Court File and Parties

Court File No.: CV-21-883 Date: 2023-05-01 Superior Court of Justice – Ontario 7755 Hurontario Street, Brampton ON L6W 4T6

Re: 2719939 Ontario Inc., Milankumar Patel and Falguni Patel, plaintiffs And: Shanmugam Thayanananthan, Suchintha Thayananthan, Nishanthy Thayananthan, 2380048 Ontario Inc., defendants

Before: Justice F. Van Melle

Counsel: Julian Binavince, for the plaintiffs Matthew Barteaux and Sarah Jamshidimoghadam, for the defendants

Heard: April 19, 2023

Endorsement

[1] This motion is between the plaintiffs and the defendants Shanmugam Thayanananthan, Suchintha Thayananthan, Nishanthy Thayananthan and 2380048 Ontario Inc.

[2] The plaintiffs seek injunctive relief enjoining the defendants from enforcing two vendor take-back mortgages.

[3] The plaintiffs Falguni Patel (Falguni) and Milankumar Patel (Milan), (the Patels), through the plaintiff 2719939 Ontario Inc. (271 Inc.), purchased the property at 19100 Hwy. No. 12, Scugog, Ontario (the commercial property) from 230048 Ontario Inc. (238 Inc.)

[4] A Shell gas station, a convenience store, a Country Style coffee shop and a Pizza Pizza pizzeria (the businesses) operate from the commercial property. The businesses were operated by the 238 Inc.

[5] Shanmugam Thayananthan (Sam) purchased the property through 238 Inc., a company that he and his wife, Suchintha Thayananthan (Suchintha) incorporated on or about January 21, 2015.

[6] 238 Inc. sold the commercial property and the businesses to 271 Inc. Confirmation of the acceptance of the Agreement of Purchase and Sale (APS) was signed by 271 Inc. and 238 Inc. on September 7, 2019. The sale closed on or about April 21, 2020.

[7] Milan and Falguni had difficulty obtaining financing prior to closing. Eventually 238 Inc. agreed to provide 271 Inc. with a vendor take-back mortgage (VTB) of $850,000. The VTB was registered against the commercial property and a second VTB was registered against the plaintiffs’ residential property. As additional security for the VTB, the plaintiffs provided a promissory note, collateral charge and assignment of rents registered on title to their personal residence. Milan and Faguni also provided personal guarantees.

[8] The plaintiffs made six payments pursuant to the VTB. No further payments were made. Power of Sale proceedings were commenced in February of 2021. No payments were made, instead the plaintiffs issued this Statement of Claim on March 24, 2021.

[9] For the reasons that follow I dismiss the plaintiffs’ motion.

Background

[10] When Sam and Suchintha purchased the property through 238 Inc. it was an empty parcel of land. Sam built a Shell gas station, a convenience store, a Pizza Pizza restaurant and a Country Style Donuts restaurant. These were family-run businesses. The gas station became operational on or about September of 2017.

[11] In August 2019 Sam was approached by Muhammad Latif (Latif), an acquaintance who held himself out as a businessman and facilitator with a particular expertise in the building, buying and selling of gas stations. Latif told Sam that he had a party who was interested in purchasing the commercial property and the businesses. Sam said he was interested if the potential purchaser was serious.

[12] On September 2, 2019 Latif gave Sam an Agreement of Purchase and Sale dated September 2, 2019. The APS contained conditions including “Due Diligence” and “Documents Satisfaction” conditions, which were required to be satisfied prior to the completion of the sale.

[13] Over the next few days, via Latif, the plaintiffs and Sam went back and forth on the issue of price. On September 4, 2019 they agreed on a price.

[14] 217 Inc. was represented by the real estate agent Ativ Shah and 283 was represented by Ken Sehgal. Sehgal and Shah worked for the same real estate brokerage.

[15] Confirmation of the acceptance of the APS was signed by both the seller and buyer on September 7, 2019 and was the first time that Sam and the Patels, Sehgal and Shah met in person. The final purchase price was $7,600,000 although there was to be a discount of $1,100,000 if 238 Inc. could not deliver a Tim Horton’s franchise to the property prior to closing. The APS also contained conditions including approval of the APS by the parties’ respective solicitors, proof of satisfactory financing, a due diligence condition and the documents satisfaction condition.

