) ) Qutub Syed v. Said Syed, 2017 ONSC 606

CITATION : Syed v. SGH Investment Inc., 2017 ONSC 606 COURT FILE NO.: 3004/11 DATE: 2017 01 25 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) Qutub Syed and Said Syed Plaintiffs – and – SGH Investment Inc. also known as SGH Investments Inc. Defendant ) ) ) ) ) ) ) ) ) Douglas Bourassa for the Plaintiffs Antonio Conte, for the Defendant ) ) ) HEARD: November 21, 22, 23, 25, 2016 REASONS FOR JUDGMENT Woollcombe J. Introduction [ 1 ] This action arises because of a dispute between creditors over the sale of land on which a partially completed retirement home was built.

The plaintiffs, Qutub Syed and Saif Syed, claim that the defendant, SGH Investment Inc. (“SGH”) made an improvident sale of the land under a power of sale. SGH held a first mortgage over the property. The plaintiffs held a second mortgage. The sale of the property was for $2,500,000.

As a result, there were no proceeds remaining for the plaintiffs. [ 2 ] In this trial, the plaintiffs seek damages of the difference between what they say is the fair market value of the property, $3,350,000, less the amount that was owed to the first mortgagee, SGH, as of the date of the sale (about $2.6 million). [ 3 ] For the reasons set out below, I conclude that the defendant did not make an improvident sale of the land for less than fair market value. I therefore dismiss the plaintiffs’ claim.

Summary of the Relevant Evidence

a) The early development of the BRLC [ 4 ] The Bobcaygeon Retirement Land Corporation (“BRLC”) was created by a group of doctors who wished to build a retirement home. One of the individuals involved was Dr. Naseer Syed. Dr. Syed is the brother of the plaintiff Qutub Syed and the uncle of the second plaintiff, Saif Syed. [ 5 ] On July 13, 2000, the BRLC purchased a piece of property for $300,000 for the development of a retirement home. Qutub Syed, who was working as an architect in Maryland, was asked by his brother Dr. Syed to assist with the design of the home. He did so. [ 6 ] Mr.

Syed testified that in about 2006, his brother called him and asked him to come to Canada. Mr. Syed testified that when he came to Canada, he was quite pleased to see the work that had been done on the project by that time. He thought that the project was about 70 percent completed. The exterior was done, the windows were in, lots of the plumbing was done and some of the electrical work had been completed. [ 7 ] Mr. Syed testified that his brother told him that the owners were short of money. As a result, he provided them with a certified cheque for $50,000.

He also set up a joint account with his brother so that he could transfer money to him for the project going forward. [ 8 ] At the time when Mr. Syed first became financially involved with the BRLC, there were two charges on the property. First,

on March 28, 2006, BRLC had granted a mortgage on the land to Quahold Corporation for $3,600,000. Second, on June 3, 2006 the BRLC granted a charge on the property for $8,000,000 in favour of Firm Capital Mortgage Fund. [ 9 ] By early 2007, the BRLC was struggling with completion of the project. [ 10 ] On February 20, 2007, a meeting of the owners of the BRLC took place. Mr. Syed chaired the meeting. He told the owners that he had found irregularities and over-billing by the contractor, architect, project manager and possibly others.

He also told the owners that he had put $250,000 into the project and that they owed $600,000 and would owe a further $400,000 in interest on the second mortgage on February 28, 2007. [ 11 ] One of the owners of the BRLC, Dr. Bharat Chawla, testified that because the owners were having difficulties, he had invited Sudhir Madan to this February 20, 2007 meeting to give the owners some advice about how to move the project forward. Dr. Chawla testified that he respected Mr. Madan and thought he could help them complete the project. Mr.

Madan told the owners that they needed to deal with the liens that had been registered on the property so that they could move the project forward. He also told them that they needed more funding. [ 12 ] A further meeting of the BRLC owners was held on March 13, 2007. Mr. Syed was again present. The minutes of the meeting indicate that “all of the shareholders accepted Q. Syed as a new shareholder and investor for the project” and that he was appointed by the shareholders to continue management of the construction. Dr.

Chawla said that by that point, the owners were tired of investing in the project and were glad that Mr. Syed was going to manage the project. [ 13 ] It was Mr. Syed’s evidence that while there was discussion about him becoming a 51 percent owner, he never accepted this. The minutes of the meeting reflect that there was a discussion about the fact that the project required between $1,500,000 and $2,000,000 and that compensation for this contribution would be 51 percent ownership. [ 14 ] In 2007, Mr. Syed put funds into the account that he held jointly with his brother Dr. Syed. Dr.

Syed wrote a cheque to Quahold Corporation on July 3, 2007 for $1,015,833.54. Mr. Syed testified that he understood that this was to make interest payments and because his brother said that he would take care of the security. He testified that after this point, it was his role to ensure that the owners of the BRLC took care of their responsibilities to pay their ongoing debts and that he wanted to protect his investment. [ 15 ] Mr. Syed denied that having put $250,000 into the investment previously, and then an additional $1,015,833.54 in July 2007, he had become a 51 percent shareholder.

He said that he did not know what the money was used for and that he was not involved with the liens or their removal. [ 16 ] It was specifically suggested to Mr. Syed that at this time, he could have bought the First Capital Mortgage and taken it over, rather than paying $1,000,000 for the liens, and that what he had done was, in fact, to become a 51 percent shareholder. He denied this. [ 17 ] In April 2008, Mr. Syed said that he was concerned that he did not have any security for his investment in the BRLC. As a result, he decided to take over the Quahold Mortgage.

On April 30, 2008, he paid $1,000,000 and, with his son Saif Syed, assumed the Quahold mortgage. He agreed that a $3,600,000 mortgage with an interest rate of 22 percent was a high rate of interest, but denied that the interest rate was high because of the high risk of the project. [ 18 ] By May 2008, the BRLC was not making its interest payments to Firm Capital. Mr. Syed testified that he and his brother and the other owners were looking for a lender to take over the Firm Capital mortgage so that the project could be completed. [ 19 ] In May 2008, Mr. Syed tried to attract additional investors.

When it was suggested to him that he was trying to find purchasers for the project, he said that he was trying to help his brother. He had some communications with Michael Chandler, the Director of Abacus, who suggested that the project might be a good fit for their Omni operations. These communications did not result in a deal.

b) The involvement of the defendant SGH in the development [ 20 ] In September 2008, Mr. Madan was again approached by the BRLC owners for assistance. Dr. Chawla called him and told him that the personal guarantees made by the investors were going to be enforced. Dr. Chawla told Mr. Madan that he was in a bad position and wanted assistance. Mr. Madan attended another meeting of the BRLC owners and told them that he could take over the first mortgage and that he would finance and finish the project. [ 21 ] On September 18, 2008, SGH Investments, Mr.

Madan’s company, signed a commitment letter to take over the first mortgage, which was in favour of Firm Capital. The assignment of this mortgage was completed and registered on October 22, 2008. Mr. Madan testified that he agreed to pay the mortgage that was owing and that the owners agreed to remove the liens. Mr. Madan also released all of the owners from the personal guarantees they had made on the original mortgage.

He testified that the investors were doctors and that he did not think they would renege on their promise, so he reduced his security and gave them some relief from their personal guarantees. [ 22 ] Mr. Madan testified that he agreed to defer interest payments on the mortgage from October 2008 to December 14, 2008 so that the owners could have the liens removed. The agreement was that the deferred interest would be payable in 2009, along with the regular monthly payments. [ 23 ] Mr. Syed gave Mr. Madan a cheque for $45,000 that was dated October 17, 2008. Mr.

