COURT OF APPEAL FOR ONTARIO

CITATION: Froom v. Lafontaine, 2023 ONCA 519

DATE: 20230802

DOCKET: C70795

Feldman, Lauwers and Roberts JJ.A.

BETWEEN

Arthur Froom

Applicant

and

Sonia Lafontaine

Respondent

AND BETWEEN

1285310 Ontario Limited

Applicant

and

Rahirna Panes Sheick-Ali and ASR Medical Research Corporation

Respondents

AND BETWEEN

Robin Seligman

Plaintiff (Respondent)

and

1285310 Ontario Limited and Sonia Lafontaine also known as Sonia Lafontaine Froom

Defendants (Appellant)

AND BETWEEN

1285310 Ontario Limited

Plaintiff by Counterclaim

and

Robin Seligman and the Director of Land Titles

Defendants by Counterclaim

Lawrence Hansen and Graeme R. Oddy, for the appellant 1285310 Ontario Limited

James M. Butson and Cristina Internicola, for the respondent Robin Seligman

Keith Juriansz, for the respondent Sonia Lafontaine

Jeffrey Claydon, for the Director of Land Titles

Peter Smiley, for the respondent Arthur Froom[^1]

Heard: January 18, 2023

On appeal from the judgment of Justice Mario D. Faieta of the Superior Court of Justice, dated May 17, 2022, with reasons reported at 2022 ONSC 2930.

By the Court:

I. OVERVIEW AND FACTUAL BACKGROUND

[1] This is an appeal from an order granting partial summary judgment in favour of the respondent, Robin Seligman, in her mortgage enforcement action against the appellant, 1285310 Ontario Limited (“128”), and Sonia Lafontaine. The motion judge rejected 128’s argument that the mortgage/charge was void and unenforceable because it had been fraudulently procured. 128 appeals, arguing that the motion judge erred in his interpretation of the relevant provisions of the Land Titles Act, R.S.O. 1990, c. L.5, (“LTA”) and in his determination that this was a proper case for partial summary judgment.

[2] The factual background in this case is complex. In 1992, Lafontaine married Arthur Froom. In 1998, while Lafontaine was incarcerated in the United States for healthcare fraud, 128 was incorporated. In 2003, while Lafontaine was still incarcerated, Froom arranged for 128 to purchase the property at issue in this case, a residential condominium apartment in Toronto. 128 is the registered owner. Froom moved into the condominium and was joined shortly thereafter by Rahima Panes Sheick‑Ali, with whom he had a child in December 2008.

[3] In 2006, 128 was cancelled as a corporation because it failed to file corporate returns. However, 128 remained the condominium’s registered owner.

[4] Lafontaine was released from custody in June 2008 and remained on probation until November 2011, when she returned to Canada. In August 2008, Froom was incarcerated in the United States after his convictions for various healthcare fraud offences. He has not returned to Canada since 2008.

[5] On October 4, 2010, 128 was revived.[^2] In December 2011, Lafontaine arranged for a change notice to be registered with the Ministry of Government Services naming her as the sole officer and director of 128. She also took over 128’s bank accounts. Froom and Lafontaine dispute whether she had authority to do any of this.

[6] In January 2013, a lawyer wrote a letter to Sheick-Ali on behalf of 128 and Lafontaine demanding that she move out of the condominium. 128, at Lafontaine’s direction, applied in July 2013 for an order for possession of the condominium.

[7] Shortly thereafter, in August 2013, Froom initiated divorce proceedings against Lafontaine seeking, among other relief, a declaration that he owns 128 and an order to equalize their net family property.

[8] On August 8, 2014, Lafontaine, on behalf of 128, entered into a mortgage loan agreement with Seligman that was registered against the condominium in the principal amount of $100,000. Lafontaine signed the real estate instruments as an officer and director of 128. Lafontaine was registered with the Ministry of Government Services as the sole officer and director of the corporation, something that Seligman learned of through her lawyer’s due diligence. Lafontaine guaranteed the mortgage, which was later amended, and renewed, and the principal amount was increased to $300,000 on September 25, 2015. Lafontaine made the required payments on the mortgage but some years later, in March 2019, default in payment occurred. As a result, in April 2019, Seligman started a mortgage enforcement action against 128 and Lafontaine, seeking payment of more than $300,000 and possession of the condominium.

[9] The eviction and family law proceedings, which had already been consolidated in 2014, were consolidated with Seligman’s mortgage enforcement action in July 2021.

[10] In August 2021, Seligman moved for summary judgment in her action to enforce the mortgage. 128, supported by Froom, opposed the motion for summary judgment on the basis that the mortgage is void because it is a “fraudulent instrument” under the LTA. 128 alleged that Lafontaine was a “fraudulent person” under the LTA because she fraudulently held herself out to Seligman as an officer and director of 128. 128 alleges that Froom was its sole shareholder, officer, and director when the mortgage was granted, and that Lafontaine had no authority to act for the corporation.

[11] For purposes of the summary judgment motion, the motion judge was prepared to assume that allegations made by Froom and 128 were true, that Lafontaine acted fraudulently and without authority, and that Froom is both the real owner and the rightful officer and director of 128. The motion judge granted summary judgment in Seligman’s favour, ordering 128 and Lafontaine to pay Seligman $303,279.21 plus interest, directing 128 to deliver the condominium to Seligman, and issuing a writ of possession for the condominium. In his view, even if Lafontaine’s actions were in fraud of 128, the operation of the LTA protected Seligman, not 128.

[12] 128 appeals. Lafontaine supports Seligman.

[13] For the reasons that follow, the appeal is dismissed.

II. ISSUES

[14] 128 submits that the motion judge made three errors: (1) finding that the charge was not a “fraudulent instrument” under the LTA, (2) holding that the doctrine of “deferred indefeasibility” had no application, and (3) granting partial summary judgment to Seligman.

