 15 Matagami Street, Brampton, for $785,000.00. The agreement was in her name only and did not include her husband, Rupasundar Jegasundaram ("Sandy") because of his credit rating. Divya paid a $5,000.00 deposit.
6Divya was unable to obtain a mortgage for the property, so they turned to the defendant, Krish Kumar Vadivale ("Krish"), who is her cousin.
7On July 7, 2015, the agreement of purchase and sale was amended to name Krish as the purchaser. He is the registered owner of 15 Matagami Street. Divya and Sandy have resided at 15 Matagami Street since it was purchased on July 13, 2015.
8The parties disagree about who paid the down payment. The plaintiffs claim they paid the down payment of $84,800.00. The defendant claims that he contributed $17,800.00 and the plaintiffs paid $67,000.00. In the supplemental motion record, the plaintiffs claim that they paid back the $17,800.00 to the defendant with the proceeds from the Malhotra mortgage.
9The defendant submits that the parties signed an agreement dated July 8, 2015, that neither party followed. For example: they were supposed to be tenants in common, but title was in just the defendant's name; Divya did not pay the defendant $10,000.00 and did not pay for the carrying costs of the property. Divya also failed to allow the property to be shown on the open market. The defendant also states that Divya failed to discharge the first mortgage within 12 months of the purchase as required by paragraph 18 of the agreement.
10The plaintiffs submit that this agreement was altered. The plaintiffs submit that paragraph 5 of the copy they have is different. In the plaintiffs' copy the tenants in common lists Divya as having 100% and Krish as having 0%. In the copy provided by the defendant, it lists Divya as having 8% and Krish as having 92%. The plaintiffs did not retain an executed copy. Divya also stated the initials and signature on the document are not hers. The plaintiffs also submit that the defendant lied at the LTB hearing when he was asked if there were any other agreements because he said he did not know of any other agreements, and he did not present the LTB with this agreement.
11On July 13, 2015, when the house was purchased, a mortgage was granted to Computershare Trust Company of Canada in the amount of $723,456.00 and registered as Instrument No. PR 2746257 ("Computershare mortgage"). That mortgage is in the name of the defendant. The defendant submits that he was and continues to be solely responsible for keeping the Computershare mortgage in good standing.
12To demonstrate that the plaintiffs owned the property they provided the property tax bills up to October 2015, which are in Divya's name. There are no records filed by the plaintiffs that they paid the tax bill. The defendant submits that the fact that the tax bills were originally in Divya's name does not demonstrate that they paid the property taxes. The defendant states that the property tax was paid by the Computershare mortgage. The defendant submits he has paid all of the property tax. The property tax bills are now in the defendant's name.
13The plaintiffs also claim they paid for the home insurance. The defendant submits that the payments came out of a joint account between the defendant and Divya, as demonstrated by the banking records filed by the plaintiffs.
14The defendant does not dispute that he is the named beneficiary under the insurance policy for the property. He submits that is because he bore all the risk in owning the property. The defendant also submits that in April 2019 he switched the payment of the insurance policy to a personal account and has been paying the insurance since then.
Signing of the Lease Agreement
15The plaintiffs claim that on August 6, 2016, the defendant requested that Sandy and Divya execute three lease agreements. The email from the defendant stated that one of the lease agreements was "purely for the financing" and the other two were for tax purposes. The plaintiffs submit this demonstrates the lease agreement was not real.
16Divya and Sandy state that they never paid rent to the defendant because there was no landlord-tenant relationship. The agreements were signed to satisfy the defendant's concerns.
17The defendant submits that around February 2016, Divya asked him for rent receipts for 2015. The defendant said he was confused but nonetheless changed the agreement so that it was a "rent-to-own" tenancy agreement. The plaintiffs would pay $1,500.00 in rent to the defendant and any excess would be held in escrow to be credited towards an eventual purchase of the property. This oral agreement became the lease agreement.
18The defendant submits that there were amendments made to the agreement to correct the amounts the plaintiffs paid to the defendant. These amendments were filed with the court.
19The defendant also submits that he received $1,500.00 per month from the plaintiffs in 2015/2016, albeit sporadically.
The Malhotra Mortgage
20On January 10, 2017, a mortgage was granted to Malhotra in the amount of $168,000.00 and registered as Instrument No. PR3059802 ("Malhotra mortgage"). The mortgage had an 11% interest rate for a one-year term interest only payments with the final interest payment plus principal due on January 10, 2018.
21The net proceeds of the Malhotra mortgage were released to Sandy on January 10, 2017, and a portion was paid to the defendant. The plaintiffs submit they paid back the monies the defendant contributed to the down payment. The defendant submits that $30,000.00 was paid to the defendant to cover rental arrears and a $10,000.00 reserve should the plaintiffs fall into rental arrears again. Two payments of $25,000.00 were made to Sandy, as was the final payment of $80,368.62.
