Court File and Parties

Court File No.: CV-19-5078 (Milton) Date: 2021-07-21 Superior Court of Justice - Ontario

Re: Benjamin Reyes and Elena Reyes, Plaintiffs/Responding Parties And: Eli Morales and Evelyn Morales, Defendants/Moving Parties

Before: Chown J.

Counsel: Brittany Goodmore, for the Plaintiffs/Responding Parties Pathik Baxi, for the Defendants/Moving Parties

Heard: March 31, 2021, by video conference; additional submissions received April 9 and 12, 2021

Endorsement

[1] The plaintiffs and the defendants swapped houses in 1991. More precisely, they swapped possession of their respective properties. However, they never transferred the title to either property. They now have a dispute over who owns what.

[2] The plaintiff Elena Reyes is the sister of the defendant Eli Morales. In late 1991, Mr. Morales and his wife, the defendant Evelyn Morales, found themselves behind in their mortgage payments and taxes for their house on Wynten Way in Oakville. Ms. Reyes and her husband, the plaintiff Benjamin Reyes, offered to assume the mortgage and debts on “Wynten” and to allow the Moraleses to move into their house on Galena Crescent in Mississauga for $1,000 per month in rent. The Reyeses would move into “Wynten,” which was larger and newer than “Galena.”

[3] In 2019, the Reyeses commenced this action seeking an order that title to Wynten be transferred to them and seeking an order for vacant possession of Galena. In 2020, the Reyeses also commenced Landlord and Tenant Board (LTB) proceedings seeking to evict the Moraleses from Galena. Those proceedings resulted in an eviction order. The Moraleses now move in this action for an interlocutory injunction preventing their eviction from Galena.

[4] The motion is dismissed.

The Parties’ Positions

[5] In support of their motion, the Moraleses say:

a. The agreement among the parties in 1991 was that on an interim basis the Moraleses would occupy Galena and “would pay $1,000 a month to cover the cost of the mortgage.” The Reyeses would occupy Wynten and would pay the monthly mortgage payments on it.

b. The “occupation rent” for Wynten was “commensurate with the monthly carrying costs” being paid by the Reyeses.

c. There was no agreement finalized between the parties to transfer ownership of Wynten. Although Mr. Morales signed an agreement of purchase and sale, Ms. Morales did not. No transfer of title was registered.

d. The Reyeses would be unjustly enriched if title to Wynten was transferred to the Reyeses because its fair market value far exceeds any payments made.by the Reyeses on the mortgage.

[6] The Reyeses say:

a. As of November 1991, the Moraleses were in substantial default on their mortgage on Wynten.

b. The amount owing on the mortgage was approximately $240,000 and was more than the property was worth.

c. Power of sale proceedings were underway, and the mortgagee had taken possession. (In their statement of defence, the Moraleses deny the mortgagee had taken possession.)

d. Property taxes were in arrears.

e. The Moraleses were going to lose Wynten and still owe money to the mortgagee and were in the process of moving out of Wynten and into a small two-bedroom apartment with three young children when the Reyeses made the offer for the Moraleses to rent Galena.

f. The parties entered into an agreement of purchase and sale for Wynten, for the approximate amount owing in mortgage plus the tax arrears.

g. They (the Reyeses) paid up the mortgage and tax arrears and started making the required the mortgage and tax payments.

h. To fund payment of the arrears, they took out a line of credit against Galena.

i. They paid the mortgage on Wynten until it was paid off in 2007.

j. The Moraleses paid them $1,000 per month but at some point, but unilaterally reduced this to $500 per month and then in 2014 stopped paying rent. Since then, the Moraleses have paid nothing.

k. They tried to sell Galena in 2019 but the Moraleses would not cooperate with showing the property.

[7] The Moraleses did not file any reply affidavit to Mr. Reyes’s affidavit. Although time was limited, they received Mr. Reyes’s affidavit on March 26, 2021, so had time to reply before the hearing of this motion on March 31, 2021. The contents of Mr. Reyes’s affidavit are consistent with the statement of claim so the Moraleses could have predicted what he would say. In the circumstances, I would have expected a reply affidavit if the contents of Mr. Reyes’s affidavit were seriously disputed.

