Court File and Parties

COURT FILE NO.: CV-19-2537 DATE: 2021-09-20

SUPERIOR COURT OF JUSTICE – ONTARIO 7755 Hurontario Street, Brampton ON L6W 4T6

RE: Kenute Mark Cornish, plaintiff AND: Caryl Turner, defendant

BEFORE: Justice R. Chown

COUNSEL: P. Wadhwa, for the plaintiff J. Silver, for the defendant

HEARD: August 26, 2021 by video conference

ENDORSEMENT

[1] This is a motion by the defendant to strike certain passages of the statement of claim and to transfer this matter to small claims court.

[2] Counsel for the defendant agrees that the allegations in the statement of claim are taken as true for the purposes of this motion.

[3] Paragraph 12 of the statement of claim states that the plaintiff and the defendant “decided to mutually purchase a property together for investment purposes and share the rent and profit coming from that property.” The plaintiff’s investment and share of the property and profit was to be 10%.

[4] The plaintiff says the matter should not be transferred to small claims court because he is claiming: $20,000 for breach of contract; $19,400 for loss of profit; the return of his $10,000 deposit; and his share of profit from the rent, being $4,100. This totals $53,500. He is also claiming a Certificate of Pending Litigation (CPL).

[5] The defendant says that although the prayer for relief seeks $53,500 and a CPL, the text of the pleading only supports the claim of $19,400 for lost profit on the investment and $4,100 for the plaintiff’s share of profit on the rent. Further, the CPL is claimed against the defendant’s home, not the subject property, which has been sold. The defendant says there is no valid claim for an interest in land but rather the CPL is an attempt at execution before judgment. Further, there has been no motion for a CPL brought. Therefore, the defendant says the claim is within the jurisdiction of the small claims court and should have been brought there. He should not be put through the expense of documentary and oral discovery.

Analysis

[6] The claim alleges that:

a. The plaintiff, the defendant, and one other person collectively invested $100,000 towards the purchase of the subject property. With a $380,000 mortgage, they were able to purchase the property for $480,000. (I have rounded to the nearest $1,000. The rounding makes no material difference in the analysis.)

b. The plaintiff’s investment was $10,000.

c. The property generated $3,500 per month, enough income to pay the mortgage and utilities, which were $2,500 a month, plus a profit of $1,000 per month. The property was rented out for 41 months.

[7] The claim states at paragraph 39 that the defendant sold the property for $673,000, “thereby making a profit of $194,000.00”. That is the difference between the alleged gross sale price and the alleged gross purchase price ($673,000 less $479,000 = $194,000). The plaintiff says at paragraph 44 of the claim that he “suffered the loss of his 10% share of the profit made by the defendant from the sale of the property, which amounts to $19,400.”

[8] The defendant argues that the plaintiff can’t get the lost profit and also get his deposit back. His factum argues that the plaintiff did not plead that he was to get the deposit back and that this is contrary to arrangement as described in the statement of claim.

[9] I don’t think either party has done the math right.

[10] The claim incorrectly indicates that the profit was the difference between the gross sale price and the gross purchase price. The profit would be the difference between the net proceeds of sale and the parties’ original investment, plus the net monthly profit on the rental income received. The net monthly profit on the rental income is alleged to be $1,000 for 41 months, or $41,000. The net proceeds of sale are not stated in the claim. If I assume that the mortgage was not reduced at all while the partners held the property, the net proceeds of sale were $673,000 less the $380,000 mortgage, or $293,000. The partners’ $100,000 initial investment therefore grew to $293,000.

[11] If the arrangement was to share profit, then by rights the plaintiff could claim his 10% share of the profit, $29,300, while the other two partners’ profit is $263,700. This recovery includes the return of the deposit. The other way to look at it is that the parties’ profit is $193,000 on top of their $100,000 investment. They would get their $100,000 investment back and divide the $193,000 in profit. The plaintiff would get $19,300 and the return of his $10,000 investment, again for a total of $29,300.

