Court File and Parties
COURT FILE NO.: CV-23-00002442-0000 DATE: 20240228 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Seema Sadique and Shagufta Sadique Plaintiffs – and – Yunus Malam and Asad Mohmed Sae Manjra Defendants
Counsel: Karan Khak, counsel for the Plaintiffs Faisal Hameed, counsel for the Defendants
HEARD: February 26, 2024
RULING ON MOTION FOR CPL
CHRISTIE J.
Overview
1The Plaintiffs brought this motion seeking an Order authorizing the issuance of a certificate of pending litigation with respect to a specified property in Whitby. They also seek costs on a substantial indemnity basis.
2The Defendants have brought a cross-motion, requesting to have the Plaintiff’s motion for a certificate of pending litigation dismissed, an order allowing the Defendants to pay $75,000 into court following the sale of the property, an order for the immediate deletion of the caution currently registered on title against the property, and costs on a substantial indemnity basis.
Background Facts
3The Plaintiff, Seema Sadique, is the biological mother of the Plaintiff, Shagufta Sadique. The Plaintiffs met the Defendant, Yunus Malam, in or around February 2019. Malam was a real estate agent who previously represented the Plaintiffs in the purchase of a home, and since that time, Malam and Seema Sadique had become friends.
4That is where the narratives diverge. There are completely different narratives being offered in this case by way of background facts.
5The Plaintiffs summarize the events as follows:
a. In January of 2022, Malam approached the Plaintiffs with a business proposal - namely, that he and the Plaintiffs flip a property together, which would include the following steps:
i. The Plaintiffs provide him with money to invest in acquiring a property; ii. Malam and potentially other partners would provide additional funds towards acquiring the property; iii. Everyone who would monetarily contribute towards acquiring the property would be partners in this collective joint venture; iv. Each partners' funds would be deposited into a joint account in the names of all partners; v. Only one of the partners would be the registered owner of the property for financing purposes, to save the name of the non-registered owner for subsequent flips; vi. Notwithstanding the fact that only one partner would be the registered owner of the property, the remaining partners who financially contributed to acquiring the property would each have an ownership interest in proportion to their initial monetary contribution; vii. Each non-registered owner's respective ownership interest in the property would be legally recognized and safeguarded by a trust agreement that would set out their respective portions of ownership in the property; viii. Once acquired, the property would be renovated, with all documentation and decisions pertaining to renovations to be agreed upon by all partners; ix. Sometime following renovations and on agreement of each of the partners, the property would be sold at a profit; and x. Following the sale of the property, each partner would be paid out their initial financial contribution made towards acquiring the property as well as any subsequent monetary contributions made (i.e. towards renovations and carrying costs - both of which ought to be substantiated by documentation). The remaining sales funds would be divided according to each respective party's proportional share in the property, which share would depend solely on the initial total funds invested in the property.
b. The Plaintiffs agreed to invest $80,000 on condition that:
i. Their monetary contribution would be protected by not only a trust agreement but also a verbal guarantee from Malam that these funds would in fact be used towards acquiring a property for the purposes of a flip only; ii. Their money would be guaranteed to be paid back, thereby leaving no risk for losing this amount; iii. The Plaintiffs' ownership interest in the property would depend solely on the percentage of their initial contribution towards acquiring the property and would not be reduced by any contributions that other partners made towards the property after it was acquired; and iv. The Plaintiffs wished to be kept apprised of all decision-making and have full transparency (including receiving all documents, invoices, receipts, etc.) regarding any renovations to the property.
c. Malam and the Plaintiffs started searching for a property.
d. In September 2022, Malam introduced the Defendant Manjra to the Plaintiffs as his friend who would be joining them as partners.
e. Malam introduced the others to a property located at 213 Warden Wilson Avenue in Whitby. The property was listed for $649,000.
f. The partners agreed to purchase the property, with the Plaintiffs investing $80,000 and Manjra investing $200,000. Malam was to cover all property costs, including carrying costs and renovation costs until it was sold.
g. The partners agreed that the Plaintiffs would be 30% owners of the property while Manjra would be a 70% owner. As for Malam, he suggested that his interest not be formalized in writing, as he preferred to deal with his ownership interest directly with Manjra.
h. On the Agreement of Purchase and Sale dated September 27, 2022, Manjra is the buyer. The closing date was November 2, 2022.
i. In October 2022, prior to the closing, Malam commenced a WhatsApp group chat. On October 1, 2022, he added Seema Sadique. The first message from Malam to the group is: “Salam partners welcome to group let’s make money InshaAllah with clear intention and honesty. Will do many more together InshaAllah”
j. A few days after the group chat was created, Malam emailed the APS to the lawyer on file and asked him to “prepare a Trust agreement”.
k. Upon discovering that the property contained mold, the partners agreed to apply for a mortgage from a “B lender” under Manjra’s name, with Manjra being the sole registered owner, while the Plaintiffs’ 30% ownership would be formalized in a trust agreement.
l. A Scotiabank joint account (ending in 1326) was opened in the names of Manjra and Seema Sadique on November 1, 2022.