22The plaintiffs state that they paid the Malhotra mortgage of $1,540.00 a month in 2017. They filed banking records to show that they paid 10 out of the 12 payments. The term of the Malhotra mortgage was extended for one year to 2018. The defendant submits that he did not request the extension. The Malhotra Statement of Claim indicates that the last payment on the Malhotra mortgage was on January 10, 2018. The Malhotra mortgage went into default.
Third Mortgage
23The defendant submits that the plaintiffs kept assuring him that they would be able to secure financing to purchase the house. The defendant submits that he fell into arrears on the first mortgage because the plaintiffs were not paying rent regularly.
24On November 17, 2017, the defendant obtained a third mortgage to get the first mortgage back into good standing. A mortgage was granted by 2448822 Ontario Inc. in the amount of $27,500.00 and registered as Instrument No. PR3238362 ("the 244 mortgage").
25The defendant submits that he told the plaintiffs that he had no choice but to list the property because the Malhotra mortgage was in default. He told the plaintiffs that they had until June 30, 2018, to obtain financing or he would list the property for sale.
26On July 18, 2018, the defendant states that Sandy demanded that the defendant sign a backdated trust agreement that would override the oral agreement and rental agreements. The defendant refused to sign it because it did not reflect the true nature of their arrangement.
Defaulting on the Malhotra Mortgage
27The defendant commenced proceedings in the LTB so that he could sell the property. On November 7, 2018, the LTB ordered the plaintiffs to pay rental arrears and cease interfering with the defendant's attempt to sell the property. The LTB declined to order eviction.
28On November 13, 2018, the defendant consented to Malhotra becoming a mortgagee in possession of rental property. The defendant provided Malhotra with the executed lease agreements.
29Malhotra commenced an application in the LTB to terminate the tenancy and evict the plaintiffs. Sandy and Divya had a lawyer by the name of Vikram Dhillon. When the hearing approached, Mr. Dhillon indicated that he could not represent Sandy and Divya at the LTB hearing. Sandy attended the LTB hearing. The plaintiffs submit that none of the documents that they had provided to Mr. Dhillon were before the LTB.
30On August 4, 2020, the LTB ordered the tenancy to be terminated and the plaintiffs to be evicted. The LTB held the following:
The tenants stated that they wanted a determination from the Board that the Board did not have jurisdiction so they could pursue a claim with the Ontario Superior Court of Justice in order to get back the money they paid under the "rent to own or Option to purchase agreement."
Based on the testimonies given by both parties and the documentary evidence or lack of, on the balance of probabilities, I am satisfied that there are two distinct agreements between the parties; one for occupancy and rental of the premises and one for the possibility of purchasing the premises if certain conditions are met. I find the $1,522.50 payment meets the definition of "rent" as defined in s. 2 of the Residential Tenancy Act, 2006. (the "Act"). Therefore, I find that the relationship dealing with the occupancy of the residential premises is one of Landlord/Tenant and is subject to the Residential Tenancies Act, 20016 (the "Act")
I also find that the "rent-to-Own or Option to Purchase["] is a contract that is separate from the "rental agreement" should the option have been exercised, then this would have become a separate offer to buy the residential property.
Any amount of money that the Tenants have paid to the Landlord towards the "rent-to-Own or Option to Purchase" is therefore outside of the Board's purview; any claim by either party should be brought before another forum.
The Appeal to Divisional Court
31The plaintiffs appealed to Divisional Court in September 2020. This resulted in a stay of the Eviction Order pending the appeal. The plaintiffs raised the following grounds of appeal:
i. The LTB failed to consider critical evidence presented by the "tenants".
ii. The "tenants" have an equitable interest and rights in the subject property.
iii. The property is in Krish Kumar Vadivale's name only. He made no payments towards the property.
iv. The LTB unreasonably refused the "tenants'" adjournment request.
32The appeal was delayed repeatedly at Divisional Court. The plaintiffs failed to make all the monthly payments of $1,500.00 as ordered by the LTB. Malhotra sought to bring a motion to quash the appeal for delay. Ultimately, on March 11, 2021, Corbett J. ordered Mr. Dhillon to report himself to the Law Society of Ontario and report a potential claim to LawPRO for his failure to perfect the appeal. In his reasons, Corbett J. noted that the legal title holder has been keeping up the first mortgage and that the appellants ("beneficial claimants"), who occupy the property and claim that they are not tenants but equitable owners of the property, have not taken any steps to pursue their claims. The relevant portions of Corbett J.'s reasons include the following:
The LTB found that there is a tenancy agreement under which the Beneficial Claimants are required to pay monthly rent of $1,500. The LTB also found it has jurisdiction over this tenancy, which is residential in nature. The LTB made no finding as to whether there is another agreement between Legal owner and Beneficial Claimant under which the Beneficial Claimant makes addition payments and may have equitable rights to purchase the property from legal order. The LTB found that it has no jurisdiction in respect of this other alleged agreement.
The core allegation in this appeal is that the LBT erred in finding a tenancy, that there is but one agreement between Legal Owner and Beneficial Claimants, which is a "rent to own" agreement given the Equitable Claimants an equitable interest in the property.
