Court File and Parties

Court: COURT OF APPEAL FOR ONTARIO Date: 2022-06-30 Docket: C68734

Before: Brown, Roberts and Paciocco JJ.A.

Between:

2257573 Ontario Inc. Plaintiff/Defendant by Counterclaim (Respondent)

And:

Alex Aiden Fitzgerald Furney also known as Alex Furney, Maryam Furney and Hassan Hashemi Defendants/Plaintiffs by Counterclaim (Appellants)

Counsel: Stephen R. Dyment, for the appellants Alex Furney and Maryam Furney Hassan Hashemi, acting in person Howard W. Reininger, for the respondent

Heard: June 14, 2022

On appeal from the judgment of Justice James R. H. Turnbull of the Superior Court of Justice, dated October 14, 2020, with reasons reported at 2020 ONSC 6002.

Reasons for Decision

Overview

[1] These grouped appeals arise out of the appellants’ default under several mortgages and guarantees.

[2] The appellants are Maryam Furney, a licensed mortgage agent and an experienced real estate investor, and her husband, Alex Furney (the “Furneys”), and their acquaintance, Hassan Hashemi, who was interested in investing in one of their properties.

[3] In February and March 2017, the Furneys negotiated several high-interest, short-term loans from the respondent 2257573 Ontario Inc. to assist them in refinancing the mortgages on their properties. These loans were secured by mortgages on the Furneys’ properties in Niagara-on-the-Lake and on a Woodstock property owned by Mr. Hashemi.

[4] The appellants gave their personal guarantees of indebtedness under the loans. The appellants were represented by counsel in these transactions.

[5] The Furneys could not refinance their mortgages and from the outset went into default on their mortgage agreements. In late 2017, the respondent sued the appellants for defaulting under the mortgage agreements and on their guarantees and brought a motion for summary judgment. The appellants asserted counterclaims, alleging damages caused by the respondent because of its failure to fulfill an alleged oral agreement relating to the discharge of executions registered against Ms. Furney as part of the refinancing arrangements, its deficient mortgage discharge statements, and the mortgage interest charged at a criminal rate. The respondent conceded at the beginning of the motion for summary judgment that the mortgage interest was at a criminal rate.

[6] The motion judge allowed the respondent’s motions for summary judgment and granted judgment against the appellants in the total amount of $880,642.98, plus interest under the mortgages. He also granted the respondent possession of the properties secured under the mortgages. Although he found that there was no agreement by the respondent to provide further advances to the appellants, he allowed the appellants’ counterclaims to proceed in light of the respondent’s failure to provide timely and accurate discharge statements, subject to the appellants’ obligations to mitigate their damages.

[7] The appellants do not question the validity of the mortgages or guarantees. Except for minor calculation issues, they concede the principal amounts that the respondent advanced under the mortgages. They do not dispute that they have never paid anything to the respondent under the mortgages and guarantees and that the mortgage loans have all been in default for several years. Their claimed justification in failing to make any payments and the basis for their counterclaims is twofold: 1) the respondent’s failure to provide proper mortgage discharge statements; and 2) the criminal rate of interest that the respondent conceded was charged under the mortgages. [1] The appellants argue that the motion judge erred by granting interest under the mortgages because of the respondent’s allegedly improper conduct. The appellants also argue that the motion judge erred in calculating the amounts owing under the mortgages.

[8] The burden is on the appellants to demonstrate that the motion judge made a reversible error that merits appellate intervention. To do so, the appellants must demonstrate that the motion judge made an error of law or a palpable and overriding error of fact or mixed fact and law: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 10, 32-33. We see none here. In our view, the appellants’ submissions amount to an invitation to this court to retry the motion judge’s discretionary findings with which they disagree. That is not our task.

[9] For the reasons that follow, we dismiss the appeals.