[8] On the issue of rent, Mr. Morales merely says that they “paid $1,000.00 per month for many years.” Mr. Reyes’s contention that the Moraleses did not pay rent after 2014 is the unrefuted last word on this subject.

[9] Mr. Morales’s affidavit says that the Reyeses “continue to reside in our home rent free.” However, he fails to mention that the Reyeses paid off the arrears of the mortgage and taxes on Wynten in 1991. Further, the Moraleses have not refuted the Reyeses’ contention that the value of Wynten was less than the arrears on the mortgage, or that if the power of sale proceedings had been allowed to run their course, the Moraleses would have been liable for a deficiency.

This Action

[10] The Reyeses commenced this action in 2019, seeking an order transferring title of Wynten to them and an order for vacant possession of Galena, plus arrears of rent on Galena of $60,000.

[11] The Moraleses have counterclaimed for $1,000,000 for occupation rent for Wynten, for vacant possession of Wynten, and for an accounting.

LTB Proceeding

[12] At the LTB hearing, the Reyeses only claimed rent from 2019 and forward. The LTB decision was issued October 28, 2020. The LTB calculated the rent owing with interest and ordered that the tenancy was terminated. If the Moraleses paid what was owing, they could apply to set aside the order. Otherwise, the Reyeses could ask the sheriff to evict the Moraleses from Galena on or after January 1, 2021.

[13] The Moraleses did not move out.

[14] On January 12, 2021, the Reyeses paid the sheriff the required fee for enforcement of the eviction.

[15] On March 8, 2021, the Moraleses were served with a notice to vacate Galena by April 1, 2021.

This Motion

[16] Only then did the Moraleses bring this motion for an order vacating or staying the eviction order of the LTB or in the alternative for an order that the defendants must vacate Wynten.

Jurisdiction

[17] During the motion hearing, I raised the question of whether the Superior Court has the jurisdiction to issue an injunction restraining enforcement of an order of the LTB.

[18] The Moraleses argue that s. 101 of the Courts of Justice Act, R.S.O. 1990, c.C.43 (CJA) and Rule 40 provide this jurisdiction. They pointed me to Young v. CRC Self-Help, 2020 ONSC 1874 to support their position. I do not find Young v. CRC Selp-Help helpful because it was a decision of the Divisional Court in circumstances where an appeal from the LTB to the Divisional Court was pending. The focus of the court’s decision was s. 134(2) of the CJA, which gives the court broad powers to make appropriate orders while an appeal is pending. The circumstance here is different. The Moraleses did not pursue an appeal. My authority to grant an injunction would not flow from s. 134(2), but from s. 101 of the CJA.

[19] The concern about whether I have the authority arises from s. 168(2) of the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (RTA), which grants exclusive jurisdiction to the LTB as follows:

The Board has exclusive jurisdiction to determine all applications under this Act and with respect to all matters in which jurisdiction is conferred on it by this Act.

[20] Neither of the parties referred me to this section.

[21] The Reyeses pointed me to s. 209(1) of the RTA, which says that an order of the LTB is final and binding, subject to the possibility of judicial review, which the Moraleses did not pursue. They also pointed me to the appeal rights available under s. 210 of the RTA, which the Moraleses also did not pursue. Finally, they relied on Lomico 188 Inc. v. Mouritsen, 2014 ONSC 2442, a decision of Justice Perell sitting as a single judge of the Divisional Court. That case stemmed from an appeal of an LTB eviction decision, in circumstances where the tenants were pursuing a Superior Court action for damages, essentially for personal injury. They claimed an equitable set-off. If successful, this would have been a defence to the landlord’s claim for rent, termination of the tenancy, and eviction. The tenants contended that the LTB did not have jurisdiction in the face of their personal injury claim against the landlords, over which the Superior Court had exclusive jurisdiction. That aspect of the claim was the inverse of the question here, which is whether the Superior Court has jurisdiction to enjoin enforcement of the LTB’s eviction order. Also, like Young v. CRC Self-Help, supra, Lomico was a decision of the Divisional Court made with reference to s. 134(2) of the CJA while an appeal was pending.