The second mortgagee just wishes to be paid out of the second mortgage
The second mortgagee says that it has done what it needs to do to exercise its security under the Mortgages Act. As persons claiming an equitable interest in the property, the Beneficial Claimants have commenced proceedings against Legal Owner in respect to their claims but have not taken any steps pursuant to the Mortgages Act to redeem the second mortgage or to challenge Malhotra's exercise of its rights as a second mortgagee in possession. As a beneficial owner of the property, it does not appear that Beneficial Claimants have any legal basis to continue to occupy the property in frustration of Malhotra's rights.
The alleged tenancy agreement- if it created a residential tenancy- affords the Beneficial Claimants a higher right to occupy the property that they would have a[s] mere equitable claimants standing behind Malhotra's registered mortgage. Malhotra, recognizing the higher right to occupy the premises created by a tenancy agreement, took the steps required of it to terminate the tenancy before the LTB. The Beneficial Claimant's position that there is no tenancy-could be a basis for setting aside an eviction order premised on the existence of a residential tenancy but would not create some basis on which the Beneficial Claimants would be entitled to stay in possession.
33A further case management meeting was held before Corbett J. on April 29, 2021. During that case management meeting, the appellant stated that she wanted to redeem the mortgage. Corbett J. recognized that as a practical matter so long as there is a dispute over ownership, the appellant may be restricted from paying out the second mortgage. Corbett J. further held the situation with the defaulted mortgage has "continued to exist for a very long time" and therefore the matter needed to move forward.
Superior Court Proceedings
34On January 3, 2020, the plaintiffs commenced a claim seeking a declaration that they own 100% of the equitable interest in 15 Matagami Street, as well as a CPL and an estoppel order barring the defendants and Malhotra from filing for eviction.
35On February 5, 2020, the defendant filed his Statement of Defence and Counterclaim.
36As a courtesy, the defendant's counsel contacted the plaintiffs' counsel, Mr. Dhillon, to remind him of the passed deadline. Mr. Dhillon requested an extension to March 2, 2020. This was subsequently extended again to March 9, 2020. The defendant's counsel advised that if the material were not filed by that date, the plaintiffs would be noted in default without further delay.
37The plaintiffs were noted in default on the Counterclaim on March 11, 2020.
38The plaintiffs state that they did not know that their lawyer Mr. Dhillon had failed to file a Defence to the Counterclaim and did not know that they were noted in default until May 21, 2021. In support of this argument, they filed a letter from Mr. Dhillon dated March 26, 2021, in which he advised the plaintiffs that he could no longer represent them. In that letter, Mr. Dhillon advised that he had issued a Statement of Claim and the action has been defended and "there is no [sic] immediate procedural deadlines pending."
39Nothing was done to move the litigation forward in the Superior Court of Justice until the plaintiffs brought this urgent motion on May 26, 2021.
Refinancing
40Divya and Sandy seek to refinance the three mortgages so that they will not be evicted. They received a mortgage commitment from Oppono. The mortgage is for $1,275,000.00 for one year. The terms in the mortgage note that $600,000.00 is to be paid to the first mortgage, $300,000.00 is to be paid to the second mortgage and $100,000.00 paid to the third mortgage. The terms of the mortgage state that the solicitor is to hold the three months of mortgage payments totalling $24,620.00 and the remainder owing is to be divided into twelve monthly payments of $6,155.15. Counsel for the plaintiffs indicated that the mortgage was prepared for the first year. That does not appear to be the case based on the documents filed with the court. Regardless it is a significant monthly mortgage payment.
41Sandy and Divya cannot refinance the mortgages unless they are on title and the defendant is not willing to change title.
Position of the Parties
42The parties agree that the ownership of the property cannot be determined based on this record and that a trial will be necessary to resolve the many issues in dispute.
The Plaintiffs
43The plaintiffs request that the noting of default of the Counterclaim be set aside. The plaintiffs submit that they were not aware of the Counterclaim until very recently. Their previous lawyer, Mr. Dhillon, had assured them that all required steps were completed. There is no real prejudice to the defendant in setting the noting of default aside in the circumstances.
44The plaintiffs also submit that there is a prima facie case that justifies issuing a preservation order and/or a CPL. The only way the plaintiffs can pay off the Malhotra mortgage is to have the title in the property vested to them. They will then refinance and pay off all three outstanding mortgages. There will then be one mortgage in the plaintiffs' name. This mortgage is prepaid or partially prepared for the year. The trial should be expedited and that way there would be no concerns about the plaintiffs defaulting on the new mortgage pending the trial.
