SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Michael Chow and 2479473 Ontario Inc., c.o.b as Goldengrove Investments Inc. or as Quick Home Buyer, Plaintiffs/Responding Parties
AND:
Regina Russell by her Litigation Guardian, Danielle Wilson, Defendant/Moving Party
BEFORE: Doi J.
COUNSEL: Andrea M. Mannell, for the Moving Defendant Siddharth S. Joshi, for the Responding Plaintiffs
James Butson, for the Non-Party, Home Equity Mortgage Corporation
HEARD: July 6, 2021
ENDORSEMENT
Overview
1On this motion, the Defendant seeks the release of proceeds being held in trust from the sale of her former home in St. Catharines. The home was sold by a mortgage lender after the Defendant defaulted on a reverse mortgage on the property, which had a certificate of pending litigation (“CPL”) on title. The Plaintiffs had obtained leave to register the CPL on a motion without notice based on an alleged agreement to buy the home from the Defendant. To allow the mortgage lender to close the sale of the property, the Plaintiffs deleted the CPL after the lender agreed to hold the net sale proceeds in trust pending an agreement or order for their release. The Defendant denies that she agreed to sell the property to the Plaintiffs and submits that they were not entitled to the CPL and have no interest in the sale proceeds. The Plaintiffs seek to have the proceeds remain in trust until trial, and they oppose the release of any funds to the Defendant.
2For the reasons that follow, I find that the proceeds of sale being held in trust should be released to the Defendant.
Background
3The moving Defendant, Regina Russell, is an 83 year old widow. Over the past few years, her cognitive functions have noticeably declined. After Ms. Russell was diagnosed with early- stage Alzheimer’s disease and the onset of dementia, her granddaughter, Danielle Wilson, became her litigation guardian in this action. Ms. Wilson is also seeking to be appointed as the Defendant’s power of attorney for property.
4The individually-named Plaintiff, Michael Chow, deals in real estate by acquiring and selling investment properties through the corporate Plaintiff, Honest Home Buyers Inc., which is registered in Ontario. The corporate entity was previously called Goldengrove Investments Inc. until it was re-named Honest Home Buyers Inc. on June 20, 2019.
5From about June 8, 2017 to October 30, 2020, the Defendant was the sole registered owner of the property in St. Catharines where she had resided with her family, most recently with her adult daughter, Lisa Russell. The lot is part of a registered plan of subdivision, has a frontage and depth of about 45 ft. by 110 ft., and features a two-storey detached home of about 2,414 sq. ft. that was built around 1981. The backyard has an in-ground swimming pool. The lot and dwelling are similar to others in the subdivision. There is nothing unique about the property.
6On March 14, 2019, the Defendant signed an alleged agreement of purchase and sale with a corporate entity named “Ontario Corp No. 002479472 o/a Quick House Buyer” that Mr. Chow represented. As set out below, there are irregularities in the agreement. There is also conflicting evidence as to how or why the agreement came to be signed.
7Mr. Chow claims that he attended the property after receiving an unsolicited call from Lisa on behalf of the Defendant. According to Mr. Chow, the Defendant agreed to sell him the property, with its substantial and open defects, for a purchase price of $491,522.00.
8The Defendant claims that she only asked Mr. Chow about his services, which included buying properties. She also claims that he tricked and coerced her into signing the agreement by convincing her that it was not binding and by refusing to leave until she signed. She further claims that she never agreed to sell the property below its fair market value of between $600,000.00 and
$650,000.00.
9A dispute arose over whether the agreement of purchase and sale dated March 14 2019 was valid and binding. On March 26, 2019, Goldengrove Investments Inc. registered a caution on title to the property pursuant to s. 128 of the Land Titles Act, RSO 1990, c. L.5.
10Between March 27, 2019 and May 1, 2019, the parties and their counsel exchanged various communications to address and resolve the dispute.
11On May 9, 2019, Defendant’s counsel conducted an internet search and found that the property had been listed for sale for $599,900.00 from March 18, 2019 until March 22, 2019 when the listing was suspended.
12On June 12, 2019, the Plaintiffs brought this action. On June 19, 2019, the Plaintiffs served their statement of claim on the Defendant through her counsel.
13On June 21, 2019, the Plaintiffs brought a motion without notice and obtained an order granting leave to register a CPL on the property. Although the parties were engaged in discussions about the dispute, the Plaintiffs did not give the Defendant notice of the CPL motion or disclose her position regarding the alleged agreement on the motion. I shall return to this point later in these reasons.
14On June 24, 2019, the Plaintiffs registered a CPL on title to the property in favour of the Plaintiffs, being “Michael Chow” and “2479473 Ontario Inc.”.
15On December 19, 2019, the Defendant served her statement of defence. Since then, the Plaintiffs have taken no further steps to progress this action.
