COURT FILE NO.: CV 22-681790
MOTION HEARD: 2022-07-08
DATE of DECISION: 2022-07-08
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CYRIL HUNT RAJAKUMAR, Plaintiff
- and -
MARYDEL HOMES (BEAVERTON) INC., Defendant
BEFORE: Associate Justice Josefo
COUNSEL: R. Hettiarachchi, for the plaintiff, moving party.
D Best, R. Del Vecchio and D. Guerrisi for the defendant, responding party.
HEARD: July 8, 2022 (by videoconference)
DATE of DECISION: July 8, 2022
ENDORSEMENT
What the Motion is About – an Urgent CPL Application:
[1] The Plaintiff, a licenced Real Estate Broker, moves urgently, with notice, for leave to register a Certificate of Pending Litigation (“CPL”) on a property municipally known as 4 Terry Clayton Avenue, Beaverton, Ontario, in a development called, Seven Meadows (“property”). Plaintiff claims an interest in this property by way of a claim in the statement of claim for, inter alia, specific performance.
[2] The urgency of this motion is that the property, which at one time plaintiff was to purchase from the defendant development company Marydel Homes (Beaverton) Inc. (“Marydel”), is now listed for sale to a third party, with that sale closing on July 8, 2022, thus, later today. Plaintiffs had on June 23, 2022 placed a caution on title of the property.
Procedural Background:
[3] Procedurally, the plaintiff inadvertently purported to bring this matter to Civil Practice Court (“CPC”). In his July 5, 2022 endorsement, Justice Myers directed the parties to this court, where such matters have long been addressed. On the afternoon of July 6, having agreed to add this matter to my July 8th regular motions list, I convened a case conference with counsel. All counsel at that time helpfully set the table with useful factual information. Settlement efforts were also made, which were ultimately unsuccessful.
[4] The motion was argued today, with argument concluding at 1:00PM. Given the necessity for these reasons to quickly issue, counsel will understand that, while I have considered all their well-made submissions, and the voluminous materials, I will not address all of this in my disposition of this matter.
Facts Underpinning the Application:
[5] The dispute arises out of a real estate transaction which was terminated by defendant. The plaintiff and Marydel had on October 18, 2016 entered into an Agreement of Purchase and Sale (“APS”) for the property, which plaintiff was prepared to purchase on a pre-construction basis. Marydel terminated the APS on February 25, 2022, asserting that the reason for the termination was fraud on the part of the plaintiff. The February 25th notice of termination reads as follows:
Upon reviewing and verifying the mortgage approval you have submitted to us, for the Agreement of Purchase and Sale ("APS") mentioned above, it has come to our attention that the approval is indeed FRAUDULENT. We consider this an act of bad faith on your part. Upon consulting our legal department we have decided to terminate the above APS immediately...
[6] Schedule X of the APS provides, at clauses 1, 4 and 29, the following which I find particularly relevant in this proceeding:
In the event the total purchase price is to be paid by cash of certified cheque as hereinbefore indicated, all references and provisions relating to first mortgage financing are hereby deemed to be deleted herefrom. In this Agreement "first mortgagee" shall mean the lender designated by the Vendor
(a) ..... The obligation to assume the first mortgage on the terms hereinbefore set forth may not in any manner be waived or altered except in accordance with the provisions of this Agreement, and, further, the Purchaser may not complete this transaction on an all cash basis without the Vendor first having given, in its sole and uncontrolled discretion, written consent thereto.
The Purchaser shall provide to the Vendor, in writing, upon firming an agreement of Purchase and Sale a confirmation of mortgage approval from a chartered bank or some other recognized financial institution. [bolding added].
[7] The unchallenged affidavit testimony of Vito Montesano, the President of Marydel (affidavit sworn June 29, 2022) is that in or about December 2021, he became aware of purchasers submitting fraudulent documents at a different development, Eastrose Homes. Thus, Montasano directed his staff to verify for compliance all of Marydel’s pre-construction APS’s and, specifically, to contact the lender identified on the mortgage approval documents to verify the validity of such approvals.
[8] Marydel realized on January 31, 2022 that the plaintiff had not submitted a mortgage approval to comply with section 29 of the APS. On February 1, 2022, plaintiff was sent a registered letter seeking confirmation of such mortgage approval. On February 8, 2022, plaintiff provided a mortgage approval from a brokerage, which approval was also dated February 8th. Yet, Marydel did not accept this, as the brokerage firm was neither a “chartered bank nor other recognized financial institution”, in its view. Thus, Marydel, at 10:10AM on February 9, 2022, emailed the plaintiff, seeking his compliance with clause 29, above (see Exhibit G to the plaintiff’s affidavit commissioned on June 24, 2022). Less than seven hours later that same day, in an email sent at 4:31PM, the plaintiff purportedly did so (see Exhibit D to the Traverso affidavit sworn June 29, 2022). His responding email to Mr. Zega at Marydel stated:
“Please find the attached approval letter”.
