ontario superior court of justice (commercial … · court file no. cv-18-592103-00cl . ontario ....

Court File No. CV-18-592103-00CL

ONTARIO SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

B E T W E E N:

COMFORT CAPITAL INC., THE BANK OF NOVA SCOTIA TRUST COMPANY, E. MANSON INVESTMENTS LTD., FENFAM HOLDINGS INC., 593651 ONTARIO LTD., 1031436 ONTARIO INC., ALRAE INVESTMENTS INC., BARRY SPIEGEL,

SHARON NIGHTINGALE, DAVID SUGAR, PHYLLIS SUGAR, NATIONAL TIRE LTD., 1119778 ONTARIO LIMITED, 1415976 ONTARIO LIMITED, ALRAE INVESTMENTS INC., BAMBURGH HOLDINGS LTD., BEVERLEY GORDON, DIANE GRAFSTEIN, RICHARD GRUNEIR, B. & M. HANDELMAN INVESTMENTS LTD., RIDGEWAY

OCCUPATIONAL CONSULTANTS INC., YERUSHA INVESTMENTS INC., MIHAL TYLMAN, A. ELIEZER KIRSHBLUM, 593651 ONTARIO LIMITED, THE BANK OF

NOVA SCOTIA TRUST COMPANY IN TRUST FOR BAILEY LEVENSON, THE BANK OF NOVA SCOTIA TRUST COMPANY IN TRUST FOR ROSEMONDE KELLY, ANNE HANDELMAN, YERUSHA INVESTMENTS INC., CELMAR INVESTMENTS CORP., BEVERLEY GORDON, PHILGOR INVESTMENTS LTD., BRILLIANT INVESTCORP INC., MAXOREN INVESTMENTS, 2227046 ONTARIO LIMITED, DAST PROPERTIES

LIMITED, TOVA MARKOVZKI, JOSEPH SUCKONIC and B. & M. HANDELMAN INVESTMENTS LIMITED

Applicants

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ANNIE YERETSIAN, TERRY WILSON, 2457674 ONTARIO INC., 2399029 ONTARIO INC. and MOSS DEVELOPMENT LTD.

Respondents

IN THE MATTER OF SECTION 243(1) OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985 C. B-3, AS AMENDED, AND SECTION 101 OF THE COURTS OF

JUSTICE ACT, R.S.O. 1990 C. C.43, AS AMENDED

CASE CONFERENCE BRIEF OF ROSEN GOLDBERG INC.

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June 20, 2019 BLANEY MCMURTRY LLP Barristers & Solicitors 2 Queen Street East, Suite 1500 Toronto ON M5C 3G5 Eric Golden LSO #38239M (416) 593-3927 (Tel) (416) 593-5437 (Fax) Email: [email protected] Chad Kopach LSO #48084G (416) 593-2985 (Tel) (416) 593-5437 (Fax) Email: [email protected] Lawyers for the Receiver, Rosen Goldberg Inc.

TO: SERVICE LIST

mailto:[email protected]



(COMMERCIAL LIST)

B E T W E E N:

COMFORT CAPITAL INC., THE BANK OF NOVA SCOTIA TRUST COMPANY, E. MANSON INVESTMENTS LTD., FENFAM HOLDINGS INC., 593651 ONTARIO LTD., 1031436 ONTARIO INC., ALRAE INVESTMENTS INC., BARRY SPIEGEL,

SHARON NIGHTINGALE, DAVID SUGAR, PHYLLIS SUGAR, NATIONAL TIRE LTD., 1119778 ONTARIO LIMITED, 1415976 ONTARIO LIMITED, ALRAE INVESTMENTS INC., BAMBURGH HOLDINGS LTD., BEVERLEY GORDON, DIANE GRAFSTEIN, RICHARD GRUNEIR, B. & M. HANDELMAN INVESTMENTS LTD., RIDGEWAY

OCCUPATIONAL CONSULTANTS INC., YERUSHA INVESTMENTS INC., MIHAL TYLMAN, A. ELIEZER KIRSHBLUM, 593651 ONTARIO LIMITED, THE BANK OF

NOVA SCOTIA TRUST COMPANY IN TRUST FOR BAILEY LEVENSON, THE BANK OF NOVA SCOTIA TRUST COMPANY IN TRUST FOR ROSEMONDE KELLY, ANNE HANDELMAN, YERUSHA INVESTMENTS INC., CELMAR INVESTMENTS CORP., BEVERLEY GORDON, PHILGOR INVESTMENTS LTD., BRILLIANT INVESTCORP INC., MAXOREN INVESTMENTS, 2227046 ONTARIO LIMITED, DAST PROPERTIES

LIMITED, TOVA MARKOVZKI, JOSEPH SUCKONIC and B. & M. HANDELMAN INVESTMENTS LIMITED

Applicants

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ANNIE YERETSIAN, TERRY WILSON, 2457674 ONTARIO INC., 2399029 ONTARIO INC. and MOSS DEVELOPMENT LTD.

Respondents



I N D E X

Tab Pages

1. Case Conference Brief of Rosen Goldberg Inc. .................................................... 1-39

A. Appendix A - Appointment Order of Justice McEwen dated February 28, 2018 .. 40-62

B. Appendix B - Endorsement of Justice Dunphy dated August 3, 2018 ................... 63-67

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C. Appendix C - Endorsement of Justice Conway dated August 31, 2018 ................. 68-69

D. Appendix D - Endorsement of Justice Chiappetta dated January 25, 2019, including Claims Process Ground Rules ................................................................

70-79

E. Appendix E - Endorsement of Justice Chiappetta dated June 12, 2019 ................. 80-82

F. Appendix F - Order of Justice Chiappetta dated June 12, 2019 ............................. 83-87

G. Appendix G - Receiver’s Interim Statement of Receipts and Disbursements for the period from February 28, 2018 to June 19, 2019 ..............................................

88-89

H. Appendix H - Endorsement of Justice Chiappetta dated June 6, 2019 ................... 90-94

I. Appendix I – Distribution Motion Documents re High Point dated June 21, 2018, parcel page for High Point, instruments regarding Foremost Mortgage and assignments thereof .................................................................................................

95-151

J. Appendix J - Instrument No. AT3218140 dated January 17, 2013 ........................ 152-154

K. Appendix K - Instrument No. AT2891823 dated December 8, 2011 ..................... 155-162

L. Appendix L - Point-in-Time Corporate Profile Report for World Iron Corporation as of October 24, 2012 .......................................................................

163-168

M. Appendix M - Receiver’s counsel’s memorandum to file dated June 15, 2019 ..... 169-172

N. Appendix N - Registered Notice with Mortgage Amending Agreement dated December 8, 2011 ...................................................................................................

173-179

O. Appendix O – Stanbarr et al v Metrolpois et al Reasons for Decision dated August 21, 2015, and Costs Endorsement dated May 9, 2016 ...............................

180-206



(COMMERCIAL LIST)



B E T W E E N:

COMFORT CAPITAL INC., THE BANK OF NOVA SCOTIA TRUST COMPANY, E. MANSON INVESTMENTS LTD., FENFAM HOLDINGS INC., 593651 ONTARIO LTD., 1031436 ONTARIO INC., ALRAE INVESTMENTS INC., BARRY SPIEGEL, SHARON NIGHTINGALE, DAVID SUGAR, PHYLLIS SUGAR, NATIONAL TIRE LTD., 1119778

ONTARIO LIMITED, 1415976 ONTARIO LIMITED, ALRAE INVESTMENTS INC., BAMBURGH HOLDINGS LTD., BEVERLEY GORDON, DIANE GRAFSTEIN,

RICHARD GRUNEIR, B. & M. HANDELMAN INVESTMENTS INC., RIDGEWAY OCCUPATIONAL CONSULTANTS INC., YERUSHA INVESTMENTS INC., MIHAL TYLMAN, A. ELIEZER KIRSHBLUM, 593651 ONTARIO LIMITED, THE BANK OF NOVA SCOTIA TRUST COMPANY IN TRUST FOR ROSEMONDE KELLY, ANNE

HANDELMAN, YERUSHA INVESTMENTS INC., CELMAR INVESTMENTS CORP., BEVERLEY GORDON, PHILGOR INVESTMENTS LTD., BRILLIANT INVESTCORP INC., MAXOREN INVESTMENTS, 2227046 ONTARIO LIMITED, DAST PROPERTIES

LIMITED, TOVA MARKOVZKI, JOSEPH SUCKONIC AND B. & M. HANDELMAN INVESTMENTS LIMITED

Applicants

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ANNIE YERETSIAN, 2399029 ONTARIO INC., 2457674 ONTARIO INC., MOSS DEVELOPMENT LTD. and TERRY WILSON

Respondents

CASE CONFERENCE BRIEF OF ROSEN GOLDBERG INC.

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I. INTRODUCTION

1. By Amended Order of the Honourable Mr. Justice McEwen dated February 28, 2018 (the

“Appointment Order”), Rosen Goldberg Inc. was appointed receiver and manager (in such

capacity, the “Receiver”) of the assets, undertakings and properties of the Respondents, including

but not limited to 13 vacant residential lots on Caldwell Drive in Oro-Medonte (“Caldwell”),

formerly owned by the Respondent Moss Development Ltd. (“Moss Ltd.”), and the properties

municipally known as (i) 65 Malmo Court, Vaughan (“Malmo”), a vacant industrial building

formerly owned by the Respondent 2399029 Ontario Inc. (“2399029”), (ii) 124597 Loyalist

Parkway, Picton (“Loyalist”), a vacant residential property on a 31 acre parcel formerly owned by

the Respondent Terry Wilson (“Terry”), (iii) 97 Bridge Street, Picton (“97 Bridge”), a vacant Inn

formerly owned by the Respondent 2457674 Ontario Inc. (“245 Inc.”), (iv) Suite 1410, 2 Toronto

Street, Barrie (the “Barrie”), a residential condominium unit still owned by Terry, and (v) 7 High

Point Road, Toronto (“High Point”), a vacant residential property in the Bridle Path formerly

owned by the Respondent Annie Yeretsian (“Yeretsian”), pursuant to section 243(1) of the

Bankruptcy and Insolvency Act, and section 101 of the Courts of Justice Act. A copy of the

Appointment Order (as amended) is marked as Appendix “A”.

II. PURPOSE OF THIS CASE CONFERENCE BRIEF 2. The purpose of this without prejudice case conference brief of the Receiver (the “Case

Conference Brief”) is to update the Court regarding the claims process (the “Claims Process”)

established by way of the Endorsement of Justice Dunphy made August 3, 2018 (the “Dunphy

August 3 Endorsement”), and to analyse the various claims made as part of the Claims Process.

A copy of the Dunphy August 3 Endorsement is attached as Appendix “B”.

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3. The Claims Process was initially established with respect to the surplus proceeds of sale of

High Point and Caldwell that were being claimed by the current first mortgagees registered against

title to those properties, being Canadian Capital Corporation Inc. (“CCCI”) and Canada

Investment Corporation (“CIC”), respectively.

4. The Claims Process was expanded by way of the Endorsement of Justice Conway made

August 31, 2018 (the “Conway August 31 Endorsement”), attached as Appendix “C”. The

Conway August 31 Endorsement expanded the Claims Process to include the surplus proceeds of

sale relating to the properties known as 97 Bridge, Malmo and Barrie, following payment of the

Applicants’ mortgages and the Receiver’s priority charges relating to those properties.

III. THE CLAIMS PROCESS GROUND RULES

5. The Claims Process ground rules (the “Ground Rules”) were established by way of

Endorsement of Justice Chiappetta dated January 25, 2019. A copy of the Ground Rules and the

related Endorsement are attached at Appendix “D”. Among other things, the Ground Rules state

that any party making a claim in to surplus proceeds in the Claims Process would have to prove

on a balance of probabilities a direct claim against CCCI (for payment out of the High Point funds),

CIC (Caldwell funds), Terry (Loyalist funds), 245 Inc. (97 Bridge funds) and/or 2399029 (Malmo

funds). The Ground Rules also contemplated alter ego claims being advanced, which if proved,

could result in direct claims against the corporations and individuals set out above.

6. As set out in the Ground Rules, prior to the Claims Process hearing, the Receiver will

deliver a report “evaluating” the claims made in Claims Process and make recommendations to

the court, following the stakeholders’ exchange of facta, which will be scheduled at the Case

Conference returnable June 27, 2019.

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7. The timetable has been amended several times, and examinations were only completed on

June 10, 2019. This Case Conference Brief is being delivered prior to the exchange of case

conference briefs by the various stakeholders. All case conference briefs are being delivered on a

without-prejudice basis, akin to pre-trial briefs.

8. As of June 12, 2019, answers to undertakings were not complete, and written

interrogatories remained outstanding. As well, Kirk Apel, counsel for Yeretsian, indicated that he

wished to examine Grant Erlick, an individual connected with the Missaghi Group. On June 12,

2019, Justice Chiappetta made an endorsement (the “Justice Chiappetta June 12 Endorsement”,

at Appendix “E”) requiring, among other things, (1) answers to undertakings delivered by June

13, 2019, save and except for those of Alizadeh, which were due June 14, 2019, (2) Morteza “Ben”

Katebian’s (“Ben Katebian”) answers to written interrogatories from Kirk Apel to be delivered

by June 12, 2019, (3) Kirk Apel to deliver written questions for Missaghi by June 12, 2019, with

Missaghi’s responses due on June 14, 2019. In addition, the Justice Chiappetta June 12

Endorsement stated that the Claims Process can proceed without further evidence of Grant Erlick

subject to further Order of the Court.

9. Mr. Apel delivered written questions for Missaghi, but Missaghi’s answers were not

received by the June 14 deadline (or at all). Ben Katebian did not deliver responses to Mr. Apel’s

written questions by the June 12 deadline (or at all), and no additional answers to undertakings

have been received following the Justice Chiappetta June 12 Endorsement. Kirk Apel has not

brought a motion to examine Grant Erlick.

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10. Given the above, and the possibility of late compliance with Justice Chiappetta’s

endorsement of June 12, 2019, the Receiver has held off on delivering the within Case Conference

Brief notwithstanding the deadline in the Justice Chiappetta June 12 Endorsement.

11. As of the date of this Case Conference Brief, only Barrie has yet to be sold and monetized.

The Applicants’ mortgages were paid out from the proceeds of sale of the other properties, and a

two day trial will be heard by Justice Chiappetta in early-September to determine a motion brought

by Ben Katebian seeking to set aside the transfer of a charge over Barrie, and directing the Receiver

to sell Barrie (the “Barrie Motion”). The Barrie Motion is being opposed by Laila Alizadeh

(“Alizadeh”).

12. Ben Katebian claims to be the owner of a number of corporations in the within claims

process, including 2435045 Ontario (defined below), which held the mortgage over Barrie that

was transferred to Canada Capital Corporation (and which is the subject of the Barrie Motion),

and 2399194 Ontario (defined below), which holds the second ranking mortgage over High Point.

13. Alizadeh is the spouse of Ara Missaghi (“Missaghi”), and claims to be the owner,

indirectly through a holding company, of, among other corporations, 2435045 Ontario, 2399194

Ontario, and the respondents to the Claims Process (the “Missaghi Group”). Troy Wilson

(“Troy”) is an officer and/or director of a number of the corporations in the Missaghi Group.

14. Brauti Thorning LLP (“BT”) are former counsel to the Missaghi Group, CCCI and CIC.

The Missaghi Group, CCCI and CIC are now represented by Miller Thompson LLP (“MT”).

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IV. SUMMARY OF AVAILABLE FUNDS BY PROPERTY

15. The Receiver’s Ninth Report dated June 4, 2019 (the “Ninth Report”), set out at paragraph

29 a summary of the funds available in the Claims Process as of June 4, and took into account the

fact that counsel for the respondents in the claims process (both BT and MT) have received interim

court-ordered funding.

16. On June 12, 2019, an Order was made by Justice Chiappetta (the “Chiappetta June 12

Order”) directing payment of $300,750.48 to BT out of 97 Bridge for outstanding legal fees and

costs owing by their former clients. The Chiappetta June 12 Order directed that the payment be

made out of the proceeds relating to 97 Bridge, with a comeback clause allowing BT’s former

clients 30 days to file material objecting to this payment. However, there was no stay regarding

payment by the Receiver to BT. A copy of Justice Chiappetta’s order dated June 12, 2019 is

attached at Appendix “F”.

17. Accordingly, the chart in the Ninth Report has been updated below to reflect this additional

payment to BT, as well as the Receiver’s Interim Statement of Receipts and Disbursements for the

period from February 28, 2018 to June 19, 2019 (attached at Appendix “G”). Barrie has not yet

been sold, so is not included in this chart.

97 Bridge Loyalist High Point Caldwell Malmo Total

Accountant of the Superior Court of Justice

Nil Nil $4,072,136 $784,843 Nil $4,856,979

Receiver Cash on Hand

$37,066 $36,430 $133,981 $47,579 $1,840,698 $2,095,754

Total $37,066 $36,430 $4,206,117 $832,422 $1,840,698 $6,952,733

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High Point

18. Yeretsian was the registered owner of High Point prior to its sale on June 7, 2018. The

following is a schedule of the encumbrances registered against title to High Point prior to the

closing of the sale:

Rank Secured Creditor(s) Date of Registration on Title

Face Amount

First CCCI (transferred from Applicants back to CCCI post-closing)

March 27, 2007 $4,500,000

Second 2399194 Ontario (defined below) – owner of 75.15% interest Curah (defined below) – owner of 24.15% interest

July 5, 2010 $2,500,000

Third Moshum Capital Inc. March 24, 2011 $70,000

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Caldwell

19. Moss Ltd. was the registered owner of Caldwell prior to its sale on June 15, 2018. The

following is a schedule of the encumbrances registered against title to Caldwell prior to the closing

of the sale:


Face Amount

First CIC (transferred from Applicants back to CIC post-closing)

March 4, 2011 $1,150,000

Second Properties Far Hills Inc./Far Hills Properties Inc.

June 30, 2009 $1,000,000

Third Mere Investments Inc. June 30, 2009 $1,000,000

Fourth Atlas Capital Corporation

July 15, 2010 $460,000

Loyalist

20. Terry was the registered owner of Loyalist. Apart from the first ranking mortgage in favour

of the Applicants, the only other encumbrance registered against title to Loyalist prior to the

closing of the sale on June 12, 2018 was a construction lien, which has been discharged.

97 Bridge

21. 245 Inc. was the registered owner of 97 Bridge prior to its sale. The two mortgages over

97 Bridge were paid out following sale on June 15, 2018, and payment to BT of $300,750.48 was

made on June 14, 2019.

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Malmo

22. 2399029 Ontario was the registered owner of Malmo until its sale on August 31, 2018.

The following is a schedule of the encumbrances registered against title to Malmo prior to the

closing of the sale (the Applicants were paid out):


Face Amount

First Applicants March 3, 2014 $1,700,000

Second 2405015 Ontario Inc., 2374715 Ontario Inc., 2418047 Ontario Inc., and Olga Domunyan

April 29, 2014 $450,000

Third Sai Mohammed, in trust (taken as assignment from CIC on March 7, 2013)

March 3, 2014 $270,000

Fourth 2396135 Ontario Corporation

March 3, 2014 $450,000

CPL Stanbarr Claimants (defined below)

July 3, 2014

23. In its seventh report dated January 23, 2019, the Receiver noted that the Stanbarr Claimants

are claiming priority to the Malmo funds over the three remaining mortgages, and that these

claimants would be bringing a motion for determination of the priority claim. The priority claim

must be determined before the claims to the Malmo funds can be analyzed in the Claims Process.

