Court File and Parties
MOTION HEARD: 20220923
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Zhuo Cheng, Plaintiff
AND:
Qu Fei Cheng also known as Qufei Cheng also known as Sophia Cheng, Xiao Shi Chen also known as Jen Chen and JDC Law LLP, Defendants
BEFORE: Associate Justice L. La Horey
COUNSEL: Wei Jiang and Shae-Lynn Chung (articling student), Counsel for the Moving Party Defendant Qu Fei Cheng also known as Qufei Cheng also known as Sophia Cheng
Paul H. Starkman and Dasyun Yang, Counsel for the Responding Party Plaintiff Zhuo Cheng
HEARD: September 23, 2022
REASONS FOR DECISION
NATURE OF THE MOTION AND OVERVIEW
1The defendant Qu Fei Cheng also known as Qufei Cheng also known as Sophia Cheng (“Ms. Cheng” or the defendant) brings this motion to discharge certificates of pending litigation (“CPL”) registered against two properties, namely, 33 Lindvest Crescent, Vaughan, Ontario (the “Lindvest Property”) and 517-17 Anndale Drive, Toronto, Ontario (the “Anndale Property”) (jointly the “Properties”). The order granting leave for the plaintiff Zhuo Cheng (“Mr. Cheng” or the “plaintiff”) to register the CPL was made by Associate Justice McAfee on May 13, 2022 on a motion in writing, without notice.
2This is a dispute between a father and his daughter. The plaintiff father alleges that he was the beneficial owner of property known as 51 East Liberty Street, Suite 1910, Toronto, Ontario (the “Condo”) which was registered in the name of the defendant daughter. Ms. Cheng asserts that she was both the beneficial and registered owner of the Condo.
3The plaintiff alleges that the defendant wrongfully mortgaged the Condo and used the proceeds of the mortgage and net rental income from the Condo to purchase the Properties. Prior to the commencement of this action, the Condo was sold and the net proceeds were distributed to the defendant daughter. In this action, the plaintiff claims the sum of $600,000 representing the net proceeds of sale of the Condo. In addition, the plaintiff seeks a tracing order with respect to net rental income and mortgage funds in the amount of $89,999 received by the defendant and invested in the Properties, a CPL over the Properties and punitive damages.
4The Lindvest Property has recently been sold. On July 7, 2022, I made an order on consent vacating the registration of the CPL from title to the Lindvest Property to allow the sale to close and requiring that the net proceeds of sale be held in trust pending the outcome of this motion.
5The defendants Xiao Shi Chen also known as Jen Chen and JDC Law LLP (the “Defendant Lawyers”) are the real estate lawyers who acted on the sale of the Condo. They did not appear on the motion.
6For the reasons that follow, I order that the CPL be discharged without security.
BACKGROUND AND CHRONOLOGY
7In March 2011, Mr. Cheng and his then wife, Ping Wang (“Ms. Wang”), entered into an agreement of purchase and sale for the Condo (the “APS”), which was yet to be built. The initial deposits in the amount of $92,100, together with a further $35,000 payment, were paid by Mr. Cheng and Ms. Wang. Ms. Wang, the mother of Ms. Cheng, is not a party to this lawsuit. She has not filed an affidavit on this motion.
8Ms. Cheng deposes that after the APS was signed and prior to the Condo being built, her parents told her that the Condo was to be a gift to her after she graduated. The plaintiff denies this.
9In May 2015, Mr. Cheng, Ms. Wang and Ms. Cheng signed an amendment to the APS pursuant to which Ms. Cheng became the purchaser of the Condo in place of Mr. Cheng and Ms. Wang.
10On or about December 21, 2015, Mr. Cheng, Ms. Wang and Ms. Cheng signed a letter to Canadian Imperial Bank of Commerce/ CIBC Mortgages Inc. (called a Down Payment Gift Letter) stating that Mr. Cheng and Ms. Wang were making a financial gift of the sum of $92,100 to Ms. Cheng to be used towards the purchase of the Condo and that the money is a genuine gift and does not need to be repaid. The plaintiff does not dispute signing this document.
11On or about January 18, 2016, the purchase of the Condo closed with Ms. Cheng taking title and entering into a first mortgage on the Condo. The Condo was leased out and Ms. Cheng collected the rent.
