Court File and Parties

COURT FILE NO.: CV-22-00682175

MOTION HEARD 20221207

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mohsen Hassanzadeh and Yas Hassanzadeh, Plaintiffs

AND:

Sasha Davoodi, Fahimeh Davoodi, Mohammad Davoodi, Tara Davoodi and Karam Bahor, Defendants

BEFORE: Associate Justice L. La Horey

COUNSEL: Jordan D. Sobel for the plaintiffs/ moving parties

Jordan Goldblatt for the defendants/ respondents

HEARD: December 7, 2022

REASONS FOR DECISION

[1] The plaintiffs bring this motion for an order for a certificate of pending litigation (“CPL”) against property known municipally as 409 Sutherland Drive, East York, Ontario (the “Property”). For the reasons that follow, the plaintiffs’ motion is dismissed.

[2] At the oral hearing a preliminary issue arose regarding the late service of a further affidavit by the defendants. The plaintiffs sought an adjournment of the motion to cross-examine on this affidavit. In response, the defendants withdrew their request that I consider the affidavit. As the plaintiffs were content to proceed on this basis, the motion was argued. I have not considered the affidavit in reaching my decision.

[3] The plaintiffs commenced this action on June 3, 2022. In their statement of claim, they seek, inter alia: (a) an order granting leave to issue a CPL over the Property; b) a declaration that the Partnership Acknowledgement and Trust Declaration dated November 19, 2021 (the “Partnership Agreement”) is binding on its partners and remains in “full force and effect”; c) a declaration that the defendant Sasha Davoodi is a bare trustee for the partnership and holds legal title to the Property as bare trustee for the benefit of the partnership; d) a declaration that the defendants have breached the Partnership Agreement; e) a declaration that the plaintiffs continue to be partners under the Partnership Agreement and hold a “partnership interest and beneficial ownership in the Property”; and, f) an interim order preventing the defendants from dealing with the Property. The plaintiffs plead that they have an unregistered interest in the Property.

[4] The parties are partners in the Partnership. The plaintiffs, who are father and daughter, have a collective 27.73% interest in the Partnership. The defendants, who are related to each other, collectively hold a 72.27% interest.

[5] It is not disputed that the parties entered into the Partnership Agreement. The parties disagree as to the interpretation of the Partnership Agreement. Each side takes the position that the other side is in breach of its terms.

[6] The Property was acquired pursuant to an Agreement of Purchase and Sale entered into on August 23, 2021. The transaction closed on November 19, 2021 with the defendants Sasha Davoodi, Fahimeh Davoodi and Mohammad Davoodi taking title as registered owners of the Property. In order to fund the acquisition of the Property a mortgage was obtained from CIBC with the registered owners as chargors.

[7] As set out in the Partnership Agreement, the Property was acquired for its development potential. Section 2.5 of the Partnership Agreement sets out the business of the partnership. It states: “The business of the Partnership is to, directly, or indirectly, acquire and develop the Property.”

[8] The Property is a detached home in the Leaside area of Toronto. The plan was to construct a two-storey rear and side addition to the Property and sell it at a profit (the “Project”). To that end, Mohsen Hassanzadeh filed a zoning certificate application with the City of Toronto. The Committee of Adjustments refused the application in a decision dated May 10, 2022. There is no evidence that the decision has been appealed.

[9] The Property is sitting vacant. None of the parties have ever lived at the Property.

[10] Mr. Bahor deposes that the defendants are not interested in continuing to work with the plaintiffs on the Project. In their counterclaim, the defendants seek recission of the Partnership Agreement, an order dissolving the partnership under s. 35 of the Partnerships Act and, in the alternative, an order under the Partition Act directing a partition or sale of the Property.

[11] The defendants have indicated their intention to sell the Property.

LAW AND ANALYSIS

[12] Section 103 of the Courts of Justice Act permits the issuance of a CPL when “an interest in land is in question.”

