SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ALAN PUPPI, Plaintiff
- and -
DOMENIC JASON LADYSHEWSKY, Defendant
BEFORE: Associate Justice Todd Robinson
COUNSEL: J. Lo Faso and J. Lo Faso, for the plaintiff
R. Hosseini and S. Kebeich, for the defendant
HEARD: June 27, 2022 (by videoconference)
REASONS FOR DECISION
1This litigation involves a dispute arising out of the plaintiff, Alan Puppi, advancing $782,500 for use by the defendant, Domenic Ladyshewsky, to purchase a property on Lonborough Avenue in Toronto. Mr. Puppi is Mr. Ladyshewsky’s common law step-father. He has been the common law spouse of Mr. Ladyshewsky’s mother for some 19 years. There is no dispute between the parties that the funds were advanced by Mr. Puppi and, ultimately, are to be repaid by Mr. Ladyshewsky. The dispute is over the terms of the oral loan agreement, notably the timing and manner of repayment and whether Mr. Puppi was ever intended to have a mortgage or other security interest in the purchased property.
2Two motions were argued before me:
(a) a motion by Alan Puppi for leave to issue a certificate of pending litigation (CPL) against title to the purchased property; and
(b) a motion by Domenic Ladyshewsky for leave to amend his statement of defence to add a counterclaim seeking various declarations and damages and for an order removing a notice registered by Mr. Puppi against title to the property under the Land Titles Act, RSO 1990, c L.5.
3I am granting Mr. Ladyshewsky leave to amend his statement of defence, since I do not agree with Mr. Puppi that the impugned paragraphs of the proposed counterclaim breach settlement privilege. With respect to the CPL, I am exercising my discretion to deny leave to issue one. Although Mr. Puppi has demonstrated a triable claim to an interest in the land by way of an equitable mortgage, in my view, the equities favour denying leave in the particular circumstances of this case. I am further satisfied that Mr. Puppi has not established entitlement to a notice under the Land Title Act, so am directing the Land Registrar to rectify the register by deleting Mr. Puppi’s registered notice.
Analysis
4The following issues must be resolved on these motions:
(a) Should leave be granted to Domenic Ladyshewsky to amend his statement of defence to add the proposed counterclaim?
(b) Should leave be granted to issue a certificate of pending litigation in favour of Alan Puppi against the purchased property? In particular:
(i) Does Mr. Puppi have a triable claim to an interest in land by way of either a purchase money resulting trust or an equitable mortgage?
(ii) If so, do the equities favour granting a CPL in the particular circumstances of this case?
(c) Was there an express intent to provide Mr. Puppi with any estate, right, interest or equity in the purchased premises such that he was entitled to register a notice under the Land Titles Act in respect of his loan?
Issue 1: Should leave be granted to amend the statement of defence?
5Rule 26.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) provides that, on motion at any stage of an action, the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
6Domenic Ladyshewsky seeks to amend his statement of defence to add a counterclaim seeking a declaration that Alan Puppi has no interest in the purchased premises, a declaration that Mr. Puppi improperly registered cautions and the notice, and damages for $50,000. Mr. Puppi does not opposed the amendment save for two paragraphs in the counterclaim (paras. 38-39), which Mr. Puppi argues refer to settlement communications and thereby breach settlement privilege. The impugned paragraphs deal with the substance of a letter from Mr. Ladyshewsky’s lawyer dated September 9, 2021 and the response by Mr. Puppi’s lawyer.
7A party asserting settlement privilege over documents and communications has the onus of demonstrating that they are prima facia protected by settlement privilege. Once done, the party seeking disclosure on the ground that an exception to the privilege applies must show that, on balance, a competing public interest outweighs the public interest in encouraging settlement: Stronach v. Belinda Stronach in her Personal Capacity and as Trustee of the Andrew Stronach 445 Family Trust, 2021 ONSC 5758 at para. 26.
