COURT FILE NO.: CV-11-424338

CITATION: Elle Mortgage Corporation v. Diamond, 2012 ONSC 3061

DATE: 2012/5/24

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Elle Mortgage Corporation v. 1700589 Ontario Inc. and Anthony Diamond

Counterclaim: 1700589 Ontario Inc. and Anthony Diamond v. Elle Mortgage Corporation and Terry Walman, Barrister and Solicitor

BEFORE: MASTER GRAHAM

HEARD: April 30, 2012

COUNSEL: A. Wygodny for the plaintiff

D. Laframboise for the defendants

REASONS FOR DECISION

(Motion by plaintiff for summary judgment)

[1] The plaintiff’s claim is for recovery of funds owing on a mortgage dated October 27, 2010 and registered on October 28, 2010 between the plaintiff as mortgagee and the defendants 1700589 Ontario Inc. and Anthony Diamond as mortgagor and guarantor respectively. The plaintiff also seeks possession of the mortgaged premises, which are located at #502, 18 Wynford Drive, Toronto. The amount owing on the mortgage as of the date on which the motion was argued was $102,353.27, exclusive of costs, which amount was not disputed by the defendants’ counsel.

[2] The defendants counterclaim for the return and repayment of the sum of $8,497.80 deducted from the mortgage loan advance and received and paid either to the plaintiff or to its solicitor Walman. The defendants also claim damages for the deliberate vandalism of the mortgaged property, for conspiracy and for breach of fiduciary duty, as well as punitive damages. They allege that on June 23, 2011, the defendant by counterclaim Walman and his agents broke into and took illegal possession of the mortgaged premises. They further plead that the defendant by counterclaim Walman breached his fiduciary duties and obligations to the defendant Diamond based on the allegation that he was solicitor of record for Diamond in other matters and that he used confidential information to Diamond’s detriment. They also allege that he colluded with the plaintiff Elle Mortgage to the detriment of both Diamond and Elle Mortgage.

[3] The plaintiff now moves for summary judgment in the main action and in the counterclaim.

[4] The motion is also for summary judgment for possession of the mortgaged property and leave to issue a writ of possession. Although the motion for summary judgment for recovery of the balance owing on the mortgage proceeded, counsel for the plaintiff requested an adjournment of the motion for summary judgment for possession. That portion of the motion is hereby adjourned sine die, to be returnable before me.

Background to the motion

[5] This motion first came before me on January 11, 2012. At that point, the defendants, who were initially self-represented, despite the fact that they never obtained leave under rule 15.01(2) for Mr. Diamond or anyone else to represent the corporate defendant, were represented by counsel. They sought an adjournment of the motion so that they could bring their own motion to remove the plaintiff’s solicitors of record based on the alleged conflict of interest. Plaintiff’s counsel did not consent to the adjournment but recognized that the issue of the alleged conflict had to be resolved before the summary judgment motion could proceed.

[6] On January 11, 2012, I scheduled the defendants’ motion to remove the plaintiff’s solicitors of record to proceed on February 23, 2012 and set a timetable for that motion as follows:

1. The defendants shall deliver their motion record by January 18, 2012.

2. The plaintiff shall deliver its responding material by January 25, 2012.

3. Any cross-examinations shall be held by February 10, 2012. Each cross-examination shall not exceed 90 minutes.

4. Any factums shall be delivered in accordance with the time periods in the Rules.

[7] On January 11, 2012, I also adjourned this summary judgment motion to proceed on April 30, 2012 and set the following timetable:

1. The defendants shall deliver responding material by February 24, 2012.

2. The plaintiff shall deliver any reply material by March 16, 2012.

3. Cross-examinations shall be completed by April 13, 2012.

4. Factums shall be delivered in accordance with the time periods in the Rules.

[8] What actually transpired following my January 11, 2012 endorsement is set out in the supplementary affidavit of Tylene Levey contained in the plaintiff’s supplementary motion record delivered for this motion. This evidence, which was not contested by way of responding affidavit, and on which the defendants did not seek to cross-examine, is as follows:

1. On January 23, 2012, the plaintiff’s counsel received the defendants’ materials for the removal motion.

2. On January 24, 2012, the plaintiff served its responding record for the removal motion.

3. On February 8, 2012, the plaintiff’s lawyer cross-examined the defendant Diamond on his affidavits and on February 9, 2012, Mr. Diamond’s lawyer cross-examined the plaintiff’s deponent Mr. Cohen on his affidavits.

