Court File and Parties

COURT FILE NO.: CV-20-00002335-0000 DATE: 2022-01-06 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jamar MCNEIL, Plaintiff AND: Vekan KALOUSTIAN and Lousineh MOVSESSIAN, Defendants

BEFORE: Kurz J.

COUNSEL: Jordan Potasky, for the Plaintiff David Wagner, for the Defendants

HEARD: November 8, 2021

Endorsement

Introduction

[1] On October 15, 2021, I granted the motion without notice of the Plaintiff, Jamar McNeil (“Jamar”), for a certificate of pending litigation (“CPL”) against the property located at 77 Wishing Well Drive, Scarborough (“the property”). The Defendants now move to have the CPL set aside. They claim that:

a. Jamar engaged in material nondisclosure to obtain the CPL, b. Jamar lacks assets to meet a damages award for the CPL’s cloud on title on the property should they succeed in this action. c. Jamar improperly seeks to use the CPL as execution before judgment, prejudicing the interests of the Defendant, Lousineh Movsessian (“Lousineh”), the owner of the subject property, described below. d. they have a valid defence to the merits of the claim,

[2] In my October 15, 2021 endorsement, I explained that I granted the order for a certificate of pending litigation because:

The Plaintiff points to a number of badges of fraud found in the transfer of title in a property located at 77 Wishing Well Drive, Scarborough, from the defendants jointly to Lousineh Movsessian alone.

The defendants are spouses. The consideration for the transfer is described in the land transfer tax affidavit as “natural love and affection”.

The transfer took place at a time that the defendant, Vekan Kaloustian, was being sued by the plaintiff in a different action. He failed to file a statement of defence. Had it not been for the pandemic and the practice direction that prevented the noting of default, the Plaintiff would already have been entitled to default judgment on that action.

[3] The Defendants concede that the Defendant, Vekan Kaloustian (“Vekan”), did transfer his joint interest in the property to his wife and co-Defendant, Lousineh, giving her full title to the property. He did so without consideration and after receiving a copy of the statement of claim in a separate action between the Plaintiff and himself (“the main action”). Vekan disputes Jamar’s assertion that he was properly served with that pleading before the transfer of his interest in the property. He says that he found it in a mailbox.

[4] Nonetheless, Vekan asserts that there was a good and innocent reason to transfer his interest in the property to his wife. The bank holding the Defendants’ mortgage on the property had announced their refusal to do any further business with Vekan. They would not renew the mortgage on the property with Vekan’s name on title.

[5] Further, as set out above, the Defendants argue that Jamar failed to raise a number of material facts in the motion without notice before me. That alone, they argue, should cause me to discharge the CPL.

[6] Jamar resists the motion. He denies any misstatements in the materials he relied upon to obtain the CPL. He states that he has a valid claim against Vekan in the main action; one that is likely to succeed. He further asserts that the transfer of Vekan’s interest in the property to Lousineh occurred under very suspicious circumstances. He worries that if the certificate of pending litigation is lifted, no assets will be available to honour any judgment he receives.

[7] For the reasons that follow, I vacate the certificate of pending litigation because of Jamar’s material non-disclosure.

Background

[8] Jamar is the registered owner of a home municipally located at 281 Clinton Street, Toronto (the Clinton home”). Jamar retained “FCI Flooring Oakville” (“FCI”) to perform renovation services on the Clinton home. Jamar and FCI never signed a written contract for those services. Yet many, if not all of the terms of their agreement were incorporated into an unsigned written draft agreement, dated August 14, 2019 (“the unsigned agreement”). Both Jamar and Vekan rely on the terms of the unsigned agreement.

[9] The unsigned agreement called for a total contract price for the renovations of the Clinton home of $200,000. That amount is inclusive of HST and payable over four instalments. But the unsigned agreement did not set out any due dates for those installments or the completion of the work.