[15] We address each issue in turn after setting out the decision below.

Decision Below

[16] The motion judge first considered whether to hear the motion for partial summary judgment on Seligman’s claim. He found that he “would not be able to reach a fair and just determination on the issue of whether Froom or Lafontaine owns the Company on this motion for summary judgement and that a trial is required” to resolve that issue. However, he found that Seligman’s motion raised an issue that was easily bifurcated from the remaining litigation and could result in the mortgage enforcement action being dealt with expeditiously. Seligman submitted that the mortgage was not a “fraudulent instrument” under the LTA regardless of who actually owned 128. Seligman did not ask the court to determine whether Lafontaine fraudulently held herself out as an officer and director of 128. Instead, Seligman submitted that the mortgage was enforceable under the LTA even if Lafontaine had fraudulently held herself out as an officer and director of 128. The motion judge accordingly assessed the enforceability of the mortgage on the assumption that Lafontaine had fraudulently taken control of 128.

[17] The motion judge then considered whether the mortgage was a “fraudulent instrument” and therefore void under s. 78(4.1) of the LTA. 128, supported by Froom, submitted that Lafontaine met the definition of “fraudulent person” in s. 1 under para. (b) (“fictitious person”) and para. (c) (“the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument”). In response to para. (a), the motion judge relied on 1168760 Ontario Inc. v. 6706037 Canada Inc., 2019 ONSC 4702, 7 R.P.R. (6th) 48 (Div. Ct.), which held, at para. 37, that “interpreting ‘fictitious person’ to mean a person who does not exist is consistent with the purpose of the 2006 amendments [to the LTA], which sought to deal with title fraud committed using fraudulent instruments.” Since Lafontaine is a real person and exists, the motion judge found that she did not meet the definition of a “fictitious person” under the LTA.

[18] Addressing the impact of para. (c) of s. 1 of the LTA, the motion judge noted that “[n]o principle of law was provided by the parties for the proposition that holding oneself out as an officer or director of a corporation and granting a charge on its behalf is equivalent to holding oneself out to be the registered owner of the corporation’s land.” The motion judge favoured a narrow interpretation of the meaning of “fraudulent person” in the LTA, noting that “the 2006 amendments to the LTA did not codify the theory of deferred indefeasibility nor does the LTA address fraud in real estate transactions in general but rather, after the 2006 amendments, only address[es] certain types of fraudulent activity”.

[19] Given that 128, and not Lafontaine, was the registered owner of the condominium, the motion judge found that even if 128’s allegations were true that Lafontaine misrepresented herself as a shareholder, officer or director of the company, 128 failed to demonstrate that Lafontaine, or 128 acting through Lafontaine, met the test as set out in para. (c) of the definition of a “fraudulent person” in s. 1 and thus also failed to establish that the mortgage is a “fraudulent instrument” within the meaning of the LTA. Accordingly, the motion judge granted summary judgment in favour of Seligman in the mortgage enforcement action.

III. ANALYSIS

Introduction

[20] The issues in this appeal are narrow and technical, and need to be put in context. In Vavilov the Supreme Court noted a legal expectation important to statutory interpretation: “[t]hose who draft and enact statutes expect that questions about their meaning will be resolved by an analysis that has regard to the text, context and purpose”.[^3] This draws on the “modern approach” to interpretation, which “requires that the words of a statute be read ‘in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’”.[^4] To analyze the issues the court must consider the text of the LTA, the context within which it operates, and the particular purpose for the provisions at issue.

[21] The LTA was originally enacted in 1885 and was modelled on the English Land Transfer Act, 1875 (38 & 39 Vict. c. 87). The “essential purpose of land titles legislation” like the Act “is to provide the public with security of title and facility of transfer”.[^5] The Act embodies three basic principles, namely:

• The mirror principle – i.e., that the register of title reflects accurately and completely the state of title;

• The curtain principle – i.e., that the register is the sole source of information regarding title such that a person need not search behind the title and investigate the property’s history; and

• The insurance principle – i.e., that that the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy.[^6]

[22] The LTA has been amended many times, including in 2006. Before the 2006 amendments, s. 78(4) provided:

(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register.

[23] The bare text of s. 78(4) led to the argument that the LTA conferred “immediate indefeasibility” on registered instruments, meaning that instruments were effective and indefeasible as soon as they were registered, even if they were fraudulent. This argument was accepted in CIBC Mortgages Inc. v Chan, 2004 CanLII 66351 (Ont. S.C.), appeal dismissed by this court under the name of Household Realty Corporation Ltd. v. Liu (2005), 2005 CanLII 43402 (ON CA), 261 D.L.R. (4th) 679 (Ont. C.A.), where the mortgage obtained through the use of a forged power of attorney was enforced. The result created a furor.

[24] Sections 78(4.1) and (4.2) were added to the LTA in 2006 and create an exception for “fraudulent instrument[s]” with the effect that such instruments are not deemed to be embodied in the register despite the words of s. 78(4). The 2006 amendments provide:

Exception

(4.1) Subsection (4) does not apply to a fraudulent instrument that is registered on or after October 19, 2006.

Non-fraudulent instruments

(4.2) Nothing in subsection (4.1) invalidates the effect of a registered instrument that is not a fraudulent instrument described in that subsection, including instruments registered subsequent to such a fraudulent instrument.

[25] The 2006 amendments added several definitions to s. 1 of the LTA. The term “fraudulent instrument” is defined in several ways in s. 1, some of which incorporate the concept of a “fraudulent person”.