To date, no motion has been brought for a determination of the Stanbarr Claimants’ priority claim.

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Barrie

24. Terry is also the registered owner of Barrie. There were two mortgages registered against

title to Barrie: the first in favour of the Applicants, and a second in favour of Canada Capital

Corporation (“Canada Capital”, a separate entity from CCCI) with a face value of $300,000. The

Applicants’ mortgage was collateral security for their loan on Loyalist, which has been paid out in

full. Accordingly, the second mortgage is, for all intents and purposes, the only encumbrance. As

noted above, the validity of the transfer of the second mortgage to Canada Capital will be the

subject of mini-trial in September (that is, the Barrie Motion).

V. THE CLAIMANTS

25. As set out in the Receiver’s sixth report dated September 18, 2018, claims materials have

been received on behalf of eight groups of claimants: (1) Yeretsian, (2) Curah Capital Corporation

(“Curah”), (3) 2399194 Ontario Inc. (“2399194 Ontario”), (4) 2435045 Ontario Inc. (“2435045

Ontario”), (5) 2450531 Ontario Limited (“2450531 Ontario”), (6) 2384419 Ontario Inc.

(“2384419 Ontario”), (7) a group of claimants consisting of HJLJ Investments Limited, 527540

Ontario Limited and Dast Properties Limited (collectively, the “HJLJ Claimants”), and (8) a

group of claimants consisting of Stanbarr Services Limited, Janodee Investments Ltd.,

Meadowshire Investments Ltd., Regard Investments Ltd., Beaver Pond Investments Ltd., The

Canada Trust Company, Rita Rosenberg and 527540 Ontario Limited. (collectively, the “Stanbarr

Claimants”).

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Excluded Properties

26. The surplus funds in Loyalist currently total only $36,430.00. Given this amount, the

claims against this property have been excluded from the Receiver’s claims summary herein.

27. Similarly, following the most recent payment to BT of fee arrears, the surplus funds in 97

Bridge are currently only $37,066, and the claims against this property have also been excluded

from the Receiver’s claims summary herein.

28. The Barrie Motion to determine ownership of the mortgage over Barrie will not be

determined until after the mini-trial in September. If Barrie is not ordered to be sold by the

Receiver, no funds would available for distribution in the Claims Process. Accordingly, Barrie

has been excluded from the Receiver’s claims analysis herein.

29. Similarly, the Stanbarr Claimants’ motion for priority over the Malmo mortgages has not

yet been brought. Given the status of that motion and the court’s availability, it is unlikely that the

Stanbarr Claimants’ motion can be brought and determined before the Claims Process is

determined. Accordingly, Malmo has also been excluded from the Receiver’s claims analysis.

30. Based on the Receiver’s review of the Claimants’ materials, the following Claimants are

advancing claims over the remaining two properties. The reasons for excluding certain claimants

are described below the chart:

Claimant (and Counsel)

Claim over High Point (CCCI) Claim over Caldwell (CIC)

Yeretsian (Kirk Apel)

$5-8M +$20M punitive damages

$5-8M +$20M punitive damages

2399194 Ontario (Adam Wygodny)

None – reduction in amount payable to CCCI

None

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2450531 Ontario (Adam Wygodny)

$400,000 None

HJLJ Claimants (Doug Bourassa)

$15,450,000 $15,450,000

Stanbarr Claimants (Doug Bourassa/Stephen Schwartz)

None Approx. $4.2 million

31. 2435045 Ontario (Adam Wygodny) is excluded from the above chart, as its claim relates

to Barrie, and will be determined at the pending mini-trial in September.

Claims the Receiver is Not Analyzing

Currah

32. Currah’s claims are in the nature of alter ego claims. That is, it has not established direct

claims, and instead is attempting to advance claims against various corporations as alter egos of

Missaghi. Initially, Currah attempted to compel delivery of affidavits of documents in the Claims

Process in order to adduce evidence to support its alter ego claims. After being refused this relief,

Currah’s position was that it would obtain the evidence it needs to substantiate an alter ego claim

through cross-examination.

33. James Zibarras, counsel to the respondents in the Claims Process, brought a motion

returnable June 6, 2019, to, among other things, strike out the Curah claim in the Claims Process

(the “Motion to Strike the Curah Claim”). Pursuant to the Endorsement of Justice Chiappetta

dated June 6, 2019 (Appendix “H”), among other things, the Motion to Strike the Curah Claim

was ordered to be scheduled by Justice Hainey at the Case Conference. In the interim, Justice

Chiappetta’s Endorsement states that there are to be no further examinations by Mr. Karp until the

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Motion to Strike the Curah Claim is resolved. Accordingly, the Receiver will not conduct an

analysis of the Curah claim at this time.

2384419 Ontario

34. As noted above, and further particularized in the Receiver’s eighth report dated April 30,

2019, 2384419 Ontario has withdrawn from the Claims Process. Any costs thrown away from its

participation in the Claims Process up to April 2, 2019, are the subject of a dispute between

2384419 Ontario and the Missaghi Group, and have yet to be determined. Therefore, the Receiver

will not analyze the claim of 2384419 Ontario.

VI. ANALYSIS OF THE REMAINING CLAIMS

1. The Yeretsian Claim (to High Point and Caldwell)

35. Yeretsian was the registered owner of High Point prior to the closing of its sale by the

Receiver on June 7, 2018 for $9,500,000.00. She is represented by Kirk Apel of Apel Law Office.

Yeretsian delivered a motion record including a Notice of Motion dated July 30, 2018 (the

“Yeretsian NoM”) an affidavit sworn August 29, 2018 (the “Yeretsian August Affidavit”), and

an affidavit sworn March 28, 2019 (the “Yeretsian March Affidavit”). The Yeretsian March

Affidavit is a sworn copy of an affidavit originally served by Mr. Apel dated July 30, 2018.

36. In response, James Zibarras, counsel for CCCI (the registered owner of the first mortgage

over High Point) delivered the Affidavit of Arash Missaghi sworn November 1, 2018 (the

“Missaghi High Point Affidavit”).

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Summary of the Yeretsian Claim

37. Yeretsian’s claim is difficult to decipher from the material she delivered. In the Yeretsian

March Affidavit, she alleges that Missaghi and Ben Katebian “delayed the sale” of High Point

(para 6). In the Yeretsian August Affidavit, she states that she is seeking from the proceeds of sale

“[t]he difference between actual sale price and the price [High Point] should have been sold for”,

which she alleges is “approximately 5 – 8 million dollars” (para 29). She also alleges that the High

Point property was neglected (para 19).

38. In the Yeretsian August Affidavit, Yeretsian alleges that Missaghi interfered with a

commercially reasonable sale of High Point (para 22), making nine general allegations to support

this conclusion. Unfortunately, Yeretsian does not provide particulars of the allegations, including

even approximate dates for when these alleged actions took place, and has produced no backup

documentation. By way of example, Yeretsian alleges, at paragraph 22(a) of the Yeretsian August

Affidavit that Missaghi “enter[ed] into agreements and acquir[ed] an interest in the parties

appointed by the court to conduct the sale”, but does not provide particulars of the agreements,

including who entered into them, and when, and does not attach copies of the agreements as

exhibits to her affidavit.

39. Throughout the Yeretsian August Affidavit, Yeretsian makes allegations of fraud against

Missaghi. The fraud allegations lack particulars, save for allegations that the fraud relates to the

title of High Point (para 26), and in particular to “false mortgages on title” (para 24). It is not clear

how these unspecified title frauds relate to Yeretsian’s claim in respect of the alleged failure to sell

High Point in a timely manner.

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40. Yeretsian alleges in the Yeretsian August Affidavit that Ben Katebian and “his shell

companies”, and Missaghi “and his shell companies” are jointly and severally liable for her

damages (para 30). Yeretsian asserts her claim “against all proceeds from the sale of High Point

and other properties dealt with in this proceeding” (para 33). Yeretsian further asserts “priority

against all other claimants” (para 33). The only corporations referenced by name are Canada

Capital and Canadian Capital Corporation (paras 4 and 26). The Receiver notes that these are

separate entities from CCCI.

41. The only exhibits to the Yeretsian March Affidavit are two endorsements of Justice

Corbett in an application commenced by 2399194 Ontario (the “239 Application”), one of which

appears to stay the 239 Application given the within receivership. The exhibits to the Yeretsian

August Affidavit are 10 transcripts from examinations conducted in the 239 Application, and a

statutory declaration dated January 8, 2014 from an individual named Bahram Azizbeiki.

42. Although Yeretsian stated in the Yeretsian August Affidavit (at para 36) that she would be

providing an appraisal of the High Point property to prove the quantum of her alleged damages, as

of the date of this Case Conference Brief (almost 10 months from the date of the Yeretsian August

Affidavit), Yeretsian has not produced an appraisal.

43. In the Yeretsian August Affidavit, Yeretsian (at para 6) lists the court file numbers for the

239 Application and for two other court proceedings that appear to have been commenced in a

civil court in Ontario in 2013 (CV-13-85229 and CV-13-485230), and purports to “repeat and rely

upon the contents of all three proceedings.” Apart from the material attached to Yeretsian’s two

affidavits (transcripts and the two endorsements from Justice Corbett in the 239 Application),

Yeretsian has delivered no material from these three proceedings.

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Summary of the Missaghi Group Response

44. Missaghi swore the Missaghi High Point Affidavit in his capacity as “mortgage

administrator” for CCCI. Missaghi states that it is “somewhere between difficult and impossible”

to respond to Yeretsian’s affidavit with any particularity (para 7), and includes a blanket denial of

allegations of “fraud, obstruction and neglect of High Point”.

45. Missaghi denies that CCCI was in possession of High Point, and alleges that 2399194

Ontario was in possession of the property. CCCI’s position appears to be that Yeretsian has no

claim against CCCI for any delay in the sale of High Point that took place while 2399194 Ontario

had possession of same.

The Examinations

46. Mr. Zibarras cross-examined Yeretsian on April 18, 2019. Among other things, Yeretsian

admitted that she had listed High Point with Kalles Real Estate, but the property did not sell (Qs.

367 and 428). Yeretsian undertook to direct Mr. Zibarras to the references in the court documents

Yeretsian alleges that “shows that Ara Missaghi delayed the [sales] process” (Q. 763). Yeretsian’s

undertakings were due in mid-May. Yeretsian has not delivered answers to any of her

undertakings.

47. During her cross-examination, Yeretsian was taken through the second mortgage over High

Point, and in particular the second mortgage in favour of 1567934 Ontario Inc. (“1567934

Ontario”) (Q. 134), the fact that 1567934 Ontario obtained possession of High Point at some point

after Yeretsian had listed the property for sale (Q. 369), and the transfer of the mortgage to

2399194 Ontario on July 4, 2014 (Q. 434). It appears that these issues are being raised in support

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of CCCI’s position that (a) the alleged failure to sell High Point in a timely manner was during the

period when a corporation other than CCCI had possession of the property, and (b) Yeretsian had

an opportunity to sell High Point prior to this other corporation taking possession.

48. Mr. Apel examined Alizadeh, Troy Wilson, Terry, Golnaz Vakili (“Vakili”, a lawyer who

received funds in respect of the mortgage over High Point registered in the name of CCCI), and

Missaghi. Mr. Apel’s examination of Missaghi was not completed, and Mr. Apel delivered written

interrogatories for the balance of his questions on June 12, 2019.

49. As of the date of this Case Conference Brief, answers have not been delivered to Mr. Apel’s

written interrogatories of Missaghi. The balance of the examinations did not elicit evidence helpful

to Yeretsian’s claim in the Claims Process.

Receiver’s Position vis-à-vis the Yeretsian Claim

50. It is the Receiver’s position that Yeretsian has not made out a direct claim against CCCI or

CIC.

51. Regarding CIC, there is no link between the allegations in Yeretsian’s material on one

hand, and CIC or the Caldwell property on the other.

52. Regarding CCCI and High Point, if there was an unreasonable failure to sell High Point,

any claim in this regard appears to be against 1567934 Ontario or 2399194 Ontario. Yeretsian has

not laid the necessary foundation for a claim to impose liability on Missaghi for the actions or

omissions of 1567934 Ontario or 2399194 Ontario, nor has she put forward evidence that CCCI is

an alter ego of Missaghi.

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53. Further, even if Yeretsian did have a direct claim against CCCI, through Missaghi, for

actions or omissions of 1567934 Ontario or 2399194 Ontario, she has provided no evidence to

support her damages claim. She has not produced an appraisal, and appears to rely on her

allegation that High Point “should have”, at some point in the past, “had a fair market value of 15-

18 million dollars”.

2. The 2399194 Ontario Claim

54. As set out in the summary of registered charges over High Point following the June 7, 2018

sale (para. 72, below), 2399194 Ontario has a 75.15% interest in the second mortgage registered

over that property (the remaining interest has been held by Curah since February 2, 2017).

55. 2399194 Ontario is represented by Adam Wygodny of Berkow Youd Lev-Farrell Das LLP.

2399194 Ontario delivered an Affidavit from Ben Katebian affirmed June 26, 2018 (the “Ben

Katebian June Affidavit”), and an Affidavit from Ben Katebian affirmed August 28, 2018 (the

“Ben Katebian August Affidavit”).

56. In response, Mr. Zibarras delivered a three volume responding record containing an

affidavit from Missaghi sworn November 7, 2018 (the “Missaghi 239 Affidavit”), affidavits from

Alizadeh affirmed August 10, 2018 (the “First Alizadeh 239 Affidavit”) and October 15, 2018

(the “Second Alizadeh 239 Affidavit”), and sworn May 21, 2019 (the “Third Alizadeh 239

Affidavit”), and an affidavit from Troy Wilson sworn June 22, 2018 (the “Wilson 239 Affidavit”).

57. In the Ben Katebian June Affidavit, 2399194 Ontario alleges that CCCI overstates the

opening balance under its first mortgage by $4 million (para 9), and that the interest ought to be

calculated at 9%, not 10% (paras 10 and 12). 2399194 Ontario’s position is that as of June 27,

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2018 (that is, after the Applicants were paid out), the sum of $2,612,826.48 was owing to CCCI,

not $10,482,066.44 (para 13).

58. However, before the Receiver can provide a position on 2399194 Ontario’s “claim”, the

threshold issue of who controls the corporation must be determined. In addition, if there are no

surplus funds left to distribute to CCCI after the prior claims to High Point are determined, the

issue of who controls 2399194 Ontario is moot (as is the issue of what is owing to CCCI).

59. As set out in the Receiver’s Ninth Report, and in the description of the Barrie Motion,

above, there is an ongoing dispute regarding Barrie between Ben Katebian and Alizadeh regarding

who controls another corporation, 2435045 Ontario, and whether the transfer of a charge in favour

of that company to Canada Capital Corporation should be set aside. As further noted above, in

Her Honour’s Endorsement made June 6, 2019, Justice Chiappetta found that the Barrie Motion

could not be determined on a paper record, and ordered a 2-day mini-trial to assess credibility

(among other things). The mini-trial is currently scheduled for September 9 and 10, 2019.

60. Similarly, there is a dispute between Ben Katebian and Alizadeh regarding who is the

legitimate owner of 2399194 Ontario. Ben Katebian has produced documents from Fogler

Rubinoff LLP that he says is back-up for his claim that he retained that firm to incorporate 2399194

Ontario (para 16 of the Ben Katebian June Affidavit). As is the case on the Barrie Motion vis-à-

vis 2435045 Ontario, Alizadeh alleges that she incorporated 2399194 Ontario, and held the shares

via her company World Corporation Inc. While Alizadeh acknowledges that Ben Katebian was

an officer and director, she alleges that his appointment was only for the period from December

2013 to March 2017.

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61. Given Justice Chiappetta’s decision regarding the court’s inability to determine the issue

of corporate ownership in the Barrie Motion on a paper record, and the need for a mini-trial, a

similar procedure may be required to determine who has the authority to act for 2399194 Ontario

if there are surplus remaining after the CCCI claims and the HJLJ Claimants’ claims have been

determined. If Alizadeh is successful in obtaining control of 2399194 Ontario then she is not likely

to advance the position that the corporation currently takes in the Claims Process (that the total

amount owing to CCCI is significantly less than that claimed).

3. The 2450531 Ontario Claim

62. 2450531 Ontario is also represented by Mr. Wygodny. 2450531 delivered a 5 paragraph

affidavit of Payam Katebian (“Payam”) affirmed September 12, 2018 (the “Payam Affidavit”).

Payam is the son of Ben Katebian.

63. The Missaghi 239 Affidavit, delivered by Mr. Zibarras in response to the 2399194 Ontario

claim, is also sworn in response to the Payam Affidavit. None of the other affidavits delivered in

response to the 2399194 Ontario claim appear to be sworn in response to the 2450531 Ontario

claim.

Summary of the 2450531 Ontario Claim

64. 2450531’s claim appears to be that it is a part owner of the CCCI mortgage over High Point

because it says it purchased an interest in that mortgage for $400,000.

65. Attached at Exhibit A to the Payam Affidavit is a copy of a bank draft in the amount of

$400,000 dated January 25, 2017, payable to C and K Mortgage Services. Attached at Exhibit B

is an e-mail from Rescom Capital dated August 21, 2018 (that is, more than a year and a half after

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the date of the draft) stating that “this draft was applied to the 7 HIGH POINT RD. – Missaghi

mortgage.” (emphasis in original).

66. Missaghi was cross-examined by Mr. Wygodny on November 16, 2018. Payam was cross-

examined by Mr. Zibarras on April 24, 2019.

67. One would expect that if 2450531 Ontario believed that the $400,000 payment was in

exchange for an asset (a part of the CCCI mortgage), it would have been reflected in the

corporation’s financial statements. However, Payam’s evidence is that 2450531 Ontario has never

prepared financial statements (Q.138), and he was unsure whether it ever filed tax returns (Q.133).

Payam also confirmed that he did not know how the money was being applied towards the CCCI

mortgage (Q.179).

68. Based on Mr. Zibarras’ questions on cross-examination, it appears that CCCI’s position is

that the payment of the $400,000 was to repay amounts owed by Payam and Ben Katebian to Ara

Missaghi. Payam denied this during cross-examination (Q.227),

Receiver’s Position vis-à-vis the 2450531 Ontario Claim

69. 2450531 Ontario has not provided documentation to prove the source of the $400,000. It

has also produced no documents from CCCI that suggest that 2450531 Ontario was to receive an

assignment or other interest from CCCI in exchange for the payment. There is no documentary

evidence upon which the Receiver could conclude that, in exchange for payment of $400,000,

2450531 Ontario has an interest in the mortgage currently registered in the name of CCCI.

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70. In the circumstances, 2450531 Ontario has not made out a direct claim against CCCI. It is

not clear that the $400,000 payment resulted in an obligation owing by CCCI to 2450531 Ontario,

and the bank draft attached to the Payam Affidavit does not create a sufficient nexus between

2450531 Ontario and CCCI to substantiate a claim to the CCCI funds on High Point.

4. The HJLJ Claimants’ Claim

Background to the CCCI Mortgage over High Point

71. To place the HJLJ Claimants claim in context, some background is required on the CCCI

Mortgage over High Point.