45The plaintiffs submit that they are the beneficial owners of 15 Matagami Street, and that the defendant is only a bare trustee. They submit that they have paid for the upkeep, mortgage payments, property tax and insurance. In support of their position that they are the beneficial owners they rely on the following:
i. The plaintiffs paid the majority of the down payment of the property;
ii. The tax property documents up to October 2015 list the plaintiffs as the owners.
iii. The plaintiffs received the majority of the cash from the Malhotra mortgage.
iv. The money that was paid to the defendant from the Malhotra mortgage was to pay the defendant back for the down payment he contributed to the property.
v. The email from the defendant dated August 4, 2016, contains three leases. The defendant states that "one is purely for financing". The others were "for tax purposes".
vi. The insurance payments came from Divya and Sandy's bank account. (The banking records are actually in Divya's and Krish's names).
vii. Email from the defendant to the plaintiffs dated July 7, 2015, that talks about the insurance and states that if he dies it does not really impact the payments "since I'm not the one paying for the mortgage."
viii. Email from the defendant dated January 8, 2018, that is titled "mortgage reconciliation", in which the defendant states "if you can fit in the payment with this month's mortgage payment it would go a long way."
The Defendant
46The defendant raises two preliminary issues. First, the defendant submits that until the noting in default is set aside, the court should not hear the motion. Second, the defendant submits that the plaintiffs have split their case. Their reply contains allegations that the defendant created a false document and lied in previous testimony. Because this evidence was presented in reply, the defendant has no opportunity to respond. The defendant asks the court to strike paragraphs 14, 16, 17, 33, 55 and 58 in the reply affidavit.
47It is the defendant's position that he is the beneficial owner of the property. In this initial agreement the plaintiffs were to buy out the defendant within a year. The plaintiffs were unable to buy out the defendant, so they came to a rental agreement where the plaintiffs would rent-to-own the property.
48The defendant submits that the initial agreement between the parties (the plaintiffs submit that this is not an accurate copy) reflected the initial intention of the parties that the defendant would be at least a co-owner. Ultimately the parties did not follow through with the agreement.
49The defendant submits that even if the plaintiffs had some beneficial interest in the property on the rent-to-own agreement, they exhausted their funds. The plaintiffs contributed $68,000.00 to the down payment of the property. They then took out 130,000.00 from the Malhotra mortgage. They only paid the interest and no principle. There is $300,000.00 owing on the Malhotra mortgage.
50In support of the defendant's argument, that over time the relationship changed from co-owners to that of landlord-tenant in a rent-to-own situation, the defendant relies on the following:
i. Bank records that show the defendant has kept the first mortgage in good standing from 2015 to present. (I note that the plaintiffs filed some bank records attached to an email from the defendant dated January 8, 2018. Those banking records disclose e-transfers from Divya and Sandy to Krish in amounts that are close to the amount paid to the first mortgage. The bank statements showed these amounts were paid from August 2015 to February 2017. After that, there are missing payments in March and April 2017, a partial payment in May 2017, no payment in June 2017, a payment in July 2017 and no payments listed in the bank records after August 2017).
ii. The signed lease agreement dated November 11, 2017. A series of backdated amendments to the lease agreement that reflect the amounts the plaintiffs paid in rent, which was approximately $1,500.00, and an additional approximately $2,000.00 to be held in escrow. The amendments are dated July 13, 2015, July 13, 2016, and September 2016.
iii. The property tax was part of the first mortgage payments, as shown in a letter from Capital Street dated August 16, 2016.
iv. The property bills were changed to list the defendant as the owner, and they were paid by the first mortgage.
v. The defendant is the beneficiary on the insurance policy. If there was any damage to the property, the defendant would be reimbursed. This document shows at the minimum he would be a co-owner.
vi. On November 7, 2018, the LTB ordered the plaintiffs to pay rental arrears and to cease interfering with the defendant's attempts to sell the property. The plaintiffs paid some of the rent.
vii. The defendant submits that the plaintiffs contributed a total of approximately $167,805.52 towards the house through the deposit, the down payment and periodic contributions to home insurance, and the funds that the defendant holds in escrow pursuant to the oral agreement and lease agreement. The cost of discharging the Malhotra mortgage would be significantly in excess of the amount the plaintiffs contributed towards the property.
Analysis
Issue #1: Should the Noting of Default of the Counterclaim be set aside?
51The defendant submits that because the plaintiffs are noted in default on the Counterclaim, they should not be permitted to bring this motion unless the noting in default is set aside pursuant to Rule 19.02(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. I will therefore address this issue first.
52Rule 19.03 states that the noting of default may be set aside by the court on such terms as are just.
53The test for setting aside a noting of default is different from the test for setting aside a default judgment. In considering whether the court should exercise its discretion to set aside a noting of default, the court "should assess the context and factual situation of the case", including the behaviour of the plaintiffs and the defendant, the length of the delay, the reasons for the delay and the complexity and value of the claim, as well as the prejudice to either party. Only in extreme circumstances should the court require a party who has been noted in default to demonstrate an arguable defence on the merits: Intact Insurance Company v. Kisel, 2015 ONCA 205, 125 O.R. (3d) 365, at paras. 12-14, referring to Metropolitan Toronto Condominium Corporation No. 706 v. Bardmore Developments Ltd. (C.A.) (1991), 1991 CanLII 7095 (ON CA), 3 O.R. (3d) 278 (C.A.), at pp. 284-85.