[9] Attached to his email was what plaintiff represented to defendants was his mortgage approval from Scotiabank. With the recognized Scotiabank logo in red on the letterhead, the February 8, 2022 official-looking correspondence purportedly from Scotiabank read as follows:
February 08, 2022
Cyril Hunt Rajakumar [address omitted],
ON ., [postal code omitted]
Dear Mr. Rajakumar, Re: Mortgage Approval for Marydel Homes (Beaverton) Inc. - Part Lot 14, Concession #6 (Thorah), Plan 40M-1020, Lots 19-29 - Beaverton, ON. We would like to thank you for choosing the Bank of Nova Scotia to service your mortgage needs. You have been approved for a mortgage of up to $415,920.00 subject to the stipulations appended below:
• Property meeting SMC appraisal requirements confirming purchase price of $519,900.00
• Maximum allowable Loan to Value (LTV) is 80%
• 5 year Fixed (closed) rate of 4.29%
• Amortization period not exceeding 30 Years
• Employment verification
• Down payment verification
The estimated closing date of the property is November 30, 2022 and your interest rate will be set 90 days prior to the confirmed closing date, if the posted rate at that time is lower than 4.29%.
We like to take this opportunity to congratulate you for your business. Should you have any questions or concerns, please do not hesitate to contact me.
Yours truly,
[electronic signature]
Ronald Bryant
Phone: (416) 821-8500
Fax: (416) 439-3387
Email: ron.bryant@scotiabank.com
[10] Another Marydel employee, unaware at that time that plaintiff had sent in what he represented to Marydel was the mortgage approval, on February 15, 2022 sent a registered letter which again requested the confirmation of mortgage approval. The registered letter of February 15, 2022 was very clear that this was a “final notice” for the plaintiff to cure its “material breach” of his APS obligations, noting that this second and final warning was provided in “good faith” and with the expectation that, by the February 19th deadline, there would be compliance, failing which the APS would be terminated without further notice.
[11] In any case, the affidavit evidence is that, after receipt of the purported Scotiabank letter, Marydel staff attempted for some days to verify its legitimacy. Ultimately, it was concluded on February 25, 2022 that the individual who signed the letter, Ron Bryant, was not an employee of Scotiabank. The above-referenced February 25, 2022 letter terminating the APS for fraud was thus sent.
[12] Subsequently, but not before he was asked for the mortgage approval, the plaintiff told Marydel that he would purchase the property by paying in cash. After the termination of the APS, plaintiff sent a supposed confirmation of his financial capacity in that regard. In neither of his affidavits, however, does the plaintiff provide any correspondence or other information showing that he had ever agreed with defendant to pay the balance owing in cash before he was asked, or even contemporaneously when he was asked for the confirmation of mortgage approval. Rather, in response to those requests, he simply sent in the two confirmations, purporting to adhere to his contractual obligations set out in the APS.
[13] Paragraph 10 of plaintiff’s affidavit commissioned on June 24, 2022 (the date of affirming remotely is inadvertently left blank), moreover, and I find deliberately and thus disingenuously, omits from its reproduction of clause 1 of Schedule X the portion I have bolded above in these reasons. Yet as Montesano clearly sets out in his affidavit, and as I agree given it is obvious, this portion of clause 1 meant the developer’s selected first mortgagee. Similarly, the plaintiff does not reproduce or discuss in his affidavits the relevant portion of clause 4 of Schedule X which, again, I bolded above. He also does not provide any evidence of written consent which APS clause 4 required for an all-cash transaction.
[14] In his first affidavit (June 24th), the plaintiff also asserts that, as he had intended to pay cash for the property (albeit never seemingly sharing this intention with or obtaining approval from the developer until after the termination of the APS), the demands for confirmation of mortgage approval represented “unreasonable demands and expectations” (paragraph 14). What the plaintiff does not discuss, however, in this affidavit is that he is a licenced realtor, and indeed, a real estate broker (yet not a broker of record, as he explains in his third affidavit, while describing therein being a very successful and experienced real estate broker). That the plaintiff is a successful and experienced realtor is in my view an important fact given the allegation of fraud, which fact defendant first put into evidence with plaintiff subsequently addressing in his subsequent affidavits.