[16] The property was originally scheduled to close on November 29, 2019. However, the closing date was extended at least 12 times between October 2019 and April 2020, primarily at the request of the Patels. The requests were made to allow the Patels additional time to have their legal representatives attend to various closing matters.

[17] The plaintiffs say that they entered into the APS based on false information. They say they received an “information sheet” which represented that the gas station sold approximately 6,000,000 liters of fuel products annually.

[18] The plaintiffs obtained financing from Kawartha Credit Union (KCU) in the amount of $5,180,000 toward the purchase of the commercial property and the businesses. KCU registered a first mortgage against the commercial property and the Patels’ residential property.

[19] Between the execution of the APS and the closing the plaintiffs say that they and the defendants agreed to reduce the purchase price to $6,500,000. At paragraph 14. of the plaintiff’s factum, the plaintiff states that it appears that KCU was advised of the reduction in price (although there is no evidence of this).

[20] The plaintiffs say they were induced to purchase the property based on inaccurate pre-closing sale date.

[21] Sam acknowledges that the plaintiffs were given inaccurate pre-closing documents but says that he did not provide those documents to them.

[22] Sam takes the position that he provided a point-of-sale printout of the sales figures related to the gas station and convenience store to Latif, whom he assumed would pass the documents on to the Patels.

[23] Following acceptance of the APS Sam’s solicitors reviewed and requested changes to the APS to ensure its contents were acceptable. Most of those changes were agreed to by the Patels, and the APS was amended accordingly.

[24] On September 25, 2019 the Patels waived the Due Diligence Condition and the Documents Satisfaction Condition in the APS. The Patels were permitted to attend the commercial property and businesses over the next 8 months to observe the running of the businesses and to shadow the employees. The Patels had access to both real-time historical sales and revenue dates.

[25] On April 19, 2020 the plaintiffs signed an acknowledgement whereby they acknowledged and agreed that they had made their own independent decision to enter in the purchase agreement and acknowledged and agreed that they were not relying upon any advice from the Vendor as to “any aspect of the transaction, including without limitation, the legal, accounting or tax treatment of such transaction, and accordingly hold the Vendor harmless from and against any and all damages, expenses and liabilities arising from a breach of the foregoing”. The acknowledgement was witnessed by the plaintiffs’ lawyer, Jasmeet Kaur Dara.

The Law

[26] The law with respect to interlocutory injunctions in cases where the injunction is sought to prevent a power of sale from proceedings is set out by Justice J.A. Ramsay in Duffin v. Norina Holdings Inc., 2011 ONSC 5799:

5 The plaintiffs argue that they have met the test for an interlocutory injunction in RJR MacDonald Inc. v. Attorney General of Canada, [1994] 1 S.C.R. 311. The defendants argue that they have not met the test, and that the plaintiffs in any event are required to meet the more demanding criteria set out in Arnold v. Bronstein, [1971] 1 OR 467 (Lacourcière J.).

6 The test in RJR MacDonald Inc. requires the party who applies for an interlocutory injunction to show a. that there is a serious question to be determined, b. that irreparable harm will result to the applying party if an injunction is not granted, and c. that the balance of convenience, taking into account the public interest, favours granting the injunction.

7 Arnold v. Bronstein reiterates longstanding common law doctrine that that a mortgagee will not be restrained from exercising a power of sale (whether contractual or by court order) unless the mortgagor pays the amount claimed by the mortgagee into court, "provided no case of fraud be made out." The courts have not taken RJR MacDonald Inc. to overrule that doctrine. They still apply it. See, for instance, Hornstein v. Gardena, [2006] O.J. No. 2757 (CA); 6661 Montrose Road Property Inc. v. 9843380 Ontario Ltd., [1998] O.J. No. 1324 (Div. Ct).

8 The Arnold v. Bronstein rule applies to a specific category of interlocutory injunction. It is not inconsistent with the doctrine in RJR MacDonald Inc. In RJR, consideration of the balance of convenience includes the public interest. Arnold v. Bronstein and the cases upon which it is based state a very strong public interest in allowing mortgagees to enforce their contractual rights. Lenders will not lend if they cannot enforce their right to be paid back.

