COURT FILE NO.: CV-22-432
DATE: 20221103
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2705310 ONTARIO LIMITED and SAM HALBOUNI Plaintiffs
– and –
AHMID EL-TURK, ALI JOMAA, CHAZIM LIMITED and GREEN LINER LTD. Defendants
COUNSEL:
Brian Chung, Anisha Bhardwaj and Michael Puopolo, for the Plaintiffs
Michael Polvere and James Leslie, for the Defendant El-Turk Jeremy Forrest for the Defendants Chazim Limited and Green Liner Ltd.
HEARD: July 27, 2022
TRANQUILLI J.
Overview
[1] In May 2017 the plaintiff, Sam Halbouni, agreed to pay $750,000 for the purchase of five (5) acres of an undeveloped single parcel of 108 acres of land on Sunningdale Road West, London, Ontario from the defendant Ahmid El-Turk. The defendant El-Turk is one of four co-owners who hold undivided interests in the subject land.
[2] The plaintiff Halbouni planned to build six homes on the 5 acres: one for each of his sons and their families. He paid the defendant El-Turk $640,00 towards the purchase price over the course of the next two years and incorporated the plaintiff corporation for the purpose of completing the transfer. In or about January 2021, the defendant El-Turk purported to terminate the agreement due to Mr. Halbouni’s failure to close.
[3] The plaintiffs seek a declaration they have a valid and binding agreement with the defendant El-Turk for the land purchase and also seek an order for specific performance of the transfer of the plaintiffs’ interest in the property.
[4] Mr. El-Turk asserts there was nothing more than an agreement to agree, that any agreement is unenforceable and that the plaintiffs have forfeited the money paid towards acquisition of those acres.
[5] The plaintiffs now move for a Certificate of Pending Litigation to be issued against the subject lands, on notice to the defendants. The defendant El-Turk opposes the motion. This was a hard-fought motion, with voluminous materials, affidavits and cross-examinations on the parties on affidavits. The remaining defendants did not participate in the motion and took no position at the hearing.
[6] At issue on this motion is whether there is a triable issue as to the plaintiffs’ claim to an interest in the land and whether the equities and relevant circumstances favour the granting of a CPL.
[7] For the following reasons, I determine that a CPL is warranted in the circumstances of this action. A CPL shall be registered until the disposition of this action or further order of this court.
Background
The Lands
[8] The property in issue is a single parcel, legally described as South Half Lot 23 Concession 6; Subject to 79312, 93042 London Township, and is described as PIN 08138-0064 (LT) (“the Lands”).
[9] The Lands are comprised of approximately 108 acres and are located at premises municipally known as 1431 Sunningdale Road West. The defendants are described as partners or shareholders in the ownership of the Lands. The land register shows each defendant holds an undivided interest in differing proportions of the 108 acres: the defendant El-Turk 54/108; the defendant Jomaa 23/108, the defendant Chazim Limited 4/108 and the defendant Green Liner 27/108.
[10] The parcel is currently zoned agricultural; however, the defendants have unsuccessfully attempted to have the Lands included in the City of London’s urban growth boundary. The Lands front on an arterial road and are adjacent to newly developed property.
The Letter Agreement
[11] The plaintiff Halbouni first approached the defendant El-Turk in 2014 to express interest in purchasing five acres of the Lands. The parties continued discussions over the next approximate three years while the defendants unsuccessfully pursued an appeal of the City’s decision not to include the Lands in the urban boundary.
[12] Nevertheless, the plaintiff Halbouni and defendant El-Turk drafted and entered into a “Letter of Agreement of Purchased Property” on May 2, 2017 (“Letter Agreement”) without legal advice or assistance. The Letter Agreement is signed by both Mr. Halbouni and Mr. El-Turk and provides:
I Ahmed El-Turk received the sum of $10,000 (Ten Thousand Dollars) in Canadian Currency as a deposit on a sale of 5 acres of my share of the land on Sunningdale Road West. Municipal address of 1431 Sunningdale Road West, London Ontario N6G 5B7. The total price is $550,000 CDN. Both parties agreed that the location of this sold portion is the northside of the property (to be determined where exactly on the north side of the property). Final agreement will be done through lawyers of both parties.