Preliminary Issue

[10] At the commencement of the hearing, the panel denied the appellants’ request for a second adjournment of the appeals. Although they complained that they were disadvantaged by the actions of their former counsel, who obtained an order removing himself as the lawyer of record in February 2022, they had done little to remedy their position. Specifically, Mr. Hashemi had failed to obtain a copy of the electronically filed documents that he said he needed, either from his former counsel or from the Furneys’ present counsel who had them, and had failed to make immediate and real efforts to retain new counsel. The Furneys had failed to seek whatever amendments to the documents already filed on their behalf that they claimed were necessary. Instead of taking any proactive steps to pursue their appeals, the appellants were engaged in bringing various unsuccessful motions in an attempt to forestall the hearing of these appeals and the consequences of their defaults under the mortgages and guarantees.

[11] Based on the lengthy and detailed submissions provided by the appellants, the denial of an adjournment occasioned no prejudice to them on the hearing of this appeal.

Analysis

(i) Did the motion judge err in granting any interest under the mortgages because of the respondent’s conduct?

[12] The main thrust of the appellants’ submissions is that the motion judge erred in granting any interest under the mortgages because of the respondent’s alleged improper conduct. They say that the respondent charged interest under the mortgages at a criminal rate of interest contrary to s. 347 of the Criminal Code, R.S.C., 1985, c. C-46, which the respondent admitted, and failed to provide timely and accurate mortgage discharge statements. The appellants argue that the motion judge erred in effectively rewarding the respondent’s improper conduct by granting interest under the mortgages in these circumstances.

[13] We are not persuaded that the motion judge made any reversible error. The motion judge was not required to impose a particular remedy. The motion judge’s assessment of the impact of the respondent’s conduct and of the appropriate remedy and interest to be awarded in the circumstances of this case was an exercise of his discretion. His conclusions were free of error and reasonable.

[14] We note, first, that the appellants’ submission before the motion judge was that any interest awarded under the mortgages should be reduced, not eliminated, as they now argue. It is hardly fair to fault the motion judge for failing to give effect to a submission that was not before him. In any event, the motion judge thoroughly addressed the implications of the respondent’s conduct in charging a criminal rate of interest under the mortgages and in its failure to provide timely and accurate discharge statements.

[15] The motion judge noted the respondent’s concession that “the calculation of interest plus the additional fees for payment, penalties, default fees, and other fees that were all included in the discharge statements that were initially provided … did offend the provisions of the Criminal Code.” He found that the respondent “was seriously deficient in providing accurate and legal[ly] enforceable discharge statements” to the appellants and that the statements included “interest and charges which the parties now agree exceeded the lawful interest rate.”

[16] The motion judge correctly recognized that “a spectrum of remedies are available to a judge in civil proceedings when a violation of s. 347 of the Criminal Code is found” and applied the guiding principles concerning the appropriateness of notional severance as a remedy from the leading case, Transport North American Express Inc. v. New Solutions Financial Corp., 2004 SCC 7, [2004] 1 S.C.R. 249. After analyzing the contractual context, the illegality involved, and the failure of the appellants to make any payment under the mortgages, the motion judge concluded that notional severance would be appropriate and would not subvert the purpose of s. 347 of the Criminal Code. Accordingly, he ordered the severance of illegal interest in relation to each of the mortgages to allow the respondent judgment “for only the principal sum of the mortgage funds advanced plus interest thereon at the rates agreed to by the parties”.

[17] The motion judge examined the effect of the respondent’s failure to provide timely and accurate mortgage discharge statements on the appellants’ rights and remedies under the mortgages and the Mortgages Act, R.S.O. 1990, c. M.40. He declined to reduce the interest owing under the mortgages as a remedy. He considered the appellants’ requests for proper mortgage statements. He also considered the appellants’ failure to pay anything under the mortgages and to avail themselves of available remedies under the Mortgages Act, notwithstanding the respondent’s eventual invitation that the appellants pay into a trust account the principal amount plus interest to date as per the appellant’s calculation pending resolution of their dispute. The motion judge concluded that although the appellants had paid nothing under the mortgages nor offered to do so, they should be permitted to proceed with their counterclaims for damages in light of the respondent’s failure to provide timely and accurate mortgage statements.