Is there a serious issue to be determined?

[27] The threshold for the determination as to whether or not there is a serious issue, is not high. I must be satisfied that the claim of the moving party is neither frivolous nor vexatious.

[28] There is a question as to the information relied upon by the purchasers. This is mitigated by the due diligence condition in the APS which was explicitly waived by the plaintiff. As well the plaintiffs were afforded opportunities to see the business workings from the inside prior to the closing of the agreement and sale. They had access to the point-of-sale documentation and any other documentation that they wished to review. However, there are serious credibility issues which are best determined at trial.

[29] Therefore based on the information before me, I am unable to say that the claim of the moving party is frivolous or vexatious.

Will the moving party suffer irreparable harm if the injunction is not granted?

[30] The moving party must establish that refusing to grant the interlocutory injunction would so adversely affect that party’s interests that the harm could not be remedied if the eventual decision on the merits is in favour of the moving party.

[31] Irreparable harm is harm that cannot be quantified in monetary terms.

[32] In Curran Farm Equipment Ltd. v. John Deere Ltd., 2011 ONSC 3600 at paragraph 16 the Divisional Court stated that "if the nature of the damages can be calculated in money, then no matter how difficult it may be to qualify damages, the court should decline to grant an injunction".

[33] The plaintiffs say that they cannot pay off the financing registered against the commercial property and the residential property. As a result, they will lose the commercial property and the business as well as their personal residence. They say this will cause a serious disruption to the entire family.

[34] The plaintiffs have not made out a case for irreparable harm that cannot be calculated monetarily. They point to the fact that their children, (approximately 16 and 18 years of age), will have to move from their home. Paragraph 2 of Milan’s affidavit sworn August 18, 2021 states:

Falguni and I, along with our two children, ages 14 and 16, live at the property having the municipal address 27 Maple Valley Street, Brampton, Ontario (the "Residential Property"). We have lived at the Residential Property for over 10 years, my children have attended schools in the neighborhood since 2011 and my family has established roots in the community around the Residential Property.

[35] No harm has been made out other than the necessity to move to another home. There is no evidence that alternate accommodation is not available in the same area and even if there were, a residential move does not constitute irreparable harm.

[36] The plaintiffs argue that there will be no prejudice to the defendants if the defendants are restrained from enforcing their mortgage thus the balance of convenience favours the granting of the injunction.

Balance of convenience

[37] In this case the balance of convenience rests with the defendants. My review of the caselaw demonstrates that Arnold v. Bronstein is still good law today. Arnold v. Bronstein endorsed the common law doctrine that a mortgagee will not be restrained from exercising a power of sale unless the mortgagor pays the amount claimed by the mortgagee into court, provided no case of fraud be made out.

[38] The plaintiffs say that the whole transaction was fraudulent, however, I accept that the fraud referred to in Arnold v. Bronstein concerns the mortgage itself. No fraud is alleged against the defendants in regard to the mortgage itself. If anything there is an allegation against the plaintiffs who may have overstated the purchase price to obtain financing.

[39] I accept that a consideration of the balance of convenience includes the public interest and that as set out in Arnold v. Bronstein, there is a very strong public interest in allowing mortgagees to enforce their contractual rights.

[40] In considering the balance of convenience I also consider the undertaking given by the plaintiffs regarding damages.

[41] I agree with the defendants that it appears from the evidence of the plaintiffs themselves, that the plaintiffs would be unable to honour their undertakings. There are three mortgages registered against the commercial property and businesses and three mortgages registered against the family home. There is no evidence that the defendants have assets exceeding the $850,000 amount of the VTB. A moving party must disclose if it does not have assets sufficient to honour the undertaking. 642947 Ontario Ltd. v. Fleischer, [2001] O.J. No. 4771 (ONCA) at paragraph 63:

But Sweet Dreams itself had the primary obligation to disclose that its assets were inadequate to satisfy its undertaking if called on to pay. The undertaking was not given to 642947 and Burnac. It was given to the court. By undertaking to "abide by any Order concerning damages that the Court may make", Sweet Dreams implicitly represented that it had sufficient assets to honour that undertaking. Both the court and Burnac were entitled to rely on that representation without making inquiries into its accuracy. If, as was the case here, Sweet Dreams did not have sufficient assets to honour its undertaking, it had an obligation to disclose that fact to the court. Sweet Dreams could then have asked to be relieved of its undertaking, or could have been asked to post security.