[13] However, it is not disputed that an additional $200,000 was to be paid in cash in addition to the purchase price reflected in the Letter Agreement for a total price of $750,000. This was ostensibly done for tax purposes. The defendant El-Turk acknowledged that he received the $10,000 deposit and a “bag of money”.
Delay
[14] The parties disagree as to which of them delayed concluding the transaction and why; however, it is uncontested that by November 2018, the plaintiff Halbouni made various payments to the defendant El-Turk on account of the agreement, totalling $640,000. In 2019, Mr. El-Turk and Mr. Halbouni exchanged several communications about the defendant El-Turk’s need to close the transaction as soon as possible as he could not otherwise record any of the deposits as income. The plaintiff Halbouni advised he would close once he received legal documents.
[15] During this time, the plaintiff learned that a transcontinental pipeline was situated at the north side of the Lands, in the area where Mr. Halbouni intended to build the houses. It was agreed that he would receive five acres from the south side of the Lands.
Incorporation and the Draft Agreement
[16] In July 2019, the plaintiff Halbouni caused the plaintiff 2705310 Ontario Limited to be incorporated for the purpose of closing the transaction. In or about August 2019, the plaintiff Halbouni instructed his lawyer to prepare a draft agreement between the plaintiffs and the defendant El-Turk.
[17] The draft agreement provided: (i) Mr. El-Turk agrees to sell five acres of the Lands to the plaintiff corporation; (ii) Mr. El-Turk already received $440,000 from Mr. Halbouni, in trust for the plaintiff corporation; (iii) a remaining balance of $110,000 was owing to Mr. El-Turk; (iv) the plaintiff corporation would receive lot allocations equivalent to 5 acres of land located on the south side of the Lands; and (v) that the terms of this legally binding agreement would be incorporated into a “formal agreement”. The plaintiff Halbouni proposed he would pay a further deposit of $40,000 and then the balance of the funds for the final acre once the formal agreement was prepared.
[18] The draft agreement was never signed. The parties again dispute the circumstances in which the draft agreement remained unsigned and what efforts the plaintiffs made to close the transaction over the next approximate year. At some point their dealings became further complicated by a debate over whether the plaintiffs would purchase four acres instead of the originally agreed upon five acres. The plaintiffs submit the defendant El-Turk ignored their inquiries and efforts to close. The defendant El-Turk contends the plaintiff Halbouni decided he did not want to involve lawyers and that he did not want his interest in the five acres to be subject to terms and conditions, which would violate Mr. El-Turk’s agreement with the co-defendant partners.
The Dispute
[19] In January 2021, Mr. El-Turk advised Mr. Halbouni by text message he would terminate the agreement if the full purchase price was not immediately paid. Mr. Halbouni rejected this position and responded he was ready to close the transaction. The two parties disputed whether the agreement was to close for four versus five acres. The defendant El-Turk stated he would either close the deal for four acres or otherwise return Mr. Halbouni’s money. Each accused the other of stalling on closing the agreement. Mr. Halbouni insisted on the agreement for 5 acres and advised that a refund on the agreement would require Mr. El-Turk to pay him 1.5 million.
The Action
The Statement of Claim
[20] In the Statement of Claim issued March 2022, the plaintiffs seek a declaration that the Letter Agreement is a valid and binding agreement upon the defendant El-Turk and an order for specific performance requiring the defendant to take all steps necessary to transfer an interest in the Lands to the plaintiffs. In the alternative, the plaintiffs seek a declaration that the plaintiffs are a beneficial owner or that they are entitled to an interest in the Lands by operation of a resulting or constructive trust or unjust enrichment. In the final alternative, the plaintiffs seek unspecified damages to be particularized prior to trial.
Statement of Defence – El-Turk
[21] The defendant El-Turk pleads that there was never a meeting of the minds between he and the plaintiffs, the Letter Agreement is void for uncertainty and was no more than an agreement to agree. To that end, he submits the agreement is unenforceable by virtue of the Statute of Frauds and the Planning Act. In the alternative, he claims the plaintiff Halbouni breached any such agreement and that in any event, the plaintiffs forfeited the funds or are barred from recovering the funds advanced to the defendant. The defendant El-Turk also pleads the claims are barred by the Limitations Act, 2002.
