Court of Appeal for Ontario

Date: 2021-04-06 Docket: M52319 (C69127)

Before: Paciocco J.A. (Motion Judge)

Between: Sub-Prime Mortgage Corporation and Elle Mortgage Corporation Plaintiffs (Respondents/Moving Parties)

And: David Kaweesa, Jacqueline Kaweesa and Jeremy Kaweesa Defendants (Appellants/Responding Parties)

And Between: David Kaweesa and Jacqueline Kaweesa Plaintiffs by Counterclaim (Appellants/Responding Parties)

And: Sub-Prime Mortgage Corporation, Elle Mortgage Corporation and Terry Walman Defendants by Counterclaim (Respondents/Moving Parties)

Counsel: Glenn Cohen, for the moving parties Sub-Prime Mortgage Corporation and Elle Mortgage Corporation Ranjan Das, for the moving party Terry Walman Matthew Tubie, for the responding parties

Heard: March 29, 2021 by video conference

Endorsement

Factual Background

[1] The moving party mortgagee Elle Mortgage Corporation (“Elle Mortgage”) holds a first and fifth mortgage on a residential property at 68 Cotswold Crescent in the City of Toronto (the “Cotswold Property” or the “Property”). The moving party mortgagee Sub-Prime Mortgage Corporation (“Sub-Prime”) holds a second mortgage on the Cotswold Property. I shall refer to the moving parties Elle Mortgage and Sub-Prime collectively as the “Mortgagees”.

[2] Title to the Cotswold Property is held by the responding party mortgagor Jacqueline Kaweesa (“Jacqueline”) and her son Jeremy Kaweesa (“Jeremy”). The mortgages held by the Mortgagees secure debts owed by Jacqueline and her husband, the responding party mortgagor David Kaweesa, who both currently reside at the Cotswold Property. Jeremy resides elsewhere.

[3] The Cotswold Property is heavily encumbered, including by third and fourth mortgages and a priority lien in favour of the City of Toronto for unpaid taxes and water levies. There is also a certificate of lien in favour of the Minister of National Revenue against the Property dating back to April 2015.

[4] The responding parties fell into arrears on the mortgages held by the Mortgagees. In a separate proceeding, the Mortgagees obtained default judgment against Jeremy. The mortgage enforcement action underlying this motion was discontinued as against Jeremy but proceeded against the responding parties, who issued a counterclaim against the Mortgagees and the moving party Terry Walman, the Mortgagees’ principal. Ranjan Das now represents Mr. Walman.

The Minutes of Settlement

[5] After several settlement conferences conducted by Stinson J., the parties executed minutes of settlement dated November 3, 2020, which underwent modest modifications in an addendum dated November 20, 2020 (together, the “Minutes of Settlement”). I will now summarize the terms of the Minutes of Settlement which are germane to the motion before me.

[6] First, the parties agreed that if the responding parties paid $2.1 million made out to Elle Mortgage on or before January 25, 2021, mortgage discharges would be arranged and the instant action and counterclaim against Mr. Walman would be dismissed without costs.

[7] Second, at para. 13 of the Minutes of Settlement, the responding parties agreed that if they did not make the $2.1 million payment before January 25, 2021, judgment in favour of the Mortgagees would “immediately issue”, requiring the responding parties to:

1. pay to the Mortgagees the amount of $2.7 million inclusive of prejudgment interest and costs, plus post-judgment interest at a rate of 8.5 percent per annum;
2. dismiss their counterclaim; and
3. give possession of the Property over to the Mortgagees, who would have leave to issue a writ of possession.

[8] Third, pursuant to para. 5, Mr. Das agreed to execute a letter set out in a schedule to the Minutes of Settlement and undertook to “answer any potential queries from potential lenders by confirming the contents of the letter.”

[9] Fourth, pursuant to para. 19 (reproduced below at para. 24), the parties permitted Stinson J. to remain seized of the action “for any purpose in connection with implementing these Minutes of Settlement”.