1 … “fraudulent instrument” means an instrument,

(a) under which a fraudulent person purports to receive or transfer an estate or interest in land, …

“fraudulent person” means a person who executes or purports to execute an instrument if,

(a) the person forged the instrument,

(b) the person is a fictitious person, or

(c) the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument;

[26] The 2006 amendments to the LTA were passed in the wake of this court’s decision in Household Realty and before the court overruled that decision in Lawrence. The amendments were aimed at ensuring that fraudulent instruments would not be given effect in the title register. The legislative debates evidence a concern about real estate fraud and the attendant risk that a property owner might lose their property or become responsible for a fraudulent mortgage. It is noteworthy that there was no specific discussion in the legislative debates to the 2006 amendments about their impact on corporations owning land and securing financing through mortgages and charges.

[27] Based on the 2006 amendments, 128 argues that the mortgage was a “fraudulent instrument” under the LTA and that the doctrine of “deferred indefeasibility” applies to protect 128 and to deprive Seligman of protection.

[28] We make two observations as we turn to the issues: first, the LTA does not provide a remedy for all frauds; second, and relatedly, the fact that a fraud might have been perpetrated is not in itself enough to invalidate an instrument.[^7]

(1) Is the charge a “fraudulent instrument” under the LTA?

[29] Section 78(4.1) of the LTA creates an exception to the rule in s. 78(4) that an instrument is valid once registered for a “fraudulent instrument”, which is an essential statutory term. Section 78(4.1) provides for the invalidation of “fraudulent instruments”.

[30] Section 1 of the LTA defines “fraudulent instrument” to mean one of four kinds of instruments, only one of which 128 argues applies in this case: an instrument “under which a fraudulent person purports to receive or transfer an estate or interest in land”.[^8]

[31] At base, this case is about whether the court should invalidate an instrument on the basis that a party fraudulently misappropriated corporate authority. 128 does not appear to be arguing that 128 itself forged the mortgage, is a fictitious person, or has held itself out to be the owner of the condominium when it is not. Indeed, there does not appear to be any dispute that 128 is a real corporation and owns the condominium. Rather, 128’s argument appears to be that the “fraudulent person” is 128, acting through Lafontaine, or Lafontaine herself. More specifically, 128 contends that because Lafontaine fraudulently took control of 128, she did not have authority to act for it and the actions she took in its name had the effect of transforming 128 or herself into a “fraudulent person”.

[32] To the extent 128 contends that it was itself a fraudulent person when Lafontaine acted on its behalf, this argument assumes that a corporation can be a “fraudulent person”. The term “person” is not defined in the LTA or its regulations. In contrast, s. 87 of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, confirms the term includes a corporation: “In every Act and regulation … ‘person’ includes a corporation.” Section 87 draws a distinction between a “person”, which “includes a corporation”, and an “individual”, which “means a natural person”.

[33] The term “person” appears more than 300 times in the LTA. Although the Act occasionally uses the term “person” to refer only to a natural person,[^9] the Act overwhelmingly applies the term non-restrictively to include corporations. Indeed, liability provisions for contravening certain provisions of the Act specifically delineate penalties for a “person” that is a “corporation” as opposed to an “individual”.[^10]

[34] Case law further supports the proposition that the term “fraudulent person” in s. 1 of the LTA extends to corporations. For example, on the basis that the mortgage over the condominium owned by the corporation was executed by the corporation’s director and that no signature was forged,[^11] this court rejected an argument in Ontario Securities Commission v. Money Gate Mortgage Investment Corporation that a mortgage given by a corporation was a “fraudulent instrument”. There was no suggestion in that case that a “fraudulent person” could not be a corporation.

[35] Further, interpreting “fraudulent person” in s. 1 of the LTA to include corporations is also consistent with the Act’s purpose and the legislative history. As noted above, the “essential purpose of land titles legislation” like the Act “is to provide the public with security of title and facility of transfer”.[^12] The 2006 amendments to ss. 1 and 78 of the Act were specifically made to address ongoing concerns with fraud in the real estate context.[^13] An interpretation of “fraudulent person” that excluded corporations would undermine that purpose, allowing corporations to perpetrate frauds and escape the operation of s. 78(4.1).

[36] It is thus clear that the definition of “fraudulent person” in s. 1 of the Act can include a corporation like 128. To find that the mortgage at issue in this case constitutes a “fraudulent instrument”, it is necessary to determine whether it was given by a “fraudulent person”.

[37] As this court observed in Ontario Securities Commission v. Money Gate Mortgage Investment Corporation, at para. 52, “fraudulent instrument” is a “narrowly defined term.” It thus follows that each of the three definitions of “fraudulent person” should likewise be construed narrowly.

[38] Before turning to how those definitions of “fraudulent person” may apply in this case, it bears repeating that 128 relies on the definition of “fraudulent instrument” under para. (a) of s. 1, which refers to “a fraudulent person” who “purports to receive or transfer an estate or interest in land.” The mortgage was purportedly granted by 128, acting through Lafontaine, rather than by Lafontaine personally. Accordingly, having established that the appellant, as a corporation, canbe a “fraudulent person”, the question is then whether either 128 or Lafontaine was, in fact, a “fraudulent person” at the relevant time. There are three possible types of “fraudulent person” under the LTA: (1) a person who “forged” the instrument; (2) a “fictitious person”; or (3) a person who “holds oneself out” in the instrument to be the owner but knows they are not.

[39] It does not follow that 128 or Lafontaine forged the instrument, are fictitious persons, or are persons that held themselves out in the instrument to be the owner knowing they were not. We review each definition below, explaining why none apply in this case.

(i) 128 and Lafontaine did not “forge” the mortgage

[40] We do not understand 128 to be arguing that it forged the mortgage itself, or is a fictitious person, or has held itself out to be the owner of the condominium when it was not. Rather, 128’s argument appears to be that the “fraudulent person” is 128 acting through Lafontaine, or Lafontaine herself, because she fraudulently obtained control of the corporation and did not have actual authority. We reject this argument.