[22] As indicated, neither party referred me to s. 168(2) of the RTA or made arguments surrounding whether the LTB has exclusive jurisdiction over evictions. The extent of the LTB’s exclusive jurisdiction is complex. (See, for example: s. 207(2) of the RTA; Kaiman v. Graham, 2009 ONCA 77 at paras. 14 to 16; Fraser v. Beach, (2005) 75 O.R. (3d) 383, 2005 CanLII 14309 (C.A.); and Spirleanu v. Transglobe Property Management Service Ltd., 2015 ONCA 187 at para. 6 and the cases which follow it.)

[23] As will be seen below, I have decided that the motion should be dismissed based on an application of the test for an injunction. It is therefore not necessary for me to determine the issues surrounding the court’s jurisdiction to grant the requested injunction. For this reason, and because the issues surrounding of the court’s jurisdiction were not adequately argued, I specifically decline to determine the question of whether I have jurisdiction to grant the requested injunction.

Res Judicata

[24] During the oral hearing, I questioned whether res judicata may apply to prevent the Moraleses from relitigating the question of their eviction. However, the Moraleses do not argue that the LTB decision was incorrect. Rather, they argue that it would be unjust to enforce the decision prior to adjudication of the issues in this action.

Entitlement to an Injunction

[25] The Moraleses’ motion asks for orders “vacating or staying” the LTB eviction order and “withdrawing or staying” the sheriff’s notice to vacate. The grounds referenced in the notice of motion include ss. 97 and 101 of the CJA, which refer to declaratory orders and interlocutory injunctions respectively.

[26] The Moraleses’ counterclaim seeks: damages; an order for vacant possession of Wynten; an accounting; an order “staying or dismissing” the LTB proceedings; and other relief.

[27] Although an “injunction” is not requested using that word in either prayer for relief, the motion was argued by both sides with reference to the test for an interlocutory injunction. I will approach the matter on this basis.

The Test for an Injunction

[28] In his text Injunctions and Specific Performance, Looseleaf Edition (Toronto: Thomson Reuters Canada Ltd., 2019), at paras. 2.60 to 2.80, Justice Sharpe said:

The problem posed by interlocutory injunction applications may best be understood in terms of balancing the relative risks of granting or withholding the remedy before full adjudication of the legal rights at issue. These risks may be stated as follows. The plaintiff must show a risk that his or her rights will be destroyed by the defendant’s actions before the court has rendered its judgment at trial. The risk to the plaintiff is that if an immediate remedy is not granted, his or her rights will be so impaired by the time of trial and judgment that it will be simply too late to afford an adequate remedy.

Against this risk to the plaintiff must be balanced the risk of harm to the defendant, should the injunction be granted. This risk is inherent in awarding a remedy before judgment.

Ideally, the problem could be avoided or minimized by devising special procedures to provide for an immediate and final resolution on the merits. Inevitably, however, cases will arise where immediate and final resolution is not possible and the court will be saddled with the difficult task of balancing the risk of harm to the defendant, inherent in granting remedial relief before the merits of the dispute can be fully explored, against the risk that the plaintiff’s rights will be significantly impaired in the time awaiting the trial. [Footnotes omitted.]

[29] The test for granting an injunction is the same as for granting a stay pending appeal. This test is succinctly stated in Morguard Residential v. Mandel, 2017 ONCA 177 at para. 17:

When deciding whether to grant a stay, generally, the courts are to apply the same three-stage test as they do when deciding whether to order an interlocutory injunction: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, at p. 334. This test requires the court to:

1. make a preliminary assessment of the merits of the case to ensure that there is a serious question to be tried;

2. determine whether the moving party would suffer irreparable harm unless the stay were granted; and

3. determine which of the parties would suffer greater harm from the granting or refusal of the stay.

[30] A further passage from Injunctions and Specific Performance, supra, at para. 2.600, is important and instructive:

As already noted, there has been a significant retreat from the assertion that consideration of the merits should never play an important role. The seeming rigidity of the remaining items in the formula is also regrettable, and the direction given by Cyanamid and RJR-MacDonald should be seen as guidelines rather than firm rules. The terms “irreparable harm”, “status quo” and “balance of convenience” do not have a precise meaning. They are more properly seen as guides which take colour and definition in the circumstances of each case. More importantly, they ought not to be seen as separate, water-tight categories. These factors relate to each other, and strength on one part of the test ought to be permitted to compensate for weakness on another.

Serious Question

[31] There are serious issues within the action. For instance, the fact that Ms. Morales did not sign the agreement of purchase and sale raises many questions.

