Court File and Parties

COURT FILE NO.: CV-22-682269 MOTION HEARD: 2023-05-11 REASONS RELEASED: 2023-08-14

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

MEHRAN NAMAKIAN and 2756289 ONTARIO INC. Plaintiffs

• and-

1974057 ONTARIO INC., HAYDEH TAFTEH, 2650728 ONTARIO INC., SHAHIN SABBAGHPOUR ARANI, ARANI GROUP HOLDINGS INC., ABDULLAH SABBAGHPOOR, AHMAD REZA DIABAIAN, BEHNAM KASHANIAN, MAHNAZ PAHLEVAN, 9712 YONGE STREET GENERAL PARTNER, and 9712 YONGE STREET GENERAL PARTNER INC. Defendants

BEFORE: ASSOCIATE JUSTICE McGraw

COUNSEL: S. Erskine and F. Dickson, for the Plaintiffs R. Flom, for the Defendants L. Borenstein, for the Defendant Ahmad Reza Dibaian

Reasons For Endorsement

I. Introduction

[1] This is a motion by the Plaintiffs for leave to issue a Certificate of Pending Litigation (“CPL”) with respect to a commercial development property located at 9712 Yonge Street in Richmond Hill (the “Property”). The motion is opposed by all Defendants except the Defendant Ahmad Reza Dibaian (“Ahmad”)(excepting Ahmad, the “Defendants”). Ahmad takes no position.

II. Background

[2] The Plaintiff, Mehran Namakian (“Mehran”) is an engineer, real estate agent and director of the Plaintiff 2756289 Ontario Inc. (“275”). Mehran’s wife, Leila Karamzadeh (“Leila”) is an architect, President of Q Architects and also a director of 275. Mehran and Leila share office space with Ahmad and his development company, ARD Development Inc. (“ARD”).

[3] In early 2021, Mehran, Leila and Ahmad identified 10-12 potential commercial development properties in the Yonge Street corridor north of Toronto. The Plaintiffs allege that Mehran and Leila contributed significant unpaid time researching and identifying potential properties. In Spring 2021, Mehran and Ahmad commenced negotiations with the Property’s owners and their agents with respect to the purchase of the Property. Mehran acted as real estate agent. Mehran and Ahmad required additional purchasers/investors to complete the purchase. On or about May 7, 2021, the Defendants Haydeh Tafteh (“Haydeh”) and Abdullah Sabbaghpoor (“Abdullah”) agreed to join Mehran and Ahmad in the original ownership/investor group (the “Group”).

[4] Other than signed Minutes from one meeting in August 2021, there is no written contract, agreement or other document with respect to the alleged terms between the Group members and other additional investors. The Plaintiffs allege that the terms agreed upon by the parties, substantially all of which are oral, constitute a binding contract and trust pursuant to which the Plaintiffs have a 10% interest in the Property. The Defendants claim that that any alleged oral agreements or trusts are void and of no effect. Generally speaking, the facts, including the existence and terms of any agreements, are substantially all in dispute.

[5] The Plaintiffs allege that for tax planning purposes, on May 8, 2021 the Group agreed to change the purchaser of the Property from ARD to the Defendant 1974057 Ontario Inc. (“197”), a company owned by Ahmad and the Defendant Sabbaghpour Arani (“Sabbaghpour”), Abdullah’s son. Among other things, the Plaintiffs allege that the Group agreed that: 197 would hold the Property in trust for the 4 original investors, all decisions would be made unanimously and that after site plan approval was obtained from the City of Richmond Hill the Property would be sold to a larger developer or construction company for a profit.

[6] Pursuant to an Agreement of Purchase and Sale dated May 10, 2021 (the “APS”), 197 agreed to purchase the Property for $14,600,000 with a first deposit of $250,000, a second deposit of $250,000 due on August 10, 2021 and closing date of October 27, 2021. The terms of the APS included a $10,000,000 vendor take back mortgage (the “Mortgage) at 4% interest per annum.

