COURT FILE NO.: CV-20-651791 DATE: 2022 05 09
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ALIREZA ALIZILOUBAF aka ALI ZILOUBAF and 2570701 ONTARIO INC., Plaintiffs
- and -
MOHAMMAD KAZEM ABAZARI also known as ABAZARI MOHAMMAD KAZEM, MASTER VENUS INC., NASSER NEMATI also known as NASSER NEMATISOULDOROGH, MARYAM PIROZRAD, and JOHN DOE, Defendants
BEFORE: Associate Justice Todd Robinson
COUNSEL: A. Kamyab, for the defendants, Mohammad Kazem Abazari and Master Venus Inc. (moving parties) J.D. Martin, for the plaintiffs
HEARD: January 21, 2022 (by videoconference)
REASONS FOR DECISION
[1] The defendants, Mohammad Kazem Abazari and Master Venus Inc. (the “Abazari Defendants”), move for an order paying out the proceeds of a mortgage held by Master Venus Inc., which are currently being held in trust, and for security for costs against the plaintiffs. The plaintiffs have brought a cross-motion to have the funds paid to them, but alternatively argue that the funds should continue to be preserved pending trial.
[2] The plaintiffs previously brought an urgent motion for leave to issue certificates of pending litigation against three properties: Units 102 and 103 of 7191 Yonge Street, Thornhill and 27 Tobruk Crescent, Toronto. In this action, they claim a beneficial interest in Unit 102 (now sold) and Unit 103, alleging that a total of $698,000 has been paid to the Abazari Defendants for that interest, comprised of $498,000 in cash and assignment of a $200,000 mortgage against the Tobruk property. The proceeds of that mortgage are the subject matter of the motions before me.
[3] At the initial return of the plaintiffs’ prior motion, Master Jolley (as she was then titled) granted an adjournment subject to a number of interim preservation terms. Among those terms was an order requiring that the payout amount for the mortgage against the Tobruk property (owned by Nasser Nemati and Maryam Pirozad) would be held in trust “pending further order of this court.”
[4] The plaintiffs’ motion was ultimately argued before Master Sugunasiri (as she then was). By that time, the Tobruk property had been sold and $215,000 was being held in a lawyer’s trust account in satisfaction of the mortgage. Master Sugunasiri dismissed the plaintiffs’ motion and ordered that the plaintiffs pay $11,800 in costs. By the time of the hearing before me, the plaintiffs had not paid the costs award.
[5] In disposing of the motion, Master Sugunasiri made no ruling on the mortgage payout funds, which have continued to be held in trust. It is unclear if payout was raised or argued at the return of the prior motion. Master Sugunasiri’s reasons state that Unit 103 was the only property in issue on the motion before her, so no orders were made with respect to the mortgage funds being held in trust.
[6] Several issues must be decided, as follows:
(a) Is there any basis upon which the funds are properly paid out to the plaintiffs? (b) Did the prior interim preservation order expire upon disposition of the plaintiffs’ motion? (c) Should the funds continue to be preserved pending determination of the parties’ dispute? (d) Does the plaintiffs’ failure to pay the adverse costs award from their unsuccessful motion warrant an order for security for costs?
[7] I am ordering that that the trust funds be paid out to Master Venus Inc., but am not ordering security for costs. I am satisfied that the interim order was not intended to extend beyond disposition of the plaintiffs’ prior motion for certificates of pending litigation and that the requirements for an interim preservation order for the mortgage funds have not been made out. Although I am not granting security for costs, I am exercising my discretion to stay the plaintiffs’ action pending payment in full of the outstanding costs award.
Analysis
[8] As already noted, when the Tobruk property was sold, discharge of the disputed mortgage was secured by payment of $215,000 into a lawyer’s trust account. The mortgage was initially held by 2570701 Ontario Inc. It was assigned to Master Venus Inc. by a transfer agreement executed between the parties. The purpose and circumstances of the mortgage assignment remain disputed in this litigation. The plaintiffs allege that the mortgage was assigned in part consideration for their interest in the Yonge properties. The Abazari Defendants allege that it was assigned as repayment of a debt, as expressly stated in the transfer agreement signed by the parties.
[9] Finally resolving the dispute over the purpose of the mortgage transfer is beyond the scope of the motions before me. That is a matter for trial or summary judgment. However, the parties’ positions and evidence about the transfer are relevant to assessing issues that are before me.
Are the plaintiffs entitled to payment of the mortgage funds?
[10] The plaintiffs’ initial position was that the funds should be paid out to them as the rightful owners of the mortgage funds. However, the plaintiffs have not moved for summary judgment on any portion of their claim. During argument, plaintiffs’ counsel conceded that ordering a payout of the mortgage funds to the plaintiffs was tantamount to execution before judgment. The plaintiffs accordingly did not pursue the relief.