[41] First, neither 128 acting through Lafontaine, nor Lafontaine herself, is a “person [who] forged the instrument”. In 1168760 Ontario Inc., the Divisional Court held that forgery “is an issue of authenticity, not truth”.[^14] In that case, a person holding land in trust for himself and others sold the property while subject to two executions registered against him. In order to complete the sale, he signed an affidavit falsely stating that he was not the person subject to the executions. While he might have engaged in a fraud in a broader sense of the word, the Divisional Court held he did not fit within the narrow definition of a “fraudulent person” and the transfer was therefore not a “fraudulent instrument”.

[42] The Divisional Court explained that the 2006 amendments to the LTA narrowly targeted certain kinds of fraudulent activity and not real estate fraud at large:

[T]he 2006 amendments do not address fraud in real estate transactions in general. Rather, the provisions prevent certain kinds of fraudulent activity with respect to title, addressing the situation where someone purports to transfer an interest or estate in land that they do not legally possess – for example, by taking on a false identity or by forging a document, including a power of attorney.[^15]

[43] The Divisional Court rejected the argument that the purported fraudster had forged the transfer because he provided a false affidavit. The court explained that forgery relates to the authenticity of a document and, for the purposes of land titles legislation, entails “an imposter sign[ing] the name of a person with lawful title in order to cause an instrument to be registered on title”.

[44] Applying the principles from 1168760 Ontario Inc. to this case, neither 128, acting through Lafontaine, nor Lafontaine herself, is a “person [who] forged the instrument”. Indeed, Lafontaine had apparent authority to act on behalf of the corporation and there is no question as to the authenticity of the documents she executed, including her signature on the acknowledgment and direction authorizing the registration of the mortgage. While the issue of whether Lafontaine fraudulently registered a notice of change with the Ministry of Government Services to make herself the sole officer and director of 128 remains to be determined, this does not change the fact that the mortgage she executed on behalf of 128 was authentic. In this respect, her alleged registration of a fraudulent notice of change is analogous to the purported fraudster’s swearing a false affidavit in 1168760 Ontario Inc. Her subsequent action of taking out the mortgage against the condominium on behalf of 128, much like the fraudster’s transfer in 1168760 Ontario Inc., did not constitute a forgery under the LTA.

[45] This case must be distinguished from cases like Lawrence, which the 2006 amendments were aimed to address. There, an imposter posing as the rightful homeowner gave a forged agreement of purchase and sale pursuant to which a fraudulent transfer was registered. There was no question that the agreement was a forgery and that the imposter had, to borrow the words of the Divisional Court in 1168760 Ontario Inc., “sign[ed] the name of a person with lawful title in order to cause an instrument to be registered on title”.[^16] Here, in contrast, 128 was the owner of the condominium and, acting through its registered officer and director, Lafontaine, entered into the mortgage. As a result, there was no forgery within the restricted meaning of s. 1 of the LTA.

[46] The expansive approach to the interpretation of “fraudulent person” urged by 128 runs into another significant barrier: the indoor management rule, which has been codified in s. 19 of the Business Corporations Act, R.S.O. 1990, c. B.16.[^17] Under the indoor management rule, if a corporation holds someone out as a director, officer, or agent to a third party, the corporation cannot deny that the person has the authority usual for the position. The third party is entitled to assume that the corporation’s internal procedures have been complied with unless the third party knew or ought to have known otherwise.[^18] Stated differently, the indoor management rule provides that a party dealing with a corporation acting in good faith and without knowledge of any irregularity, is entitled to assume that the corporation has complied with its internal policies and procedures.

[47] If the court treated a document authorized by a director or officer who fraudulently obtained control of a company as a forgery, it would mean that those transacting with corporations would potentially have to look behind the corporate register to ensure that the director or officer was duly appointed and authorized to enter into the transaction. This is not only impractical, but contrary to the indoor management rule.

[48] In this case, and contrary to the indoor management rule, 128 is effectively asking this court to look behind Lafontaine’s apparent authority to enter into the mortgage in order to conclude that it was a forgery. It has not pleaded that Seligman ought to have known that Lafontaine lacked authority to enter into the transaction or that the corporate documents Lafontaine executed should have alerted Seligman to the alleged fraud.[^19]

[49] The curtain principle under the LTA is intended to excuse a purchaser or lender from having to go behind the title register. This is quite consistent with the policy thrust behind the indoor management rule.

[50] We accordingly dismiss 128’s invitation to expansively interpret what constitutes a forgery for the purpose of s. 1 of the LTA. There was no forgery within the restricted meaning of that provision in this case because Lafontaine was authorized to act for 128, even if 128 is correct that she obtained control through fraudulent means. The mortgage is authentic.

(ii) Neither 128 nor Lafontaine is a “fictitious person” within the meaning of the [LTA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-l5/latest/rso-1990-c-l5.html)

[51] The second avenue for 128 or Lafontaine to have been a “fraudulent person” under the LTA is as a “fictitious person” through Lafontaine’s fraudulent actions. The term “fictitious person” is not defined in the LTA, but there is no dispute that both 128 and Lafontaine do in fact exist. 128’s argument is more nuanced, suggesting that Lafontaine assumed a false identity as a director and officer of the corporation, thus creating a fictitious persona somehow attached to 128 and transforming her and the company into a fictitious person. We reject this argument.

[52] In 1168760 Ontario Inc., at paras. 36-37, the Divisional Court explained that a plain and ordinary interpretation of the term “fictitious person” in the LTA, consistent with the legislative purpose, is of a person who does not exist:

The Oxford English Dictionary (online edition, 2019) defines “fictitious” as “not real or true; imaginary or fabricated”. Thus, applying the ordinary meaning of a “fictitious person,” the term would mean a person who does not exist. It would apply, for example, where someone has created a false identity in order to transfer the title or interest in the land that he or she purports to convey. It would not encompass an existing person … who was the true registered owner of the property that he conveyed.

