Court of Appeal for Ontario

Citation: 2017 ONCA 348 Date: 2017-05-01 Docket: C62864

Judges: Juriansz, Pepall and Miller JJ.A.

Parties

Between

Concentra Financial Services Association Plaintiff (Respondent)

and

Kenneth Rawling Defendant (Appellant)

Counsel

Michael S. Deverett, for the appellant

Benjamin Frydenberg, for the respondent

Hearing

Heard and released orally: April 26, 2017

On appeal from: the judgment of Justice D.K. Gray of the Superior Court of Justice, dated October 4, 2016 and the costs endorsement dated October 17, 2016.

Endorsement

[1] The appellant appeals from the October 4, 2016 judgment granting summary judgment to the respondent and ordering the appellant to pay approximately $311,000 on account of a mortgage debt. In addition, the motions judge dismissed the appellant's counter-claim seeking a refund of the payments he had made to the respondent on the mortgage.

[2] The motions judge found that the appellant was a direct participant in the shady transaction in issue. The true owner of the property was Edwards but he could not qualify for a mortgage. The appellant therefore put himself forward as the face of the purchase. He obtained a letter verifying his income from his place of employment, he supplied Canada Revenue Agency ("CRA") notices of assessment to the respondent and signed all documents knowing that he would be taking title and signing the mortgage in favour of the respondent. Indeed, he signed a statutory declaration in which he was identified as both the purchaser and mortgagor of the property. Significantly, the appellant was paid $5,000 for his participation knowing that he was assuming the risk of payment if Edwards failed to make payments on the mortgage.

[3] When that eventuality arose, the appellant paid some arrears and then made the regular monthly payments on the mortgage for seven years. He did not disavow his obligation to the respondent. In September 2015, the mortgage went into default and the respondent sued and subsequently moved for summary judgment.

[4] The appellant brought a cross-motion for summary judgment on his counter-claim. The motions judge granted the summary judgment motion requested by the respondent and dismissed that of the appellant.

[5] The appellant advances, in essence, two grounds of appeal. First, he asserts that the motions judge failed to apply rule 20.02 because the respondent did not provide evidence of a witness with personal knowledge of the contested facts and the motion judge ought to have drawn an adverse inference against the respondent. Moreover, the respondent should have been sanctioned for its failure to produce relevant documents.

[6] We disagree.

[7] Rule 20.02 is discretionary and not mandatory. The motions judge considered the appellant's argument and dismissed it, noting that there was no real dispute on the facts and no dispute that the appellant had signed the mortgage. Approximately three weeks prior to the hearing of the summary judgment motions, the respondent produced its entire file to the appellant. There was no evidence that the respondent had actual knowledge of a mortgage fraud prior to advancing funds. The respondent offered to produce a witness from its indemnity department but the appellant did not proceed with an examination. Moreover, even if the respondent could and should have uncovered the fraud prior to advancing funds, given the appellant's active participation, the respondent's role would not provide a defence to the appellant.

[8] We could not give effect to this ground of appeal.

[9] Secondly, the appellant submits that a mortgage based on a fraudulent agreement of purchase and sale is unenforceable. There is no suggestion here that the vendor was not paid for the purchase of the property in the appellant's name or that the mortgage proceeds given by the respondent were not used to fund the purchase of the property. The appellant was not an innocent party and the transfer and the mortgage are valid instruments. Moreover, no declaration that the mortgage was unenforceable was sought by the appellant in its counter-claim.

[10] Lastly, in his factum, the appellant seems to submit that the motions judge erred in failing to impute the lawyer Gertner's knowledge to the respondent. The motions judge considered this issue in considerable detail and concluded that Gertner's involvement did not assist the appellant because his actions represented those of Edwards and the appellant in fraudulently representing to the respondent that the mortgage was what it appeared to be and that the appellant was the true mortgagor and responsible for the payments. We see no palpable and overriding error in the motions judge's findings of fact.

[11] For these reasons, the appeal is dismissed with costs as agreed, on a substantial indemnity scale fixed in the amount of $11,911.31 to be paid to the respondent.

"R. Juriansz J.A."

"S.E. Pepall J.A."

"B.W. Miller J.A."