COURT OF APPEAL FOR ONTARIO
CITATION: 7550111 Canada Inc. v. Charles, 2020 ONCA 386
DATE: 20200616
DOCKET: C67479
Rouleau, van Rensburg and Roberts JJ.A.
BETWEEN
7550111 Canada Inc.
Plaintiff (Respondent)
and
Natalie Charles
Defendant (Appellant)
Kevin Sherkin, for the appellant
Doug Bourassa, for the respondent
Heard: in writing
On appeal from the judgment of Justice Dale F. Fitzpatrick of the Superior Court of Justice dated August 29, 2019.
REASONS FOR DECISION
A. Overview
[1] The appellant appeals from the judgment granted in favour of the respondent in the amount of $164,820.86. The respondent successfully brought a motion for summary judgment to enforce its mortgage rights against the appellant.
[2] At the request of the panel, the parties provided further written submissions, including the appellant’s draft counterclaim and the revised calculation of the amounts owing under the mortgage that formed the basis for the judgment.
[3] For the following reasons, we allow the appeal for the narrow purpose of addressing calculation errors in the amount of the award and otherwise dismiss the appeal.
B. Background
[4] The appellant admitted on the hearing of the motion that in or about the end of February 2018, she sought a mortgage loan of $120,000 from the respondent and entered into a mortgage for that amount. She also admitted that funds were advanced under the mortgage and used to pay off her personal debts and other debts she had guaranteed. It was common ground that she has never repaid any of these monies. She disputed that the respondent had made a further $3,300 advance and the respondent abandoned its claim for this amount at the hearing of the motion.
[5] However, the appellant argued before the motion judge that she was the victim of an elaborate fraud carried out by the respondent, its principals and lawyers, and Kazembe Law, the firm purporting to represent her in the mortgage transaction. Her principal allegation was that the respondent and the others fraudulently changed the term of the mortgage from 12 months to one month. She denied signing mortgage documents setting out a one-month term and claimed her signature was forged, relying on expert evidence. She pointed to various inconsistencies among the different versions of the mortgage commitment letters that were produced and highlighted the fact that the mortgage registered on title on March 2, 2018 provided for a 15-month term.
[6] The motion judge rejected the appellant’s fraud allegations and determined that there was no meaningful evidence “to suggest any misconduct let alone fraud on the part of 7550111” in relation to the mortgage transaction. While acknowledging that “the loan documents present inconsistencies”, the motion judge concluded that “these inconsistencies do not amount to fraud or anything close to it” but rather suggested “sloppy paperwork” by the respondent and the lawyer representing the appellant in the transaction. In any event, he found the discrepancies among the differing terms of the mortgage to be moot: even if the mortgage term was for 12 months, as the appellant alleged, or 15 months, as provided for in the registered mortgage, there was no question that the mortgage had long since matured, had not been repaid, and was in default.
[7] The motion judge determined that the various inconsistencies pointed out by the appellant provided no defence to the respondent’s claim nor raised any triable issues. The appellant had received exactly what she bargained for and benefitted from the advance of the mortgage funds which she had never repaid. Accordingly, the motion judge concluded there was no genuine issue requiring a trial and granted judgment to the respondent.
C. Issues and Analysis
[8] The appellant submits that the motion judge erred in granting judgment to the respondent and that the judgment should be set aside. She raises the following three issues, which we consider in turn.
(1) Did the motion judge err by denying the appellant’s request for an adjournment of the respondent’s motion and for leave to file additional materials?
[9] We see no error. In the context of these proceedings, the motion judge’s decision was reasonable and within his discretion to make.
[10] The hearing date was set, with the appellant present, to proceed with or without counsel and it was made peremptory on her. She retained counsel the week before this hearing date. Her new counsel appeared an hour late because he was putting together affidavit evidence, not knowing what affidavit evidence had already been filed. The motion judge declined the request for an adjournment and refused the new affidavit evidence, allowing counsel time to review the filed materials. Having done so, counsel for the appellant did not submit that the new affidavit would provide additional material that was not already in the record nor that he required more time to prepare for the motion. As reflected in the transcript and as the motion judge noted in his reasons, counsel for the appellant proceeded to make full submissions.
