Endorsement

Court File No.: CV-24-5383
Date: 2025-01-13
Superior Court of Justice – Ontario

Re: Muhammad Asif, Plaintiff
And: Atique Khan, Defendant

Before: R.E. Charney
Counsel: Emraan Dharsi, Counsel for the Plaintiff
Atique Khan, Self-Represented
Heard: In Writing

Introduction

[1] The Plaintiff, Muhammad Asif, brings this urgent motion in writing, without notice, for leave to issue a Certificate of Pending Litigation (CPL) on title to property municipally described as 341 Lawford Road, Vaughan, Ontario (the “Property”) and for a Mareva injunction to prevent the Defendant, Atique Khan, “or anyone else” from dealing with the Property.

[2] The Plaintiff alleges that the motion is urgent because the Property was sold under a Power of Sale proceedings on December 6, 2024, and the sale is scheduled to close on January 15, 2024. If it closes, the Plaintiff “will lose his interest in the Property and the within action will be moot”.

[3] For the following reasons, the motion is dismissed.

Facts

[4] The motion arises out of a series of promissory notes executed by Asif and Khan and dating back to 2017. The relevant promissory note was executed on June 30, 2020 and consolidated two previous promissory notes in which Khan borrowed a total of $200,000 from Asif. The June 30, 2020 promissory note purported to be secured against the Lawford Road Property. It stated:

The principal amount of $200,000 is secured against the Borrower’s principal residence 341 Lawford Road Vaughan.

[5] Notwithstanding this statement, no mortgage was signed, and nothing was registered on the title of the Property.

[6] Khan repaid $100,000 plus interest on February 23, 2023, and the promissory note was amended to reflect that repayment. Khan failed to repay the balance of the loan by the due date of June 30, 2023, and a formal demand for repayment was made on December 4, 2024.

[7] The Defendant Khan did have mortgages registered on the Property, and failed to keep the registered mortgages in good standing.

[8] The motion material before me does not indicate when the mortgages were registered on title or the identity of the registered mortgage holders. It does not indicate the value of the mortgages or how many mortgages were registered on title.

[9] The motion record indicates only that “Khan failed to keep the legal mortgages registered on title to 341 Lawford in good standing, resulting in the mortgagees commencing a power of sale proceedings”, that the house was sold on December 6, 2024 for $1.7 million, and that the sale is to be completed on January 15, 2025.

[10] The motion record further indicates that Khan failed to pay the Canada Revenue Agency (CRA) taxes owed resulting in registration of “super priority liens on title to the Property for unpaid taxes totalling $190,000.”

[11] The motion record also indicates that Khan failed to defend an action for damages in the amount of $302,328, resulting in default judgment and the issuance of a writ of seizure and sale binding the Lawford Property. The Plaintiff in that action was Huntersbay Condominium Inc.

[12] Finally, the motion record indicates that Khan was found liable for sums owing to Asif and “two other judgment creditors” in the amount of $880,214, and that a writ has been issued for that amount.

[13] The Plaintiff alleges that Khan “intends using the equity in the Property” to pay CRA, the secured creditors and the judgment creditors “without consideration to Asif’s priority as an equitable mortgagee”. As a result, Asif seeks the registration of a CPL and a Mareva injunction to stop the sale of the Property. The Draft Order suggests that the CPL should only be discharged “upon payment of the sum of $100,000 plus interest of $9,000…into Court for the credit of this action”.

Analysis

[14] The Plaintiff seeks a Mareva injunction to stop the Defendant from dissipating or otherwise dealing with his assets pending the Court’s determination of his claim for an equitable mortgage.

[15] Section 101 of the Courts of Justice Act, RSO 1990, c C.43 provides the court with the jurisdiction to grant interlocutory injunctions including Mareva injunctions.

[16] For a Mareva injunction to be granted, the plaintiff must satisfy the following criteria: (1) a strong prima facie case; (2) irreparable harm if the remedy for the defendant’s misconduct were left to be granted at trial; (3) the balance of convenience favours granting an interlocutory injunction; (4) the defendant has assets in the jurisdiction; and (5) that there is a serious risk that the defendant will remove property or dissipate assets before judgment. Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction: Neville v. Sovereign Management Group Corp., 2022 ONSC 3466, para 30; OPFFA v. Paul Atkinson et al, 2019 ONSC 3877, para 6.

Failure to Give Notice

[17] Mareva injunctions and CPLs are often granted without notice because there is a concern that if the defendant is given notice, the defendant will use that notice period as an opportunity to quickly and surreptitiously dissipate or otherwise encumber the assets to defeat his creditors. This would defeat the purpose of the motion and cause irreparable harm to the plaintiff.