[15] What is also missing from all three of the plaintiff’s affidavits is any explanation of the mortgage approval process he allegedly underwent. In less than seven hours from when he was asked, plaintiff obtained and submitted a mortgage approval letter that looked genuine, down to the bank logo in red. But for the defendant’s diligence, it would have been relied upon. Yet, it was, as even counsel for the plaintiff admits, “false”. There is no evidence from the plaintiff of what steps he took with his mortgage agent, what applications he completed for Scotiabank, or even the name of his mortgage agent, who plaintiff blames despite in his third affidavit stating that he “trusted” the unidentified individual. There is also no explanation for the basis for that trust: for how long or on how many transactions had the plaintiff worked with this individual; what, if any, documents this individual asked him to complete, or indeed, any evidence in this regard at all.
[16] Yet the plaintiff, by his own evidence, is an experienced realtor. He also in his third affidavit describes graduating University in Ottawa as a computer engineer. The plaintiff, thus, could hardly be taken to be a neophyte or unsophisticated in matters involving real estate.
[17] The property was subsequently re-sold for approximately double what the plaintiff had agreed to pay for it in 2016.
The Test for a CPL: Applying the Law to the Facts
[18] I have reviewed the factums from both sides which were helpful, as were their oral submissions. Given, again, the urgency of this matter, a brief legal overview of the principles that are well known to all counsel, will have to suffice.
[19] Section 103 of the Courts of Justice Act (“CJA”), in conjunction with Rule 42, provides for the authority to issue and discharge a CPL. The test to obtain or discharge a CPL involves several hurdles. These are summarized in Perruzza v. Spatone, 2010 ONSC 841, [2010] O.J. No. 493, ONNSC 841. First, the moving party must demonstrate a reasonable claim to an interest in land. If there is a triable issue that there is an interest in land, this threshold has been met.
[20] In this case, this dispute clearly involves land. The threshold is, despite the able arguments of Mr. Best, arguably met. For purposes of this decision, I need not rule on the Non-Registration Clause and determine if it is or is not sufficiently clear to be enforceable. Instead, I come to my conclusions on different grounds.
[21] Other factors from Peruzza, and from Bains v. Khatri 2019 ONSC 1401, include:
• whether the property is unique,
• the intention of the party acquiring it,
• if there is an alternative remedy in damages, and the ease or difficulty in calculating damages,
• would damages be a satisfactory remedy,
• the harm to each party if the CPL is, in this case, granted or not.
[22] An important factor for consideration if the remedy of a CPL should apply, especially in this matter, was noted by Associate Justice McAfee in 2511899 Ontario Inc. v. 221465 Ontario Inc., 2017 ONSC 5363:
[at paragraph 6(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 [citations omitted].
[23] In other words, a CPL is an equitable remedy. I will return to this issue, most important in this matter, subsequently.
[24] The principles that emerge from Smith v. Vankoughnet and Rasmussen 2017 ONSC 4293 also assist. That case involved the failed purchase of an actual lakefront property (which the within property is not) in cottage country. Ultimately, Justice DiTomaso declined to issue a CPL. Such was available, the court found, only if substitute land was not readily available. Damages must also be inadequate to compensate the moving party, and the onus to establish such inadequacy rests with the moving party. The land must also be shown to be unique.
[25] While not strictly necessary for me to decide the issue of whether a CPL should or should not issue herein, the evidence is persuasive that the property is not hardly unique. While the plaintiff asserts that the cost would be greater now to obtain a similar property, given in his June 24, 2022 affidavit he claimed access to over one million dollars in liquid or ready cash, I find this not to be a valid excuse. If he has such funds available, then I agree with defendant that he likely could have purchased what Montesano describes in his July 4, 2022 affidavit as one of the ten comparable properties in the Seven Meadows development available since February 25th and sued for damages.
[26] The particular property, moreover, while no doubt very nice, again, does not strike me as unique. It is close to, but not directly on water, it is comfortable, yet not a mansion, it is not on an amount of acreage as was the property described in 2676547 Ontario Inc. v. Elle Mortgage Corporation, 2020 ONSC 4463 (appeal denied, 2020 ONSC 4595).
[27] Regarding monetary damages not being an ideal remedy, as the plaintiff also asserts, most litigants can make a similar argument. However, real estate assessments are routinely able to be done, experts routinely testify, even about complex financial transactions and the calculations of damages arising there-from, and courts routinely award damages to successful litigants. In that regard, I agree with Justice Sugunasiri, who (then as Master) wrote in Triple Eight Asset Management Inc. and Greco 2019 ONSC 2855:
Courts are routinely determining damages for breach of contract with respect to property. While there are variables, there is nothing in the record to suggest that damages could not be determined, perhaps with the assistance of an expert.