16Around late 2019, the Defendant’s municipal property taxes fell into arrears. The arrears caused her to default on her reverse mortgage with the non-party lender, Home Equity Mortgage Corporation (“Home Equity”). Her default prompted the lender to sell the property under the Mortgages Act, RSO 1990, c. M.40, which she did not oppose.
17On October 30, 2020, Home Equity sold the property to a third-party purchaser under the
Mortgages Act for $620,000.00. The purchaser required the CPL to be vacated prior to closing.
18Home Equity regarded the CPL on title as an encumbrance under s. 27 of the Mortgages Act. To allow the sale of the property to close, the Plaintiffs deleted the CPL after Home Equity agreed to hold the net proceeds of sale in trust pending further agreement or an order for their release. The net proceeds being held in trust total $272,546.48. The Plaintiffs will not agree to the release of any proceeds to the Defendant.
19The subject property was the Defendant’s largest asset. To facilitate the sale of the property, she moved to a rental apartment with her daughter, Lisa. Without access to the net proceeds of sale, it is difficult for the Defendant to cover her living expenses and needs.
Analysis and Law
20As set out below, I find that: a) the CPL should have been discharged under ss. 103(6) of the Courts of Justice Act; and b) an order for security under Rule 45.02 should not be made.
A. The CPL
21As explained earlier, the Plaintiffs deleted the CPL after Home Trust agreed to hold the net sale proceeds in trust. On this motion, the Defendant seeks the release of the funds held in trust by claiming that a CPL should not have been registered on the property. The Plaintiffs submit that the status quo for the funds held in trust should continue until trial.
22Although the CPL was deleted on consent, I accept that the proper approach to take on this motion is to consider whether the CPL should have been discharged under ss. 103(6) of the Courts of Justice Act. Without the CPL registered on title, there would have been no encumbrance and no basis to hold the net sale proceeds in trust: Natale v. Testa, 2018 ONSC 4541 at para. 28.
23The jurisdiction to grant a CPL is found under s. 103 of the Courts of Justice Act. Rule 42.01(1) of the Rules of Civil Procedure provides that a CPL under s.103 may be issued by the registrar only under an order of the court. Pursuant to Rule 42.01(3), a motion for an order under Rule 42.01(1) may be made without notice.
24Once a CPL is granted, a motion for its discharge may be brought under Rule 42.02(1). The moving party seeking to discharge a CPL must satisfy ss. 103(6) of the Courts of Justice Act, which provides 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. [Emphasis added]
25The factors to consider on a CPL motion are well-established and were summarized by Master Glustein, as he then was, in Perruzza v. Spatone, 2010 ONSC 841 at para. 20:
(i) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL (Homebuilder Inc. v. Man- Sonic Industries Inc., 1987 CarswellOnt 499 (S.C. - Mast.) ("Homebuilder") at para. 1);
(ii) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. - Comm. List) at para. 62);
(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CanLII 6832 (ON CA), 2002 CarswellOnt 219 (C.A.) at para. 20);
(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (S.C.
- Mast.) at paras. 10-18); and
(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CanLII 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).
26As questions of fact and credibility are reserved to the trial judge, disputes over these issues should not be decided on a motion to discharge a CPL except as required to properly dispose of the motion: 2676547 Ontario Inc. v. Elle Mortgage Corporation, 2020 ONSC 4595 at para. 10; 1408795 Ontario Inc. v. Denofrio, [2000] OJ No. 002 (Gen Div) at para. 12.
27As set out below, I have serious concerns over whether the CPL was properly obtained by the Plaintiffs. The concerns relate to: i) the fact that neither Plaintiff is named as the purchaser in the alleged agreement of purchase and sale; ii) the lack of a property term in the alleged agreement;
iii) the Defendant’s mental capacity at the time of the alleged transaction; and iv) the Plaintiffs’ decision to bring a CPL motion without notice to the Defendant.
i. The Purchaser
28There is a serious concern with the strength of the Plaintiffs’ claim as neither is named as the purchaser in the alleged agreement of purchase and sale.
29The Defendant submits that the Plaintiffs cannot assert an enforceable agreement because a different entity is named as the purchaser in the alleged agreement. The Plaintiffs to this action are “Michael Chow” and “2479473 Ontario Inc., c.o.b. as Goldengrove Investments Inc. or as Quick Home Buyer.” However, the named purchaser in the alleged agreement is “Ontario Corp. No. 002479473 o/a Quick House Buyer.”
30The personally-named Plaintiff, Mr. Chow, signed the alleged agreement on behalf of the purchaser. Nevertheless, Mr. Chow is not a party to the alleged agreement. The other Plaintiff, 2479473 Ontario Inc., is not a registered corporation. Although Goldengrove Investments Inc. was created on August 18, 2015, it was never registered to operate as 2479473 Ontario Inc. or as Ontario Corp. No. 002479473, which is also not a registered corporation.