[10] One question that will have to be determined in the main action is whether FCI is the business style of Vekan personally, as a sole proprietor, or of a corporation. Jamar paid $150,000 in installments under the unsigned agreement to a corporation, 1950533 Ontario Inc. (“195”). Jamar says that he did so at Vekan’s behest. But he asserts that at all material times, he was dealing with FCI, as the business style of Vekan’s sole proprietorship. He says that he was never informed that he was dealing with a corporation, even though he was instructed to make out his cheques to 195. He points out that the onus falls on Vekan to inform him in advance of entering into the contract if he was asserting that FCI was a corporation, or the business name of a corporation.

[11] Vekan denies personal liability to Jamar. He asserts that Jamar’s contract was with 195. He points out that all payments under the unsigned agreement were made to 195. Thus, Vekan claims that Jamar knew that he was dealing with a corporation and that he is not personally liable for any of Jamar’s claims. The evidence before me in support that claim is far from robust and clear. Even the unsigned agreement makes no reference to a corporation.

[12] The services for which Jamar contracted with FCI were extensive, as follows:

a. Replacement of two sets of staircases; b. Replace the main bathroom; c. Build a new laundry room; d. Remove old kitchen, relocate it, and build new one in another part of the Clinton home; e. Remove and install new front porch; f. Remove and replace all flooring.

[13] When the work set out in the unsigned agreement was not completed at what Jamar claims to be the contracted upon time, December 20, 2019, and after a sub-contractor complained of non-payment by FCI, Jamar fired FCI. He then brought in another contractor to complete the work. On March 10, 2020, Jamar commenced the main action against Vekan.

Pleadings in the Main Action

[14] In the main action, Jamar sues both Vekan, operating as FCI, and 195. He claims damages for a variety of causes of action. Among the remedies he seeks are:

a. $238,977.49 for “fraudulent misrepresentation, breach of contract, and unjust enrichment”, related to the uncompleted renovation work; b. $100,000 for disappointment, distress, upset, frustration, mental distress, and loss of expected enjoyment resulting from the failure of the requested work to be completed properly and in time. c. $250,000 for punitive and aggravated damages for allegedly improper and high-handed conduct. d. A declaration that any judgment in the main action survives Vekan’s bankruptcy, as one founded in fraud.

[15] In essence, Jamar is claiming Vekan, operating as FCI, or in the alternative, 195:

a. failed to perform many of the renovation services set out in the unsigned agreement; b. failed to perform the services contracted for by the agreed upon deadline of December 20, 2019; c. was required to do the services contracted for without the use of subcontractors on the job. But instead, he defrauded Jamar by taking his money and then using sub-contractors. Vekan then failed to either pay his subcontractors the amounts owing to them or complete the work for which he contracted. d. failed to comply with the alleged December 20, 2019 deadline. As a result, Jamar and his wife suffered losses.

[16] In his statement of defence in the main action, Vekan denies personal liability for Jamar’s claim, as set out above. He pleads that 195, operating as FCI, contracted with both Jamar and his wife, Ronica Brown, to perform the services set out in the unsigned agreement. It then performed its work properly. Vekan pleads that the unsigned agreement contained no firm deadlines for the completion of any work set out in the unsigned agreement. But Jamar attempted to unilaterally impose deadlines on FCI for the completion of the renovations, after the fact. Further, Jamar attempted to add further services than those contracted for. That slowed the renovations down. Jamar was then unwilling to pay for those added services.

[17] Regarding subcontractors, Vekan pleads that the unsigned agreement did not forbid the subcontracting of renovation services. Rather, it only states that FCI would not subcontract any “[floor] installers”. He adds that FCI had made arrangements to pay its subcontractors but that it was entitled to charge a markup on their work.

Timing of Steps in the Main Action and this Action

[18] On March 10, 2020, Jamar issued the statement of claim in the main action. His counsel thereupon sent it out for service. Although his counsel’s process server claimed that he personally served Vekan on March 16, 2020, Vekan denies that to be the case and offers compelling reasons to accept that view. However, Vekan admits that he was aware of the main action because a copy of the statement of claim had been left in his mailbox. He does not deny seeing the pleading. He claims that his counsel advised him that he needed not respond to it until he was properly served. Thereafter the pandemic suspension of the courts set in.