Madan testified that this was security for the first interest payments, which were due to Mr. Madan in January 2009. Mr. Syed said that the partners of the BRLC were supposed to pay him back for this but that they never did so. Dr. Syed also gave Mr. Madan a cheque for $70,000 post-dated to October

17, 2008. Mr. Syed testified that these funds were provided to Mr. Madan because the legal fees charged to take over the Firm Capital mortgage were higher than Mr. Madan had anticipated. This cheque was later returned NSF. [ 24 ] On October 22, 2008, the plaintiffs postponed their second mortgage on the property so that SGH held the first mortgage. [ 25 ] Between January and March 2009, the BRLC did not make the payments that were due to SGH. Mr.

Syed testified that he contacted his brother to try to ascertain why the BRLC was not honouring its obligations. [ 26 ] On March 6, 2009, the BRLC registered a third mortgage on the property. This was for $4,890,000.00 in favour of the plaintiffs. Mr. Syed was asked why this was done. He testified that he and his son had invested about two million dollars in the project and that they only had the $1,000,000 second mortgage that they had taken from Quahold. His son had asked what they were going to do about their investment, and so they asked his brother for more security. Dr.

Syed agreed that this mortgage would be registered on the property. It was payable on demand with 18 percent interest. [ 27 ] Mr. Syed testified that he did not know if he told Mr. Madan about this new mortgage. Mr. Madan testified that he was unaware of this mortgage and did not learn about it until he saw the abstract for the property at the time he began to enforce the power of sale in May 2009.

c) The deterioration of the relationship between SGH and the BRLC leading to the power of sale proceedings [ 28 ] In 2009, payments that were owed to SGH by the BRLC were not made as they were due and interest began to accrue. [ 29 ] On March 10, 2009, Mr. Madan wrote to Dr. Syed and indicated that SGH was looking for lenders to complete the project. He indicated that to obtain financing, the corporation’s financial obligations had to be up to date. Accordingly, he asked for a cheque for $50,914.14 to cover the interest owing.

He also sought a letter from the BRLC authorizing discussions with potential lenders. [ 30 ] Mr. Syed said that he was displeased to learn that the BRLC was not making its interest payments. He spoke to his brother and testified that he had the impression that he was going to speak with his partners. Mr. Syed acknowledged that no payments were made in response to the March 10, 2009 demand letter. [ 31 ] On March 24, 2009, Mr. Madan’s office sent to Dr. Syed a proposal to undertake and complete the construction of the project.

The proposal was for the project to be completed by Ram Sharma, on behalf of Hari Kaush Developments Limited in three phases. The first phase involved negotiating the lien claims. The proposal was forwarded to Mr. Syed on April 1, 2009. He said that he gave it to his brother (who already had received it on March 24) and did not respond to it. Mr. Madan testified that the proposal was never accepted. [ 32 ] Mr. Madan deposited the $70,000 cheque he had received in the fall of 2008 and said that it was returned to him NSF on March 24, 2009.

He said he was not happy and that he had lost trust in the Syeds because of this. [ 33 ] On March 30, 2009, SGH sent a Notice of Intention to Enforce Security under the Bankruptcy and Insolvency Act to the BRLC and to the plaintiffs. The letter indicates that the outstanding arrears of $51,914.17, and the due on April 14, 2009 for payment of $21,020.17, had to be received by April 11, 2009 in order to avoid power of sale proceedings. [ 34 ] On April 21, 2009 a fax was sent by Dr. Syed to counsel for SGH authorising counsel to contact the lien holders to negotiate the outstanding liens and to begin with $50,000.

Mr. Madan said that he responded by calling Dr. Syed and telling him that he needed to provide at least $250,000 to negotiate the liens. [ 35 ] A Notice of Sale under Mortgage was issued on May 25, 2009. It indicated that the redemption period for the mortgage was until July 8, 2009. Mr. Syed received a copy of this document. Mr. Madan said that at this point, a title search was conducted on the property. It revealed liens registered by the architect for $107,263.50, by general contractor Unimac for $1,017,583.15, as well as other claims for $77,790.20 and for $62,063.00. [ 36 ] On June 30, 2009, Mr.

Syed sent an email to Mr. Madan. Mr. Syed described this as a further effort by him to have the project succeed. He said that he was interested in protecting his investment and that he had a buyer who was interested and that he wanted some time so that they could understand the project. Mr. Syed agreed to pay $10,000 in return for a suspension of SGH’s proceedings until September 30, 2009. In addition, he suggested a jointly obtained appraisal. [ 37 ] Mr. Syed’s proposal was not accepted by SGH. Mr. Madan explained why. From his perspective, the property was deteriorating as construction had ceased.

It was also costing him money because he was not receiving monthly interest payments that were owing. [ 38 ] On July 7, 2009, Mr. Madan’s counsel advised that if Mr. Syed paid $100,000, SGH would put the power of sale in abeyance. Mr. Syed did not make any payment. [ 39 ] Later that month, Mr. Madan learned that the insurance bills for the property had not been paid. On July 29, 2009, he sent a fax to Dr. Syed indicating that the Cooperators Insurance needed to be paid.

d) The listing of the property for sale beginning August 31,

2009 [ 40 ] The property was not listed for sale on July 9, 2009, as it could have been. [ 41 ] Mr. Syed was asked if he and Mr. Madan had discussed the value of the property. He testified that Mr. Madan told him that he had an appraisal of the property of $4,900,000. Mr. Syed testified that he asked to see this appraisal but that he was never shown it. [ 42 ] The property was listed for sale on MLS on August 31, 2009 for $5,200,000. The listing agent was Ashok Sharma. According to his letter of December 15, 2009 to SGH, the property was listed on MLS and was promoted in the Globe and Mail. [ 43 ] Mr.

Sharma testified that he had not previously been involved in the sale of retirement homes. He said that prior to the listing, he consulted with other agents in his office. Mr. Sharma testified that he thought the listing price in August 2009 was too high and that a price of $3,200,000 to $3,400,000 was more realistic. However, he said that it is the seller who decides the listing price and so he listed it as Mr. Madan wished. [ 44 ] Mr. Madan explained his reason for this listing price. He said that Mr.

Syed had told him that he had a buyer from Alberta who was interested in the property and that he expected that he would pay $5,000,000. Mr. Madan could not recall when precisely Mr. Syed had told him about this potential offer. When it was suggested to Mr. Madan that there was no $5,000,000 offer coming from Alberta, he agreed that this was possible. However, he said that he listed the property at $5,200,000 in order to obtain as much as possible. [ 45 ] Mr. Madan agreed that when the property was listed, he did not have an appraisal of it. He could not recall if he ever told Mr.

Syed that he had an appraisal for $4,900,000. Under re-examination, Mr. Madan clarified Mr. Syed may have been referring to the $4,786,066 figure that was listed as the value for the property in the appraisal report that was obtained later. This is the value before the discount factor of 30 percent was applied to take into account of the significant costs to complete the development, the risks and the unknown factors. [ 46 ] Mr. Madan agreed that he had wanted to have an appraisal done and that he had asked for access to the property so that an appraisal could be done.

It appears from the appraisal report that was eventually completed that the appraiser inspected the property on August 20, 2009. [ 47 ] Mr. Madan did not know if he had seen a draft of the appraisal report before the property was listed for sale. He later received the report, which valued the property at $3,350,000. It was suggested to him that he would never have listed the property at $5,200,000 had he been aware of the value determined by the appraiser. He said that he might still have listed the property over the appraised value.