[42] The same could be said of the plaintiffs who are obliged to show that their assets are sufficient to honour the undertakings. It does not appear that they are.

[43] The plaintiffs say that the defendants do not come to court with clean hands. In examining the claims of “value-added fraud”, if it in fact exists, it appears that it was perpetuated by the plaintiffs, although that is a determination for another day.

[44] For purposes of this motion it is enough to say that Falguni gave Sam $100,000,000 by way of two cheques allegedly on the premise that Sam could cash the cheques if he provided a Tim Horton’s at the commercial property and was to tear up the cheques if he could not. The purchaser provides no explanation for this. The inference to be drawn is that the plaintiffs wanted an APS with a higher purchase number upon which to arrange financing. The plaintiffs were asked in cross-examination to provide the application to the primary lender and did not do so. I draw an adverse inference and find it is likely that the application supports Sam’s version of events.

[45] To state it another way, it appears that the plaintiffs presented to KCU an APS with a purchase price of $7.6 million and arranged financing thereupon when the real purchase price was $6.6 million.

[46] In the result I dismiss the plaintiffs’ motion for the reasons set out herein.

Costs

[47] The plaintiffs claim costs on a partial indemnity basis in the amount of $38,954.66; on a substantial indemnity basis in the amount of $43,389.08; and on a full indemnity basis in the amount of $55,706.93.

[48] The defendants claim costs on a partial indemnity basis in the amount of $76,909.50; on a substantial indemnity basis in the amount of $95,672.13 and on a full indemnity basis in the amount of $105,053.45.

[49] The defendants were successful on this motion. I have reviewed their Costs’ Outline and find it to be very high for a motion that admittedly involved a number of cross-examinations. While there is no question that the issues were important to the parties, I do not believe that there is a basis for anything other than partial indemnity costs. Of the costs claimed, $11,240.28 is disbursements and $83,000 is legal fees. The balance is HST. I find that an appropriate amount for costs is $50,000 plus $11,240.28 for disbursements plus HST.

Materials Filed on the Motion

[50] Approximately 3,700 pages were uploaded to CaseLines in support of this motion.

[51] Neither party complied with the procedures outlines in the Notices to the Profession.

[52] There were no compendiums despite the requirement at rule 4.05.3(3) in the Rules of Civil Procedure and in the Provincial Notice to the Profession:

For hearings or conferences in civil matters, in accordance with rule 4.05.3(3) of the Rules of Civil Procedure, each party must upload to CaseLines a compendium containing key materials that will be referred to in oral argument (e.g., fair extracts of documents, transcripts, previous orders, authorities, etc.). The compendium must include only those materials that will be referred to in argument and must have a table of contents hyperlinked to the sections within it and hyperlinks to authorities cited.

[53] The Notice contains a specific direction regarding Books of Authorities and Facta:

No book of authorities containing the full text of all authorities to be relied on shall be filed with the court in paper or electronic format, unless the court orders otherwise.

Each party’s factum shall hyperlink authorities to a publicly available, free website such as, whenever they are available on such a website.

The factum must include paragraph references each time a case is cited in the factum, with the applicable paragraph also hyperlinked.

Authorities that are not available on a free public website, such as unreported decisions and excerpts from textbooks, shall be included in an abbreviated book of authorities and filed electronically in PDF format. The abbreviated book of authorities shall include a table of contents that has internal hyperlinks to the cases and textbook excerpts contained within it.

[54] Although there was some hyperlinking in the documents, notably the indices in the defendants’ two Books of Authority were not hyperlinked. They were not bookmarked. The result of the failure to comply with the Rules and The Notice to the Profession was that this endorsement took much longer than it should have. Finding the references in the materials and in my notes was laborious. With the tools available in CaseLines it was also unnecessary.

Van Melle J.