54I am satisfied that in the circumstances it is appropriate to set aside the noting of default of the Counterclaim for the following reasons.
55I recognize that the noting in default took place in March 2020, which was approximately two months after the Statement of Claim was filed. I also agree that the plaintiffs have an obligation to move their litigation forward regardless of what their counsel did. However, in this case, the evidence is that the plaintiffs were not aware of the Counterclaim or the need to respond to the Counterclaim.
56Based on the record, it appears that Mr. Dhillon did not act with diligence on behalf of his clients. Mr. Dhillon's failure to act diligently is demonstrate by the delays in the LTB proceedings and the appeal to the Divisional Court. Mr. Dhillon's misconduct rose to the level where Corbett J. ordered Mr. Dhillon to report himself to the Law Society of Ontario and LawPRO.
57Mr. Dhillon sent a letter to his clients dated March 2021 where he advised the plaintiffs that he could no longer represent them. Mr. Dhillon specifically told the plaintiffs that there were no procedural steps that had to be dealt with in the Superior Court proceedings. That clearly was not the case. Mr. Dhillon should have filed a Defence to the Counterclaim. He did not.
58I am not prepared to impose an outcome that would be extremely detrimental to the plaintiffs solely as a result of counsel's conduct when monetary damages can be awarded: Halton Community Credit Union Ltd. v. ICL Computers Canada (1985), 8 O.A.C. 369 (C.A.); Wittmann Canada Inc. v. Uniglobe (Canada) Inc., 2011 ONSC 822, at para. 13.
59I have also considered that the plaintiffs personally have not moved swiftly in the Superior Court in pursuing their claim. Had they done so they would have learned of the noting in default of the Counterclaim sooner, but it is likely they would still be in the same position, having to request that the noting in default be set aside, given when the matter was noted in default.
60There is also no evidence of any prejudice to the defendant if the noting of default is set aside, other than a delay in collecting on any judgment that may be awarded.
61There is also the risk of inconsistent decisions if judgment is granted on the Counterclaim and the plaintiffs are successful on their Statement of Claim because the issues significantly overlap.
62Given the complexity and nature of the counterclaim and its interconnectedness to the Statement of Claim, it is in the interest of justice that the matters be determined on their merits rather than technical failings. The noting of default of the Counterclaim is therefore set aside.
Issue #2: Should the Court issue an Interlocutory Order that title be vested to the Plaintiffs to allow them to Refinance 15 Matagami Street?
63The plaintiffs seek an Interlocutory Mandatory Order pursuant to Rule 40.01 of the Rules of Civil Procedure and s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
64The test for granting injunctive relief is set out in RJR-MacDonald v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, at p. 334. There are three requirements:
i) there is a serious question to be tried;
ii) the plaintiffs will suffer irreparable harm if the motion is not granted;
iii) the balance of convenience favours the plaintiffs.
i) A Serious Question to be Tried
65The threshold for finding that there is a serious issue to be tried is low. The plaintiffs need to only demonstrate that the matter is not frivolous or vexatious: 2169205 Ontario Inc. v. Ontario (Liquor Control Board) 2010 ONSC 5382, 268 O.A.C. 365 (Div. Ct.), at para. 12.
66The parties agree that there is a serious question to be tried in this case - do the plaintiffs have a beneficial interest in 15 Matagami Street? I agree that there are serious issues to be tried in this case. There are serious disputes between the parties about the agreement the parties had when the property was first purchased and whether that agreement changed over time. There are significant credibility issues that need to be resolved and allegations of false documents that cannot be resolved on this written record.
67The defendant submits that the court should strike the paragraphs of the plaintiffs' reply affidavit that allege that the document is false and accuse the defendant of lying when testifying before the LTB. In raising these issues in reply, as opposed to their initial affidavit, the defendant has no right to respond to these serious allegations. I can only speculate as to why the plaintiffs did not include the agreement in their materials. Regardless, I do not need to determine whether the agreement filed by the defendant was altered. The parties already agreed that there are significant matters in dispute. This is just one more issue. I do not make any adverse credibility findings against the defendant based on the plaintiffs' allegations about fraud or the defendant lying that are set out in the reply affidavit. I have disregarded those paragraphs in deciding this motion.
ii) Irreparable Harm
68Irreparable harm refers to "the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms, or which cannot be cured, usually because one party cannot collect damages from the other": RJR MacDonald, at p. 341.
69Irreparable harm may arise from eviction, but there must be some evidence aside from a bald assertion. For example, in Garside v. Jane Oak Apartments Inc. (1998), 27 O.A.C. 308 (H.C.), the appellant was a single mother with small children who was in arrears but would shortly have more than enough funds to make up the arears owing. The case was described as "very unusual", and the Court of Appeal noted that the eviction of a single mother with small children would be "devastating, rendering her and her family homeless."