[32] The Reyeses argue, however, that there is no serious issue with respect to whether they are entitled to vacant possession of Galena. Title to Galena is not in question. The Moraleses do not dispute the LTB finding that there was a tenancy at Galena and that they were living there as tenants. The Moraleses do not dispute that they were paying $1,000 a month in rent historically. The Reyeses entitlement to the arrears of rent determined by the LTB (approximately $25,000) is admitted.

[33] I agree with the Reyeses that there is no serious issue over whether they are entitled to be paid rent. They are. And as they have not been paid rent in a long time, they are entitled to vacant possession of Galena.

[34] Mr. Baxi argued that the amount that the Moraleses owe in arrears of rent is modest relative to the large financial issues that are involved in the Superior Court action, where there are claims and counterclaims being made over who is the legal and beneficial owner of Wynten. He argues that it would be inequitable to evict the Moraleses now pursuant to the LTB order. Essentially his argument is that with their counterclaim the Moraleses are going to be able to set off much more than the amount of rent that is owing, so there is a serious issue to be tried, they will suffer irreparable harm if they are evicted, and the balance of convenience favours their position.

[35] The problem with this argument is that the Reyeses have presented evidence to demonstrate that they have a strong constructive trust claim to Wynten, and the Moraleses have not presented evidence to refute this claim. The Reyeses say that the agreement, although not signed by Ms. Morales, reflects the parties’ intentions. In his affidavit, Mr. Morales does not even explain what his intention was when he signed the agreement, or why Ms. Morales did not sign it. Although the agreement was not properly formalized and the transfer was not registered, the parties appear to have acted in a manner that is consistent with the agreement. The Reyeses paid off the arrears on the Moraleses’ mortgage and taxes. They assumed ongoing payments for the mortgage and taxes. They completely paid off the mortgage in 2007 and have remained in possession. There is no evidence that the Moraleses ever requested or sought to regain possession of Wynten prior to their counterclaim. There is no real evidence of behaviour on the part of the Reyeses that is inconsistent with their ownership of Wynten. Apart from the fact that the 1991 agreement of purchase and sale was not signed by Ms. Morales and that the sale was not concluded, there is no evidence of behaviour on the part of the Moraleses that is consistent with their continued ownership of Wynten. For instance, there is no evidence that the Moraleses ever paid any expenses associated with Wynten. In contrast, the Reyeses continued paying the mortgage on Galena. They took out a line of credit against it. They collected rent for it. They tried to sell it. Further, the Moraleses acknowledged their responsibility to pay rent for Galena.

[36] The strength of the Reyeses case is disproportionate to that of the Moraleses.

[37] Mr. Baxi pointed out that the Reyeses proceeded before the LTB under Form N4 (used to end a tenancy for non-payment of rent). They did not proceed under Form N12 (used to end a tenancy because a family member or purchaser intends to move in). Thus, Mr. Baxi argues, the Reyeses will not be able to get vacant possession to sell the premises if the Moraleses pay the rent owing. Ms. Goodmore acknowledged and agreed with this. This does not change the analysis significantly. There is no serious issue at the moment that the Reyeses are entitled to vacant possession of Galena. The Moraleses’ claim to Wynten is disproportionately weak.

Irreparable Harm

[38] For the “irreparable harm” element of the test, the question to be asked is whether damages will be an adequate remedy at trial. If an interlocutory injunction is not granted but it turns out that the Moraleses are entitled to an injunction at trial, will the trial victory become an empty victory? “If damages are an adequate remedy, running the risk of restraining the defendant unjustifiably pending the trial is simply not warranted”: Injunctions and Specific Performance, supra, at para. 2.393.

[39] In theory, the Moraleses should be able to find alternate premises and if they are successful at trial they will recover their rent paid for alternate premises, and other losses associated with Galena. There is no evidence, for instance, that they expended funds to maintain, repair or improve Galena, but if such expenses were incurred, they would be claimable. At trial, there will likely be a more complete evidentiary record regarding such expenses, just as the Reyeses will likely present evidence as to what they have spent on Wynten. However, these are matters for which monetary compensation is an appropriate remedy.