[19] On September 17, 2020, Vekan transferred his interest in the property to Lousineh for no consideration but “natural love and affection” (“the transfer”). Five days later, on September 22, 2020, Jamar issued his statement of claim in this action. In his prayer for relief, Jamar seeks a certificate of pending litigation against the property and to reverse the transfer as a fraudulent conveyance. He had yet to obtain judgment in the main action.

[20] As set out above, on October 15, 2021, I granted the Plaintiff’s motion without notice for a certificate of pending litigation.

[21] On October 30, 2020, the Registrar of this court granted Jamar default judgment against the defendants in the main action for $241,988.19. Jamar obtained that monetary judgment even though his claim was not “a debt or liquidated demand in money” per Rule 19.04(1)(a).

[22] In other words, he should not have been entitled to that judgment without a hearing under Rule 19.05, in which he proved his damages. Under Rule 19.06, Jamar would not have been entitled to judgment unless the facts proven in the hearing entitled him to that judgment. The rule reads as follows:

19.06 A plaintiff is not entitled to judgment on a motion for judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment.

[23] When Jamar refused to set aside the default judgment, Vekan was forced to move to set it aside. On March 11, 2021, Conlan J. ordered that the default judgment be set aside.

Issues

[24] This motion raises the following Issues:

a. Should the CPL be set aside based on Jamar’s failure to make full and complete disclosure in the ex parte motion? If not, b. Should the CPL be set aside because of the failure to meet the test for a CPL based on an underlying action for a fraudulent conveyance when no judgment has been issued?

Issue No. 1: Should the CPL be set aside based on Jamar’s failure to make full and complete disclosure in the ex parte motion?

Jurisdiction to Grant and vacate a Certificate of Pending Litigation

[25] The jurisdiction to issue a CPL is found in s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”), which states:

Certificate of pending litigation

103 (1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).

Registration

(2) Where a certificate of pending litigation is issued under subsection (1) it may be registered whether the land is registered under the Land Titles Act or the Registry Act.

[26] Under Rule 42.01(1) of the Rules of Civil Procedure, a certificate of pending litigation (Form 42A) under section 103 of the CJA may be issued by a registrar, but only under an order of the court.

[27] The jurisdiction to discharge a CPL is found in CJA s. 103(6), which states:

Order discharging certificate

(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.

[28] A motion to discharge a CPL is made under Rule 42.02. That rule does not set out the test for the discharge of certificate of pending litigation. It only states:

Discharge of Certificate

42.02 (1) An order discharging a certificate of pending litigation under subsection 103 (6) of the Courts of Justice Act may be obtained on motion to the court.

The Duty of Candour in Motions Without Notice

[29] A party seeking to obtain a CPL may do so without notice under Rule 42.01(2). However, it is not mandatory that the motion proceed without notice. But, as set out below, a party who chooses to move without notice must, at their peril, accept the higher standards of candour that apply to such motions.

[30] Under Rule 39.01(6), a party bringing a motion or application without notice has a duty to “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.”

[31] This obligation applies to the party who brings the motion as well as the witnesses upon whom the moving/applying party relies: Moses v. Metro Hardware and Maintenance Inc., 2020 ONSC 6684, at para. 25.

[32] At para. 26 of Moses v. Metro Hardware, Myers J. added that a motion without notice is different than an ordinarily contested one. The one-sided format of the motion raises the moving party’s obligation of candour and requires that party to reduce the zeal with which the case is presented. As Myers J. wrote:

26 The party who moves without notice must be fair. The regular zeal that is perfectly appropriate in face of an equally zealous adversary does not apply when a party chooses to go before a judicial officer without anyone else present to keep his or her zealousness in check.

[Emphasis in original.]