He did not agree that listing over value dissuades purchasers as he said that sophisticated buyers are indifferent to the list price. He said that his idea was to obtain the maximum price possible. He thought that if Mr. Syed was in negotiations for around $5,000,000, he should list the property above that.

e) Offers made on the property [ 48 ] An offer was made to purchase the property on September 3, 2009. The offer was made by 2216787 Ontario Inc. to buy the property for $3,500,000, with a $25,000 deposit. [ 49 ] Mr. Madan signed this offer back with a purchase price of $5,000.000 and a $100,000 deposit. The purchaser signed it back at $3,600,000 with a $50,000 deposit and SGH did not accept the offer. Mr.

Madan testified that the offer was not accepted because it was conditional and that the conditions were going to take too long, potentially delaying the sale. [ 50 ] On September 25, 2009, Boswell J. granted judgment against the BRLC in favour of the defendant for $1,947,180.67, and granted possession of the property to the defendant. After this, Mr. Madan went to the property several times and observed the significant deterioration of the development. [ 51 ] Mr.

Sharma’s letter to SGH of December 15, 2009 indicates that following the listing, there was “a lot of response in the form of enquiries” but only the one offer. On November 13, 2009, the price was dropped to $4,800,000 and a new advertisement was placed in the Globe and Mail. Mr. Sharma testified that he advertised in the Financial Post, and not the Globe and Mail. When shown his letter of December 15, 2009, he could not recall in which newspaper he had advertised. [ 52 ] Mr.

Sharma’s letter lists the “overall activity” from the time the property was initially listed for sale on August 30, 2009 as including twenty-four names, although the degree of interest each had in purchasing the property is unclear. [ 53 ] A second offer was made on the property on December 15, 2009. This offer was for $2,600,000. Pradeep Kumar testified that he made this offer. Initially, it was open until January 4, 2010. He then extended it to January 20, 2010. [ 54 ] A letter from SGH’s counsel to Dr. Syed and Mr. Syed dated January 5, 2010 summarizes the status of the sale of the property at that point.

There had been two offers: one in September 2009 for $3,500,000 (by 2216787 Ontario) and a second one on December 15, 2009 for $2,600,000 (by Mr. Kumar). The second offer remained available for consideration. Counsel for SGH indicated that Mr. Madan wished to accept any offer between $2,600,000 and $2,950,000. Counsel made clear that if this fell through, his client intended to commence foreclosure proceedings as there was little equity that remained in the property after the first mortgage and liens were accounted for. [ 55 ] Mr.

Syed testified that he was deeply disappointed by this letter as he believed that the property was worth much more than that. According to Mr. Madan, Mr. Syed asked for more time. An email was sent to Mr. Madan’s counsel on January 12, 2010 by

counsel Sven Hombach, who indicated that he was in the process of being retained by the Syeds and that they were in the process of obtaining financing to redeem the first mortgage held by SGH.

Counsel asked for more time and expressed the view that selling the property at $2,950,000 would constitute an improvident sale. [ 56 ] Counsel for SGH responded on January 15, 2010 that SGH was prepared to give the Syeds an additional 90 day extension on terms that included that monthly costs of $7,000 would be paid, that $100,000 of arrears were to be paid and that monthly interest payments on the mortgage be paid. [ 57 ] SGH never signed back Mr. Kumar’s offer and it lapsed. [ 58 ] Another offer was received on January 15, 2010.

This was for $2,200,000 and was not accepted as it was too low. [ 59 ] Between January 15 and 28, 2010 there were further discussions and negotiations between counsel for SGH and counsel for the Syeds, with SGH reducing the amount that it required from $100,000 to $75,000. Ultimately, no agreement was finalized. [ 60 ] There was some discussion about a possible offer involving Paul Pearl at The Exxel Group in early February. It appears that Albert Rumph, who Mr. Madan said worked with Mr. Syed, indicated that his company was interested in assuming the mortgage for $1,730,000 with a due diligence period. Mr.

Madan made clear to Mr. Pearl that there needed to be a complete offer or steps would be taken to proceed with a judicial sale. [ 61 ] On February 19, 2010, Mr. Madan received the appraisal report for the property. It concluded that the market value of the property was $3,350,000. Mr. Madan testified that the listing price was dropped again to something in the $3,300,000 range. In fact, Mr. Sharma testified that it was not until July 23, 2010 that the listing price was reduced to $3,300,000. [ 62 ] Mr.

Madan testified that as of March 2010, he was paying about $5,000.00 a month in insurance, as evidenced by an invoice and cheque. He was also paying for security monitoring and the property taxes, for a total of $8,000 to $10,000 a month. [ 63 ] On March 15, 2010, counsel for SGH again wrote to Mr. Syed and Dr. Syed. He indicated that SGH was concerned that the property was not selling. He expressed concern that Mr. Syed had indicated that he wished to purchase the mortgage but had not taken steps to make any payments.

Counsel indicated that his client intended to continue selling under a power of sale and would proceed to auction with a reserve bid of $1,500,000. He advised that Dr. and Mr. Syed would be advised of the place and time of the auction so that they could bid or find others to bid on the property. [ 64 ] On March 31, 2010, Mr. Syed wrote to Mr. Madan in response to the March 15, 2010 letter. He testified that he was very concerned that he had invested millions in the project and that Mr. Madan was going to auction it for much less than it was worth. He referred to the fact that Mr.

Madan had told him that the property had been appraised at $4,900,000. [ 65 ] On April 5, 2010, counsel for SGH responded. Counsel again advised the plaintiff that he would be able to bid when the auction was held. Mr. Syed testified that it was his intention to attend at the auction with his son Saif and to bid on the property. He said that he did not hear anything further until after the property had been sold. He said that he was not in contact with the shareholders or his brother at the time. [ 66 ] Mr. Syed never asked where or when the auction would be as he said that he expected to be told.

He insisted that he had the resources to bid on the project. It was suggested to him that he lacked the resources to even pay to delay the sale, and that he could not have bid on the property even had he been notified. He denied this.

f) The auction [ 67 ] On July 20, 2010, SGH signed a Real Estate Auction Contract with Grand Valley Auction. It was Mr. Madan’s evidence that once he decided to go through with an auction of the property, he searched the internet for a company to do the auction. He said that Grand Valley Auction had a forty to fifty year record and had a website indicating that they sold properties that had been possessed. They had a number of properties listed. [ 68 ] The auction contract indicated that the auction would take place on August 20, 2010 and that the property would not be sold for less than $1,500,000.

Grand Valley Auction was to charge a “buyer premium” of eight percent of the hammer price and would then be responsible for compensating the buyer’s agent for a two percent commission. If Mr. Madan bought the property for an amount over the reserve, Grand Valley would receive the much smaller commission of $30,000.00, rather than the eight percent. [ 69 ] As indicated above, Mr. Sharma’s evidence was that the price was reduced on July 23, 2010 to $3,300,000.00.

It was unclear whether this listing would have remained in place or would have been terminated once the auction contract was signed. [ 70 ] An email from Tim Bowman at Grand Valley Auctions to Mr. Madan, dated July 29, 2010, indicates that he had a buyer’s package and registration package ready. He also indicated that the property would be up on what appears to be the Grand Valley website by the end of the day. This information was forward to Dr. Chawla that day. [ 71 ] Mr. Madan testified that he saw a Bidder Registration document and Buyer Report that were prepared by Grand Valley Auction.

