Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20210212 DOCKET: C67753

Rouleau, Benotto and Thorburn JJ.A.

BETWEEN

Royal Bank of Canada Plaintiff/Defendant to Counterclaim (Respondent)

and

Baharak Azkia, Diana Nekonam and Nader Zanddizari also known as Nader Zand Defendants/Plaintiffs by Counterclaim (Appellants)

Counsel: Hossein Niroomand, for the appellants Jeffrey Kukla, for the respondent

Heard: February 3, 2021 by videoconference

On appeal from the order of Justice Markus Koehnen of the Superior Court of Justice, dated November 11, 2019, with reasons reported at 2019 ONSC 5894.

Reasons for Decision

The order sought

[1] This is an appeal of the order:

a) granting summary judgment in favour of the respondent, Royal Bank of Canada (“RBC”) in three separate actions, and ordering payment of the sums owing by the plaintiffs to RBC;

b) dismissing the appellants’ counterclaim in one action;

c) granting RBC possession of the premises; and,

d) vacating the certificates of pending litigation (“CPLs”) on the two properties at 56 Hawksbury Drive and 326 St. Clements Avenue (“the two properties”).

[2] The appellants seek to overturn the dismissal of their counterclaim and stay the judgments pending the trial of the appellants’ counterclaim. They also seek leave to adduce new evidence on this appeal.

The basis for the claims

[3] RBC lent money to the appellants by way of mortgages, demand loans, lines of credit, overdrafts and credit cards. The total principal and interest owing as of October 5, 2018 was approximately $4,852,286.02.

[4] RBC commenced three separate actions on the various debts. The actions relate primarily to mortgages made in favour of RBC secured by the two properties, and a demand loan which the bank claimed was secured by a second mortgage on one of those properties.

[5] The appellants filed a counterclaim in the third action seeking damages in the amount of $3,650,000 in connection with RBC’s registration of cautions and two certificates of pending litigation on the two properties (“the CPLs”).

The motions for summary judgment

[6] RBC brought a motion for summary judgment in each of the three actions.

[7] The appellants did not dispute the debt, but opposed the request for summary judgment on the basis that there was a sufficiently close connection among the three actions that it would be inequitable to allow RBC to obtain summary judgment in respect of the three claims without first deciding the counterclaim and permitting the appellants to set off any award in the counterclaim against amounts owing in the other actions.

[8] The appellants also took the position that the CPLs were improperly granted resulting in damage to the appellants which damage should be assessed prior to the granting of any order for summary judgment.

[9] The motion judge summarized the appellants’ position at para. 46 of his decision as follows:

The gist of the defence is that the defendants were renovating 326 St. Clements in order to sell it. They had a buyer, but the sale did not close because the certificate of pending litigation prevented the [appellants] from obtaining a small amount of additional financing from a third party which would have enabled them to complete the renovations.

[10] On November 11, 2019, the motion judge granted summary judgment in favour of RBC in all three actions. Although he vacated the CPLs because of RBC’s failure to make proper disclosure in the course of obtaining the CPLs on an ex parte motion, he dismissed the appellants’ counterclaim.

[11] He held that the appellants had not demonstrated that there is any issue that requires a trial, as the counterclaim for damages was “implausible and the defendants have not provided any evidence at all about their damages, let alone sufficient evidence to demonstrate that a trial is required on damages.”

[12] His reasons for so finding, at paras. 49-56, are set out below:

If it is true that [the appellant] Mr. Zanddizari needed only $100,000 to complete the renovation of 326 St. Clements, one might have expected Mr. Zanddizari to explain that to RBC and try to arrange additional financing. RBC had a material interest in completing the sale of 326 St. Clements because that would free up money to repay the demand loan. There is no evidence of any efforts by Mr. Zanddizari to enter into arrangements like this with RBC and no explanation for his failure to do so.

If Mr. Zanddizari had two other lenders whose loans would fund the renovation and bring the demand loan into good standing, one might expect him to advise RBC of that fact and try to enter into an arrangement whereby the additional loan to complete construction of 326 St. Clements would have priority over the certificate of pending litigation. Once again there is no evidence to suggest that Mr. Zanddizari tried to make such an arrangement and no explanation for his failure to do so.

Mr. Zanddizari provides no information about these other lenders. He does not disclose the lenders' names, the loan documentation or the terms of the loans.

Mr. Zanddizari does not describe what work was left to be completed on 326 St. Clements Avenue beyond describing it a “small amount of work and appliances”. He has not produced any photographs that would allow me to compare the renovations that had already been completed with the work that remained.