Statement of Defence - Jomaa, Chazim Limited and Green Liner Ltd
[22] By separate pleading, the defendants Jomaa, Chazim Limited and Green Liner Ltd. plead that each defendant is the beneficial owner of an undivided proportionate share of the entire parcel constituting the Lands. These defendants plead they did not consent to the purported agreement between the plaintiffs and defendant El-Turk and that in particular they did not consent to any severance of the Lands to give effect to such agreement. Like the defendant El-Turk, they plead the agreement is unenforceable due its uncertainty and is in violation of the Planning Act as the defendant El-Turk purports to sell a fixed part of a single parcel of land when his interest in the land is an undivided proportionate share of the whole. In the alternative, these defendants plead the plaintiffs’ claims are limited to an undivided 5/108^th^ proportionate interest in the whole of the Lands.
Issues
[23] A certificate of pending litigation may be issued by the court where a proceeding is commenced in which “an interest in land is in question”: r. 42.01 Rules of Civil Procedure. This analysis is informed by the well recognized and oft-cited principles outlined in Peruzza v. Spatone, 2010 ONSC 841 at para. 20 and need not be repeated at length in these reasons.
[24] The questions to be determined on this motion are:
Is there a triable issue as to whether the plaintiffs have an interest in the Lands; and
Is it equitable for the court to exercise its discretion to grant a CPL?
Analysis
1. Is there a triable issue as to whether the plaintiffs have an interest in the Lands?
[25] The defendant El-Turk submits there is no triable issue as to whether the plaintiffs have an interest in the Lands. The Letter Agreement is no more than an agreement to agree and lacks the essential terms for the agreement to be enforceable. The terms are uncertain, provide for no closing date and is defeated by the Planning Act. Even if there is no uncertainty as to the terms, their legal obligations are to be deferred until a formal agreement has been approved and executed such that the preliminary agreement cannot constitute an enforceable contract: Bawitko Investments Limited v. Kernels Popcorn Limited, 1991 CanLII 2734 (ONCA) at p. 13.
[26] The onus is on the party opposing the CPL to demonstrate that there is no triable issue as to whether the party seeking the CPL has a reasonable claim to the interest in the land claimed: Perruzza, at para. 20.
[27] This matter was argued as though it was a motion for summary judgment. However, the party seeking the certificate need not prove its case at this stage. It is not the court’s role to determine whether the plaintiff’s claim will likely succeed at trial: City Core Constortia Limited v. 2549386 Ontario Inc., 2022 ONSC 2723 at para. 33. It is not appropriate to make findings of credibility or to conclusively determine the question of liability: Interrent International Properties Inc. v. 1167759 Ontario Inc., 2013 ONSC 4746 at para. 28. At the same time, the court must examine the whole of the evidence and not uncritically accept the affidavits and pleadings: Twelve Gates Capital v. Eminence Living Inc., 2017 ONSC 3506 at para. 69. The test is met where there is sufficient evidence to establish a reasonable claim to an interest in the land based upon the facts: Ma v Ideal Developments Inc., 2022 ONSC 963 at para. 37.
[28] I am satisfied in all the circumstances that there is a triable issue as to the plaintiffs’ interest in the Lands by way of the Letter Agreement or an equitable interest.
[29] The Statute of Frauds does not require contracts for the sale of land to be in a specific form: 1589380 Ontario Limited v. Heasty, 2009 CanLII 25608 (ON SC) at para. 14. The circumstances surrounding the Letter Agreement and subsequent discussions arguably establish the essential terms of a binding agreement for sale of a property: the parties, the property and the price: McKenzie v. Walsh, 1920 CanLII 72 (SCC). Mr. El-Turk acknowledged in cross-examination that he agreed to transfer his interest in five acres of the Lands for $750,000 and that $200,000 would be paid in cash. The plaintiff Halbouni advanced $640,000 to the defendant El-Turk as a result of their agreement. The parties agreed the precise acres or lots in the parcel would be determined at a later date. The defendant insisted that the plaintiff take steps to “close” on the deal. Mr. El-Turk now takes the position the plaintiffs have either forfeited the money advanced or that they are otherwise barred from recovering the funds. These circumstances suggest that neither party treated the Letter Agreement as simply a non-binding agreement to agree. Parties may “contract to make a contract” and may bind themselves to execute a formal written agreement containing specific terms and conditions at a later date: Bawitko Investments, at p. 12.