Moreover, interpreting “fictitious person” to mean a person who does not exist is consistent with the purpose of the 2006 amendments, which sought to deal with title fraud committed using fraudulent instruments. When one looks to the cases decided before the amendments, it is evident that a major legislative concern was fraud accomplished by someone who assumed a false identity in order to sell or mortgage property (see for example Lawrence and Rabi v. Rosu (2006), 2006 CanLII 36623 (ON SC), 83 O.R. (3d) 37 (Ont. S. C.).

[53] The Divisional Court also rejected an argument, which 128 raised in this case, that the Supreme Court’s interpretation in Fok Cheong Shing Investments Co. Ltd. v. Bank of Nova Scotia, 1982 CanLII 57 (SCC), [1982] 2 S.C.R. 488of “fictitious or non-existent person” in a provision of the Bills of Exchange Act, R.S.C. 1970, c. B‑5, ought to inform the interpretation of “fictitious person” in the LTA. In Fok Cheong Shing Investments Co. Ltd., the Supreme Court held that a fictitious person could include an existing person and that the analysis should focus on fraudulent intent.[^20] The Divisional Court distinguished the case, reasoning that that the Bills of Exchange Act was “a different legislative regime, serving a different purpose from the LTA and codifying a common law defense.”[^21]

[54] We agree that Fok Cheong Shing Investments Co. Ltd. is not dispositive. The provision at issue in that case concerned a defence meant to provide banks “with some reprieve from the harsh result of an innocent conversion.”[^22] This defence was codified in the Bills of Exchange Act, one purpose of which is to provide certainty in the validity and status of negotiable instruments in order to facilitate business transactions.[^23] The provision in the Bills of Exchange Act also applied to both a “fictitious or non-existent person”, which implies that the term “fictitious” has a different meaning than “non-existent” in that statute, in view of the interpretive principle that every word of a statute has meaning and function.[^24]

[55] Given the context and history of the LTA outlined above, we agree with the Divisional Court in 1168760 Ontario Inc. that a “fictitious person” must mean a fabricated or otherwise non-existent person. Adopting this approach, 128, acting through Lafontaine, was not a “fictitious person”. 128 is a valid and subsisting corporation. It was not posing as a non-existing entity when the mortgage was registered. Even accepting the allegation that Lafontaine fraudulently obtained control of the corporation (a matter that remains to be determined), it does not change the fact that 128 is and was a real and subsisting corporation and the true owner of the property and thus not “fictitious”. To hold otherwise would be inconsistent with the plain and ordinary meaning of the word “fictitious” and the purpose of the LTA.

[56] Similarly, we do not agree that Lafontaine herself is a “fictitious person” within the limited meaning of that term in the LTA. As the motion judge observed, “Lafontaine exists and is a real person.” This remains true even if 128 ultimately prevails in establishing that Lafontaine fraudulently obtained control of the corporation. Indeed, if this court were to accept that Lafontaine somehow ceased to be a real person because she fraudulently obtained control of 128, it would strain the meaning of “fictitious person” beyond what the text can plausibly bear and the provision’s purpose. Further, it would undermine the indoor management rule, discussed above, by placing an onus on those conducting business with a corporation to look behind the apparent authority of a person held out by the corporation to conduct such business, even in the absence of any indication of irregularity.

[57] As a result, 128’s argument that “fictitious person” should be broadly interpreted to extend to either 128, acting through Lafontaine, or Lafontaine herself, must be rejected. 128 and Lafontaine are not fabricated or otherwise non-existent persons.

(iii) The appellant corporation did not hold itself out to be the owner knowing it was not

[58] The third avenue for 128 or Lafontaine to have been a “fraudulent person” is under para. (c) of s. 1 (“the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument”). 128 argues the “hold[ing]” out provision applies because Lafontaine fraudulently claimed and held herself out to be an officer and director of the corporation.

[59] The argument that para. (c) applies to Lafontaine herself is not correct. A plain reading of the paragraph confirms this. By its terms, para. (c) applies if “the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument”. Here, Lafontaine never held herself out to be the registered owner of the condominium. Instead, she purported to act for the registered owner, 128. The provision thus does not apply to Lafontaine herself.

[60] Nor does para. (c) apply to 128, acting through Lafontaine. It is trite law that a corporation is a separate legal entity with rights and liabilities belonging to it. A corporation, however, can only act through individuals, including its officers, directors and employees.[^25]

[61] 128 relies in part on the decision of the Deputy Director of Titles in 2659954 Ontario Inc. (1 February 2021), Toronto (Director of Land Titles). In that decision, the Deputy Director determined that a person holding himself out to be a director and officer of a company after filing, who, without authorization, filed change notices making himself the director and officer, was a “fraudulent person” for a charge he subsequently obtained. The Deputy Director explained that because “a corporation can only act through its Directors and Officers, holding oneself out to be a Director and Officer of a corporation and granting a charge on its behalf is equivalent to holding oneself out to be the registered owner.” It appears that the Deputy Director accepted that someone stole the personal identity of one of the corporate directors and impersonated that individual, which would make the case readily distinguishable from the present facts.[^26] In any event, as the motion judge noted, courts are not bound by the decisions of the Deputy Director. Counsel for the Director of Land Titles appeared at the motion hearing and at this appeal but took no position on the disposition.

[62] We do not accept that 128, acting through Lafontaine, met the definition of a person “hold[ing] oneself out in the instrument to be, but know[ing] that the person is not, the registered owner” under para. (c) of s. 1 of the LTA. The plain text of the provision refers to a person, not a person who fraudulently obtains control of a person. There is no dispute that 128 is and was the registered owner of the condominium. A person cannot falsely hold itself out as something that it actually is. Lafontaine never claimed that she owned the condominium. Her claim was that she was a director of the corporate owner.