31On this motion, the Plaintiffs took the position that an irregular naming of the numbered entities apparently occurred based on the internal number assigned by the Ministry of Government Services to Honest Home Buyers Inc. and its predecessor, Goldengrove Investments Inc.. For unexplained reasons, this somehow led to the numbered entities being used even though they were never registered and do not actually exist. The Plaintiffs’ position is troubling, and raises serious questions about the merits of their claim under the alleged agreement of purchase and sale.
ii. No Property Term
32The alleged agreement of purchase and sale dated March 14, 2019 lacks a property term for the transaction. This raises a serious question as to whether the Plaintiffs have established an agreement of purchase and sale that is enforceable.
33The essential or material terms for an agreement of purchase and sale for real property are the parties, the property and the price: McKenzie v. Walsh (1920), 1920 CanLII 72 (SCC), 61 SCR 312 at 313; Hunter’s Square Developments v. 351658 Ontario Ltd. (2002), 60 OR (3d) 265 (SCJ) at para. 33; affirmed (2002), 2002 CanLII 9163 (ON CA), 62 OR (3d) 302 (CA); Rangwani v. Pinewoods Home, 2018 ONSC 5819 at para. 26. To be enforced under the Statute of Frauds, an agreement to buy or sell real estate must be in writing and contain all essential terms: Hunter’s Square (SCJ) at para. 33. As the alleged agreement does not identify the property for the transaction, it appears that an essential term is missing which raises a serious question as to the validity of the alleged agreement under the statute.
34The Plaintiffs claim that the failure of the alleged agreement to identify the property for the transaction is an inadvertent omission which can be remedied by considering evidence of the surrounding circumstances when the alleged agreement was formed. However, the Defendant submits that the entire agreement clause in the alleged agreement prevents anything done or said before the alleged agreement was made from being considered. The entire agreement clause states:
This Agreement contains the final and entire Agreement between the parties hereto and they will not be bound by any terms, conditions, representations, or addenda not herein written or referenced. No rights other than the right to purchase shall pass to any assignee without the written permission of the original Purchaser.
35An entire agreement clause alone does not prevent a court from considering admissible evidence of the surrounding circumstances when a contract is formed, which may inform the
interpretation of contractual words in dispute: Ontario First Nations (2008) Limited Partnership
v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592 at para. 62, citing Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 47. On this point, Jamal J.A., as he then was, adopted in Ontario First Nations at para. 62 the following analysis by Fraser C.J. for a majority of the Alberta Court of Appeal in IFP Technologies (Canada) v. EnCana Midstream and Marketing, 2017 ABCA 157 at para. 124, leave to appeal refused [2017] SCCA No 303:
The mere existence of an “entire agreement” provision does not mean that the words chosen beyond that entire agreement provision admit of one interpretation only. The purpose of considering the surrounding circumstances is not to add to, contradict or vary the terms of the agreement but rather use them as an interpretive aid to determine the meaning of the words in dispute. Where parties have concluded an agreement and a court is left to sort out the parties’ objective intentions, it cannot be prevented from considering the surrounding circumstances by a provision that is itself based on the assumption that the agreement is clear — when it is not. [Emphasis added]
As this passage makes clear, the surrounding circumstances may be used to interpret disputed terms in a contract but cannot add new terms to cure the omission of any essential terms: see also Hunter’s Square (SCJ) at para. 33.
36In this case, the alleged agreement lacks a property term which cannot be added by considering the surrounding circumstances when the agreement was allegedly formed. As such, the Defendant submits that the Plaintiffs have not established a claim under a written agreement of purchase and sale that is enforceable under the Statute of Frauds. In response, the Plaintiffs submit that the alleged agreement may be upheld in equity.
37The equitable doctrine of part performance allows the court to apply an oral agreement in cases where it is unconscionable to apply the Statute of Frauds to render a contract unenforceable: Hill v. Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), [1997] 1 SCR 69 at para. 10; Hunter’s Square at para. 36. In Mountain v. Mountain Estate, 2012 ONCA 806 at paras. 80-87, Winkler C.J.O. writing for the Court of Appeal confirmed the circumstances when sufficient acts of part performance take an alleged agreement outside the operation of the Statute of Frauds:
[66] Fundamentally, the issue whether a valid and binding oral agreement exists does not depend on the existence of a formal written document between the contracting parties: see Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 CanLII 2734 (ON CA), 79 D.L.R. (4th) 97 (Ont. C.A.), at pp. 103-104. The essential terms of an oral contract for the purchase and sale of real property are the parties, property and
price: see McKenzie v. Walsh (1920), 1920 CanLII 72 (SCC), 61 S.C.R. 312 (S.C.C.). If these terms have been agreed on, then a contract may be found without the need for evidence of a written agreement.
