CITATION: 1737402 Ontario Inc. v. Luxury Properties Inc., 2012 ONSC 1581
DIVISIONAL COURT FILE NO.: 488/10
DATE: 2012/03/08
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, PEPALL, HARVISON YOUNG JJ
BETWEEN:
1737402 ONTARIO INC. Plaintiff/Respondent
– and –
LUXURY PROPERTIES INC. AND HELEN MANIMARAN Defendants/Appellants
Olubunmi Ogunniyi, for the Plaintiff/Respondent
Suvendu Goswami, for the Defendants/Appellants
HEARD at Toronto: February 17, 2012
REASONS FOR JUDGMENT
Pepall J.
[1] The Appellant/Defendants appeal from the judgment of Miller J. dated June 28, 2010 in which she ordered them to pay $30,213 to the Respondent/Plaintiff, 1737402 Ontario Inc.
[2] The Appellant, Luxury Properties Inc. (“Luxury”), purchased property located in Scarborough, Ontario, for $2.7 million. An institutional lender provided financing of $2.4 million that was secured by a first mortgage on the property. Luxury needed additional funding and obtained a second mortgage of $151,000 from the Respondent. Interest was calculated at 18% per annum payable monthly. The second mortgage was guaranteed by the Defendant, Helen Manimaran who was the President of Luxury.
[3] Ms. Manimaran and her husband, Siva Manimaran, signed various documents in support of the $151,000 second mortgage. These documents included a Solemn Declaration that was signed by Ms. Manimaran on August 13, 2008. In it, the amount of the mortgage is stated to be $151,000 and the net advance, after deductions of $10,000 for the Lender’s administration fee and $33,000 for mortgage commission, amounted to $108,000. Other documents relating to the mortgage, including an Acknowledgment and Direction, all refer to the sum of $151,000 but no others made any mention of the $33,000 mortgage commission.
[4] The Respondent advanced $108,000 to Luxury. Luxury eventually defaulted in payment and the Respondent sued Luxury on the covenant and Ms. Manimaran on the guarantee.
[5] On June 22, 2009, the parties consented to partial summary judgment in which the Appellants were ordered to pay the Respondent “a sum calculated by deducting from the net loan advance of $108,000 along with accrued interest, sums that the defendants have already paid…” That sum amounted to $76,600.40. The balance of the issues in the action “including the deduction of $10,000 and $33,000 from the principal loan amount of $151,000” were to proceed to trial. A writ of possession relating to the Scarborough property was ordered to issue but was not to be enforced pending trial.
[6] The trial of the remaining issues in the action took place on March 19 and 20, 2010 before Miller J. She stated that the Respondent’s position was that the fees were part of the mortgage agreement and should therefore be paid. The Appellants’ position was that the agreement was unenforceable because the Respondent did not advance funds that were his own, and he was not a member of the Financial Services Commission of Ontario (“FSCO”), was not licensed to lend money on the security of real property and failed to provide appropriate documentation. Furthermore, the sums charged were in contravention of the Mortgage Brokerages, Lenders and Administrators Act, S.O. 2006 (“MBLA Act”) and the contract was therefore unenforceable.
[7] Having described the parties’ positions, the trial judge determined that the Appellants had agreed to repay the Respondent $151,000 which included a $10,000 administration fee and interest. She was not prepared to characterize $33,000 of the $151,000 amount as being on account of mortgage commission. Although the Solemn Declaration referred to it as such, she found that none of the other documents did. The contract was with the Respondent and the Appellants had agreed to make payment of $151,000.
[8] She therefore ordered the Appellants to pay $30,213 representing the difference between the principal amount of $151,000 and the payments on account.
[9] She also determined that non-compliance by Mr. Raza, the principal of the Respondent, with the provisions of the MBLA Act and his lack of a licence and membership in FSCO did not render the parties’ contract or any part of it a nullity. In addition, she stated that she had considered the provisions of the Unconscionable Transactions Relief Act, R.S.O. 1990 but did not find the contract terms to reflect excessive costs or the transaction to be harsh or unconscionable. She also found that the Appellants were not liable for any additional interest with the exception of post-judgment interest.
