COURT FILE NO.: CV-22-00684622-0000 DATE: 20240506 AMENDED DATE: 20240607 ONTARIO SUPERIOR COURT OF JUSTICE
RE: Danila Lim and Emmanuel Lim, both by their Litigation Guardian Maria Christina Lim, Plaintiffs -and- Omar Khan, Simply Green Home Services Inc., Canadian Home Improvement Credit Corporation, Extend Financial Ltd. (formerly known as Bankright Financial Ltd.), Rafael Alter, Yuval Barzakay, 2820992 Ontario Inc ., Michaeal Yosher, Min Pei Professional Corporation, Shengmin Pei, Stephen Price, 2758729 Ontario Inc. (carrying on business as Complete Home Comfort), Manjit Singh, Manjit Singh carrying on business as Complete Home Comfort, Anant Jain, Anant Jain Law Professional Corporation, Canada Choice Investments Inc., Anas Ayyoub , 12212382 Canada Inc., Yigal Rifkind, Centum Mortgage Smart Inc., Kamal Kaur Dhillon, Maryam Hasaballah, Edmond Ohayon, Blossom Rabinowitz , Krishna Thillanadarajah, defendants
BEFORE: Robert Centa J.
COUNSEL: Maurice W. Pilon and Johanne S. Pilon, for the plaintiffs Melvyn L. Solmon and Nancy Tourgis, for the defendants Canada Choice Investments Inc., and Anas Ayyoub Eli Karp, for the defendants Edmond Ohayon and Blossom Rabinowitz
HEARD: March 25, 2024
Amended Endorsement [^1]
[1] Danila Lim is 87-years old and blind. Emmanuel Lim is her 60-year-old son, a 28-year veteran of the Canadian Armed Forces who suffers from post traumatic stress disorder. They allege that through a combination of aggressive door-to-door sales techniques, misrepresentations, wholly inadequate legal representation, and predatory business practices, they went from living essentially debt-free to having a $500,000 mortgage on their home. They plead that they did not want or need this debt and cannot possibly service or retire it. The plaintiffs have sued each of the parties that allegedly played a role in chain of transactions that left them in their current situation. The plaintiffs submit that they will lose their home absent intervention of the court.
[2] Canada Choice Inc. and its principal Anas Ayyoub are two of the defendants in the action. CCI was one-half of a syndicate that put a $500,000 mortgage on the Lims’ home. The effective interest rate of the one-year loan was over 33% per year. From the proceeds of the mortgage, CCI shared in $125,000 in pre-paid interest, plus a $25,000 mortgage arrangement fee. CCI and Mr. Ayyoub seek an order striking out the claim against them, in whole or in part. They primarily rely on rule 21.01(1)(b) of the Rules of Civil Procedure, but also rely on rules 25.06(2), 25.06(8), 25.06(9), 25.11, and 25.10. [^2]
[3] Blossom Rabinowitz and Edmond Ohayon are two of the defendants in the action. Mr. Ayyoub lined up Ms. Rabinowitz to provide a $675,000 mortgage to the Lims that would take out the CCI mortgage. That transaction fell apart after Danila and Emmanuel’s other family members learned of the situation. Ms. Rabinowitz and Mr. Ohayon subsequently took an assignment of the CCI mortgage. Ms. Rabinowitz and Mr. Ayyoub move under rule 21.01 for determinations of questions of law and for an order striking out the claims against them. They submit that the plaintiffs’ claim does not disclose a cause of action because they can shelter under the protection of the Land Titles Act. [^3]
[4] Granting the defendants’ motions to strike out the claim would end the action against them. The defendants would not have to make documentary production. They would not have to answer questions under oath about their participation in this unsavoury series of transactions. The plaintiffs would lose the ability to recover against them without ever having the chance to prove their claims at trial.
[5] As the case management judge for this proceeding, I find that the defendants have not met the very high threshold to strike out the plaintiffs’ claim. The interests of justice strongly support permitting Danila and Emmanuel to proceed with this action against these defendants. The motions are dismissed.
1. Legal principles
[6] The proper approach on a rule 21.01(1)(b) motion is well settled. [^4] I am to take the facts asserted in the statement of claim as true unless they are patently incapable of proof or are merely bald conclusory statements of fact, unsupported by material facts. [^5] I am to read the statement of claim generously. The ultimate question is whether it is plain and obvious, assuming the facts pleaded to be true, that each of the pleaded claims discloses no reasonable cause of action. This is true where:
a. the allegations do not give rise to a cause of action;
b. the plaintiff fails to plead a necessary element of a cause of action; or
c. the allegations in the pleading are conjecture, assumptions, or speculation unsupported by material facts.
[7] This is a stringent test, and the moving party must satisfy a very high threshold. [^6] However, if the claim has no reasonable prospect of success, where it is plain and obvious that the action cannot succeed, it should not be allowed to proceed to trial. Plaintiffs may not plead bald conclusions. If plaintiffs lack knowledge of the facts necessary to support the causes of action, they ought not to make the allegation in the statement of claim.
[8] It is important to note the Court of Appeal’s caution regarding Rule 21 motions and how they can cause unnecessary delay and expense at the cost of the timely adjudication of disputed on their merits:
Pleadings are very important. They frame the proceedings and the case that must be met. However, long gone are the days where proceedings could be terminated at the early pleadings stage on mere technicalities that can be cured by amendment unless it would result in non compensable prejudice to the opposing party or the administration of justice. Motions to strike can certainly serve a useful purpose at early stages of a proceeding to weed out clearly untenable causes of action that have no chance of success: Imperial Tobacco, at para. 19. But in circumstances where parties are quibbling over whether a known cause of action has been pleaded with sufficient particularity, injudicious use of motions to strike inevitably lead to proceedings becoming mired down, as here, in technical pleadings disagreements that cause unnecessary delay and expense, rather than the adjudication of the dispute on the merits. [^7]
[9] In addition, CCI and Mr. Ayyoub rely on rule 25.11, which permits the striking of a claim as scandalous, frivolous, or vexatious. The court may strike pleadings under rule 25.11 where they contain allegations that are irrelevant, extraneous, argumentative, or incapable of affecting the outcome of the action. [^8]
2. Facts
[10] I am required to take the facts asserted in the statement of claim as true unless they are incapable of proof. The following facts are taken from the plaintiffs’ Amended Amended Statement of Claim, dated August 21, 2023, which is the most recent pleading.