4. On February 17, 2012, which was past the deadline for the filing of materials for the removal motion, Mr. Diamond served a supplemental motion record containing an “urgent supplemental affidavit” for the removal motion scheduled to be heard February 23, 2012. Mr. Diamond alleged in this affidavit that the plaintiff’s lawyer Mr. Cohen gave “false and perjured testimony”.

5. On February 22, 2012, the plaintiff’s lawyer cross-examined Mr. Diamond on his “supplemental” affidavit.

6. Mr. Diamond failed to confirm the removal motion.

[9] Owing to the failure of Mr. Diamond to confirm the removal motion, it did not proceed as scheduled on February 23, 2012. According to the court’s case history, it has never been rescheduled.

[10] Ms. Levey’s evidence as to what transpired in relation to this summary judgment motion is as follows:

1. As of February 29, 2012, the plaintiff’s lawyers had not received any responding material from the defendants with respect to the summary judgment motion, contrary to my order that any such material be delivered by February 24, 2012. On February 29, 2012, the plaintiff’s lawyers wrote to the lawyer for the defendant and advised that the plaintiff would not consent to the late filing of any of the defendants’ materials.

2. On March 7, 2012, the plaintiff’s lawyers received a “Notice of Responding & Cross Motion” along with an affidavit of Mr. Diamond, both of which appeared to be back dated to February 24, 2012. The plaintiff’s lawyers reiterated their position that the time for the filing of responding materials had expired and that the plaintiff would not consent to the filing of same. The plaintiffs’ lawyers also raised the issue that the defendant Diamond had not answered his undertakings from his cross-examination on February 8, 2012.

3. On March 14, 2012, the plaintiff’s lawyer again wrote to Mr. Diamond’s counsel stating that the plaintiff maintained the position that the defendants’ materials for the summary judgment motion had not been served in time but that the plaintiff’s lawyer was prepared to cross-examine Mr. Diamond on his responding affidavit without prejudice to his position that the materials, having been filed late, were inadmissible. Plaintiff’s counsel requested a date on which Mr. Diamond could attend to be cross-examined.

4. Plaintiff’s counsel never received a response from the defendants’ lawyers to any of the letters sent subsequent to February 24, 2012.

[11] On April 30, 2012, Mr. Laframboise attended on this motion on behalf of the defendants and submitted that the defendant had filed responding materials for this summary judgment motion. There were no responding materials in the motions file and the court’s case history did not record the filing of any responding materials. As indicated above, the plaintiff acknowledges receiving responding materials on March 7, 2012, after the deadline of February 24, 2012, but the defendants never responded to plaintiff’s counsel’s request for a date on which to cross-examine Mr. Diamond on his responding affidavit.

[12] Because the responding materials were served late and more significantly, because Mr. Diamond never made himself available for cross-examination on his responding affidavit, I refused Mr. Laframboise’s request to file the responding materials on the day of the motion. Accordingly, the defendants had no responding evidence before the court on this motion. In addition, although not raised by counsel for the plaintiff, I note that the defendants also failed to serve or file a factum, in contravention of both rule 20.03 (see below) and my timetable order.

Applicable rules of civil procedure and case law

[13] This motion for summary judgment is brought under rule 20 of the Rules of Civil Procedure. The parts of that rule applicable to this motion are as follows:

20.01(1) A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim. . . .

20.02(2) In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. [emphasis added] . . .

20.03(1) On a motion for summary judgment, each party shall serve on every other party to the motion a factum consisting of a concise argument stating the facts and law relied on by the party. . . .

20.04(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; [emphasis added]

(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence. . . .

[14] The Court of Appeal reviewed the application of rule 20 in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431; 108 O.R.(3d) 1. The following paragraphs of that decision are particularly helpful:

50 . . . In deciding if these powers [in rule 20.04(2.1)] should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial? (emphasis added)

51 We think this "full appreciation test" provides a useful benchmark for deciding whether or not a trial is required in the interest of justice. In cases that call for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record, a summary judgment motion cannot serve as an adequate substitute for the trial process. Generally speaking, in those cases, the motion judge simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Accordingly, the full appreciation test is not met and the "interest of justice" requires a trial.

52 In contrast, in document-driven cases with limited testimonial evidence, a motion judge would be able to achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Similarly, the full appreciation test may be met in cases with limited contentious factual issues. The full appreciation test may also be met in cases where the record can be supplemented to the requisite degree at the motion judge's direction by hearing oral evidence on discrete issues.