12In or about February 2017, Ms. Cheng applied for a mortgage advance on the Condo. On March 7, 2017, Ms. Cheng obtained a second mortgage advance of $89,999 against the Condo. Ms. Cheng deposes the advance was obtained primarily to pay off personal debts, including her student loans, car loan and credit card debts. She says that the advance also eventually funded repairs to the Condo and paid for a personal care worker to assist Ms. Wang. The plaintiff takes the position that the monies were used for down payments on the Properties.
13On or about March 15, 2017, Mr. Cheng and Ms. Wang divorced.
14On or about June 6, 2017, Mr. Cheng, Ms. Wang and Ms. Cheng signed an Agreement (the “Agreement”) which, inter alia, deals with the Condo and another property, 110 Acton Avenue, Toronto (the “Acton Property”). The Agreement is drafted in Chinese and a certified translation was attached to Mr. Cheng’s affidavit filed on the CPL motion. The Agreement states in a recitals section that during their marriage, Mr. Cheng and Ms. Wang purchased the Acton Property which was their residence and the Condo. The recital goes on to state: “At present, the Condo is under Party C’s name [Ms. Cheng] as is the mortgage, and is leased out by Party C.”
15Under the Agreement Mr. Cheng gave up ownership of the Acton Property to Ms. Wang and Ms. Cheng. Paragraph 2 of the Agreement provides:
Party A [Ping Wang] and Party C [Ms. Cheng] agree to give up the ownership of the above-mentioned Condo (including Parking and Locker), and transfer to Party B [Mr. Cheng] all property rights and debts (including bank loans, indoor facilities, as well as fees payable such as management fees, property taxes, water, electricity, gas, and possible maintenance fees, etc.). [Ms. Cheng] shall cooperate with [Mr. Cheng] to complete all relevant legal procedures such as title change, and Ms. Cheng shall bear the expenses incurred in such procedure.
16Ms. Cheng deposes in her affidavit that the Agreement was drafted by Mr. Cheng, who is trained as a paralegal. In her statement of defence, she pleads that the Agreement was not binding on her.
17It is not disputed that the plaintiff transferred his interest in the Acton Property to Ms. Wang on June 29, 2017. Ms. Cheng says that she tried to transfer the Condo to her father in accordance with the Agreement, but he did not qualify for the mortgage and so the transfer could not take place. Mr. Cheng says that Ms. Cheng has wrongfully refused to transfer the Condo into his name.
18Ms. Cheng entered into an agreement of purchase and sale for the Anndale Property in September 2017, paying a deposit of $35,000. She entered into an agreement of purchase and sale for the Lindvest Property in October 2017, paying a deposit of $50,000. Both transactions closed in or about November 2017.
19The Condo was leased to third parties from March 2016 to March 2019 by Ms. Cheng who collected the rent and paid the Condo expenses including the mortgage.
20Mr. Cheng lived in the Condo beginning in or about March 2019 and made monthly payments to Ms. Cheng. Mr. Cheng characterizes the payments as amounts to cover the Condo expenses.
21In his affidavit filed on the motion for the CPL, Mr. Cheng deposed that in March 2020 he wished to sell the Condo and that Ms. Cheng told him she would handle the sale. His evidence is that Ms. Cheng refused to permit him to retain his own lawyer and list the Condo with his broker of choice. He further deposes that because of COVID, the Condo was not listed for sale until December 2021.
22The Condo was sold to a third party on March 25, 2022 for the sum of $835,000. The sale was handled on behalf of the seller by the Defendant Lawyers.
23On March 28, 2022, the Defendant Lawyers sent to the plaintiff a “Conditional Gift Agreement” between Ms. Cheng as donor and Mr. Cheng as donee. The covering email states that the document is enclosed for his review with a lawyer for independent legal advice. The Conditional Gift Agreement states that Ms. Cheng is the registered owner of the Condo, that the Agreement (called a Separation Agreement) was entered into without independent legal advice for Ms. Cheng. The Conditional Gift Agreement provides that on the date of execution, the Agreement “shall be of no further force of [sic] effect and is hereby fully voided.” In brief, the Conditional Gift Agreement contemplates that Mr. Cheng will receive the net proceeds of the sale of the Condo as a gift over a number of years, subject to stringent conditions including that the monies shall be only used for Mr. Cheng’s reasonable living expenses, written approval of Ms. Cheng is required if the monies are to be gifted to anyone else, and Mr. Cheng cannot make “inappropriate comments” against Ms. Cheng or Ms. Wang.