Non-compliance with the Minutes of Settlement

[10] The responding parties did not pay $2.1 million to the Mortgagees by the January 25, 2021 deadline. The Mortgagees brought a motion for judgment in accordance with the Minutes of Settlement. Having been unable to secure financing, the responding parties resisted the motion and requested an extension of the payment deadline. They argued the Minutes of Settlement had been frustrated by the ongoing COVID-19 pandemic and additional lockdown measures. The financing “commitment letter” the responding parties relied upon to support their extension request was unsigned and contained conditions that the responding parties clearly could not satisfy.

[11] In reasons on the motion for judgment dated January 29, 2021, Stinson J. denied the extension. He ruled that, since he was enforcing the Minutes of Settlement, it was not open to the court to re-write the agreement by changing the deadline and that, in any event, the responding parties knew the Property was heavily encumbered and took a knowing risk that they may not be able to secure requisite financing in time to meet the deadline. According to Stinson J., all parties had been aware of the COVID-19-related restrictions when they executed the Minutes of Settlement and those restrictions “were not of a nature that would preclude [the responding parties] from refinancing.”

[12] Stinson J. further ruled that the Minutes of Settlement were not frustrated because the pandemic (1) had not altered the obligations the responding parties had assumed, and (2) did not constitute a supervening event, as the pandemic was ongoing “with no prospect of early resolution” when the Minutes of Settlement were executed.

[13] Stinson J. therefore granted judgment in favour of the moving parties on the terms provided for in the Minutes of Settlement; namely, a money judgment against the responding parties for $2.7 million, the termination of the counterclaim, and a writ of possession against the Property (the “Judgment”).

The Temporary Stay

[14] However, Stinson J. added a term to the Judgment, at para. 5, temporarily staying enforcement of the writ of possession: “enforcement of the writ of possession is stayed for 90 days after the termination of the State of Emergency in Ontario”. I shall refer to this term as the “Temporary Stay”.

The Stay Condition

[15] Stinson J. imposed two conditions on the Temporary Stay. Only one of those conditions, at para. 5(i) of the Judgment, is material to the motions before me. It stated that the Temporary Stay was “conditional on the [responding parties] complying with” the following term:

The [responding parties] shall pay to the City of Toronto in reduction of realty tax arrears $3,000.00, monthly on the 15th day of each month starting February 15, 2021….

I shall refer to this term as the “Stay Condition”.

[16] The responding parties are in breach of the Stay Condition; they have not made the $3,000 monthly realty tax payments to date. Their counsel on this motion, who did not represent them before Stinson J., now argues that the responding parties are not required to comply with the Stay Condition because they claim to have an agreement with the City of Toronto relieving them from the obligation to make tax payments until this action is settled.

Relief Sought by the Moving Parties

[17] The responding parties have appealed the Judgment to this court. In the meantime, the moving parties ask me to grant the following relief:

1. An order that the responding parties post security for the moving parties’ costs of the appeal;
2. An order lifting or revoking the Temporary Stay of the writ of possession contained in the Judgment;
3. An order that the responding parties post further security of $11,037 for the costs awarded in the Judgment; and
4. An order expediting the hearing of this appeal.

Analysis

(1) Security for Costs

[18] To order a party to post security for costs, I must be persuaded that the preconditions provided for in the relevant rule are met and that it is in the interests of justice to exercise my discretion to make such an order: Heidari v. Naghshbandi, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 6. The moving parties seek an order for security for costs under rr. 61.06(1)(a) and (c). I need only to consider r. 61.06(1)(a).

[19] I cannot make an order pursuant to r. 61.06(1)(a) unless: (i) there is good reason to believe that the appeal is frivolous and vexatious, and (ii) the responding parties have insufficient assets in Ontario to pay the costs of their appeal.

(a) There is good reason to believe the grounds of appeal are frivolous

[20] With respect to the first precondition, I am satisfied there is good reason to believe that the grounds advanced by the responding parties in their appeal are “frivolous”, in that there is good reason to believe that those grounds are “devoid of merit, with little prospect of success”: Heidari, at para. 10.