72. As set out below, these were the claims being asserted by the Applicants and CCCI to the

Surplus Funds from High point following the sale of the property by the Receiver (the net proceeds

of sale as of June 15, 2018 were $8,367,342.00), excluding t Receiver’s priority charges

(borrowings and professional costs):

MORTGAGE & RANK FACE AMOUNT

AMOUNT CLAIMED

1. Applicants (Dec. 8, 2011)

by way of assignment from Canada Capital Corporation Inc.

which itself took by way of assignment on Dec. 8, 2011 from Foremost Financial Corporation et al (March 27, 2007)

$4,500,000 By Applicants:

$3,471,206.47 (as of May 15, 2018, and excluding legal costs)

By Canada Investment Corporation:

$10,211,670.07 (as of April 30, 2018)

2. Currah Capital Corporation (Feb. 2, 2017)

$2,500,000 No response yet

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by way of an assignment of a 24.85% interest from 2399194 Ontario Corporation

which itself took by way of assignment on July 4, 2014, from 1567934 Ontario Inc. (July 5, 2010)

3. Moshum Capital Inc. (Aug. 31, 2011)

which took by way of an assignment from Barry Bilyk (March 24, 2011)

$70,000. No response yet

73. On March 27, 2017, Foremost Financial Corporation and a number of other syndicated

participants took a mortgage for $4.5 million over High Point (the “Foremost Mortgage”). This

mortgage was assigned to CCCI on December 8, 2011, and on the same day assigned to the

Applicants herein for $4 million as security for a loan in that amount by the Applicants to CCCI.

Yeretsian signed an acknowledgment in favour of CCCI that as of November 24, 2011,

$5,079,741.23, was owing under the Foremost Mortgage. The Applicants’ loan to CCCI includes

a term whereby on payout of that loan, CCCI could elect to either have the Foremost Mortgage

assigned back to CCCI, or discharged (the right to the assignment back to CCCI was because the

amount owing under the Foremost Mortgage - $5,079,741.23 as of November 24, 2011 – was

greater than the amount under the Applicants’ loan to CCCI, being $4 million).

74. After High Point was sold by the Receiver, the Applicants claimed $3,471,206.47 under

the Foremost Mortgage (as of May 15, 2018, and excluding legal costs), and CCCI claimed

$10,211,670.07 under the same mortgage (as of April 30, 2018). The Applicants were then to

assign the Foremost Mortgage back to CCCI. The material that the Applicants and CCCI

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delivered in respect of their payout demands, including the CCCI payout statement and related

history, is included in Appendix “I” (which also includes the parcel page for High Point, the

instruments regarding the Foremost Mortgage and the two assignments thereof).

75. CCCI appears to be alleging that it did not receive any payments under the Foremost

Mortgage once it took an assignment of that mortgage, and that is owed the entire amount it is

claiming ($10,211,670.07 plus interest from April 30, 2018), less whatever amount was not paid

by the Receiver to the Applicants, (who were paid $3,471,206.47) plus interest from May 15, 2018,

plus costs. However, the amount CCCI is claiming is now practically capped at the amount of

Surplus Funds form High Point available for distribution (there is approximately $4,072,136.00

currently paid into Court, over and above the funds currently held by the Receiver, being

$133,981.00).

76. However, as set out below, there is a dispute between CCCI and the HJLJ Claimants about

which of them funded the assignment of the Foremost Mortgage to CCCI, over and above the $4

million advanced to CCCI from the Applicants.

Summary of the HJLJ Claimants’ Claim

77. The HJLJ Claimants are represented by Doug Bourassa of Chaitons LLP. These claimants

delivered Affidavits from Segal Adler (“Adler”, the principal of one of the claimants) sworn June

26, 2018 (the “First Adler Affidavit”) and October 1, 2018 (the “Second Adler Affidavit”),

Affidavits from Golnaz Vakili sworn August 24, 2018 (the “First Vakili Affidavit”) and May 31,

2019 (the “Second Vakili Affidavit”), an Affidavit from Lucy Caterina sworn August 28, 2018

(the “Caterina Affidavit”), and an Affidavit from Aldona Cybulski that appears to have been

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sworn May 31, 2019, though the jurat has the date as August 28, 2018 (the “Cybulski Affidavit”).

Lucy Caterina and Aldona Cybulski are legal assistants at Chaitons LLP.

78. In response, Mr. Zibarras delivered affidavits from Missaghi sworn November 1, 2018 (the

“First Missaghi HJLJ Affidavit”) and April 2, 2019 (the “Second Missaghi HJLJ Affidavit”),

and affidavits from Troy sworn November 7, 2018 (the “First Troy HJLJ Affidavit”) and May

22, 2019, though the cover page to the affidavit has the date May 21, 2019 (the “Second Troy

HJLJ Affidavit”).

79. There are two types of claims advanced by the HJLJ Claimants. First, they allege that they,

either collectively or individually, incurred losses totalling $15,450,000.00 on 10 loans made as a

“result of Missaghi-directed frauds”. In most cases, it appears that the HJLJ Claimants are alleging

that they thought they were getting mortgage security for their loans, but the mortgages (and other

related documents) were forged. By way of example, Exhibit A to the Second Adler Affidavit

includes, among other things, what appears to be a mortgage in favour of two of the HJLJ

Claimants over 45 Park Lane Circle in Toronto in the amount of $2,500,000.00 dated January 18,

2013 (the first loan listed in paragraph 3 of the Second Adler Affidavit) . The instrument number

is AT3218140. However, the Receiver’s counsel obtained a copy of instrument number

AT3218140, and while it is a mortgage, it was registered January 17, 2013, is in respect of a

property on Maxome Avenue in Willowdale, and involves different owners and mortgagees than

that set out in Exhibit A. A copy of instrument AT3218140 is attached at Appendix “J”.

80. Another of these 10 loans (the fourth listed in paragraph 3 of the Second Adler Affidavit)

is alleged to have been made in respect of High Point in the second half of 2012 in the amount of

$2,500,000. The HJLJ Claimants do not allege that these funds went to CCCI directly, nor to fund

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any particular mortgage. Rather, they appear to be alleging that the funds went to a Missaghi-

controlled corporation, and that CCCI should also be responsible for the funds because it, too, is

Missaghi-controlled.

81. The second type of claim is in the nature of a trust claim, and is in respect of the third loan

listed in paragraph 3 of the Second Adler Affidavit. The HJLJ Claimants allege that their funds

were used by CCCI in December, 2011 to purchase an assignment of the mortgage over High Point

from a group of 38 mortgagees, which included Foremost Financial Corporation (the “Foremost

Group”).

82. The HJLJ Claimants allege that they were tricked by Missaghi into believing that High

Point was owned, directly or indirectly, by an individual named Bahram “Bob” Beiki, when in fact

it was owned by Yeretsian, and advanced funds based on this belief. As evidence of security for

their loan in the amount of $1,450,000, the HJLJ Claimants were provided with what appears to

be a mortgage from Bahram Beiki dated December 8, 2011 (Adler does not say who provided the

documents, and could not say for certain on cross-examination if it was Missaghi or Vakili). The

mortgage is in the amount of $1,450,000.00, and bears instrument number AT2891823 (Exhibit C

to the First Adler Affidavit). However, this document is a fake. This instrument number is actually

the transfer of the mortgage over High Point from CCCI to the Applicants herein. A copy of

instrument AT2891823 is attached at Appendix “K”.

83. The HJLJ Claimants have produced a copy of a receipt in the amount of $717,250.00 dated

December 2, 2011, indicating it is for the purchase of a bank draft to “Golnaz Vakili in Trust”, and

a copy of a certified cheque, also in the amount of $717,250.00, also dated December 2, 2011, and

also payable to “Golnaz Vakili in trust”. The HJLJ Claimants allege that these were the funds that

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went to Vakili, and that Vakili sent them to McLean & Kerr LLP (lawyers for the Missaghi Group),

and which were used by CCCI to purchase the assignment of the first mortgage over High Point

from the Foremost Group. The HJLJ Claimants’ position is that CCCI holds the mortgage over

High Point as a trustee for the HJLJ Claimants.

84. Vakili admits in the First Vakili Affidavit to having participated in frauds against the HJLJ

Claimants. Vakili’s license has been revoked by the Law Society of Ontario, and she has pleaded

guilty to criminal charges arising from the fraud. Vakili states that in March 2013 “at Missaghi’s

behest, threats, and on his instruction”, she was directed to Missaghi to leave the country “for four

years, until [she] made arrangements with the police for [her] return.” (para 27). Regarding the

HJLJ Claimants’ trust claim, Vakili states in the First Vakili Affidavit that she contacted the

principals of the two HJLJ Claimants who advanced her the funds, and they “confirmed that they

were prepared to lend $1.45 million for a 1st ranking mortgage against title to [High Point]” (para

9). She also states that she received the funds, and on Missaghi’s instructions wired them to

McLean & Kerr LLP on or about December 8, 2011. Vakili stated in the First Vakili Affidavit

that at the time she swore the affidavit, she did not have access to her trust account information

“as a result of the Law Society actions after I was forced to leave the country.”

85. Regarding the $2,500,000 that the HJLJ Claimants allege they sent to Vakili in the second

half of 2012, Vakili states in the First Vakili Affidavit that she believes she “transferred the funds

from [her] trust account to World Iron Corporation on October 24, 2012. World Iron Corporation

is a Missaghi controlled corporation, and I am certain that the ultimate recipient of the funds was

Missaghi.” (Para. 29).

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Summary of CCCI’s Response

86. CCCI agrees that the funds used to purchase CCCI’s interest in the Foremost Mortgage

came from McLean & Kerr LLP, and before that, from Vakili. However, through the affidavits

from Missaghi and Troy, CCCI alleges that Vakili received the funds from Alizadeh, not from the

HJLJ Claimants.

87. In the First Troy HJLJ Affidavit, Troy states that there were three sources of the funds.

First, Troy states that Parichehr Missaghi (Missaghi’s mother) took out mortgages on 2 Laurleaf

Road and 133 Boake Trail in the total amount of $600,000. Exhibit E to the First Troy HJLJ

Affidavit includes a bank draft dated July 29, 2011 in the amount of $592,333.64 (mistakenly said

to be $592,233.64 in the affidavit). Troy states at paragraph 4(d) of the First Troy HJLJ Affidavit

that this draft is from Parichehr Missaghi, but the face of the draft includes no reference as to who

it came from.

88. Second, Troy states that Canada Land Corporation took out a mortgage on 129 Homewood

in the amount of $800,000. Exhibit E to the First Troy HJLJ Affidavit includes a bank draft dated

October 21, 2011 in the amount of $766,932.39. Troy states at paragraph 4(d) of the First Troy

HJLJ Affidavit that this draft is from Canada Land Corporation, but again, the face of the draft

includes no reference as to who it came from.

89. As an aside, based on the exhibits to the First Troy HJLJ Affidavit, it appears that the funds

from the two mortgages from Parichehr Missaghi, as well as the funds from the Canada Land

Corporation mortgage, all came from HJLJ Investments Limited (it is the mortgagee in all three

instruments).

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90. Third, Troy states that Alizadeh personally contributed $82,364.76.

91. In the First Troy HJLJ Affidavit, Troy states that Alizadeh transferred $1,441,530.79 to

Vakili “over a number of payments beginning in October 2011”. Troy states that he picked up a

trust cheque from Vakili (he does not specify the amount), and delivered it to McLean & Kerr

LLP.

92. Troy has a slightly different narrative in the Second Troy HJLJ Affidavit. Troy attaches to

his affidavit page 1 (of 2) of Alizadeh’s RBC account statement for October, 2011, and page 1 (of

2) of the statement for November, 2011. Troy notes that the statements show three transfers from

Alizadeh to Golnaz Vakili in trust. The transfers are dated October 11, 2011, in the amount of

$106,000, a second one dated October 11, 2011 in the amount of $988,800, and finally dated

November 18, 2011 in the amount of $270,707.

93. There are at least two significant concerns with Troy’s evidence.

94. The first is regarding the quantum of the funds sent by Alizadeh to Vakili. In the First Troy

HJLJ Affidavit, Troy swore that the funds sent by Alizadeh to Vakili total $1,441,530.79.

However, the totals of the three October and November 2011 transfers in the Second Troy HJLJ

Affidavit total only $1,365,507 (i.e. $76,023.79 short of what Troy said Alizadeh provided to

Vakili). The Receiver notes there is another transfer in Alizadeh’s October 2011 RBC account

statement with a similar entry, “funds transfer G Vakili Trust”, on October 14, 2011 in the amount

of $107,507.50, but this would bring the total up to $1,473,014.50 (i.e. $31,483.71 more than what

Troy said Alizadeh provided to Vakili).

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95. The second and more significant concern is Troy’s evidence regarding the timing of the

payments. In the First Troy HJLJ Affidavit, Troy swore that Alizadeh received $592,333.64 from

Parichehr Missaghi on July 29, 2011, $766,932.39 from Canada Land Corporation on October 21,

2011, and contributed $82,364.76 herself. In the Second Troy HJLJ Affidavit, Troy references the

First Troy HJLJ Affidavit, repeats that the funds were raised “between four properties’ second

mortgages and collateral mortgages”, and then states that Alizadeh transferred a total of

$1,094,800 on October 11, 2011. However, even if Alizadeh’s entire “personal” $82,364.76

contribution was combined with the funds that are alleged to have been received from Parichehr

Missaghi on July 29, 2011, that total is only $674,698.40, which is $420,101.60 short of the amount

that appears on Alizadeh’s statement for October 11, 2011. In the First Troy HJLJ Affidavit, Troy

stated that Alizadeh did not receive the $766,932.39 from Canada Land Corporation until October

21, 2011. This means that as of October 11, 2011, when Alizadeh is said to have transferred

$1,094,800.00 to Vakili, she had, at most, only $674,698.40 of the $1,441,530.79 that she is said

to have been raised for the purchase of the subject mortgage. This is less than half of the funds

that she is said to have raised for this purpose. She did not (according to the First Troy HJLJ

Affidavit) receive the balance until October 21, 2011.

96. Vakili addressed the allegation that she received funds from Alizadeh on October 11 and

November 18, 2011, in the Second Vakili Affidavit. In this affidavit, Vakili stated (again) that she

did not have access to her trust account records, and her recollection is limited, but based on her

experience in dealing with Alizadeh, she is “confident that if over $1 million was transferred to

my trust account on October 11, 2011, it would not have remained in my trust account until

December 12, 2011 [sic] (the date of CCCI’s acquisition of the High Point mortgage).”

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97. The Cybulski Affidavit (delivered by the HJLJ Claimants) attaches documents regarding

the sale of assets in a CCAA proceeding involving Grant Forest Products in October and November

of 2011. It appears that the implication is that the funds alleged to have been advanced by Alizadeh

to Vakili were not used to purchase the mortgage over High Point, but were rather used to purchase

assets from the Monitor in the CCAA proceeding. The evidence attached to the Cybulski Affidavit

is not conclusive on that point.

98. Regarding the HJLJ Claimants’ allegation that they were led to believe by Missaghi and

others that they would be receiving a first mortgage over High Point, Missaghi alleges that the

discussions with the HJLJ Claimants were in respect of another property.

99. Specifically, in the Second Missaghi HJLJ Affidavit, Missaghi states that Adler is incorrect

that an e-mail from Missaghi to Adler dated July 31, 2012 (Exhibit J to the First Adler Affidavit)

is in respect of an opportunity for the HJLJ Claimants to make a further loan in respect of High

Point. Missaghi states that the property being discussed in that e-mail is not High Point in Toronto,

but rather an unspecified property in Milton on High Point Road owned by another “Bob”; Robert

Kershaw. Missaghi has not provided the municipal address or parcel identification number for

this purported other “High Point” property in Milton.

100. Mr. Zibarras cross-examined Adler on April 2, 2019, and proceeded with written

interrogatories of Markovski and Fruitman. Mr. Zibarras also cross-examined Golnaz Vakili on

May 21, 2019.

101. During Mr. Zibarras’ cross-examination of Adler, Adler’s evidence was that she had never

heard of Robert Kershaw, and “certainly never heard of any property in Milton.” (Q. 558).

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102. Mr. Bourassa cross-examined Wilson and Missaghi on June 3, 2019, and examined

Alizadeh on June 10, 2019. The transcripts of these examinations have not yet been received, but

the Receiver’s counsel attended at the examination and Alizadeh’s evidence was that she does not

know who controls, and denies any involvement with, World Iron Corporation (who is alleged by

Vakili to be the recipient of the HJLJ Claimants’ funds sent to Vakili in the latter half of 2012

totalling approximately $2.5 million), notwithstanding that Alizadeh was an officer and director

of that corporation as of October 24, 2012 (the date that Vakili believes she sent funds to that

corporation, including funds belonging to the HJLJ Claimants). A copy of the point-in-time

corporate profile report for World Iron Corporation as of October 24, 2012 is attached at Appendix

“L”.

The Vakili Trust Account Records

103. As set out in the Eighth Report, the Receiver has attempted to obtain copies of Vakili’s

trust account records to assist in analyzing the HJLJ Claimants’ claims, including the trust claim

in respect of the CCCI mortgage. To date, the Receiver has not been provided with copies of these

records, but expects to be able to receive them, at least in part, though possibly subject to

redactions, prior to the Case Conference on June 27, 2019.

104. In the interim, the Receiver’s counsel has been provided with viewing access to Vakili’s

trust account records from another source, Christine Mainville of Henein Hutchison, Vakili’s

counsel in relation to the criminal charges to which she plead guilty. Ms. Mainville advises that

she received these records, among other things, subject to an undertaking not to provide copies of

same to any other person. The Receiver’s counsel’s memorandum to file regarding his attendance

and review of the records is attached at Appendix “M”.

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Receiver’s Position vis-à-vis the HJLJ Claimants’ Claims

105. At this stage, the Receiver’s position is that the evidence of the HJLJ Claimants on their

claim that the interest in the mortgage held by CCCI over High Point was purchased using the

HJLJ Claimants’ funds is, on a balance of probabilities, more persuasive than the evidence of the

Missaghi Group that Alizadeh’s funds were used for the purchase.

106. However, the HJLJ Claimants have not made out a claim against CCCI for the balance of

their claim, being a claim for the further $2,500,000 they purported to loan to Bakram “Bob” Beiki

(or his corporation) in exchange for a further mortgage over High Point (which was not registered),

or for the additional approximately $11.5 million they allege they lost, either by way of a direct

claim, or by way of a claim that CCCI is an alter-ego of Missaghi or another individual who the

HJLJ Claimants say defrauded them.

107. Regarding the quantum of the trust claim, the total amount advanced by the HJLJ Claimants

was $1,434,500. The interest rate under the CCCI mortgage is 10% pursuant to an agreement

registered on title to High Point (see Appendix “N”). However, based on Exhibit I to the First

Adler Affidavit, interest payments were received by the HJLJ Claimants up to September, 2012.