[7] The Group met with potential new investors in May and June 2021. It was agreed that the Defendants Benham Kashanian (“Benham”) and Mahnaz Pahlevan (“Mahnaz”) (the “Additional Investors”) would invest in the Property. The Plaintiffs allege that it was agreed that the Additional Investors would be silent partners. However, Mehran admitted on cross-examination that he did not advise Benham or anyone else that they would be a silent partner, he thought someone else advised them. On his examination, Ahmad deposed that it was his understanding that the Group agreed that all future partners would be silent partners. The Defendants deny that the Property was to be held by the Group or anyone as tenants in common or that any future investors were to be silent partners pointing out that the Minutes state that the power of veto was to be in accordance with each investor’s share. The Defendants allege that Mehran was not an original investor, was invited to become an investor and initially only wanted some decisions to be unanimous but changed his mind as he wanted to have veto power over the development.

[8] On July 19, 2021, the APS was amended to remove the due diligence conditions, increase the Mortgage, extend the closing date to February 28, 2022 and provide for a third deposit of $250,000 on October 27, 2021. The Plaintiffs claim that as of July 5, 2021, 197 held a 10% interest in the Property. Commensurate with this interest, the Plaintiffs contributed $62,500 towards the first deposit and $12,500 at the time of the third deposit for a total of $75,000, 10% of the aggregate deposits of $750,000. The other investors paid their deposits pursuant to their ownership interests of 10% or 25%. In addition to $75,000 in deposits, the Plaintiffs paid $10,000 towards legal, accounting and architectural fees.

[9] Signed minutes from a meeting on August 2, 2021 (the “Minutes”) state that ARD would provide management and development consulting and that 197 was the buyer of the Property as trustee for the pending partnership. The Plaintiffs allege that a dispute arose with Benham with respect to ARD’s and Q Architects’ rights to manage the development of the Property. At a meeting on October 27, 2021, Benham, Mahnaz and Haydeh offered to buy Mehran’s and Ahmad’s 10% shares at a 50% profit and that Benham also agreed to sell his shares for the same profit on condition that payment was made the following morning. Mehran claims that he confirmed to Benham that he would buy his shares but says no arrangements were made to accept payment. Mehran and Ahmad subsequently sourced two offers to purchase the Property in December 2021 and January 2022 both of which were rejected by the other investors.

[10] The Plaintiffs further claim that unbeknownst to Mehran, on December 23, 2021, Ahmad, Abdullah, Sabbaghpour and Haydeh caused 179 to assign its rights under the APA to YSGP Inc. (“YSGP”), a corporation formed on behalf of a limited partnership formed by Benham (the “Assignment”). Ahmad stated on examination that he executed the Assignment on the basis that Haydeh and Sabbaghpour told him that they would agree to use ARD as the developer. However, the other Defendants later withdrew their agreement and Ahmad revoked his consent to the Assignment.

[11] The Defendants submit that the Minutes, signed by all parties confirms that Mehran and all parties agreed to the transfer of 197’s interest to the partnership which was necessary because 197 did not have sufficient funds to complete the purchase and all deposits would have been lost. Further, the Defendants allege that Mehran breached his obligation to his fellow investors by not disclosing for over 8 months that he was also acting as real estate agent and by only sharing his commission with Ahmad.

[12] On February 25, 2022, 3 days prior to closing, Mehran’s counsel wrote to the Defendants’ real estate counsel tendering the balance of the Plaintiffs’ 10% investment in the amount of $420,000. Defendants’ counsel refused to accept the tender and the Plaintiffs registered a caution on title to the Property.

[13] The Plaintiffs commenced this action on June 6, 2022. In their Amended Statement of Claim issued on September 29, 2022, the Plaintiffs seek, among other things, declarations that: there is a valid, binding and enforceable co-ownership agreement with respect to the Property; the Plaintiffs hold a 10% beneficial interest in the Property; the Defendants have breached the co-ownership agreement; and the Defendants are bare trustees of the Property and the Plaintiffs’ 10% beneficial ownership interest. The Plaintiffs also seek an interim, interlocutory and permanent order restraining the Defendants from marketing and selling the Property and an order tracing the Property and the funds received from the Property due to the breach of trust or contract.