53 We wish to emphasize the very important distinction between "full appreciation" in the sense we intend here, and achieving familiarity with the total body of evidence in the motion record. Simply being knowledgeable about the entire content of the motion record is not the same as fully appreciating the evidence and issues in a way that permits a fair and just adjudication of the dispute. The full appreciation test requires motion judges to do more than simply assess if they are capable of reading and interpreting all of the evidence that has been put before them.

54 The point we are making is that a motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to fully appreciate the evidence and the issues posed by the case. In making this determination, the motion judge is to consider, for example, whether he or she can accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear the witnesses speak in their own words, and without the assistance of counsel as the judge examines the record in chambers.

55 Thus, in deciding whether to use the powers in rule 20.04(2.1), the motion judge must consider if this is a case where meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of a trial narrative, and to experience the fact-finding process first-hand. Unless full appreciation of the evidence and issues that is required to make dispositive findings is attainable on the motion record - as may be supplemented by the presentation of oral evidence under rule 20.04(2.2) - the judge cannot be "satisfied" that the issues are appropriately resolved on a motion for summary judgment.

56 By adopting the full appreciation test, we continue to recognize the established principles regarding the evidentiary obligations on a summary judgment motion. The Supreme Court of Canada addressed this point in Lameman, at para. 11, where the court cited Sharpe J.'s reasons in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), at p. 434, in support of the proposition that "[e]ach side must 'put its best foot forward' with respect to the existence or non-existence of material issues to be tried." This obligation continues to apply under the amended Rule 20. On a motion for summary judgment, a party is not "entitled to sit back and rely on the possibility that more favourable facts may develop at trial": Transamerica, at p. 434.

57 However, we add an important caveat to the "best foot forward" principle in cases where a motion for summary judgment is brought early in the litigation process. It will not be in the interest of justice to exercise rule 20.04(2.1) powers in cases where the nature and complexity of the issues demand that the normal process of production of documents and oral discovery be completed before a party is required to respond to a summary judgment motion. In such a case, forcing a responding party to build a record through affidavits and cross-examinations will only anticipate and replicate what should happen in a more orderly and efficient way through the usual discovery process.

[15] The function of the “full appreciation” test established in Combined Air is primarily to assist motions judges applying rule 20.04(2.1) to decide whether all or part of an action can be resolved on a summary judgment motion or whether it should proceed to trial. This test is of more limited application to this motion because a master has no jurisdiction to evaluate credibility under rule 20.04(2.1). Accordingly, if there were genuine issues of credibility, I would be required to treat them as “genuine issues requiring a trial”, and require that the matter proceed to trial.

[16] In this case, there is no responding evidence before me so there can be no issues of credibility as between the plaintiff’s deponent and the defendants. However, the “full appreciation” test still provides guidance in addressing the fundamental question of whether a just result can be achieved in this case without the need for a trial. Combined Air is also helpful in its reiteration at paragraph 56 of the decision of the parties’ evidentiary obligations on a summary judgment motion.

Evidence on the motion

[17] The plaintiff’s evidence is contained in the affidavit of Terry Walman sworn November 30, 2011 and the attached exhibits. Mr. Walman is a lawyer practicing primarily real estate and mortgage law in Ontario and is an officer of the plaintiff corporation. The defendants never cross-examined him on this affidavit nor did they ever try to initiate any cross-examination.

[18] Mr. Walman deposes that on October 13, 2010, he received a request from the defendant Diamond for a first mortgage loan on the subject premises. In searching executions, he noted numerous executions against Mr. Diamond personally but none against the corporate owner of the property. In a subsequent email, Mr. Diamond stated that Mr. David McGregor, who acted for the defendants on the mortgage, “will do the signing part”.

[19] Mr. Walman sent the plaintiff’s standard mortgage documentation to Mr. McGregor. On the basis of an appraisal received, Mr. Walman informed Mr. McGregor that the loan would be for $90,000.00 instead of the $110,000.00 originally requested. On October 28, 2012, Mr. Walman received from Mr. McGregor the mortgage documents executed by Mr. Diamond both personally as guarantor and on behalf of the corporate defendant mortgagor. These documents included the following:

1. An Acknowledgment signed by Mr. Diamond that Mr. Walman did not represent him or the corporation as a lawyer or in any other capacity.

2. A copy of the Charge terms with each page initialed on behalf of the mortgagor and the guarantor.

3. An acknowledgement by Mr. Diamond that the Charge terms were included in the mortgage and that he had received a copy of those terms.