[63] 128 would have the court look behind the registered owner and determine whether the individuals holding themselves out as acting on behalf of the corporate owner do in fact have authority. As outlined above, 128’s approach would require setting aside the indoor management rule or create a unique exception to it, which we are not prepared to do.

[64] Moreover, the motion judge’s interpretation, not 128’s, is consistent with the legislative history of the provision. The 2006 amendments came about in part to address the concerns of real estate fraud in cases like Lawrence.[^27] The language of the ‘holding out’ provision was specifically amended to make clear that it applies to an individual who knows he or she is not the registered owner, but holds himself or herself out as such.[^28]

[65] To conclude, interpreted correctly, the concept of “holding out” does not capture an individual who has apparent authority to act for the registered owner and does not assist 128.

(2) Deferred indefeasibility does not assist 128

[66] Under the theory or doctrine of deferred indefeasibility, the mere registration of an instrument that is void because of fraud does not cure the defect for the party who immediately acquires the property by means of that fraudulent instrument, but the next person dealing with the property may rely on the fraudulent document and its registration and takes good title. Deferred indefeasibility was explained by this court in Lawrence, at para 67:

Under this theory, the party acquiring an interest in land from the party responsible for the fraud (the “intermediate owner”) is vulnerable to a claim from the true owner because the intermediate owner had an opportunity to avoid the fraud. However, any subsequent purchaser or encumbrancer (the “deferred owner”) has no such opportunity. Therefore, in accord with s. 78(4) and the theory of deferred indefeasibility, the deferred owner acquires an interest in the property that is good as against all the world.

[67] Before the 2006 amendments, this court had considered the theory of deferred indefeasibility and the LTA in Household Realty Corporation Ltd. In that case, the defendant wife had forged her husband’s signature to create a fraudulent power of attorney, which she used to grant mortgages on the property. The court held that these mortgages were valid and enforceable under s. 78(4) of the LTA, despite their fraudulent origin, because the mortgagees offered good consideration and did not have notice of the fraud.[^29] Although the court expressly declined to determine whether deferred indefeasibility applied under the LTA, the result was seen as a rejection of deferred indefeasibility in favour of immediate indefeasibility.[^30]

[68] When the 2006 amendments were being debated, some members of the Legislative Assembly spoke of their fear that this court’s decision in Household Realty would open the doors for people to commit title fraud.[^31] However, this court soon overturned Household Realty in Lawrence. Justice Gillese, writing for a unanimous five-judge panel, held that Household Realty was wrongly decided.[^32] She stated that deferred indefeasibility, rather than immediate indefeasibility or absolute title, was consistent with prior case law and the plain meaning of the statute, as well as being preferable from a policy perspective.[^33] As Gillese J.A. noted, a system of deferred indefeasibility “encourages lenders to be vigilant when making mortgages and places the burden of the fraud on the party that has the opportunity to avoid it, rather than the innocent homeowner who played no role in the perpetration of the fraud”.[^34]

[69] Notably, Lawrence was heard based on the LTA as it existed before the 2006 amendments because those amendments did not have retroactive effect to the date of the transaction in question. However, the Attorney General of Ontario, who intervened on that appeal, advised that Bill 152, which introduced the amendments, was “intended to make clear that, as of the effective date, the [LTA] operates on the basis of deferred indefeasibility”.[^35]

[70] In view of this court’s decision in Lawrence and the legislative history of the LTA, there is little doubt that the Act incorporates the doctrine of deferred indefeasibility and should be interpreted accordingly. The Act operates to put the obligation on the party acquiring the interest in land to ensure that it acquires that interest from the true owner. But, as we will explain, it does not follow that the appeal should be allowed.

[71] 128 argues that it would be consistent with the purpose of deferred indefeasibility for the court to exercise its residual discretion, which was not abrogated by the amendments to the LTA,to protect an innocent party like 128 against fraud. We reject this argument.

[72] While this court recognized in Lawrence that the LTA is predicated on a theory of deferred indefeasibility, it also held that “it is the relevant legislative provisions that must drive the analysis”.[^36] 128 argues that deferred indefeasibility, as applied to protect innocent property owners against fraud, was not expressly abrogated by the 2006 amendments, so that the exceptions to s. 78(4) are not limited to those types of fraudulent activity defined in s. 1 of the Act in accordance with s. 78(4.1), relying on the court’s comments in Lawrence that the theory of deferred indefeasibility permits common law principles of real property to remain the law unless expressly abrogated.

[73] For example, while the deferred indefeasibility of title regime typically guarantees that a transfer in favour of a subsequent purchaser or encumbrancer is valid once registered, there may be an exception for a subsequent purchaser or encumbrancer with actual notice of a defect. In MacIsaac v. Salo, 2013 ONCA 98, 114 O.R. (3d) 226, this court endorsed the principle, at para. 39, “that equity continues to have application to claims governed by the Land Titles Act and that the Act has not abrogated equitable principles of actual notice”.

[74] Despite the ongoing role of equity in decisions made under the LTA, deferred indefeasibility and the principles underlying it do not assist 128 in this case. There are four reasons for this. First, this is not a case about whether a purchaser or encumbrancer had actual notice of a defect in title. The discussion in MacIsaac is thus of limited assistance. 128 does not claim that there was a defect in title to the condominium and that Seligman had notice of that defect. To the extent actual notice of a defect may defeat the interest of a bona fide purchaser or encumbrancer for value with notice of the defect, the principle would not apply in this case.