Did the interim order expire?
[11] The Abazari Defendants argue that, since the plaintiffs’ motion was dismissed, the preservation order has effectively expired and the funds may be released. I agree with the plaintiffs’ submission that nothing in the terms of the adjournment order permits release of the mortgage funds upon dismissal of the plaintiffs’ motion. Use of the language “pending further order of this order” clearly makes a further court order a precondition to release of the funds. However, that does not mean that the interim preservation order was intended to continue indefinitely. It is undisputed that the preservation order over the mortgage funds was a term of the original adjournment. It was not relief sought on the plaintiffs’ motion.
[12] I accept that the interim preservation order for the mortgage payout funds was granted for the purpose of preserving the mortgage funds pending disposition of the plaintiffs’ motion for leave to issue certificates of pending litigation. The plaintiffs’ motion was unsuccessful and was dismissed.
[13] Although no order was specifically made for release of the funds, the preservation was not reasonably intended to extent beyond disposition of the plaintiffs’ motion. Since the purpose for interim preservation ceased (even if the preservation order formally did not), it follows that the funds should be released from trust, unless the plaintiffs satisfy the requirements for an interim preservation order under Rule 45.02 of the Rules of Civil Procedure, RRO 1990, Reg 194.
Should the funds continue to be held in trust?
[14] Obtaining an interim preservation order requires that a plaintiff establish three criteria: (i) the plaintiff claims a right to a specific fund, (ii) there is a serious issue to be tried regarding the plaintiff’s claim to that fund, and (iii) the balance of convenience favours granting the relief sought by the plaintiff: Sadie Moranis Realty Corp. v. 1667038 Ontario Inc., 2012 ONCA 475 at para. 18; BMW Canada Inc. v. Autoport Limited, 2021 ONCA 42 at para. 42.
[15] On the first criteria, there is no dispute that the mortgage payout funds are a specific fund.
[16] On the second criteria, I agree with the Abazari Defendants that there is no serious issue to be tried about the plaintiffs’ claim to that fund. The executed mortgage transfer agreement expressly states that the assignment was provided as alternative repayment for a loan to 2570701 Ontario Inc., which was to be registered only if a $200,000 draft could not be cashed by an agreed date. Ali Ziloubaf’s evidence is that there is an error in the language of the transfer agreement, which he says wrongly describes the $200,000 amount as repayment of a loan when it was in fact part payment for purchase of a one-half interest in the Yonge properties.
[17] I accept the Abazari Defendants’ argument that there has been no meaningful explanation from the plaintiffs as to how or why the not insignificant error in describing the $200,000 occurred, particularly in circumstances where both sides were represented by counsel when the transfer agreement was prepared an executed. Those lawyers were the witnesses to the parties’ signatures. Mr. Ziloubaf’s evidence on the erroneous description in the assignment of the $200,000 is self-serving and uncorroborated by any other witness or documentary evidence.
[18] There are also unexplained discrepancies in Ali Ziloubaf’s evidence about the $200,000 transfer. Mr. Ziloubaf’s position in this action and his evidence on this motion is that the $200,000 mortgage over the Tobruk property was assigned as part consideration for the plaintiffs’ one-half interest in the Yonge properties. However, that evidence is inconsistent with Mr. Ziloubaf’s sworn evidence in a prior proceeding.
[19] In an affidavit sworn as a non-party in Court File No. CV-19-625639-00CL, Mr. Ziloubaf describes his currency exchange business and a series of foreign exchange transactions for clients who had placed orders for Canadian dollars and provided equivalent foreign currency. His affidavit appends as an exhibit various FINTRAC reports and proofs of payment, which include a $200,000 draft to Mohammed Kazem Abazari, related transfer details for equivalent foreign currency from Tehran, and a related money exchange transaction confirmation. That evidence and those documents are consistent with Mr. Abazari’s evidence on this motion that he transferred the Iranian Rial equivalent of $200,000 to Mr. Ziloubaf’s representative in Tehran, following which Mr. Ziboulof provided Mr. Abazari with the $200,000 draft. Mr. Abazari’s evidence is that the draft was rejected by his bank, ultimately leading to the mortgage assignment agreement as collateral security.
[20] In reply evidence, Mr. Ziloubaf alleges that Mr. Abazari is “lying” about the alleged transfer of Iranian currency, stating “[t]here had never been rials paid to my account in Iran as alleged by [Mr.] Abazari, and that story was told by [Mr.] Abazari to explain the origin of the $200,000.” However, no explanation has been given for Mr. Ziloubaf’s seemingly inconsistent prior affidavit or the documents appended it, which support Mr. Abazari’s position. The discrepancy remained unexplained when the certificate of pending litigation motion was argued. It still remains unexplained on these motions.