m. On November 29, 2022, the Plaintiffs deposited $75,000 into the account and provided Malam with $5000 in cash. The $5000 is referenced in the WhatsApp chat on November 28, 2022. (In a letter to counsel for the Plaintiffs from Manjra in November 2023, there is confirmation that “Seema Sadique has paid $80,500 toward the property.”)
n. The property closed on November 29, 2022 with Manjra as the sole owner on title.
o. On December 21, 2022, Malam provided the Plaintiffs with a copy of a trust agreement dated November 28, 2022, stating that Manjra was a trustee holding 30% of the property in trust for Shagufta Sadique as part beneficial owner. The trust agreement also stated: “The Trustee shall not deal with the property in any manner, except in a manner in accordance with the instructions of a majority in interest of the individual." Manjra acknowledged signing the agreement when examined.
p. Manjra and Shagufta Sadique signed the trust agreement in January 2023.
q. In October 2023, Malam advised the Plaintiffs that renovations to the property were complete.
r. The property was listed for sale but did not sell.
s. Malam advised the Plaintiffs that the property needed to be refinanced. Malam also advised that during the refinancing, title to the property would be changed to reflect Shagufta Sadique, Malam and Manjra as owners.
t. Refinancing was attempted. Shagufta Sadique was directly involved at the early stages of the refinancing process as demonstrated by emails.
u. Malam ultimately advised the Plaintiffs that financing had to be obtained from a certified “B lender” instead of an “A lender” because Manjra was recently discharged from bankruptcy.
v. Malam later advised that the new mortgage and title to the property could only be in the name of Manjra and Malam.
w. The Plaintiffs advised that they would not agree to any dealings with the property and required Shagufta Sadique to be registered on title. Thereafter, Malam and Manjra stopped sharing information about refinancing.
x. A few days later, the Plaintiffs advised Malam that if the property was refinanced in the name of the Defendants only, or if title to the property was changed to add Malam, the Plaintiffs required a new trust agreement to confirm their interest. Malam became irate and refused to speak further about the property.
y. Manjra has since advised the Plaintiffs that if one or both of them wished to be named as a registered owner of the property, they must pay additional funds.
6The Defendants summarize the events as follows:
a. The Plaintiff, Seema Sadique, was a close acquaintance of Manjra, and would share her struggles and domestic abuse with her biological daughter, Shagufta Sadique.
b. Around October 2022, Seema Sadique urgently requested Manjra to protect her $75,000 from Shagufta's reach. Knowing that Manjra was in search of a property, Seema Sadique asked Manjra to keep the money in the property.
c. Manjra agreed, but made it clear that Manjra would not provide any interest or payment for this service. Seema Sadique agreed and even suggested writing a will in Manjra’s favour, which was declined.
d. In November 2022, Seema Sadique deposited $75,000 into a joint bank account that was opened together. Seema Sadique and Manjra agreed that if she needed her money, it would be returned to her one year after either a refinance or sale.
e. As a gesture of kindness, Manjra authorized his real estate lawyer to keep Seema Sadique informed about the progress of the purchase, as Manjra wanted her to know that her funds were being utilized for the purchase according to her wishes and not for any other purpose.
f. The property was purchased for $640,000 on November 28, 2022, and a one-year mortgage was placed on it. The mortgage was set to expire on November 28, 2023.
g. In December 2022, Seema Sadique urgently asked Manjra to sign an artificial trust agreement to end her financial dispute with her daughter.
h. On January 3 and 4, 2023, they signed the trust declaration, which was scanned and emailed to Malam.
i. The mortgage was set to mature on November 28, 2023. Prior to maturity, Manjra became aware that a new lender might provide higher interest rates.
j. Manjra got in touch with Seema Sadique to inquire if she would be willing to be on the title so that they could obtain a lower-rate mortgage. However, Seema Sadique did not respond to the request and instead hired a lawyer.
k. Manjra's real estate lawyer tried to reach out to Seema Sadique's lawyer but there was no response.
l. Seema Sadique never made any demand for the return of her sheltered funds.
m. Manjra was in the process of refinancing the property when he received a statement of claim on December 30, 2023. Malam was out of the country until January 10, 2024, and the statement of claim was left with his tenant. Unfortunately, the tenant did not notify Malam about the statement of claim until Manjra informed him about it.
n. On January 20, 2024, the lender who had agreed to refinance the property informed the Defendants' counsel about a caution that the Plaintiffs had registered on November 28, 2023. The lender has threatened to initiate a power of sale due to the caution that is still active. The caution is preventing any transactions related to the property and putting it at risk of an imminent power of sale at any moment.
7While this court appreciates that the Plaintiffs suggest that this court should give little to no weight to the affidavit of Manjra given Rule 4.06(8) of the Rules of Civil Procedure and his lack of ability to speak and understand English, it is still important to set out the respective positions for context. The Plaintiffs refer to Daimler Truck Financial v. 9936726 Canada Inc. operating as Tiger Towing and Heavy Recovery, 2020 ONSC 5179 at para. 32 and Vaticano Holdings Inc. v. Greco, 2011 ONSC 2513 at paras. 29-31.