[11] In 2021, Danila Lim was an 87-year-old widow. She had been blind for over 40 years, cannot read braille and does not own any assistive technology for her computer. Danila suffers from depression and is socially isolated. She lives in the home she had owned since 1989. In 2021, a small mortgage was registered against the home.
[12] Since 2002, Danila has lived with her 60-year-old son, Emmanuel, who retired from the Canadian Armed Forces in 2011 after serving this country for 28 years. Emmanuel lives with post-traumatic stress disorder and adjustment disorder. He is socially isolated and struggles with managing his diabetes. Both Danila and Emmanuel are easily confused and prone to panic when confronted with urgent situations.
[13] On August 12, 2016, the defendant Simply Green Home Services registered a notice of security interest against the plaintiffs’ home. On April 9, 2018, the defendant Canadian Home Improvement Credit Corporation registered a NOSI against the plaintiffs’ home. The plaintiffs plead that these registrations were done without either notice or Danila’s consent.
Omar Khan and the Bankright mortgage
[14] In the spring of 2021, the defendant Omar Khan knocked on the plaintiffs’ door. Mr. Khan told the plaintiffs that the defendants Simply Green and Canadian Home had liens registered against the home and that, unless the plaintiffs cleared the liens immediately, Simply Green and Canadian Home could seize their house. The plaintiffs panicked over the thought of losing their home. Mr. Khan took advantage of the plaintiffs’ fears and told them that he could remove the liens, he just needed their identification. The plaintiffs trusted Mr. Khan and gave him their passports, photo identification chards, and a void cheque.
[15] Mr. Khan then arranged for the plaintiffs to borrow $45,000 for five years at an interest rate of 17.49% calculated monthly, with 15 months of interest payments pre-paid from the loan. The lenders would be the defendants Extend Financial Ltd. (formerly known as Bankright Financial Ltd.) and 2820992 Ontario Inc. The cost of borrowing over the five-year term was over $41,000. Emmanuel guaranteed the loan, which was secured by a mortgage on the plaintiffs’ home.
[16] The loan documents were fraudulently signed by Mr. Khan after the plaintiffs participated in a Zoom meeting orchestrated by Mr. Khan with the defendant Shengmin Pei, a lawyer, of the defendant law firm Min Pei PC. Although the plaintiffs had never met Pei, or anyone at the firm, that firm apparently acted as their lawyers on the mortgage transaction. According to the trust statement of Ming Pei PC, $20,000 in proceeds from the loan were paid to the defendant Complete Home Comfort. There is no explanation for this payment. These defendant lawyers billed the plaintiffs over $1,000 for their efforts on this transaction. After the payment of other fees, charges, and prepaid interest, the plaintiffs received proceeds of $5,161.87, which Mr. Khan characterized as a “government rebate.”
[17] I pause to note that on August 16, 2023, the Law Society of Ontario, issued a notice to the legal profession about exploitative loan agreements and, in particular, the risks of acting for clients in the registration of NOSIs, or completing mortgage loan transactions in cases involving vulnerable people. That notice warned that:
The Law Society has become aware of instances where vulnerable senior citizens were induced into exploitative loan agreements. This predatory lending targeting the elderly and the vulnerable involves loans that were secured against the seniors’ homes through transactions in which Ontario lawyers and paralegals have played a role.
The purpose of this notice is to alert Law Society licensees to the risks of acting for clients in the registration of Notices of Security Interest (“NOSIs”), or in the course of completing mortgage loan transactions in cases involving vulnerable people.
In these transactions, senior homeowners were pressured by door-to-door salespeople to enter into contracts for home renovations and the purchase of other goods and services. The seniors were then led to enter into loan agreements from private lenders to finance these products and services. These lenders registered NOSIs on the title to their property to secure the loans, sometimes without the senior citizens being aware of the NOSI. The seniors were later induced to take out increasingly larger mortgage loans, secured against their homes, to pay off some of the NOSIs and finance further home renovations. These mortgages involve significantly higher than market interest rates, with substantial lender and broker fees. Enforcement proceedings have been commenced under some of these mortgages when the homeowner defaulted on payments.
In these transactions, a lawyer may be asked by a broker or other intermediary to represent the lender or the borrower and may receive purported instructions from the same intermediary, rather than the actual client.
Before accepting such retainers, and during the course of the retainer, lawyers must ensure that they inform themselves of the clients’ circumstances and are in a position to act in the best interests of their clients and that they comply with their professional obligations.
Failure to meet a licensee’s professional obligations can result in regulatory measures being taken against them. [^9]
[18] At a high level of generality, Danila and Emmanuel plead that:
a. The NOSIs registered by Simply Green and Canadian Home were obtained by deceit and are void;
b. Mr. Khan defrauded, exerted undue influence over, and obtained benefits under duress from the plaintiffs;
c. The defendants Ming Pei PC, Shengmin Pei, and Stephen Price regularly acted as lawyers for Bankright, knew the plaintiffs were vulnerable, provided negligent legal advice to the plaintiffs, and failed to protect their interests;
d. The Bankright mortgage is unconscionable, procured in bad faith and through duress, and because of undue influence.
e. The defendant 2820992 Ontario Inc. acted as a mortgage broker and is liable in negligence for damages.
f. The defendant Complete Home Comfort, which received $28,000 from the proceeds of the loan, knew that the entire loan transaction was unlawful and unenforceable at law.
g. The plaintiffs seek to hold the principals of Bankright Complete Home Comfort (the defendants Manjit Singh and Krishna Thillanadarajah), 282 Ontario (the defendant Michael Yosher), and Complete Home Comfort Bankright (the defendants Rafael Alter and Yuval Barzakay), personally liable because they used their companies for improper purposes and as a shield for their own wrongful conduct;
Canada Choice Investments and the $500,000 mortgage
[19] About one month after Bankright registered its charge against the plaintiffs’ home, Mr. Khan returned to the plaintiffs’ door. This time he was accompanied by someone who said they were a “law clerk.” Mr. Khan said the plaintiffs still had “liens” registered against their home and that they needed to clear them urgently or they would be evicted. Mr. Khan also said that it would be necessary for them to complete renovations to their home. Mr. Khan requested that Danila give him a void cheque, which she did.