[30] I acknowledge the CPL by necessity covers the entire parcel, whereas the plaintiffs seek to enforce their interest in only five acres of the 108-acre undivided Lands. There is also an issue with the Planning Act as to whether five acres could ever be successfully conveyed to the plaintiffs by the defendant El-Turk as contemplated in the Letter Agreement. However, for the purpose of this analysis, this fact does not negate the existence of the plaintiffs’ interest in the land in these circumstances: Ma, at para. 41.
[31] Notwithstanding any deficiency in the Letter Agreement and any subsequent oral amendments, in the alternative, I am satisfied from the circumstances of the parties’ dealings that a CPL can be issued based on a claim to a beneficial interest in the Lands. There is a triable issue that Mr. El-Turk holds the interest in the five acres in trust for the plaintiffs. For the plaintiffs to advance $640,000 in consideration for the purchase of these acres and for the defendant El-Turk to then terminate the agreement and deny an ownership claim on the basis of the either the Statute of Frauds or the Planning Act and to both the existence of an agreement but then entitlement to keep the funds appears contrary to fairness and principles of justice: Perruzza, at paras. 32-35.
[32] Finally, there is also a triable issue in respect to the plaintiffs’ entitlement to specific performance. There is a factual dispute that cannot be resolved on this motion as to whether the plaintiffs were, in fact, ready to close the transaction when called upon by Mr. El-Turk to do so. The plaintiffs contend the defendant avoided Mr. Halbouni and refused to accept the final payment for closing whereas Mr. El-Turk submits the plaintiffs were unable to make the final payment. However, the plaintiffs advanced approximately 85% or $640,000 towards the purchase price before the defendant El-Turk purported to terminate the agreement: Ma, at paras. 38-39. Even accepting the issues raised by the Planning Act, there is a triable issue that the plaintiffs would at least be entitled to the conveyance of an undivided interest, if not the five acres as was first represented by the defendant El-Turk.
[33] I acknowledge the defendant also relies upon a limitation defence to argue there is no triable issue that the plaintiffs have an interest in the land. The argument is that time started to run in August 2019 (when the defendant El-Turk did not sign the draft agreement proffered by the plaintiff Halbouni) and that the plaintiffs were out of time when they started the action in March 2022. However, the plaintiffs note Mr. El-Turk did not purport to terminate or repudiate the agreement until January 2021. In my view, these factual contentions were not fully canvassed on this record and the issue is best left to be determined through trial or summary disposition, if appropriate.
2. Is it equitable for the court to exercise its discretion to grant a CPL?
[34] The court must now consider all the relevant matters between the parties and make a determination, in equity, as to whether to exercise its discretion to issue a CPL. Again, these factors are well-recognized from Perruzza, at para. 20.
(i) Whether the Plaintiff is a shell corporation
[35] The plaintiff corporation was incorporated to hold real estate. However, the plaintiff Halbouni has given an undertaking as to damages. The court did not hear there was any dispute as to the sufficiency of that undertaking.
(ii) Whether the Land is unique
[36] The defendant El-Turk submits the Lands are not unique. It is zoned agricultural and is not included in the city’s urban growth boundary. It can not be developed for residential homes and is owned by several parties with undivided interests such that no acres can be severed and sold to the plaintiffs.
[37] The plaintiffs submit the five acres and the Lands in general are unique. They are near a pond, district park, a new high school and elementary school, a shopping mall, a golf club, a university, and a significant amount of municipal infrastructure that could allow for the lands to be serviced. In fact, an engineering report prepared on behalf of the defendants points to many of the lands’ unique characteristics. The plaintiffs intended to build homes in proximity to these characteristics. Given the increased demand for raw developable land in the region, the plaintiffs will not be able to afford a property of similar size in proximity to these amenities.