[11] In our view, there was no unfairness to the appellant in the circumstances of this case. It was within the reasonable exercise of the motion judge’s discretion to decline an adjournment and additional materials that did not appear to be necessary. The appellant was well aware that the motion date was peremptory to her whether or not she had counsel. The issues were relatively straightforward. The motion judge accommodated newly retained counsel by granting further preparation time. There is no indication that the appellant was prejudiced in any way.
(2) Did the motion judge err by failing to find that the interest, fees and charges sought by the respondent were in violation of s. 347 of the Criminal Code and s. 8 of the Interest Act?
[12] The appellant submits that the motion judge erred by failing to consider whether the mortgage’s one-month term, ten percent interest rate, and $12,000 lender fee, as well as the other fees and charges, amounted to a criminal rate of interest contrary to s. 347 of the Criminal Code, R.S.C. 1985, c. C-46, and whether they contravened s. 8 of the Interest Act, R.S.C. 1985, c. I-15, by “increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.” In support of this argument, appended to her factum, the appellant proffers a calculation using an online “Basic APR Calculator” tool that produces an effective annual percentage interest rate of 131 percent.
[13] We agree with the respondent’s submission that this court should not entertain these arguments raised for the first time on appeal.
[14] As a general rule, appellate courts do not permit an issue to be raised for the first time on appeal: see Kaiman v. Graham, 2009 ONCA 77, 75 R.P.R. (4th) 157, at para. 18; R. v. Reid, 2016 ONCA 524, 132 O.R. (3d) 26, at paras. 37-44, leave to appeal refused, [2016] S.C.C.A. No. 432. The reasons for this general prohibition are obvious. Typically, the evidentiary record is inadequate to permit an appellate court to properly determine the new issue. Moreover, the introduction of a new issue on appeal is usually prejudicial to the respondent and runs counter to the societal interest in finality and the expectation that cases will be disposed of fairly, fully and expediently at first instance. Accordingly, the burden falls squarely on the appellant to satisfy the court that it should exercise its discretion to permit the argument to be advanced.
[15] In our view, the appellant has failed to meet this onus.
[16] First, since these issues were not raised before the motion judge, he did not make the findings necessary to determine them.
[17] The motion judge made no finding about what qualifies as “interest” under the impugned mortgage. “Interest” under s. 347 of the Criminal Code comprises certain charges and expenses under a mortgage but excludes others. As a result, before any effective rate of interest calculation can be prepared, a determination must be made as to whether the various charges and expenses in issue are “interest” under s. 347 of the Criminal Code.
[18] Further, a violation of s. 8 of the Interest Act requires the court to find that the effect of the mortgage’s terms is to impose a higher rate on arrears than on money not in arrears: Krayzel Corp. v. Equitable Trust Co., 2016 SCC 18, [2016] 1 S.C.R. 273, at para. 25. As this was not argued before the motion judge, he did not make such a finding.
[19] Second, the evidentiary record does not permit this court to determine these issues.
[20] With respect to the criminal rate of interest submission, the question is whether the terms of the mortgage, including the ten percent interest rate and the various fees and charges, exceed an effective annual rate of interest of 60 percent as prohibited under s. 347 of the Criminal Code. On its face, the mortgage provides for a ten percent interest rate.
[21] Under s. 347(2) of the Criminal Code, “interest” is broadly defined to include “the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit… but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes”. A criminal rate of interest means “an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds sixty per cent on the credit advanced under an agreement or arrangement”.
[22] As a result, where, as here, a mortgage does not contain on its face a criminal rate of interest, the party alleging that a mortgage contravenes s. 347 must identify the fees or other charges that it alleges are “interest”, and then provide evidence that the effective annual rate of interest calculated in accordance with “generally accepted actuarial practices and principles” exceeds sixty percent. Because the appellant did not challenge the various fees charged by the respondent in response to the motion for summary judgment, there was no evidence that would permit the court to determine whether they are properly considered “interest”. Moreover, the impact of such fees and charges on the interest rate is not a simple calculation that the court can make on the submissions of counsel. Even if all of the fees and charges here were considered “interest” (which has not been determined), the appellant has not tendered fresh evidence of a calculation of the rate of interest in accordance with generally accepted actuarial practices and principles. The calculation submitted by the appellant, which assumes a 10% interest rate per month, appears wrong on its face, and in any event falls far short of the required evidentiary standard.