Accordingly, if interest accrues from September 2012, then the HJLJ Claimants’ debt would be

principal of $1,434,500, plus 92 months of interest at $11,954 per month ($1,099,768), for a total

debt of $2,534,268.

108. The Receiver notes that this amount is less than the reduced amount that 2399194 Ontario

alleges is owing to CCCI in its claim ($2,612,826.48 as of June 27, 2018). Accordingly, even if

Ben Katebian is successful in obtaining an order that he controls 2399194 Ontario, and that

company is successful in its claim that a reduced amount is owing under the CCCI mortgage,

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- 34 -

2399194 Ontario will not be prejudiced by the interim payment out of $2,534,268.00 to the HJLJ

Claimants, as this payment is less than the maximum amount that 2399194 Ontario alleged was

owed as of June 27, 2018.

109. Furthermore, as set out above, there is currently $4,072,136 paid into court in respect of

the High Point surplus proceeds. If $2,534,268 is paid out to HJLJ Claimants, the issue is whether

the remaining $1,537,868 would still be available to CCCI, or be payable to the second mortgagees

(2399194 Ontario and Curah) and/or the third mortgagee (Moshum Capital Inc.). Inquiries

regarding the amounts properly owing these mortgages, and the validity of these mortgages, will

be required.

110. For example, even though the Applicants’ mortgage over High Point has been paid out in

full, and even though the Court may find that the HJLJ Claimants monies were used by CCCI to

purchase the remainder of the Foremost Mortgage, there may still be monies owing to CCCI under

that Foremost Mortgage. If not, then the claims of the remaining mortgagees must be determined.

5. The Stanbarr Claimants’ Claims

111. The Stanbarr Claimants are also represented by Mr. Bourassa. They delivered affidavits

of Harvey Margel (“Margel”) sworn June 26, 2018 (the “First Margel Affidavit”), and

September 7, 2018 (the “Second Margel Affidavit”).

112. Mr. Zibarras delivered an affidavit from Missaghi sworn November 1, 2018 (the “Missaghi

Stanbarr Affidavit”).

34

- 35 -

113. This claim is against CIC in respect of an inflated mortgage payout statement in respect of

a property municipally known as 91-93 Scollard Street in Toronto (“Scollard”), a three story

commercial/residential property in Yorkville. CIC purchased an assignment of the first mortgage

over Scollard on August 9, 2013 for $764,290.90 plus $15,429.96 for legal fees. At the time of

the assignment, the Stanbarr Claimants held the 2nd ranking through 12th ranking mortgages over

Scollard, with a cumulative total debt of $3,847,016.71 as of June 4, 2014.

114. CIC sold Scollard under power of sale proceedings less than one year after purchasing the

first mortgage on that property, on June 6, 2014, for $5,875,000 (the “Impugned Scollard Sale”)

to a numbered company (the “Scollard 2014 Purchaser”). CIC delivered a discharge statement

alleging that its first mortgage secured $6,010,856.32 as of the date of sale.

115. The Stanbarr Claimants challenged the Impugned Scollard Sale, as well as the quantum of

the amount allegedly owing to CIC under the first mortgage. On July 10, 2014, Justice Brown (as

he then was) made an order that CIC pay the proceeds of the Impugned Scollard Sale to MNP Ltd.,

a receiver appointed in respect of Scollard. CIC did not pay the proceeds to MNP Ltd., and

provided an affidavit (attached, without exhibits, as Exhibit X to the First Margel Affidavit, and

further discussed below) that the funds had been distributed to investors prior to the Order being

made.

116. The Stanbarr Claimants’ claim against CIC seeking, among other things, to set aside the

June 6, 2014 transfer, was heard in June 2015 before Justice Matheson, and Her Honour’s reasons

for decision were released August 21, 2015 (the “Matheson Reasons”). Among other things,

Justice Matheson found that several of the amounts added to CIC’s first mortgage over Scollard

related to pre-assignment amounts, though Her Honour did not determine the amount properly

35

- 36 -

owing on CIC’s first mortgage. Her Honour also found that proper notice had not been given of

the sale, and that the purchaser had notice of the defect. Her Honour set aside the CIC Notice of

Sale Under Mortgage, and set aside the June 6, 2014 Impugned Scollard Sale. The Stanbarr

Claimants were awarded, among other things, costs against CIC in the amount of $80,000.00 (the

“Stanbarr Costs Award”). A copy of the Matheson Reasons and the related Costs Endorsement

are attached at Appendix “O”.

117. Justice Matheson’s decision was appealed by the purchaser on the issue of whether it had

notice of the defect in the notice of sale. The appeal was allowed on March 14, 2018 on this basis

(Justice Matheson’s findings regarding the CIC mortgage including improper expenditures was

not disturbed), in effect finding that the Impugned Scollard Sale should have been allowed to stand.

In the interim, Scollard had been sold again, this time by the receiver over that property, MNP Ltd.

on March 9, 2017. Given the successful appeal (in essence, determining that the first sale should

have been allowed to stand), the proceeds of sale of Scollard by the receiver were given to the

lender for the Scollard 2014 Purchaser on the June, 2014 Impugned Scollard Sale.

118. As set out above, Scollard was sold to the Scollard 2014 Purchaser for $5,875,000. There

is no evidence in the material delivered by either the Stanbarr Claimants, or on behalf of CIC, as

to the amount of the net proceeds of sale that were paid to CIC by the 2014 Scollard Purchaser.

119. The net result of the above is that the Stanbarr Claimants received no payment towards

their mortgages over Scollard. The quantification of the Stanbarr Claimants’ claim against CIC

for the inflation of the amount outstanding under the CIC first mortgage was left to be determined

by Justice Matheson following the appeal. This has not yet taken place.

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- 37 -

120. As set out above, CIC’s discharge statement for the sale to the Scollard 2014 Purchaser

was in the amount of $6,010,856.32. Justice Matheson reviewed the calculations relied on by CIC

(set out at Exhibit G to the Margel Affidavit), and found that “the expenditures that predate the

assignment of the mortgage to CIC total more than $1.1 million, and interest was accrued on those

amounts, resulting in the bulk of the very substantial increase in the amount said to be owing under

the then CIC mortgage” (Exhibit H to the Margel Affidavit, para. 40).

121. Her Honour found, at paragraph 41 of her decision, that the evidentiary record before her

did not “provide an adequate foundation to conclude that the pre-assignment amounts were

properly included by CIC as amounts due under the mortgage.”

122. Regarding the post-assignment expenditures, some of which are significant (i.e. $450,000

for “mortgage management” and an $415,000 “admin fee”), Justice Matheson held (at para 46 of

the Matheson Reasons) that “[a]s agreed between the parties, the question of whether the post-

assignment amounts should have been added to the amount due under the CIC mortgage is not

being addressed now.”

123. The Missaghi Stanbarr Affidavit does not address the net proceeds received by CIC from

the sale of Scollard. Missaghi refers to the Stanbarr Claimants claim regarding Scollard as being

for an “undetermined amount” (para. 6), and states that the proceeds of sale cannot be traced to

any of the properties that are the subject of the within Claims Process (para. 8).

Receiver’s Position vis-à-vis the Stanbarr Claimants’ Clam

124. As an initial point, the Stanbarr Costs Award of $80,000 should be paid out of the Caldwell

funds.

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- 38 -

125. Regarding the balance of the Stanbarr Claimants’ claim, CIC’s discharge statement for

Scollard in the amount of $6,010,856.32 as of June 6, 2014, was clearly inflated based on the

Matheson Reasons. While it appears that the Stanbarr Claimants should receive a payment out of

the balance of the Caldwell funds given CIC’s inflated discharge statement regarding its mortgage

over Scollard, the quantum of the payment is not clear from the material delivered. The only

findings to date (by Justice Matheson) is that the amount outstanding as of the date the mortgage

over Scollard was assigned to CIC (August 9, 2013) was $764,290.90 (para 37), and pre-

assignment expenditures “total more than $1.1 million”. Based on the Receiver’s addition of the

pre-assignment amounts in the calculations relied on by CIC (Exhibit G to the First Margel

Affidavit), the amounts total $1,162,472.78 for the entries dated up to but not including August,

2013.

126. There are two ways of interpreting Justice Matheson’s findings. First, based on the CIC

discharge payout alleging $2,906,414.76 owing under the Scollard mortgage as of August, 2013,

and Justice Matheson’s finding that the amount owing under the mortgage was $764,290.90, the

total “pre-assignment amounts” could be read as being $2,142,123.86, meaning the CIC discharge

statement as of June 6, 2014, should have been for, at most, $3,868,732.46 (i.e. $6,010,856.32 less

$2,142,123.86).

127. The other way of interpreting Justice Matheson’s reasons are that the CIC discharge

statement as of June 6, 2014, should have been for, at most, $4,848,383.54, being the amount of

the discharge statement ($6,010,856.32), less the total of the pre-assignment expenditures set out

in the far right hand column of the discharge statement ($1,162,472.78).

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- 39 -

128. In addition, both amounts are also subject to further reduction following an analysis of

post-assignment expenditures.

129. However, regardless of the correct interpretation of Justice Matheson’s reasons, to date,

there is no evidence as to what proceeds of sale from Scollard actually went to CIC. This

information appears to be available, as the First Margel Affidavit attaches at Exhibit X thereto an

affidavit from George Safarian (“Safarian”) sworn July 16, 2014. Safarian describes himself as

the president and a director of CIC, and he states, at paragraph 7, that the statement of adjustments

on the sale was given to the receiver over the Scollard property (MNP Ltd.). At paragraph 13,

Safarian states that the accounting of the sale proceeds have been provided to the receiver’s counsel

(that is, the receiver over the Scollard property, MNP Ltd.).

130. The Stanbarr Claimants have not put forward any evidence that an amount greater than

$4,848,383.54 was disbursed to CIC from the proceeds of sale of Scollard. On the other hand, the

Missaghi Group has not put forward any evidence as to the amount that CIC received from the

sale of Scollard.

131. As an aside, if the amount received by CIC is at least $5,633,226.54, then the issue of the

correct interpretation of Matheson J.’s reasons is moot (in respect of the Claims Process), as the

Stanbarr Claimants would recover the full amount of the funds available from Caldwell in the

Claims Process ($5,633,226.54 - $4,848,383.54 = $784,843.00, which is the amount currently held

in court in respect of Caldwell).

132. However, absent information regarding the net proceeds of sale from Scollard received by

CIC, the Receiver is not in a position to determine what amount, if any, the Stanbarr Claimants

should receive out of the Caldwell property.

39

Appendix “A”

40

Appendix “B”

63

Appendix “C”

68

Appendix “D”

70

Appendix “E”

80

Appendix “F”

83

Appendix “G”

88

Appendix “H”

90

Appendix “I”

95

Appendix “J”

152

LRO # 80 Charge/Mor tgage Registered as A T3218140 on 2013 01 17 at 13:04

The applicant(s) hereby applies to the Land Registrar. yyyy mm dd Page 1 of 5

Proper ties

PIN 10027 − 0054 LT Interest/Estate Fee SimpleDescription PT LT 25 PL 1962 TWP OF YORK AS IN NY136108 EXCEPT TB881670; TORONTO (N

YORK) , CITY OF TORONTO

Address 151 MAXOME AVENUEWILLOWDALE

Chargor(s)

The chargor(s) hereby charges the land to the chargee(s). The chargor(s) acknowledges the receipt of the charge and the standardcharge terms, if any.

Name MASERAT, SAEIDEH

Address for Service 151 Maxome AvenueToronto, Ontario M2M 3K7

I am at least 18 years of age.

I am not a spouse

This document is not authorized under Power of Attorney by this party.

Charg ee(s) Capacity Share

Name 1320215 ONTARIO LTD. $200,000.00

Address for Service C/O JS Balitsky, solicitor311 − 3100 Steeles Ave WestConcord, Ontario L4K 3R1

Name 1462092 ONTARIO LIMITED $175,000.00


Name 1328806 ONTARIO INC. $150,000.00


Provisions

Principal $525,000.00 Currency CDN

Calculation Period monthly

Balance Due Date 2014/01/17

Interest Rate EIGHT (8%) per cent per annum

Payments

Interest Adjustment Date 2013 01 17

Payment Date 17th monthly − interest only on amounts advanced from time to time

First Payment Date 2013 02 17

Last Payment Date 2014 01 17

Standard Charge Terms 200033

Insurance Amount full insurable value

Guarantor

Additional Pr ovisions

See Schedules

Signed By

Mary Rodrigues 311−3100 Steeles Avenue W.ConcordL4K 3R1

acting for Chargor(s)

Signed 2013 01 17

Tel 9057611245

Fax 9057617951

153

LRO # 80 Charge/Mor tgage Registered as A T3218140 on 2013 01 17 at 13:04


Signed By

I have the authority to sign and register the document on behalf of the Chargor(s).

Submitted By

JERRY S. BALITSKY 311−3100 Steeles Avenue W.ConcordL4K 3R1

2013 01 17

Tel 9057611245

Fax 9057617951

Fees/Taxes/Payment

Statutory Registration Fee $60.00

Total Paid $60.00

File Number

Chargee Client File Number : 3464

154

Appendix “K”

155

LRO # 80 Transfer Of Char ge Registered as A T2891823 on 2011 12 08 at 16:10


Proper ties

PIN 10126 − 0383 LT Remove S/T interestDescription PT LT 13−14 PL 2801 NORTH YORK AS IN TR91353; TORONTO (N YORK) , CITY OF

TORONTO

Address 7 HIGH POINT ROADTORONTO

Source Instruments

Registration No. Date Type of Instrument

AT1405966 2007 03 27 Charge/Mortgage

Transf eror(s)

This transfer of charge affects all lands that the charge is against which are outstanding.

Name CANADA CAPITAL CORPORATION INC.

Address for Service c/o Golnaz Vakili, 4950 Yonge Street,Suite 1000, Toronto, Ontario, M2N 6K1

I, Masoumeh Shaer−Valaei (A.S.O.), have the authority to bind the corporation.


Transf eree(s) Capacity Share

Name COMFORT CAPITAL INC. as to anundivided 2.5%share

Address for Service c/o Harry Erlich, 1670 Bayview Avenue, Suite 400, Toronto,Ontario, M4G 3C2

Name THE BANK OF NOVA SCOTIA TRUST COMPANY as to anundivided22.5% share

Address for Service c/o Harry Erlich, 1670 Bayview Avenue, Suite 400, Toronto,Ontario, M4G 3C2 and 130 King Street West, 20th Floor,Toronto, Ontario, M5X 1K1

Name E. MANSON INVESTMENTS LTD. as to anundivided 25%share

Address for Service c/o 1670 Bayview Avenue, Suite 400, Toronto, Ontario, M4G3C2

Name FENFAM HOLDINGS INC. as to anundivided 25%share


Name 593651 ONTARIO LTD. as to anundivided6.25% share


Name 1449859 ONTARIO LIMITED as to anundivided 2.5%share


Name B&M HANDELMAN INVESTMENTS LIMITED as to anundivided 2.5%share


Name 1031436 ONTARIO INC. as to anundivided 2.5%share

156



Transf eree(s) Capacity Share


Name ALRAE INVESTMENTS INC. as to anundivided 2.5%share


Name SPIEGEL, BARRY Trustee as to anundivided 2.5%share


Name NIGHTINGALE, SHARON as to anundivided1.25% share


Name SUGAR, DAVID Joint Account, Right OfSurvivorship

as to anundivided 5%share togetherwith PhyllisSugar


Name SUGAR, PHYLLIS Joint Account, Right OfSurvivorship

as to anundivided 5%share togetherwith DavidSugar


Statements

The chargee transfers the selected charge for $4,000,000.00.

The transferee agrees to retransfer this charge on payment of SEE SCHEDULE at SEE SCHEDULE as follows SEE SCHEDULE

Schedule: See Schedules

This document relates to registration no.(s)AT1405966, AT1405989, AT2051205 , AT2891758 and AT2891759

Signed By

Faruk Gafic 130 Adelaide St. W. Suite 2800TorontoM5H 3P5

acting forTransferor(s)

Signed 2011 12 08

Tel 416−364−5371

Fax 4163668571

I have the authority to sign and register the document on behalf of the Transferor(s).

Martin LLoyd Rubinoff 402−300 John St.ThornhillL3T 5W4

acting forTransferee(s)

Signed 2011 12 08

Tel 9058863110

Fax 9058860989

I have the authority to sign and register the document on behalf of the Transferee(s).

Submitted By

M. LLOYD RUBINOFF BARRISTER & SOLICITOR 402−300 John St.ThornhillL3T 5W4

2011 12 08

Tel 9058863110

Fax 9058860989

157



Fees/Taxes/Payment


Total Paid $60.00

158

Instrument Statement, 61 Page 4 of 7

The Transferee The Bank of Nova Scotia Trust Company holds its share of this mortgage intrust for SDRRSP 494�02797�16C.

The Transferee, Barry Spiegel, holds his share of this mortgage in trust for The BarryAlan Spiegel Trust.

SCHEDULE 1All words contained herein shall be construed in the proper number and gender of theparties referred to as required.

In consideration of and as security for the Loan (herein after defined) Canada CapitalCorporation Inc. (the˜Transferor˜), has by this instrument assigned the Charge referredto in the Transfer of Charge appended hereto, to Comfort Capital Inc., The Bank of NovaScotia Trust Company, E. Manson Investments Ltd., Fenfam Holdings Inc., 593651 OntarioLtd., 1449859 Ontario Limited, B&M Handelman Investments Limited, 1031436 Ontario Inc.,Alrae Investments Inc. Barry Spiegel, Trustee, Sharon Nighingale, David Sugar andPhyllis Sugar, (the ˆTransferee˜) in the proportions set out in the Transfer of Chargeto which this Schedule is appended.

The Transferee hereby agrees that upon payment to the Transferee of the sum of FOURMILLION ($4,000,000.00) dollars together with interest thereon at 10.00 percent (10%)per annum calculated monthly not in advance (the ˆLoan˜) and any other sums due inaccordance with this schedule, it will re�transfer the Charge (together will allsecurity documents) to the Transferor and/or, upon request of the Transferor, execute adischarge of Charge.

The said principal sum of $4,000,000.00 shall become due and payable on the 1st day ofDecember, 2012. Interest only payments shall be made, in arrears, to the Transferee inthe amount of $33,333.33 at the said rate as well after as before maturity and afterdefault on such portion of the principal as remains from time to time unpaid, suchinterest only payment to be made on the 1st day of each and every month in each yearuntil the principal is fully paid; save that interest from the date of advance of theLoan to February 29, 2012 shall be paid in advance on the date of the advance of theloan and thereafter interest shall be paid in arrears commencing on April 1, 2012 andcontinuing thereafter on the 1st of each month on a monthly basis until the principalamount is repaid.

All payment due to the Transferee under the Loan (interest, principal and other amounts)shall be paid by the Transferor to C&K Mortgage Services Inc. and any and all suchpayments made to C&K Mortgage Services Inc. shall be good and valid as if made jointlyto all the Transferees above listed.

The Transferor covenants with the Transferee that the Transferor will pay the Loansecured hereunder and interest and observe the above proviso.