[80] In Erie Sand and Gravel Ltd. v. Seres' Farms Ltd. (2009), 2009 ONCA 709, 97 O.R. (3d) 241, [2009]
O.J. No. 4179, 2009 ONCA 709, Gillese J.A. clarified the legal principles that apply when determining whether there is an oral agreement respecting land and, if so, whether there are sufficient acts of part performance to take the oral agreement outside s. 4 of the Statute of Frauds. As explained in Erie Sand, at para. 49, the doctrine of part performance is a creation of equity. The doctrine was created
. . . to prevent the Statute of Frauds from being used as a variant of the unconscionable dealing which it was designed to remedy: see Hill v. Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), [1997] 1 S.C.R. 69, at
para. 10. The requirements in s. 4 of the Statute of Frauds must give way in the face of part performance because the acts of part performance fulfill the very purpose of the written document -- that is, they diminish the opportunity for fraudulent dealings with land based on perjured evidence.
[81] Gillese J.A. made it clear, at para. 75, that the doctrine of part performance is not limited to a consideration of the acts of the plaintiff:
In sum, it appears to me that given the decision of the Supreme Court in Hill, it is now settled law in Canada that the acts of both parties to an alleged oral agreement may be considered when a court is called on to determine if sufficient acts of part performance take an alleged agreement outside the operation of the Statute of Frauds.
[82] Gillese J.A. also made it clear that the acts of part performance need not be "referable only to the contract alleged". Rather, the test as established by the majority judgment of Cartwright J. in Deglman v. Brunet Estate, 1954 CanLII 2 (SCC), [1954]
S.C.R. 725, 1954 CanLII 2 (SCC), [1954] S.C.J. No. 47, at p. 733 S.C.R., is that it is sufficient if the acts are "unequivocally referable in their own nature to some dealing with the land".
[86] In Erie Sand, Gillese J.A. explained, at para. 94, that the proper approach to determining whether acts of part performance are referable to some dealing with the land is to begin by determining the context or, in other words, the relevant circumstances. The court is to "[t]hen consider the acts of part performance having regard to the way in which reasonable people carry on their affairs".
[87] The need for a contextual approach follows from the purpose of the doctrine of part performance. At para. 79 of Erie Sand, Gillese J.A. discussed the two underlying aspects of the doctrine:
The first aspect is detrimental reliance which, as has been noted, requires a party to prove its acts of part performance. Without detrimental reliance there can be no inequity in relying on the Statute of Frauds, thus, it is the first hurdle to be met. The second aspect of the doctrine, however, relates
to Equity's requirement that the acts of part performance sufficiently indicate the existence of the alleged contract such that the party alleging the agreement is permitted to adduce evidence of the oral agreement The
former is a matter of substantive law based on the rationale for the doctrine of part performance, whereas the latter is primarily evidentiary in nature. [Emphasis added]
See also Foertsch v. Foertsch, 2021 ONSC 3999 at paras. 149-167.
38There is conflicting evidence on this motion going to the issue of part performance. Each side has offered a very different account as to how or why the alleged agreement was signed and what surrounding actions were taken. The affidavits on this motion give conflicting explanations that raises serious credibility issues going to key matters in dispute. The conflicting affidavits were not tested by cross-examination, cannot be reconciled on the documentary record, and raise important factual and credibility issues that should be determined at trial.
39The Plaintiffs claim that the Defendant agreed to sell the property for a purchase price of
$491,522.00 when she knowingly and willingly signed the alleged agreement of purchase and sale on March 14, 2019. They attribute the lack of a property term in the alleged agreement to clerical inadvertence, and submit that the Defendant had no other property which the alleged agreement could refer to. The Defendant claims that she only asked Mr. Chow about his services, which included buying residential homes, and that she never agreed to sell the property. She claims that Mr. Chow tricked and coerced her into signing the alleged agreement by reassuring her that it was not legally binding, and by refusing over several hours to leave her home until she signed. Although the Defendant had been thinking of listing her property, she denies that she agreed to sell it. She further denies that she sold the property below its fair market value of $600,000.00 to
$650,000.00.
40The Plaintiffs claim that the Defendant was satisfied with the agreement and note that her daughter, Lisa, was complimentary towards Mr. Chow in a testimonial video that she made at his request on March 14, 2019 after the agreement was signed. However, the Defendant came to a very different view. Although her initial dealings with Mr. Chow were pleasant and positive, the Defendant came to strongly disagree with his unrelenting insistence that she had sold the property to him. The Defendant later refused to engage with Mr. Chow and grew fearful after he purportedly tried to enter her home without permission.
