MOTION HEARD: 20210923
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MICHAEL JIMENEZ and CYNTHIA PARRA, Plaintiffs/Moving Parties
AND:
JAMES BARROS and MONICA CLAVIJO, Defendants/ Responding Parties
BEFORE: Associate Justice Robert Frank
COUNSEL: Gerald Sternberg, Counsel for the Plaintiffs/Moving Parties
Jasdeep Dhillon, Counsel for the Defendants/Responding Parties
HEARD: 23 SEPTEMBER 2021
REASONS FOR DECISION
I. INTRODUCTION
1The plaintiffs, Michael Jimenez (“Michael”) and Cynthia Barros (“Cynthia”), bring this motion seeking leave to issue a certificate of pending litigation against lands located at 44 Rosethorn Avenue, Toronto, Ontario (the “Property”).
2The defendants, James Barros and Monica Clavijo (“Monica”), oppose the motion and defend the action on the basis that the plaintiffs do not have a reasonable claim to an interest in the Property.
3For the reasons that follow, leave is not granted to issue a certificate of pending litigation with respect to the Property. However, the conditions outlined below are imposed on the defendants in order to protect the interests claimed by the plaintiffs.
II. BACKGROUND
4The defendants are the registered owners of title to the Property which they purchased in 2007. The plaintiffs lived in the Property from 2007 until the late summer/early fall of 2020. There is conflicting evidence with respect to the circumstances surrounding the purchase of the Property, its ownership and the basis on which the plaintiffs resided in the Property.
5The plaintiffs’ evidence is that they had a “family” relationship with the defendants that began when their son Joshua lived with the defendants for approximately 4 months in 2007. The plaintiffs’ say that the defendants told them that they wanted to help them buy a house, which they knew the plaintiffs could not afford to do on their own. The plaintiffs also attested that they attended with the defendants at the Property at the time the defendants were presenting the offer to purchase it, and that they participated in a decision as to whether to pay the increased purchase price being demanded by the vendor. This is contested by the defendants who say that, with no input from the plaintiffs, they purchased the Property as an investment.
6There is no disagreement that it was the defendants who entered into the agreement of purchase and sale for the Property, paid a portion of the purchase price and obtained a mortgage to finance the purchase.
7The plaintiffs’ evidence is that at the time of the purchase of the Property, Monica presented them with a document dated November 28, 2007 (the “November 2007 Document”) which she asked the plaintiffs to sign. The plaintiffs say that they and the defendants signed the November 2007 Document and the defendants kept the signed copy and left an unsigned copy with the plaintiffs.
8The plaintiffs say that Monica explained the November 2007 Document to them, indicating that, as outlined in the document, the plaintiffs would have to pay certain costs relating to the Property, including $2,200/month to cover what the defendants said was the cost of the mortgage and $83.72 to cover the cost of insurance for the mortgage. The plaintiffs say that, based on the terms of the November 2007 Document, they were also required to pay a portion of the property taxes, utilities, and the upkeep of the Property. The plaintiffs also say that the document confirms that the Property was a joint ownership between the plaintiffs and defendants. Essentially, their evidence is that they were at all times beneficial owners of the Property.
9The plaintiffs say that they made the payments required under the November 2007 Document, in part through payments directly into the defendants’ bank account and in part through cash payments to the defendants.
10The plaintiffs’ evidence is that in or around May 2009, Monica asked the plaintiffs to sign a lease for the Property. The plaintiffs say that they questioned why they had to sign a lease given that they were owners of the Property. They say that Monica explained that the defendants required the lease for tax purposes and that they trusted her and signed the lease.
11The plaintiffs also say that when the defendants refinanced the Property in December 2012 (with a higher mortgage in the amount of $284,000.00), Monica presented them with a new document dated December 6, 2012 which she asked them to sign (the “December 2012 Document”) . The plaintiffs’ evidence is that, like the November 2007 Document, they signed the December 2012 Document as did the defendants, and that the defendants kept the signed copy and gave an unsigned copy to the plaintiffs. The plaintiffs say that the December 2012 Document provided, among other things, updated terms with respect to the plaintiffs’ payment obligations and that it continued to indicate joint ownership of the Property among the plaintiffs and defendants.