[21] On the third criteria, I find that the balance of convenience favours the Abazari Defendants. Since I am not convinced there is a serious issue to be tried on the purpose for the mortgage assignment, it would be unjust to continue to hold the mortgage funds in trust. There is also no evidence supporting any intention of Master Venus Inc. to dissipate the funds or supporting any genuine concern that Master Venus Inc. will be unable to satisfy a judgment for repayment of the mortgage funds. Evidence before me supports that Master Venus Inc. owns at least two properties, including the disputed Unit 103.
[22] Moreover, the plaintiffs’ entitlement to the mortgage proceeds only arises in their alternative claim for rescission of the mortgage transfer. That claim depends on being unsuccessful in the claim for a declared one-half interest in the Yonge properties. If the plaintiffs are successful in their primary claim, there will be no basis for return of the mortgage funds, which would be part consideration for the ownership interest.
[23] In these circumstances, I find no compelling reason to restrict Master Venus Inc.’s freedom to access and deal with the mortgage funds. Damages are an appropriate alternative remedy to retaining the mortgage proceeds pending trial.
[24] For these reasons, I find that the plaintiffs have not satisfied the requirements for an interim preservation order for the mortgage proceeds. The funds may accordingly be released.
Should the plaintiffs be required to post security for costs?
[25] Rule 56.01(1)(c) of the Rules of Civil Procedure provides that the court may make an order for security for costs “as is just” where it appears that a defendant has an order against the plaintiff for costs in the same or another proceeding that remain unpaid in whole or in part. An order for security for costs should only be made where the justness of the case demands it. The court must consider the justness holistically, examining all the circumstances of the case as guided by the overriding interests of justice: Yaiguaje v. Chevron Corporation, 2017 ONCA 827 at paras. 22-25.
[26] The Abazari Defendants submit that the plaintiffs have failed to pay anything toward the $11,800 costs award. They further submit that an order for security for costs is just because the plaintiffs are not impecunious and their claim lacks merit. The Abazari Defendants seek $150,000 in security for costs.
[27] It is undisputed that the plaintiffs have failed to pay the costs award. They breached a court order and, despite a motion for security for costs being brought, still failed to pay the costs. However, I am not convinced that it is just to award $150,000 in security for costs for default in payment of a $11,800 costs award, whether on a lump sum or staged basis. In my view, I lack a sufficient evidentiary record to fairly assess the merits of the plaintiffs’ claim, so cannot accept the Abazari Defendants’ position that it is meritless. My finding that there is no serious issue to be tried on entitlement to the mortgage proceeds is not itself sufficient to find the case as a whole lacks merit.
[28] Granting security for costs is a discretionary decision. Since I am not satisfied an award of security for costs is just in the circumstances, I am dismissing the Abazari Defendants’ motion insofar as that relief. I am also dismissing related relief to dispense with the requirement for personal service of a notice of examination under Rule 60.18(7) of the Rules of Civil Procedure as it relates to the requested security for costs.
[29] Nevertheless, I am not prepared to ignore the plaintiffs’ unapologetic breach of a court order. Rule 60.12 of the Rules of Civil Procedure gives me given broad authority to sanction the plaintiffs’ failure to comply with the costs order. That includes staying this proceeding or making any other order as is just. Master Sugunasiri (as she was then) did not view it appropriate to make continued prosecution of the action contingent on paying the costs award at the time. However, in my view and in the particular circumstances of this case, it is now appropriate to require that the outstanding costs award be paid before this action proceeds. This action shall accordingly be stayed pending full payment of the outstanding costs award.
Disposition
[30] I accordingly order as follows:
(a) The interim preservation order of Master Jolley dated January 4, 2021 is hereby set aside. (b) The mortgage proceeds in the amount of $215,000.00, currently held in trust by Sheldon Weinless, plus any accrued interest, shall be paid out to the mortgagee, Master Venus Inc., or as it may otherwise direct. (c) This action is hereby stayed pending the plaintiffs full payment of the outstanding costs award of Master Sugunasiri (as she was then) dated July 21, 2021. (d) The balance of the Abazari Defendants’ motion is dismissed. (e) This order is effective without further formality.
Costs
[31] Costs outlines have been exchanged and submitted. I encourage the parties to agree on costs of this motion. If they cannot agree, then written costs submissions shall be exchanged. The Abazari Defendants shall serve any costs submissions by May 25, 2022. The plaintiffs shall serve their responding costs submissions by June 8, 2022. There shall be no reply submissions absent leave of the court. Costs submissions shall not exceed four (4) pages, excluding any offers to settle and case law, and shall be submitted by email directly to my Assistant Trial Coordinator, Christine Meditskos, with proof of service.
[32] Unless costs submissions are exchanged and filed in accordance with the above, the parties shall be deemed to have agreed on costs.
ASSOCIATE JUSTICE TODD ROBINSON DATE: May 9, 2022