Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20240913 DOCKET: COA-24-CV-0182

Lauwers, Paciocco and Harvison Young JJ.A.

BETWEEN

Yury Boltyansky, Susanna Yampolsky, Ladislav Vojtila, Elena Keimakh, 12275601 Canada Inc., and Wendy Tan Plaintiffs (Respondents)

and

Janina Joseph-Walker*, Avenue Developments Inc.*, Alpha Financing Inc.*, Steven Hazan, 2380376 Ontario Limited d.b.a. Dominion Lending Centres Ambassador Mortgage Solutions, Mark Buslovich, Ishan Dhanapala, First Financial Consulting Services (FFCS) Ltd., Axess Law Professional Corporation, and Edouard Voskresensky Defendants (Appellants*)

Counsel: Shahen Alexanian, for the appellants Avi Freedland, for the respondents

Heard: September 4, 2024

On appeal from the order of Justice Jessica Kimmel of the Superior Court of Justice, dated January 12, 2024, with reasons reported at 2024 ONSC 192.

Reasons for Decision

Overview

[1] The appellants, Janina Joseph-Walker and her companies, Avenue Developments Inc., and Alpha Financing Inc. (the “appellants”) seek to set aside a provisional summary judgment order made against them in a mortgage action (the “Mortgage Action”). For the reasons that follow, their appeal is dismissed.

Material Facts

[2] In October 2020, the appellants borrowed $2,010,000 for a land development project from 22 lenders through a syndicated mortgage loan. This mortgage loan is secured by two properties in Richmond Hill. By December 2021, the appellants had defaulted on the mortgage loan. On June 30, 2022, the respondents, who are six of the twenty-two lenders, commenced the Mortgage Action against the appellants. In that action, they sought payment of the principal and interest they were owed as well as real remedies, namely, an order of vacant possession as well as writs of possession. Even though the real remedies the respondents were requesting would affect the interests of the other syndicated mortgage lenders, the respondents did not add them as parties to the action nor did they serve notice on them.

[3] The same day the Mortgage Action was commenced, the appellants brought an application (later converted into an action) alleging fraud (the “Fraud Action”) against lawyers (the “Lawyer Defendants”), the mortgage brokers (the “Broker Defendants”) and nine of the other lenders. No fraud allegations were made against the respondents in that application.

[4] On November 7, 2022, the respondents moved for summary judgment in the Mortgage Action, leading, more than two years later, on January 12, 2024, to the provisional summary judgment order that is the subject of this appeal.

[5] On February 13, 2022, before the summary judgment motion was heard, the appellants expanded the Fraud Action to include fraud allegations against additional parties, including the six respondents. The allegations made against the respondents consist of unparticularized allegations of “fraud”, “illegality” and “collusion”.

[6] On January 12, 2023, the Mortgage Action, and the Fraud Action, along with a related “Receivership Application”, were consolidated by a consent Consolidation Order. The respondents’ summary judgment motion then continued within the consolidated action.

[7] In defence of the summary judgment motion, in addition to numerous other objections, the appellants repeated the fraud allegations they were making in the Fraud Action against the respondents, and they sought declarations of invalidity and removal of the mortgages, as well as damages for slander of title. During the motion they claimed, without supporting evidence, that the respondents were aware of an alleged fraudulent scheme masterminded by the Broker and Lawyer Defendants and had received funds or other benefits through their participation in a circular flow of funds through their lawyers. Mindful that the appellants were self-represented, the motion judge provided them with several opportunities to furnish supporting evidence for these allegations, including by making documentary discovery orders and by giving them other opportunities to discover other evidence, which the appellants did not avail themselves of. Ultimately, in support of their fraud claims the appellants relied upon some documentation that had been filed by other parties in the Mortgage Action, namely, trust and banking records as well as an email dated February 7, 2022, in which one of the defendants in the Mortgage Action claimed to have discovered an apparent $200,000 fraud.

