Court File and Parties

COURT FILE NO.: CV-23-692486 MOTION HEARD: 20230126 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mr. Greek Meats Inc., Plaintiff AND: Mr. Zagros Management Inc., Zubair Afzal, Halil Bozca, Surrayya Afzal and 2872173 Ontario Ltd., Defendants

BEFORE: Associate Justice Jolley

COUNSEL: Kevin Sherkin, counsel for the moving party plaintiff Prabhjot Badesha, counsel for the responding party defendants Zubair Afzal, Surrayya Afzal and 2872173 Ontario Ltd.

HEARD: 26 January 2023

REASONS FOR DECISION

[1] The plaintiff seeks leave to have issued a certificate of pending litigation on property located at 130 Manville Road, Scarborough (the “Property”) purchased by the defendant 2872173 Ontario Ltd. (“287”) in November 2021. The plaintiff recently discovered the purchase and commenced this action. It bases its claim on an equitable or constructive trust and seeks a tracing remedy.

[2] At the commencement of the motion, counsel for the defendants Zubair Azfal (“Zubair”), his wife Surrayya Azfal (“Surrayya”) and 287 sought an adjournment, which I denied. They were served with the motion material two weeks ago, had counsel in December who discussed payment of the debt with the plaintiff, but then retained new counsel the evening before this motion. I was advised that there is a proposed sale of the Property some time this following week so the motion had to proceed or become irrelevant. The defendants did not file any responding material, although their counsel made submissions in the course the motion.

Pertinent Facts

[3] For either five or ten years (depending on which statement of claim is read), the plaintiff supplied meat products to Mr. Zagros Management Inc. (“Zagros Inc.”), which it then resold to its franchises. While Zagros Inc. paid down its account from time to time, by 2022, it had rung up roughly $400,000 in outstanding invoices.

[4] In July 2022, the plaintiff sued Zagros Inc. and its two shareholders and directors, Zubair and Halil Bozca (CV-22-683583) for payment of the unpaid invoices on the basis of breach of contract, conversion and unjust enrichment. The defendants were noted in default and the plaintiff has submitted its claim for default judgment to the registrar.

[5] In this action, the plaintiff alleges that the payments Zagros Inc. received from its franchise customers for the meat were impressed with a trust in the plaintiff’s favour. Rather than pay that money to the plaintiff, the directors of Zagros Inc. directed those funds to 287. 287 then used those funds to fund part of its $1,000,000 down payment on the purchase of the Property. It has sued 287, its two directors Zubair and Surrayya, Halil Bozca (who is alleged, with Zubair, to be the controlling mind of 287) and Zagros Inc., looking to trace the money that should have been paid to it, into the Property.

[6] It appears from the parcel register that 287 financed the purchase with a $3,600,000 vendor take-back mortgage and $1,000,000 in equity. The purchase predated any litigation by the plaintiff, but on the plaintiff’s evidence Zagros Inc. did owe it $156,281.49 at that time, which it was sporadically paying.

The Test for Granting Leave to Issue a Certificate of Pending Litigation

[7] On a motion for leave to have issued a certificate of pending litigation, the court must examine the whole of the evidence and, without deciding disputed issues of fact and credibility, consider whether the plaintiff’s case raises a triable issue as to a reasonable claim to an interest in the land. As noted by the plaintiff in its factum, citing Perruzza v Spatone 2010 ONSC 841, the governing direction on a motion for leave to issue a CPL is that the court is to “exercise its discretion in equity and look at all relevant matters between the parties”.

Has the Plaintiff Raised a Triable Issue as to a Reasonable Claim to an Interest in the Property?

[8] On the evidence before me, I am not satisfied that the plaintiff has raised a triable issue with respect to a reasonable claim to an interest in the Property.

[9] The plaintiff sold product to Zagros Inc. and allowed or acquiesced in Zagros Inc. effectively running a tab, without security. Its only interest in the Property is to satisfy the debt owed by Zagros Inc. I am not satisfied that Zagros Inc.’s unpaid debt can be transformed into an interest in land by way of a claim for a constructive or resulting trust claim that supports the intrusive remedy of the granting of a CPL. Even if I were to accept, as I do for the purposes of this motion, that Zagros Inc. transferred funds to 287 while it owed the plaintiff money, and to accept that 287 used those funds to pay part of the purchase price for the Property, the plaintiff’s status is akin to an unsecured creditor of Zagros Inc. or a soon-to-be judgment creditor of Zagros Inc., Zubair and Bozca.

Is it just in all the circumstances that leave to granted to issue a CPL?

[10] If I am incorrect in the first analysis, I am not satisfied that the granting of a CPL would be just and equitable based on all of the circumstances and balancing the equities. While the plaintiff claims that it does not assert a claim for damages, the claim is only about payment of a debt. The plaintiff pleads the payments the defendants received from Zagros Inc.’s franchises for the meat product were impressed with a trust in favour of the plaintiff. As against the personal defendants, the plaintiff pleads that they used the funds that were earmarked for the plaintiff for their own benefit. But all of those claims are in aid of obtaining payment of a business debt and looking to the Property to ensure payment. The logical extension of the plaintiff’s argument is that every lender or supplier would be entitled to a CPL over every real property purchased by a debtor, or even with funds from a debtor, during any period when it had an outstanding account, as all of the debtor’s funds would be impressed with a trust until the plaintiff was paid.

[11] If the CPL is not granted, the plaintiff remains able to execute on all the assets of Zagros, Zubair and Bozca, assuming its default judgment is granted against all three. If Zubair is a shareholder in 287, as the plaintiff alleges, his shares are subject to seizure to satisfy any judgment against him. If Zagros Inc. is a creditor of 287, then remedies are available to the plaintiff through that route as well as it appears to be an ongoing business.

[12] As the court noted in Tribecca Development Corporation v Danieli 2015 ONSC 7638, “a CPL is intended to protect an interest in land where other remedies would be ineffective. It is not intended to be an instrument to secure a claim for damages”. This sentiment was echoed by Doi, J., who stated in Bains v Khatri, 2019 ONSC 1401 that “Should the moving Plaintiffs have concerns about the dissipation of assets, it is open for them to seek relief by way of a Mareva order. A certificate of pending litigation is intended to protect an interest in land in situations where other remedies would be ineffective.”

[13] I find that the harm and inconvenience of granting the CPL would be greater to 287 than the harm to the plaintiff if it were not granted. Considering all the factors before me, I find a CPL is not the most appropriate remedy. For these reasons, I decline to exercise my discretion to grant leave to issue a certificate of pending litigation.

[14] The plaintiff’s motion is dismissed. I make no order as to costs. The defendants did not file materials and, while they retained counsel, they did so at the last possible moment.

Associate Justice Jolley

Date: 31 January 2023