41Claiming that the Defendant had agreed to sell the property, the Plaintiffs assert that arrangements were made to survey and photograph the property to list and market the home which led them to incur unspecified costs. The Defendant claims that she only agreed to allow a home inspection so that Mr. Chow could evaluate his interest in the property before deciding whether he would enter into a binding agreement of purchase and sale. But instead of attending with a home inspector, Mr. Chow brought a photographer with him to the property on March 18, 2019. The Defendant refused to allow her home to be photographed and stated her unwillingness to sell the property. Mr. Chow responded that the Defendant was legally required to sell the property which was listed for sale that day for $599,000.00. He also claims that he spent time to locate potential buyers on March 21, 2019 before the listing was suspended on March 22, 2019 after the Defendant refused to allow viewings. Although Mr. Chow claims that other efforts were made to market the property and to confirm the particulars for the second mortgage under the alleged oral agreement, the Defendant claims that she stopped engaging with Mr. Chow after he attended her property without notice on March 22, 2019 and tried to enter her home without her permission.
42The Plaintiffs assert that the Defendant was paid part-consideration in the form of a nominal $10.00 deposit pursuant to the agreement of purchase and sale. However, the mere payment of money alone will not qualify as part performance without the kind of detriment that justifies an equitable intervention to avoid unconscionability if the Statute of Frauds is applied: Hunter’s Square at para. 36, citing Hunter v. Baluke (1998), 1998 CanLII 14719 (ON SC), 42 OR (3d) 553 (Gen Div) at 570. Moreover, give the token value of the deposit, which was returned on May 1, 2019, I question whether it would have caused sufficient detriment to implicate any equitable considerations.
43The agreement of purchase and sale provided for the Defendant to receive $491,522.00 as the purchase price and a second mortgage of $35,000.00 that she is said to have requested as part of the agreement. However, none of these funds were ever advanced. As such, I am not persuaded that these terms alone gave rise to acts of part performance warranting equitable relief at this time.
44The Plaintiffs sought to rely on certain communications made on behalf of the Defendant that are said to acknowledge the binding nature of the alleged agreement of purchase and sale. The Defendant claimed that settlement privilege attached to these communications which were made on a without prejudice basis to resolve the dispute over the alleged agreement. In my view, it was implicit that these settlement communications were not to be disclosed if the matter did not settle:
Re Hollinger Inc., 2011 ONCA 579 at para. 16. From the record, I see no basis to find an exception to the inadmissibility of these privileged negotiations to do justice in this case: Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 at paras. 12 and 19. Many parties seek to rely on exchanges made in unsuccessful settlement negotiations to gain a litigation advantage but may not do so as settlement privilege ensures that these communications are inadmissible: Sable at para. 2. Exceptions to the privilege are narrowly construed and given effect only where another policy objective is shown to outweigh any impact to the settlement objective: Singh v. PCPO, 2018 ONSC 203 (Div Ct) at para. 57. The mere fact that a party wishes to use settlement privileged information to support a position in litigation is not a competing public interest that justifies an exception to settlement privilege: Stronach v. Belinda Stronach in her Personal Capacity and as Trustee of the Andrew Stronach 445 Family Trust, 2021 ONSC 5758 at para. 84; Singh at paras. 54-57. On the facts of this case, privilege over the parties’ settlement negotiations was never waived and statements made on behalf of the Defendant during negotiations clearly maintained her position that she was not required to sell the property. In the circumstances, I am not persuaded that these settlement communications should be considered for any admissions made against interests.
45On April 16, 2019, Ms. Wilson emailed Mr. Chow to request a 30 day extension of the closing date from April 30, 2019 to May 30, 2019. The alleged agreement of purchase and sale contained a term to extend the closing date, which provided:
Both parties agree, a maximum of one closing extension from April 30, 2019 to May 30, 2019 will be granted to Seller provided Seller provides written notice in email to Buyer of said extension no less than 14 calendar days before April 30, 2019 (no later than 6PM April 16, 2019).
Although the Defendant had retained counsel who later continued to correspond with the Plaintiffs, Ms. Wilson apparently took it upon herself to email Mr. Chow directly on this occasion for reasons that are unclear.
46On April 22, 2019, the Plaintiffs sought to accommodate the extension request by sending the Defendant an amendment to the alleged agreement of purchase and sale for her to sign to move the closing date to May 30, 2019. However, the Defendant did not sign the extension amendment or personally send an email to extend the closing date pursuant to the extension term in the alleged
agreement. Later, through her counsel, the Defendant asserted that the alleged agreement was null and void because the original April 30, 2019 closing date had passed. Although Ms. Wilson’s email raises some questions, there is no clear indication that the Defendant agreed to extend the closing date or sought to preserve or ratify the alleged agreement.
