Court File and Parties

COURT FILE NO.: CV-20-636740 DATE: 20230111 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2495940 Ontario Inc. Applicant (Moving Party)

AND:

2633346 Ontario Inc. Respondent (Responding Party)

BEFORE: VELLA J.

COUNSEL: Behrouz Amouzgar and Stefanija Savic, for the Applicant Scott Turton, for the Respondent

HEARD IN WRITING: January 6, 2023

Reasons for Decision

[1] The Applicant seeks to amend its Fresh As Amended Statement of Claim in relation to a trial of an issue that I ordered arising from its original application.

[2] For the reasons that follow, while leave to amend the Fresh As Amended Statement of Claim is granted in some respects, the bulk of the proposed amendments are denied.

Juridical Background

[3] On August 21, 2020, this matter originally came before me by way of an application. The Applicant, 2495940 Ontario Inc. (“249”), as the former second mortgagee to the property municipally known as 23 Thornridge Drive, Vaughan, Ontario (the “Property”), sought a judicial determination of the validity of certain charges claimed by the Respondent, 2633346 Ontario Inc. (“263”) as the former first mortgagee by assignment (under what has been described by 249 in its pleading as the “Amending Agreement” and in my Reasons dated December 18, 2020 as the “Renewed First Mortgage”), from the proceeds of sale of the Property which were paid into court to the credit of this application.

[4] In the supplementary affidavit of Hootan Ghovanloo, sworn July 30, 2020, and in the Applicant’s responding factum, dated July 30, 2020, 249 raised allegations of fraud, challenging the validity of the summary judgment decision of Di Luca J. released (on consent of Mr. Alijanpour and 263) on November 22, 2019 (the “Di Luca J. Judgment”). The judgment was granted in favour of the Respondent in a separate proceeding in the sum of $3,261,290.58 as the total arrears and damages owing to 263 under the terms of the Renewed First Mortgage. The Di Luca J. Judgment reflected damages arising under the charges that 249 disputes in this application.

[5] At paragraphs 16 and 17 of its 2020 Reply Factum, 249 alleged that it had “serious concerns with respect to the identity” of the directors of 263, and in particular, their relationship with the Mortgagor, Alijan Alijanpour, and the individuals “involved in fraudulent activities involving various properties in General (sic) Toronto Area”. 249 also stated that it had “serious concerns … regarding whether the Mortgagor [Alijan Alijanpour] is actually the true owner of the mortgaged property”.

[6] At the initial hearing of this application, 249 confirmed that it was pursuing the allegations of fraud set out in the 2020 Reply Factum and the 2020 supplementary affidavit of Ghovanloo as undermining the validity of the Di Luca J. Judgment.

[7] Notwithstanding the concerns I raised regarding the appropriateness of the application procedure given these disputed essential material facts asserted by 249, I was urged by both parties to proceed with a ruling on the merits of the application, subject to hearing a trial of an issue on the discreet issue of fraud as it relates to the validity of the Di Luca J. Judgment.

[8] At paragraphs 25 and 26 of my Reasons I directed a trial of an issue relating to the fraud allegations and their legal effect on the Di Luca J. Judgment. I stated that the fraud allegations being pursued by 249 were confirmed by it to be contained in its 2020 Reply Factum and the Ghovanloo supplementary affidavit. This was embodied in my Order dated December 18, 2020.

[9] I directed that the parties prepare a statement of claim and statement of defence in order to properly frame the claim and defences relating to the trial of an issue. This trial of an issue is being treated as an action (r. 38.10(3)).

[10] On February 12, 2021, 249 delivered its statement of claim.

[11] Several case conferences and motions in writing have followed. I had established a timetable for the steps leading to the trial of an issue and for the hearing itself, but the timetable was disrupted due to a number of motions. In my August 26, 2021 Endorsement I set a four-day trial for the week of February 22, 2022. A trial record was to have been filed, and a pre-trial conference was to have been conducted.

[12] I also made an order requiring 249 to pay further funds into court under s. 12(7) of the Mortgages Act, R.S.O. 1990, c. M.40, and to pay security for costs (Endorsement dated February 24, 2021), including a proposed motion by a nonparty, Alijan Alijanpour, to become an intervenor, which never materialized.

[13] Then on October 21, 2021, 249 delivered a Fresh As Amended Statement of Claim. 263 consented to the Fresh As Amended Statement of Claim while expressly reserving its rights to challenge 249’s standing to make certain claims within the scope of this trial of an issue and to assert any defences it may have. I granted the order on consent with that proviso.

