Executive Summary: Key Legal and Evidentiary Issues

• Youhanan's claim that the loans were equity investments was rejected as inconsistent with documentary and testimonial evidence.

• Signed loan agreements, mortgage registrations, and legal advice confirmed the transactions were enforceable debt instruments.

• Allegations of coercion or duress lacked legal or factual basis and were not pleaded in the Statement of Claim.

• A fabricated "developer" agreement naming Tzaferis was used solely to mislead Tarion, further undermining the plaintiffs' credibility.

• Injunction was denied due to lack of serious issue, irreparable harm, or balance of convenience favoring the plaintiffs.

• Post-judgment misrepresentations by Youhanan to the Landlord and Tenant Board prompted judicial warnings of contempt.

Facts of the case and procedural background

Howard Youhanan, through his companies Condoman Developments Inc. and 1808176 Ontario Inc., engaged in several real estate developments for which he secured over $46 million in loans from Marcus Tzaferis and his Cannect mortgage entities. These loans were documented, registered, and secured against numerous properties owned by Youhanan or related entities in Ontario, Quebec, and Florida. By early 2023, Youhanan had defaulted on these loans, prompting Cannect to initiate enforcement under Power of Sale provisions.

In July 2024, Youhanan commenced litigation seeking to invalidate the mortgages, arguing they reflected equity investments pursuant to an alleged partnership with Tzaferis. He applied for an interlocutory injunction to halt further enforcement actions, including property sales, until the underlying dispute was adjudicated.

The court’s analysis of the mortgage agreements

Justice Morgan found that Youhanan, a seasoned real estate professional, was fully knowledgeable about the nature of the transactions. The mortgages, covering properties including 1245–1249 Queen St. East, 31 and 39 Gladstone Ave., and 507–511 Kingston Rd., were found to be legitimate loans. The Gladstone Property involved a structured mix of equity and secured lending, with Youhanan signing all loan documents and pledging personal or corporate property.

For the Kingston Property, Youhanan had initially characterized the transactions as equity contributions. However, all documentation, including a signed loan agreement dated July 23, 2020, showed a secured lending arrangement with specific interest rates and repayment terms. The court emphasized that the financial support was always presented and executed as debt financing.

Attempts by Youhanan to recharacterize the arrangement as a partnership were contradicted by his own emails, affidavits, and admissions during cross-examination. Notably, the 2020 “Kingston Management Agreement,” naming Tzaferis as developer, was acknowledged to be a fabricated document aimed at misleading Tarion into believing Tzaferis, and not Youhanan, was the project developer.

Late-stage refinancing and enforceability

In 2021 and 2022, several refinancing agreements were executed, including a $30 million loan and a $4.2 million loan, both of which were secured and acknowledged in a December 2022 Repayment and Buyout Agreement. These agreements clarified, consolidated, and superseded earlier arrangements, and were executed with legal counsel involved. Justice Morgan found them valid and enforceable, noting that Youhanan’s claims of no consideration were without merit given the significant advances made to support his failing developments.

The court concluded that Youhanan had knowingly entered into all relevant agreements, received legal advice, and accepted the financial obligations.

Injunction application and denial

Applying the RJR-MacDonald test, the court held there was no serious issue to be tried. Evidence overwhelmingly showed that Youhanan knowingly obtained and secured the loans, and that Cannect held valid mortgages. Claims of irreparable harm were dismissed, as property loss could be compensated monetarily, and the balance of convenience favoured Cannect’s right to enforce its security.

Further, the court noted that Youhanan had delayed bringing the injunction motion for nearly 20 months after default, undermining the urgency of his request. The evidence suggested that the injunction request was primarily a tactic to delay Cannect's recovery efforts.

Post-judgment conduct and enforcement

On April 9, 2025, Justice Morgan issued an additional endorsement addressing misrepresentations made by Youhanan to the Landlord and Tenant Board. In his submission, Youhanan falsely claimed that the court’s interim injunction remained in effect and that failing to collect rents would breach a Superior Court order. The court clarified that the March 14, 2025 decision had dismissed the injunction, restoring Cannect’s full enforcement rights.

Justice Morgan warned that such conduct could constitute contempt of court and ordered Youhanan to correct his submissions to the Board and provide copies of the March 14 and April 9 decisions. The judge emphasized that Youhanan must cease misleading representations that interfere with Cannect’s lawful remedies.

Conclusion

Across three decisions, the court definitively upheld Cannect’s rights as a mortgagee and rejected Youhanan’s attempts to recast the loans as equity investments. The evidence, including extensive documentation, confirmed that the relationship was that of borrower and lender. The dismissal of the injunction and the judicial reprimand regarding misleading statements underscore the enforceability of properly documented commercial mortgages and the importance of candor in legal proceedings.

There was no monetary award, damages, or cost order quantified in any of the three decisions