47There is conflicting evidence on this motion that raises factual and credibility issues which will have to await a determination at trial. That said, there appear to be serious issues with the evidence of part performance led by the Plaintiffs in their effort to take the alleged oral agreement outside the Statute of Frauds. The alleged marketing efforts, which are disputed, seem to be quite modest even when they are considered collectively. From the record on this motion, there are serious issues with the sufficiency of these efforts and whether they unequivocally refer to some dealing with the land: Mountain at para. 82; Deglman at p. 733. In arriving at this, I am mindful of the whole record on this motion including the Defendant’s statements and conduct to oppose the alleged agreement that give important context to key events that occurred in this case.
iii. The Defendant’s Health and Capacity
48The evidence also suggests that the Defendant may have experienced the onset of Alzheimer’s disease and dementia when the alleged agreement of purchase and sale was signed on March 14, 2019. The Plaintiffs deny that the Defendant appeared incapable and submit that she had an opportunity to consult her family about the sale and review the agreement before she signed it. However, the record shows that members of her immediate family had noticed a significant and concerning decline in her cognitive function around the time of the alleged agreement. This raises a serious question as to whether the Defendant appreciated what was being signed, which she asserts was only meant to be a provisional arrangement. There is some evidence that her daughter, Lisa, also has health issues and is a vulnerable person.
49The vulnerability of a party to an agreement is a factor to consider in assessing part performance: Sigrist v. McLean, 2011 ONSC 7114 at para. 66.
iv. The CPL Motion
50On June 21, 2019, the Plaintiffs obtained leave to register a CPL by bringing a motion without notice. The Plaintiffs had been engaged in ongoing discussions with the Defendant who
clearly raised concerns with the alleged agreement of purchase and sale in support of her position that the Plaintiffs had no claim to an interest in the property. Despite this, the Plaintiffs brought the CPL motion without notice and did not disclose the Defendant’s concerns on the motion.
51In my view, the Plaintiffs’ CPL motion should have been brought on notice.
52Rule 42.01(3) provides that a CPL motion may be brought without notice. However, it is well-established that motions without notice should be avoided unless: a) there is such urgency that notice cannot practically be given; or b) there is a real risk that, if notice if given, the defendant would act so as to defeat the plaintiff’s rights. The onus to prove this urgency and risk is on the moving party to the motion without notice: Mao v. Rossi Diaz-Munoz, 2021 ONSC 1929 at para. 20; United States v. Friedland, [1996] OJ No 4399 at paras. 159-160.
53On the Plaintiffs’ CPL motion, the only reason given in Mr. Chow’s supporting affidavit for moving without notice was his alleged belief that the Defendant was trying to sell the property in the midst of litigation by the Plaintiffs to assert their claim to the property under the agreement of purchase and sale. Mr. Chow’s belief was purportedly based on the listing for the property that was posted from March 18, 2019 to March 22, 2019.1
54In my view, the Plaintiffs’ did not meet their onus of proving urgency and risk to warrant bringing the CPL motion without notice. By the time Mr. Chow swore his supporting affidavit for the CPL motion on June 20, 2019, the property was no longer listed for sale as the listing had been suspended on March 22, 2019. The Plaintiffs led no other evidence to suggest that the property was at risk of being sold. More troubling is the Defendant’s allegation that Mr. Chow relied on his own property listing to improperly suggest that his rights to the property were at risk. On this motion, the Defendant led evidence that neither she nor any members of her family had ever listed the property for sale. According to the Defendant, the only plausible explanation for the listing is that Mr. Chow had arranged for it after insisting that the Defendant had to sell the property to him. Notably, on the same day the listing was first posted, Mr. Chow attended the Defendant’s home with a photographer to survey and document the property.
55In addition to finding that the Plaintiffs’ CPL motion should have been brought on notice, I find that there was material nondisclosure by the Plaintiffs on the CPL motion.
56A moving party on a CPL motion without notice is required to make full and fair disclosure of material facts on the motion. A failure to make this disclosure may constitute a sufficient basis for setting aside the CPL. On this point, Rule 39.01(6) provides:
Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.
Material facts are those which may affect the outcome of the motion and must be drawn to the attention of the court. The test for materiality is objective and considers whether the omissions may have impacted the court’s decision: Boal v. International Capital Management Inc., 2018 ONSC 2275 at para. 59; Henein v Alala, 2021 ONSC 5871 at para. 43. A CPL may be discharged for serious non-disclosure even if the plaintiff would otherwise have been entitled to the certificate: Mao at para. 28; Goldberg v. Galluzzo, 2019 ONSC 3960 at para. 18; 790668 Ontario Inc. v. D’Andrea, [2003] OJ No 741 (ONSC) at para. 31.