12The plaintiffs say that their relationship with the defendants began to break down when James decided, against their wishes and without their agreement, to renovate the basement so that it could be rented out. They say that the relationship became further strained when the defendants told the plaintiffs in or around January 2020 that they were no longer owners of the Property and were required to vacate the Property. They say that by the summer or early fall of 2020 their relationship with the defendants had become so strained due to continued harassment from the defendants that they moved out of the Property and into a rental property.
13The defendants evidence tells a very different story. The defendants say that did not purchase the Property with the intent that the plaintiffs would have an ownership interest in it, beneficial or otherwise. Monica’s evidence is that the defendants purchased the Property as an investment property for themselves and that, from the outset, the plaintiffs were tenants rather than owners of the Property.
14The defendants say that neither the November 2007 Document nor the December 2012 Document were ever signed. Monica’s evidence is that she gave the documents to the plaintiffs for “educational” purposes, in order to educate them on what being a homeowner in Canada meant.
15Monica also gave evidence that if the plaintiffs had been able to demonstrate over time that they were capable of making the payments necessary to cover the mortgage, utilities, maintenance and part of the taxes for the Property (as contemplated in the November 2007 Document), the defendants would have considered transferring the Property to the plaintiffs. Monica says that, from the outset, the plaintiffs failed to make the full payments provided for in the November 2007 Document and were always in arrears.
16Monica’s evidence points to the agreement of purchase and sale and mortgage documents, all of which name the defendants as owners of the Property. She also points to a lease agreement dated, May 1, 2009, which she says confirms that the plaintiffs were tenants of the Property.
17Monica disputes the plaintiffs’ evidence that in early 2020 the defendants told the plaintiffs they were no longer the owners of the Property because, she says, the plaintiffs had never been owners of the property. Her evidence is that in March 2020, due to the plaintiffs’ continued defaults and increasing rent arrears, the defendants served the plaintiffs with a notice to terminate their tenancy of the Property.
18The defendants say that the plaintiffs vacated the subject Property voluntarily in or about September 2020 and moved into a new residence which they lease.
19Monica’s evidence is that the defendants are well-established in Ontario, own other property in Toronto and are capable of satisfying an order for damages from their other resources, should the plaintiffs ultimately be successful in this action.
III. POSITION OF THE PARTIES
20The parties agree that the applicable threshold for showing an interest in the land on a motion seeking a certificate of pending litigation is whether there is a “triable issue” as to such interest, not whether the plaintiffs are likely succeed.
21The plaintiffs say that the threshold for showing an interest in the Property is low and that the defendants have failed to meet the burden of showing that there is no triable issue with respect to the plaintiffs’ claim to an interest in land. The plaintiffs also submit that the equities favour the granting of a certificate of pending litigation, including because of the uniqueness of the Property and because the harm they would suffer without a certificate of pending litigation is greater than the harm the defendants would suffer if leave is granted to issue a certificate of pending litigation.
22The plaintiffs also take the position that their claim is only for a certificate of pending litigation, and not for damages in the alternative. They say that their claim for damages relating to deceit, mischief, bad faith conduct, misrepresentation, theft and harassment is a claim in addition to rather than as an alternative to the claim for a certificate of pending litigation.
23The defendants’ position is that there is no triable issue with respect to the plaintiffs’ claim to an interest in the Property. They say that the evidence as a whole does not support the plaintiffs’ claim to an ownership interest in the Property.