[33] At paras. 27-30, Myers J. adopts the reasoning of Sharpe J., as he then was, in United States v. Friedland, [1996] O.J. No. 4399 (Ont. Gen. Div.). There, at para. 36, Sharpe J. approved this statement, delineating the breadth and scope of the moving/applying party’s duty of candour from “the leading English text, Gee, Mareva Injunctions and Anton Piller Relief (3d Edition) 1995” at p. 98:

. . . The duty extends to placing before the court all matters which are relevant to the court’s assessment of the application, and it is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same. The test as to materiality is an objective one, and it is not for the applicant or his advisers to decide the question; hence it is no excuse for the applicant subsequently to say that he was genuinely unaware, or did not believe, that the facts were relevant or important. All matters which are relevant to the ‘weighing operation’ that the court has to make in deciding whether or not to grant the order must be disclosed.

[Emphasis added by Meyers J.]

[34] What that means, as Sharpe J. stated, was that

27 . . . That party is not entitled to present only its side of the case in the best possible light, as it would if the other side were present. Rather, it is incumbent on the moving party to make a balanced presentation of the facts and law. The moving party must state its own case fairly and must inform the Court of any points of fact or law known to it which favour the other side. The duty of full and frank disclosure is required to mitigate the obvious risk of injustice inherent in any situation where a Judge is asked to grant an order without hearing from the other side.

[35] To place some teeth into this obligation, where the moving party in a motion without notice is found to have omitted or misrepresented material facts, the responding party is entitled to have the order set aside: United States v. Friedland, at para. 28.

Alleged Want of Full and Frank Disclosure

[36] In arguing that Jamar failed to make full and frank disclosure when obtaining the CPL on the property, the Defendants allege the following misstatements or omissions:

1. Vekan was not “indebted” to Jamar at the time of the CPL motion, as he claimed in his supporting affidavit for that motion. Jamar had no judgment against Vekan. In fact, his claim against Vekan was for an unliquidated rather than a liquidated sum. In other words, Jamar misrepresented the nature of his claim; implying that it was a debt when he had yet to prove that any money was owing to him.
2. Although Jamar swore that he had sufficient assets to meet a potential judgment for damages arising from the improper registration of the CPL, that was not the case. He failed to disclose that a $1.6 million charge had been registered against the property, when he had purchased the property for that same amount about a year earlier.
3. Ronica is a co-owner of the Clinton home (even though she is not a party to either this or the main action).
4. The unsigned agreement, which Jamar attached to his affidavit, is, in fact just that, not signed, a fact that Jamar failed to mention.
5. Jamar made all payments under the unsigned agreement to 195 rather than Vekan.
6. The unsigned agreement contained no deadline for completion or “time is of the essence” term;
7. The unsigned agreement does not contain a term forbidding the subcontracting of any renovation services.

Jamar’s Candour Regarding the Nature of his Claim

[37] I agree that Jamar failed to be fully candid about the nature of his claim when he described Vekan as being “indebted” to him when he transferred the property to Lousineh. That statement was not accurate. In fact, Jamar relied on that notion of Vekan being indebted to him when he originally obtained a default judgment based on a claim for “a debt or liquidated demand in money” under Rule 19.04(1)(a).

But the fact that Jamar had failed to obtain a judgment against Vekan for unliquidated damages claim was clear in Jamar’s motion materials. His use of the term “indebted” represented hyperbole rather than misrepresentation. He should have been more “fair” and less “zealous”, as Myers J. put it in Moses v. Metro Hardware, in describing his claim. But that finding, itself, is not conclusory. Nonetheless, as set out below, it does point to other areas in which Jamar could have been more fair and less zealous in his presentation in the original CPL motion.

Jamar’s Candour Regarding his Ability to Meet any Damages

[38] Regarding his ability to meet any damages claim from Lousineh should this action be dismissed, Jamar swore in his affidavit in support of a CPL: ”should I be mistaken in my assertion that a certificate of pending litigation is appropriate I have more than sufficient assets to compensate the Defendants for any damages which may have resulted.” But as Vekan points out, that fact is far from clear, even from the materials now before me.