70In Hausler v. El Zayat, 2016 ONSC 3370, at paras. 13-18, the Divisional Court refused to stay an eviction order that was issued by the LTB. The LTB had ordered the appellant evicted. He appealed and the landlord brought a motion to quash the appeal. Sachs J. granted the landlord's motion to quash the appeal and lifted the stay of eviction. The appellant then brought an emergency motion at Divisional Court requesting a stay of the eviction. Pattillo J. of the Divisional Court considered the test for a stay and found that the appellant had not demonstrated that there was a serious issue to be tried, as it was found his appeal was void of merit. Pattillo J. also found no evidence of hardship if evicted. The appellant had not paid rent and had known that eviction was a real possibility for approximately 6 months. The appellant had more than enough time to find new accommodations and organize his affairs. The court found that while it may be inconvenient for the appellant to move, it did not rise to the level of irreparable harm.
71In this case, the plaintiffs submit that this order is required because they will be evicted from their home. There is no evidence before me that they will be homeless, particularly given that they qualified for a mortgage that would require monthly payments of $8,200.00.
72I recognize that the plaintiffs have lived in the residence for six years, but there is no evidence that there is a special connection to the home that is unique and cannot be replaced. Monetary damages can resolve the dispute between the parties. The plaintiffs have not demonstrated that they will suffer irreparable harm if they are forced to move out of the property: See for example Peshee v. Tsuu T'ina Nation, 2007 ABCA 211, 412 A.R. 193, at paras. 21-31.
73Moreover, the plaintiffs have been aware of the possibility of eviction at least since the commencement of the first LTB proceedings in November 2018. If the Plaintiffs were not tenants and/or were going to suffer irreparable harm by being evicted one would have thought that they would have taken steps within the past two and a half years to deal with ownership of the property and the refinancing issue. The plaintiffs made no attempts to refinance the property despite obtaining the proceeds of the Malhotra mortgage in January 2017. It was not until January 2020 that the plaintiffs even filed a Statement of Claim in the Superior Court of Justice. The plaintiffs did nothing to move the matter forward until bringing this urgent motion. While I recognize that there were difficulties with Mr. Dhillon, the plaintiffs have to accept responsibility for not pursuing the refinancing issue until the eleventh hour. The plaintiffs' actions are different with respect to the refinancing as compared to the Counterclaim because they have been aware of the refinancing issue for quite some time.
74I also note that it is unlikely that the plaintiffs will be evicted immediately. They will have some time to find a new place to live.
75The plaintiffs have not demonstrated that they will suffer irreparable harm if they are not granted the injunction.
iii) Balance of Inconvenience
76The factors to consider in determining whether to grant interlocutory relief includes the nature of the relief sought and the harm which the parties contend they will suffer.
77The defendant will suffer significant prejudice if the Preservation Order is granted, and the plaintiffs obtain title to the property because the defendant's legal rights will be altered. The plaintiffs are not asking to maintain the status quo pending the litigation. This is not a case where the property will be sold, and the proceeds held in trust until the issue of who is entitled to the proceeds is resolved. The plaintiffs are asking the court to alter the defendant's legal status on the property without having determined that the plaintiffs have a constructive or resulting trust in the property. The plaintiffs have not provided the court with any cases where this has been done on an interlocutory motion.
78The defendant has already suffered prejudice in this matter. While the Malhotra mortgage is in the defendant's name, the plaintiffs defaulted. This impacted the defendant, as he is the sole charger on the mortgage, and reflects on his credit standing.
79The defendant will continue to suffer prejudice if the plaintiffs are permitted to have title and refinance the property. The plaintiffs' proposed refinancing will likely exhaust any equity in the property. The mortgage is $1,275,000.00 for a one-year term. There is also a lender fee of $36,435.00 which will be lost from the equity of the property. If the defendant is successful in the litigation, a vesting order made at this stage of the proceedings may leave him with a paper judgment with no realizable equity in the property to enforce.
80The terms listed in the proposed that $1,000,000.00 be paid out to the three mortgages. The solicitor is to hold 3 months' worth of mortgage payments for a $24,620.00 remainder to be divided into 12 monthly payments for a monthly mortgage payment of $6,155.15. The plaintiffs counsel indicated that the mortgage was prepared for a year. Regardless of whether the mortgage is prepaid for the year or three months it causes prejudice to the defendant because the mortgage encroaches on the equity that has already been built up in the property.
81The plaintiffs submit that the defendant should not be concerned if the plaintiffs maintain the mortgage for another year because the value of the property will only increase. While that it is possible, there is also a real risk that the plaintiffs may default again in paying the mortgage and the defendant may not be able to recover any damages because the mortgage would take precedence over any claim the defendant has in the property because the property would not be in his name. Based on the mortgage documents filed by the plaintiffs, the plaintiffs are required to pay $6,155.15 per month. The plaintiffs previously defaulted on the Malhotra mortgage when the payment was only $1,500.00 a month. As noted by Corbett J., pending the LTB appeal the plaintiffs failed to regularly pay the $1,500.00 per month that the court ordered. Even if counsel is correct and the mortgage is prepaid for the year, if the litigation does not conclude within the year the same concern remains.