8Settlement privilege attaches to a document or communication where three elements are established: (i) there is a litigious dispute, (ii) the communication has been made with the express or implied intention it would not be disclosed in a legal proceeding in the event negotiations failed; and (iii) the purpose of the communication is to attempt to effect a settlement: Hollinger Inc. (Re), 2011 ONCA 579 at para. 16.
9There is no question that the letter was written in the context of this litigation and that the purpose of the letter was settlement, namely reaching an interim “compromise” on Mr. Puppi’s claim that would permit Mr. Ladyshewsky to proceed with selling the premises. However, I agree with Mr. Ladyshewsky that Mr. Puppi has failed to meet his onus of showing that the letter was written with the express or implied intention that it would not be disclosed in a legal proceeding.
10Nothing in the letter supports an express intention that it would not be disclosed. The letter is not marked “without prejudice” nor is that term used anywhere in the letter. There is also no language used to that effect or meaning. In my view, the contents of the letter also do not support an implied intention that it ought not to be disclosed.
11No cogent argument was made by Mr. Puppi for why the letter should be held to be settlement privileged, other than the fact that it contains an offer. Mr. Puppi did not address the requirement for express or implied intention that the letter would not be disclosed in either his factum or in oral argument. Mr. Puppi’s position that the letter is settlement privileged is, in my view, undercut by his decision to include it in his own moving affidavit, which was sworn by Mr. Puppi prior to Mr. Ladyshewsky’s motion to amend being served. Mr. Puppi specifically swears to the contents of the letter and appends a copy of it as an exhibit. Nothing in his affidavit suggests that he viewed it as a privileged document.
12Even if I am wrong in finding that the letter is not settlement privileged, I would have found that any privilege was waived.
13Settlement privilege belongs to both parties to the communication. Although neither can unilaterally waive it, the privilege may be lost if the party resisting disclosure of the communication waives that privilege. That may be done by demonstrating a clear intention to forego the privilege or using the privileged communication as the basis of a claim or defence: Hallman Estate (Re), 2009 49643 (ON SC) at paras. 14 and 16.
14Mr. Puppi expressly cited and relied on the letter as evidence supporting his claim for a CPL. In doing so, Mr. Puppi did not assert privilege over the communication and included it in unredacted form in a motion record that he then filed in a public court file. In my view, Mr. Puppi has demonstrated a clear intention to forgo the privilege he has claimed in response to Mr. Ladyshewsky’s motion.
15For these reasons, I am granting Mr. Ladyshewsky leave to amend his statement of defence and counterclaim in the form proposed.
Issue 2: Should leave be granted to issue a CPL?
(a) Test for leave to issue a CPL
16My authority for granting leave to issue a CPL is found in s. 103 of the Courts of Justice Act, RSO 1990 c C.43 and rule 42.01 of the Rules. The applicable two-part analysis is not disputed. It is set out in the oft-cited decision of Perruzza v. Spatone, 2010 ONSC 841 at para. 20. I must first determine if there is a triable issue regarding Mr. Puppi’s claimed interest in the property. If I am satisfied that the threshold requirement has been met, I must then consider whether the equities favour a CPL.
17Granting leave for a CPL is discretionary. My discretion is to be exercised having regard to relevant factors in the circumstances of this particular case. Relevant considerations 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 from the CPL. These factors are non-exhaustive: Sachkov v. Ilnitskaya, 2021 ONSC 5495 at para. 9.
(b) Triable issue regarding claimed interest in land
18Alan Puppi argues that he has a claim to an interest in the property by way of either a purchase money resulting trust or an equitable mortgage. Domenic Ladyshewsky has put forward detailed arguments for why Mr. Puppi cannot succeed in either argument. However, the threshold requirement of demonstrating an “interest in land” is whether there is a triable issue about the interest, not whether the plaintiff will likely succeed: Perruzza v. Spatone, supra at para. 20(ii).