And it is hereby agreed by and between the parties hereto that in case default shall bemade in payment of any sum to become due for interest at any time appointed for thepayment thereof as aforesaid, compound interest shall be payable on the sum in arrears,at the rate aforesaid, and in case the interest and compound interest are not paid inONE month from the time of default, compound interest at the rate aforesaid shall bepayable on the aggregate amount then due, as well after as before maturity, and so onfrom time to time, and all such interest and compound interest shall be a charge on theCharge hereby assigned.

And the Transferor covenants with the Transferee that the said Charge hereby transferredis a good and valid security, and that the sum of FIVE MILLION TWO HUNDRED AND FORTY−NINE THOUSAND EIGHT HUNDRED AND SEVENTY−FOUR DOLLARS AND SEVENTY−TWO CENTS($5,249,874.72) and interest stipulated in the Charge (as amended) (the ˆMortgageAmount˜) is now unpaid under and by virtue of the said Charge, as amended and that saveas mentioned hereunder the Transferor has not done or permitted any act, matter or thingwhereby the said Charge has been released or discharged either partly or in entirety andthat the Transferor will upon request, do, perform and execute every act necessary toenforce the full performance of the covenants and other matters contained therein.

Provided that the Loan is in good standing and/or all defaults have been remedied withinthe Notice Period (as defined below), the Transferee agree that it shall not take anysteps whatsoever to enforce the terms of the Charge and all such steps, if required bysome default of the Chargor/Mortgagor, shall be taken by the Transferor withoutintervention by the Transferee. The Transferee agrees that if required it will execute

159


all necessary documents, without cost, to permit the Transferor to enforce the terms ofthe Charges (which may include permitting the Transferor to commence proceedings it itsname) and will cooperate with any enforcement proceedings (including issuance of noticeof sale, statement of claim for possession and moneys owed by Chargor/Mortgagor andpower of sale proceedings), as necessary.

If the Transferor requests that the Transferee execute a discharge of the Charge (uponrepayment of the Loan, all interest and other amounts that may be due thereunder) andpayment of the Loan was as a result of power of sale proceedings undertaken by theTransferor under the Charge, the Transferee may request confirmation that the Transferorobtained two appraisal of the real property charged by the Charge prior to its sale, theproperty was listed on the MLS and that such sale was effected with the use of alicensed real estate agent, prior to providing the requested discharge.

The Parties further agree that if the Loan is in good standing and/or all defaults havebeen remedied within the Notice Period (as defined below), all interest payment due fromthe Chargor/Mortgagor under the Charge, as amended, shall be made to the Transferor. Ifnecessary, the Transferee will execute a direction requiring interest payments under theCharge to be made to the Transferor. Any and all prepayments of the principal amount ofthe Mortgage shall be paid to Lloyd Rubinoff, in trust, and thereafter the funds shallbe paid to the Transferee and applied in payment of the Loan amounts as set out herein.Lloyd Rubinoff shall advise the Transferor of any payments received by him.

Provided further that the Transferee agrees that if the Loan is in default, it will notcommence any enforcement proceedings (whether against the Transferor or theChargor/Mortgagor under the Charge, as amended, if such Charge is in default), unlessthe Transferee has first given the Transferor notice of the default and such default hasnot been remedied within 15 days of such notice of default being given to the Transferor(the ˆNotice Period˜).

Provided that it shall not be incumbent upon the Transferee to sue for, or requirepayment of, the Mortgage Amount or the Loan secured by the Charge, as amended, or anypart thereof, unless he shall think fit so to do, nor shall he be responsible for anyloss which may arise by reason of his omission to enforce or delay in enforcing paymentof the said Mortgage Amount or the Loan. In the event the Transferee is able, butchooses not to require payments of the Mortgage Amount, it shall permit the Transferorto do so.

Provided that the Transferee, on default of payment of any amount due under the Loan andexpiry of the Notice Period, may on at least thirty�five days’ notice to the Transferorgiven in accordance with the provisions of The Mortgages Act, as amended, sell, transferand convey the said Charge, as amended, and all the interest of the Transferor thereinand in the mortgaged lands and also the Mortgage Amount assigned hereby, either for cashor credit or partly for cash and partly for credit, and either by public auction orprivate contract, and as attorney for the Transferor, or otherwise subject to theprovisions of The Mortgages Act, as amended, may, if the said Charge is in default,exercise the power or powers of sale and all other powers in the said Charge, and on asale of the said lands (which sale shall be effected only after appropriate appraisalshave been obtained, the lands have been listed on the MLS and an licensed Agent has beenretained to market and sell the lands) may make proper conveyance thereof, and apply theproceeds from such sale firstly, in payment of all costs and disbursements, as betweensolicitor and client, in connection with such sale (including payment of commission, ifany, to any Broker or Agent), then in payment of the principal Loan amount, interest andother moneys hereby secured and thereafter to pay the balance, if any, to theTransferor; and in the event of there being any deficiency the Transferor covenants andagrees with the Transferee to forthwith pay the same with interest thereon at the rateaforesaid.

And it is declared and agreed that if the Transferee takes steps to enforce its securityin compliance with the terms of this agreement, then upon payment of the Loan, interestand other amounts owing in connection with the Loan as stipulated herein, the Transfereemay sign and deliver a good valid discharge of the said Charge, as amended, and theTransferor shall not be a necessary party to such a discharge if the Transferee hastaken all reasonable steps to obtained the fair market value for the Charge, as amended,and/or the real property secured by the Charge.

And it is hereby further declared and agreed that the Transferee may pay all premiums ofinsurance and all taxes and rates which shall from time to time fall due and be unpaidin respect of the mortgaged premises (between solicitor and client) which may beincurred in connection with, or to realize, this security shall be with interest at the

160


rate aforesaid added to the moneys payable hereunder, and that the Transferee may pay orsatisfy any lien, charge or encumbrance now existing or hereafter created or claimedupon the said lands, and the amount paid in respect thereof, shall be added to the Loanhereby secured and shall be payable forthwith with interest at the rate aforesaid.

PREPAYMENT PRIVILEGEProvided further that the Transferor, when not in default hereunder, shall have theprivilege of prepaying the whole or any part of the principal sum herein secured, at anytime or times, upon payment of two months interest as a bonus.

PROVIDED further that the Transferor agrees to pay the Transferee its usual statement,discharge and/or re�transfer fees (such fee not to exceed $500.00).

PROVIDED further that the Transferor agrees to provide a series of twelve (12) postdated cheques on the commencement of the within Transfer and on each anniversary datethereof.

N.S.F. CHEQUES OR NON�PAYMENTIn the event that any of the Transferor’s post�dated cheques are not honoured whenpresented for payment to the Institution on which they are drawn, the Transferor shallpay to the Transferee for each such returned payment the sum of TWO HUNDRED($200.00) DOLLARS as a liquidated amount to cover the Chargee’s administration costs andnot as a penalty.

TIME OF PAYMENTAny payment (other than of the regular payments of principal and interest) that is madeafter 1:00 p.m. on any date shall be deemed, for the purpose of calculation of interest,to have been made and received on the next business�banking day.

ADMINISTRATION FEE ON DEFAULTShould the Transferee take any proceeding as provided in the within Transfer of Chargeby reason of the Transferor’s default, Rescom Capital shall be appointed as manager andshall be entitled to $250.00 per hour for its services to be added to the principal sumowing hereunder in addition to all other fees, claims or demands to which the Transfereeis also entitled.

INTEREST AFTER MATURITYThe Transferor agrees that on the maturity date of this Transfer, if the Transferor hasnot paid the principal balance owing together with any interest and costs owing orentered into a renewal agreement with the Transferee, then the Transfer of charge asSecurity shall bear interest at the rate of 10% per annum calculated monthly not inadvance until such time as the Transfer of Charge as security is paid in full orrenewed. The Transferor agrees that provided that a renewal is offered it must be agreedupon at least 30 days prior to the date of maturity.

GUARANTORS CLAUSEWe, 2294105 ONTARIO INC, ARA MISSAGHI AND GRANT ERLICK, the Guarantors herein, inconsideration of the Loan and payment of the sum of One ($1.00) Dollar to us and othergood and valuable consideration (receipt whereof is hereby by us acknowledged) covenantand agree with the Transferee that the Transferor will duly pay and satisfy all moniesat any time secured by this Transfer of Charge as Security and will duly perform andobserve all covenants, agreements and provisos in this transfer contained: and furtherthat we shall be considered as primarily liable to the Transferee and shall not bereleased nor our liability hereunder lessened by any variation or departure from theprovisions of this Transfer nor by the Transferee granting time, taking or giving upsecurities, accepting compositions, granting releases or discharges, or otherwisedealing with the mortgaged premises or the parties hereto or any of them or with anyother person or persons nor by any other thing whatsoever either of a like nature to theforegoing or otherwise whereby as Guarantor only we would or might be released, and theTransferee shall not be bound to exhaust its recourse against the Transferor or againstany other person or persons before enforcing its rights against us.

Upon payment in full to the Transferees of the Loan amount, interest and other sumsowing pursuant to the Loan as stipulated herein, the guarantors shall be released fromany and all liability hereunderIf there is more than one Guarantor named herein, the guaranty of all covenants,liabilities and obligations shall be joint and several.

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NOTICE ADDRESSES

All notice required herein shall be sent by courier to the address below and shall beeffective two business days after the courier has been sent:

Transferee: C&K Mortgage Services Inc. c/o Harry Erlich1670 Bayview Avenue, Suite 400, Toronto, Ontario M4G 3C2

and

The Bank of Nova Scotia Trust Company130 King Street West, 20th Floor, Toronto, OntarioM5X 1K1

Transferor: Canada Capital Corporation Inc. c/o Golnaz Vakili4950 Yonge St., Suite 1000Toronto, Ontario M2N 6K1

ASS SECURITY�high point

Page 1

162

Appendix “L”

163

Request ID: 023042312 Province of Ontario Date Report Produced: 2019/05/03 Transaction ID: 71671969 Ministry of Government Services Time Report Produced: 16:21:42 Category ID: UN/E Page: 1

CORPORATION POINT IN TIME REPORT As of: 2012/10/24 Ontario Corp Number Corporation Name Incorporation Date

2179341 WORLD IRON CORPORATION 2008/07/16

Jurisdiction

ONTARIO

Corporation Type Corporation Status Former Jurisdiction

ONTARIO BUSINESS CORP. ACTIVE NOT APPLICABLE

Registered Office Address Date Amalgamated Amalgamation Ind.

NOT APPLICABLE NOT APPLICABLE 65 MALMO COURT New Amal. Number Notice Date

Suite # B TORONTO NOT APPLICABLE NOT APPLICABLE ONTARIO CANADA L6A 1R4 Letter Date

Mailing Address NOT APPLICABLE

Revival Date Continuation Date

65 MALMO COURT NOT APPLICABLE NOT APPLICABLE Suite # B TORONTO Transferred Out Date Cancel/Inactive Date

ONTARIO CANADA L6A 1R4 NOT APPLICABLE NOT APPLICABLE

EP Licence Eff.Date EP Licence Term.Date

NOT APPLICABLE NOT APPLICABLE

Number of Directors Date Commenced Date Ceased Minimum Maximum in Ontario in Ontario

00001 00010 NOT APPLICABLE NOT APPLICABLE Activity Classification

NOT AVAILABLE

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CORPORATION POINT IN TIME REPORT As of: 2012/10/24 Ontario Corp Number Corporation Name

2179341 WORLD IRON CORPORATION

Corporate Name History Effective Date

WORLD IRON CORPORATION 2008/07/16

Current Business Name(s) Exist: NO

Expired Business Name(s) Exist: NO

Active Administrator: Name (Individual / Corporation) Address

LAILA 65 MALMO COURT ALIZADEH Suite # B MAPLE ONTARIO CANADA L6A 1R4

Date Began First Director

2011/08/15 NOT APPLICABLE

Designation Officer Type Resident Canadian

DIRECTOR Y

165









OFFICER PRESIDENT Y






OFFICER SECRETARY Y

166









OFFICER TREASURER Y


BATOUL 65 MALMO COURT NOUR-MOHAMMADI Suite # B MAPLE ONTARIO CANADA L6A 1R4




OFFICER SECRETARY

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CORPORATION POINT IN TIME REPORT As of: 2012/10/24

Ontario Corp Number Corporation Name


Last Document Recorded

Act/Code Description Form Date

CIA CHANGE NOTICE 1 2012/06/08 (ELECTRONIC FILING)

THIS REPORT SETS OUT INFORMATION FILED BY THE CORPORATION ON OR AFTER JUNE 27, 1992 AND RECORDED ON THE ONTARIO BUSINESS INFORMATION SYSTEM UP TO THE "AS OF DATE" INDICATED ON THE REPORT. ALL CURRENT DIRECTORS AND OFFICERS ARE INCLUDED AS ACTIVE ADMINISTRATORS.

ADDITIONAL HISTORICAL INFORMATION MAY EXIST ON THE MICROFICHE.

The issuance of this report in electronic form is authorized by the Ministry of Government Services.

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Appendix “M”

169

MEMORANDUM

To: File From: Chad Kopach Date: June 15, 2019 Re: Yeretsian Review of Crown Disclosure - R v. Vakili

On June 12, 2019, Golnaz Vakili advised me that her criminal lawyer, Christine Mainville of Henein Hutchison LLP, may have received a copy of Ms. Vakili’s trust account records as part of the Crown Disclosure briefs delivered in her criminal matter.

On June 13, 2019, Ms. Mainville confirmed that an appointment could be set up for me to review the disclosure if I was accompanied by Ms. Vakili, but that she was unable to provide a copy of the contents of the brief, including whatever statements are contained therein, because the disclosure brief was produced subject to an undertaking from Ms. Mainville’s firm to, among other things, only use the documents in the criminal proceeding, and to not produce the contents to anyone else, including to Ms. Vaklil.

I made arrangements with to review the disclosure brief with Ms. Vakili in the afternoon of June 14, 2019.

Ms. Vakili and I reviewed the account histories for approximately 2 hours on June 14, 2019. This memo summarizes the information I was trying to confirm with my review, as well as other entries of note in the histories.

The Purpose of the Review

The primary purpose of my review was to try to determine the source of the funds that Ms. Vakili provided to McLean & Kerr LLP, which were then sent to M. Lloyd Rubinoff by way of certified cheque in the amount of $1,441,530.79 dated December 8, 2011. These funds were used to purchase part of the first mortgage over High Point in December 2011, which interest is registered in the name of CCCI.

To summarize the parties’ positions regarding the source of funds and timing of delivery to Vakili, the HJLJ claimants allege that they were the source of these funds, and provided them to Ms. Vakili by way of (1) a bank draft in the amount of $717,250 dated December 2, 2011, and (2) a certified cheque in the same amount bearing the same date. The HJLJ claimants allege that CCCI is holding the mortgage in trust for them, and that they should receive the mortgage payout.

The Alizadeh parties, however, allege that these funds came from mortgages over lands owned by Parichar Missaghi (Ara Missaghi’s mother), from Canada Land Corporation, and from Alizadeh personally.

Specifically, the Alizadeh parties say P. Missaghi gave $592,333.64 to Alizadeh by way of RBC bank draft dated July 29, 2011, Canada Land Corporation gave $766,932.39 to Alizadeh by way of RBC bank draft on October 21, 2011, and Alizadeh contributed $82,364.76 personally.

Initially these parties alleged that the funds went to Vakili “starting in October 2011”. More recently, they have produced parts of two RBC statements from Alizadeh’s personal account, and say that the funds were done via

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three transfers (i.e., not via cheque) that appear on the statements. The first two entries are dated October 11, 2011, and state “Funds transfer G. Vakili Trust”. One is in the amount of $106,000.00, and the other is in the amount of $988,800.00. The third entry in Alizadeh’s personal account statement that these parties say was used to fund the mortgage purchase is dated November 18, 2011 in the amount of $270,707.00.

The Account Statements

Ms. Vakili’s trust account statement shows that $1,434,500.00 was paid out of her account by way of certified cheque (cheque number 998340) on December 5, 2011. A copy of the cheque was not included in the disclosure. It would appear that these were the funds that went to McLean & Kerr LLP.

Regarding the source of funds, and starting in chronological order, I first reviewed the account statement for October, 2011. There is no entry showing funds coming into Ms. Vakili’s trust account on October 11, 2011 (as alleged by the Alizadeh parties). In fact, there are no “transfers” into Ms. Vakili’s trust account after October 11 until October 24, 2011, when $540,000 was transferred with the entry “RBC PSC HOMELIN”. From October 11, 2011 to December 4, 2011, there was no single entry showing funds going into the account in an amount greater than $900,000.00.

The account statement for November, 2011 does not show a transfer into Ms. Vakili’s trust account on November 18, 2011 (as alleged by the Alizadeh parties). Again, there are in fact no “transfers” into the account from November 18 to 30, 2011, when $677,293.59 was transferred with the entry “Web payment FNF Canada Compa”. The statement does not have an entry for a transfer into the account in the amount of $270,707.00.

The statement for December, 2011 shows a deposit on December 5, 2011 in the amount of $1,439,500.00, which is $5,000.00 more than the totals of the two drafts from the HJLJ parties. An entry the same day indicates that a certified cheque was drawn on the trust account on December 5, 2011 in the amount of $1,434,500, which is the same amount as the two drafts ($717,250 + $717,250 = $1,434,500).

From my review of the account statements, it does not appear that the funds allegedly given to Ms. Vakili by Alizadeh on October 11 and November 18, 2011 were actually given to Ms. Vakili at all. It appears that the HJLJ parties were the source of the funds that were sent to McLean & Kerr LLP.

Other Account Entries

The account statements included other entries of note regarding the Alizadeh parties’ allegations.

The statement for July, 2011 has an entry for a cheque drawn on the account (cheque number 998127) on July 29, 2011 in the amount of $592,333.64. This the same amount that was allegedly received by Alizadeh personally from P. Missaghi on July 29, 2011 to fund the purchase of the mortgage.

The statement for October, 2011 had an entry for a cheque written on the account (cheque number 998265) on October 7, 2011 in the amount of $766,932.39. This is the amount allegedly received by Alizadeh personally from Canada Land Corporation on October 21, 2011 to fund the purchase of the mortgage.

It would appear then that Ms. Vakili’s trust account was the source of the funds to Alizadeh in July and October, 2011. I am not able to explain why the funds went out of the trust account as cheques, but went to Alizadeh by way of bank drafts. That said, the two bank drafts produced by the Alizadeh parties appear to have been created at RBC branch 2874 at 5001 Yonge Street, which is the same branch where Ms. Vakili maintained her trust account.

I also reviewed Ms. Vakili’s account regarding the funds advanced purported for a second mortgage over High Point in 2012. The HJLJ parties have produced four instruments payable to Ms. Vakili; a certified cheque dated August 22, 2012 in the amount of $1,000,000, a certified cheque dated October 1, 2012 in the amount of $500,000, a TD bank draft dated October 1, 2012 in the amount of $1,225,000, and a CIBC bank draft dated

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October 1, 2012 in the amount of $225,000. In Ms. Vakili’s affidavit sworn August 24, 2018, she stated that she believed she transferred the funds to World Iron Corporation on October 24, 2012.

Ms. Vakili’s account statement for August, 2012 indicates a deposit of $1,000,750 on August 23, 2012 (i.e. $750 more than the certified cheque dated August 22).