82In contrast, if the property is sold, the equity in the property is defined and it can be held in trust pending resolution of the litigation. Proceeding in this fashion limits the significant prejudice that the defendant faces by vesting title to the plaintiffs until this matter is resolved.
83The inconvenience to the plaintiffs is that they will have to vacate the home they have lived in for the past six years.
84The balance of inconvenience does not favour the plaintiffs.
85I am therefore satisfied that this is not an appropriate case to grant the Interlocutory Order sought by the plaintiffs.
Issue #3: Should the Court grant a Certificate of Pending Litigation?
86Registering a CPL on a property is similar to granting injunctive relief because it effectively prevents the owner from selling the property: Grefford v. Fielding (2004), 2004 CanLII 8709 (ON SC), 70 O.R. (3d) 371 (S.C.), at para. 33.
87Neither party really focused on the claim for a CPL during oral submissions. I suspect this is because it does not solve the problem for the plaintiffs. It would just slow down the process of selling the property, which would only drive up the costs associated with the outstanding Malhotra mortgage.
88The granting of a CPL is an equitable remedy. When a motion is made with notice, the courts apply the same criteria when the motion is made to discharge the certificate. The test is set out in s. 103(6) of the Courts of Justice Act as follows:
(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.
89I am satisfied that the plaintiffs have established a reasonable claim to an interest in the property. However, I am not prepared to grant the CPL. I am satisfied that the plaintiffs' claims can be adequately addressed by another form of security. It is appropriate to grant an order that if the property is sold, the proceeds from the property after the mortgages are paid out, are to be held in trust until this claim is resolved.
90I am not satisfied that it is just or equitable the to grant the plaintiffs the CPL for the reasons I have already discussed in declining to vest title to the plaintiffs.
Issue #4: Is this Motion a collateral attack on the LTB's decision?
91While it is not strictly required that I address this issue given my findings that the interlocutory motion and CPL should not be granted, I will nonetheless address the defendant's submissions that this motion is a collateral attack on the LTB proceedings.
92It is first helpful to review briefly what has occurred in the LTB. On November 7, 2018, the LTB found that the tenants had not paid rent and that they were interfering with the sale of the residence. They were ordered to pay rental arrears, or they could be evicted.
93On November 13, 2018, the defendant consented to Malhotra being a mortgagee in possession of a rental property. Essentially Malhotra became the defendant for the purpose of the LTB hearing.
94On February 25, 2020, the LTB heard an application by Malhotra to terminate the tenancy and evict the plaintiffs for failing to pay rent owed and failing to pay rent in a timely fashion.
95On August 5, 2020, the LTB issued an order to terminate the tenancy and evict the plaintiffs. The LTB found that it had jurisdiction to hear the matter despite the plaintiffs alleging that there was a rent-to-own contract. Any monies paid on the option to purchase were outside of the LTB's jurisdiction. The LTB ordered that arrears for rent be paid and the plaintiffs were to move out of the property by August 15, 2020.
96The plaintiffs filed an appeal to the Divisional Court pursuant to s. 210 of the Residential Tenancies Act, 2006, S.O. 2006, c. 17, asking that the order be set aside, dismissed or a new hearing ordered. As previously noted, the grounds of appeal are that i) the LTB failed to consider critical evidence ii) that the plaintiffs have an equitable interest and rights in the property, iii) the property is Krish Kumar Vadivale's name only and he has not made any payments to the property, and iv) the LTB unreasonably denied the plaintiffs' adjournment request.
97A collateral attack is defined as an attack on an order "made in proceedings other than those whose specific object is the reversal, variation, or nullification of the order": Wilson v. The Queen, 1983 CanLII 35 (SCC), [1983] 2 S.C.R. 594, at p. 599. "The rule provides that, with limited exceptions, 'an order issued by a court must be obeyed unless it is set aside in a proceeding taken for that purpose'.": R. v. Irwin, 2020 ONCA 776, at para. 23, citing R. v. Bird, 2019 SCC 7, [2019] 1 S.C.R. 409, at para. 21.
98The purpose of the rule is to prohibit a party from avoiding the consequences of an order issued against it by proceeding in another forum: Irwin, at para. 24.
99In determining whether there is a collateral attack to an order, the court must consider the plaintiffs' legal argument and the object of bringing the legal motion to determine whether it should be properly characterized as a collateral attack: Garland v. Consumers' Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at para. 71; Canada (Attorney General) v. TeleZone Inc., 2010 SCC 62, [2010] 3 S.C.R. 585, at paras. 64-65, 79; and Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 34.