[12] The plaintiff’s share of the net profit on the rent would be 10% of $41,000, so $4,100.

[13] This analysis assumes the mortgage balance was not decreased. It also neglects other transaction costs, such as land transfer tax and real estate and legal fees, and it neglects other expenditures or expenses that may have been incurred by the parties during the ownership of the property.

[14] The claim for $19,400 for lost profit on the investment, return of the $10,000 investment, and $4,100 for lost profit on the rent is poorly stated but fully supported by the facts alleged in the claim. These total $33,500, which is less than but close to the $35,000 small claims court limit.

[15] The basis of the claim for $20,000 for breach of contract is not clearly articulated in the statement of claim. The statement of claim does state:

The plaintiff always fulfilled the responsibility of maintainence [sic] of the property and paid money to the technician from his pocket, in case the furnace or any other break down. [sic]

[16] The claim goes on to say that the defendant took second and third mortgages on the property without informing the plaintiff and that he changed title on the property to include his wife without informing the plaintiff. The claim describes that the defendant attempted to have the plaintiff evicted by the Landlord Tenant Board but was not successful because he could not establish a landlord tenant relationship with the plaintiff. However, the claim does not articulate what cause of action these facts establish or state the damages suffered as a result.

[17] The claim also describes a fight between the parties and police involvement which resulted in the plaintiff being implicated in criminal charges and incurring expense and time as a result. However, the usual causes of action one sees accompanying an allegation of this nature, such as personal injury or malicious prosecution, are not pleaded. Only breach of contract is pleaded.

[18] An amendment of the claim is possible. On inquiry after a discussion of what I saw as the mathematical error in the claim, Mr. Wadhwa said he anticipated seeking to amend the claim. If I transfer this matter to the small claims court and the plaintiff amends the claim, there is a possibility that the plaintiff might need to bring a motion to move it back to Superior Court.

[19] The plaintiff elected to bring this matter in Superior Court and asserts entitlement to an amount in excess of the jurisdiction of the small claims court. I agree that the claim is poorly drafted. However, it is not plain and obvious that the claim is within the jurisdiction of the small claims court.

[20] There may of course be costs consequences if the plaintiff is not successful in recovering more than the small claims court limit.

[21] I therefore dismiss request to transfer this matter to the small claims court.

Certificate of Pending Litigation

[22] With respect to the claim for the CPL, under s. 103(1) of the Courts of Justice Act, entitlement to a CPL is conditioned on “The commencement of a proceeding in which an interest in land is in question.” There is no interest in the defendant’s home in question in this proceeding. The claim does not even pretend as much. It states that the CPL is sought “as a security for recovery of damages and costs of proceedings.” The claim for the CPL in paragraph 5 of the statement of claim is struck.

Striking Paragraphs of the Claim

[23] Paragraphs 32, 33, 34 and 46 deal with the fight, police charges and Landlord Tenant Board proceedings. As indicated, the claim does not make any connection between these allegations and the alleged breach of contract. These paragraphs are struck.

[24] Paragraph 47 asserts:

Defendant had to take out time from his busy schedule and also pay cost of litigation from his pocket as plaintiff was left with no option except to go to Court to seek justice. [sic]

[25] I will not order that this paragraph be struck. While it duplicates the claim for costs made in paragraph 6 and expresses a claim for compensation for inconvenience very weakly, does contain a theoretically pursuable claim.

[26] Paragraph 48 and 49 are argument. These paragraphs are struck.

[27] My ruling regarding striking the offending paragraphs is without prejudice to the plaintiff’s right to amend his claim.

Costs

[28] Success on this motion is divided. I am inclined to award no costs for this motion to either side. However, if either counsel wishes to deliver written submissions on costs, they may do so, with a two-page limit, by September 30, 2021. Reply submissions with the same page limit shall be delivered by October 7, 2021. The page limit does not include offers to settle, costs outlines or dockets.

Chown J.

Released: September 20, 2021