[13] The test for a CPL is well known. Master Glustein (as he then was) summarized the applicable principles in Perruzza v Spatone[^1] 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 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 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).

[14] The defendants do not dispute that the plaintiffs have raised a triable question as to an interest in land and thus the plaintiffs have satisfied the threshold requirement for a CPL. Accordingly, I must consider whether I should exercise my discretion to grant the CPL. In so doing, I will consider what are commonly called the Dhunna factors.[^2] 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.

[15] None of the parties is a shell corporation.

[16] The plaintiffs concede that there is nothing unique about the Property. This factor weighs against the granting of a CPL.

[17] It is clear that the intent of the parties in acquiring the land was for the purpose of investment. The parties intended to renovate the Property and sell it a profit. This is evident from the Partnership Agreement as well as the affidavits filed by both the plaintiffs and defendants. This factor militates against a CPL.

[18] The statement of claim makes no claim for damages. However the absence of a claim for damages is not determinative in my view. The plaintiffs seek declaratory relief including that the Partnership “remains in full force and effect”. They also seek a declaration that the defendants have committed breaches of trust but, unusually, do not claim damages for breach of trust. The omission of an alternative claim for damages in the circumstances of this case appears to be a strategic choice to maximize the chances of obtaining certificate of pending litigation. Although the absence of claim for damages is a factor that weighs in favour of a CPL, in these circumstances I give it little weight.

[19] The plaintiffs submit that damages will be difficult to calculate as the calculation will be more complicated than simply dividing the net sale proceeds by the respective partnership interests. In particular, they submit that because Mohsen Hassanzadeh was to act as the construction contractor and would be entitled to overhead and profit, his damages in this respect would be difficult to calculate. However, this submission is undercut somewhat by the letter from plaintiffs’ counsel listing the expenses allegedly incurred by Mr. Hassanzadeh in respect of the renovation that states that he is entitled to a 15% mark-up on these expenses. Assuming that the plaintiffs are entitled to a mark-up on expenses, which the defendants deny, profit will be relatively easy to calculate as it is based on a percentage of costs. I do not find that the damages in this case would be especially difficult to calculate.

[20] The defendants submit that damages would be an adequate remedy and that this is a relevant consideration, even though the plaintiffs have not claimed damages.

[21] In Interrent International Properties Inc. v 1167750 Ontario Inc., Master McLeod, as he then was, said:[^3]

The second and really the more important issue is whether or not damages would be an adequate remedy. I recognize the plaintiff has not asked for damages in its statement of claim but that is not the question. Specific performance is only available as an equitable remedy when the ordinary legal measure of damages will be insufficient and this depends on the court finding that the land is so unique that its loss cannot be adequately calculated in damages alone. If damages are an adequate remedy then specific performance will not be granted even if that is the only remedy that has been claimed.

[22] Given that the intention of the parties was to make a profit on the renovation and sale of the Property, monetary damages would seem to be an adequate remedy and I anticipate that the plaintiffs will seek leave to amend their claim to seek damages. In his affidavit filed on behalf of the defendants, Mr. Bahor does not take issue with the plaintiffs amending their claim to claim damages and particularize the alleged breaches of the Partnership Agreement.

[23] There is no evidence of the presence or absence of a willing purchaser and therefore this is not a factor in the case at bar.

[24] The defendants submit that they will be harmed if the CPL is granted. The plaintiffs do not wish to dissolve the partnership and put the Property up for sale. They want to proceed with the Project, which would require a further application to the Committee of Adjustments. The affidavits filed by the plaintiffs do not clearly set out a going forward plan for the Project, although it appears that the plaintiffs have suggested that the Property be rented until the renovations can begin to cover the mortgage. The defendant Yas Hassanzadeh says that she has been advised by Mohsen Hassanzadeh that it is not uncommon for a variance application to be opposed by local interest groups and rejected and it common to revise and resubmit an application. She deposes that, “Mohsen Hassanzadeh has taken steps to evaluate a revised zoning application and revised variance request, but the within dispute is preventing that outcome.”