[18] We agree with the motion judge’s view that the disposition in Cheung v. Moskowitz Capital Mortgage, 2018 ONSC 1322, 87 R.P.R. (5th) 89 is distinguishable on its facts. We would highlight, however, that the court’s remedial determination of interest in the face of wrongful conduct in Cheung was a fact‑driven exercise of its discretion. Similarly, the motion judge’s decision here to apply the remedy of notional severance and to grant interest at the contract rates under the mortgages was an exercise of his discretion that, absent error, is entitled to deference. We see no error that warrants appellate intervention.

(ii) Did the motion judge err in calculating the amounts owing under the mortgages?

[19] The appellants submit that the motion judge misapprehended the evidence and therefore erred in his calculation of the amounts owing under two of the mortgages, as follows:

a) The motion judge erred in finding that the principal amount advanced by the respondent was $547,000, instead of $542,319.19. The appellants say that there was no evidence to support the amount of $547,000, which also conflicted with the figure contained in the respondent’s expert actuarial report.

b) The motion judge erred in finding that the principal amount advanced under the mortgage registered against Mr. Hashemi’s Woodstock property was $73,000, instead of $67,000. The appellants maintain that there was no evidence to support his finding that $6,000 in brokerage fees had been paid.

[20] We do not give effect to these submissions. The motion judge made no error in his evaluation of the evidence that grounded his findings.

[21] First, it was not contested that $547,000 was advanced. That is the position put forward by the appellants’ motion counsel on his cross-examination of the respondent’s principal, Anil Kingrani, as well as in his submissions before the motion judge. As a result, the motion judge concurred with appellants’ submission that “only $547,000 was advanced with respect to this transaction based on the evidence before this court”. The evidence of the mortgage advanced before the motion judge included the mortgage loan agreement, the trust statements and other documents from the respondent’s lawyer, the exchange of correspondence between the parties’ lawyers on the mortgage transactions, and the evidence given by Mr. Kingrani on the motion. The motion judge was entitled to accept this evidence.

[22] Second, the trial judge was entitled to conclude that the $73,000 advance was made up of $67,000 principal, plus $6,000 in brokerage fees paid by the respondent on closing to the mortgage brokers involved as per the signed mortgage commitments. His finding was supported by the evidence before him, including the mortgage commitments signed by the appellants with the benefit of legal advice, the evidence of Mr. Kingrani, and the evidence of Mr. Muthukumarasamy Thulasitharan, who acted as an associate agent for Ms. Furney in the transactions, that he received a broker fee and used the brokerage fees paid “as an adjustment to balance out [his] other debt to Mr. Kingrani.” We also note that while Ms. Furney denied in her affidavit and on cross-examination that the $6,000 in brokerage fees were paid, she agreed during her cross-examination that the fees were to be paid, which several documents support. Moreover, Mr. Kingrani’s evidence that they were paid was not challenged during his cross-examination.

[23] The appellants have not met their burden to demonstrate that the motion judge made any reversible error.

(iii) Additional issues raised by Mr. Hashemi

[24] Although a factum was initially filed on behalf of all the appellants, new arguments were advanced orally by Mr. Hashemi. Mr. Hashemi was not represented on this appeal by the Furneys’ present counsel and had not filed a new factum. His argument is essentially that his rights to a fair hearing were breached in violation of ss. 7, 12, and 15 of the Canadian Charter of Rights and Freedoms and because of an apprehension of judicial bias.

[25] We reject these submissions. Mr. Hashemi’s bald allegations are unsubstantiated by anything in the record before us, including the motion judge’s reasons, and are wholly without merit.

Disposition

[26] The appeals are dismissed. The parties may provide written costs submissions of no more than two pages, plus a costs outline, as follows: the respondent shall provide its submissions by July 4, 2022, and the appellants shall provide their respective responding submissions by July 11, 2022. No reply is permitted.

“David Brown J.A.”

“L.B. Roberts J.A.”

“David M. Paciocco J.A.”

Footnote

[1] In oral argument, the appellants focused their appeals on only the grounds referenced in these reasons and abandoned the other grounds set out in the factum filed by their previous counsel of record.