[14] The Plaintiffs initially sought to schedule an injunction motion at Civil Practice Court (“CPC”), however, the parties were directed to attend before an Associate Judge to speak to a CPL motion. Counsel appeared before me at case conferences on January 13 and 24, 2023 to speak to scheduling and potential resolution. As set out in my Endorsements, the Plaintiffs’ also asked to bring a motion (or seek terms) to prevent the development of the Property. This relief is injunctive, not within the jurisdiction of an Associate Judge and would require the parties to re-attend at CPC.

[15] The motion was scheduled to proceed on April 14, 2023, however, the Plaintiffs failed to confirm it. The Plaintiffs attempted to schedule an urgent motion through the Duty Associate Judge and I rescheduled it before me for May 11, 2023.

[16] The Plaintiffs requested that certain paragraphs and exhibits of Benham’s affidavit filed on this motion be struck. The Plaintiffs did not include this relief in their Notice of Motion, the Defendants did not file any responding materials and no time was added to the motion to accommodate these arguments. Accordingly, no substantive submissions were made on the return of the motion and it did not proceed.

III. The Law and Analysis

[17] The court’s jurisdiction to grant leave to issue a CPL is set out in section 103 of the Courts of Justice Act (Ontario). The factors which the court must consider on a CPL motion were summarized by Master Glustein (as he then was) in Perruzza v. Spatone, 2010 ONSC 841 at para. 20:

“(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 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 CarswellOnt 1026 (Div. Ct.) at para. 9 ).”

[18] The court must first determine whether there is a triable issue with respect to the Plaintiffs’ claim to an interest in the Property which would support the granting of a CPL (Saggi v. Grillone, 2020 ONSC 4140 at paras. 31 and 55; Zhao v. 8657181, 2020 ONSC 2864 at paras. 9 and 11). The issue is whether a triable issue has been raised with respect to a reasonable claim in the property by the plaintiff (G.P.I. Greenfield at para. 20; Saggi at para. 67; Boal v. International Capital Management Inc., [2018] O.J. No. 1954 at para. 64). It is not the court’s role to determine whether the plaintiff’s claim will likely succeed at trial, but whether a triable issue exists with respect to a reasonable claim to an interest in land (HarbourEdge Mortgage Investment Corp. v. Timbercreek Mortgage Investment Corp. (Trustee of), [2016] O.J. No. 265 at para. 56; Sun Rise at para. 10). The “triable issue” threshold can be characterized as whether the remedies sought by the plaintiff are possible remedies or those which may be available to the plaintiff at trial, which may include a constructive or resulting trust and tracing remedies (Sun Rise Elephant Property Investment Corporation v. Luu, 2018 ONSC 5247 at paras. 10-12). The onus is on the party opposing the CPL to show that there is no triable issue (Boal at para. 64).

[19] In determining if there is a triable issue, the evidentiary bar is low (Saggi at paras. 45 and 62; Bains v. Katri, 2019 ONSC 1401 at para. 36). The court is not to assess credibility or decide disputed issues of fact (Huntjens v. Obradovic, 2019 ONSC 4343; Sunrise at para. 10). The court must examine the whole of the evidence after cross-examination and, without deciding disputed issues of fact and credibility, consider whether on the whole of the evidence the plaintiff’s case constitutes a reasonable claim to the interest in land claimed (Huntjens at para. 21; Boal at para. 64).

[20] A triable issue as to a reasonable interest in land is a gateway requirement for a CPL (Sun Rise at para. 12). If this threshold is met, the court must go on to consider whether it is just and equitable based on all of the circumstances to exercise its discretion to grant a CPL by considering and balancing the equities including the list of factors set out in 572383 Ontario Inc. v. Dhunna, [1987] O.J. No. 1073 (Sun Rise at para. 12; Tribecca Development Corp. v. Danieli, 2015 ONSC 7638; Huntjens at para. 48; Bat-Amy v. Zribi, 2010 ONSC 1272 at paras 21-22). To the extent not covered by the relative harm, I have also considered the balance of convenience (Bains at para. 37).