[39] In his counsel’s argument, Jamar asks me to assume and even take judicial notice of the fact that property values in Toronto have substantially increased since the time that he and Ronica purchased the Clinton home. Thus, the facts that he purchased the home for $1.6 million and then placed a $1.6 million mortgage against the property does not mean that he had no assets available to meet a damage award to Lousineh. The fact that he omitted mention of that mortgage in the body of his affidavit was immaterial, he says. He did attach the parcel register for the Clinton home to his affidavit, which does show the registration of the $1.6 million charge on the bottom of one page.

[40] Jamar argues that I should find, notwithstanding the absence of a reference to that mortgage in the body of his affidavit, that the growth of property values in Toronto meant that there was sufficient equity in the Clinton home to meet any damages claim.

[41] Jamar also filed a supplementary affidavit in this motion, dated November 2, 2021, in which he claims that he has at least $300,000 in equity in the Clinton home. He attaches a mortgage statement from his bank, showing that only $1,167,093.82 was owing on his mortgage. But the mortgage itself, according to the parcel register, has a face amount of $1.6 million, while the mortgage statement says that the original mortgage amount was $1,250,000. Jamar fails to explain the discrepancy.

[42] In considering all of the facts set out above, I find that Vekan has a point. Jamar baldly claimed in his affidavit that he had sufficient assets to meet a judgment, but on the evidence I cannot say that that is the case. Even with regard to his inclusion of the parcel register as an exhibit to his affidavit in support of a CPL (Exhibit “N”), he did not draw the court’s attention to the existence of the mortgage. He did not, to paraphrase the words of Sharp J., above, inform the Court of a material point of fact which favoured the Defendants. The fact that the parcel register was hidden in plain sight, as one of the exhibits to Jamar’s original affidavit does not relieve him of his obligation to be fully candid with the court. Jamar stated in his affidavit that the parcel register was attached to his affidavit because it “shows that I am the sole owner of the house”. He said nothing about the mortgage. Even now, with his supplementary affidavit and mortgage statement, the evidence in support of his claim that he has sufficient equity in the Clinton home to meet any damages claim by Lousineh is ambiguous and far from determinative.

Jamar’s Candour Regarding his Cheques made out to 195

[43] Vekan claims that Jamar failed to advise the court that he was asked to make all payments to 195. That claim is incorrect. Jamar admits that his cheques were made out to 195 but says that he did so based on Vekan’s (unstated) representations. There is a conflict about Vekan’s personal liability to Jamar’s claim. But Jamar did admit to having endorsed his cheques to 195. There was no want of candour on that front.

Jamar’s Candour Regarding the Fact that the Unsigned Agreement is in Fact Unsigned

[44] While Jamar referred to the unsigned agreement and even attached it as an exhibit to his affidavit, he failed to point out to the court that it was not signed. Instead, his description of it implied that it was signed. He deposed at para. 10 of his affidavit:

10. By way of agreement dated August 14, 2019, a copy of which is attached as Exhibit “B”, Vekan, under the unregistered business names of FCI Flooring Oakville and FCI & Flooring Oakville, entered into a contract with me for renovations of my family home located at 281 Clinton Street, Toronto, Ontario (“281 Clinton”).

11. The Agreement was entered into at 281 Clinton following meetings between the parties and my wife, Ronica Brown…

[45] The unsigned nature of the agreement, like the mortgage in the parcel register for the Clinton home, was hidden in plain sight. Not being alerted to the issue, the court had no reason to check for signatures on the agreement attached to Jamar’s affidavit. Again, there was a lack of candour in fully setting out all relevant facts, on both sides, regarding that agreement.

Jamar’s Candour Regarding his Claim that there was a Deadline for the Completion of Vekan’s Performance of the Unsigned Agreement

[46] Jamar makes much in his original affidavit about Vekan’s delays in completing his work. He claims that Vekan represented that all work would be completed by December 20, 2019. He claimed that Vekan’s failure to complete the contracted work on time was part of his claim of a fundamental breach of contract.