19I am satisfied that Mr. Puppi has no triable claim to an interest in the property by way of a purchase money resulting trust. However, I am satisfied that there are triable factual and legal issues to the claim to an equitable mortgage, although I question the ultimate viability of that claim. The threshold requirement for a CPL is accordingly met.
i. Claimed interest by way of purchase money resulting trust
20A purchase money resulting trust arises when a person advances funds to contribute to the purchase price of property, but does not take legal title to that property, which gives rise to a presumption of a resulting trust: Nishi v. Rascal Trucking Ltd., 2013 SCC 33 at paras. 1-2 and 21.
21In this case, it is undisputed that Alan Puppi advanced the full purchase price for the property, as well as all ancillary costs, such as legal fees, the land transfer tax, and adjustments. The record before me supports that Mr. Puppi never intended his advance to be a gift, which is further consistent with the position ultimately taken by Domenic Ladyshewsky on this motion that the parties agreed to repayment terms and that the “gift” was a period of ten years to repay the loan. However, the intentions and agreement of the parties at the time that funds were advanced cannot properly be decided on a motion of this nature.
22Mr. Ladyshewsky argues that his relationship with Mr. Puppi precludes the presumptive resulting trust. In his affidavit, Mr. Ladyshewsky describes that relationship as being, at least as far as he believed, “akin to a father and son relationship.” The nature of their relationship may well bear on whether a resulting trust is found, but no case law was put before me supporting that a familial relationship is itself sufficient to defeat a claim to a purchase money resulting trust.
23The stronger argument is that any presumption of a resulting trust is rebutted by the evidence that Mr. Puppi had no intention to obtain any beneficial interest in the purchased property by his advance, which was nothing more than a loan. I agree with Mr. Ladyshewsky that the totality of the evidence and Mr. Puppi’s own pleading support that Mr. Puppi is only seeking to enforce his loan, and that he is not claiming any ownership interest in the purchased property.
24Mr. Puppi has provided no case law supporting that a lender may secure an otherwise unsecured loan by way of a purchase money resulting trust. Nishi v. Rascal Trucking Ltd. supports that the effect of a purchase money resulting trust is to create a beneficial ownership interest in property in favour of the person who advanced purchase funds, but does not hold legal title to the purchased property. The respondent in Nishi v. Rascal Trucking Ltd. was specifically claiming a beneficial ownership interest. Mr. Puppi had advanced no such claim in this action.
25Although Mr. Puppi has pleaded a purchase money resulting trust, the statement of claim discloses no claim to any beneficial ownership interest in the property. Rather, the statement of claim expressly advances a claim on the basis that Mr. Puppi loaned money to Mr. Ladyshewsky to purchase the property (para. 7), that the parties agreed to a mortgage (para. 8), that Mr. Puppi advanced funds based on the agreement to register a mortgage (para. 8), that the funds were loaned and not gifted (para. 11), and that Mr. Ladyshewsky “refuses to repay the loan” (para. 13).
26Put simply, the statement of claim supports a claim based on a loan, not a claim for any beneficial ownership interest. Mr. Puppi’s affidavit evidence and the other materials before me only reinforce that the relationship between the parties stems from and revolves around a loan agreement.
27For these reasons, I find that there is no triable claim to a purchase money resulting trust in the purchased property.
ii. Claimed interest by way of equitable mortgage
28The Court of Appeal has set out that an equitable mortgage seeks to enforce a common intention of the mortgagor and mortgagee to secure property for either a past debt or future advances, where that common intention is unenforceable under the strict demands of the common law: Re Elias Markets Ltd., 2006 31904 (ON CA), [2006] OJ No 3689 (CA) at para. 65.
29Mr. Puppi argues that there was a common intention for Domenic Ladyshewsky to grant a legal mortgage on the property in favour of Mr. Puppi, albeit that Mr. Puppi appears to acknowledge that specific terms of the mortgage were never discussed or agreed.