24The plaintiff sent the Defendant Lawyers an email on March 29, 2022, stating that he would not sign the Conditional Gift Agreement as there is already a signed agreement in place that is “real and effective”.
25The Defendant Lawyers paid out the net proceeds of the sale of the Condo to Ms. Cheng on March 29, 2022.
26On May 4, 2022, the plaintiff’s lawyer wrote to the Defendant Lawyers asserting breach of trust with respect to the disbursal of the net sale proceeds of the Condo to Ms. Cheng and demanded payment to Mr. Cheng in an amount equal to the net sale proceeds. The Defendant Lawyers replied the same day.
27On May 9, 2022, the plaintiff’s lawyer wrote to Ms. Cheng demanding payment of an amount equal to the net proceeds of the sale of the Condo.
28The plaintiff issued this statement of claim on May 11, 2022.
29The plaintiff brought a motion for the CPL without notice, relying on his affidavit sworn May 12, 2022.
30On May 13, 2022, Associate Justice McAfee granted the order for leave to issue the CPL.
31The defendant brought an urgent motion to discharge the CPL, returnable on July 7, 2022. Ms. Cheng had entered into an agreement of purchase and sale for the Lindvest Property which was scheduled to close on July 12, 2022.
32On the return date of July 7, 2022, the parties agreed to an order vacating the CPL against the Lindvest Property, requiring that the proceeds of the sale of the Lindvest Property be held in trust by the seller’s lawyer on the transaction, not to be released without a further court order, and adjourning the defendant’s motion.
APPLICABLE LAW
Discharge of CPL
33Section 103 of the Courts of Justice Act1 authorizes the registration of a CPL. Subsection 103(6) sets out when an order discharging a CPL may be granted. It reads as follows:
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.
34Master Glustein (as he then was) summarized the applicable principles on a motion to discharge a CPL in Perruzza v Spatone2 as follows:
(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).
Obligation to make Full and Fair Disclosure
35Mr. Cheng moved for leave to issue the CPL without notice. Rule 39.01(6) of the Rules of Civil Procedure 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.
36“Material facts” are those facts which must be drawn to the attention of the court and which may affect the outcome of the motion.3 The question is not whether the order would or would not have been granted; rather the issue is whether the omissions might have had an impact.4 The test for materiality is an objective one.5
37In moving without notice, a plaintiff must disclose relevant facts which may explain the defendant’s position, if these facts are known to the plaintiff.6
38In Moses v Metro Hardware Maintenance, Inc., Justice Myers explained the rationale for Rule 31.09(6) in the context of a CPL obtained without notice. In that decision Justice Myers wrote:7
[24] To protect the rule of law and the fundamental assurance of a fair civil justice system, Rule 39.01(6) imposes vital, extra burdens on parties who seek relief before the court without notice to their adversary. They are required to make “full and fair disclosure of all material facts.” The rule provides that the failure to make “full and fair disclosure of all material facts” is itself a basis to set aside an order obtained without notice regardless of the merits of the request for relief.
[28] The duties to make full and fair disclosure replace the checks and balances of the adversarial system. The court has no choice but to trust the moving party when he or she says they are fully disclosing and fairly presenting all material facts and the applicable law. It is the need to trust an otherwise zealously adversarial party that makes the situation so fraught with risk and renders justice so vulnerable to abuse.
39Even if I conclude that the CPL was obtained without full and fair disclosure, the CPL may still be maintained. The court has a continuing discretion to act in the interests of justice having regard to the totality of the evidence.8
40In Moses, Justice Myers held:9
…on a finding being made that a plaintiff has breached the duties of full disclosure and fair disclosure, the presumptive remedy should be to set aside the order. The plaintiff should have to bear a real burden to show why it is just and equitable for the court to exercise its discretion to maintain or reissue the order on all the facts. I agree with Sharpe J. [in United States v Friedland10] that were it otherwise, the duties would be empty and the law would be powerless to protect the absent party.