57In moving for an order without notice, a plaintiff must disclose relevant facts which may explain the defendant’s position if these facts are known to the plaintiff: Anselmini v. Noonan Estate, 2008 CanLII 1833 (ON SC) at para. 10; Bank of Nova Scotia v. Rawifilm Inc., 1994 CanLII 7277 (ONSC), citing Chitel v. Rothbart (1982), 1982 CanLII 1956 (ON CA), 39 OR (2d) 513 (CA) at p. 519.
58In this case, I find that it was improper for the Plaintiffs to have failed to disclose the Defendant’s position (i.e., as set out in her counsel’s letters dated March 29, 2019 and May 1, 2019) that the alleged agreement of purchase and sale was null and void because: a) it lacked a provision that identified the property for the alleged transaction; b) the entire agreement clause meant that the parties were not bound by any unwritten terms; c) the Defendant’s advanced age and issues with dementia left her without capacity to enter into the transaction; d) the Defendant claims that she was subjected to undue influence, that included the buyer’s refusal to leave the property for a period of 5 hours until the Defendant signed the alleged agreement of purchase and sale which indicated issues of duress, undue influence and lack of capacity to contract; e) the named purchaser, “Ontario Corp. No. 002479473”, is not a legal entity and cannot hold an interest in contract; f) a condition for a home inspection was not waived within a stipulated period which caused the transaction to be null and void as of March 21, 2019; g) the purchase deposit was returned; h) the Defendant did not ratify the alleged agreement and expressly rejected it; i) the
caution registered on March 26, 2019 by the Plaintiffs was registered in the name of Goldengrove Investments Inc. which is not a party to the alleged agreement of purchase and sale and held no interest to the property; and j) if the alleged agreement was in fact binding, then the buyer was in breach for not having advanced funds to the seller as required under its terms. Having received correspondence from Defendant’s counsel, the Plaintiffs clearly knew that the facts grounding the Defendant’s concerns with the alleged agreement were serious and reasoned. The Plaintiffs were obliged to disclose the relevant facts to explain the Defendant’s position which, in my view, would likely have impacted the court’s decision on the CPL motion given the cogent nature of these facts and her concerns. As the Plaintiffs did not disclose these points on the CPL motion, I am satisfied that they did not provide full and frank disclosure: Anselmini at para. 10; Chitel at p. 519.
59In my view, the Plaintiffs’ failure to make full and frank disclosure on the ex parte CPL motion was significant and breached Rule 39.01(6). The list of non-disclosed facts is quite lengthy, and included matters that raised serious and compelling concerns that may well have impacted the court’s decision, as the Plaintiffs likely would have realized. A CPL may be discharged for serious non-disclosure even if the Plaintiff would otherwise have been entitled to the CPL: Mao at para. 28; Goldberg at para. 18. Given the serious nature of the Plaintiffs’ failure to give full and fair disclosure, I am satisfied that the CPL should have been discharged on this basis.
60Quite apart from the Plaintiffs’ failure to provide full and fair disclosure, I am satisfied that the CPL should have been discharged on the equities in view of the Perruzza and Dhunna factors.
61The property at issue is not unique. It features a fairly typical residential dwelling in a standard residential subdivision. The purchaser viewed the property as a short-term investment opportunity, and its sole intent in acquiring the property was to immediately sell it to a third-party purchaser for a profit. Even if the alleged agreement of purchase and sale were to be considered as a binding contract for the sale of the property to the Plaintiffs, which is disputed, the Plaintiffs would still have no claim for specific performance as the property is simply not unique. As the property is not unique and the purchaser’s motive to acquire the property was to flip it to a third party for a profit, I find that these considerations weigh heavily in favour of discharging the CPL: Perruzza at para. 20(iii); Dhunna at para. 10.
62In the statement of claim, the Plaintiffs made an alternative claim for damages in the amount of $52,513.00, which they quantified as their alleged lost profits as a result of the Defendant’s refusal to sell the property. It follows that damages are a satisfactory remedy for the Plaintiffs as their interest in the property revolved around turning a profit. Accordingly, I find that this factor should favour a discharge of the CPL: Perruzza at para. 20(iv).
63Based on the foregoing, I conclude that the CPL should have been discharged.
B. Security
64Following the discharge of a CPL, ss. 103(6) of the Courts of Justice Act provides the court with discretion to impose terms, including the giving of security. This provision must be read in conjunction with Rule 45.02, which allows a party asserting a right to a specific fund to seek an order for the funds to be paid into court or otherwise secured on terms that are just.