[28] Monetary damages may not be the remedy of choice for some litigants, including this plaintiff, yet such can, in the right case, provide fair compensation for a breach of contract. There is in this case no reliable evidence that the usual remedy of money damages is incapable of calculation, or that such calculation would be difficult. All there is, is speculation that the defendant will possibly become a shell corporation by the time the litigation reaches its conclusion. That may or may not occur. Yet as with any litigant, including those who at one time felt suing Eaton’s was risk-free because Eaton’s would always be there, or that Nor-Tel Networks would always be able to pay a judgment, or that General Motors would never file for CCAA protection, those are the normal risks and vicissitudes which every plaintiff must confront. Absent reliable evidence, I am not prepared to order a CPL on speculation.
[29] The main basis for my decision, however, is in this case, overall, it cannot be stated that the equities favour the plaintiff. Plaintiff, again, is a realtor, who on his emails has the “tag” that he is in the “top 5% of Sales Representatives in Canada”. He is also a registered Broker, licenced by the Real Estate Council of Ontario (“RECO”). Pursuant to evidence obtained by Montesano and addressed in his July 4th supplementary affidavit, the plaintiff also has several mortgages from several Canadian chartered banks on his own several properties.
[30] Given the plaintiff’s obvious experience with real estate, his expected professional and personal familiarity with and understanding of an APS, not only from his own purchases but from advising his many clients, and his prior borrowing experience, I would have expected the plaintiff to have known, or certainly he at least should have strongly suspected, that the Scotiabank document obtained so quickly was false. Again, there is no evidence before me that he submitted any information to Scotiabank akin to which he likely had submitted to obtain his other mortgages, or which he knew that his clients had submitted (especially if he referred his clients to the unidentified mortgage agent whom he professed to trust). His claim that he was relying on a mortgage agent I find improbable and unlikely in these particular circumstances when weighing the equitable remedy sought. Again, there is no evidence of what the plaintiff submitted to the mortgage broker, and no evidence directly from the mortgage broker, nor even his or her name. His record is sparse indeed in that regard. Yet when seeking equitable relief from the court, full, frank, and complete disclosure is mandatory.
[31] Is this conduct of the plaintiff fraudulent? I need not determine whether the plaintiff did or did not commit fraud today, for purposes of deciding his request for a CPL. Yet I find the definition of fraud extrapolated in the decision of Holley v. Northern Trust Company, Canada, 2014 ONSC 889, very instructive and helpful. Justice Perell therein states as follows:
[114] While the notion of fraud may elude precise definition, it necessary involves some aspect of impropriety, deceit, or dishonesty: Royal Bank of Canada v. Gentra Canada Investments Inc., 2001 CanLII 6996 (ON CA), [2001] O.J. No. 2344 at para. 8 (C.A.); Cineplex Odeon Corp. v. 100 Bloor West Partner Inc., [1993] O.J. No. 112 at para. 30 (Gen. Div.).
[115] In Washburn v. Wright (1913), 1914 CanLII 525 (ON CA), 31 O.L.R. 138 (App. Div.), Justice Riddell said, at p. 147:
Fraud is not mistake, error in interpreting a contract; fraud is "something dishonest and morally wrong, and much mischief is ... done, as well as much unnecessary pain inflicted, by its use where 'illegality' and 'illegal' are the really appropriate expressions:" Ex p. Watson (1888), 21 Q.B.D. 301, per Wills, J., at p. 309.
[116] The moral turpitude of fraud, deceit, or fraudulent misrepresentation are found in the constituent elements that: (1) the defendant knows that his or her statement is false or the defendant is indifferent to the statements truth or falsity; and (2) the defendant having an intent to deceive the plaintiff. The common law punishes the immorality of lying for an evil purpose with an award of damages. In the contractual setting, equity also provided the remedy of rescission for fraudulent misrepresentation with the same constituent elements, save that it is not necessary for the plaintiff to show damages in order to obtain rescission.