[40] I have considered whether it is overly simplistic to say that monetary damages will be an adequate remedy if the Moraleses are successful at trial. Although they have provided no direct evidence as to their financial circumstances, the LTB found that Mr. Morales had an accident and was unable to work in 2017. The LTB decision says that the Reyeses “forgave rent payments for long periods of time because of the Tenants’ unemployment and financial difficulties.” The LTB also held that “on a balance of probabilities, … the Tenants do not have sufficient means to pay the amount of arrears that are owing, nor have they shown any good faith intention of paying rent for a number of years.” Consequently, the LTB found that the tenancy was not viable.

[41] No direct evidence has been provided to indicate that the Moraleses will be unable to rent other premises. However, the LTB found that “it will be very difficult for them to find suitable alternative accommodation quickly with their limited means.”

[42] Although I have no direct evidence that $1,000 per month is below the market rate for Galena, there is evidence that the rent has been set at that level for almost 30 years. On this basis alone, I am satisfied that $1,000 per month is below the market rate for Galena. I have little doubt that it will be difficult for the Moraleses to find equivalent accommodations for the same rent.

[43] On the other hand, Mr. Reyes points out in his affidavit (which, again, is not refuted) that the Moraleses’ son lives with them, so that at least three income earning adults occupy Galena. The Moraleses’ affidavit material should not have relied solely on the findings of the LTB to demonstrate their apparent financial hardship, but rather there should be direct evidence from them. “Failure to tender particularized financial evidence in support of an allegation of financial harm is usually fatal to an injunction application”: Can. American Enterprises Ltd. v. The Office of the British Columbia Container Trucking Commissioner, 2020 BCSC 2156 at para. 67. “Avoidable or self-induced harm does not constitute irreparable harm”: Ibid., at para. 68; Morguard Residential v. Mandel, supra, at para. 25.

[44] Even if the Moraleses are not able to afford the rent elsewhere, that should not be used to justify continuing to impose their burdens on the Reyeses.

[45] If the tenancy is non-viable, it should not be maintained.

Balance of Convenience

[46] Some of the foregoing considerations also apply to the balance of convenience. While it will be inconvenient for the Moraleses to move out of Galena, it is also inconvenient for the Reyeses that they are not receiving any rent.

[47] Granting the injunction would perpetuate the injustice of the Moraleses living rent free at the expense of the Reyeses. This tilts the balance of convenience strongly in favour of the Reyeses.

[48] Mr. Baxi suggested that the Moraleses would resume paying rent and that I could order a payment plan for the arrears of rent. The LTB could have made such an order and chose not to. Rather, the LTB found that the Moraleses had not “shown any good faith intention of paying rent for a number of years.”

Conclusion on the Test for an Injunction

[49] This case is a good example to show that the elements of the test for an injunction or stay are not watertight compartments. They cannot be approached as a series of checkboxes. When weighing the elements here, it is readily evident that the interlocutory injunction requested should not be granted:

a. There is no reasonable question regarding the Reyeses’ entitlement to rent for Galena. With respect to the Moraleses’ claims regarding Wynten, these claims are disproportionately weaker than the Reyeses’ claims.

b. The Moraleses have not adequately shown a significant risk of irreparable harm. They have not shown that if an immediate remedy is not granted, their rights will be so impaired by the time of trial that it will be simply too late to afford an adequate remedy. While there is some evidence that Moraleses’ financial circumstances are difficult and that they will have difficulty securing premises with such low rent, they did not present direct evidence or adequate evidence to show they faced irreparable harm. In any event, they should not be permitted to continue to place their financial burdens on the Reyeses until trial. The strength of their case is too weak to justify this result.

c. The balance of convenience favours the Reyeses’ position.

Disposition

[50] The motion is dismissed.

[51] Ms. Goodmore advised the court that the Reyeses would consent to 30 to 60 days, as the court may consider appropriate, for the Moraleses to leave Galena. On this basis, I order that the sheriff shall not execute the eviction prior to September 1, 2021.

Costs

[52] If the parties cannot agree on costs, I will receive written submissions. Ms. Goodmore may file, not later than August 4, 2021, written submissions of not more than two pages plus a costs outline, copies of offers to settle, and dockets or other supporting documentation. Responding submissions from Mr. Baxi may be filed not later than August 13, 2021, with the same page restrictions. There shall be no reply without leave.

(Original signed by)

Justice R. Chown

Released: July 21, 2021