[21] For the reasons set out below, having considered all of the relevant factors and circumstances, I decline to exercise my discretion to grant leave to issue a CPL. While I am satisfied that there is a triable issue with respect to whether the Plaintiffs have a reasonable claim to an interest in the Property, I conclude that it would not be just and equitable in all of the circumstances to grant a CPL.

[22] In my view, the Defendants have not discharged their onus to demonstrate that there is no triable issue with respect to whether the Plaintiffs have a reasonable claim to an interest in the Property. It is not disputed that the Plaintiffs advanced deposits totaling $75,000. The Defendants submit that because the deposits were not used to purchase the Property (they are being held in trust by real estate counsel) and that there was no agreement or trust with respect to the Plaintiffs’ alleged interest, there is no triable issue. However, whether the Plaintiffs’ funds were in fact used in the purchase and/or whether the Plaintiffs’ have an interest given the advance of the deposits and tendering of the balance notwithstanding whether they were used, are disputed issues for trial. Consistent with this Court’s role on this motion, I refuse to make findings with respect to the many disputed facts and to assess credibility in order to determine these issues on the motion. I am satisfied on the record before me that there is sufficient evidence to meet the low threshold to establish a connection between the Plaintiffs’ advances and the Property (Saggi at paras. 64-65).

[23] While there is no contract or written agreement between the parties, there is sufficient basis on the record to conclude that there is a triable issue with respect to whether an agreement, or certain terms, existed. The effect of the Plaintiffs’ part performance through the deposits and tendering, the alleged oral terms and whether the Statute of Frauds (Ontario) applies in the circumstances given the assertion of trust remedies are all issues for determination at trial (Arias v. Brennan, 2020 ONSC 1603 at paras. 48-64). Further, the Plaintiffs and the Defendants rely on the Minutes in support of their positions with respect to the existence of certain terms. I draw no conclusions on the Defendants’ submission that the remedy of specific performance is not available or the Plaintiffs’ claim that Mehran’s and Leila’s work in kind creates an interest in the Property. On the totality of the evidence, I am satisfied that some of the remedies sought by the Plaintiffs, including trust remedies, an accounting or tracing may be available to the Plaintiffs at trial.

[24] Turning to the equities, I have concluded that it is not just and equitable based on all of the circumstances to grant the CPL. In arriving at this conclusion, I have considered the equities as between the parties including the non-exhaustive factors in Dhunna: (a) whether the plaintiff is, or is not, a shell corporation; (b) whether the land is, or is not, unique; (c) the intent of the parties in acquiring the land; (d) whether there is an alternative claim for damages; (e) the ease or difficulty of calculating damages; (f) whether damages would be a satisfactory remedy; (g) the presence or absence of another willing purchaser; and (h) the harm done to the defendant if the certificate is allowed to remain, or to the plaintiff if the certificate is removed, with or without the requirements of alternative security (Dhunna at paras. 10-18; Saggi at para. 28; Sun Rise at paras 12-17; Huntjens at para. 49; Bat-Amy v. Zribi, 2010 ONSC 1272 at paras 21-22). To the extent not covered by the relative harm, I have also considered the balance of convenience (Bains at para. 37).

[25] There is no dispute that the purpose of acquiring the Property was to make a profit. Mehran admits that the reason for investing in the Property was to sell it (to “flip” it) after site plan approval to a developer or construction company. This supports the conclusion that damages would be a satisfactory remedy and militates against granting the CPL (John E. Dodge Holdings v. 805062 Ontario Ltd., [2001] O.J. No. 4397 at para. 59; Hassanzadeh v. Davoodi, 2022 ONSC 6977 at para. 17). The absence of an alternative claim for damages by the Plaintiffs is not determinative (Hassanzadeh at para. 18). The fact that the Plaintiffs claim that the Property was to be held until site approval does not change the ultimate purpose of making a profit. This is not a property which any of the parties intended to occupy. I further reject the Plaintiffs’ assertion that damages are speculative. If the Plaintiffs are successful at trial, damages can be calculated based upon the amount of their investment, their relative interest in the Property, the sale price of the Property and other applicable amounts and relevant factors.