[8] It is on this record that the motion judge provisionally ordered summary judgment in favour of the respondents. In making this provisional summary judgment order, the motion judge concluded, as required by r. 20.04(2) of the Rules of Civil Procedure, that there was no genuine issue requiring a trial with respect to the entitlement of each of the respondents to be repaid their proportionate fractional share of the loan advance along with agreed interest. The reasoning the motion judge used in coming to that conclusion accords with the direction of Karakatsanis J. in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits for summary judgment. This will be the case when the process (1) allows the trial judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[9] The motion judge found that she was able to make the necessary factual findings on the record before her without employing the enhanced fact-finding powers granted to motion judges in r. 20.04(2)(1), and she was able to apply the law to the facts. Specifically, she concluded that despite “the multitude of sequential and creative arguments” made by the appellants, they “cannot delay any longer the basic and irrefutable fact that they were loaned money by the [respondents] … they granted the Mortgage, [and] they defaulted on the Loan”. She concluded that “the amounts that were deducted from the Loan Advances were in accordance with the provisions of the Lender Commitments.” She also found that “there is no evidentiary foundation for the suggestion that the [respondents] were involved in or benefited from the alleged fraud.” She concluded that the trust and banking documents relied upon as proof of the respondent’s alleged fraud in fact supported a finding that no improper flow of money had occurred. She also found that the February 7, 2022, email did not support the fraud allegations; its author had provided an unchallenged affidavit in which he swore that he is not aware of any involvement by the respondents in the fraud he was referring to.

[10] The motion judge also found “that summary judgment is the proportionate, most expeditious and least expensive way to address the claims and defences” between the parties. She noted that the appellants had delayed a simple debt collection for more than two years with unsupported allegations of fraud, thereby putting the respondents to continued expense and inconvenience. She found that this delay was imperilling equity in one of the mortgaged properties, which was highly leveraged. She reasoned that the summary judgment requested by the respondents would put them instead of the appellants in possession of the property, benefiting all encumbrancers. And she concluded that summary judgment would simplify and refocus future proceedings by reducing the number of parties in the Fraud Action.

[11] In coming to this decision, the motion judge recognized that granting summary judgment would effectively end the fraud allegations made against the respondents in the Fraud Action. In light of this, she assessed the request for summary judgment as if it was a request for partial summary judgment, considering the factors identified by this court in Malik v. Attia, 2020 ONCA 787, 29 R.P.R. (6th) 215, at para. 62. She found that dividing the determination would be cheaper for the respondents by sparing them from having to participate in the Fraud Action. She concluded that this was a fair result because no foundation had been shown for the fraud allegations even though the appellants had been given ample opportunity to show a basis for their claim. She concluded that granting summary judgment and thereby resolving the fraud allegations made against the respondents posed no risk of inconsistent verdicts because the fraud claims made against the other Fraud Action defendants are “sufficiently separate and distinct”.

[12] When issuing the summary judgment order, the motion judge made it “provisional” and stayed the order, for two reasons. First, she found that under the Rules, given that the respondents were seeking vacant possession and leave to obtain writs of possession, they should have added the seven lenders who were not parties to the consolidated proceeding as “necessary party defendants” to the action. But she was satisfied that the failure to do so did not render the action a nullity and that the interests of the seven lenders could be addressed in due course. She stayed the order, in part, so that this could be accomplished. Second, she wanted to address the procedural concern that the same fraud allegations she had resolved in favour of the respondents might be repeated in the Fraud Action, raising a risk of re-litigation. A stay of the order would permit her to take steps to regularize the pleadings in the Fraud Action before declaring final judgment in the Mortgage Action. She made provision to address these two concerns in case conferences that would include the seven lenders, a process that was underway when this appeal was instituted.

Issues and Analysis

[13] We are not persuaded by the grounds of appeal raised by the appellants. In our view, the decision was persuasive, carefully crafted and arrived at without error.

[14] First, we do not accept the appellants’ claims that summary judgment was inappropriate given the pending Fraud Action or that the motion judge failed to consider the context of the consolidated action. As indicated, the motion judge carefully considered and rejected the risk that giving summary judgment in the Mortgage Action could result in inconsistent findings with those that may be made subsequently in the Fraud Action, concluding reasonably that dismissing the allegations against the respondents would not affect the outstanding fraud allegations the appellants were making against the other Fraud Action defendants. She also recognized that steps can be taken to have the proceeds of a mortgage sale held in trust pending the outcome of the Fraud Action to protect the interest of the other lenders.