On October 2, 2012, Ms. Vakili’s account statement had a balance of only $575,347.20. On that date, a deposit was made in the amount of $1,960,000 (i.e. $10,000 more than the total of the three instruments dated October 1, 2012).

The account statement indicates that $2,427,204.29 left Ms. Vakili’s trust account on October 25, 2012, but the description for this entry is redacted, and reads “Funds Transfer [REDACTED]”. However, the request to admit from Vakili’s Law Society proceeding indicates the funds went to World Iron Corporation. A point in time report for that company as of October 24, 2012 shows Alizadeh as an officer and director of that corporation at that time.

172

Appendix “N”

173

LRO # 80 Notice Registered as A T2891822 on 2011 12 08 at 16:10


Proper ties

PIN 10126 − 0383 LT Remove S/T interestDescription PT LT 13−14 PL 2801 NORTH YORK AS IN TR91353; TORONTO (N YORK) , CITY OF

TORONTO

Address 7 HIGH POINT ROADTORONTO

Consideration

Consideration $2.00

Applicant(s)

The notice is based on or affects a valid and existing estate, right, interest or equity in land

Name YERETSIAN, ANNIE

Address for Service 7 High Point RoadToronto, Ontario M3B 2Y3


Party To(s) Capacity Share

Name CANADA CAPITAL CORPORATION INC.

Address for Service 4950 Yonge Street, Suite 1000Toronto, Ontario M2N 6K1

I, Masoumeh Shaer−Valaei, President, have the authority to bind the corporation


Statements

This notice is pursuant to Section 71 of the Land Titles Act.

This notice may be deleted by the Land Registrar when the registered instrument, AT1405966 registered on 2007/03/27 to which thisnotice relates is deleted

Schedule: See Schedules

This document relates to registration no.(s) Charge AT1405966, AT2891758, AT2891759

Signed By

Faruk Gafic 130 Adelaide St. W. Suite 2800TorontoM5H 3P5

acting forApplicant(s)

Signed 2011 12 08

Tel 416−364−5371

Fax 4163668571

I have the authority to sign and register the document on behalf of the Applicant(s).

Submitted By

MCLEAN & KERR LLP 130 Adelaide St. W. Suite 2800TorontoM5H 3P5

2011 12 08

Tel 416−364−5371

Fax 4163668571

Fees/Taxes/Payment


Total Paid $60.00

174

LRO # 80 Notice Registered as A T2891822 on 2011 12 08 at 16:10


File Number

Party To Client File Number : 11−9425 LG/FG/DJ

175

Appendix “O”

180

CITATION: Stanbarr Services et al. v. Metropolis Properties et al., 2015 ONSC 5249 COURT FILE NO.: CV-14-10585-00CL

DATE: 20150821

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN: ) )

Stanbarr Services Limited, Janodee Investments Ltd., Meadowshire Investments Ltd., Regard Investments Ltd., 1563503 Ontario Limited, Beaver Pond Investments Ltd., The Canada Trust Company, Rita Rosenberg and 527540 Ontario Limited

Applicants

– and – Metropolis Properties Inc., Ginkgo Mortgage Investment Corporation, Canada Investment Corporation, 2413913 Ontario Limited, 2421955 Ontario Inc. and Sai Mohammed

Respondents

) ) )) ) ) ) )) ) ) ) ) ) ) ) ) ))))) )

Stephen Schwartz and Doug Bourassa, for the Applicants Richard Quance for the Respondent Canada Investment Corporation Mark Veneziano and Jaclyn Greenberg for the Respondent 2413913 Ontario Limited Philip Polster for the Respondent Ginkgo Mortgage Investment Corporation Salma Sheikh for the Respondents 2421955 Ontario Inc. and Sai Mohammed

))

No one appearing for Metropolis Properties Inc.

) ) HEARD: June 29 and 30, July 2 and 3, 2015

REASONS FOR JUDGMENT

JUSTICE W. MATHESON

[1] At the center of this dispute is the sale, under power of sale, of a commercial/residential property known as 91-93 Scollard Street, Toronto. The impugned sale closed on June 6, 2014.

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http://intra.judicialsecurity.jus.gov.on.ca/NeutralCitation/

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The applicants submit that they were never served with the required notice of sale and the sale is therefore invalid.

[2] This matter began as a receivership application, but, pursuant to the order of Penny J. dated October 3, 2014, the following issues were ordered to be determined in a hybrid trial:

(1) Is the November 28, 2013 Notice of Sale valid?

(2) If not, is the purchaser, 2413913 Ontario Inc. a bona fide purchaser for value without notice of the invalidity of the sale? If so, can it obtain title to the property?

(3) If the answer to question #2 is no, are the mortgages registered subsequent to the purchase valid?

(4) If the answer to question #3 is no, do the mortgagees have an equitable subrogated interest if they advanced funds?

[3] Justice Penny left open the issue of quantification of the first mortgage subsequent to the impugned sale, specifically the Ginkgo Mortgage Investment Corporation mortgage. That amount is not to be determined in this trial.

[4] As well, at the outset of trial an issue was raised about the extent to which the quantification of the amount owing under the Canadian Investment Corporation (“CIC”) mortgage was properly part of the hybrid trial. CIC held the first mortgage prior to the sale, and it was CIC that purported to sell the property under power of sale.

[5] The applicants viewed the quantification of the amount owing under the CIC mortgage as part of question #1, arguing that the amount claimed as owing set out in the Notice of Sale was grossly inflated. After discussion, the parties agreed that the following issue could be determined in the hybrid trial as part of question #1:

Is the amount of the [CIC] mortgage set out in the Notice of Sale dated November 28, 2013, overstated by the inclusion of those expenses set out in Exhibits A and B of the Supplemental Affidavit of George Safarion sworn August 10, 2014, excluding those expenses incurred after August 2013?

[6] Other issues regarding the quantification of the CIC mortgage, and other matters raised in the application, are not being determined at this time. The sale of a property at 65 Malmo Court, Vaughan, forms part of the materials, but it is not the subject of any of the specific questions to be answered in this hybrid trial.

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[7] In accordance with the order of Penny J., the trial evidence included written evidence by way of affidavits, transcripts and other documents, as well as viva voce evidence from certain witnesses.

Overview of impugned transaction

[8] Before the impugned sale, the Scollard property was owned by the respondent Metropolis Properties Inc. Metropolis did not appear at trial.

[9] There were numerous encumbrances on the property. At the time of sale, the first mortgage was held by CIC. There then followed twelve more mortgages, held by various of the applicants either as sole mortgagee or along with other applicants. At time of the sale, the applicants’ mortgages secured the aggregate principal sum of approximately $4,165,000.

[10] The main witness for the applicants was Harvey Margel. He is a real estate lawyer who was counsel to the mortgagees on eleven of the twelve subsequent mortgages held by the applicants. He also had an indirect personal interest in two of the mortgagees, specifically Regard Investment Ltd. and Beaver Investments Pond Ltd., and those companies were mortgagees on seven of the mortgages. He did not act for the applicant/mortgagee 527540 Ontario Limited. There was also one further mortgagee for a period of time, 2329916 Ontario Limited; however, it did not have a charge at the time of the impugned sale and did not participate in this trial.

[11] CIC was not the original first mortgagee. The first mortgage was originally held by Equitable Trust, securing the principal sum of $1,200,000. That mortgage was registered in 2004, when Metropolis purchased the property. The first mortgage was transferred to a group of individuals (the “Yermus Group”) on November 24, 2009. At that time, a notice pursuant to section 71 of the Land Titles Act, R.S.O. 1990, c. L.5, was registered against title to the property, providing notice that the terms of the mortgage were amended to reduce the principal secured by the mortgage from $1,200,000 to $710,000, among other changes. CIC took an assignment of the mortgage from the Yermus Group on August 9, 2013. At that time, the mortgage was transferred without discount, for the full value of $779,720.86.

[12] There is a family connection between Metropolis and CIC. Arash Missaghi has for many years been the manager of Metropolis. His wife is a director. At the relevant time he was an undischarged bankrupt and therefore not able to be a director. His father is Hosseingholi Missaghi, who is one of three directors of CIC and, on the trial evidence, the person in charge of the sale under power of sale.

[13] CIC is accused of fraud in these proceedings. However, the applicants submit that they need not prove fraud to succeed on the issues in this trial.

[14] There is no issue that in late 2013 the CIC mortgage was in default. Indeed, all of the mortgages on the Scollard property were in default and had been since early 2013.

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[15] Numerous steps had been taken as a result of these defaults. In August 2013, two of the lower-ranking mortgagees issued notices of sale, but did not proceed with a sale. Metropolis was taking steps to sell the property. It entered into an agreement of purchase and sale dated November 19, 2013, which was to close in 2014, but ultimately that sale did not proceed. Both CIC and subsequent mortgagees also delivered notice of attornment of rents. Mr. Margel testified that he dealt with Wendy Greenspoon, external counsel to CIC, about these competing notices. They agreed that Ms. Greenspoon would collect the rents and use those funds to pay the municipal realty taxes, which were in arrears.

[16] According to CIC, it commenced power of sale proceedings in November 2013 using a Notice of Sale dated November 28, 2013. CIC submits that the notice was properly served on the applicants in early December 2013, a proposition that is highly disputed. That evidence is discussed in more detail below.

[17] The Notice of Sale stated that the amount due under the CIC mortgage totaled $3,271,947.36, including $2,988,966.14 for principal, interest and costs. Thus, according to the Notice, the amount secured under the CIC mortgage had quadrupled in the approximately five months since CIC acquired the mortgage.

[18] The property was listed in February 2014 and was ultimately purchased by 2413913 Ontario Limited for $5,875,000, by agreement of purchase and sale dated March 11, 2014, as later amended. From the standpoint of the purchaser, the transaction took place under CIC’s power of sale. The sale closed on June 6, 2014.

[19] Mr. Mohammed, a director of the purchaser, testified about how he became aware of the property. Mr. Mohammed was in the business of buying and developing properties. I found him to be a straightforward and credible witness, who testified to the process he went through to assess the property, obtain financing and facilitate 2413913’s purchase of the property. While allegations of fraud have been made against CIC in these proceedings, no allegations of fraud have been made against Mr. Mohammed or the companies involved in the purchase.

[20] I accept Mr. Mohammed’s evidence that he was introduced to the property by a real estate broker in his building who he had previously done business with, and that he had no prior connection with CIC or Metropolis. I further find that 2413193 was a bona fide purchaser for value of the Scollard property. 2413913 was independent of Metropolis, CIC and the Missaghi family. This was not seriously contested by any party in closing argument at trial. The key issue, as regards the purchaser, is whether or not the purchase was “without notice” that the sale under power of sale was defective. Mr. Mohammed had some notice of the alleged defect. That too is discussed in more detail below.

[21] The respondent Ginkgo Mortgage Investment Corporation provided financing to the purchaser of $3,650,000 and took a first mortgage on the property. In closing argument at trial, no one suggested that the first mortgagee was other than a third party encumbrancer for value without notice, and I find on the evidence that it was.

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[22] There were also subsequent mortgages registered against the Scollard property as part of the purchase; however, each of those mortgagees had some connection with Mr. Mohammed, which gives rise to the question of whether or not they too had notice of a defect in the power of sale proceedings.

[23] When CIC completed the sale, it delivered to its counsel a discharge statement claiming that about $6.01 million was outstanding under its mortgage. This represented an approximate 800% increase in the amount of the mortgage from the date it acquired the mortgage in August 2013. This amount also slightly exceeded the sale price. Accordingly, no sale proceeds were distributed to any mortgagee other than CIC. In connection with the closing of the sale, the applicants’ mortgages were all expunged from title.

[24] In the time period leading up to and after the sale closed on June 6, 2014, there was considerable activity in relation to the Scollard property that is inconsistent with the suggestion that the applicants received the November 2013 Notice of Sale. Briefly, that activity included the following steps.

[25] On February 18, 2014, 2329916 Ontario Limited issued demands, and commenced receivership proceedings against Metropolis in respect of both the Scollard property and the Malmo property.

[26] That receivership application was terminated on June 3, 2014 when counsel for Metropolis delivered a bank draft for the full payment due to 2329916. On that day, D. Brown J., as he then was, ordered that the receivership application be treated as withdrawn.

[27] On the next day, June 4, 2014, Mr. Margel issued demands on behalf of all of the mortgagees he acted for, specifically all but CIC and 527540. A second receivership application, i.e., this proceeding, was then commenced on June 9, 2014. Thus, this proceeding, seeking a receivership over the Scollard property, was commenced three days after the sale of the Scollard property.

[28] I accept the trial evidence showing that this receivership application was served on CIC, even though CIC denies receiving it. Courtesy copies were also served on Wendy Greenspoon as counsel for CIC.

[29] On June 11, 2014, Wilton-Siegel J. ordered that the receivership application would be heard on June 16, 2014. He ordered that, in the interim, Metropolis and CIC were not to encumber, sell or otherwise dispose of the Scollard property.

[30] On June 16, 2014, the matter came before D. Brown J. once again. Metropolis appeared through counsel, and advised that it did not oppose the appointment of the Receiver. Justice Brown appointed MNP as receiver of the Scollard property.

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[31] At no point did Metropolis or anyone else advise the Court that CIC had issued a Notice of Sale, or that the property had already been sold. Nor did CIC (or its counsel) respond in any way to the receivership proceedings, despite being given notice.

[32] In the course of its duties as court-appointed receiver, MNP took possession of the property on June 17, 2014 and changed the locks on June 19, 2014.

[33] On June 26, 2014, the receiver attended at the property and discovered that the locks had been changed again, and a notice affixed to the door. The notice was a letter from a lawyer, Jonathan Ricci, advising that ownership of the property had been transferred to 2413913 by power of sale on June 6, 2014.

[34] According to the applicants, this was how they learned of the power of sale proceedings. The applicants moved immediately for an order setting aside the sale. The parties attended before Brown J. on July 10, 2014. Justice Brown’s endorsement made that day read, in part, as follows:

The evidence shows that some person or persons are interfering with the Receiver’s performance of its duties and, as well as, that serious questions exist about the legality of the sale of the property on June 6/14 from [CIC] to 2413913 Ontario Ltd. and the legality of the 4 mortgages registered against the Property on June 6 and 17/14…. Serious questions also exist about whether the debtor, Metropolis, through its counsel, misled this Court on June 11 and 16/14. These questions must be answered.

[35] Justice Brown ordered production of documents in relation to the Notice of Sale. The court proceedings then continued with cross-examinations and other steps, including Penny J.’s order for this hybrid trial.

Amount due under the CIC mortgage

[36] Among other requirements, a notice of sale must state the amount due on the mortgage under which the power of sale is being exercised. This is important, among other reasons, because it tells the recipients how much money is needed to exercise the right of redemption. The Notice of Sale relied upon in these proceedings, dated November 28, 2013, stated that the principal, interest and costs as of that date totaled $2,988,966.14. The Notice of Sale gives other figures, such as the power of sale fee, but it is the above figure that is at issue. The applicants say it is incorrect and that by itself invalidates the power of sale.

[37] When CIC took its assignment of this mortgage, the total amount outstanding under the mortgage, as at August 7, 2013, was communicated by the then mortgagees’ counsel to CIC’s counsel. The total amount outstanding was $764,290.90. In turn, that sum, plus legal fees and disbursements of $15,429.96, was required to be paid on closing. The interest per diem was

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$164 per day. The assignment occurred on August 9, 2013. The mortgage was not assigned at a discount.

[38] Thus, for the Notice of Sale to be correct there had to be additional expenditures properly accrued under the mortgage of more than $2,000,000 as of the date of the Notice of Sale less than five months later.

[39] CIC put forward an affidavit of George Safarian, one of the three directors of CIC and its president. He attached the calculations by which he said the total amount outstanding under the CIC mortgage came to be $6,010,856.32 by the date of sale on June 6, 2014. Those figures are broken down by date and are relied upon by CIC to substantiate the amount included in the Notice of Sale as of November 28, 2013.

[40] According to those figures, the amount in the Notice of Sale is justified by series of expenditures for “property management” and “maintenance” stretching back to 2009, years before the assignment. The expenditures that predate the assignment of the mortgage to CIC total more than $1.1 million, and interest was accrued on those amounts, resulting in the bulk of the very substantial increase in the amount said to be owing under the then CIC mortgage.

[41] The evidentiary record before me does not provide an adequate foundation to conclude that the pre-assignment amounts were properly included by CIC as amounts due under the mortgage. There is no satisfactory explanation for why, if they were proper expenditures under the mortgage, they were not included in the amount outstanding at the time of the assignment of the mortgage to CIC. Mr. Safarian’s affidavit offers no explanation, nor does he purport to have personal knowledge or any belief in that regard.

[42] CIC’s position that the amount in the Notice of Sale is justified by the pre-assignment expenditures is inconsistent with the letter by counsel to the Yermus Group that set out the amount outstanding at the time of assignment. That letter makes no reference to any amounts being left out of what it describes as the total amount outstanding under the mortgage. The CIC position is also inconsistent with Mr. Margel’s evidence based upon his direct involvement in the assignment.

[43] At final argument, CIC relied on Mr. Mehta’s trial evidence that he recalled seeing an agreement between CIC and the Yermus Group under which CIC had control of the mortgage before the assignment. However, he did not have a copy in his file and he did not purport to recite its terms in any detail. Most significantly, no such agreement was introduced into evidence by CIC.

[44] The other evidence comes from Arash Missaghi of Metropolis. His evidence was filed in writing, including an affidavit and a cross-examination transcript. His cross-examination included some weak evidence adduced through leading questions by CIC, which was not adverse in interest. It was suggested to him that CIC was paying the “costs” of the Scollard property from 2009 and “everyone” understood they would be added to the amount of the first mortgage.

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The small amount of non-leading evidence from this witness does not justify this conclusion nor were any documents put forward evidencing this alleged understanding. At most, this evidence shows that Arash Missaghi was aligning himself with his father’s company, CIC.

[45] The list of amounts that CIC put forward to justify the increased amount also includes amounts said to be expended post-assignment. These entries also raise questions. For example, in December 2013 there is an amount of almost $450,000 described as “Mortgage management” “As per agreement with Metropolis” “Metropolis is assessed with a 15% rate on entire outstanding mortgage amount including all fees and interest.” Similarly, in March 2014 there is an amount of almost $415,000 that is described as “Admin fee” “As per agreement between Metropolis and CIC; 10% fee on entire amount owing”. There are several other entries that give rise to questions.

[46] As agreed between the parties, the question of whether the post-assignment amounts should have been added to the amount due under the CIC mortgage is not being addressed now. For this trial, the only issue is the propriety of including the pre-assignment amounts in the sum set out in the Notice of Sale.

Service of Notice of Sale

[47] The question of whether or not the Notice of Sale was actually sent to the applicants is the subject of significant dispute. Both the purported sender of the Notice of Sale and the purported recipient for most of the applicants testified at trial.

[48] CIC retained Rasik Mehta to act for it in connection with the power of sale proceedings. Mr. Mehta had been called to the Bar that year, and had been in sole practice for a few months. He had not previously undertaken a power of sale.

[49] There is no dispute that Mr. Mehta prepared a Notice of Sale dated November 28, 2013.