[23] Similarly, since the appellant did not submit the Interest Act argument at the motion, the necessary evidence on this point does not form part of the record. Specifically, it is not clear from the record that the impugned charges were levied to effect a higher rate on the arrears, rather than reflecting the appellant’s actual administrative costs: P.A.R.C.E.L. Inc. v. Acquaviva, 2015 ONCA 331, 126 O.R. (3d) 108, at para. 96.
[24] Third, it would be unduly prejudicial to the respondent and entirely contrary to the principles of procedural fairness to permit the appellants to advance these issues on appeal.
[25] These interest rate allegations constitute completely new defences to the respondent’s claim. They are not pleaded. They were not raised before the motion judge. On the motion, the appellant did not contest the mortgage’s rate of interest or any of the fees, charges or penalties. Counsel did not indicate to the motion judge that the appellant needed an adjournment in order to raise these issues. There is no motion for fresh evidence nor any explanation as to why they are being raised for the first time on appeal. It is not challenged that had these issues been raised at first instance, the respondent would have provided an evidentiary response.
[26] Fairness to the respondent and respect for the due administration of justice require finality in these circumstances. In consequence, we decline to consider these issues on appeal.
(3) Did the motion judge err by granting summary judgment in favour of the respondent?
(a) Will summary judgment lead to inconsistent findings?
[27] The appellant submits that the motion judge erred by granting summary judgment in the face of a counterclaim and a third party claim in which she alleges fraud against the respondent and others. She says summary judgment is inappropriate because of the possibility of inconsistent findings.
[28] We disagree.
[29] It was open to the motion judge to determine on a summary judgment motion the validity of the mortgage and the question of the respondent’s alleged participation in a mortgage fraud. The well-settled purpose of summary judgment motions is to dispose of any issues that do not require a trial: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 47; Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.4(2).
[30] The prospect of inconsistent findings does not come into play here. It is not clear to us that a counterclaim has actually been filed or that it was in the record before the motion judge. Regardless, whatever determination may be made in relation to the appellant’s related claims will not be inconsistent with the motion judge’s conclusion that the mortgage is valid, and the respondent did not participate in any fraud. Those issues have been finally determined and the appellant is bound by those conclusions.
(b) Are there errors in the calculation of the judgment?
[31] Finally, the appellant challenges the amount of the judgment. She submits that she should not have to pay any of the charges and penalties levied under the mortgage, especially not those related to the $3,300 advance abandoned by the respondent at the motion. She says she should only be personally liable for $101,352.94, comprised of amounts that she acknowledges receiving from the respondent to pay out her indebtedness under second mortgages, a loan and a first mortgage. She disputes liability for $4,147.06 paid for legal fees related to the mortgage transaction which was disbursed by the respondent to Kazembe Law against whom she has commenced a third party proceeding.
[32] It was open to the motion judge to find that the mortgage was valid. As a result, there is no basis to relieve the appellant from her liability to the respondent for any of the principal, interest, or other charges, including the lender’s fee of $12,000, provided for under the mortgage, that relate to the advances made by the respondent, other than the additional $3,300 advance abandoned by the respondent. These amounts include the payment by the respondent on behalf of the appellant of Kazembe Law’s legal fees for the mortgage transaction, which the motion judge upheld. As the motion judge noted in his reasons, any issues that the appellant has with the representation she received by Kazembe Law are between her and that firm.
[33] However, we agree that there are errors in the calculation of the judgment. The revised mortgage calculation submitted by the respondents erroneously includes interest, charges and other fees related to the abandoned $3,300 advance. While the abandoned $3,300 advance to the appellant was not included in the revised calculation that formed the basis for the judgment, the related interest and other charges, such as the $150 in fees for the second advance, remained. The interest and other charges related to the abandoned second advance also should have been removed from the mortgage calculation.
[34] We expect that the parties should be able to agree on a revised amount owing based on these reasons. If they cannot agree, they shall each submit a revised calculation, with brief submissions of no more than two pages, electronically to coa.e-file@ontario.ca within ten days of the release of these reasons.
D. Disposition
[35] We allow the appeal and modify the amount to be paid by the appellant to the respondent in accordance with the reasons above. The appeal is otherwise dismissed.
[36] The respondent was largely successful on this appeal and is entitled to its costs. If the parties cannot agree, they shall submit brief costs submissions of no more than two pages, addressing scale and quantum, plus a costs outline, electronically to coa.e-file@ontario.ca, within ten days of the release of these reasons.
“Paul Rouleau J.A.”
“K. van Rensburg J.A.”
“L.B. Roberts J.A.”