[38] I acknowledge that the location of the subject property and even a vacant property, can demonstrate uniqueness, where there is an intention to build: 2033363 Ontario Ltd. v. Georgetown Estates Corp., 2006 CanLII 5141 (ON SC); Roppo v. Avvro Developments Inc., 2006 CanLII 41809 (ON CA). I accept that the plaintiffs intended to build homes for the plaintiff family. Leaving aside the issue of whether that plan was feasible, which I will address later, I accept that the property is unique.
(iii) The intent of the parties in purchasing the Lands
[39] Notwithstanding the doubts raised by the defendant that plaintiff homes could be built as contemplated, there is no dispute that the plaintiffs intended to build homes for Mr. Halbouni’s family. The plaintiffs contend the vacant lands for which they have already advanced significant consideration may still eventually be available for development. Questions as to whether the Lands can be developed for a residential subdivision and whether a transfer would be prevented by the Planning Act do put the reality of this intent into question. However, this is only one factor and on its own is not a bar to the issuance of a CPL.
(iv) Whether there is an alternative claim for damages
[40] Declaratory relief and specific performance are the core claims in the statement of claim. There is an alternative claim for damage, but only to be particularized prior to trial. The plaintiffs submit it would be extremely difficult, if not impossible, to calculate the plaintiff’s damages. The defendant questions the sincerity of this submission, as Mr. Halbouni demanded $1.5 million from the defendant as the cost of terminating the contract.
[41] The plaintiffs do not explain how damages would be “impossible” to calculate beyond these representations; however, the claim for damages as an alternate remedy is not a bar to the issuance of a CPL.
(v) The presence or absence of a willing purchaser
[42] The defendants did not assert that there are any willing purchasers of the lands who would be thwarted by a CPL.
(vi) The harm to each party if the CPL is or is not removed with or without security
[43] The plaintiff notes the Lands remain vacant, with no activity being undertaken upon them. There is no evidence a CPL will interfere with the defendant’s activities or dealings with the land and the plaintiff Halbouni has given an undertaking as to damages. In contrast, the plaintiffs would be prejudiced without a CPL registered on the Lands to protect its interest. The defendants would be free to deal with the lands in any manner they see fit, such as by selling, disposing or encumbering the lands, for which the plaintiff Halbouni already advanced $640,000 to acquire an interest.
Conclusion
[44] There is a triable issue as to whether the plaintiffs have an interest in the Lands, either by way of agreement or as a beneficial interest. Although there are questions on this record as to whether it would be possible to convey the five acres as contemplated in the Letter Agreement, in circumstances where the property is unique, where the plaintiffs have already advanced 85% of the purchase price and where the defendant El-Turk maintains the funds are forfeited, I find the equities in this case support granting leave to issue a CPL.
[45] I grant leave the plaintiffs to obtain and register a Certificate of Pending Litigation in respect of the lands and premises legally described as South Half Lot 23 Concession 6; Subject to 79312, 93042 London Township, and as described as PIN 08138-0064 (LT), known municipally as 1431 Sunningdale Road West, London, Ontario.
[46] I have a bill of costs filed by the plaintiffs at the return of the motion. The defendant had not prepared a bill of costs and the court advised this could be deferred pending the release of this decision. If the parties cannot resolve costs, the plaintiffs shall deliver their written submissions by November 21, 2022 and the defendants shall deliver their written submissions by December 2, 2022. Written submissions are limited to two pages excluding the bill of costs and any offers to settle.
Justice K. Tranquilli
Released: November 3, 2022
COURT FILE NO.: CV-22-432
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2705310 ONTARIO LIMITED and SAM HALBOUNI
AND
AHMID EL-TURK, ALI JOMAA, CHAZIM LIMITED and GREEN LINER LTD.
REASONS FOR JUDGMENT
Justice K.C. Tranquilli
Released: November 3, 2022