He also saw a website that had the property listed and had instructions about how to register. [ 72 ] Mr. Madan confirmed that he had no role in the auctioneer marketing the property. He did not tell the auctioneer who to contact as prospective purchasers. Mr. Madan could not recall if the auctioneer had produced a written report of his marketing efforts. Certainly there is no such report before me. Mr. Madan produced no copies of any of the advertisements and no list of people to whom information about the property was sent. He did not know if the individuals who had made the earlier offers were contacted.

[ 73 ] Mr. Madan testified that he attempted to obtain information about the auction from Grand Valley Auctions. The evidence is that the company ceased operations effective June 2012. Mr. Madan was asked what steps he took before that time to obtain this information and testified that he must have taken steps to obtain this information. [ 74 ] Mr. Madan testified that prior to the auction, contact was made with the lien claimants’ counsel and an agreement was made for the lien amounts to be paid into court. [ 75 ] There are incomplete email chains between Tim Bowman and Mr. Madan prior to the auction.

In one, Mr. Bowman expressed concern about the fact that potential buyers were concerned that a title search of the property did not come up clear. He included in his email to Mr. Madan an email in which someone had advised him that a buyer had been scared off by the fact that the title was not good. Mr. Bowman sought assurance from Mr. Madan that the title was clear. Mr. Madan testified that emails were sent to Mr. Bowman assuring him that the liens and taxes would be dealt with. Mr.

Madan testified that he understood buyers were concerned about the liens and the mortgages, including the $4,900,000 mortgage held by the plaintiffs. [ 76 ] Pradeep Kumar testified that he learned about the auction for the property in the newspaper and immediately contacted Mr. Sharma, who confirmed it was the same property he had made an offer to purchase previously.

He retained architect Georges Papadopoulos to look at the property and learned about many of the problems that had resulted from the halt in construction. [ 77 ] There was evidence about the auction from a number of people who were present including Mr. Madan, Mr. Sharma and Pradeep Kumar, the purchaser. Dr. Syed was present but Mr. Syed was not. [ 78 ] Mr. Madan testified that as a 51 percent shareholder, Mr. Syed was aware of the auction. Mr. Syed’s evidence was that he was not aware of the auction and that had he known of it, he would have attended and purchased the property. [ 79 ] Mr.

Madan testified that there were thirty to thirty-five people present at the auction. Mr. Sharma thought there had been twenty to twenty-five people present. Mr. Kumar thought there had been thirty to thirty five people there. The only person Mr. Madan understood was registered to bid was Mr. Kumar. According to Mr. Madan, Dr. Syed again asked to postpone the auction. [ 80 ] Although it was scheduled to begin at noon, the auction did not proceed until 2:30 or 3:00 p.m. Mr. Madan and Mr. Sharma testified that when the auction started, the auctioneer advised that there was a proxy bid. Mr.

Sharma said that it was for $2,400,000. Mr. Kumar understood it was $2,450,000. There is no documentation before me to confirm any details about a proxy bid. [ 81 ] Mr. Kumar then bid $2,500,000. He was successful as there were no other offers. He said that he was surprised that there were no other bidders. He had instructions to bid up to $2,600,000. [ 82 ] Mr. Madan testified that prior to bidding, Mr. Kumar, who he knew, asked if he would agree to a short term vendor take-back (“VTB”) mortgage. He acceded to this request.

The Agreement of Purchase and Sale has a $50,000.00 deposit and VTB mortgage that was due March 21, 2011. Mr. Kumar testified that Mr. Madan agreed that he would come back into the project once the VTB mortgage was paid. [ 83 ] Mr. Kumar was asked about the buyer’s premium. He said that his bid of $2,500,000 was based on there being a $30,000 buyer’s premium. [ 84 ] Mr. Madan was cross-examined extensively about the auction and the arrangement that he made with Mr. Kumar. For instance, it was suggested to Mr. Madan that he permitted Mr. Kumar to bid without him having paid the registration fee. Mr.

Madan said that Mr. Kumar must have made an arrangement with the auctioneer and testified that as soon as he was successful, he provided two cheques for $25,000. Initially, Mr. Madan said he had no

part in approving the cheques after the auction. He then changed his evidence and said that he did. [ 85 ] Initially, Mr. Madan said that there was only one Agreement of Purchase and Sale ever signed with Mr. Kumar at the auction. When shown that there were, in fact, two signed agreements with different terms, he agreed that he had signed both. The later agreement provided for the purchaser to pay $450,000 by bank draft prior to closing, in addition to the $50,000 deposit, and left the balance for a VTB mortgage. [ 86 ] Mr. Kumar was cross-examined in a similar fashion.

He said that he only signed one agreement that had a VTB mortgage. But he said that the VTB was not for 100 percent of the outstanding amount and that he had to pay $450,000 on closing. Like Mr. Madan, he appeared to have been confused about the fact that there were two Agreements of Purchase and Sale signed – one with 100 percent VTB mortgage and one in which $450,000 was due on closing and the rest of the outstanding amount was covered by a VTB mortgage. [ 87 ] The statement of adjustments indicates that when the property closed, SGH took back a vendor’s first mortgage for $2,130,000.

He explained that the purchaser needed funds. [ 88 ] Mr. Madan agreed that the option of a purchaser being financed through a VTB mortgage was not advertised and no information about this option was given in the buyer information package. However, he said that prospective purchasers at the auction were told that this was available with approved credit. It was suggested to Mr. Madan that he “changed the rules of the game”, to which he responded that he was trying to be flexible with bidders. He agreed that the VTB mortgage agreement was only made available to Mr.

Kumar, but said that he was the only person who had asked for it. [ 89 ] Mr. Madan was also questioned about the buyer’s premium. He agreed that prospective bidders would have understood from the contract that they would have to pay an 8 percent buyer’s premium. This would have been $200,000 on a sale of $2,500,000, and would have been added to the cost for the purchaser. It was repeatedly suggested to Mr. Madan that he didn’t care about the buyer’s premium and that he was only interested in selling the property to his friend, a person to whom he gave preferential treatment. He denied this.

[ 90 ] It was Mr. Syed’s evidence that he was in disbelief when he learned of the terms of the sale. He said that he was never offered a VTB mortgage and that he would happily have made that deal with SGH.

g) Evidence as to the Value of the Property [ 91 ] There was evidence from a number of sources about the value of the partially completed retirement home. [ 92 ] On February 19, 2010, Tobe Otvos completed an appraisal that had been commissioned by SGH, the first mortgagee. His report was an exhibit in the trial. His conclusion was that the market value of the property as of the date of the inspection, which was August 20, 2009, was $3,350,000. [ 93 ] Mr. Otvos testified that he conducted a physical inspection of the property to ascertain its state of repair on August 20, 2009.

He knew that the land had been bought in 2000 for $300,000 and was told by SGH that about $6,500,000 in costs had been incurred by October 15, 2006. He said that he was told by SGH that an additional $7,600,000 was required to complete the retirement home. [ 94 ] Mr. Otvos explained the three recognized methodologies used to estimate market value: the cost approach, the income approach and the direct comparison approach. He determined that the most accurate method in this case was the income approach. [ 95 ] Mr. Otvos explained in detail how he calculated the market value using this approach.

This approach looks at projected rental income for the property. The net annual income (which he determined to be $1,453,410) is capitalized to determine a value having normal occupancy. He used a capitalization rate of 10 percent and thus reached a normalized value of $14,534,100. This is then reduced by the cost to complete the project, which he was told was $7,600,000, and further discounted for lost revenue in order to obtain normalized occupancy, which would be a period of five years.