[75] Second, 128’s argument rests on a misunderstanding of deferred indefeasibility. 128 essentially argues that because Seligman was the immediate, rather than deferred, encumbrancer, the mortgage is not valid in her favour. The problem with this argument is that the doctrine of deferred indefeasibility concerns fraudulent, and therefore invalid, instruments. It is not the case that any instrument is invalid as against the immediate person who registers it simply because that person is the first to deal with it. Here, the Legislature, through the 2006 amendments, has delineated what constitutes a fraudulent instrument. For the reasons discussed above, the mortgage is not a fraudulent instrument.

[76] Third, applying the doctrine of deferred indefeasibility in this case would arguably be inconsistent with its own underlying principles. The doctrine is premised in part on the principle that, as between two innocent parties, the party who, by due diligence, has an opportunity to uncover and possibly prevent the risk of fraud ought to be the one who bears it.[^37] While the motion judge’s findings of fact in this case are limited, given that his analysis proceeded on the assumption that 128’s allegations are true, it is notable that there is no allegation that Seligman should have been aware of the alleged fraud. To the contrary, in her affidavit evidence, Seligman stated that her counsel conducted a search of the corporation and obtained corporate documents. These documents identified Lafontaine as the director and officer of 128 and did not disclose any obvious fraud. 128 was better placed to avoid this fraud by due diligence than was Seligman.

[77] Fourth, and relatedly, not extending deferred indefeasibility to this case says nothing about any remedies the appellant might potentially have against Lafontaine directly. If 128 is correct that Lafontaine fraudulently revived the corporation and made herself a shareholder, officer and director, 128 might have a valid claim against her for the amounts it owes to Seligman under the mortgage. That, however, is a separate issue from whether the mortgage is valid and enforceable by Seligman.

[78] For these reasons, the doctrine of deferred indefeasibility does not assist 128. To the extent the court has a residual discretion beyond the LTA to invalidate the registration of an instrument, the motion judge did not exercise that discretion to invalidate the mortgage, nor do we. There is no doubt that, of the three parties, Seligman is entirely innocent; it is not clear how the dispute between Froom and Lafontaine over 128 will end.

(3) Granting partial summary judgment to Seligman was not an error

[79] The motion judge carefully instructed himself on the legal principles for granting or refusing partial summary judgment and made no error in their recitation. He rejected 128’s argument that there was a genuine issue requiring a trial as to whether the mortgage is a “fraudulent instrument” under the LTA. He also rejected the argument that the determination of whether the mortgage is a “fraudulent instrument” is inextricably linked to other ownership disputes between Lafontaine and Froom that are raised in the other two consolidated proceedings.

[80] The standard of review of a decision to grant summary judgment is deferential, unless there are extricable errors.[^38] Summary judgment might not be in the interest of justice where there is a “risk of duplicative proceedings or inconsistent findings of fact”.[^39] The motion judge was alive to that issue in this case, and stated:

Partial summary judgment should only be granted in the clearest of cases where the issue on which summary judgment is sought is clearly severable from the balance of the case: Butera v. Chown, Cairns LLP, 2017 ONCA 783, para. 34. The factors to be considered include: (1) whether the matter to be resolved by summary judgment can be bifurcated from the remaining litigation; (2) dealt with in an expeditious and cost-effective manner; and (3) whether the possibility of inconsistent findings by different courts can be avoided: Feltz Design Build Ltd. v. Larson, 2022 ONCA 150, para. 18.

[81] As noted earlier, the motion judge determined that a trial was required “on the issue of whether Froom or Lafontaine owns the company.” However, he found that Seligman’s motion for summary judgment raised an issue that was “easily bifurcated from the remaining litigation”. He added: “given that no findings of fact are being made in determining whether the Mortgage is a ‘fraudulent instrument’ the possibility of inconsistent findings is avoided.”

[82] We add the observation from Hryniak that, in some cases, “the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost-effective approach.”[^40] This is such a case.

IV. DISPOSITION

[83] For the reasons set out above, the mortgage is not a “fraudulent instrument” under s. 78(4.1) of the LTA. Accordingly, under s. 78(4) of the LTA, the mortgage became enforceable upon registration, and remains enforceable, regardless of the outcome of the remaining issues in the consolidated action. The appeal is therefore dismissed. In accordance with the agreement of the parties, the appellant shall pay the respondent its costs in the appeal in the amount of $12,000, inclusive of HST and disbursements.

Released: August 2, 2023 “K.F.”

“K. Feldman J.A.”

“P. Lauwers J.A.”

“L.B. Roberts J.A.”