[50] The required manner of giving notice is set out in s. 33 of the Mortgages Act, R.S.O 1990, c. M.40. A notice of sale may be served personally or by registered mail. Mr. Mehta testified that he served all the mortgagees (other than his client CIC) by registered mail. There is no issue that the Notice of Sale was served personally on Masoumeh Shaer Valaei for Metropolis, Arash Missaghi, and his spouse, Laila Alizadeh, also a principal of Metropolis. All three came to Mr. Mehta’s office to pick up the Notice of Sale. Each signed a receipt dated December 4, 2013.

[51] With respect to service by registered mail, Mr. Mehta testified that he prepared envelopes enclosing copies of the Notice of Sale, addressed them to the mortgagees who are now the applicants, took them himself to the post office and had them sent by registered mail.

[52] Eleven of the twelve envelopes were addressed to Mr. Margel as the representative of eleven of the mortgagees. Mr. Margel testified that he did receive those eleven registered mail envelopes. He still has them. However, he testified that they did not contain copies of a Notice

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of Sale. He testified that they each contained a letter from Mr. Mehta regarding the payment of taxes in connection with the Scollard property. Those envelopes were introduced into evidence at trial, and each currently contains an original signed letter from Mr. Mehta dated November 27, 2013, regarding the payment of taxes.

[53] Mr. Mehta testified that he sent these tax letters to the same list of recipients by regular mail, in the same large size envelopes as the Notice of Sale, the day before he sent the Notices of Sale.

[54] Mr. Margel testified that he found it odd to receive the tax letter at all, and also to receive it by registered mail. He already had an understanding with a different lawyer for CIC about the taxes, Ms. Greenspoon. She was collecting rents from the Scollard Property and applying those amounts to pay the taxes.

[55] Mr. Margel was also dealing with another lawyer, Robert Pollock, about the potential assignment of one of the mortgages on the Scollard property. They had discussed the possibility of a CIC power of sale by email in November 2013, as something that might have an impact of the proposed assignment. Mr. Pollock noted that CIC had refused to provide him with a mortgage statement on its first mortgage.

[56] At the time Mr. Margel received the registered mail envelopes in early December 2013, he called Mr. Pollock. He called him about the tax letter and its manner of transmission by registered mail. After discussion, Mr. Margel decided that no further steps were required in response to the tax letter. It was unusual, but the letter did not call for a response. Mr. Pollock also testified at trial, confirming the call and the subject matter of the call.

[57] As for 527540, the mortgagee that Mr. Margel did not represent, the address for that registered mail was the home address of the President of that company. In her affidavit, the President attested that she searched the files and no Notice of Sale was discovered in 527540’s files.

[58] Other than the evidence of Mr. Mehta about sending the Notice of Sale to Mr. Margel, the main evidence before me that asserts that Mr. Margel actually received the Notice of Sale comes from Arash Missaghi of Metropolis. In his affidavit, he directly challenged Mr. Margel’s account of the events. He was cross-examined, but at that stage of the proceedings it was more in the nature of a discovery by the applicants, and a self-serving cross-examination by CIC. That material forms part of the evidence on this hybrid trial. Mr. Margel testified at trial that Mr. Missaghi’s account of events is false.

[59] Mr. Missaghi attested in his affidavit that he first learned of the Notice of Sale from Mr. Margel, who called him after receiving it. Mr. Missaghi said that he then contacted Mr. Mehta and ascertained that the Notices addressed to Metropolis and Ms. Alizadeh had been sent to old addresses, which was why he had not received them. He attested that he therefore arranged to go to Mr. Mehta’s office to pick them up. Mr. Missaghi further attested that after he picked up the

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Notice of Sale he discussed it with Mr. Margel at a restaurant that they sometimes went to together.

[60] Mr. Missaghi’s affidavit is based on a false premise. He said that the Notices were served on Metropolis, Ms. Alizadeh and himself by mailing them to old addresses and that is why he had not received them. He said he discussed this with Mr. Mehta. This in direct conflict with the documentary evidence. The record contains numerous copies of the registered mail and postal receipts that comprise the evidence of what was sent by registered mail. Mr. Mehta did not serve those three Notices by mail to old addresses or otherwise. Only twelve envelopes were sent by registered mail, eleven to Mr. Margel and one to 527540.

[61] Nor did Mr. Mehta testify that he first sent those three notices by registered mail. Nor did he testify that Mr. Missaghi contacted him about the Notice of Sale having spoken to Mr. Margel about it, nor that on discussion with him they ascertained that the Notices were sent to out-of-date addresses. Indeed, Mr. Mehta testified, in the course of explaining a cover memo he wrote, that it was incorrect to say that the Notices had previously been mailed to those three recipients.

[62] Mr. Mehta was called as a witness by CIC. Presumably, if evidence from Mr. Mehta supporting Mr. Missaghi’s account of the events had been available, it would have been introduced. Arash Missaghi could also have been called as a trial witness to explain the inconsistency in his evidence, and respond to Mr. Margel’s evidence that Mr. Missaghi was lying.

[63] Given the fundamental conflict between Arash Missaghi’s evidence and the uncontested historical documents, I am not prepared to accept his evidence about how he learned of the Notice of Sale.

[64] Neither side squarely put their theory of what actually happened to the opposing witness. I have taken this into account. However, each side put forward some other evidence in support of their submission that either Mr. Margel’s or Mr. Mehta’s evidence should be preferred.

[65] The applicants put forward evidence that Mr. Mehta was somewhat disorganized in his practice and with his files and documents at the relevant time. The applicants rely on the fact that Mr. Mehta’s file, which was ordered produced by Brown J., was not all produced at once. Some important documents from the file did not surface until after the file was first produced. Some expected documents were not in the file at all. And Mr. Mehta had a practice at the time of deleting all soft copies of the documents that he prepared. The applicants submit that Mr. Mehta was relying on his file in his evidence and since the file is unreliable, so is his evidence.

[66] The evidence put forward as regards Mr. Margel falls into two categories. First, a number of relatively small errors in his affidavits were identified. While it is obviously not desirable to have any errors in an affidavit, the particular errors were of the sort that do occur from time to time, especially in “real-time” litigation. Having heard that evidence, I conclude that they do not

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demonstrate any intention to mislead on the part of Mr. Margel. Second, the parties rely on a finding of professional misconduct against Mr. Margel from more than twenty years ago. That case involved a number of real estate transactions and included a finding that he prepared an affidavit that wrongly stated the consideration when he knew the actual consideration. At trial, Mr. Margel took full responsibility for his discipline history, as he should do. Having heard his testimony, I conclude that this evidence does not shed light on the issues.

[67] The applicants do not suggest that Mr. Mehta was himself perpetrating a fraud. They submit that Mr. Mehta simply made a mistake. He thought he had put the Notices of Sale in those envelopes. The type of envelope was the same. The addressees were the same. The intended sending of the tax letter was very proximate in time. It was human error.

[68] The respondents have not put forward any credible theory to explain why Mr. Margel would receive the Notices of Sale and then deny that he had done so and deliberately falsify the contents of the original envelopes that form part of the trial evidence. There were good reasons for Mr. Margel to act on the Notice of Sale. All of his clients would have had a right to redeem to consider. Mr. Margel had an indirect personal stake in seven of the mortgages.

[69] Mr. Margel testified that if he had received the Notice of Sale he would have taken immediate steps to challenge it because of the amount claimed under the CIC mortgage. Mr. Margel was personally involved in the transaction under which CIC took its assignment of the first mortgage for $779,720.86. The amount claimed on the Notice of Sale had quadrupled in a matter of months. Obviously, the veracity of that amount would have a substantial impact on the likelihood that the other mortgagees would realize on the debts owed to them, including those in which he had an indirect ownership interest.

[70] Given the history of the dealings regarding the Scollard property, the trial evidence and the steps taken by Mr. Margel in June 2014 when he tried to put in a receiver on the Scollard property, I conclude that he would have taken immediate steps to challenge the amount said to be due under the CIC mortgage had he received the Notice of Sale.

[71] Based upon on all of the trial evidence, I find that Mr. Mehta intended to serve the Notice of Sale and honestly believes that he did so. He thought the Notice of Sale was the document he had put in the envelopes. But I find that it is more likely than not that through human error the envelopes that were sent out by registered mail contained the tax letter, not the Notice of Sale. I therefore find that the Notice of Sale was not served on the mortgagees.

Notice to purchaser

[72] The applicants submit that the purchaser had notice of the defect in the power of sale process. They rely on an email dated May 16, 2014, which was sent to the purchaser’s counsel.

[73] Jonathan Ricci, a real estate lawyer and counsel to the purchaser, testified at trial. As of about May 2014, he was approached by Mr. Mohammed to act on the purchase of the Scollard property. He had previously acted for Mr. Mohammed. He declined the retainer because he was

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already retained by Metropolis in relation to its sale of the Scollard property. He told Mr. Mohammed that he was retained on another transaction regarding the same property, but did not disclose any details of the transaction given his confidentiality obligations to his then client Metropolis.

[74] As of May 2014, the first receivership proceeding was ongoing. Metropolis had retained litigation counsel to represent it in that proceeding.

[75] Mr. Ricci testified that he was instructed by Metropolis to send an email on May 2, 2014, to Metropolis’ litigation counsel. In that email, Mr. Ricci advised that he was acting on behalf of Metropolis in connection with a pending sale of the Scollard property by Metropolis, which was scheduled to close on May 20, 2014. He further stated he was retained for the refinancing of the property in the event that the sale was not completed.

[76] In his email, Mr. Ricci indicated that he was in the process of receiving information and preparing documents for closing. Mr. Ricci testified that he was expecting to receive various documents and information from Metropolis in connection with this retainer, but nothing was forthcoming. He testified that as a result, very shortly after sending the above email, he terminated his retainer with Metropolis and accepted the retainer from Mr. Mohammed. By May 7, 2014, he was sending out a requisition letter on behalf of one of Mr. Mohammed’s companies.

[77] Mr. Ricci’s May 2, 2014, email made its way to other counsel in the receivership proceedings, presumably forwarded by Metropolis’ litigation counsel.

[78] Just before this time period, the Malmo property had been sold by CIC, as first mortgagee, under power of sale. That property was also owned by Metropolis and many of the same parties were involved as mortgagees. The sale by CIC occurred in circumstances that left the mortgagees subsequent to CIC without any proceeds. Serious concerns about that transaction had been raised in the receivership proceedings and are now the subject of separate litigation.

[79] After receipt of the May 2, 2014 Ricci email, one of the counsel to other mortgagees sent an email to Mr. Ricci. That email was sent on May 16, 2014, from Doug Bourassa, and read as follows:

You provided an email to [Metropolis’ litigation counsel] dated May 2, 2014 (see attached) in which you advised that you are acting for Metropolis Properties, and that you were ‘in the process of receiving mortgage statements from mortgagees and preparation of documentation for closing.’

Today, none of the mortgagees ranking 2 through 13 have received a mortgage statement request from your office. Nor have we received any communication from the purchaser or the purchaser’s counsel.

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Kindly advise of the status of this pending transaction, or provide particulars of any transaction in respect of the property of which you are aware.

Please note that my clients have never received any notice of sale from the 1st ranking mortgagee [CIC] (which is a related corporation to Metropolis). Any attempt by the 1st mortgagee to sell under power of sale will be invalid. [Emphasis added.]

[80] The email was, in essence, a “shot in the dark”, arising from the events that had transpired in the receivership proceedings, including the sale by CIC of the Malmo property under power of sale. A similar email was sent to Metropolis’ litigation counsel.

[81] Thus, through the above course of events, an email was sent to Mr. Ricci on the understanding that he was real estate counsel to Metropolis but was received by him when he was acting for the purchaser of the Scollard property. It is now accepted that the email to Mr. Ricci means the information in the email was conveyed to his client, the purchaser. Indeed, Mr. Ricci told Mr. Mohammed about the alleged problem with the power of sale.

[82] Neither Mr. Ricci nor Metropolis’ litigation counsel replied to Mr. Bourassa’s email. No one told Mr. Bourassa that there was, in fact, a power of sale being exercised by CIC. No one challenged the statement in the email that there had been no notice of sale given by CIC to the subsequent mortgagees.

[83] After receiving the above email, Mr. Ricci contacted Mr. Mehta. He did not tell Mr. Mehta that service of the Notice of Sale was being challenged. He asked and was told that the Notice of Sale went out properly. Mr. Mehta sent a copy of the Notice of Sale and registered mail documentation to Mr. Ricci’s law clerk. Based upon that information, Mr. Ricci told Mr. Mohammed that he had evidence that the Notice of Sale had been served.

[84] In addition, on June 3, 2014, before closing, Mr. Ricci obtained a statutory declaration from Mr. Mehta regarding service of the Notice of Sale.

[85] Mr. Ricci did not make any other inquiries about why Mr. Bourassa was taking the position that a sale by CIC under power of sale would be invalid. In Mr. Ricci’s testimony, his main reasons for not replying to Mr. Bourassa’s email were that it was not clear to him who Mr. Bourassa was representing and Mr. Ricci was, in any event, no longer retained on the sale by Metropolis. He also said he had some recent discord with Mr. Bourassa.

[86] Mr. Ricci told Mr. Mohammed that the problem had been addressed. The purchaser was content to go ahead and close the transaction, and did so. Subsequent mortgages (after the first charge in favour of Ginkgo) were put on the property in favour of Mr. Mohammed and his companies. They also took an assignment of the vendor take-back mortgage. As such, all of the

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mortgagees other than Ginkgo were also aware of the above email alleging no notice of a sale under power of sale.

Discussion

Question 1: Is the November 28, 2013 Notice of Sale Valid?

[87] The applicants allege that the Notice of Sale is not valid for two reasons: (1) because it was not served in accordance with the Mortgages Act; and (2) because it does not accurately set out the amount secured by the mortgage. I agree.

[88] There is no dispute that CIC had the right to institute power of sale proceedings. If a mortgage is in default for a prescribed period of time, as transpired here, the mortgagee has the power to sell all or part of the mortgaged property.

[89] The Mortgages Act prescribes the obligations on a mortgagee seeking to sell under power of sale. Compliance with the statutory conditions is a condition precedent to the valid exercise by a mortgagee of its power of sale: Re Hal Wright Motor Sales Ltd. and Industrial Development Bank (1975), 57 D.L.R. (3d) 172 (Ont. Dist. Ct.) at p. 177.

[90] The statutory conditions under which a power of sale contained in a mortgage may be exercised must be strictly complied with: Re Botiuk and Collison et al. (1979), 26 O.R. (2d) 580 (C.A.) at p. 598, per Wilson J.A. for the majority.

[91] Section 31 of the Mortgages Act demarcates who must be given notice. There is no question that notice to the applicants was required.

[92] Section 33 of the Mortgages Act determines how notice is to be given:

33.(1)A notice of exercising a power of sale shall be given by personal service or by registered mail addressed to the person to whom it is to be given at the person’s usual or last known place of address, or, where the last known place of address is that shown on the registered instrument under which the person acquired an interest, to such address, or by leaving it at one of such places of address, or, where the mortgage provides for personal service only, by personal service, or, where the mortgage provides a specific address, to such address.

(2)Where a person to be given a notice of exercising a power of sale is an execution creditor, the notice may be given in the manner provided in subsection (1) by addressing it to the solicitor who issued the execution or, where there is no solicitor, to the execution creditor. [Emphasis added.]

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[93] I have found above that the applicants were not given notice, despite the intention to do so. The obligation to give notice under s. 33 was not fulfilled.

[94] Further, the notice of sale must accurately set out the amounts due in order for the mortgagor or subsequent encumbrancers to intelligently assess their position with respect to redemption of the mortgage: Grenville Goodwin Ltd. v. MacDonald (1988), 65 O.R. (2d) 381 (C.A.) at p. 382.

[95] Focusing on the inclusion of the pre-assignment amounts only, they were not properly included in the amount due under the CIC mortgage. And this was not a minor variance that might be excused – the pre-assignment amounts and related interest comprise the majority of the amount claimed as due in the Notice of Sale.

[96] There were therefore two significant defects in CIC’s purported exercise of its power of sale. As such, the exercise of a power of sale under the Notice of Sale was not valid.

Question 2: Was 2413913 Ontario Inc. a bona fide purchaser for value without notice

of the invalidity of the sale? If so, can 2413913 obtain title to the property?

[97] I have found that 2413913 was a bona fide purchaser for value. The issue is whether it had notice of the defect and with what effect.

[98] 2413913 takes the position that even though there was some notice, the steps it took successfully restored it to the position of a bona fide purchaser for value without notice. Specifically, the purchaser relies on Mr. Ricci speaking to Mr. Mehta, obtaining documents evidencing service of the Notice of Sale by registered mail and obtaining a statutory declaration from Mr. Mehta. 2413913 therefore submits that its title is not liable to be impeached despite its notice of problems with CIC’s power of sale process.

[99] 2413913 relies on ss. 35 and 36 of the Act. Those sections provide some relief from the strict requirements of Parts II and III of the Act.

[100] Section 35 of the Act does contemplate that a statutory declaration can be conclusive evidence of compliance in appropriate circumstances. There was argument about whether it would apply in this case, but that issue is academic because the statutory declaration obtained by Mr. Ricci does not include all of the required elements under this section. Section 35 provides as follows:

Subject to the Land Titles Act and except where an order is made under section 39, a document that contains all of the following is conclusive evidence of compliance with this Part and, where applicable, with Part II, and is sufficient to give a good title to the purchaser:

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1. A statutory declaration by the mortgagee or the mortgagee’s solicitor or agent as to default.

2. A statutory declaration proving service, including production of the original or a notarial copy of the post office receipt of registration, if any.

3. A statutory declaration by the mortgagee or the mortgagee’s solicitor that the sale complies with this Part and, where applicable, with Part II. [Emphasis added.]

[101] It is now accepted that the statutory declaration that Mr. Ricci obtained from Mr. Mehta did not include all of the declarations required under s. 35. Specifically, the document does not include the declarations required by items 1. and 3. Section 35 is therefore unavailable in any event.

[102] Turning to s. 36, regarding professed compliance, s. 36 provides as follows:

Where a notice has been given in professed compliance with this Part and, where applicable, with Part II, the title of the purchaser is not liable to be impeached on the ground that the provisions of this Part or, where applicable, Part II respecting default and the provisions of this Part respecting notice, have not been complied with, but any person damnified thereby has a remedy against the person exercising the power of sale. [Emphasis added.]

[103] As put by Wilson J.A. in Re Botiuk and Collison at pp. 331 and 329 respectively, the limited role of professed compliance is as follows:

[T]he statutory conditions under which a power of sale contained in a mortgage may be exercised must be strictly complied with. They are there for the benefit of the defaulting mortgagor and they are requirements imposed by the Legislature on the exercise by the mortgagee of a self-help remedy.

…

"Professed compliance'' is not a term of art. It bears its ordinary meaning and it seems to me peculiarly apt to describe a compliance which is in reality no compliance but is put forward publicly as purporting or pretending to be such. Clearly, however, the "professed compliance" must be such as to enable the parties to whom the notice is required to be given to protect their interests. It must, in other words, identify the mortgage, stipulate the amount due thereon for principal, interest and costs and state that unless

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the sum is paid by the specified date the property will be sold. The notice in issue on this appeal did all of these things. It also identified the mortgagee and purported to be given on her behalf by her solicitors. I think the notice was unquestionably given in "professed" although not for the reasons already given in proper compliance with the Act. [Emphasis added.]