30Mr. Ladyshewsky submits that the evidence supports that he clearly never agreed to provide Mr. Puppi with a mortgage, and that a mortgage was not even raised until after the property purchase transaction had closed. Mr. Ladyshewsky’s evidence is that the only agreement was for Mr. Puppi to unconditionally fund the purchase of the property, with the advance to be repaid over a period of ten years. Mr. Ladyshewsky further submits that, although Mr. Puppi argues that there was a common intention to register a mortgage, Mr. Puppi’s evidence does not go beyond saying that Mr. Puppi himself intended to register a mortgage. It does not say that Mr. Ladyshewsky ever agreed to grant one.
31In my view, there are disputed factual issues that bear directly on whether Mr. Puppi may be entitled to an equitable mortgage, which cannot fairly be resolved on this motion. The evidence on communications between Alan Puppi, Domenic Ladyshewsky, and Scott Ladyshewsky (Domenic Ladyshewsky’s adopted brother and seeming partner in the business endeavour intended for the property) is somewhat ambiguous about whether there was any genuine discussion about providing security to Mr. Puppi for his loan.
32Scott Ladyshewsky’s affidavit indicates there may have been some discussions or communications with Mr. Puppi about a trust arrangement or a mortgage. Alan Puppi has tendered a text exchange with Scott Ladyshewsky, prior to Mr. Puppi advancing the closing funds, about potentially registering a mortgage with a 0% interest. Subsequent to the closing, a further text exchange occurred between Alan Puppi and Domenic Ladyshewsky, in which Mr. Puppi asked for “the lawyer you plan to use to review mortgage documents”. In response, Mr. Ladyshewsky provided a contact card for a lawyer. Mr. Ladyshewsky acknowledged in cross-examination that the mortgage documents were sent to the lawyer and that he reviewed them with the lawyer. His evidence was that he did not sign the mortgage documents because it was for an “on demand” mortgage.
33Mr. Ladyshewsky’s evidence is also unclear on when he was first aware that Mr. Puppi wanted a mortgage. I was asked to infer that it was after the closing based on Mr. Ladyshewsky’s statement in cross-examination that being asked about a lawyer was “the first time that [he] ever knew that [Mr. Puppi] wanted a lawyer for a mortgage”. However, knowledge that Mr. Puppi wanted a lawyer for a mortgage is not necessarily the same as knowledge that Mr. Puppi wanted a mortgage. Mr. Ladyshewsky’s evidence is also unclear on why he reviewed and considered the mortgage documents at all if there had been no prior discussion about a mortgage.
34In my view, Mr. Ladyshewsky’s legal arguments similarly cannot fairly be resolved on this motion, namely that the proposed mortgage contravenes Statute of Frauds, RSO 1990, c S.19 and that other case decisions support that an equitable mortgage cannot be made out on the facts of this case.
35The Statute of Frauds provides that an interest in lands shall only be made or created by a written agreement and, further, that no action concerning an interest in land can be brought without a written agreement or “some memorandum or note thereof”: Statute of Frauds, supra at ss. 1(1) and 4. However, there is one exception that may well bear on this case. Common law has long recognized an exception to the strict application of the Statute of Frauds where there has been part performance: Erie Sand and Gravel Limited v. Tri-B Acres Inc., 2009 ONCA 709 at para. 49.
36During oral argument, I questioned why the doctrine of part performance would not apply in the circumstances of this case if Mr. Puppi succeeds in his argument that a mortgage was discussed and agreed, yet was not ultimately given. Mr. Puppi pleads that the loan was advanced in reliance on an agreement for a mortgage, which is consistent with Mr. Puppi’s own evidence on the motion. It is unclear if, in fact, a mortgage was specifically raised as a genuine term of the loan and, if so, when it was first raised, what terms were discussed, and whether it was agreed. Nevertheless, those matters go to whether Mr. Puppi will succeed, not whether there are triable issues. If those factual disputes are resolved in favour of Mr. Puppi, then he could potentially succeed in establishing part performance by advancing the loan funds.