The grounds of appeal regarding Mr. Das

[21] The first two grounds of appeal are challenges to the conduct of Mr. Das which the responding parties say were raised before Stinson J. in the proceedings below. Namely, the responding parties allege that Mr. Das impeded the responding parties’ efforts to obtain financing by refusing or failing “to answer potential queries from potential lenders confirming the contents of the executed letter”, contrary to his obligations under para. 5 of the Minutes of Settlement (reproduced above at para. 8).

[22] In my view, there is good reason to believe that these two grounds of appeal are devoid of merit and have little prospect of success on appeal. This is because there is good reason to believe the issues underlying these grounds of appeal were not raised before Stinson J. The moving parties point to four considerations which I find support my conclusion:

1. Jacqueline’s first affidavit was executed on January 25, 2021 and filed before Stinson J. It says nothing about Mr. Das’ compliance with the Minutes of Settlement. Jacqueline’s second affidavit, which includes exhibited documents the responding parties claim to be relevant to Mr. Das’ compliance, was executed on March 23, 2021, long after Stinson J.’s Judgment was rendered.
2. Mr. Walman’s affidavit, dated March 17, 2021, asserts that no evidence was presented and no argument made before Stinson J. relating to Mr. Das. Mr. Walman also attests: “I attended the virtual hearing and I saw and heard [prior counsel for the responding parties] expressly state that her clients were not making allegations regarding Mr. Das.” This assertion is uncontradicted on the evidence before me.
3. Mr. Das appeared on this matter before Stinson J. Had his conduct been a material issue in the case, as alleged by the responding parties, he would have been in a position of conflict. It is unlikely that he would have been permitted to continue as counsel.
4. In his thorough decision, Stinson J. makes no mention of what the responding parties now claim was a central issue before him. In my view, it is highly probable that Stinson J. would have addressed this issue if it had been raised before him.

The ground of appeal related to Stinson J.’s role in the proceedings

[23] One of the remaining two grounds of appeal is that Stinson J. erred in presiding over the motion for judgment after having presided at the settlement conferences. The responding parties contend that Stinson J. erred by treating the matter before him as a consent judgment, when in fact it was contested.

[24] There is good reason to believe that this ground of appeal is also devoid of merit. Rule 50.10(1) permits pre-trial conference judges to preside at the trial of an action with the written consent of the parties. Paragraph 19 of the Minutes of Settlement provide as follows:

The parties agree that the Honourable Justice D. Stinson will, subject to His Honour’s discretion, remain seized of this action and [the action against Jeremy] for any purpose in connection with implementing these Minutes of Settlement including, if necessary, scheduling and dealing with next steps if Jeremy Kaweesa does not sign these Minutes of Settlement and the signing of Judgment on January 26, 2021.

[25] This provision appears to constitute clear written consent by the parties to Stinson J. presiding over the motion for judgment. I am therefore satisfied that there are good grounds to believe that this ground of appeal is frivolous.

The ground of appeal regarding frustration of the Minutes of Settlement

[26] The final ground of appeal is that Stinson J. erred in failing to find that the Minutes of Settlement were frustrated. Stinson J. held that the doctrine of frustration did not apply because: (1) the pandemic was not a supervening event, but was contemplated by the parties at the time of the settlement; and (2) the pandemic and the ensuing lockdown did not render the contract substantially different from the one which the parties had executed. Stinson J. also held that the pandemic had not precluded the responding parties from obtaining financing. Any one of these considerations condemns the frustration argument, indicating that this ground of appeal has little prospect of success. There are therefore grounds to believe this ground of appeal is also frivolous.

[27] Accordingly, without declaring that the grounds of appeal are frivolous, I am satisfied that there are grounds to believe that all of them are frivolous because I find they are “devoid of merit, offering little prospect of success”.

(b) There is good reason to believe the appeal is vexatious

[28] Turning to the second component of the first precondition to r. 61.06(1)(a), I am also satisfied there is good reason to believe that the appeal is “vexatious”. An appeal is vexatious when it is “taken to annoy or embarrass the respondent or conducted in a vexatious manner”: Heidari, at para. 10.