[104] Thus, section 36 provides some relief from the strictness of the power of sale requirements to protect a bona fide purchaser for value: Cranberry Cove Tower Inc. v. Monarch Trust Co., [2003] O.J. No. 2862 (S.C.J.) at para. 176, aff’d [2005] O.J. No. 272 (C.A.). However, s. 36 does not drastically undermine the express notice requirements of the Act. It provides relief from technical non-compliance, such as the failure to sign a notice, where the purchaser does not know of the alleged defect before closing.

[105] There are two problems with 2413913’s attempted reliance on s. 36. First, the opening words of the section – “Where a notice has been given” – foreclose the suggestion that the section is available where there has been no notice at all: Walter M. Taub, Falconbridge on Mortgages, Looseleaf, 5th Ed. (Toronto: Canada Law Book, 2015), at p. 35-39; Re Hyde and Besserer (1971), 1 O.R. 434 (Co. Ct.) at pp. 436-437.

[106] In Re Hyde and Besserer, although notice was given to others, no notice was given to an execution creditor. In finding that the purchaser could not rely on professed compliance, the Court held at pp. 284-285 as follows:

This section appears to relieve against non-compliance with the provision of Part II-A [now Part III] respecting default and respecting notice. As I read this section, its provisions are governed by a condition precedent expressed in its opening clause: "Where a notice has been given in professed compliance with this Part ...". The subsequent relief against non-compliance with the provisions respecting notice cannot, in my opinion, be read as including the failure to give any notice, as this would be in total contradiction to the opening clause. I interpret this section to mean that once notice of intention to sell in professed compliance with the Act has been given, then strict compliance with the Act is not required and defects in the notice or the method of service will not affect the purchaser's title. Further, I am of the view that the opening clause refers to the giving of notice to all those persons set out in s. 29(1) [now s. 32] as having an interest and that a notice given to one of them does not bring s. 29e [now s. 36] into operation with respect to the others having such an interest. [Emphasis added.]

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[107] Thus, s. 36 is not available where there is no service of the notice of sale on parties entitled to notice, as is the case here.

[108] There is a second problem with 2413913’s attempted reliance on s. 36. The protection of the section is not available where the purchaser had actual notice of the invalidity of the sale: Re Botiuk and Collison at pp. 588-589; Durrani v. Augier, [2000] O.J. No. 2960, 50 O.R. (3d) 353 (S.C.J.) at para. 58; Re Richards and DeVancker (1985), 50 O.R. (2d) 36 (H.C.J.) at p. 39. In Falconbridge, at pg. 35-39, it is put this way:

The protection of the statute, as well as that usually provided in express powers of sale, extends only to purchasers, without notice, actual or constructive, of any impropriety or irregularity.

[109] As put by Wilson J.A. in Re Botiuk and Collison, at p. 589:

Unfortunate as it undoubtedly is for the respondent purchasers, I do not think they can be viewed as bona fide purchasers without notice in view of the knowledge of their solicitors that the validity of the notice of sale was being impugned by the second mortgagee. [Emphasis added.]

[110] 2413913 submits that the threshold for notice is high, especially because the property is registered in the land titles system. The essential purpose of land titles legislation is to provide the public with security of title and facility of transfer: Durrani at para. 41. However, even in the land titles system “[i]t is always a necessary precondition for valid title that the purchaser or mortgagee be a bona fide or good faith purchaser for value without notice” [emphasis added]: Durrani at para. 58, citing United Trust Co. v. Dominion Stores Ltd. [1997] 2 S.C.R. 915.

[111] Actual notice is knowledge, not presumed knowledge. The test is whether the registered instrument holder was in receipt of such information as would cause a reasonable person to make inquiries: Durrani at para. 61, citing Canadian Imperial Bank of Commerce v. Rockway Holdings Ltd. (1996), 29 O.R. (3d) 350 (Gen. Div.).

[112] Here, 2413913 had actual notice. Its counsel received an email that stated flatly that no notice of sale had been received from CIC and any attempt by CIC to sell would be invalid. This was sufficient information to put 2413913 on inquiry.

[113] 2413913 argues that despite this notice, it could and did restore itself to the status of being “without notice” through making reasonable inquiries and receiving acceptable responses. It does not put forward authority for this, but submits that the facts in this case are unusual.

[114] In my view, this approach does not accord with the scheme of the Act or common sense. The exercise of a power of sale is governed by a system of strict statutory requirements, and limited statutory exceptions. The statutory exception in s. 36 is only available where there is no notice to the purchaser of the alleged defect. Here, 2413913 is asking to bear no risk even

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though it was on notice of an alleged defect, because of the inquiries that were made on its behalf. This approach would be cumbersome at best and only serve to introduce uncertainty into a statutory regime that is premised on strict compliance, not uncertainty. The proposed approach would allow the question of whether title can be impeached to be deferred to an after-the-fact consideration of all the circumstances to determine whether a purchaser acted reasonably in the face of knowledge of an allegedly defective notice of sale.

[115] The effect of notice is to fix the purchaser on notice of a problem with the risk. A purchaser on notice can assess its risk. After inquiry, it could decide the risk is small and decide to run that risk and close the transaction. Or it could be dissatisfied with the results of its inquiries and potentially withdraw from the purchase transaction because of the risk. Or it could pursue a ruling with the seller under s. 39 of the Mortgages Act to obtain certainty before closing. All of these avenues of relief allow the purchaser on notice to bring the matter to a head before closing. If the purchaser could, instead, attempt to rely on its inquiries to restore its status to “without notice” after closing, this would defer the problem and introduce uncertainty into the system. I therefore decline the invitation to introduce this approach into s. 36.

[116] Even if 2413913 could “restore” its status, I am not satisfied on the facts that the inquiries that were made were sufficient to satisfy a reasonable person. Looking first at what Mr. Ricci did do, it was a good first step for him to make inquiries of Mr. Mehta and obtain documents and assurances from him. However, the documents obtained were only those that related to service by registered mail. And not all required services were done in that way. If the documents had been reviewed against a list of those requiring notice, Mr. Ricci would have seen that the documents were insufficient. Since Mr. Ricci testified that he did not know who Mr. Bourassa acted for, he could not reasonably be satisfied by those documents.

[117] Further, I do not find it reasonable to take no steps to communicate with Mr. Bourassa in the circumstances. Mr. Ricci ought to have contacted Mr. Bourassa, if not before, then after receiving Mr. Mehta’s assurances, to find out what Mr. Bourassa had to say.

[118] Lastly, the statutory declaration that was obtained, which did not contain a statement that Part III had been complied with, was insufficient in these circumstances.

[119] Thus, even if the approach suggested by 2413913 applied, I find that the steps taken were insufficient to benefit from it.

[120] I conclude that 2413913 cannot rely on professed compliance as against the applicants not only because of the complete failure to give notice on the applicants but also because the purchaser did have notice that the power of sale proceedings were being impugned. I further find that even if 2413913 could have restored itself to the position of being “without notice” by making reasonable inquiries and receiving satisfactory responses, it did not do so here.

[121] I conclude that 2413913 was on notice, and it did not obtain valid title as against the applicants.

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Question 3: If the answer to question #2 is no, are the mortgages registered

subsequent to the purchase valid?

[122] The mortgages subsequent to the purchaser fall into two categories. There is the first mortgage, of Ginkgo, which was a bona fide encumbrancer for value without notice. There are then the remaining mortgagees, which are caught by the same notice received by the purchaser given that Mr. Mohammed was involved in all of them. One of those mortgages began as a vendor take-back mortgage and was then assigned to 2421995. In taking that assignment, 2421995 was caught by notice along with the others. As a result, all of the subsequent mortgagees are in the same position as 2413913, without valid charges as against the applicants. Only Ginkgo is in a different position, with a valid mortgage. And Justice Penny has already ruled that “it is clear that Ginkgo will have a claim to an equitable charge.”

Question 4: If the answer to question #3 is no, do the mortgagees have an equitable

subrogated interest if they advanced funds?

[123] The mortgagees that hold mortgages subsequent to Ginkgo also claimed an equitable subrogated interest, the extent of which they submitted was not to be determined in this trial.

[124] The applicants agree that since CIC received the benefit of the new mortgage advances, Ginkgo and the other new mortgagees are entitled to an equitable subrogated interest in the Scollard property. However, the applicants say that the aggregate amount of any charges in priority to the applicants’ should not exceed the amount that was properly secured by the CIC mortgage at the date of closing. That amount remains the subject of dispute. If the CIC charge was properly for the amount claimed to be due at the time of closing, there will likely be no issue about the position of the various mortgagees. However, if it is a lower amount, there likely will be an issue.

[125] The fundamental principle underlying the doctrine of equitable subrogation is fairness, in light of all the circumstances. Where the parties have been replaced to their former positions by subrogation, no injustice is done: O’Brien v. Royal Bank of Canada, [2008] O.J. No. 653 (S.C.J.) at para. 27.

[126] There was considerable disagreement between the parties at trial about the extent to which all or part of a remedial order was to be determined during this trial. The applicant sought an order restoring title, but did not fully address the outcome for CIC in that regard, or the specific orders that would be needed to deal with the land titles registry. Ginkgo asked for relief at this stage as well, based upon the doctrine of deferred indefeasibility: Lawrence v. Wright, 2007 ONCA 74. However, a number of the other respondents submitted that remedy was meant to be dealt with in the second stage, including the question of to what extent any mortgagee could be put back on, or remain on, title. Certainly, the quantification issues were mainly left to the second stage.

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[127] Having reviewed the pleadings, the order for trial of certain issues and the parties’ submissions, I conclude that the parties should have an opportunity, now, to make submissions about how these matters should be addressed given this judgment.

[128] The parties shall therefore make brief written submissions about how they propose that remedy and any other remaining issues should be addressed. Any party is free to submit that there is an adequate record and no prejudice to dealing with some remedial orders now, if that is their position. The applicants shall deliver their written submissions by September 4, 2015. The respondents shall deliver their written submissions by September 9, 2015. Any party may reply by September 11, 2015. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by September 4, 2015. If a case conference would be helpful, one can be arranged through my office.

[129] If the parties are unable to agree on costs of the trial, any party claiming costs shall make their submissions by delivering brief written submissions together with a bill of costs by September 11, 2015. Any responses to costs claims shall be made by delivering brief written submissions by September 30, 2015. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by September 11, 2015.

Justice W. Matheson

Released: August 21, 2015

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DATE: 20150821

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Stanbarr Services Limited, Janodee Investments Ltd., Meadowshire Investments Ltd., Regard Investments Ltd., 1563503 Ontario Limited, Beaver Pond Investments Ltd., The Canada Trust Company, Rita Rosenberg and 527540 Ontario Limited

Applicants

– and – Metropolis Properties Inc., Ginkgo Mortgage Investment Corporation, Canada Investment Corporation, 2413913 Ontario Limited, 2421955 Ontario Inc. and Sai Mohammed

Respondents

REASONS FOR JUDGMENT

Justice W. Matheson

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DATE: 20160509

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Stanbarr Services Limited, Janodee Investments Ltd., Meadowshire Investments Ltd., Regard Investments Ltd., 1563503 Ontario Limited, Beaver Pond Investments Ltd., The Canada Trust Company, Rita Rosenberg and 527540 Ontario Limited, Applicants AND: Metropolis Properties Inc., Ginkgo Mortgage Investment Corporation, Canada Investment Corporation, 2413913 Ontario Limited, 2421955 Ontario Inc. and Sai Mohammed, Respondents BEFORE: Justice Matheson

COUNSEL: Stephen Schwartz and Doug Bourassa, for the Applicants

Richard Quance for the Respondent Canada Investment Corporation Mark Veneziano and Jaclyn Greenberg for the Respondent 2413913 Ontario Limited Philip Polster for the Respondent Ginkgo Mortgage Investment Corporation Salma Sheikh for the Respondents 2421955 Ontario Inc. and Sai Mohammed No one appearing for Metropolis Properties Inc.

HEARD: In writing.

COSTS ENDORSEMENT

[1] This costs endorsement arises from a hybrid trial of certain issues, as directed by the order of Penny J. dated October 3, 2014. The decisions arising from the trial are found at 2015 ONSC 5249 and 2016 ONSC 1258. The factual background to this case is extensively set out in the above decisions and will not be repeated here.

[2] The applicants were successful in their claims against all but one of the respondents that participated in the hybrid trial. They were unsuccessful as against the respondent Ginkgo.

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General principles

[3] The general principles applicable to the order of party and party costs are well settled. Costs are discretionary. Rule 57.01 of the Rules of Civil Procedure sets out factors I may consider in exercising my discretion, in addition to the result of the proceeding and any written offers to settle. Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634, 71 O.R. (3d) 291 (C.A.) at paras. 26, 38.

[4] Certain general principles have now been expressly articulated in subparagraphs (0.a) and (0.b) of Rule 57.01, specifically the principle of indemnity and the affirmative obligation to consider the amount of costs than an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed.

Costs against unsuccessful respondents

[5] The applicants seek substantial indemnity costs against the respondents CIC and 2413913, and partial indemnity costs against the respondents 2421955 and Sai Mohammed. The total costs claim on a substantial indemnity basis is about $200,000, and on a partial indemnity basis is about $143,000.

[6] I am not persuaded that there should be an order for substantial indemnity costs against either CIC or 2413913. Although there remain open allegations of fraud against CIC, they were neither determined nor abandoned as part of the hybrid trial. A substantial part of the allegations regarding the amounts in the Notice of Sale also remains to be determined. As for 2413913, the reasons put forward relate to the receivership itself and not the hybrid trial.

[7] CIC seeks to resist costs altogether due to the unproved allegations of fraud. This overlooks the bifurcated nature of this proceeding. Those allegations did not form part of the hybrid trial, but they may yet be pursued. CIC may seek costs in that regard at a later stage.

[8] As the successful party, the applicants shall have partial indemnity costs against CIC, 2413913, 2421955 and Mr. Mohammed.

[9] I accept the applicants’ submissions that the matters at issue were important, the quantum significant and the proceeding complex. Without limiting the other issues raised regarding these costs, all of which I have considered, the two main remaining issues are quantum, and whether or not all the unsuccessful respondents should be jointly and severally liable for the total amount of costs awarded.

[10] Beginning with quantum, the respondents have raised a number of issues and generally submit that an award of around $70,000 would be appropriate. I have taken all relevant factors into account for a partial indemnity costs claim, such as insufficient delegation, some duplication and some excess disbursements, among other things. I have also taken into account the bills of costs tendered by other parties, showing their lower amounts. However, it is more time-

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consuming for the applicants to make out their case than for an individual respondent, at least in the circumstances of this case. Having regard for all factors, I exercise my discretion to fix the applicants’ costs at $120,000, all inclusive.

[11] There remains the issue of whether these costs should be payable jointly and severally. It is open to me to make several costs orders: Society of Lloyd’s v. Saunders, [2001] O.J. No. 5144 (C.A.). In this case, it would be profoundly unfair for any one of 2413913, 2421955 or Sai Mohammed to be called upon to pay all of the above costs. CIC was responsible for the invalid power of sale proceedings. The other three unsuccessful respondents were independent of CIC. They were related to each other through Mr. Mohammed, and ultimately in a similar situation with regard to notice as a result. The time spent on trial evidence and argument was mainly in regard to the power of sale proceedings undertaken by CIC. 2413913, 2421955 and Sai Mohammed were secondary from that standpoint. I conclude that fairness requires a several order to some extent. I therefore order that $80,000 of the costs be paid by CIC and $40,000 jointly and severally by the other three unsuccessful respondents.

Costs claim of Ginkgo

[12] In regard to Ginkgo, the applicants ask to be relieved from paying costs because they too were victims of the invalid power of sale. Alternatively, the applicants’ request a Sanderson order under which any costs payable to Ginkgo would be paid directly by the unsuccessful respondents.

[13] Ginkgo successfully defended the claim against it. It seeks costs of about $72,000 on a full indemnity basis or, alternatively, about $48,000 on a partial indemnity basis. I am not persuaded either that Ginkgo ought to receive more than partial indemnity costs or that it should be denied costs altogether because the applicants were also innocent of the invalidity of the power of sale. As for the quantum, with some modest adjustments, it is reasonable. Bearing in mind all factors, I fix its costs at $45,000, all inclusive.

[14] Ordinarily, these costs would be paid by the applicants. However, here the applicants request a Sanderson order, requiring that these costs be paid by the unsuccessful respondents.

[15] As set out in Moore v. Wienecke, 2008 ONCA 162, at para. 41, the test for determining whether or not a Sanderson order is appropriate has two steps. The court must first determine whether it was reasonable to join the several defendants together in one action. If the answer is yes, the court must use its discretion to determine whether a Sanderson order would be just and fair in the circumstances.

[16] With respect to the first step, it was reasonable to join all the respondents. The applicants included all the parties who purported to take an interest in the property at issue as a result of the impugned power of sale, including Ginkgo.

[17] Moving to the second step, a number of factors have been found relevant to the question of whether a court should exercise its discretion to grant a Sanderson order. Those factors are as follows: (1) whether the defendants tried to shift responsibility onto each other at trial, as

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opposed to concentrating on meeting the plaintiff’s case; (2) whether the unsuccessful defendant caused the successful defendant to be added as a party; (3) whether the two causes of action were independent of each other; and, (4) whether there is a question about the plaintiff’s ability to pay: Moore, at paras. 46-50. These factors need not be applied mechanically in every case: Moore, at para. 45.

[18] In this case, most of these factors do not work in favour of a Sanderson order. There is no issue raised about the applicants’ ability to pay. The respondents did not try to shift responsibility onto each other. They focused on defending the applicants’ claim. Further, they did not cause Ginkgo to be added. However, Ginkgo was included as part of a single challenge to the exercise of a power of sale. These were not independent claims.

[19] Considering all factors, and the overall fairness of the situation, I am not prepared to exercise my discretion to grant a Sanderson order. In the ordinary course, the applicants shall bear the cost of their unsuccessful claim against Ginkgo.

Orders

[20] I therefore order as follows:

(i) the respondent CIC shall pay the applicants $80,000 in regard to costs;

(ii) the respondents 2413913, 2421955 and Sai Mohammed shall be jointly and severally liable to pay the applicants $40,000 in regard to costs; and,

(iii) the applicants shall pay Ginkgo $45,000 in regard to costs.

Justice W. Matheson

Date: May, 9 2016 20

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Court File No. CV-18-592103-00CL COMFORT CAPITAL INC., ET AL. and ANNIE YERETSIAN, TERRY WILSON, ET AL.

Applicants Respondents

ONTARIO

SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

Proceeding commenced at Toronto

CASE CONFERENCE BRIEF OF

ROSEN GOLDBERG INC.

BLANEY MCMURTRY LLP Barristers & Solicitors 2 Queen Street East, Suite 1500 Toronto ON M5C 3G5 Eric Golden LSO #38239M (416) 593-3927 (Tel) (416) 593-5437 (Fax) Email: [email protected] Chad Kopach LSO #48084G (416) 593-2985 (Tel) (416) 593-5437 (Fax) Email: [email protected] Lawyers for the Receiver, Rosen Goldberg Inc.

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