ANALYSIS
Does the plaintiff have a reasonable claim to an interest in land
41The plaintiff submits that he has a reasonable claim to an interest in land. He claims tracing orders in respect of net rental income and mortgage funds wrongfully obtained by Ms. Cheng from the Condo, and invested in the Properties.
42Mr. Cheng claims that he was the beneficial owner of the Condo. It is not disputed that Mr. Cheng and Ms. Wang paid the deposits on the purchase of the Condo. Mr. Cheng submits that this results in the presumption of a resulting trust in favour of Mr. Cheng, although on his own evidence, it would be a resulting trust in favour of Mr. Cheng and Ms. Wang.
43The plaintiff contends that the Agreement required Ms. Cheng to transfer the Condo. He performed his part of the Agreement by transferring the Acton Property to Ms. Wang, but says that Ms. Cheng failed to transfer the Condo to his name as required by the Agreement. He argues that Ms. Cheng’s evidence on cross-examination that she tried to transfer the Condo to him but was unable to, is evidence that she understood the terms of Agreement and believed it to be valid.
44Mr. Cheng submits that the language in the Conditional Gift Agreement confirms that the Agreement was in place and that he was the beneficial owner of the Condo.
45The plaintiff says that Ms. Cheng wrongfully obtained the second mortgage advance of $89,999 from the Condo, which she used for the purchase the Properties and that she wrongfully kept the rents received from the Condo for her own benefit and/or invested them in the Properties. As such, the plaintiff states that he is entitled to a tracing order. The fact that a tracing is difficult is as least partly as a result of Ms. Cheng’s failure to produce all of the relevant records in unredacted form. The plaintiff submits that the purchase of the Properties was at least partially funded by Ms. Cheng’s fraud.
46Ms. Cheng makes two arguments in her factum as to why the plaintiff does not have a reasonable claim to an interest in land. First, she says she is the beneficial owner of the Condo and that she could do what she wanted with the $89,999 mortgage advance and the rent received from the Condo. Second, she says that the monies used to purchase the Properties came from separate sources and are not traceable to monies obtained from the Condo.
47With respect the ownership of the Condo, Ms. Cheng’s evidence is that the Condo was a graduation gift from her parents and that the presumption of resulting trust is rebutted by the evidence of the letter to CIBC which states that the deposit monies were a gift.
48Ms. Cheng does not dispute that she signed the Agreement but takes the position that the Agreement is not enforceable against her, and in particular did not require her to transfer the Condo to her father. Her evidence is that the Agreement was drafted by her father, a paralegal, and that she did not have legal advice. She says that she was tricked into promising to gift the Condo to her father. When she did try to gift the Condo to her father, she was not able to do so because he did not qualify for a mortgage. She argues that the fact that she has previously tried to gift the Condo to her father, does not mean that she does not own the Condo. She submits that she sold the Condo that was hers to sell. Although she was prepared to make a gift of the proceeds of the Condo to her father on certain terms as set out in the Conditional Gift Agreement, she is not now prepared to make a gift to her father.
49She further argues that even if the Agreement is binding, the $89,999 mortgage advance was received prior to the date that she signed the Agreement and the plaintiff has no claim on these monies.
50With respect to her second argument, that the monies from the Condo (mortgage advance and net rentals) cannot be traced to the Properties, Ms. Cheng submitted that the funds to purchase the Properties did not come from the $89,999 and came from completely separate sources. However, in oral argument, Mr. Jiang conceded that, based on the documents produced thus far, it is not possible to show that there is no way that the $89,999 advance could not have gone into the Properties.
51As Ms. Cheng conceded that the tracing issue is a live one, she falls back on her submission that the Condo belongs to her and that Mr. Cheng cannot show that he has a reasonable claim that the Condo belonged to him. The CIBC letter contradicts what she calls a bald statement in Mr. Cheng’s affidavit that the Condo belongs to him. The defendant also points to the fact that there is no explanation in Mr. Cheng’s affidavit as to why the Condo was put into her name in the first place. As noted above, she disputes that the Agreement is enforceable against her.