4. A certificate of independent legal representation signed by Mr. McGregor and Mr. Diamond in which Mr. McGregor states that he is the solicitor for the mortgagor and guarantor (i.e. the defendants in this action) with respect to the mortgage and Mr. Diamond acknowledges that Mr. McGregor was retained as their solicitor.

[20] Net funds were advanced by way of a cheque for $77,702.20 dated October 29, 2010. The principal amount of the loan of $90,000.00 was reduced by the amount of the lender’s fee, legal fees, realty taxes and arrears, title insurance, estimated disbursements for registration and estimated premiums for mortgage insurance. The mortgage was registered on title on October 28, 2010. On November 5, 2010, a notice was registered to reflect the amendment of the principal amount of the mortgage from $110,000.00 to $90,000.00.

[21] Mr. Walman was eventually provided with 6 of 12 required post-dated cheques payable from a corporation other than the mortgagor. These cheques, in the amount of $600.00 each, were dated monthly from November 28, 2010 to April 28, 2011.

[22] The March 28, 2011 cheque was returned “NSF” and default continued thereafter. On April 4, 2011, Mr. Walman wrote to the corporate defendant notifying it of the default under the terms of the mortgage and requesting payment of $1,150.00 consisting of the mortgage payment of $600.00, a “dishonoured cheque” administration fee of $200.00 and legal costs of $350.00. Mr. Walman’s covering letter stated that if the payment were received by April 11, 2011, the $350.00 in costs would be waived.

[23] As Mr. Walman did not receive a response to the letter, he drafted a statement of claim, had it issued and asked a process server to serve it. The process server had difficulty serving Mr. Diamond, so Mr. Walman sent the statement of claim to Mr. Diamond by email, asked him to accept service and suggested that he cure the defaults so that the claim would be unnecessary.

[24] The April 28, 2011 cheque was also returned NSF.

[25] There was a further email exchange between Mr. Walman and Mr. Diamond and on May 25, 2011, Mr. Diamond stated that it had been a most difficult time for him, that he was sorry for the delay in bringing the account up to date and that “the May payment is OK”. On that same date, Mr. Walman wrote to Mr. Diamond to inform him of the total amount owing on the mortgage.

[26] Mr. Walman’s office then received two $600.00 cheques but he believes that they were received after the due date for the May 28 payment. Shortly thereafter, he received a copy of a letter from the condominium corporation enclosing a notice to the corporate defendant of a lien against the mortgaged condominium property in respect of unpaid common expenses.

[27] On June 24, 2011, Mr. McGregor wrote to Mr. Walman informing him that he had received a direction from the corporation to send him the amount requested in his May 25, 2011 letter to restore the mortgage to good standing and that he had been advised that the mortgage payments of May 28, 2011 and June 28, 2011 had been cashed. Mr. Walman deposes that he “assumed that the mortgage was being brought current”, but that “nothing of the sort happened”. Instead of, for example, tendering arrears and arguing over legal fees, Mr. Diamond served a notice of intent to defend on behalf of himself and the corporation.

[28] Mr. Walman asked Mr. Diamond on June 27, 2012 for proof that the mortgage was not in default and subsequently received a letter dated July 7, 2011 from an administrator stating that replacement cheques had been provided for the March 28 and April 28 cheques and that payments for May 28 and June 28 had been negotiated by the plaintiff.

[29] Mr. Walman deposes that he never received any replacement cheques for the March 28 and April 28 “NSF” cheques and that Mr. Diamond never offered to pay anything for the legal fees or other costs owing, despite the acknowledgment in Mr. McGregor’s previous letter. He acknowledges receiving the two $600.00 cheques but received no further post-dated cheques. In addition to the arrears, service charges and costs, the plaintiff is entitled to compound interest under the terms of the mortgage.

[30] With respect to the allegations in the statement of defence and counterclaim, Mr. Walman deposes, in response to the pleading that the plaintiff is precluded from bringing an action on the mortgage by its failure to serve notices under the Personal Property Security Act and the Bankruptcy and Insolvency Act, that it was not necessary to provide notice under either of those statutes. The plaintiff is not enforcing personal property security.

[31] Mr. Walman also denies that there was any trespass on the mortgaged premises. He deposes that his process server Mr. Chhabra attended at the premises on June 23, 2011 and found them vacant, secured the property by arranging for the locks to be changed and posted a notice that the premises were in the possession of the mortgagee. At the very least, the plaintiff had a colour of right to take possession of the premises. At the same time, he had the letter from Mr. McGregor, referred to above, acknowledging substantial arrears and stating that they were to be paid.