24With respect to the equities, the defendants take the position that it would be neither equitable nor just to grant leave to issue a certificate of pending litigation. The defendants assert that the equities favouring the defendants include the following:
a. the plaintiffs did not prosecute their claim with reasonable diligence;
b. the Property is not unique;
c. the plaintiffs claim damages in place of or as alternative to their claim to an interest in the Property and, in any event, damages are readily calculated and would be a satisfactory remedy;
d. the harm caused to the plaintiffs by dismissing their request for an order for a certificate of pending litigation is virtually nil and in any case their claim for beneficial ownership of the Property is adequately and appropriately protected by a damages remedy should they succeed at trial; and
e. alternatively, other protections are available that would not involve tying up the Property through a certificate of pending litigation.
IV. LAW AND ANALYSIS
a. The test for leave to issue a certificate of pending litigation – general principles
25The purpose of a certificate of pending litigation is to give non-parties notice of a proprietary claim, thereby permitting a party to protect its claim pending the determination of the alleged interest on its merits. It does not, in and of itself, create a right or interest in the land. (Ambassador Electric Inc. v. Fernwood Builders (London) Ltd. 2014 ONSC 3738 at para 7).
26In Perruzza v. Spatone, 2010 ONSC 841 at paragraph 20, Master Glustein, as he then was, set out the following legal principles which are applicable on a motion for leave to issue a certificate of pending litigation:
a. The test on a motion for leave to issue a certificate of pending litigation made on notice to the defendants is the same as the test on a motion to discharge a certificate of pending litigation (Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (Ont. Master) ("Homebuilder") at para 1);
b. The threshold in respect of the "interest in land" issue in a motion respecting a certificate of pending litigation (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 (Ont. Gen. Div. [Commercial List] at para 62);
c. The onus is on the party opposing the certificate of pending litigation to demonstrate that there is no triable issue with respect to whether the party seeking the certificate of pending litigation 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 (Ont. C.A.) at para 20);
d. Factors the court can consider on a motion to discharge a certificate of pending litigation 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 certificate of pending litigation is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (Ont. Master) at paras 10-18); and
e. 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 certificate of pending litigation should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1977 1414 (ON SC), 1991 CarswellOnt 460 (Ont. Gen. Div.), 1977 CarswellOnt 1026 (Ont. Div. Ct.) at para 9).
[27] In sequence, the court first determines if there is a triable issue as a threshold question. If and when this threshold question has been answered to the satisfaction of the court, the equities on all matters between the parties may then be considered for the exercise of the court's discretion on a principled basis as to whether a certificate should be allowed or discharged (THMR Development Inc. v. 1440254 Ontario Ltd., 2017 ONSC 5411 at para 13, citing 2526716 Ontario Inc. v. 2014036 Ontario Ltd., 2017 ONSC 1762).
28On a motion seeking leave to issue or discharge a certificate of pending litigation, the court is not to assess credibility or decide disputed issues of fact. Rather, the court must examine the whole of the evidence after cross-examination and, without deciding disputed issues of fact and credibility, consider whether on the whole of the evidence the plaintiff's case constitutes a reasonable claim to the interest in land claimed; see Pauwa North America Development Group Co Ltd v Skyline Port McNicoll (Development) Inc. 2021 ONSC 18 at para. 38.
b. Is there a triable issue for a claim to an interest in the Property?
29The defendants submit that, looking at the whole of the evidence, including the cross-examination transcripts, there are no triable issues. The defendants submit that the evidence of the plaintiffs on many of the key issues should be rejected because it is contradicted by some of the documents and it lacks credibility from a common-sense perspective.
30The problem with the defendants’ position on this issue is that there is a substantial amount of conflicting evidence on key points which cannot be resolved on this motion. For example, the defendants submit that the lease agreement that was signed by the plaintiffs in 2009 demonstrates that the relationship between the parties was as landlord and tenant, and that the signed lease agreement should be preferred to the unsigned November 2007 Document and the December 2012 Document. However, the evidence from the plaintiffs is that the lease agreement was entered into not as a true lease but because Monica told them she needed it for tax purposes. The plaintiffs also say that the parties signed the November 2007 Document and the December 2012 Document but that the plaintiffs never gave them an executed copy.