[15] We also reject the appellants’ related submission that summary judgment was based on a “future contingent evidentiary record”, a characterization the appellants based on the prospect that “more expansive” evidence could emerge from the Fraud Action. In spite of being given the benefit of opportunities for discovery that delayed the summary judgment motion, the appellants have offered no realistic, non-speculative basis for their assertion that evidence could emerge during the Fraud Action to support their fraud theory against the respondents. They are not entitled to waylay access to summary judgment based on the speculative hope that future evidence might materialize. The appellants had an obligation to put their best foot forward during the summary judgment motion: Combined Air Mechanical Services Inc. et al. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1, at para. 15; Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753, 52 B.L.R. (5th) 51, at para. 9. But they failed to raise any realistic prospect that the respondents were complicit in the alleged fraud. The motion judge was entitled to proceed on the evidence before her.

[16] Relatedly, we reject the submission made before us for the first time in oral argument that there were irregularities in the documentation that should have served as red flags of impropriety or potential fraud, alerting the motion judge that a trial was required. Not only is it unclear whether the concerns the appellants now raised were argued before the motion judge, but none of those “irregularities” offer any support for the suggestion that the respondents were parties to any fraud that may have been occurring within the mortgage syndicate.

[17] The appellants also argue that the motion judge erred by, in effect, granting “partial summary judgment”. In order to address this ground of appeal, we need not decide whether this characterization is correct. Even if the order under appeal is, in form or substance, a partial summary judgment, no error occurred. Partial summary judgment is not impermissible per se. If partial summary judgment does not present a risk of duplicative proceedings or inconsistent findings of fact, and resolving the claim could significantly advance access to justice and be the most proportionate, timely and cost-effective approach, it may be in the interests of justice to grant partial summary judgment: Heliotrope Investment Corporation v. 1324789 Ontario Inc., 2021 ONCA 589, 462 D.L.R. (4th) 731, at para. 32. The motion judge addressed each of these considerations and found they were met. She likened the facts of this case to Heliotrope itself, and she tested the propriety of granting summary judgment against the criteria identified in Malik, at para. 62. Her decision is entitled to deference, and we see no extricable errors in her decision: Heliotrope, at para. 30.

[18] We are also unpersuaded by the appellants’ submission that the motion judge exceeded her jurisdiction by granting summary judgment, given the respondents failure to serve the seven syndicated mortgage lenders who are not parties to the consolidated action. Even though she recognized that these mortgage lenders were necessary parties to the Mortgage Action and should have been added by the respondents as defendants, she was entitled to exercise discretion to invoke the curative provision in r. 2.01(1)(a). In our view, her approach was sensible and workable. And we find no merit in the submission that in making this decision, she failed to consider that the seven syndicated mortgage lenders may have supported the appellants’ case had they been parties to the proceeding. This is a speculative suggestion, and the failure to add them as parties did not prevent the appellants from presenting any evidence that these seven lenders may have been able to contribute.

[19] Finally, the appellants argue that the motion judge erred by treating the summary judgment motion as a motion for default judgment by failing to require proof that the mortgage costs were appropriate, and that the terms of the mortgage commitments were as claimed. We do not agree. The record before the motion judge contained the necessary documentation, and she made specific findings of fact on each of the issues that were open to her to make. The appellants have not shown any palpable or overriding errors in any of these findings.

Conclusion

[20] The appeal is dismissed. The parties are encouraged to attempt to settle the issue of costs. If this does not occur, both parties are invited to provide written costs submissions within 10 business days of the release of this decision. Those submissions are not to exceed 3 pages in length. The respondents have filed a bill of costs. The appellants are directed to add their own bill of costs to any submissions they choose to make.

“P. Lauwers J.A.”

“David M. Paciocco J.A.”

“A. Harvison Young J.A.”