[122] In Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club, 2002 SCC 19, Justice Binnie for the majority of the Supreme Court of Canada considered whether equitable fraud could provide the basis for a claim for rectification, and at para. 39 of his judgment, Justice Binnie described the nature of equitable or constructive fraud as follows:
- What amounts to "fraud or the equivalent of fraud" is, of course, a crucial question. In First City Capital Ltd. v. British Columbia Building Corp. (1989), 1989 CanLII 2868 (BC SC), 43 B.L.R. 29 (BCSC), McLachlin C.J.S.C. (as she then was) observed that "in this context fraud or the equivalent of fraud' refers not to the tort of deceit or strict fraud in the legal sense, but rather to the broader category of equitable fraud or constructive fraud ... Fraud in this wider sense refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained" (p. 37). Fraud in the "wider sense" of a ground for equitable relief "is so infinite in its varieties that the Courts have not attempted to define it", but "all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken": [citations omitted].
[123] As appears from this passage in Justice Binnie’s judgment, equitable fraud refers to conduct falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained by his or her conduct. The idea of unconscientiousness connotes the idea of conduct not guided by principles of what is the right thing to do but falling short of the evil or wickedness of deceitful conduct. Justice Binnie described constructive fraud as wider than strict fraud and including all kinds of unfair dealing and unconscionable conduct.[bolding added].
[32] I have bolded the portions of the above excerpt which resonate in this matter. The plaintiff, for my purposes, was at least indifferent as to the reliability of the document that he sought and submitted. Moreover, the only reason that the plaintiff did not succeed to cause damage to defendant was because he was found out and stopped.
[33] Was defendant right to terminate the APS accordingly? Again, that is an issue that will be decided as the case progresses. Yet, for my purposes today, despite able argument I must disagree with counsel for plaintiff that the defendant was acting wrongfully and thus unfairly to the plaintiff when it took the steps that it took. It is clear that, if there is fraud, then the contract was voidable. Defendants chose to void it, asserting fraud. While disposition of that allegation remains to be adjudicated, the steps taken by defendant are consistent with established case law, such as what the Supreme Court reiterated in Bank of Montreal v. Trade Finance Inc., 2011 SCC 26, when referring to Bawlf Grain Co. v. Ross (1917) 1917 CanLII 51 (SCC), 55 SCR 232:
What is only voidable and not void cannot be held as invalid until it has been rescinded. It is not enough to avoid the contract, that nothing is done to affirm it, it must be disaffirmed. In Deposit Life Assurance Co. v. Ayscough [6 E. & B. 761], the defence was that the contract was induced by fraud and Lord Campbell C.J. said:- It is now well settled that a contract tainted by fraud is not void, but only voidable at the election of the party defrauded.
[34] While the plaintiff complains about the terms of the APS, he freely signed it. He had an opportunity to review the terms with legal counsel. Again, he never addressed, prior to defendant’s termination of the APS, purchasing in cash, nor did he obtain defendant’s approval for this method of payment as the APS required.
[35] Signing contractual documents, as this experienced realtor and broker should know, is consequential. Parties are held to the bargains that they freely make. Moreover, if one signs a document without either reading or understanding it, that is usually no justification to avoid one’s end of the bargain.
[36] The bottom line in this matter is that the plaintiff, who tendered an admitted false, and arguably fraudulent, document to defendant in order to close his purchase of the property, was found out. Defendants purported in response to terminate the transaction. Defendants may be wrong in that regard, or they may be right. That is an issue for another day. If wrong, defendants will owe the plaintiff easily quantifiable damages.
[37] Yet, the plaintiff comes before the court seeking interim equitable relief in the form of a CPL. The consequence of my granting this would likely be to stop the sale of the property to the third party purchaser, thus inconveniencing that purchaser and also the defendant. As discussed in the case-law, I must balance the impact of a CPL on the resulting likely harms.
[38] I agree that there is harm to the plaintiff if I do not grant the CPL as he will not obtain the property. Yet the reason for that, entirely, is due to what the plaintiff did. He is responsible for his actions. The harm to the defendant and the innocent third party thus weighs far greater in the balance.
Conclusion:
[39] Having considered all the submissions, evidence, and the equities in the matter, I am not prepared to grant the relief sought. The plaintiff, who tendered an admitted false, arguably fraudulent, document to the defendant, and who also was not candid in his affidavit evidence given my review of his evidence, above, does not come before the court with the requisite “clean hands”. He is thus not entitled to the equitable relief sought. I do not make an Order for a CPL.
[40] The motion is dismissed.
[41] Moving counsel stated in court that if the motion was dismissed, he would discharge the Caution on title. I trust he will do so.
Costs and an Order:
[42] I understand that there were offers to settle in this motion (if not the overall action). If the parties cannot agree on costs of the motion, a tele-case-conference with me may be arranged through my ATC.
[43] If the parties wish a formal Order signed, a draft may be sent to my ATC for my review.
ASSOCIATE JUSTICE J. JOSEFO
DATE: July 8, 2022