[20] Mr. Khan arranged for the defendant Centum Mortgage Smart Inc. and its agent, the defendant Maryam Hasaballah, to process a mortgage application for the plaintiffs.
[21] Someone arranged for the defendant lawyer Anant Jain of the defendant law firm Anant Jain PC to represent the plaintiffs. I pause here to note that on October 3, 2023, the Law Society of Ontario obtained a consent interlocutory order to suspend Mr. Jain’s licence to practice law in Ontario. [^10] The Law Society submitted evidence that Mr. Jain “participated or facilitated a mortgage fraud or a scheme meant to financially exploit senior citizens through predatory lending practices.” The Law Society described this as “the Seniors Scheme” and noted that the transactions “involved the same recurring participants” including the moving defendant in this action,. The Law Society Tribunal provided the following particulars of the evidence, which Mr. Jain conceded for the purposes of that motion:
Particulars of allegations re: the Seniors Scheme
[10] The general pattern of the Seniors Scheme was that door-to-door salespeople would induce senior homeowners to enter into contracts for home equipment and renovations with monthly payments which were then secured by a notice of security interest (NOSI), which is akin to a lien registered on the title to their property, often without their knowledge. In some cases, senior citizens were induced into taking out a small mortgage in addition to finance further home renovations and services.
[11] Later, the senior citizens were approached by more door-to-door salespeople for further home renovations, which were subsequently financed by large mortgages (between $100,000 to $550,000) on their properties.
[12] In her affidavit, Ms. Lord advised that the evidence gathered to date reveals that the Lawyer acted on these large, predatory mortgages which had the following features:
- the senior homeowners often had a low fixed income;
- they had considerable equity in their homes;
- there were multiple NOSIs registered on title within a short timeline;
- the mortgages were large and featured high rates of interest (i.e. 25%);
- there were substantial lender and broker fees; and
- there was significant potential inability by the senior homeowners to repay the mortgage.
[13] It is alleged that the Lawyer represented the senior borrowers in about 20 transactions but never cautioned the clients about the onerous terms of the mortgages or the extremely high cost of lending. These transactions are currently the subject of the Law Society’s concern.
[14] These transactions involved the same recurring participants: Ranjit Dhillon, a mortgage broker at Centum Mortgage Smart Inc. (Centum), and Canada Choice Investment (CCI), a mortgage lender. The senior borrowers were referred to the Lawyer by Ranjit Dhillon. [^11]
[22] Danila and Emmanuel plead that they did not know Mr. Jain and did not contact him to represent them. They plead that Mr. Jain knew or ought to have known they were vulnerable, did not explain the transaction documents to them, he did not provide independent or adequate legal advice to the plaintiffs, and that he did not meet the standards of a reasonably competent real estate lawyer. Danila and Emmanuel assert Mr. Jain did not protect their interests, was negligent, and breached his contract with them.
[23] On July 20, 2021, a $500,000 charge was registered against the property in favour of the defendant CCI (30%) and the defendant 12212382 Canada Inc. (70%) as tenants in common. The effective interest rate of the one-year loan was over 33% per year, with pre-paid monthly interest-only charges of $10,416. Emmanuel guaranteed the loan. The uses of the funds were as follows:
a. $125,000 paid to CCI and 122 as pre-paid interest;
b. $25,000 to CCI as a “lender’s fee”;
c. $3,500 to CCI as a “mortgage arrangement fee”;
d. $4,184.64 to the Bank of Nova Scotia to discharge the original, legitimate mortgage on the property;
e. $46,433.77 to discharge the Bankright mortgage discussed above;
f. $11,000 to Centum as a mortgage broker fee;
g. $1,700 to Keyser Mason Ball, LLP for the lender’s legal fees;
h. $3,000 to Anant Jain PC for the legal services described above;
i. $279,338.59 paid to Ms. Lim.
[24] Mr. Khan then directed Danila to prepare two bank drafts in the total amount of $135,000 payable to the defendant Complete Home Comfort. I will discuss the use of these funds further below.
[25] The plaintiffs plead that Mr. Khan “fraudulently and intentionally deceived them for his own benefit to cheat, steal, and unlawfully receive monies, which directly caused the plaintiffs’ financial injury and damages.” They plead that Mr. Khan exerted undue influence and duress on the plaintiffs to take advantage of and exploit their vulnerability and lack of understanding.”
[26] The plaintiffs plead as follows regarding CCI:
The Plaintiffs state that the [CCI] and 122 mortgage is void and unenforceable and ought to be wholly set aside. All monies received by [CCI] and 122 must be repaid to the Plaintiffs. The mortgage was signed under duress and because of undue influence (as described in paragraphs 57, 58, and 67 [which describe the conduct of Mr. Khan]), was not understood by the Plaintiffs, is unconscionable, unfair, and procured in bad faith, charged an unconscionable interest rate, and is contrary to law.
The Plaintiffs seek that the corporate veil of [CCI] and 122 be pierced and that Ayyoub, as directing mind of Canada Choice, and Rifkind, as the directing mind of 122, be held personally liable to the Plaintiffs and obligated to disgorge any monies received. The Plaintiffs state that Ayyoub and Rifkind used their companies for an improper purpose, directed a wrongful thing to be done, and are using the corporation as a shield for improper conduct as set out herein. …
The Plaintiffs state that they never contacted Centum, Hasaballah, [CCI], and/or 122 to obtain a mortgage. They did not need, request, nor want a mortgage, and yet a $500,000.00 mortgage with a high interest rate was registered against the Plaintiffs’ property which they did not have the ability to repay.
[27] The plaintiffs plead that Centum and Hasaballah breached their duties as mortgage brokers and seek to lift the corporate veil to affix personal liability on the defendant Kamal Kaur Dhillon.
[28] Mr. Khan was the plaintiffs’ primary point of contact with Complete Home Comfort for the alleged renovations. The plaintiffs plead that they did not sign a contract with Complete Home Comfort and that employees or subcontractors attended their home sporadically between November 2021 and March 2022, when the work stopped altogether. The work done is incomplete and of poor quality. It will need to be repaired and redone, despite the plaintiffs paying $270,000 for the work in 2021. The plaintiffs allege that Complete Home Comfort received those funds through misrepresentations and the company is liable to disgorge those funds. The plaintiffs also seek to lift the corporate veil and have the principals of the company, the defendants Singh and Thillanadarajah, held personally liable.