[29] The moving parties have identified good reasons to believe that the appeal is being conducted in a vexatious manner. The responding parties have provided nothing to support their claim that allegations about Mr. Das’ non-compliance with the Minutes of Settlement were raised before Stinson J. These allegations jeopardized Mr. Das’ ability to continue representing his client and impugn his good faith. The responding parties have also impugned the integrity and professionalism of Mr. Walman, which does nothing to advance their appeal on the merits. Like those against Mr. Das, the responding parties’ allegations against Mr. Walman are based on material that does not appear to have been before Stinson J.

[30] On these bases, I find good reason to believe that the appeal is vexatious.

(c) There is good reason to believe there are insufficient funds to pay the costs of the appeal

[31] I am also satisfied there is good reason to believe the second precondition of r. 61.06(1)(a) is met; namely, that the responding parties have insufficient assets in Ontario to pay the costs of their appeal.

[32] This issue was in controversy before me. The responding parties contend that the Cotswold Property is worth $3.5 million in the current market, based on a November 2020 appraisal. The moving parties contest this, relying on a “drive-by” appraisal of their own, from March 2021, which values the Property at between $2.7 and $2.8 million.

[33] The Cotswold Property appears to be the sole asset claimed by the responding parties. Even if one accepts their valuation of $3.5 million, the moving parties argue that there is insufficient equity in the Property to cover the proven encumbrances plus the costs of the appeal.

[34] I have reviewed the documentary evidence and I am persuaded that there is good reason to accept the moving parties’ position regarding the encumbrances on the Property. The responding parties have not been making payments on those encumbrances, in some cases for years. The accumulated interest, which only continues to mount, is staggering.

(d) Conclusion on security for costs

[35] The preconditions to making an order for security for costs pursuant to r. 61.06(1)(a) are therefore met and I exercise my discretion to order security for costs. Doing so is necessary to provide the moving parties, the respondents in the appeal, with a measure of protection for the costs of that appeal. I base the justness of this decision on the facial weakness of the appeal, the promptness with which the motion for security for costs was brought, and the serious risk that, without such an order, the moving parties will be unable to collect a costs award in the likely event that the appeal is unsuccessful.

[36] The submissions made by the moving parties on the estimated costs of the appeal are reasonable. I order the responding parties to post $30,000 as security for costs in favour of the Mortgagees.

[37] In addition, I order the responding parties to post $7,500 as security for costs in favour of Mr. Walman.

(2) Lifting or Revoking the Temporary Stay

[38] I do not accept the responding parties’ position that they are not in breach of the Stay Condition. The responding parties have not proven the “agreement” with the City of Toronto that they say suspends their obligation to make the required tax payments. More importantly, even if such an agreement exists, it would not alter the condition that the Temporary Stay is premised upon; namely, that the responding parties pay $3,000 monthly to the City of Toronto. The Stay Condition is not contingent on the City of Toronto demanding payment; the payments are to be made “in reduction of the realty tax arrears.” The responding parties breached the Stay Condition in February 2021 and again in March.

(a) A conditional writ of possession is not automatically stayed on appeal

[39] Nor do I accept the responding parties’ position that a term providing for a writ of possession is automatically stayed pursuant to r. 63.01(1). Rule 63.01(1) provides as follows:

The delivery of a notice of appeal from an interlocutory or final order stays, until the disposition of the appeal, any provision of the order for the payment of money, except a provision that awards support or enforces a support order.

[40] The provision of the Judgment at issue provides conditionally for a writ of possession. It is not an order for the payment of money. In my view, the nature of an order for a writ of possession does not change because it is conditional on the payment of money to a third party. It is evident that r. 63.01(1) is intended to automatically stay monetary remedies secured by the respondent to an appeal, pending that appeal. Manifestly, r. 63.01(1) is not intended to stay in rem remedies, and the order requiring the responding parties to pay their realty taxes is not a monetary remedy in favour of the moving parties. Rather, it is a modest condition attaching to an indulgence granted by Stinson J. to the responding parties on this motion, no doubt intended to ameliorate the hardship of the in rem order for a writ of possession. If interpreted as suggested by the responding parties, the purpose of r. 63.01(1) would be exceeded and frustrated.

[41] Accordingly, the conditional order for a writ of possession in the Judgment is not automatically stayed pending the responding parties’ appeal.