[18] If the Mareva injunction is granted on an ex parte basis, it cannot exceed ten days, and the parties must return to court to argue the motion again: Rule 40.02 of the Rules of Civil Procedure, RRO 1990, Reg 194.

[19] But not every motion for a Mareva injunction may proceed without notice. In 1910878 Ontario Inc. v. 2551204 Ontario Inc., 2020 ONSC 3415, Sanfilippo J. explained, at paras. 9 and 10:

A motion for an injunction that is brought without notice requires “extraordinary urgency”, where “the delay necessary to give notice might entail serious and irreparable injury to the [moving party]”: Robert Half Canada Inc. v. Jeewan, para 32. “Extraordinary urgency” includes where there is good reason to believe that the Defendants, if given notice, will act to frustrate the process of justice before the motion can be decided, or where there is simply not the time or means to provide notice: Robert Half Canada, at paras. 36-40.

There is a very strong presumption against proceeding without notice. The moving party must bring all material facts to the attention of the judge that bear on the issue of whether notice ought to be given. This duty applies to the substantive basis of the claim for an interlocutory injunction and the facts upon which the moving party relies in proceeding without notice: Akagi v. Synergy Group (2000) Inc., 2015 ONCA 368, para 95; United States v. Friedland, [1996] O.J. No. 4399 (S.C.J.), at paras. 26-37.

[20] In this case, the usual reason for hearing the motion on an ex parte basis does not apply. There is no concern that the Defendant will sell the house in order to defeat creditors. Quite the opposite. In this case, the house has already been sold by the secured creditors in order to collect the debt owed to them. As secured creditors, they had the right to sell the house through a power of sale. Whatever “equitable mortgage” the Plaintiff may have, he cannot prevent the secured creditors from selling the house, and his rights cannot take priority over their registered security interest or the security interest registered by the CRA.

[21] As such, the Plaintiff should have given notice of this motion to the secured creditors and the prior judgment creditors whose priority he is trying to defeat. He has provided no explanation why such notice was not given. The material in support of his motion is dated January 3, 2025. Notice – even abbreviated notice – could have been given to the secured creditors before the motion was considered.

[22] The secured creditors, who have exercised their right to a power of sale, might have something to contribute with respect to the merits of the Plaintiff’s case and the balance of convenience in this case.

[23] On this basis alone, the motion must be dismissed.

Failure to Give Full and Fair Disclosure

[24] The issue of full and fair disclosure is directly related to bringing a motion without notice.

[25] Rule 39.01(6) imposes “full and fair disclosure” obligations on a party that brings a motion without notice. The rule provides:

Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.

[26] In R. A. Fox v. R.S. Fox, 2014 ONSC 1135, the Divisional Court outlined the reason for Rule 39.01(6) (at paras. 11-13):

The reason for requiring such disclosure is based on the recognition that the judicial officer hearing a motion has only the moving party or their counsel before him. There is usually no opponent present who can file opposing evidence and make opposing submissions. Accordingly, there is a heavy burden on a moving party to tender evidence that he might prefer not to tender so the judicial officer can obtain a reasonably balanced view of those facts that might reasonably affect the outcome of the motion.

[27] As indicated above, the motion material before me does not indicate when the mortgages were registered on title or the identity of the registered mortgage holders. It does not indicate the value of the mortgages or how many mortgages were registered on title.

[28] Most of this information was available from the land titles registry and should have been provided on this motion. It is impossible to properly consider the merits of the Plaintiff’s case or the balance of convenience without this information. For example, the Property has been sold for $1.7 million dollars. Is this sufficient to satisfy the mortgage debt owed by the Defendant to the secured creditors? Why does the Plaintiff need to prevent the sale of the Property or freeze the entire $1.7 million dollar proceeds in order to protect his $100,000 “equitable mortgage”?

Undertaking for Damages

[29] Pursuant to Rule 40.03, a party seeking an interlocutory injunction must provide an undertaking for damages “if it ultimately appears that the granting of the order has caused damages to the responding party for which the moving party ought to compensate the responding party”.

[30] The Plaintiff has given an undertaking for any damages to Khan.

[31] It is not, however, Khan who is likely to suffer damages as a result of the proposed Mareva injunction. In this case, the Property was sold by the secured creditors by way of power of sale. If there are any damages, it will likely be the secured creditors or the innocent purchaser for value who will suffer damages if the sale is stopped or if the proceeds of sale are frozen. In these circumstances, I would require a more generalized undertaking for damages before granting the relief requested.

Conclusion

[32] For the foregoing reasons, the Plaintiff’s motion in writing brought without notice is dismissed.

R.E. Charney
Date: January 13, 2025