[32] With respect to the allegation that the demand for payment of $250.00 as a fee for the NSF cheque and $300.00 for legal fees constitutes interest at a criminal rate, Mr. Walman deposes that the mortgage was never brought current. The fees charged are in accordance with the terms of the mortgage or the Mortgages Act and Mr. Diamond had the option to pay the arrears and have the costs assessed. The service of the statement of defence and counterclaim has given the defendants months of payment-free time and an opportunity to run the arrears higher.

[33] With respect to the allegation that Mr. Walman is in possession of confidential solicitor client information which he has used in these proceedings to the advantage of the plaintiff and himself and to the detriment of the defendants, Mr. Walman denies that he has any confidential information regarding Diamond or the defendant corporation. He acknowledges having acted for Diamond’s company, Diamond + Diamond MBG Inc., only on two minor matters.

[34] Specifically, between January and June 2010, Mr. Walman acted for Diamond + Diamond MBG Inc. to enforce that company’s mortgage on a condominium at 77 Harbour Square. He issued a demand, Notice of Sale and Statement of Claim. He believes the mortgage was paid out or brought current and his involvement ended in June, 2010. For about two months from October to November 2010, Mr. Walman represented Diamond + Diamond MBG Inc. in the enforcement of a third mortgage on another property. He drafted the statement of claim and had it issued and served. A statement of defence was filed and shortly thereafter, Mr. McGregor took over the file.

[35] Finally, Mr. Walman deposes that the institution of this action did not involve any information, confidential or otherwise, about Mr. Diamond or any of his companies and in any event, he had no such information. Upon receipt of the statement of defence and crossclaim, he ceased acting as lawyer for the plaintiff in this action.

Does the plaintiff’s evidence support summary judgment?

[36] Counsel for the defendants submits that based on the “full appreciation” test in Combined Air, supra, summary judgment should not be granted where credibility is at the heart of the dispute. However, in this case, where there is no affidavit evidence before the court to contradict the evidence in the plaintiff’s affidavit, and no cross-examination on that affidavit, there are no credibility issues and there is therefore no issue of whether the court needs the benefit of a trial to obtain a full appreciation of the evidence. Accordingly, the issue to be addressed is simply whether the plaintiff’s evidence is sufficient to demonstrate under rule 20.04(2)(a) that “there is no genuine issue requiring a trial with respect to a claim or defence”.

[37] The plaintiff’s evidence is that the corporate defendant entered into the subject mortgage, with the defendant Diamond as guarantor, after having obtained independent legal advice from Mr. McGregor. The mortgage was for the principal amount of $90,000.00 and provided for the payment of an administration fee and legal fees for NSF cheques.

[38] The initial default under the mortgage occurred when the March 28, 2011 payment was returned NSF. The plaintiff demanded payment and although Diamond responded on April 27, 2011, the April 28, 2011 cheque was also returned NSF. The plaintiff’s solicitor Mr. Walman submitted a statement of arrears and on June 24, 2011 the defendants’ lawyer Mr. McGregor wrote that he had received instructions to pay the amount owing of $6,190.97. Meanwhile, the plaintiff received and deposited two cheques of $600.00 each. No other payments were received and specifically, no payment of $6,190.97. Accordingly, the evidence is that the defendants continue to be in default.

[39] The defendants, through their counsel, did not dispute that the plaintiff’s calculation of the amount owing under the mortgage as of April 30, 2012 was $102,353.27.

[40] The evidence submitted by the plaintiff entitles it to summary judgment for $102,353.27. The court must therefore determine whether the defendant has “set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial” as required by Rule 20.02(2).

Submissions of the defendants

[41] Although, as set out above, the defendants did not have any evidence to put before the court, their counsel made submissions in response to the motion.

[42] First, the defendants submit that there would be no prejudice to the plaintiff if the case were to go to trial. This statement is incorrect. If the plaintiff is entitled to summary judgment on a motion, then any delay in obtaining judgment is prejudicial owing to the corresponding delay in collecting the judgment. Further, even if this statement were true, a lack of prejudice to the moving party from having to proceed to trial is not a valid consideration on a summary judgment motion.

[43] Second, the defendants submit that a $200.00 charge for an NSF cheque and a $350.00 charge for legal costs create what in effect amounts to a usurious rate of interest on a monthly payment of $600.00. Based on the terms of the mortgage itself, this is not a valid defence.