[10] The Appellants initially appealed on three bases but before this Court counsel advised that he was not advancing that relating to the Unconscionable Transactions Relief Act, R.S.O. 1990, c. U. 2. As such, the Appellants were no longer taking the position that the transaction was harsh and unconscionable and the cost of the loan excessive.
[11] The Appellants submit that the trial judge’s conclusions were inconsistent with her factual findings and lacked intelligibility. In particular, they state that at paragraph 46 of her Reasons, the trial judge states that she was not satisfied that commission was part of the agreement yet at paragraph 51 of her Reasons, she states that the contract was for $151,000. In addition, they complain that the trial judge ought not to have concluded that the $10,000 and $33,000 were payable because the contract was unenforceable, given that the Respondent was not licensed, was not a member of FSCO, was in breach of the MBLA Act and gave the Appellants no mortgage commitment statement and no mortgage disclosure statement.
[12] The standard of review on an appeal from the decision of a trial judge on a question of law is correctness. The standard of review on a question of fact is that of palpable or overriding error. Questions of mixed law and fact lie on a spectrum, depending on whether the alleged error is based on a legal or factual inference: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 26-27.
[13] There are two issues to address. Firstly, were the trial judge’s conclusions inconsistent with her factual findings and secondly, did she err in failing to nullify the mortgage agreement in the face of her conclusion that the Respondent had breached the MBLA Act and its principal was unlicensed and unregistered with FSCO?
[14] Dealing with the first issue, while in our view her Reasons are somewhat confusing, the trial judge clearly found that the Appellants had agreed to pay the Respondent the sum of $151,000 and that none of this sum was on account of mortgage commission. While the Solemn Declaration did speak of a mortgage commission of $33,000, the other relevant documents did not and it was open to the trial judge to find as she did. This was a factual determination and there was no palpable or overriding error.
[15] Turning to the second issue, there are a number of problems with the position advanced by the Appellants. Firstly, the Appellants did not plead that non-compliance with the MBLA Act and the lack of a FSCO membership and licence rendered any part of the parties’ agreement a nullity. Secondly, the parties consented to partial summary judgment based on an agreement which they now attempt to argue is a nullity. Thirdly, the trial judge found that Mr. Raza’s unlicensed status and lack of membership in FSCO did not nullify the parties’ contract or any part of it.
[16] Lastly, the MBLA Act does not stipulate that a breach of its provisions renders the underlying contract a nullity. The trial judge obviously concluded that it was the intention of the parties to make a legal contract and to carry it out. It was open to her to conclude that, in light of the purpose of the statute and the circumstances under which the contract was made and to be performed, the contract was enforceable notwithstanding any illegality. See in this regard Beer v. Townsgate I Ltd. (1997), 1997 976 (ON CA), 36 O.R. (3d) 136 (C.A.).
[17] For all of these reasons, the appeal is dismissed. Although the parties agreed on costs of $25,000 for this appeal, the amount is excessive, given the complexity of the matter and the amount in issue, Costs to the Respondent are fixed at $7,500.00 on a partial indemnity scale inclusive of disbursements and HST.
Pepall J.
Swinton J.
Harvison Young J.
Released: March 8, 2012
CITATION: 1737402 Ontario Inc. v. Luxury Properties Inc., 2012 ONSC 1581
DIVISIONAL COURT FILE NO.: 488/10
DATE: 2012/03/08
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, PEPALL, HARVISON YOUNG JJ
BETWEEN:
1737402 ONTARIO INC. Plaintiff/Respondent
– and –
LUXURY PROPERTIES INC. AND HELEN MANIMARAN Defendants/Appellants
REASONS FOR JUDGMENT
Pepall J.
Released: March , 2012