While he was discussing bringing the demand loan back into good standing between September 2017 and January 2018, Mr. Zanddizari sent the bank a screenshot of an account he had at CIBC showing a balance of $137,016.05. Mr. Zanddizari told RBC that when this deposit cleared within a few days, he would transfer the money into his RBC account to cover his overdue loan balance of $70,000. He never did so.

If Mr. Zanddizari was being honest in his statements to RBC, he in fact had funds that exceeded the approximately $100,000 he needed to finish off the renovations on 326 St. Clements Avenue. Mr. Zanddizari provided no explanation for why the funds in his CIBC account could not be used to complete the renovations on St. Clements.

Mr. Zanddizari also made no efforts to set aside the certificate of pending litigation. If this were truly a case of losing a sale of St. Clements Avenue, Mr. Zanddizari had ample time to set aside the certificate of pending litigation. According to Mr. Zanddizari, the purchaser extended the closing to February 28, 2019. This gave Mr. Zanddizari just short of 12 months to set the certificate of pending litigation aside, obtain additional funds and sell the property. He took no steps to set aside the certificate of pending litigation until the end of January 2019. Even then he did so only in response to RBC's motion for summary judgment.

Similarly, Mr. Zanddizari has provided no explanation for his damage claim of $3,500,000. On the record before me, it is simply a number that has been inserted into a counterclaim.

[13] However, the motion judge dismissed RBC’s request for an order for a legal or equitable mortgage in respect of the demand loan over the two properties. RBC had not established on a balance of probabilities that there was a mutual intention by the parties to grant a mortgage on those properties as security for the demand loan.

The issues on this appeal

[14] The issues on this appeal are (1) whether the motion judge erred in finding that there was no genuine issue requiring a trial in respect of the appellants’ counterclaim and refusing to order a stay of execution on the judgments, and (2) whether the appellants should be permitted to adduce new evidence on appeal.

Analysis and Conclusion

[15] As explained 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 on a summary judgment motion. This will be the case when the process (1) allows the judge to make 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.

[16] The appellants take issue with the motion judge’s finding that there is no genuine issue for trial.

[17] Although parties are required to present the best version of their case on a motion for summary judgment, the appellants adduced no evidence from lenders that they would have advanced funds even if the CPLs had not been placed on title. It was therefore open to the motion judge to reject the appellants’ evidence regarding damages. His findings are owed deference.

[18] The motion judge accepted the appellants’ submission that the CPLs should not have been placed on the properties and ordered that the CPLs be vacated. However, he held that the appellants had not suffered damages as a result of the CPLs, as pleaded in the appellants’ counterclaim.

[19] On this appeal, the appellants seek leave to introduce an exhibit of documents most of which were not before the motion judge. The exhibits are not appended to an affidavit and consist of letters and other documentation regarding refinancing. In oral submissions, counsel for the appellants claimed that two letters, one to a possible lender and the other to RBC, were provided in support of the appellants’ cost submissions and should therefore be allowed to be introduced on appeal.

[20] This evidence does not meet the test for the introduction of new evidence on appeal: see Palmer v. R., [1980] 1 S.C.R. 759, at p. 775; Sengmueller v. Sengmueller, 111 D.L.R. (4th) 19 (Ont. C.A.), at p. 23.

[21] The appellants were represented at trial and this evidence should and could have been obtained prior to the motion, through the exercise of reasonable diligence. Moreover, it was not attached to a sworn affidavit and there has been no opportunity for the respondent to examine or cross-examine on this evidence. In any event, this new evidence, like the evidence proffered to the motion judge, does not demonstrate any quantifiable damages suffered by the appellants and thus, could not reasonably have affected the result.

[22] As set out above, the motion judge gave ample reasons for his finding that the appellants:

a) did not satisfy him that they were unable to sell the property;

b) did not take appropriate steps to address the CPLs with RBC; and,

c) did not adduce evidence to outline the steps taken to complete the renovations required to sell the property.

[23] We see no error in these findings, nor do we accept that the motion judge erred by failing to consider the defence of equitable set-off.

[24] As such, the appeal – seeking to set aside the order dismissing the counterclaim and, if such an order is granted, requesting that the execution of the judgment in favour of RBC be stayed, pending resolution of the counterclaim – is dismissed.

[25] We order costs payable to the RBC in the amount of $15,000, all inclusive.

“Paul Rouleau J.A.”

“M.L. Benotto J.A.”

“J.A. Thorburn J.A.”