52In RJM56 Holdings Inc. v Treemart Farms Inc.,11 Master McGraw (as his title then was) held:
[13] It is not the court’s role to determine whether the plaintiff’s claim will likely succeed at trial (HarbourEdge Mortgage Investment Corp. v. Timbercreek Mortgage Investment Corp. (Trustee of), [2016] O.J. No. 265 at para. 56; Sun Rise at para. 10). In determining if there is a triable issue, the evidentiary bar is low and the court is not to assess credibility or decide disputed issues of fact (Huntjens v. Obradovic, 2019 ONSC 4343; Sunrise at para. 10; Saggi at paras. 45 and 62; Bains v. Katri, 2019 ONSC 1401 at para. 36). Rather, the court must examine the whole of the evidence and, without deciding disputed issues of fact and credibility, consider whether the plaintiff’s case constitutes a reasonable claim to the interest in land claimed in the action (Huntjens at para. 21; Boal at para. 64).
53The determination of whether Mr. Cheng was the beneficial owner of the Condo cannot be determined on this motion as it depends on resolving disputed facts and assessing credibility. For the purposes of this motion, I am satisfied that the plaintiff has a reasonable claim to the interest in the Properties.
Whether there was full and fair disclosure on the motion
54The defendant argues that the plaintiff did not make full and fair disclosure on the motion in a number of ways with respect to material facts and that this non-disclosure warrants the discharge of the CPL.
55Ms. Cheng submits that the plaintiff misled the court when he said in his affidavit on the CPL that he purchased the Condo and he paid the deposits, when in fact it was Mr. Cheng and his then wife, Ms. Wang. In his second affidavit, filed in response to the discharge motion, Mr. Cheng admits that he and his former spouse made the down payment for the Condo. The defendant further notes that there is nothing in Mr. Cheng’s affidavit filed on the CPL motion that mentions that the APS was initially in the name of Mr. Cheng and Ms. Wang and that there was an amendment to change the name of the buyer to Ms. Cheng. There is also no mention of the CIBC letter wherein both Mr. Cheng and Ms. Wang signed a letter saying the deposit funds are a gift to their daughter.
56Ms. Cheng submits that the plaintiff only put his version of the ownership of the Condo forward on the CPL motion and did not put forward those facts which could lead to a contrary conclusion as he was required to do.
57The plaintiff submits that the issue of whether he made the deposits on the Condo alone, or whether it was Mr. Cheng and Ms. Wang is irrelevant because the down payment was never gifted to Ms. Cheng. Further, he argues that it was not relevant because under the Agreement, Ms. Cheng and Ms. Wang transferred their interest to Mr. Cheng.
58With respect to the amendment of the APS changing the name of the buyer for the Condo, Mr. Cheng submits that the amendment was not material “because the amendment only consisted of filling out routine banking documents at CIBC’s request to enable [Ms. Cheng] to become the nominee title holder of the Condo.”
59With respect to the CIBC letter in which the signatories state that the down payment for the Condo was a genuine gift and does not have to be repaid, Mr. Cheng deposes in his second affidavit in response to the discharge motion, that: “The reason it was signed and prepared is because CIBC will only grant a personal mortgage if the mortgagor confirms that they are not holding legal title only.” In saying this, Mr. Cheng is essentially saying that he signed a false document so that a mortgage could be obtained from CIBC in respect of the Condo.
60Mr. Cheng takes the position, correctly, that he only has to make the court aware of points of fact or law known to him which favour the other side. He submits that Ms. Cheng’s position that she was the beneficial owner of the Condo “came out of left field”. He points to the fact that Ms. Cheng signed the Agreement and attempted to transfer the Condo to Mr. Cheng in accordance with the Agreement. He also relies on her evidence on cross-examination that prior to March 2022 she never raised any issue about the ownership of the Condo.
61However at the time that the affidavit was sworn on May 12, 2022, in support of the motion without notice to obtain the CPL, Mr. Cheng knew that Ms. Cheng was asserting that she was the beneficial owner of the Condo. In oral argument, I asked Mr. Starkman when his client received notice of the ownership dispute. He referred to the email from the Defendant Lawyers to Mr. Cheng dated March 28, 2022, which enclosed the draft Conditional Gift Agreement. This email states in part, “I am the solicitor representing [Ms. Cheng]. On March 25th, 2022, our office completed her sale of the above-noted property and she wishes to provide a gift to you subject to certain conditions.” The email attached the Conditional Gift Agreement. This letter was included as an exhibit to Mr. Cheng’s May 12, 2022 affidavit.