37Mr. Ladyshewsky also points to the decisions in Royal Bank of Canada v. Azkia, 2019 ONSC 5894 and De Luca v. Zomprelli, 2018 ONSC 3789, both of which he argues support that an equitable mortgage cannot be made out on the facts of this case. I agree that there are parallels between the facts of those cases and the facts of this case. However, as noted above, the question on this motion is not whether Mr. Puppi will succeed in his claim. It is whether his claim is triable.
38In order to accept Mr. Ladyshewsky’s legal arguments, I must make factual determinations on disputed issues that, as I have already noted, are not properly made on this motion. I am accordingly satisfied that the disputed factual and legal issues support a triable claim to an interest in the land by way of an equitable mortgage.
(c) Assessment of the equities
39Despite my finding that Alan Puppi has a triable claim to an interest in the purchased premises, I have nevertheless concluded that the equitable factors favour Domenic Ladyshewsky’s position such that leave to issue a CPL should not be granted.
40Most significantly, in my view, the purpose behind both Mr. Puppi’s prior registrations of cautions and a notice under the Land Titles Act and this motion appears to be to obstruct dealings with the property and secure his damages claim. Mr. Puppi has no intended use for the property. Despite his acknowledged experience in land development and mortgages, he elected to advance funds without any clear agreement on security. Notably, during cross-examination, Mr. Puppi confirmed that he has been in the land development business for over 40 years and that he is “knowledgeable of mortgages”. There is nevertheless no cogent evidence of any request for security for the loan (let alone agreement to provide that security) prior to Mr. Puppi advancing funds.
41Although the timing and manner of repayment is disputed, it appears undisputed that Mr. Puppi’s advance was an interest-free loan to his common law step-son. The relationship soured sometime after the loan funds were advanced. Mr. Puppi registered a caution and commenced this action. Nevertheless, rather than move promptly for a CPL and take steps to diligently prosecute this action, Mr. Puppi instead opted to use further registrations to tie up the premises and only brought this motion when essentially forced to do so.
42Mr. Puppi gave notice of his intention to move for a CPL in a letter from his lawyer dated August 27, 2021, yet did not proceed with the motion at that time. Instead, Mr. Puppi proceeded to register a second caution (seemingly contrary to s. 130 of the Land Titles Act) and, ultimately, registered a notice under the Land Titles Act after that second caution had expired. He then took no further steps until Mr. Ladyshewsky booked a Civil Practice Court attendance months later to schedule his motion to remove the registered notice. Only after that attendance was this CPL motion brought.
43In my view, granting a CPL in these circumstances would be contrary to the purpose behind a CPL. Case law has consistently held that a CPL is intended to protect an interest in land in situations where other remedies would be ineffective. It is not intended to be an instrument to secure a claim for damages: 254069 Ontario Inc. v. Kim, 2017 ONSC 5003 at para. 38; Sachkov v. Ilnitskaya, supra at para. 29.
44Damages are readily calculated and are, in my view, a satisfactory remedy in the circumstances of this case. Significantly, Mr. Puppi’s only claim is for damages. Other than the certificate of pending litigation, the relief claimed in para. 1 of his statement of claim is limited to payment of the loan amount, plus interest and costs. No declaratory relief is sought with respect to any interest in land asserted on this motion.
45The relative harm to Domenic Ladyshewsky is also much greater than the potential harm to Alan Puppi. Mr. Ladyshewsky has put forward evidence of his inability to refinance the property and the impact of Mr. Puppi’s cautions and the notice on selling it. A CPL will have the same effect. I accept that Mr. Puppi has concerns about recovery on a judgment, but there is no evidence that those concerns are founded or that he will be unable to enforce a judgment against Mr. Ladyshewsky.
46For these reasons, balancing the relevant equitable considerations in the particular circumstances of this case, I find that the equities favour Mr. Ladyshewsky. I accordingly dismiss Mr. Puppi’s motion.
Issue 3: Should the notice under the Land Title Act be removed?
47Pursuant to s. 160 of the Land Titles Act, a person aggrieved by a registration may apply to the court for an order that the register be rectified and, if satisfied of the justice of the case, the court may make an order for rectification of the register. Domenic Ladyshewsky seeks an order rectifying the register by deleting Alan Puppi’s registered notice.