[47] But while making that claim, Jamar failed to cite the fact that the unsigned agreement, upon which Jamar relied in large measure in the main action, had no deadline for the completion of the work. Nor did it have a time is of the essence term. Those omissions are material.

Jamar’s Candour Regarding his Claim that the Unsigned Agreement Prohibits the use of Subcontractors

[48] Jamar claimed that one way in which Vekan breached the unsigned agreement was the use of subcontractors, which he claims were not allowed under the terms of the unsigned agreement.

[49] But as set out above, the unsigned agreement only referred to a limited scope in which contractors would not be used in the renovation of the Clinton property. Again, it only states: “FCI & Flooring does not subcontract any installers, all installers are insured bonded and work solely for us” [emphasis added]. That is far from a blanket prohibition on the use of subcontractors. Once again, the truth may have been hidden in plain sight, but that truth was not brought to the court’s attention.

Conclusion Regarding Candour in Jamar’s Materials

[50] Jamar chose to bring his motion for a CPL without notice, as he was entitled to do. But he was also entitled to bring it with notice. He would have done better to have done so.

[51] Jamar’s evidentiary approach would have been appropriate had he moved with notice for the CPL. He could have put his best arguments forward, and provided that he did not mislead the court, he need not have offered the other side of the story. But that was not the path he took. He chose the path that imposed upon him the duties of fairness and candour in return for the right for an uncontested hearing.

[52] Jamar may have felt that the information that he omitted to include in his affidavit was not material. But the choice was not his to make. As Sharpe J. wrote in United States v. Friedland, citing Gee again, at para. 36:

The duty extends to placing before the court all matters which are relevant to the court's assessment of the application, and it is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same. The test as to materiality is an objective one, and it is not for the applicant or his advisers to decide the question; hence it is no excuse for the applicant subsequently to say that he was genuinely unaware, or did not believe, that the facts were relevant or important. All matters which are relevant to the 'weighing operation' that the court has to make in deciding whether or not to grant the order must be disclosed.

[Emphasis added.]

[53] Here some of the omissions cited by Vekan were material while others were not. Had this motion been brought on notice on the material presently before the court, Vekan may have succeeded. But that is not the test that I must follow. Rather, as Myers J. described them, the questions that I must answer are set out below:

31 The question then is whether the plaintiffs presented their case fairly and made full disclosure of all material facts. Did they recognize that they could not just present their own case in the best possible light, but that they were duty-bound to make a balanced presentation of both sides’ cases? Did they fulfil their obligation to inform the court of all material facts known to them that favour the other side? Did they disclose all facts that the Master might consider relevant as part in her “weighing operation”?

[54] In looking at Jamar’s affidavit in support of his CPL motion, I cannot say that he made full disclosure of all material facts. I cannot say that his presentation was balanced. I cannot say that Jamar informed the court of all materials facts he knew which favoured the Defendants or that I might consider in my “weighing operation” regarding the facts and law in this case. Had I been given the opportunity, I may not have weighed them as the Defendants now ask me to do. But I would have had the opportunity to weigh them.

[55] There is a reason that courts must be rigorous in enforcing the duty of candour in motions without notice. Without that duty, the excluded responding party to such a motion would be at the mercy of the one-sided materials of the zealous moving party. What protects the absent responding party to such a motion is the duty of fairness and candour. That duty also protects the process by which those who truly require and are entitled to an ex parte remedy are able to obtain one.

[56] It is said that it is process which applies the blindfold of fairness to justice. It is what makes court proceedings fair and impartial. In order to protect the process that allows ex parte motions, this court must offer a meaningful consequence for the breach of that duty. At para. 28 of United States v. Friedland, Sharpe J. described the stringent remedy of vacating an ex parte order at para. 28 as “the price the Plaintiff must pay for failure to live up to the duty imposed by the law. Were it otherwise, the duty would be empty, and the law would be powerless to protect the absent party.”