The Rabinowitz Charge
[29] In May 2022, Mr. Ayyoub personally visited the plaintiffs’ home. He told them there was a $500,000 mortgage owing against their home that they needed to refinance immediately or they would be evicted. Mr. Ayyoub arranged for a $675,000 loan to be provided by the defendant Blossom Rabinowitz, who was known to Mr. Ayyoub but not to the plaintiffs.
[30] A letter of commitment was prepared by Financial Litigation, which is a trade name of Karp Litigation Professional Corporation. The letter of commitment stated that K&Y Law Professional Corporation would represent the lender. The letter of commitment required the plaintiffs to pay a $6,000 solicitor fee, 4.0% broker fee, and a $6,000 commitment fee, which would be payable to Karp Litigation Professional Corporation. The plaintiffs plead that Karp Litigation Professional Corporation has acted for CCI prior to May 1, 2022. [^12]
[31] The plaintiffs plead that Mr. Ayyoub or one of his associates organized a call with the Olowolafe Law Professional Corporation, who purportedly represented the plaintiffs. The plaintiffs did not choose this firm or have any prior connection to it. Emmanuel requested the opportunity to speak with his family, but Mr. Ayyoub “forcefully asserted and insisted that the plaintiffs could not speak to anyone about this and that it must remain confidential, failing which he would not assist them and the Sheriff would evict them.” The plaintiffs felt compelled to move forward and had the Zoom call with the Olowolafe Law Professional Corporation.
[32] After the call, Danila contacted other family members to explain what was happening. The family members contacted the Olowolafe Law Professional Corporation and, on May 16, 2022, put a stop to the $675,000 transaction with Ms. Rabinowitz. The plaintiffs subsequently received a “Disengagement Letter” from the Olowolafe Law Professional Corporation, purportedly dated May 14, 2022, stating that the lender’s lawyer, which I infer to be a reference to the Karp Litigation Professional Corporation, had cancelled the transaction.
[33] Approximately one week later, CCI and 122 transferred its $500,000 mortgage on the plaintiffs’ property to Rabinowitz and the defendant Edmond Ohayon. The instrument listed the consideration for the transfer as $2.00. The lawyer for CCI and 122 was Keyser Mason Ball LLP. [^13] The lawyer for Ms. Rabinowitz and Mr. Ohayon was listed as Aryan Yassavoli-Sani of K&Y Professional corporation, which is also referenced in paragraph [30], above.
[34] On August 25, 2022, after the statement of claim was served on them, Ms. Rabinowitz and Mr. Ohayon transferred the $500,000 charge to Mr. Ohayon alone. Mr. Yassvoli-Sani of K&Y Professional Corporation was the lawyer for all parties.
[35] Danila and Emmanuel seek damages against Ms. Rabinowitz and Mr. Ohayon, and plead that they owe no money to Ms. Rabinowitz or Mr. Ohayon, and that the two defendants ought to be enjoined from any enforcement measures on the mortgage. They plead that Ms. Rabinowitz and Mr. Ohayon are not bona fide assignees without notice and that they had actual knowledge, by obtaining the original lender’s file and other ways, that the mortgage was unconscionable and procured in bad faith. They also plead that Ms. Rabinowitz and Mr. Ohayon hold the charge subject to the equites between the plaintiffs and the original mortgagees. Finally, Danila and Emmanuel plead that the transfers of charge are fraudulent instruments as defined in the Land Titles Act and are void.
3. The motion by CCI and Ayyoub to dismiss the action
[36] Mr. Ayyoub and CCI seek an order dismissing the action against Mr. Ayyoub in its entirety, without leave to amend, and for an order dismissing the claims against CCI alleging fraud, fraudulent instruments, duress, undue influence, and that the mortgage was an unconscionable transaction. The motion has no merit and is dismissed.
[37] In his oral submissions, Mr. Solmon advanced four submissions on behalf of Mr. Ayyoub and CCI. I will address each in turn.
The prayer for relief need not be amended at this time
[38] Mr. Ayyoub and CCI move for relief under rule 25.06(9) and submit that the prayer for relief must be amended because it does not distinguish what precise relief it seeks against each defendant. I disagree.
[39] The prayer for relief provides as follows:
The Plaintiffs claim as against the Defendants:
(a) damages in the sum of $750,000.00;
(b) aggravated damages in the sum of $300,000.00;
(c) removal from title all notices of security interests and/or liens;
(d) temporary and permanent injunction enjoining all mortgagees and assignees of the mortgages from exercising any remedies against the Plaintiffs or their property;
(e) disgorgement of all monies received from the Plaintiffs or by reason of the Plaintiffs mortgage loans;
(f) rescission of the $45,000.00 mortgage and the $500,000.00 mortgage as referred to in this Amended Amended Statement of Claim;
(g) an Order that pursuant to the Unconscionable Transaction Relief Act that the mortgages and the assignments herein are harsh and unconscionable and ought to be set aside;
(h) an Order that the mortgagees at set out herein indemnify the Plaintiffs pursuant to section 2(d) of the Unconscionable Transaction Relief Act;
(i) an Order that the assignments of the $500,000.00 mortgage is void and of no legal consequence or effect;
(j) punitive damages in the amount of $1,000,000.00;
k) costs of this action on a full indemnity basis;
(l) such further and other relief as counsel may request and this Honourable Court may deem just;
(m) prejudgment and postjudgment interest in accordance with the Courts of Justice Act.
[40] I accept the proposition that, typically, a global claim for general damages against all defendants does not comply with rule 25.06(9) and that the amount claimed from each defendant must be particularized. [^14] However, this requirement is not absolute and there can be amendments to the prayer for relief even after judgment is granted. [^15]
[41] In this case, the plaintiffs have pleaded a chain of misconduct among a series of defendants that has caused them damages. As pleaded, the plaintiffs assert that their damages have been caused by a cascading series of interconnected actions among the defendants. At this point in the proceeding, it would be artificial and inappropriate to require Danila and Emmanuel to distinguish what precise harm was caused by which defendant. Given the facts pleaded, I find that it is appropriate for the plaintiffs to frame their prayer for relief in broad terms at this time. Further particularity may be possible after documentary and oral examination is complete. At this stage, however, I see no reason to compel an amendment to the prayer for relief pursuant to rule 25.06(9).