62Thus the plaintiff was on notice by March 28, 2022, well prior to swearing his affidavit, that Ms. Cheng was taking the position that she was the beneficial owner of the Condo and was prepared to make a “gift” of the sale proceeds to him on certain terms. Further, the May 4, 2022 letter from the Defendant Lawyers to plaintiff’s counsel stated that they had been retained by the “sole legal and beneficial owner of the property” Ms. Cheng, to complete the sale of the Condo. Therefore, the plaintiff had an obligation to advise the court of all material facts that favoured Ms. Cheng’s position that she was the beneficial owner of the Condo.
63In my opinion, the plaintiff did not make full and fair disclosure when he misstated the source of the down payment (that it was Mr. Cheng and Ms. Wang, not Mr. Cheng alone) and failed to include the CIBC letter in his motion materials and refer the court to it in his affidavit. These are material facts relevant to the ownership of the Condo. In my view, they might have influenced Associate Justice McAfee’s decision on the motion and may have caused her to require notice of the motion to Ms. Cheng.
64I do not agree with the defendant that the failure to include the amendment to the APS changing the name of the original purchasers to Ms. Cheng is a material non-disclosure given that Ms. Cheng took title to the Condo on closing.
65Ms. Cheng also submits that the plaintiff failed to make full and fair disclosure when he said that he was not aware of the closing date for the sale of the Lindvest Property in his affidavit. He attached to his affidavit a copy of the listing page for the Lindvest Property sale. The listing indicates that it was printed on May 10, 2022, two days before the affidavit was sworn. At the bottom of the page it states that the Lindvest Property was sold on April 13, 2022 and immediately underneath this date, the listing indicates a closing date of July 12, 2022.
66Relevant and material facts should be highlighted and specifically referred to in the body of the affidavit; it is not sufficient that they be contained hidden away in an exhibit.12
67In my opinion, the plaintiff failed to make full and fair disclosure when he said in his affidavit that he did not know when the closing was, when in fact the exhibit he presented to the court disclosed that it was not for another two months. Saying that he did not know when the closing was created a false sense of urgency, by implying that the sale could close imminently.
68Mr. Cheng does not refer this point in his affidavit in response to the motion. He does not say that he overlooked the fact that the listing page disclosed a July 12, 2022 closing date. In any event, given that the plaintiff was moving without notice, he ought to have been especially careful to ensure the accuracy of his statement on this material point and was obliged to review carefully the exhibits attached to his affidavit.
69I find that the fact that the closing was two months away may have had an impact on Associate Justice McAfee’s decision on the motion, and in particular, may have caused her to require the motion to be on notice.
70Although I have found that the plaintiff did not make full and fair disclosure on the CPL motion, this does not mean that the CPL is automatically discharged. I will go on to consider the equities, as the court has a continuing discretion to act in the interests of justice having regard to the totality of the evidence.
Consideration of the Equities
71It is at this stage that I must consider what are commonly called the Dhunna factors.13 These factors are not intended to be exhaustive nor is any one determinative. Rather, the court must exercise its discretion in equity and look at all relevant matters between the parties.
72The plaintiff is not a shell corporation and this is a factor that weighs in favour of maintaining the CPL.
73The plaintiff has a claim in damages. He is seeking payment of the sum of $600,000 representing the net proceeds of the sale of the Condo, together with payment of the net proceeds of the rental of the Condo and punitive damages. Although he seeks a tracing order with respect to the net rental income and mortgage funds in the amount of $89,999 and invested in the Property, he does not make a claim for specific performance nor does he claim a trust interest in the Properties. This factor weighs against the CPL.
74In my view damages would be a satisfactory remedy, and would be relatively easy to calculate when the parties have complied with their documentary discovery obligations. There is no evidence that plaintiff has any particular interest in the Properties. He is only concerned to be reimbursed for the monies from the Condo that the plaintiff says Ms. Cheng wrongfully obtained, together with any profit gained from the use of the monies. This factor weighs against maintaining the CPL.