48Domenic Ladyshewsky argued that, if I found that Alan Puppi had made out a triable issue to his claim to an interest in the property, but I found that the equities nevertheless favoured Mr. Ladyshewsky, then as a matter of fairness I should direct that Alan Puppi’s notice be removed. To hold otherwise would be to allow Mr. Puppi to achieve through the Land Titles Act something that I would not permit under the Courts of Justice Act and the Rules. Mr. Puppi also acknowledged the interrelationship of his entitlement to a CPL and the notice.
49Given my finding that Mr. Puppi is not entitled to a CPL, in my view, it follows that the notice should be removed. However, for completeness, I would have found that Mr. Puppi was not entitled to register a notice under the Land Titles Act in any event.
50The relevant authority for registering a notice is in s. 71(1) of the Land Titles Act. It provides that any person “entitled to or interested in any unregistered estates, rights, interests or equities in registered land” may protect that entitlement or interest by registering notices, cautions, inhibitions or other restrictions authorized by the Land Titles Act or by the Director of Titles.
51Mr. Puppi registered his notice for an indeterminate period. The notice includes a statement by Mr. Puppi’s lawyer that Mr. Puppi “has an unregistered estate, right, interest or equity in the land”. Mr. Puppi has tendered no case law on the requirements for registering a valid notice or supporting that the notice as registered is compliant with those requirements.
52Mr. Ladyshewsky has tendered several cases in support of his position that Mr. Puppi was not entitled to register a caution or notice under the Land Titles Act. Two are particularly relevant in my disposition. In Mendes v. Mendes, 2020 ONSC 5205, Chalmers J. held that an alleged loan unsupported by any written agreement or executed charge was insufficient to found reasonable cause to register a caution on title to a property (paras. 13-15). Similarly, in Fletcher's Fields Limited v. Estate of Samuel Harrison Ball, 2018 ONSC 2433, Matheson J. held that express intent to create an interest in land under s. 71(1) of the Land Titles Act is required to maintain a notice on the register (para. 25).
53As outlined above, there is no dispute that Alan Puppi loaned the purchase price for the premises and ancillary costs. However, that is not enough. Mr. Puppi must be “entitled to or interested in” the claimed “unregistered estate, right, interest or equity in the land.” Motions for leave to issue a CPL focus on whether there is a triable claim to an interest in land. Case law before me supports that a valid notice under s. 71(1) of the Land Titles Act requires express intent to create an entitlement or interest in the land, not merely a triable claim to some interest in the land. The record before me falls short of demonstrating any express intention or agreement between the parties to create an interest in the purchased premises in favour of Mr. Puppi.
Disposition
54For the above reasons, I accordingly order as follows:
(a) Domenic Ladyshewsky is hereby granted leave to amend his statement of defence to add a counterclaim in the form of amended statement of defence and counterclaim appended as Schedule “A” to his notice of motion.
(b) The Registrar of the Land Registry Office of Toronto is hereby directed to delete the plaintiff’s notice under s. 71 of the Land Titles Act, registered as instrument no. AT5931858, from title to the purchased premises.
(c) Alan Puppi’s motion for leave to issue a CPL is dismissed.
(d) This order is effective without further formality.
Costs
55The parties have exchanged costs outlines. The parties are encouraged to agree on costs. If they cannot, then written costs submissions shall be exchanged and filed. Domenic Ladyshewsky shall serve any costs submissions by November 14, 2022. Alan Puppi shall serve his responding costs submissions by November 28, 2022. There shall be no reply submissions.
56Costs 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. Unless costs submissions are exchanged and filed in accordance with these directions, the parties shall be deemed to have agreed on costs.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: October 31, 2022
ERRATUM: Following release of these reasons for decision, a typographical error misnaming the defendant was identified by counsel for the parties in paragraph 54(a). On November 3, 2022, the inadvertent error was corrected and the decision re-sent to counsel for the parties.