31In HarbourEdge Mortgage Investment Corporation v. Community Trust Company, 2016 ONSC 448 at para. 45, Justice DiTomaso held that: “… the court does not ‘assess the credibility of deponents or decide disputed issues of fact’ at the juncture of an interlocutory motion for a CPL, or on a motion to discharge the CPL…”. Thus, the difficulty with the defendants’ position is that it would require the Court to make findings of fact that can only be determined at trial or, perhaps, on a motion for summary judgment. The heavily contested facts (that relate to various key issues) should not be determined on a motion seeking leave to issue a certificate of pending litigation.
32In conclusion on this issue, I find that, considering the whole of the evidence, there is a triable issue with respect to whether the plaintiffs have an interest in the Property.
c. Should the Court exercise its discretion to grant leave to issue a CPL?
33In assessing whether the court should exercise its discretion to grant leave to issue a certificate of pending litigation, I have considered and applied the Dhunna factors that are relevant in the current circumstances.
34First, the defendants argue that the plaintiffs did not prosecute their claim with reasonable diligence. The defendants point to the date that the plaintiffs moved out of the Property (September 2020) and argue that the plaintiffs’ failure to have this motion heard until September 2021 demonstrates their lack of diligence. The plaintiffs argue that they have acted with diligence. They point to the overall context from which the plaintiffs’ claim and this motion arises. This includes the time it took the plaintiffs to retain legal counsel, their (failed) efforts to have the motion heard on an ex parte basis, and their attempts to have the motion scheduled as a contested motion which resulted in further delay through no fault of their own.
35I find that although the plaintiffs may have been able to advance the motion somewhat more rapidly, the delays were not excessive. I also note that the contested motion, once scheduled, was initially returnable on June 2, 2021 and that an interim order (which was made on a consent but without prejudice basis) has been in place since that time. As a result, I find that this factor is a neutral one.
36There is some overlap in the considerations that arise with respect to several of the other Dhunna factors. In particular, the question of whether the Property is unique is connected with the question of whether damages would be an adequate remedy.
37With respect to the question of the adequacy of damages, I accept the plaintiffs’ submission that the damages claimed are in addition to rather than an alternative to the plaintiffs’ claim to an interest in the Property. However, the form of the pleading and relief sought therein is not determinative. In Ghuman v. 1368394 Ontario Limited, 2007 ONSC 27026 at para. 10, Justice Corbett outlined the following principle:
The fate of a CPL should not depend upon counsel's drafting choice to claim damages in the alternative. It is cogent to argue that one is entitled to specific performance, and yet ask for damages in the alternative, if the court is not prepared to grant the equitable remedy. Similarly, simply because a party does not claim damages as an alternative remedy does not mean that damages would not be an adequate remedy. The proper question for the court, on a motion such as this, is whether, in fact, it would be just to limit the plaintiff to a remedy in damages. In assessing this question, the court should consider whether the plaintiff is entitled, in fact and in law, to the remedy of specific performance or declaratory relief to the same effect.
38With respect to uniqueness, I am not satisfied based on the evidence that the plaintiffs have shown the Property to be unique. The plaintiffs assert that the Property is special to them because they resided in it for 13 years and, therefore, it holds important memories that will not be replaceable if they are required to live in another home. To the extent that the Property has any special value to them as the home in which their children were raised, I find that this is counterbalanced by the fact that they have already vacated that home and resided elsewhere since at least September 2020. On this issue, I accept the defendants’ submission that the plaintiffs’ decision to leave to the Property supports the conclusion that it is not unique. In addition, I accept the defendants’ submission that damages are readily calculable (see Sachkov v. Ilnitskaya, 2021 ONSC 5495at para. 25) and that the defendants have the financial ability to satisfy an award for damages or costs in the event the plaintiffs’ claim succeeds. (See Homebuilder Inc., supra).