[57] Here, looked at as a whole, Jamar’s failures to meet his duty of candour are sufficient that the appropriate remedy is to discharge the CPL.

Issue No 2: Should the CPL be set aside because of the failure to meet the test for a CPL based on an underlying action for a fraudulent conveyance when no judgment has been issued?

[58] Having found that the CPL must be discharged for material non-disclosure, it is not necessary to go further. However, in case I am wrong, I nonetheless find that this is a case where the CPL should nonetheless be discharged.

The Applicable Test

[59] The general test to obtain a CPL was set out by Master Donkin in 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (“Dhunna”). There, in a review of the applicable caselaw, he set out eight factors that a court may consider in determining whether to grant a certificate of pending litigation where an interest in the property is claimed. Commencing at para. 10, he set those factors out as follows:

1. whether the plaintiff is, or is not a shell corporation
2. whether the land is, or is not unique (ibid) bearing in mind that in a sense any parcel of land has some special value to the owner.
3. the intent of the parties in acquiring the land.
4. whether there is an alternative claim for damages
5. the ease or difficulty of calculating damages.
6. whether damages would be a satisfactory remedy.
7. the presence, or absence of another willing purchaser.
8. the harm done to the defendant if the certificate is allowed to remain, or to the plaintiff if the certificate is removed, with or without the requirement of alternative security.

[60] The Dhunna test does not consider the right to obtain a CPL in the face of an alleged fraudulent conveyance. Under the Fraudulent Conveyances Act, R.S.O. 1990 c. F.29, s. 2:

Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

[61] The test to obtain a CPL based on an allegedly fraudulent conveyance where no judgment has been granted in the underlying proceeding was set out in Grefford v. Fielding, 2004 CarswellOnt 1181 (S.C.J.). There, R. Smith J. pointed out the extraordinary nature of the remedy of a CPL when judgment has not yet been granted. He wrote:

25 If Mr. Fielding had not transferred his interest in the matrimonial home to his wife, the Greffords would not have been able to obtain a CPL against Mr. Fielding’s interest in the jointly owned matrimonial home, before obtaining judgment, as the Greffords made no claim to an interest in this land in the main action. The laws of Ontario do not prevent a defendant from continuing to deal with his or her assets after a claim has been made and before judgment is obtained. A defendant to any claim is permitted to sell any interest he or she may have in land. In order to obtain a CPL in an action alleging a fraudulent conveyance of land, before the claimant in the main action has obtained a judgment, where no interest in land is claimed in the main action, requires special circumstances to fairly balance the interest of both parties.

[62] After reviewing the applicable case law, R. Smith J. set out the test on such a motion as follows:

26 I have reviewed the relevant cases provided by counsel, and I find that in order to obtain a CPL in an action claiming to set aside an alleged fraudulent transfer pursuant to the Fraudulent Conveyances Act, i) before obtaining judgment in the main action, and ii) where the claim in the main action does not concern an interest in the land allegedly fraudulently transferred, the following legal tests should be met:

(i) The claimant must satisfy the court that there is high probability that they would successfully recover judgment in the main action; and (ii) The claimant must introduce evidence demonstrating that the transfer was made with the intent to defeat or delay creditors; evidence that the transfer was for less than fair market value lightens the burden; and (iii) The claimant must demonstrate that the balance of convenience favours issuing a CPL in the circumstances of the particular case.

[63] That test was approved by Sachs J., sitting as a single judge in the Divisional Court, in Claireville Holdings Ltd. v. Botiuk, 2015 ONSC 694, at paras. 17-18.

[64] Sachs J. also stated at para. 18 that the test when a judgment has been granted in the underlying action is a different one. It is the one approved by the Divisional Court in York University v Markicevic, 2014 ONSC 3227 (Ont. Div. Ct.), at para. 8, that is a “triable issue respecting the fraudulent nature of the conveyance”.