[14] 249 now seeks to further amend its Fresh As Amended Statement of Claim as a result of information it submits it discovered after October 21, 2021. It seeks to add new factual allegations and new causes of action. It delivered its draft Further Amended Statement of Claim on February 7, 2022. As consent was not forthcoming, I requested that the applicant bring its motion in writing in my endorsement dated August 11, 2022.

[15] 263 opposes this motion on various grounds, including:

(a) the new causes of action raised are beyond the scope of the trial of an issue; (b) the new causes of action are not legally tenable because the applicable limitation periods have expired; (c) many of the new allegations are improper as they are irrelevant and/or constitute evidence; and (d) much of the “new” information was known, or ought to have been known, to 249 before it last amended its Statement of Claim on October 21, 2021.

Rule 26.01

[16] 249 brings this motion under r. 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides that amendments to the pleadings shall be granted unless there would be prejudice that cannot be compensated by costs or an adjournment.

[17] However, the scope of the proposed amendments to the Fresh As Amended Statement of Claim is restricted to the trial of the issue I directed pursuant to r. 38.10(1)(b). That trial of an issue relates to 249’s claim that the circumstances underlying the Renewed First Mortgage constituted a fraud on the court (and 249) in relation to the Di Luca J. Judgment granted in favour of 263.

[18] This is not an opportunity for 249 to expand the scope of its claims beyond the issue that is the subject of the pending trial of an issue. It cannot raise new arguments that it neglected to raise at the hearing of the application beyond fraud and its impact on the Di Luca J. Judgment. As I have stated in prior endorsements, including my endorsement dated July 19, 2022, 249 chose to commence its proceeding by way of a notice of application under r. 14.05. Late in the course of that proceeding, 249 raised fraud allegations which it conceded are not suitable for adjudication on the basis of a written evidentiary record, but it chose to pursue the hearing on the merits of its application, aside from the fraud issue.

[19] At some point in the proceedings, the length of the delay caused by motions seeking leave to amend pleadings constitutes some presumptive prejudice for the responding party that cannot be compensated by costs or an adjournment. That point has arrived. 249 had ample opportunity to frame and then amend its claim. Much of the “new” information was discoverable by 249 before it last amended its claim. The s. 12(7) Mortgages Act payment I ordered covered accruing interest to December 31, 2021 and was issued on the basis that this matter was to proceed in February 2022. It has not proceeded to a timely trial of an issue due to 249’s desire to repeatedly amend its claim.

[20] It is clear from the Fresh As Amended Statement of Claim that the crux of 249’s fraud allegations are aimed at vitiating the Di Luca J. Judgment and essentially focus on:

a) the relationship between the Original Mortgagor, Mr. Alijanpour, and 263’s directors; and b) whether Mr. Alijanpour was the true mortgagor or rather was a “straw man” or, alternatively, whether his signature on the Renewed First Mortgage was forged by a third party who 249 alleges was known to 263.

[21] It is through the lens of the parameters of the trial of an issue that the proposed amendments to the Fresh As Amended Statement of Claim must be assessed under r. 26.01.

The proposed amendments

[22] The proposed fresh amendments can be grouped into four general categories:

(e) paragraphs that correct what appear to be clerical errors and formatting issues; (f) paragraphs that add or expand upon existing factual allegations; (g) paragraphs that plead new causes of actions; and (h) the addition of descriptive subheadings.

[23] Rule 25.06 sets out the general principles underlying pleadings. Rule 25.06(1) provides that a concise statement of facts, but not evidence, must be pleaded. Rule 25.06(8) requires that full particulars of claims in fraud must be pleaded.

Clerical errors and Formatting Issues

[24] Paragraphs 4, 5 and 22 are essentially corrections to clerical errors or formatting changes and are consented to. Leave is granted to amend the Fresh As Amended Statement of Claim to include those further amendments.

Paragraphs that purport to expand upon existing factual allegations

[25] The following paragraphs or portions thereof plead evidence (which is impermissible), are irrelevant to the fraud allegations as framed for the trial of an issue or are legally untenable, and are struck without leave to amend:

(a) Paragraph 25 – this paragraph relates to factual allegations unrelated to the Property, Mr. Alijanpour or 263. These alleged transactions that occurred in 2018 are the subject of separate court actions in Oshawa and are irrelevant. This paragraph also pleads evidence that is the subject of the trial of an issue. (b) The second sentence of paragraph 26 – this sentence pleads evidence. (c) The following phrase from paragraph 27: “Although the Defendant has stated that it only became aware of Missaghi’s true identity in January 2019” – this phrase is improper. (d) Paragraph 29 – this paragraph is not legally tenable. Constructive knowledge in place of actual knowledge of the fraudulent activities is not sufficient to satisfy fraud (Thomas J. Lipton Inc. v. Spada, 1992 CarswellOnt 3635, at paras. 46-47, citing Derry v. Peek (1889), 14 App. Cas 337). (e) The second sentence of paragraph 32 – this sentence pleads evidence in the form of a different court action and pleading in which neither of the parties are involved. (f) Paragraph 60, reference to specific statutory provisions – As observed by 263, I already ruled that s. 22 of the Land Titles Act, R.S.O. 1990, c. L.5, is inapplicable to the impugned Renewed First Mortgage transaction in my Reasons. Furthermore, I already ruled s. 93(4) is beyond the scope of the trial of any issue in my endorsement dated July 19, 2022. The remaining proposed statutory provisions similarly are beyond the scope of this trial of an issue.

[26] Paragraph 58 is also struck but with leave to amend. The change requested would result in a withdrawal of the admission that Mr. Alijanpour, as mortgagor, signed the Renewal First Mortgage (styled as the Amending Agreement in the Fresh As Amended Statement of Claim). 263 states that the test for withdrawal of an admission, as set out in Liu v. The Personal Insurance Company, 2019 ONCA 104, 89 C.C.L.I (5th) 195, is not met. In the Fresh As Amended Statement of Claim, 249 alleges that Mr. Alijanpour did sign the Renewal First Mortgage, but that he was a straw man. It maintains this plea. At paragraph 11 of the Fresh As Amended Statement of Claim it pleads that Mr. Alijanpour has alleged in other proceedings that his name was forged. At paragraph 23 of the Fresh As Amended Statement of Claim, 249 pleads 263 knew of the fraudulent activity between Alijanpour, Missaghi and the Property. However, at paragraph 58 of the Fresh As Amended Statement of Claim, 249 pleads that Alijanpour did enter into the Renewed First Mortgage with 263. The allegations that Alijanpour signed the Renewal First Mortgage as a straw man and that his signature was forged without his knowledge are inconsistent pleadings.

[26] The following paragraphs, or portions thereof, have some semblance of relevance to the subject allegations of fraud and leave is granted to add them:

(a) The first sentence of paragraph 26; (b) The balance of the sentence at paragraph 27 – “[t]he Plaintiff pleads that….” (c) Paragraph 28 – This paragraph pleads actual knowledge of the alleged forgery of Mr. Alijanpour’s name to the subject Renewal Mortgage Agreement and of past practice of this pattern of forgery; (d) The second sentence of paragraph 32 to paragraph 34 – These paragraphs plead the defendant’s actual knowledge of the alleged fraudulent scheme involving the subject Renewal Mortgage Agreement and when it learned of same (relevant to whether the Di Luca J. judgment should be vitiated by reason of fraud). (e) Paragraph 39 – While the relevance of this pleading is somewhat tenuous, I will allow this amendment. (f) Paragraph 46 – Again, while the relevance of this pleading is somewhat tenuous, I will allow it.

Paragraphs that plead facts relative to new causes of actions

[27] As stated, the trial of an issue is restricted to fraud as those allegations relate to an undermining of the Di Luca J. Judgment by reason of alleged fraud.

[28] Paragraphs 40 and 41 plead noncompliance with ss. 101(3), 101(4) and 155 of the Land Titles Act. This falls outside the scope of the trial of an issue. In my endorsement dated July 19, 2022, I ruled that it was too late for 249 to add new legal arguments concerning the application of the Land Titles Act, 249 having urged me to render a ruling on the merits of the application, including the application of the Land Titles Act, with the exception of the fraud allegations as they in turn relate to the Di Luca J. Judgment. These pleadings are struck without leave to amend.

[29] Paragraphs 47 to 48 are pleaded under the subheading of unlawful interference with 249’s economic relations. This is a tort pleading and falls outside the scope of the trial of an issue and, as such, these paragraphs are struck without leave to amend.

[30] Paragraphs 49 to 57 are under the subheading of negligence and relate to negligence. Again, this is a tort pleading and falls outside of the scope of the trial of an issue. They are struck without leave to amend.

Addition of Descriptive Subheadings

[31] The purpose of subheadings is only to assist the reader by providing a road map through the pleading. The subheadings are not allegations. Accordingly, with the exception of the subheadings relating to new causes of action (interference with economic relations and negligence), the new subheadings are permitted and leave is granted to add them.

[32] Costs of this motion will be reserved to the hearing of the trial of an issue.

[33] An Order reflecting my disposition will be prepared for my consideration. If there are matters to be spoken to affecting the timetable for this trial of an action, counsel should contact my judicial assistant and request a case conference.

Justice S. Vella

Date: January 11, 2023