He noted that because the property was not completed, he built in a further discount of 30 percent. [ 96 ] Prior to the auction, architect Georges Papadopoulos was asked by Pradeep Kumar to conduct a visual inspection of the property to determine what he thought about it. He completed a report on August 16, 2010. [ 97 ] Mr. Papadopoulos’ letter to Mr. Kumar was entered as an exhibit.

He also testified about the problems that he saw, which included: the roof was leaking, there was mold on the drywall, there were charges owing to the city, the fire separation in soffits and facia would need to be reinstalled, the terrace area sloped towards the building and caused leaks, the attic insulation was not visible and even if it was there it would need to be replaced because of leakage, and the waterline had been installed without inspection.

He concluded that “many other repairs would be required when actual construction takes place as new codes may be applicable”. [ 98 ] On February 2, 2010, an engineering report was completed by KAMCO for SGH. This report was based on a visual inspection conducted by a consulting engineer in order to give Mr. Madan an opinion on the status of the building. The report indicates that construction had ceased on 2006.

The conclusion is that while the existing building envelope was generally intact and could be repaired prior to commencing construction of the remaining systems, the building required immediate attention to halt building deterioration. [ 99 ] Engineer Kamal Salamé testified about this report, which he prepared. He visited the property in August 2009 and January 2010 to conduct a visible inspection that did not include any readings or stress analysis. He concluded that there needed to be an independent structural analysis. His attention was most attracted by the water damage and incomplete work.

He was not asked to provide an assessment of the cost to complete the project. [ 100 ] Mr. Madan and Mr. Kumar each testified about the costs that were actually incurred to complete the project. Each said it was about $10,000,000. It was suggested to Mr. Madan that the cost to complete the project was higher than what he told Mr. Otvos because changes were made to the original plan. He agreed that the layout inside may have changed, but said that the envelope was the same and that the changes had been “fractional”. [ 101 ] Mr.

Madan set out a number of specific respects in which the costs were higher than had been expected: • Development charges for the city had not been paid – these cost nearly $300,000; • Building permits were needed as there was not permit for the medical part of the building. This cost about $250,000; • Underground water and sanitary pipes and waterlines were not inspected and had to be reinstalled at a cost of $250,000; • A new electrical and mechanical system had to be installed with an unexpected cost of over $1,000,000; • There was mold that had to be removed and the drywall re-installed.

This cost an extra $500,000; • Broken windows had to be replaced at a cost of about $40,000; • There was extra HST owed. The Positions of the Parties [ 102 ] The plaintiffs make several complaints in support of their argument for improvident sale. They say that the fair market value of the property was $3,350,000, as determined by Mr. Otvos, and that the defendant failed to take reasonable precautions to obtain market value for the property. It is submitted that the defendant imprudently defied the recommendation of the listing agent and, without

having an appraisal of the property, listed it for sale at $5,200,000, an amount too high, which would have deterred legitimate investors. When the price was reduced to $4,800,000, the plaintiffs say it was still too high. The plaintiffs also say that after receiving the appraisal on February 10, 2010 of $3,350,000, the defendant should have listed the property at that price immediately.

The defendant failed to do so until July 23, 2010, when the listed price was reduced to $3,300,000. [ 103 ] The plaintiffs also say that the defendant has failed to demonstrate that when it was determined that the property would be sold at auction, reasonable steps were taken to market the property. The plaintiffs argue that there is an absence of evidence to demonstrate that the defendant took proper steps. [ 104 ] Finally, the plaintiffs argue that the defendant’s conduct at the auction casts further doubt on the defendant’s efforts to properly market the property.

The plaintiffs say that having been assured that they would be advised of the date and time of the auction, the defendant failed to do so, thereby precluding the plaintiffs from buying the property, as they assert was their intention. In addition, the plaintiffs say that the defendant never advertised that it was prepared to sell the property with a vendor take-back mortgage, which it ended up offering to the purchaser, and that had this been done, there would have been greater interest in the property. [ 105 ] The defendant says that burden of proof is on the plaintiffs to establish both liability and damages.

It says that there is no evidence as to the value of the property on the date of the auction and that the appraisal reflected a value from a year earlier, and before subsequent deterioration. [ 106 ] The defendant also points to the unchallenged evidence that completion of the property took more than the $7,600,000 accounted for the in appraisal report. As a result, it says that the value of the property reached by the appraiser was too high and must be reduced.

When this is done, the defendant says that the property sold for more than the fair market value. [ 107 ] The defendant explains that the initial price of $5,200,000 was based on the fact that Mr. Syed told Mr. Madan that he had a potential buyer who was discussing purchasing the property for $5,000,000. He wanted to set a price that would allow for that negotiation to take place. [ 108 ] Further, the defendant submits that the market is the best assessor of the value of the property. It points out that there were three offers made on the property: one at $3,500,000, one at $2,600,000 and one at $2,200,000.

It points out that the highest of these had a very low deposit and conditions. With the $2,600,000 offer, the defendant wanted to sign the offer back for $2,950,000 but the plaintiffs delayed this and the offer was lost. [ 109 ] The defendant says that Mr. Syed’s evidence that he would have purchased the property himself cannot be accepted given his conduct over the year before and inability or unwillingness to pay for either the liens to be removed or the outstanding interest charges.

Applicable Legal Principles [ 110 ] The duties of a mortgagee acting under a power of sale were summarized by Saunders J. in Oak Orchard Developments Ltd. v. Iseman, [1987] O.J. No. 361 (H.C.J.) ; aff’d [1989] O.J. No. 2394 (“ Oak Orchard ”) in these terms: 1. A mortgagee selling under a power of sale is under a duty to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it. This does not mean that the mortgagee must, in fact, obtain the true value. 2. The duty of the mortgagee is only to take reasonable precautions.

Perfection is not required. Some latitude is allowed to a mortgagee. 3. In deciding whether a mortgagee has fallen short of his duty, the facts must be looked at broadly and he will not be adjudged to be in default of his duties unless he is plainly on the wrong side of the line. 4. The mortgagee is entitled to exercise an accrued power of sale for his own purposes whenever he chooses to do so. It matters not that the moment may be unpropitious and that by waiting, a higher price could be obtained. 5.

The mortgagee can accept the best price he can obtain in an adverse market provided that none of the adverse factors are due to fault on his part. 6. Even if the duty to take reasonable precautions is breached, the mortgagor must show that a higher price would have been obtained but for the breach in order to be compensated in damages. [ 111 ] The Court of Appeal recently confirmed in Centurion Farm Ltd. v Citifinancial Canada Inc. , 2013 ONCA 79 at para. 4 that the test for whether a sale was improvident remains that set out in Oak Orchard . Analysis

a) Credibility findings [ 112 ] While many of the facts in this trial are not at issue, there are some areas in which credibility is important. I make the following findings respecting the credibility of Mr. Syed and Mr. Madan. [ 113 ] I begin with Mr. Syed. While there is a great deal about his role as an investor in the project that is undisputed, I find that he made great efforts in his testimony to try to minimize his role as an investor and to distance himself from what the BRLC was doing.

Repeatedly, he said things like he was “disappointed” with what his brother and the other investors were doing, that he raised concerns with his brother and that he was surprised to learn that payments were not being made. He did this so as to suggest that he had no power or role in the decisions of the BRLC. [ 114 ] I do not accept Mr. Syed’s evidence about having such a limited role in the BRLC. I find that Mr. Syed invested a significant amount of money and then took a very active role in trying to move the project forward. He assumed the Quahold mortgage. He chaired meetings of the investors.