[65] The Dhunna criteria have been considered on motions to discharge certificates of pending litigation: see: Gong v. Neuhaus Management Ltd., 2021 ONSC 531, at para. 57. That has even been the case when, unlike Dhunna, the action is not one for specific performance. In that event, the court considers only those Dhunna factors which apply: see for example, Lio v. Jescan Leasing Inc., 2012 ONSC 7318, at paras. 44-45.

[66] All of that being the case, in a motion to discharge a certificate of pending litigation based on an action for a fraudulent conveyance when no judgment has been issued would logically follow the three-part test set out in Grefford v. Fielding.

Analysis

[67] Here, based only on the limited evidence before the court at this time:

a. Vekan does not appear to have a strong case to deny personal liability for Jamar’s claim. There is, for example, no reference to a corporation in the unsigned agreement, upon which both parties rely. b. But, even if Vekan is found to be the proper defendant in the main action, that does not mean that there is a “high probability” that Jamar will succeed in obtaining judgment against him. I say this because: i. One of the key issues for Jamar is the notion of a deadline for the completion of the work. Yet, as set out above, the unsigned agreement contains no timelines, let alone deadlines for the completion of services. ii. Further, there is no time is of the essence term in the unsigned agreement. iii. In other words, there is a real possibility that a court could find that Jamar fired Vekan and/or 195 prematurely. A number of authorities find that, absent fundamental breach or urgency, an owner is required to allow a contractor a reasonable opportunity to correct any deficiencies in their work before they can claim damages for the cost of remediating those deficiencies: Rocksolid v Bertolissi, 2013 ONSC 7343, at paras. 78-99 and 117-118; DiBella Construction Ltd. v Cloud, 2015 ONSC 7544, at para. 7; Beta Construction Inc. v Chiu, 2015 ONSC 5288, at para. 86. iv. Similarly, the complaint about the use of subcontractors is not borne out by the plain wording of the unsigned agreement; v. The concern about the non-payment of subcontractors is not borne out by the registration of any construction liens against the Clinton home. vi. While much of Jamar’s claim is made out in fraud, the bar to meet the level of fraud is a very high one. While he may well have a claim against Vekan for breach of contract, the evidence before me does not demonstrate that Jamar has a very strong case in fraud or fraudulent misrepresentation. vii. In light of the factors set out above, Jamar’s claims for damages appear to be questionable. c. Clearly Vekan transferred his interest to Lousineh for no consideration. That makes Jamar’s burden lighter. But the evidence on which Jamar relies to demonstrate that the transfer was made with intent to defeat his claim is the circumstantial evidence of the timing of the transfer. But that transfer occurred a number of months after Vekan learned of Jamar’s claim against him. Unlike many such cases, Vekan raises at least a plausible explanation for the transfer: his bank’s refusal to do further business with him and to renew its mortgage when it expires. The fact that the mortgage would not immediately mature diminishes the argument somewhat but does not eliminate it. d. If I were required to decide, I would, for all of the reasons set out above, find that the balance of convenience favours Vekan and Lousineh. Jamar’s case against Vekan is far from clear. He has been overly zealous in obtaining the CPL and arguably in his pleadings in the main action. He is not entitled to execution before judgment. But his pursuit of a CPL strongly raises the concern that that is exactly what he seeks.

Conclusion

[68] For all of the reasons cited above, I order that the CPL be immediately vacated.

Costs

[69] The parties should attempt to resolve the issue of costs of this motion on their own. If they are unable to do so, Vekan and Lousineh may file costs submissions of up to three pages, double-spaced, one-inch margins, plus a bill of costs/costs outline and offers to settle within 14 days of the release of this endorsement. They need not include the authorities upon which they rely so long as they are found in the commonly referenced reporting services (i.e., LexisNexis Quicklaw, or WestlawNext) and the relevant paragraph references are included. Jamar may file his responding submissions, upon the same terms, fourteen days later. No further submissions will be accepted unless I request them. If I have not received any submissions within the time frames set out above, I will assume that the parties have resolved the issue and will make no costs order.

“ Marvin Kurz J. ” Electronic signature of Justice Marvin Kurz, Date: January 6, 2022