No part of the statement of claim is irrelevant or scandalous
[42] CCI and Mr. Ayyoub submit that paragraphs 81 to 84 and 92 of the statement of claim should be struck as irrelevant or scandalous pursuant to rule 25.11. I disagree. The paragraphs provide as follows:
In or around May of 2022, Ayyoub attended the Property and advised the Plaintiffs that there was a $500,000.00 mortgage owing against the Property. He proceeded to tell the Plaintiffs that they would need to refinance the Property immediately, failing which they would be evicted from the Property by the Sheriff. The Plaintiffs again feared for their home and safety.
As was the case with Omar, Ayyoub immediately and hastily proceeded to registered against the Property. This time the amount of the loan would be for $675,000.00 and the lender would be Rabinowitz. The Plaintiffs never contacted anyone to secure a new mortgage. They did not need, request, nor want a new mortgage, nor did they have the ability to repay a $675,000.00 loan.
A Letter of Commitment was prepared and presented to the Plaintiffs on May 1, 2022, setting out terms of a $675,000.00 mortgage between the Plaintiffs as borrowers and Rabinowitz as lender. The Letter of Commitment was prepared by Financial Litigation, a trade name of Karp Litigation Professional Corporation. The Letter of Commitment indicates that K&Y Law Professional Corporation would represent Rabinowitz. It further indicated that a $6,000.00 solicitor fee, 4.0% broker fee, and a $6,000.00 commitment fee would be payable by the borrower. It confirmed that the commitment fee would be payable to Karp Litigation Professional Corporation on closing. Karp Litigation Professional Corporation has acted for Canada Choice prior to May 1, 2022.
A Zoom call was organized on behalf of the Plaintiffs by Ayyoub and/or one of his associates Olowolafe Law Professional Corporation (an office the Plaintiffs never previously had any dealings with). Prior to the Zoom call, Emmanuel requested to speak to family members about this but Ayyoub forcefully asserted and insisted that the Plaintiffs could not speak to anyone about this and that it must remain confidential, failing which he would not assist them and the Sheriff would evict them. The Plaintiffs felt compelled to move forward and did so under duress. During this Zoom call, Ayyoub left the Property but one of his accomplices stayed with the Plaintiffs and from behind the camera instructed Emmanuel what to say.
Due to increasing distress, Danila ultimately advised other family members as to her fears of being evicted of the Property. Upon gathering more information, the Plaintiffs family members immediately contacted Olowolafe Law Professional Corporation and were able to put a stop on the $675,000.00 loan on or about May 16, 2022. The Plaintiffs received a “Disengagement Letter” dated May 14, 2022, from Olowolafe Law Professional Corporation confirming that the lender’s lawyer on May 10, 2022, cancelled the mortgage transaction “on the lender’s side”
[43] Paragraphs 80 to 84 plead facts related to Mr. Ayyoub’s direct and personal contact with the plaintiffs. If the plaintiffs are able to prove these facts, Mr. Ayyoub could be fixed with personal knowledge of Danila and Emmanuel’s infirmity and vulnerability. The plaintiffs plead that Mr. Ayyoub then threatened to have them evicted and attempted to swamp them with even more debt, which may establish Mr. Ayyoub’s personal liability or be otherwise relevant to claims against Mr. Ayyoub and CCI. The paragraphs plead a direct link between Mr. Ayyoub, CCI, and the lawyers at the Olowolafe Law Professional Corporation who allegedly acted for the plaintiffs. If these facts are proven, Mr. Ayyoub may be found to have personally arranged for inadequate legal advice to be given to the plaintiffs.
[44] The paragraphs also plead a direct links among Mr. Ayyoub, Ms. Rabinowitz the anticipated lender, and her lawyers at Mr. Karp’s firm.
[45] All of the paragraphs are directly relevant to the chain of misconduct asserted by the plaintiffs. They are not scandalous within the meaning of rule 25.11 and I decline to strike them out.
[46] In paragraph 92, the plaintiffs plead that “The Plaintiffs’ family members have reported these matters to the police.” CCI and Mr. Ayyoub submit that this paragraph should be struck out as irrelevant. I disagree. In my view, it is an acceptable part of the narrative of the statement of claim. The paragraph may be relevant to the plaintiffs’ good faith and to rebut any suggestion that they are simply dissatisfied with the economic bargains that they made. In any event, I do not think this paragraph will prejudice or delay the fair trial of the action or that it is scandalous, embarrassing, frivolous or vexatious within the meaning of those words in the Rules of Civil Procedure.
The plaintiffs have adequately pleaded that the transactions are unconscionable and may fall within the Unconscionable Transaction Relief Act
[47] CCI and Mr. Ayyoub submit that the plaintiffs have not properly pleaded that the transaction between CCI and the plaintiffs was unconscionable and contrary to the provisions of the Unconscionable Transactions Relief Act and that it is plain and obvious that these claims cannot succeed. I disagree.
[48] First, CCI and Mr. Ayyoub submit that “there are no facts pleaded to support [that the transaction was] “harsh.” I disagree. The plaintiffs have pleaded that the $500,000 one-year loan had an effective annual interest rate of over 33%, that CCI received $125,000 in pre-paid interest, $25,000 as a lender’s fee, $3500 as a mortgage arrangement fee. The pleaded terms of this transaction are plainly harsh.
[49] Second, CCI submits that the plaintiffs have not pleaded facts to demonstrate that CCI had any knowledge of any deficiency of the legal advice provided to the plaintiffs. I disagree. The plaintiffs plead that CCI knew that the mortgage was unlawful, unenforceable, unconscionable, and charged an exorbitant interest rate, that the plaintiffs had no ability to repay and would imminently go into default on the mortgage. Any commercially reasonable lender would have known that the plaintiffs did not receive proper or independent legal advice before entering into such a patently abusive transaction. I reject the submission of CCI and Mr. Ayyoub that that the plaintiffs did not plead that the bargain was improvident. The plaintiffs clearly pleaded the improvidence of this transaction.