It appeared to me that he did not want to answer for the fact that the BRLC failed to deal with the lien claimants and, after SGH became involved, failed to make its interest payments. He preferred to blame others. I do not accept his testimony that he had no involvement in the decisions the BRLC was making. The minutes of the meetings and Mr. Madan’s evidence suggest otherwise. I conclude that it was Mr. Syed who came to manage, albeit perhaps poorly, the affairs of the BRLC.

I find that through the period in which there was a deterioration of the relationship between BRLC and SGH, he was actively trying to find investors to finish the project and trying to delay SGH from taking steps to sell the property under power of sale. He was very much alive to the financial difficulties that the BRLC and its investors were having. [ 115 ] I do not accept Mr. Syed’s evidence that he was unaware that the auction was going to proceed.

It is unfathomable to me that an individual who was as intimately involved with the project as he was would not have kept himself apprised of the steps being taken by SGH and would have just assumed that SGH would tell him of the auction date. If he was the 51 per cent owner that Mr. Madan believed he was, he would certainly have had notice of the sale when the BRLC was notified of the sale. However, I need not determine his actual ownership percentage. I am satisfied that he knew that the auction was going to take place. [ 116 ] I also do not accept Mr.

Syed’s evidence that he planned to attend at the auction and to purchase the property. The evidence before me suggests that he either could not, or would not, take the steps that were needed to remove the liens on the property in early 2010. He was not ensuring that SGH was being paid the interest it was owed. He knew that arrangements could have been made to pay SGH a portion of what it was owed in order to delay the auction. The evidence before me suggests that Mr. Syed was not in a financial position to make an offer to purchase the property. I cannot accept that Mr.

Syed genuinely intended to make an offer on the property at the auction. [ 117 ] Moreover, I find the suggestion that Mr. Syed was somehow disadvantaged because he was not offered the VTB mortgage that Mr. Madan offered to Mr. Kumar to be unrealistic. By the time of the auction, Mr. Madan had been dealing with the Syeds for years. Given the conduct of the BRLC owners, and the plaintiffs, it is not surprising that Ms. Madan had lost trust in them. Repeated agreements to make payments had not been fulfilled. Even had Mr. Syed been at the auction, it is wholly unrealistic to think that Mr.

Madan would have extended to him the short VTB mortgage that was offered to his trusted friend Mr. Kumar. This is not because Mr. Madan was favouring a deal with his friend. It is because he could not, at that point, have had any realistic expectation that Mr. Syed would fulfil the terms of any short-term VTB mortgage. [ 118 ] I turn now to Mr. Madan. It is the plaintiffs’ position that his credibility was impugned through various areas of cross- examination. [ 119 ] There was certainly one area where I was struck by the fact that Mr. Madan was not particularly forthcoming. Mr.

Madan seemed to refuse to acknowledge that SGH had provided to the appraiser the $7,600,000 amount as the cost to complete the project. I find that SGH did provide this figure. I am not sure much turns on this and do not conclude from this that Mr. Madan’s evidence was generally lacking in credibility. [ 120 ] The plaintiffs point out that Mr. Madan seemed completely sure that there was only one Agreement of Purchase and Sale signed with Mr. Kumar for the property. The evidence makes clear that there were two. It is suggested that this undermines his credibility. I am not persuaded that Mr.

Madan was being intentionally misleading about this. It seemed to me that he was more likely mistaken and confused, as was Mr. Kumar. I see little flowing from this. [ 121 ] I accept Mr. Madan’s evidence that the project cost significantly more than the $7,600,000 to complete. While he seemed to testify that there was deterioration after the appraisal was completed and before the sale, I cannot and need not decide when, precisely, in the more than three years that it sat, the deterioration occurred. This is not a credibility issue. The expert evidence appears to be that there was ongoing deterioration.

I do not accept that Mr. Madan exaggerated the costs to complete the project in order to improperly create a lower value for the property at the time it was sold. [ 122 ] Much was made by the plaintiffs about Mr. Madan having only made available the VTB mortgage to his friend Mr. Kumar and about the fact that Mr. Kumar ended up negotiating a commission arrangement of $30,000 as opposed to eight percent, which would have been much more expensive for him. I am not persuaded that anything really turns on this issue.

The evidence does not explain why the auctioneer walked away from the much more lucrative eight percent commission that was provided for in the auctioneer agreement. Mr. Kumar testified that he was able to negotiate this arrangement. I am not convinced that I can draw from this an inference that the auctioneer perceived that Mr. Kumar was affiliated with Mr. Madan and so the felt he had to accept a lower commission than he was entitled to. None of the commission evidence really assists me in determining the credibility issues or the substantive issues before me.

b) Have the plaintiffs shown that the defendant failed to take reasonable steps to obtain fair market value for the property? [ 123 ] The first issue to be decided is whether the plaintiffs have shown that the defendant failed in its duty to take reasonable steps to obtain fair market value for the property. In order to answer this, an assessment must be made as to whether the property was sold at less than fair market value. If it was not, the plaintiffs’ claim must be dismissed.

If it was, then the question is whether the mortgagor has shown that a higher price would have been obtained but for the defendant having taken reasonable precautions. [ 124 ] In my view, the plaintiffs have not shown that the defendant sold the property for less than its true market value.

[ 125 ] I accept that the property was listed on August 30, 2009 for well over what it proved to be worth. Mr. Madan’s explanation for the price of $5,200,000 was that he believed that Mr. Syed was negotiating with an Alberta purchaser for a price around $5,000,000 and he did not want to jeopardize those negotiations. This suggestion was never put to Mr. Syed when he was cross-examined. He certainly gave no evidence that he was involved in such negotiations. [ 126 ] I acknowledge that the initial price was well over what the listing agent Mr. Kumar thought appropriate.

While he said that he had discussions with his colleagues about the property, his evidence was clear that he had no experience with development projects like a partially constructed retirement home and that he had never dealt with selling a retirement home before. [ 127 ] I need not make any determination as to whether there was a prospective Alberta purchaser or not.

What is important is that while the initial listing price was too high, it does not seem to have deterred offers being made on the property. [ 128 ] I note that on September 3, 2009, immediately after the initial listing, an offer was made by a numbered Ontario corporation for $3,500,000. This, of course, was well below the listing price. It appears that SGH negotiated in good faith with the prospective purchaser to try to obtain a higher price and less onerous conditions. Mr. Madan testified about these conditions and why they were troubling and would have delayed the sale.

The negotiations failed. [ 129 ] When there were no further offers made, SGH dropped the purchase price on November 13, 2009 to $4,800,000. The evidence is not clear as to how this new price was chosen. Certainly, Mr. Madan did not have the final appraiser’s report, as it was not completed until February 2010. He may have had a verbal report about the property’s value, but seemed unsure. Mr. Sharma’s evidence was that the property had been on the market for a hundred days and that they wanted to sell it.

I cannot conclude that this price reduction was anything other than a good faith attempt by SGH to obtain what Mr. Madan perceived to be the fair market value for the property. [ 130 ] Again, while the price reduction may still have resulted in a listing price over the market value, it does not appear to have dissuaded potential offers. [ 131 ] In fact, the reduced price led to two further offers, again both of which were well below the revised listing price. The first was on December 15, 2009 and was for $2,600,000. The correspondence sent by Mr.