[26] I also conclude that the Property is not unique. In determining whether a property is unique, the court should consider the purchaser’s subjective interests and the circumstances of the underlying transaction (Lucas v. 1858793 Ontario Inc. (Howard Park, 2021 ONCA 52 at paras. 73-74). The Property was 1 of 10-12 commercial development properties initially identified by Mehran, Leila and Ahmad. To at least a certain degree, these properties can be considered comparables with respect to the parties’ objective of acquiring a commercial property in the area with similar characteristics to flip. I cannot conclude in the present circumstances that the location of the Property, including the general area, access to the LRT, on a corner lot and other characteristics makes it unique in the larger context of the number of comparable commercial properties originally identified in the same area for their intended purpose. In any event, even if I had concluded that the Property was unique, balanced with the other equities, it would not alter my conclusions that the overall equities favour the Defendants and that the CPL should not be granted.

[27] The fact that the Plaintiff 275 is effectively a shell corporation which does not conduct any business and exists primarily for the purpose of holding Mehran’s share in the Property also favours the Defendants. However, together with the fact that Mehran is an individual, this is a lesser factor.

[28] I am also satisfied that the relative harm if the CPL were granted would be greater for the Defendants and that the balance of convenience favours the Defendants. In exercising its discretion, the court must be mindful of the impact of granting a CPL, in particular, that a CPL effectively acts like an injunction:

“The purpose of a CPL is to provide notice to the world that there is an issue with respect to the title of the property and/or that there is an interest claimed in the property. Once registered, the CPL prevents a subsequent purchaser from asserting the defence of bona fide purchaser for value without notice. It has the same general effect on a subsequent encumbrancer. This has profound consequences for the titleholder; the CPL effectively acts like an injunction because virtually no one will complete a purchase of the property with an outstanding unresolved claim looming. This impact has been judicially recognized: see Matheson v. Gordon at para. 22; Bowbriar Investments Inc. v. Wellesley Community Homes Inc., [1977] O.J. No. 66 (S.C.) at para. 9.” (Middlesex Centre (Municipality) v. McRobert, 2017 ONSC 4552 at para. 12)

[29] If the CPL is granted, it would deter potential investors and purchasers and likely delay the development and/or sale of the Property indefinitely, effectively acting as injunctive relief. At the same time, the Defendants would still be responsible for the Mortgage and other carrying costs while the Plaintiffs, with no such obligations and their deposits held in trust (which could be paid into court), have their maximum 10% interest determined. If the CPL is not granted, the Plaintiffs would still be able to assert their claims and if successful, their alleged profits can be calculated based on their interest in the Property. Allowing the Property to be developed and/or sold while the Plaintiffs’ claim is determined is consistent with the purchase of the Property to turn a profit. There is no evidence that the Defendants would be unable to satisfy a judgment and, in any event, a CPL is not to be used as security for damages (Tribecca at para. 20). Mehran has also stated that he would know if the Property is sold. I also reject the Plaintiffs’ submission that the CPL should be granted in order to effectively prevent the Defendants from developing the Property given that they do not have the expertise. This would permit the Plaintiffs to obtain the injunctive relief that this Court does not have the jurisdiction to grant. In all of the circumstances, I am satisfied that both the harm and inconvenience of granting the CPL would be greater to the Defendants than the Plaintiffs.

[30] I draw no conclusions or make any findings with respect to the Plaintiffs’ and the Defendants’ claims that the other does not come to court with “clean hands”.

III. Disposition and Costs

[31] Order to go dismissing the Plaintiffs’ motion.

[32] If the parties cannot agree on the costs of this motion they may file written costs submissions with me, not to exceed 3 pages (excluding Costs Outlines) on a timetable to be agreed upon by counsel. If counsel cannot agree on a timetable, they may schedule a telephone case conference to speak to one.

Released: August 14, 2023 Associate Justice McGraw