[50] Moreover, although Mr. Jain was unknown to the plaintiffs before the transaction, prior decisions of the court and the LSO Tribunal demonstrate that Mr. Jain had previously worked on transactions with CCI. [^16] For example, in its decision to impose an interlocutory suspension on Mr. Jain’s licence to practice, the LSO Tribunal noted the evidence presented by the Law Society that:
[13] It is alleged that [Mr. Jain] represented the senior borrowers in about 20 transactions but never cautioned the clients about the onerous terms of the mortgages or the extremely high cost of lending. These transactions are currently the subject of the Law Society’s concern.
[14] These transactions involved the same recurring participants: Ranjit Dhillon, a mortgage broker at Centum Mortgage Smart Inc. (Centum), and Canada Choice Investment (CCI), a mortgage lender…. [^17]
[51] Given their longstanding prior relationship among Mr. Jain, CCI, and Mr. Ayyoub, the plaintiffs may be able to prove that CCI was fully aware of the quality of advice Mr. Jain provided to the plaintiffs and which party’s interests Mr. Jain advanced.
[52] Moreover, the plaintiffs plead that Mr. Ayyoub was personally involved in the plaintiffs obtaining what they allege to be poor legal advice from the Olowalafe Law Professional Corporation. If the plaintiffs are able to establish that fact, Mr. Ayyoub would be personally involved in arranging for the plaintiffs to receive allegedly inadequate legal advice from a firm of Mr. Ayyoub’s choice. Proving that fact that would, in turn, go some way to prove that Mr. Ayyoub and CCI knew that Mr. Jain was not retained for the purpose of giving credible, independent, and effective legal advice to the plaintiffs.
[53] I am not persuaded by the submission of Mr. Ayyoub and CCI that they did not know and could not have known that Mr. Jain provided inadequate legal advice to the plaintiffs. They will be able to plead their knowledge in their statement of defence and have their evidence in support of that pleading tested at trial.
[54] In conclusion, I do not accept the submissions of CCI and Mr. Ayyoub. I find that the plaintiffs have adequately pleaded the risk and the surrounding circumstances. I find that the facts pleaded by the plaintiffs are sufficient to demonstrate that the cost of the loan is excessive, and that the transaction is harsh and unconscionable within the meaning of the Unconscionable Transactions Relief Act, R.S.O. 1990, c. U.2.
[55] I also decline the defendants’ alternative request for an order requiring the plaintiffs to particularize further their claim. I have no doubt that CCI and Mr. Ayyoub are fully aware of the allegations against them and are well-positioned to plead in defence of those allegations.
There is no reason to strike out the claims against Mr. Ayyoub
[56] Mr. Ayyoub submits that all claims against him should be struck out because the plaintiffs have not pleaded facts sufficient to lift the corporate veil or to pursue him personally. I disagree.
[57] First, the plaintiffs have pleaded that Mr. Ayyoub personally:
a. attended their home and threatened to have them evicted;
b. organized a further and larger loan to discharge the CCI mortgage and to place an even larger mortgage against the Lims’ home;
c. picked the law firm to whom the plaintiffs would speak and obtain legal advice regarding this dubious transaction; and
d. forcefully asserted and insisted that Danila and Emanuel could not speak to anyone about the loan transactions other than the law firm that he selected for them, and that the transactions must remain confidential or he would not “help” them and the Sheriff would evict them from their home.
[58] Although that transaction did not proceed, it is not plain and obvious that Mr. Ayyoub would not be personally liable to the plaintiffs for damages if they are able to prove these facts and Mr. Ayyoub’s personal involvement in the transaction.
[59] Second, the plaintiffs plead that Mr. Ayyoub used CCI “for an improper purpose, directed a wrongful thing to be done, and are using the corporation as an improper shield for improper conduct as set out herein.” In my view, this pleading combined with the misconduct pleaded against CCI is a sufficient pleading to survive a motion to strike. I accept Mr. Ayyoub’s submission that the test for lifting the corporate veil is that found in Transamerica. [^18] The court will “disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct.” [^19]
[60] I find that it is not plain and obvious that the plaintiffs have failed to plead improper conduct that, if proven, would be sufficient to justify lifting the corporate veil. Even if the plaintiffs’ current pleading does not explicitly plead fraud, the plaintiffs have pleaded facts that, if proven, demonstrate that Mr. Ayyoub has behaved disgracefully. It is not plain and obvious that the court would not lift the corporate veil and hold Mr. Ayyoub personally liable for using the corporate structure of CCI for an improper purpose, namely, to induce vulnerable persons to enter into mortgages that CCI knew were unlawful, unenforceable, unconscionable, and that he charged an exorbitant interest rate.
[61] I reach this conclusion without considering the amendment to the claim proposed by the plaintiffs. In response to Mr. Ayyoub’s objections to the adequacy of the pleading, the plaintiffs proposed to amend their claim to add a new paragraph reading as follows:
Ayyoub incorporated CCI on May 25, 2021, and the Plaintiffs' mortgage in favour of CCI was registered on July 20, 2021. Between the incorporation date and the registration date of the mortgage, Ayyoub placed mortgages on at least 12 other properties and on July 20, 2021 on a further 3 other properties other than that of the Plaintiffs. These mortgage loans were to vulnerable seniors on limited fixed incomes, and the principal loaned ranged from $100,000.00 to $550,000.00 at 25% interest. Ayyoub continued this predatory lending practice after July 20, 2021. Ayyoub knew of the unaffordability of these loans to these seniors, of their vulnerability and of the inevitable fact that they would default on their mortgage loan. As such, Ayyoub was not a true lender with a reasonable expectation of repayment, but rather was seeking to ultimately take over the borrowers' homes and to do so in a surreptitious manner.
[62] Mr. Ayyoub raised several objections to this amendment. As mentioned, I do not need to consider this proposed amendment at this time as the statement of claim adequately pleads facts that would permit the plaintiffs to maintain a claim against Mr. Ayyoub personally and to justify lifting the corporate veil. If the plaintiffs wish to amend their claim to add this paragraph, they may raise that issue on notice to the defendants at a subsequent case conference.
[63] I decline to strike out either the claims against Mr. Ayyoub personally or the request for the relief of lifting the corporate veil on CCI to hold Mr. Ayyoub personally liable.