[42] However, that does not end the matter. The Temporary Stay is tied to an in rem remedy and therefore remains in place pending appeal unless and until it is set aside, as the moving parties ask me to do.

(b) The Temporary Stay should be lifted

[43] The moving parties submit that, given the responding parties’ breach of the Stay Condition, the Temporary Stay should be lifted and a writ of possession should issue. They argue that since this matter is now before this court, Stinson J. is functus and lacks the jurisdiction to make such an order. Therefore, they submit that I have authority to grant the order sought as a single judge of the Court of Appeal, either by necessity or pursuant to s. 134(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”), which provides as follows:

On motion, a court to which a motion for leave to appeal is made or to which an appeal is taken may make any interim order that is considered just to prevent prejudice to a party pending the appeal.

[44] I agree with the moving parties that CJA s. 134(2) authorizes an appellate court to remove a stay as an interim order pending an appeal: Paul M. Perell and John W. Morden, The Law of Civil Procedure in Ontario, 4th ed. (Toronto: LexisNexis Canada, 2020), at ¶12.160. As acknowledged by Laskin J.A. (in Chambers), the jurisdiction conferred by s. 134(2) may be exercised by a single judge of this court pursuant to s. 7(2) of the CJA: Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627, [2010] O.J. No. 4102, at para. 5.

[45] The jurisdiction under CJA s. 134(2) is broad, but it is not unlimited. The focus of any remedy provided under s. 134(2) must be on preventing prejudice in the context of the appeal and the interests of justice: Waxman v. Waxman (2003), 2003 ONCA 22440, 168 O.A.C. 217, at para. 21 (C.A.).

[46] The test for granting relief under s. 134(2) is the same as that for granting a stay pending appeal pursuant to r. 63.02(1): Abuzour v. Heydary, 2015 ONCA 249, 126 O.R. (3d) 101, at para. 24. It is based on the test for an interlocutory injunction set out by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 SCC 117, [1994] 1 S.C.R. 311, at p. 334. Namely, it must be established that it is in the interests of justice to exercise the judge’s discretion to lift or remove the stay, given the relative strengths and weaknesses of the following criteria:

1. there is a serious question to be adjudicated on appeal;
2. the moving party would suffer irreparable harm if the relief were refused; and
3. the balance of convenience favours the moving party (i.e., the moving party would suffer greater harm if the relief were not granted than would the responding party if the relief were granted).

There is a serious question to be determined on appeal

[47] Obviously, the relevant concern under the first RJR-MacDonald criterion is whether the moving party has identified a serious question to be adjudicated on appeal that supports the relief sought. Here, the moving parties contend that the trial judge’s discretionary Temporary Stay should be set aside, in part, because the grounds of appeal that are to be adjudicated are weak and unlikely to succeed. I have already found that there is good reason to believe that the grounds of appeal are frivolous. The position of the Mortgagees that will be adjudicated on the appeal – that the appeal should be rejected – is therefore a serious one, thereby satisfying the first RJR-MacDonald consideration. Indeed, the weakness of the appeal pushes strongly in favour of the relief sought.

The moving parties will suffer irreparable harm if the Stay is not lifted

[48] I am also satisfied that unless the Temporary Stay is set aside, the moving parties will suffer irreparable harm, thereby supplying the prejudice required for relief under s. 134(2). Given the weakness of the grounds of appeal, there is every reason to believe that this appeal is being used as a litigation tactic to delay enforcement of the Minutes of Settlement. The responding parties have a strong incentive to employ such a tactic. They remain in the residence pending appeal and are not making payments on any of the mortgages against the Property, nor have they been paying the property taxes and water charges they are incurring.

[49] As these expenses accumulate, the equity in the Cotswold Property is reduced, as is the strength of the Mortgagees’ security for the responding parties’ debt to them and to the City of Toronto, which the Mortgagees will have to discharge before recovering the funds they are owed. Meanwhile, as the unpaid interest on the mortgages accumulates, the Mortgagees’ investment in the Property is increasing, further reducing the prospect that full collection will ever be achieved. Moreover, if the Temporary Stay is not lifted and the status quo is maintained, the Mortgagees will be unable to access the capital they have tied up in the Property until the appeal is finalized.