Madan’s counsel to counsel for the plaintiffs sets out that he wished to try to negotiate to sell the property for as close to fair market value as he could. He wanted to sign back the offer for $2,950,000. At this point, the plaintiffs’ counsel both tried to delay negotiations with this prospective offer, and expressly stated that it was his view that a sale price of $2,950,000 would amount to an improvident sale. As a result, this potential offer, which turned out to be from Mr. Kumar, lapsed. It is my view that Mr.

Madan and SGH wanted to negotiate in good faith for a fair market price and that they were impeded by the plaintiffs. [ 132 ] The second offer after the price reduction, which was for $2,200,000, was rejected by Mr. Madan as being too low. [ 133 ] Mr. Madan received the appraisal report in February 2010. It valued the property at $3,350,000. The appraiser testified about the difficulties in accurately assessing the value of this unique type of property. He acknowledged that this is a challenging task and involves educated guesswork.

Usually, when appraising a property like this, there are actual revenues and expenses that are factored in. Here, he had to extrapolate all of these figures. [ 134 ] The appraisal report notes the following important limitation on the market value of the property: Our analysis of the market conditions pertaining to fully developed and operational retirement facilities indicates that approximately three to nine months has been the approximate exposure time.

As the subject retirement facility is only partially constructed with no further construction having been completed in the past two and a half years, the potential market for the subject property is very limited. Given this, no marketing time will be estimated as it would be speculative in nature [emphasis added] [ 135 ] Mr. Otvos was asked about how, using the current market approach, his estimate of the property value would change if the cost to complete the project was higher than the figure he had used in his report.

For his appraisal, he calculated a net operating income and then used a ten percent capitalization rate. From this, he deducted a value of $7,600,000 as this is what SGH told him would be the cost to complete the project. With a deduction for lost income until normalization, he calculated the property value to be $4,786,066, which he then discounted by 30 percent. He agreed that if the cost to complete the project was $1,000,000 higher, then its value would be $3,786,066 and that if a 30 percent discount were applied, the value of the property would be only $2,650,000. [ 136 ] Mr.

Otvos agreed that if the cost to complete was increased by $1,000,000, this would also reduce the estimated value of the property using the cost approach and direct comparison approach. [ 137 ] While Mr. Madan did not agree that he gave the $7,600,000 figure to complete the project, as I have indicated, I accept the evidence of Mr.

Otvos that this is the figure that he received from SGH at the time he prepared his appraisal report. [ 138 ] The evidence before me is uncontroverted that the actual cost to complete the project was closer to $10,000,000 than $7,600,000 or more than $2,500,000 higher than the figure Mr. Otvos worked from. In addition, there was an HST liability that resulted from a law change, which added an additional $1,200,000 to the completion costs. [ 139 ] The plaintiffs argue that the cost to complete increase was because there was a change in the plans.

While the defendant accepts that there was some modification, I find that on the evidence before me, the figures used by the appraiser for the cost to complete the project were just too low. As the calculations above reveal, when the actual increased costs are properly taken into account in determining the value of the property at the time of the appraisal, there can be no issue that the actual value of the property is less than what it was sold for at the auction. I conclude that the property sold for more than its true market value. As such, the plaintiffs suffered no damages.

c) Even if the property was sold for less than true market value, have the plaintiffsshown that a higher price would have been obtained but for the breach? [140] Even if I am wrong as to whether the property sold over its true market value, and the property was sold for less than marketvalue, I find that the plaintiffs have failed to demonstrate that a higher price would have been obtained but for the actions of thedefendant. It is my view that if the selling price was below market value, it was not because of anything done by the defendant.

I willreview the various criticisms made by the plaintiffs of the actions of the defendant that are said to have resulted in property being sold atless than its market value. [141] The plaintiffs submit that the defendant unreasonably rejected the expert advice of his real estate agent and the appraiser andthat had the property been initially listed at an appropriate price, more interest would have been generated.

At the very least, it is arguedthat SGH should have reduced the list price in February 2010 when the appraiser report was received and suggested that the marketvalue was much lower than the $4,800,000 at which the property was listed, and remained listed until July 2010. [142] I am not satisfied that the defendant’s decision to list the property above what the agent recommended was unreasonable in thecircumstances of this case. The agent had limited experience in this area and his view does not appear to have been based on anyappraisal. What I view as a reasonable explanation was offered by Mr.

Madan for the higher price. [143] More importantly, to me however, is the fact that there is no evidence that the inflated listing price had the effect of deterringpotential buyers from making offers. [144] When the property did not sell initially, Mr. Madan accepted the agent’s recommendation for the price to be lowered to$4,800,000 after the first hundred days. The agent never refused to list the price as Mr. Madan wanted and testified that he continued tomarket it in an effort to sell it.

Listing a property at well over an appraised price does not necessarily lead to a conclusion that the vendorof the property failed to take reasonable precautions to obtain fair market value. [145] I am also not satisfied that it was unreasonable for Mr. Madan, after reducing the price once, to leave it at $4,800,000 inFebruary 2010 after receiving the appraiser’s report. The onus is on the plaintiffs to show that a higher price would have been obtainedbut for the listing being too high. There is just no evidence in this case to support such a conclusion: Samu v.

Arts (C.A.) at paras. 5-6. [146] Further, it is my view that this is not a case where a great deal of reliance could reasonably be placed on the appraisal report. While Mr. Madan agreed under cross-examination that it was important for him to have the report completed, the report itselfacknowledges that this was a property for which there was a very narrow market. It was difficult to predict how long it would take forthe property to be sold. There were a significant number of uncertainties about the project and projections that had to be made about itsvalue.

While the plaintiffs submit that the appraisal was conservative, I find merit in the defendant’s position that for this type of riskyinvestment, the market may be the best indicator of the value of the project. [147] This is a case in which there were a number of factors that likely led to a reduced interest in the property. This was anunfinished, deteriorating retirement home in a small town. There were obvious risks to purchasing a property that had been left tolanguish and where there was obvious damage. [148] Further, as Mr.

Sharma testified, many of the prospective purchasers had concerns about the mortgages and liens on theproperty. He expressed frustration that his agency put money into advertising the property and wanted to sell it. It was his view that itdid not sell because of the mortgages and liens. He agreed that prospective buyers should have been comforted by knowing that themortgages would be deleted when the property was sold under power of sale but said that they were not. [149] The plaintiffs also allege that the defendant failed to demonstrate that the property was properly marketed.

The plaintiffs relyon Justice Herold’s decision in Kavanagh v. Royal Bank, [1997] O.J. No. 2210 (O.C.G.D.) to suggest that typically, copies ofadvertisements are produced by the individual who marketed the property. I see the facts in that case as being very different. Themortgagors in that case “watched for signs of the property being advertised and checked the local papers without success”. They saw noadvertisements whatsoever. Justice Herold found that the real estate agent was “a most evasive and unreliable witness”.

He thenrejected the agent’s unconfirmed evidence, contradicted by the mortgagors, that he had advertised the property, though he could not saywhere or when. [150] In my view, Justice Herold’s comments about needing evidence by way of copies of advertisements in order to establish that aproperty was marketed must be viewed in the context of the time in which they were written. He was referring to the sale of a property in1993. There is no suggestion that an MLS listing on the internet was even a possibility in that case. Mr. Kumar testified that here theproperty was listed on MLS.

Such a listing is made available to all agents. And, of course, it is accessible to prospective buyers throughthe internet. Copies of the November 13, 2009 and July 23, 2010 MLS listings were filed as exhibits. In my opinion, the availability ofthe MLS service on the internet, and proof that there was such a listing as was provided in this case, diminishes the requirement for thereto be copies of further advertisements filed as exhibits. [151] Mr. Sharma was unclear as to whether additional advertisements were placed in the Globe and Mail or the Financial Post.