Other issues
[64] CCI and Mr. Ayyoub raised a number of other issues in their factum that were not pursued in oral argument. In my view, none of the other issues raised have any merit. The plaintiffs have adequately pleaded the remaining causes of action and have provided sufficient particulars to the defendants. I have no doubt that CCI and Mr. Ayyoub will be able to plead in defence to all the allegations in the statement of claim.
4. The motion by Ms. Rabinowitz and Mr. Ohayon
[65] Ms. Rabinowitz and Mr. Ohayon seek a determination of a question of law before trial under rule 21.01(1)(a) and an order striking the claim without leave to amend pursuant to rule 21.01(1)(b).
[66] Ms. Rabinowitz and Mr. Ohayon seek determinations of law in the absence of a factual record. The court is traditionally reluctant to do so because deciding questions of law in the abstract, or where there are contested material facts, impairs the judicial function. The questions of law they raise cannot be determined absent a full factual record. A full factual record on which to base the findings of the court, including legal issues is important. [^20]
[67] In my view, there are material facts in dispute that do not allow for the plaintiffs’ claim to be struck out on a question of law. [^21] Moreover, it is not plain and obvious that the legal conclusions that Ms. Rabinowitz and Mr. Ohayon wish the court to draw are correct. It is desirable that these issues be determined on a full factual record. [^22] Here, the facts are disputed. The alleged misconduct is interconnected. The knowledge and role of each of the defendants remains to be determined. For the reasons set out below, there is no merit to the motion brought by Ms. Rabinowitz and Mr. Ohayon.
[68] In addition to the facts described above, the specific pleading against Ms. Rabinowitz and Mr. Ohayon states as follows:
Ohayon and Rabinowitz are not bona fide assignees without notice. Ohayon and Rabinowitz themselves, or through their counsel or broker, had actual knowledge and/or notice that the $500,000.00 mortgage was unconscionable, unfair, and procured in bad faith, and was therefore unenforceable. Rabinowitz, as a lender, had days before cancelled the proposed new mortgage.
Moreover, Ohayon and Rabinowitz received an assignment of a mortgage that was maturing in less than 2 months (July 20, 2022). Ohayon and Rabinowitz were aware of the Plaintiffs ages, incomes, and inability to repay the amount of the mortgage. Prior to the assignment, Ohayon and Rabinowitz received the “original lenders’ file”.
Alternatively, Ohayon and Rabinowitz would have indirect knowledge of the lack of enforceability of the $500,000.00 mortgage. They were wilfully blind to the enforceability of the charge and its unconscionability. In the further alternative, Ohayon and Rabinowitz hold the charge subject to the equities and accounts between the Plaintiffs and the original mortgagees. The Plaintiffs rely on section 53 of the Conveyancing and Law of Property Act and section 101(4) of the Land Titles Act.
In the further alternative, the transfers of charge are fraudulent instruments as defined in section 1 (d) of the Land Titles Act and are void pursuant to section 155 of the Act. Particulars of the fraud are as follows:
(a) The original mortgagees (Canada Choice and 122) knew that this mortgage was unlawful, unenforceable, unconscionable, and charged an exorbitant interest rate;
(b) The original mortgagees (Canada Choice and 122) knew that the Plaintiffs had no ability to repay the mortgage and would imminently go into default;
(c) The original mortgagees (Canada Choice and 122) unloaded the mortgage to avoid challenges to its enforceability;
(d) Ohayon and Rabinowitz knew that this mortgage was unlawful, unenforceable, unconscionable, and charged an exorbitant interest rate;
(e) Ohayon and Rabinowitz knew that the Plaintiffs had no ability to repay the mortgage and would imminently go into default;
(f) Ohayon and Rabinowitz knew that the Plaintiffs did not want a new mortgage (the $675,000.00 mortgage) and yet agreed to an assignment of the Canada Choice and 122 mortgage that was about to mature;
(g) Ohayon and Rabinowitz, in the circumstances herein described, ought to have communicated directly with the Plaintiffs prior to receiving the assignment;
(h) Canada Choice and 122 acted quickly and hastily to ensure the registration of the mortgage;
(i) Ohayon and Rabinowitz acted quickly and hastily to ensure the completion of the assignment.
[69] First, to the extent that Ms. Rabinowitz and Mr. Ohayon assert that they are purchasers for value without notice, that is a fact that they can plead in defence to the action. Moreover, it will be for them to prove those facts at trial. For the purposes of this motion, I must accept the plaintiffs’ allegations as true. The plaintiffs pleaded that “Ohayon and Rabinowitz are not bona fide assignees without notice.” On this motion, I cannot accept the defendants’ assertion that they are bona fide assignees for value for the purpose of the Unconscionable Transactions Relief Act, or for any other purpose.
[70] Second, and relatedly, Ms. Rabinowitz and Mr. Ohayon assert that the plaintiffs have not pleaded facts to connect them to any of the other claims in the statement of claim. I disagree. The plaintiffs have pleaded that Mr. Ayyoub personally set up the aborted Rabinowitz charge and that they obtained the original lender file in the course of the discussion of the charge or the subsequent assignment of the CCI mortgage. These pleaded facts are sufficient to connect Ms. Rabinowitz and Mr. Ohayon to the chain of misconduct the plaintiffs have pleaded in the clam.
[71] Third, I do not accept that the defendants’ reliance on s. 78(4) of the Land Titles Act raises a dispositive question of law that can be determined in the absence of a fully developed factual record. I disagree with submission of Ms. Rabinowitz and Mr. Ohayon that the plaintiffs have only pleaded that they had constructive knowledge of a defect in title. The plaintiffs plead that the two defendants had “actual knowledge and/or notice that the $500,000.00 mortgage was unconscionable, unfair, and procured in bad faith, and was therefore unenforceable.” Even if Ms. Rabinowitz and Mr. Ohayon are correct that it is not sufficient for a plaintiff to merely allege constructive knowledge of a defect in title for purposes of the Land Titles Act, the plaintiffs have gone further and pleaded that the two defendants had actual knowledge. Moreover, that section of the Land Titles Act must be interpreted and applied in light of a full factual record.