[50] These harms will be irreparable if the heavily encumbered Property proves insufficient as security for the Mortgagees’ investment, because it is evident that personal judgments against the responding parties will almost certainly go unpaid. The responding parties have an established history of not paying their debts.

The balance of convenience favours the moving parties

[51] I am equally persuaded that the balance of convenience favours the moving parties. As I have already described, if the Temporary Stay is not lifted, the moving parties will suffer irreparable harm.

[52] On the other hand, I appreciate that if possession is given over to the Mortgagees, the responding parties will be displaced from their residence and much of the benefit of their appeal would be lost. However, three things must be emphasized.

[53] First, the responding parties agreed to pay the mortgage debts secured against the residence they now inhabit. Displacement in the event of non-payment was a consequence they accepted. There was no suggestion made before me that the money in question is not owed to the Mortgagees.

[54] Second, as I have said, the responding parties are living in the residence without paying the expenses associated with doing so. In the circumstances, their moral and legal claim to entitlement to remain in the Property is diminished.

[55] Third, the outcome of lifting the Temporary Stay is simply that the responding parties may lose possession of the Property before the expiry of the State of Emergency in Ontario, as provided for in the Judgment. In other words, lifting the Temporary Stay now does not remove a benefit the responding parties were guaranteed to enjoy until the end of their appeal.

[56] In the circumstances, the responding parties’ argument that the balance of convenience lies with them is unpersuasive. I am satisfied that the balance of convenience favours the moving parties.

The interests of justice favour lifting the Temporary Stay

[57] Finally, since the order I am being asked to make is discretionary, I will consider the relative equities at play.

[58] First, the responding parties have shown an unwillingness to pay their debts, including to the Mortgagees, yet no explanation for this conduct has been offered.

[59] Second, the responding parties freely entered into Minutes of Settlement with the benefit of legal representation, but then sought to disavow their agreement. Notwithstanding their attempt to do so, Stinson J. generously granted them an indulgence to ameliorate the hardship that the writ of possession would cause, subject to the very modest precondition that they begin repaying money they owe to the City of Toronto. They breached that precondition, and then claimed before me that an unproven deal with the City relieved them from having to do so.

[60] Third, it appears that the responding parties have burdened the Mortgagees by complicating the underlying appeal with inappropriate and legally gratuitous allegations against two lawyers, Mr. Das and the moving party Mr. Walman.

[61] In my view, the equities in this case militate in favour of granting the discretionary relief sought by the moving parties.

[62] Based on the foregoing, I am satisfied that it is in the interests of justice to lift the Temporary Stay pursuant to s. 134(2) of the CJA.

(3) The Costs of the Proceedings Below

[63] I am not prepared to order payment of the costs below. In the unlikely event that the appeal is successful, that costs order is apt to be set aside. Although I am empowered to do so, I would not exercise my discretion to order payment of a costs order that remains a live issue before this court.

(4) Expediting the Appeal

[64] In my view, given the orders I am making for security for costs and to lift the Temporary Stay, there is no need to expedite the appeal.

Disposition

[65] For the reasons set out above, I order the following:

1. The motions for security for costs are granted. The responding parties shall post the following amounts within 10 business days of the release of this decision: a. $30,000 to secure the costs of the appeal to the moving party Mortgagees; and b. $7,500 to secure the costs of the appeal to the moving party Mr. Walman.
2. The motion for an order lifting the Temporary Stay of enforcement of the writ of possession is granted. Paragraph 5 of Stinson J.’s Judgment dated January 29, 2021 is hereby set aside.
3. The motion for payment of the costs in the proceedings before Stinson J. is dismissed.
4. The motion expediting the appeal is dismissed.

[66] Costs in this motion are payable to the moving party Mortgagees in the combined amount of $2,500, inclusive of disbursements and HST. Costs on this motion are also payable to the moving party Mr. Walman in the amount of $1,000, inclusive of disbursements and HST.

“David M. Paciocco J.A.”