75In his factum, the plaintiff says that should the CPL be discharged and the monies from the sale of the Lindvest Property released, the defendant will “lose his security, as [Ms. Chen] is planning on leaving the country with the money she appropriated.”
76In his affidavit in response to the discharge motion, the plaintiff lists reasons why he believes that Ms. Cheng is planning on leaving the country with her mother, Ms. Wang, some of which are based on hearsay. He then goes on to say: “That’s when I realized that she was planning on fleeing the country with my money.” The plaintiff’s concern that the defendant will leave the country with “his money” if the CPL is not maintained or if the sale monies are not held in trust or paid to the Accountant, and that he will be unable to collect on a judgment is not a reason to maintain a CPL. As Justice Doi stated in Bains v Khatri, “Should the moving Plaintiffs have concerns about the dissipation of assets, it is open for them to seek relief by way of a Mareva order. A certificate of pending litigation is intended to protect an interest in land in situations where other remedies would be ineffective.”14
77Mr. Starkman argued that I should view the matter from a “higher perspective” and have regard to the overall conduct of the parties. He submitted that I should have regard to the daughter’s treatment of her father. He maintained that Ms. Cheng acted deceitfully in obtaining the $89,999 mortgage advance on the Condo and concealed it from Mr. Cheng, who did not become aware of this advance and the purchase of the Properties until 2020. He also contended that the Conditional Gift Agreement that Ms. Cheng had prepared for Mr. Cheng to sign was “unconscionable”. In finding that the plaintiff had reasonable claim to an interest in land, I noted above that I could not decide disputed facts and make credibility assessments. The same applies at this stage of the analysis. I cannot come to a conclusion on this motion as to whether Mr. Cheng or Ms. Cheng was acting reprehensibly towards the other.
78Having considered and balanced the equities, including the plaintiff’s failure to make full and fair disclosure, I have concluded that it is just and equitable to discharge the CPL.
79The plaintiff asks for an order that the net proceeds from the sale of the Lindvest Property now held in trust by Arthur Liangfei Tan and Sun Law Professional Corporation, pursuant to my order of July 7, 2022, be paid to the Accountant of the Superior Court of Justice to be held until the resolution of this action. As I have concluded that it is not in the interests of justice to maintain the CPL as set out above, and in particular, given the plaintiff’s failure to make full and fair disclosure, I am not prepared to make an order that would require the defendant’s interest in the sale proceeds to be tied up pending the trial of this action.
DISPOSITON
80The defendant’s motion is granted and an order shall go vacating the CPL registered against the Properties without security.
81If the parties cannot agree on the costs of this motion, they may file written costs submissions not to exceed three pages (double-spaced) together with any offers to settle the motion. The parties have already filed costs outlines which shall be uploaded to CaseLines. The defendant shall deliver her costs submissions by October 20, 2022, and the plaintiff shall deliver his two weeks thereafter.
L. La Horey, A.J.
Date: October 5, 2022
Footnotes
- RSO 1990, c C.43
- 2010 ONSC 841 at para 20
- K.A. v Mitchell, 2013 ONSC 4051 at para 16;
- K.A. v Mitchell, at para 20
- Horrocks v McConville, 2021 ONSC 522 (Master) at para 12; Boal v International Capital Management Inc., 2018 ONSC 2275 at para 59
- Chow v Russell (Litigation guardian of), 2021 ONSC 6525 at para 57
- 2020 ONSC 6684 at paras 24, 26, motion for leave to appeal refused, 2021 ONSC 877.
- Heinen v Alala, 2021 ONSC 5871 at para 45; Moses at para 72; K.A. v Mitchell, 2013 ONSC 4051 at para 19
- Moses at para 76
- [1996] OJ No. 4399 (Ont Gen Div)
- 2021 ONSC 4422.
- 830356 Ontario Inc. v 156170 Canada Inc. at para 23
- These are described in Perruzza, para 20(iv) quoted above.
- 2019 ONSC 1401 at para 37. See also Heinen v Alala, 2021 ONSC 5871 at para 66.