[72] Fourth, it is not plain and obvious that the plaintiffs cannot establish that Ms. Rabinowitz and Mr. Ohayon had actual knowledge that the mortgage was unconscionable. I have found, for the reasons set out above in paragraphs [48] to [55], that the plaintiffs have adequately pleaded that their mortgage with CCI is unconscionable. In my view, whether Ms. Rabinowitz and Mr. Ohayon are fixed with that knowledge can only be determined on a full factual record. It is not appropriate to strike out the statement claim on this basis.
[73] Fifth, I do not accept the submission of Ms. Rabinowitz and Mr. Ohayon that “there is no allegation that either CCI or [they] knew that the [plaintiffs] did not receive proper legal advice or knew that the plaintiffs were under distress.” The plaintiffs have pleaded many facts that, if proven, would demonstrate that Mr. Ayyoub and CCI knew that the plaintiffs had not received proper legal advice. The plaintiffs have also pleaded that Mr. Ayyoub threatened to evict the plaintiffs unless they entered into a new $675,000 mortgage and then personally arranged for Ms. Rabinowitz to be the lender on that mortgage. Those pleaded facts, combined with the pleading that Ms. Rabinowitz and Mr. Ohayon had the original lender file, plead sufficient material facts to survive a motion to strike the pleading.
[74] Ms. Rabinowitz and Mr. Ohayon may establish their defences at trial. The plaintiffs may fail to prove their allegations at trial. However, Ms. Rabinowitz and Mr. Ohayon have not met the very high bar to have this claim struck out on a Rule 21 motion.
Costs
[75] I urge the parties to attempt to resolve the costs of this motion.
[76] If the parties are not able to resolve costs of the motion, the plaintiffs may email their costs submission of no more than three double-spaced pages to my judicial assistant on or before May 13, 2024. Each group of defendants may each deliver their responding submissions of no more than three double-spaced pages on or before May 20, 2024. Any reply is to be delivered by June 23, 2025. These submissions are to be uploaded to Case Center and provided to my judicial assistant.
Robert Centa J.
Date: May 6, 2024
Amended Date: June 7, 2024
[^1]: On May 30, 2024, counsel advised me of an error in paragraph 18(g) of the reasons for decision. I have corrected that error on the face of this amended endorsement. [^2]: Rules of Civil Procedure, R.R.O. 1990, Reg 194. [^3]: Land Titles Act, R.S.O. 1990, c. L.5. [^4]: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 22; Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441, at p. 455; Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420, at para. 14; FNF Enterprises Inc. v. Wag and Train Inc., 2023 ONCA 92, 165 O.R. (3d) 401, at para. 12; Fernandez Leon v. Bayer Inc., 2023 ONCA 629, at para. 8; Asghar v. Toronto Police Services Board, 2019 ONCA 479; MacKinnon v. Ontario Municipal Employees Retirement Board, 2007 ONCA 874, 88 O.R. (3d) 269; Tran v. University of Western Ontario, 2015 ONCA 295; Stronach v. York Region, 2023 ONSC 1264, at para. 12; MacLean v. National CarWash Solutions, 2020 ONSC 6032, at para. 22; Region Plaza Inc. v Hamilton-Wentworth (Regional Municipality) (1990), 12 O.R. (3d) 750 (S.C.). [^5]: Trillium Power Wind Corp. v. Ontario (Ministry of Natural Resources), 2013 ONCA 683, 117 O.R. (3d) 721, at para. 31; Balanyk v. University of Toronto, at para. 29. [^6]: PMC York Properties Inc. v. Siudak, 2022 ONCA 635, 473 D.L.R. (4th) 136, at para. 30. [^7]: PMC York Properties Inc. v. Siudak, 2022 ONCA 635, at para. 34. [^8]: Astley v. Verdun, at para. 53. [^9]: Law Society of Ontario, “Notice to the Professions: Exploitative loan agreements” (August 16, 2023), online: https://lso.ca/news-events/news/latest-news-2023/notice-to-the-professions-exploitative-loan-agreem, emphasis in original. [^10]: Law Society of Ontario v. Jain, 2023 ONLSTH 132. [^11]: Law Society of Ontario v. Jain, 2023 ONLSTH 132, at paras. 10 to 14 [emphasis added]. [^12]: I note that Mr. Eli Karp has also represented CCI in another case with similar pleadings before me: Sanders v. Canada’s Choice Investments Inc., 2023 ONSC 195. [^13]: I note that the Law Society of Ontario has suspended the CCI lawyer’s licence to practice law on an interlocutory basis while the Law Society completes an investigation into, among other things, her legal work for CCI and certain borrower clients, including senior citizens: Law Society of Ontario v. Harrison, 2023 ONLSTH 80, rev’d 2024 ONLSTA 1; Law Society of Ontario v. Harrison, 2024 ONLSTH 24. [^14]: Ontario Store Fixtures Inc. v. Mmmuffins Inc. (1989), 70 O.R. (2d) 42 (Ont. H.C.J.), at para. 2. [^15]: Beals v. Saldanha (2001), 54 O.R. (3d) 641, at para. 98 (C.A.); Tribute (Springwater) Limited v. Atif, 2021 ONCA 463 at para. 23. [^16]: Law Society of Ontario v. Jain, 2023 ONLSTH 132, at para. 14. Sanders v. Canada’s Choice Investments Inc., 2023 ONSC 195, at paras. 79 to 82. [^17]: Law Society of Ontario v. Jain, 2023 ONLSTH 132, at paras. 13-14, emphasis added. [^18]: Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), at para. 22; Wag and Train, at paras. 20 and 27. [^19]: Joy Estate v. 1156653 Ontario Ltd., 2007 CarswellOnt 3762, at para. 48 (S.C.J.). [^20]: Lomas v. Rio Algom Ltd. (2008), 89 O.R. (3d) 130 (Div. Ct.), at paras. 2 to 5, rev’d on other grounds, 2010 ONCA 175. [^21]: Gokstorp v. TD Insurance Meloche Monnex (2009), 102 O.R. (3d) 235 (S.C.J.), aff’d 2010 ONCA 313, 102 O.R. (3d) 239 (C.A.). [^22]: Gauthier v. Toronto Star Daily Newspapers Ltd. (2003), 228 D.L.R. (4th) 748 (Ont. S.C.J.), at para. 9, aff’d , 245 D.L.R. (4th) 169 (Ont. C.A.).