65Recourse to Rule 45.02 to secure funds is undertaken sparingly and only in limited circumstances where: a) the plaintiff must claim a right to a specific fund; b) there must be a serious issue to be tried regarding the plaintiff’s claim to that fund; and c) the balance of convenience must favour granting the relief sought by the plaintiff: Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., 2012 ONCA 475 at para. 18. Rule 45.02 is a limited exception to the law’s settled aversion to giving a plaintiff execution before judgment, which Goudge J.A. described in Sadie Moranis at para. 17 as follows:
Clearly, pre-trial execution of any kind poses definite problems. Attachment of assets or interference with disposition of assets will often constitute a serious interference with the defendant's affairs. That interference may be more readily justified where the plaintiff's right is specifically related to the asset in question. However, where the plaintiff asserts a general claim and looks to the assets only as a means of satisfying a likely or possible monetary judgment against the defendant, interference with the defendant's assets is more difficult to justify.
66Notably, the test for an order under Rule 45.02 will not be met where the plaintiff’s claim is for damages, even if a specific fund is identifiable in the factual matrix of the litigation, as a claim for damages is not a claim to a legal right to that fund: Sadie Moranis at para. 21, citing Assante Financial Management Ltd. v. Dixon, [2004] OJ No 2237 (SCJ) at para. 28; Khan v. Coloma, 2019 ONSC 7202 at para. 26. By acquiescing to the sale of the property by the third-
party mortgage lender, the Plaintiffs effectively forfeited their claim for specific performance of the alleged agreement of purchase and sale. The remaining relief sought in their statement of claim is their alternative claim for special damages in the amount of $52,513.00, which they quantified as lost profits from the Defendant’s refusal to sell the property under the alleged agreement of purchase and sale. As damages are being claimed and would clearly provide an adequate remedy in this case, the Plaintiffs cannot be said to have a legal right to the proceeds of sale.
67In any event, the parties in submissions largely focussed their arguments on the balancing exercise under the third arm of the analysis which requires a compelling factor on the Plaintiffs’ side to outweigh the Defendant’s ability to deal with her property: Sadie Moranis at paras. 20-21.
68As mentioned above, the Plaintiffs’ only remaining claim is for damages of $53,513.00 which is significantly less than the $272,546.49 in proceeds from the sale of the property that are being held in trust. In the circumstances, I find that it would be unjust to prohibit the Defendant from being able to access the entirety of the proceeds of sale when the Plaintiffs, by their own admission, are only entitled to a fraction of the proceeds of sale at best.
69The Defendant presently lives in a rental apartment with her daughter, Lisa, and has an immediate need for the proceeds of sale to meet her living expenses. The property at issue was her largest asset. As she is presently unable to access the proceeds of sale, it is difficult for her to cover her costs of daily living and ensure that her needs are met. She also requires access to the proceeds of sale in order to pay her legal expenses associated with defending this action. Although it is her intention to move for summary judgment to dispose of the claim, she cannot pay the legal fees to do so without having access to the proceeds of sale.
70The Plaintiffs have not shown that any prejudice would arise from the release of the proceeds of sale to the Defendant. Their only concern relates to the potential of facing the inconvenience of having to enforce any judgment which they may obtain in this action.
71In considering the balance of convenience under the Sadie Moranis test, the Plaintiffs’ conduct in this action should be factored. As set out earlier, I am satisfied that the Plaintiffs did not establish any urgency or risk to justify moving for the CPL without notice and or satisfy their obligation to provide full and fair disclosure of material facts that may have affected the outcome
of the CPL motion. I also accept that the Plaintiffs have not taken any steps to progress this action following the close of pleadings.
72Accordingly, I find that the Plaintiffs clearly have not met the requirements of Rule 45.02 under the Sadie Moranis analysis. In my view, the proceeds of sale being held in trust should be released to the Defendant forthwith.
Outcome
73Based on the foregoing, the motion is granted. I hereby order the proceeds being held in trust from the sale of lands known municipally as 16 Burdy Drive, St. Catharines, Ontario, to be released to the Defendant forthwith.
74If the parties are unable resolve the issue of costs for this motion, the Defendant may deliver costs submissions of up to 2 pages (excluding her costs outline or any offer(s) to settle) within 15 days, and the Plaintiffs may deliver their responding submissions on the same terms within a further 15 days. Reply submissions shall not be delivered without leave.
Doi J.
Date: October 4, 2021
COURT FILE NO.: CV-19-2459-00
DATE: 2021 10 04
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Michael Chow and 2479473 Ontario Inc., c.o.b as Goldengrove Investments Inc. or as Quick Home Buyer, Plaintiffs/Responding Parties
AND:
Regina Russell by her Litigation Guardian, Danielle Wilson, Defendant/Moving Party
BEFORE: DOI J.
COUNSEL: Andrea Mannell,
for the Moving Defendant
Siddharth S. Joshi,
for the Responding Plaintiffs
James Butson,
for the Non-Party,
Home Equity Mortgage Corporation
ENDORSEMENT
Doi J.
DATE: October 4, 2021
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