39In summary on these issues, I find that the factors of uniqueness (lack of uniqueness in this case) and adequacy of damages favour the defendants in terms of the equities.
40In terms of relative harm to the parties, the plaintiffs assert that, in addition to their claim that the Property is unique, they would suffer significant harm without the certificate of pending litigation because the defendants could sell the Property. They also argue that there would be no harm to the defendants if leave is granted to issue a certificate of pending litigation. The defendants assert that the certificate will interfere with their natural property rights. They also assert that the harm caused to the plaintiffs by dismissing their request for leave to issues a certificate of pending litigation is virtually nil and, in any case, their claim for beneficial ownership of the subject property is adequately and appropriately protected by a damages remedy should they succeed at trial.
41Having considered all of the circumstances, I find that the relative harm factor weighs in favour of the defendants because of the potential for interference with their property rights. I reach this conclusion in view of my finding that the Property is not unique and that damages would be a satisfactory remedy, and in view of my order below imposing certain conditions on the defendants that will protect the plaintiffs’ interests.
42In summary, having considered the applicable Dhunna factors and having considered and balanced the equities, I find that, based on all of the circumstances, it would not be just and equitable to grant leave to issue a certificate of pending litigation. However, that conclusion is subject to the conditions and protections provided below.
d. Should the Court impose conditions to protect the plaintiffs’ claim to equity in the Property from dissipation?
43The defendants submit that that an order for substituted security is not necessary. In support of this assertion, they submit that they have not listed the Property for sale and that there is no basis to support a conclusion that the Property will not remain available pending the trial of this action. They also assert that they are employed and reside in Ontario and are not a flight risk as they continue to raise their family in Canada.
44However, the defendants’ evidence is that they had purchased the property as an investment property. As such, there is a risk that the defendants may decide at any time to liquidate that investment. In my view, although the equities do not favour the plaintiffs in terms of obtaining leave to issue a CPL, it would be just in the circumstances to make an order protecting their claim to an interest in the Property in the event that the defendants decide to liquidate their investment or otherwise encumber the Property. Such an order is appropriate to ensure that damages remain an adequate remedy by securing the value of the Property pending the trial of this action.
45This is similar to the order made in 10381187 Canada Inc. v. Cherny, 2020 ONSC 4325, where Justice Davies held that in discharging a certificate of pending litigation “it would not be just for [the defendant] to encumber the property or otherwise dissipate her assets in a manner that will frustrate any damages awarded” (at para. 44) and, therefore, conditions were imposed “to protect the equity in the property from dissipation” (at para. 55).
V. CONCLUSION
46Although I find that there is a triable issue with respect to the plaintiffs’ claim to an interest in land, the equities favour the defendants such that, based on the applicable Dhunna factors, it would not be just and equitable in the circumstances to grant leave to issue a certificate of pending litigation. However, I also find that it is appropriate in the circumstances to impose the following conditions on the defendants in order to protect the plaintiffs’ claim to an interest in the Property:
(1) the defendants shall not sell, convey, assign, or otherwise transfer title to the property, in whole or in part, other than to a bona fide arm’s length third party;
(2) if the defendants decide to sell, convey, assign, or otherwise transfer the Property, in whole or in part, they shall pay the proceeds into Court pending the trial of this action;
(3) the defendants shall not, without leave of the Court, further encumber the Property or register any mortgage or other security interest in the Property in an amount that exceeds the current mortgage on the Property.
47For greater certainty, this is Order made as part of the final disposition of the motion. As a result, the terms of my June 2, 2021 Order with respect to the adjournment of this motion (which was made on consent and on a without prejudice basis to any of the parties’ positions and/or rights on this motion and/or in the action), are replaced by this Order and are no longer of any force or effect from the date of this Order.
48If the parties cannot agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding Costs Outlines). Both parties cost submissions shall be filed by October 12, 2021.
Associate Justice Robert Frank
Date: 28 September 2021