8The narratives provided about this business proposal could not be more different. Quite frankly, the narrative of the Plaintiffs is more believable based on the other evidence presented. For example, the WhatsApp group chat seems to contradict the Defendants position on this motion that the Plaintiff provided $75,000 to safeguard rather than as an investment. This court questions why the Defendants would add Seema Sadique to the group chat and refer to “many more”, suggesting subsequent flips together, if this money was only being provided for safekeeping. Further, in cross-examination, Manjra had stated that Malam was not involved in the property at all. The group chat commenced in October 2022, and other documents, suggest otherwise.
Analysis
9The Ontario Superior Court of Justice has discussed the test for granting leave to register a certificate of pending litigation in many cases. See for example: Pacione v. Pacione, 2019 ONSC 813; Bains v. Khatri, 2019 ONSC 1401.
10The first question the court must answer is whether there is a triable issue in respect of the moving party’s claim to an interest in the property. The threshold at this stage is a low one. See: Obsidian Group v. Kingswhite Properties, 2007 ONSC 41895 at para. 7. The Court is not to assess credibility or decide disputed issues of fact. See: Meibodi v. Aghaiemeybodi, 2023 ONSC 340 at para. 15. The Court must only determine that the claim is not frivolous or vexatious, and the evidence gives rise to a triable issue or reasonable claim. See: Thompson Centres Inc. v. Hyde Park 1989 Ltd. Partnership, 2010 ONSC 718 at para. 33.
11There is no question that a triable issue exists in this case. All of the evidence seems to suggest that the Plaintiffs are partial owners – 30% owners. There is a trust agreement that confirms the interest. The Defendants do not suggest that the trust agreement is unenforceable. In the examination, Manjra did not dispute the Plaintiffs 30% interest in the property. The following exchange took place:
Q: ….do you disagree with my client’s position that they have 30 percent ownership interest in the property? A: No
12It would seem that the interest in property is not only triable – rather it is demonstrated and admitted.
13Once this threshold test has been met, the court must consider a number of factors to determine if the granting of a CPL is an equitable form of relief. These considerations include:
i. whether the applicant 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; viii. the harm to each party if the CPL is or is not removed with or without security; ix. whether the interests of the party seeking the CPL can be adequately protected by another form of security; and x. whether the moving party has prosecuted the proceeding with reasonable diligence.
14Having considered the entirety of the circumstances, this court is not satisfied that the granting of a CPL is an appropriate equitable form of relief in the circumstances given the following:
a. The property is not unique. The Plaintiffs did not even choose the property. This property was acquired only to flip and make a profit. The Plaintiffs concede that the property was acquired with a business purpose – namely to renovate and sell it at a profit to be shared in proportion to the percentage of each party’s initial contribution. b. While the Plaintiffs have not submitted an alternate claim for damages, damages would certainly be a satisfactory remedy. Again, there is nothing special about this property. There is no indication that the Plaintiffs ever intended to use this property themselves. The purpose of the investment was to make money. This court is satisfied that damages would be a satisfactory alternative in this case. c. There will be no difficulty calculating damages. According to the Plaintiffs, their ownership interest is 30%. This will be basic math once all the numbers are known. Just because the numbers are not completely obvious at this point does not mean that damages cannot be calculated. d. The Plaintiffs claim that if a CPL is not granted, their 30% ownership interest will be left unprotected. This is simply not the case. The trust agreement, if valid, will protect their 30% interest. Even if the property is disposed of, the trust agreement will still exist. The Defendants would still owe the Plaintiffs that 30% once calculated. The fact that the Defendants are actively looking to refinance is not surprising given that the mortgage matured. The fact that the Defendants are actively looking to sell the property is also not surprising given that this was the whole point – to flip the property and make a profit. e. Given the existence of the trust agreement, this court does not see any harm flowing to the Plaintiffs if a CPL is not permitted. On the other hand, there seems to be some risk of foreclosure on this property. If that occurs, everyone loses. While this court questions the credibility of the Defendants narrative in many respects, the risk of foreclosure seems realistic in these circumstances given that the mortgage matured and financing is pending.
15This court accepts that the Plaintiffs have pursued this matter with diligence and pleaded for a CPL. However, when weighing and balancing all of the factors, this court is not satisfied that the granting of a CPL is an appropriate equitable form of relief in the circumstances.
16The Plaintiffs motion is dismissed. As for the Defendants cross-motion, and their voluntary offer to do so, the Defendants are ordered to pay $75,000 into court following the sale of the property. This court makes no comment on whether this is the amount owing to the Plaintiffs, but at the very least it will protect some of their interest. As for removing the caution currently registered on title against the property, this court declines to do so.
17As for costs, the court strongly encourages the parties to consult with each other and attempt to reach a reasonable agreement. The parties might even consider whether the issue of costs would be best dealt with at the conclusion of this litigation. If the parties are unable to agree as to costs, the court will accept written submissions on costs, which shall be no more than two pages in length, excluding supporting documentation, and which shall be provided to the court office, and to Bev.Taylor@ontario.ca, no later than 4:30 p.m. on March 8, 2024.
Justice V. Christie Released: February 28, 2024