[25] The defendants wish to sell the Property and take the position that the Project is not viable as the Committee of Adjustments has denied the application. In any event, even if a second application to the Committee of Adjustments was viable, they have no desire to continue to work with the plaintiffs given what has transpired. As Mr. Bahor puts it in his affidavit, “There is no universe where the Defendants want to continue working with the Plaintiffs on this or any other project.”

[26] It is not controverted that the defendants Sasha Davoodi, Fahimeh Davoodi, and Mohammad Davoodi are the borrowers on the mortgage in favour of CIBC. The mortgage information statement filed on the motion indicates that the principal balance as of December 31, 2021 was $940,402.58. It is not disputed that the plaintiffs are not contributing to the monthly mortgage payments. The defendants do not want to continue to fund the mortgage indefinitely while the litigation proceeds.

[27] With respect to the possibility of renting the Property, Mr. Bahor deposes that renting the Property to fund the mortgage was never part of the plan, and a tenant would complicate plans to move forward with the Project. He says that the Property cannot be renovated with a tenant in possession. Section 2.5 of the Partnership Agreement, quoted above, makes no reference to leasing the Property.

[28] In oral argument, Mr. Sobel submitted that his clients will be harmed if the CPL is not granted because “there is no security available with respect to my client’s Partnership interests.” Counsel further noted that often when a CPL is granted, it is later discharged on the provision of adequate security and the parties then fight over the proceeds.

[29] A CPL is not intended to be an mechanism to secure a claim for damages.[^4] Although the plaintiffs have not included a request for damages in the statement of claim in its current form, it appears that damages are what the plaintiffs are really looking for. If the plaintiffs have concerns about a dissipation of assets, then it is open for them to seek relief by way of a Mareva order.[^5]

[30] If the CPL is not granted, the plaintiffs will not be able to continue with the Project, however, it is hard to see how the Project remains viable given that the defendants do not want to work with the plaintiffs and the zoning application has been rejected. Moreover there is no evidence that this renovation project is unique.

[31] Having considered and weighed the equities, I exercise my discretion to refuse the CPL.

DISPOSTION AND COSTS

[32] Costs were argued at the conclusion of the hearing. The parties agreed that the successful party would be entitled to costs on a partial indemnity scale. Both parties submitted costs outlines. The plaintiffs argued that if the defendants were successful their partial indemnity costs should be $6,500 which is the amount they were seeking for their partial indemnity costs if successful (in addition to disbursements). The defendants requested costs of $10,000. The plaintiffs say that this is too high and refer to the defendants’ cost outline submitted in August which sought $7,610.55 on a partial indemnity basis. However that cost outline did not include any amount for preparing for or attending the hearing. Although the plaintiffs’ partial indemnity bill is lower, the defendants’ factum was more comprehensive.

[33] Having considered the circumstances of this case and applying them to the factors set out in Rule 57, I am satisfied that it is fair and reasonable and within the reasonable expectations of the parties for the plaintiffs to pay costs of the motion on a partial indemnity scale fixed in the amount of $10,000 (all inclusive).

[34] The plaintiffs’ motion is refused. The plaintiffs shall pay to the defendants their partial indemnity costs fixed in the sum of $10,000 (all inclusive) within 30 days.

L. La Horey, A.J.

Date: December 9, 2022

[^1]: 2010 ONSC 841 at para 20

[^2]: These are described in Perruzza, para 20(iv) quoted above.

[^3]: 2013 ONSC 4746 (Master) at para 31

[^4]: 2254069 Ontario Inc. v Kim, 2017 ONSC 5003 at para 38, Nabizadeh v Manifar, 2015 ONSC 5503 (Master) at para 19

[^5]: Bains v Khatri, 2019 ONSC 1401 at para 37