[^1]: Peter Smiley appeared but made no written or oral submissions on behalf of the respondent Arthur Froom. [^2]: In summarizing the evidence on the motion, the motion judge stated that Froom directed Sheick‑Ali to revive the company. The basis for this finding is not clear. 128 argued that Lafontaine revived the company, and this was the basis upon which the motion judge made his decision. [^3]: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 118. [^4]: 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, 157 O.R. (3d) 79, at para. 6, citing Elmer A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87, quoted in Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21. [^5]: Lawrence v. Maple Trust Company, 2007 ONCA 74, 84 O.R. (3d) 94, at para. 30, quoting Durrani v. Augier (2000), 2000 CanLII 22410 (ON SC), 50 O.R. (3d) 353 (S.C.), at para. 41. [^6]: See Donald H.L. Lamont, Lamont on Real Estate Conveyancing, 2nd ed. (Toronto: Carswell, 1991), at § 29.6; Durrani, at para. 42, citing Marcia Neave, “Indefeasibility of Title in the Canadian Context” (1976) 26 U.T.L.J. 173, at p. 174. [^7]: See e.g., CIBC Mortgages Inc. v. Computershare Trust Company of Canada, 2016 ONSC 7094 (Div. Ct.), at para. 61 (holding that the fraud perpetrated against the mortgagees was in the concealment of a prior fraudulently discharged mortgage). See also 1168760 Ontario Inc., at para. 32, (“[T]he 2006 amendments do not address fraud in real estate transactions in general. Rather, the provisions prevent certain kinds of fraudulent activity with respect to title, addressing the situation where someone purports to transfer an interest or estate in land that they do not legally possess – for example, by taking on a false identity or by forging a document, including a power of attorney.”) [^8]: The other definitions of “fraudulent instrument” do not apply in this case. First, the mortgage was not given under the purported authority of a forged power of attorney (para. (b)). Second, the mortgage is not a transfer of a charge given by a fraudulent person (para. (c)). And third, the mortgage does not perpetrate a fraud as prescribed with respect to the estate or interest in land affected by the instrument (clause (d)); an instrument perpetrates a fraud for the purpose of clause (d) if it is a cessation of a charge or of an encumbrance purported to be registered by a fraudulent person: see Procedures and Records, R.R.O. 1990, Reg. 690, s. 63; see also Ontario Securities Commission v. Money Gate Mortgage Investment Corporation, 2020 ONCA 812, 153 O.R. (3d) 225, at para. 53. [^9]: See e.g., LTA, s. 28(1) (“If a minor, person who is incapable as defined in the Substitute Decisions Act, 1992, whether or not the person has a guardian, person absent from Canada or person yet unborn is interested in land in respect of the title to which a question arises, any person interested in the land may apply to the Divisional Court for a direction that the opinion of the court in the case stated to it under this Act shall be conclusively binding on the minor, person who is incapable, person absent from Canada or unborn person.”); s. 44(1) (“All registered land, unless the contrary is expressed on the register, is subject to such of the following liabilities, rights and interests as for the time being may be subsisting in reference thereto, and such liabilities, rights and interests shall not be deemed to be encumbrances within the meaning of this Act: … 5. Any right under Part II of the Family Law Act, of the spouse of the person registered as owner.”); and s. 102(4) (“The death of the person who signed the requisition or certificate does not revoke or otherwise affect the discharge.”). [^10]: For example, s. 59.2. [^11]: Ontario Securities Commission, at para. 52. [^12]: Lawrence, at para. 30, quoting Durrani, at para. 41. [^13]: See e.g., “Bill 152, Ministry of Government Services Consumer Protection and Service Modernization Act, 2006,” 1st reading, Legislative Assembly of Ontario, Official Report of Debates (Hansard), 38-2 (October 19, 2006) at p. 5624 (Hon. Mr. Phillips). [^14]: 1168760 Ontario Inc., at para. 42. [^15]: 1168760 Ontario Inc., at para. 32. [^16]: 1168760 Ontario Inc., at para. 41. [^17]: Martin v. Artyork Investments Ltd. (1995), 1995 CanLII 1383 (ON CA), 25 O.R. (3d) 705 (C.A.), at p. 708, rev’d on other grounds, 1997 CanLII 349 (SCC), [1997] 2 S.C.R. 290. [^18]: 1162251 Ontario Limited v. 833960 Ontario Limited (M-Plan Consulting), 2017 ONCA 854, 76 B.L.R. (5th) 259, at fn. 6. See also AOD Corporation v. Miramare Investment Incorporated, 2022 ONCA 95, 26 B.L.R. (6th) 15, at para. 20. [^19]: At best, 128 pleads that any loss Seligman incurred was caused by her own acts and omissions: “To the extent that the plaintiff has sustained any loss, something which is not admitted and is denied, it was caused by her own acts and omissions, is too remote, has not been mitigated and is not recoverable from the defendant 128”. [^20]: At pp. 489-90. [^21]: 1168760 Ontario Inc., at para. 35. [^22]: Rouge Valley Health System v. TD Canada Trust, 2012 ONCA 17, 108 O.R. (3d) 561, at para. 10. [^23]: SeeDrive Auto Group Inc. v. David Hay Limited (Fix Auto Richmond Hill), 2022 ONCA 239, at para. 4. [^24]: See Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, [2006] S.C.R. 715, at para. 45. [^25]: See Budd v. Gentra Inc. (1998), 1998 CanLII 5811 (ON CA), 111 O.A.C. 288 (C.A.), at para. 25. [^26]: It is not perfectly clear from the decision whether the Deputy Director did in fact find that the director was impersonated. On the one hand, the reasons state that “the real Mr. Disimone” was impersonated, but on the other they say that “Mr. Disimone, or someone calling himself Mr. Disimone” filed the notices of change and the charge. [^27]: See e.g. “Bill 152, Ministry of Government Services Consumer Protection and Service Modernization Act, 2006”, 2nd reading, Legislative Assembly of Ontario, Official Report of Debates (Hansard), 38-2 (October 26, 2006) at p. 5822 (Mr. Tascona). [^28]: Ontario, Legislative Assembly, Standing Committee on Social Policy, Official Report of Debates (Hansard) (December 5, 2006), at pp. 1422-25, 1436. [^29]: Household Realty, at para. 43. [^30]: See Jeffrey W. Lem & Brian G. Clark, “Commentary: Title Fraud Response ‘A Virtual Alphabet Soup’” 26(32) The Lawyers Weekly (December 22, 2006). [^31]: See e.g. “Bill 152, Ministry of Government Services Consumer Protection and Service Modernization Act, 2006”, 2nd reading, Legislative Assembly of Ontario, Official Report of Debates (Hansard), 38-2 (October 30, 2006) at pp. 5876-77 (Mr. Kormos). [^32]: Lawrence, at paras. 65-66. [^33]: Lawrence, at paras. 54-57. [^34]: Lawrence, at para. 58. [^35]: Lawrence, at fn. 2. [^36]: Lawrence, at para. 31. [^37]: See Rabi v. Rosu (2006), 2006 CanLII 36623 (ON SC), 83 O.R. (3d) 37 (Ont. S.C.), at paras. 40-41. [^38]: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 30; Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at paras. 13-15. [^39]: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 60. [^40]: Hryniak, at para. 60.