COURT OF APPEAL FOR ONTARIO
CITATION: Tribecca Finance Corporation v. Tabrizi, 2015 ONCA 748
DATE: 20151105
DOCKET: C59769
Gillese, van Rensburg and Miller JJ.A.
BETWEEN
Tribecca Finance Corporation, Yogesh Shah and Rita Shah
Respondent (Plaintiffs)
and
Ani Tabrizi and Haroutioun Tabrizi
Appellants (Defendants)
Adam Wainstock, for the appellants
Maureen Whelton and Neil G. Wilson, for the respondent
Heard: October 6, 2015
On appeal from the judgment of Justice Meredith Donohue of the Superior Court of Justice, dated November 19, 2014 and amended April 15, 2015, and from the costs order dated January 21, 2015.
ENDORSEMENT
[1] The respondent, Tribecca Finance Corporation (“Tribecca Finance”), was successful on its summary judgment motion. It obtained judgment against the appellants in the sum of $497,120.75, as the outstanding balance owing under a second mortgage registered against a residential property in Markham, Ontario, plus costs of $101,789.09. By the time the action was brought, the property had been sold under power of sale, the first mortgagee had been paid out and the balance had been paid to the respondent in partial satisfaction of its claim.
[2] The appellants argue that the respondent’s action on the covenant must be considered in the wider context of a luxury residential construction project in which Tribecca Finance, its principal Rajan Kaushal, and related corporations, are all alleged to have breached various obligations to the appellants.
[3] As such the appellants contend that there were genuine issues requiring a trial, and that judgment ought not to have been granted against them. In the alternative, they assert that enforcement of the judgment should be stayed pending the disposition of their counterclaim in the action, and proceedings they commenced against the respondent and other parties in Toronto (the “Toronto action”).
Facts
[4] In June 2010, the appellants entered into a contract with Tribecca Development Corporation (“Tribecca Development”) for the construction of their home. The contract specified that Tribecca Development was to act as project manager/construction manager, while a corporation controlled by the appellant, Haroutioun Tabrizi, was to be the builder.
[5] The appellants allege that Kaushal, through the Tribecca corporations, wrongly usurped control of the construction project, ran up construction costs, and delayed completion of the project so as to prevent the appellants from selling the home and repaying the mortgage debt at an earlier date. The cumulative effect of these actions, the appellants say, was to create a situation where the appellants had no option but to obtain financing from Tribecca Finance on unfavourable terms, which depleted the appellants’ equity in the property and ultimately resulted in its sale by the first mortgagee under power of sale at a substantial loss.
[6] The appellants argued that they entered into the mortgage agreement under duress, and that the respondent’s actions amounted to fraud, bad faith, and breach of its fiduciary duty to the appellants. The appellants argued that they are therefore entitled to equitable set-off against the mortgage debt.
[7] In 2012, after a default judgment in the mortgage enforcement action had been set aside, the appellants commenced the Toronto action against Tribecca Finance, Kaushal, Tribecca Development and other corporations that Kaushal is said to control. In the appellants’ counterclaim in the mortgage action they sought, among other things, an order consolidating the two actions. Additionally, in response to the summary judgment motion, the appellants brought a cross-motion for consolidation of the two proceedings.
[8] The motions judge noted that the mortgage contained standard charge terms that provide that the mortgagor will pay the principal and interest “without any deduction or abatement”, and that there is no right to equitable set-off against a liquidated demand under the mortgage in the absence of bad faith or fraud.
[9] The motions judge found that the evidence did not support the claims that the mortgage contract was made under duress or was unconscionable. She made factual findings and concluded that the respondent’s actions did not rise to the level of bad faith or fraud, and that the respondent did not owe a fiduciary duty to the appellants.
Issues on Appeal
[10] The appellants raise four grounds of appeal. They submit that the motions judge erred in:
finding that the appellants were not entitled to equitable set-off against the mortgage due to bad faith;
refusing to consolidate the mortgage action with the Toronto action;
refusing to stay the judgment pending the Toronto action; and
the quantum of costs ordered.
[11] We reject the first three submissions and do not grant leave to appeal the costs order.
[12] The motions judge considered the evidence on the motions. In particular, the appellants claimed that the construction of the home was delayed and that costs of construction were excessive. She noted that this was the subject of the Toronto action that was brought after default under the mortgage.
[13] The motions judge made findings of fact with respect to the actions of all the parties. These findings are fully supported by the record before her, and are entitled to deference. In particular, she found that the appellants were “sophisticated, experienced and well-heeled people” and that they had the benefit of independent legal advice. She noted that Mr. Tabrizi, in particular, is an engineer with over 20 years of experience in home construction.
[14] The motions judge found that the mortgage loan was high risk and she accepted the respondent’s evidence of why it was an expensive loan. She found that the construction project was completed within budget and that the appellants did not establish on the evidence that Mr. Tabrizi would have been able to source less expensive subtrades.
[15] Significantly, the appellants only complained of the conduct of the Tribecca corporations late in the day, in response to the mortgage action, and did not invoke the termination or arbitration clauses available to them under the construction contract.
[16] These findings amply support the conclusion of the motions judge to reject the appellants’ claim of bad faith. This disposes of the claim for a set-off against the mortgage debt.
[17] Having concluded that the claim for a set-off was not made out, the motions judge made no error in refusing to exercise her discretion to consolidate the action with the Toronto action. The judgment does not affect the appellants’ ability to pursue that action, which has been dormant since the exchange of pleadings.
[18] In view of the findings of fact of the motions judge, which were reasonable and fully supported by the evidence, and her rejection of the defence of equitable set-off, there is no basis for a stay of execution of the judgment pending the disposition of the Toronto action. The motions judge did not err in her refusal to grant such relief.
[19] We do not grant leave to appeal the costs award, which awarded costs on a substantial indemnity basis pursuant to the standard charge terms of the mortgage.
DISPOSITION
[20] The appeal is dismissed, with costs to the respondent fixed at $13,700, inclusive of disbursements and HST.
“E.E. Gillese J.A.”
"K. van Rensburg J.A."
“B.W. Miller J.A.”