100The motion brought by the plaintiffs is a collateral attack on the order of the LTB that the plaintiffs should be evicted from 15 Matagami Street property. The sole purpose of the motion before this court is to give the plaintiffs title so they can refinance the property and not be evicted. The motion seeks to attack the LTB's order and its legal effect. The plaintiffs seek "to avoid the consequences of the order issued against [them]", which undermines the very purpose of the collateral attack rule: TeleZone, at para. 64, referring to Garland, at para. 72.
101This is a collateral attack because the plaintiffs seek to contest the legal effect of the LTB order. This court is being asked to find that there is a prima facie case that the plaintiffs are the beneficial owners of the property and are not tenants. If the Divisional Court were to uphold the LTB's decision that the plaintiffs are tenants, there would be an inconsistency in the two court rulings that adversely impacts the integrity of the judicial system.
102Having found that the plaintiffs' motion is a collateral attack, the court must then consider whether the legislature intended to permit a collateral attack of an LTB decision or intended that the party must challenge the order through other review mechanisms. There are several factors to consider, including: i) the wording of the statute under which the order was issued, ii) the purpose of the legislation, iii) the existence of a right of appeal, iv) the kind of collateral attack in light of the expertise of the administrative appeal tribunal, and v) the penalty on a conviction for failing to comply with the order: R. v. Consolidated Maybrun Mines Ltd., [1988] 1 S.C.R. 706, at paras. 45-51. These factors are not absolute.
103Subsection 83(2) of the Residential Tenancies Act, 2006 gives the board the power to evict tenants. It reads as follows:
83 (1) Upon an application for an order evicting a tenant, the Board may, despite any other provision of this Act or the tenancy agreement,
(a) refuse to grant the application unless satisfied, having regard to all the circumstances, that it would be unfair to refuse; or
(b) order that the enforcement of the eviction order be postponed for a period of time. 2006, c. 17, s. 83 (1).
104The LTB is empowered to impose conditions that it considers reasonable and necessary to protect the landlords' and the tenants' interests. This suggests that it was intended to be a complete scheme when dealing with landlords and tenants and therefore collateral attacks should not be permitted.
105The purpose of the Act is set out in section 1 as follows:
1 The purposes of this Act are to provide protection for residential tenants from unlawful rent increases and unlawful evictions, to establish a framework for the regulation of residential rents, to balance the rights and responsibilities of residential landlords and tenants and to provide for the adjudication of disputes and for other processes to informally resolve disputes.
106The purpose of "provid[ing] for the adjudication of disputes" weighs against allowing a collateral attack in another forum.
107There is a limited right of appeal. Section 210 provides that "[a]ny person affected by an order of the Board may appeal the order to the Divisional Court within 30 days after being given the order, but only on a question of law." The fact that the appeal is limited to a question of law demonstrates the expertise of the LTB. In addition, the fact that there is a legislated route of appeal weighs against permitting a collateral attack. However, the fact that the appeal to the Superior Court as opposed to a specialized administrative tribunal weighs in favour of permitting a collateral attack.
108Ultimately, after considering the various factors, I am of the view that the purpose of the Act and the appeal mechanisms in place demonstrate that the legislature did not intend to permit collateral attacks on LTB rulings. The plaintiffs have an outstanding appeal at Divisional Court. As explained by the Court of Appeal for Ontario in Irwin, at para. 31, where "the legislature has definitively prescribed a particular appeal mechanism for challenging an administrative order, the court is bound to give effect to that legislative choice". The plaintiffs are asking this court to find on an interim basis that the plaintiffs are not tenants and have a legal right to remain in the house. This is exactly the opposite of what the LTB decided. Whether the LTB's decision should be upheld is for the Divisional Court to determine, not this court.
Conclusion
109The plaintiffs' motion seeking to vest title of the property at 15 Matagami Street to the plaintiffs is dismissed. The plaintiffs' motion requesting a CPL is also dismissed.
110If 15 Matagami Street is sold, any proceeds that remain after the mortgages and other fees, such as taxes and solicitors' fees, are paid out are to be held in trust pending the determination of this claim, unless otherwise agreed to by the parties.
111The noting of default of the Counterclaim is set aside.
112This dispute between the parties has gone on far too long. It is in both of the parties' interests to resolve this matter as quickly as possible. The parties are to devise a timetable immediately so that this matter may be set down for trial. A timetable should be agreed to within thirty days of receipt of this endorsement.
Costs
113Given the divided success on this motion, the parties are encouraged to work out the issue of costs between themselves.
114If the parties are unable to resolve the issue of costs, the defendant shall serve and file written submissions of no more than two pages, double spaced, twelve-point font, relevant case law, a detailed bill of costs, and any offers to settle within ten days of receipt of this endorsement.
115The plaintiffs may file a written response consisting of no more than two pages, double spaced, twelve-point font, relevant case law and a detailed bill of costs, if not already provided and any offers to settle within ten days receipt of the defendant's submissions.
116The defendant may file a one-page reply, double spaced, twelve-point font, within five days of receipt of the plaintiffs' submissions on costs.
Dennison J.
DATE: June 23, 2021