Given the passage of time, I do not think his confusion undermines the reliability of his evidence that there were newspaperadvertisements. I accept that he and his agency did advertise the property in one of these newspapers, in addition to listing it on MLS. [152] I also accept that there were a number of people who expressed interest in the property over the eleven months from August2009 until July 2010. For instance, Mr. Kumar testified that he became involved in making an initial offer on the property after seeing iton MLS.

The evidence does not support the plaintiffs’ allegation that the defendant was not trying sell the property at fair market value. [153] I observe that the price of the property was reduced again on July 23, 2010 to $3,350,000. An MLS listing at that reducedprice was filed as an exhibit. The evidence is not clear as to how long the property remained listed on MLS and marketed at this price.

The defendant’s position is that an offer could have been accepted by the mortgagee up to the point of the auction on August 20, 2010.

There is no evidence of any offer having been made over this period. [154] It seems to me that the reduction in the price at that point was relatively unlikely to result in there being any offers because atthe same time, the sale of the property had been turned over to the auctioneer where an auction was to be conducted with a reserve bit of$2,500,000. [155] The plaintiffs say that the defendant has not demonstrated that it took reasonable steps, through the auctioneer, to expose theproperty to the market so as to ensure that a fair market price would be obtained at the auction.

The plaintiffs submit that the defendantknew as early as November 2010 that the plaintiffs wanted to know what the auctioneer had done and that counsel for the defendantrefused to make appropriate inquiries. It is argued that the defendant cannot hide behind the absence of evidence from his auctioneer todemonstrate that reasonable precautions were taken. [156] No evidence was adduced as to the specific advertisements that were placed by the auctioneer to market the property betweenJuly 23 and August 20, 2010. [157] However, as set out above, the evidence does reveal that Mr.

Madan testified that he saw information about the property on awebsite. The emails from the auctioneer suggest that there were interested buyers who needed reassurance about the outstandingmortgages and liens, which was given to him by counsel for Mr. Madan shortly before the auction was held. [158] Further, I accept the evidence of Mr. Madan, Mr. Kumar and Mr. Sharma that at the auction, the auctioneer announced thatthere was a proxy bid. While little is known about this bidder, this suggests to me that there had been some marketing of the project.

Ialso observe that there were at least twenty people in attendance at the auction. While it is not known whether any of them had anyinterest in bidding on the project, their presence suggests that the auction had been publicized. [159] The starting point respecting onus is worth remembering. The plaintiffs, who allege improvident sale, have the onus ofproving it on a balance of probabilities. There is no doubt that SGH was under a positive duty to ensure that the property was advertisedfor a time and in a manner to bring the sale to the attention of the market: Royal Bank v. Cramer, (ON SC), [1990]O.J.

No. 827 (S.C.) at para. 64. In my view, the evidence suggests that they did so. [160] The MLS listing over a period of almost a year brought to the attention of those interested in this sort of property that it wasbeing sold under a power of sale. In addition to the MLS listing, I accept that the property was advertised in either or both of theFinancial Post and Globe and Mail over the period from August 30, 2009 to July 23, 2010.

In my view, listing a property on MLS hasthe effect of bringing it to the attention of the market in the manner described in the jurisprudence. [161] I accept that SGH was also required to ensure that the property was marketed prior to the auction. [162] Mr. Madan’s evidence was that he left the marketing to the auctioneer. However, he also testified that prior to the auction, hesaw the website that listed the retirement home and had instructions for how to register for the auction. I accept his evidence. [163] Mr. Kumar’s evidence was that he learned about the auction in the newspaper.

While no copy of whatever was printed in thenewspaper was produced, I did not understand the plaintiffs to challenge that Mr. Kumar had learned of the auction through thenewspaper. This is some additional evidence that the property was marketed beyond on the website. [164] There is evidence that the auctioneer had interest from prospective bidders who, having learned about the auction, wereconcerned about the mortgages and liens. Again, this suggests that there was an awareness in the appropriate market of the sale of theproperty.

While the evidence is not particularly detailed, it does suggest that prospective buyers learned about the auction and wereanxious about ensuring that there would be clear title to the property. [165] I find that the fact that there were at least twenty people who attended at the auction on August 20, 2010 is some furtherevidence about the fact that it was marketed. [166] Finally, I concluded that the existence of a proxy bid for either $2,400,000 or $2,450,000 further supports the defendant’sposition that there had been adequate marketing of the auction.

I accept that little is known about who made the proxy bid and whetherit was properly registered. However, the only evidence from those who were at the auction is that the auctioneer made an announcementthat there was such a bid. I find that it existed. [167] I find it surprising that the defendant did not take steps, much earlier on in these proceedings, to obtain from the auctioncompany a description of what steps were taken to market the property. The evidence before me is that Grand Valley Auctions ceasedoperations in June 2012.

However, it appears that counsel for the plaintiffs sought this information from counsel for SGH as early asNovember 25, 2010. Counsel for SGH declined to obtain it as he viewed seeking this information from the auctioneer as a “fishingexpedition”. While Mr. Madan testified that he tried to obtain information from the auctioneer, he was very non-specific about what hedid and had no evidence to prove that any steps were taken.

I cannot conclude from his evidence about possible emails or phone callsthat were not returned that he took any actual steps. [168] I would have expected that one or other counsel would have followed up with the auction company sooner. Counsel for theplaintiffs never did so.

Counsel for the defendant apparently did not do so until after September 2012, at which point the auctioneer wasclosed. [169] That said, on the basis of all of the evidence that I do have about steps that were taken to market the property in the elevenmonths it was listed for sale, and then in the lead up to the auction, I cannot conclude that there was any breach of the defendant’s dutyto take reasonable steps to obtain fair market value. [170] Accordingly, even if I am wrong that the property sold for over its true market value, I would not have found that there was

any breach in the defendant’s duty to take reasonable steps to obtain fair market value. I find that the mortgagee, SGH, accepted a price that was the best price it could, having taken reasonable precautions to obtain the true market value. In my view, the fact that the defendant was not able to obtain a higher price for the property at the auction is not because of adverse factors created by it. Conclusion [ 171 ] I conclude that the property sold for more than its true market value.

If I am incorrect about this, I would have concluded that the plaintiffs have not demonstrated that the price obtained would have been higher but for a breach in the defendant’s duty to take reasonable precautions. To the contrary, it is my conclusion that the defendant took reasonable and appropriate steps to ensure that as close to market value as possible would be obtained for a property that posed real risks and challenges to any prospective buyer. The plaintiffs’ action is dismissed. Costs [ 172 ] As the successful party, the defendant is entitled to reasonable costs.

If the parties are unable to resolve the issue of costs, they may make written submissions of not more than three pages, in addition to a bill of costs and any authorities. The defendant shall file its submissions within three weeks of the release of this judgment. The plaintiffs shall have ten days in which to respond. There will be no reply without leave of the Court. Woollcombe J. Released: January 25, 2017 CITATION : Syed v.

SGH Investment Inc., 2017 ONSC 606 COURT FILE NO.: 3004/11 DATE: 2017 01 25 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Qutub Syed and Said Syed Plaintiffs – and – SGH Investment Inc. also known as SGH Investments Inc. Defendant REASONS FOR JUDGMENT Woollcombe J. Released: January 25, 2017