[44] With respect to charges for NSF cheques, the mortgage terms include the following:

The Chargee/Mortgagee shall charge an administration fee of $200.00 for each occurrence of any of the following events: . . . 2. Cheque Dishonoured for any reason.

[45] With respect to the charge for legal costs, the mortgage terms include a section headed “COSTS”, the relevant provisions of which are as follows:

In the event of default under the herein Charge/Mortgage, . . . all costs, charges and expenses including all legal costs on a solicitor and client basis, which may be incurred in endeavoring to collect any monies overdue under this charge, and/or rectifying all other monetary or non-monetary default under the terms of this charge and including but not limited to obtaining legal counsel . . . shall be, with interest at a rate as set out herein, a charge upon the said lands in favour of the Chargee/Mortgagee. [emphasis added]

[46] Mr. Diamond, who obtained independent legal advice from Mr. McGregor, signed each page of the mortgage terms both on behalf of the defendant corporation as mortgagor and on his own behalf as guarantor. Accordingly, the defendants agreed to those terms when entering into the mortgage in consideration of the funds being advanced and they cannot now escape the obligations that they assumed under those terms. Further, the defendants’ counsel provided the court with no authorities that might support his contention that these terms should not apply.

[47] I also note that, in his letter of April 4, 2011 demanding payment following the NSF cheque of March 28, 2011, Mr. Walman stated that the $350.00 in costs would be waived if payment was received by April 11, 2011.

[48] Thirdly, the defendants submit that the plaintiff had no right under the lease to request a certified cheque to replace the NSF cheque. This argument fails for two reasons. The plaintiff’s bank stamped the cheque with the words: “Pursuant to clearing house rules, this item must not be cleared again unless certified”. The plaintiff cannot be expected to accept payment by means of a cheque that it could not negotiate. Also, there is no evidence in the subsequent correspondence from the defendants that they ever objected to paying the amount owing by certified cheque.

[49] Fourthly, the defendants submit that, in the event of an action on the mortgage, the tenant of the leased premises should have been notified of the default on the mortgage. The defendants rely on the Declaration re: Occupancy of Property and use of same, included in the documents enclosed with Mr. McGregor’s letter of October 28, 2010, which includes the statement that “Property is leased to: Ellinismos Foundation”.

[50] This argument also fails. There is no reference to any such lease in the statement of defence and counterclaim and therefore no pleading of any defence based on any failure to give notice to the tenant. Counsel for the defendants attempted to provide the court with a copy of a lease between the corporate defendant and the tenant. I refused to accept it because it was not properly in evidence as part of an affidavit and therefore would not have been the subject of cross-examination.

[51] After hearing the motion, and before I began writing these Reasons, I received a letter dated May 2, 2012, addressed to “His Worship Master Graham” from Mr. David R. McGregor of McGregor & Martin, being the same Mr. McGregor who acted for the defendants on the mortgage. In this letter, Mr. McGregor stated that he was writing on behalf of Ellinismos Foundation and 2135616 Ontario Limited, the tenants of the mortgaged premises, and commented that “for unexplained reasons” the responding material of the defendant 1700589 Ontario Inc. was not before me on the motion. I have indicated in paragraphs [11] and [12] above my reasons for not accepting the material from the defendants.

[52] Mr. McGregor enclosed with his letter a copy of the lease between 1700589 Ontario Inc. as Landlord and “Ellinismos Foundation a Global Charitable & Philanthropic Organization, presently represented in North America by Mr. Aaron Herbert Stein, his replacement(s), and administered by Mr. Anthony Diamond of 516-18 Wynford, Toronto, Ontario, M3C 3S2” [emphasis added] as tenant. He requested that I re-open the proceedings to allow further submissions on behalf of the tenant.

[53] I then received correspondence of May 3, 2012 from plaintiff’s counsel, objecting to Mr. McGregor’s letter being put before me as a breach of rule 1.09. I subsequently received further letters of May 4, 2012 from Mr. McGregor and May 8, 2012 from plaintiff’s counsel.

[54] The defendants’ argument is that summary judgment should not be granted on the mortgage because the corporate mortgagor’s tenant should have been given notice of the motion. Aside from the fact that, as stated above, the defendants have not actually defended the action on this basis, it turns out that the tenant Ellinismos Foundation did have notice of both the action and the motion because Mr. Diamond is its administrator. It is disingenuous of Mr. Diamond to try to argue at this point that the Ellinismos Foundation was not aware of the proceedings because he himself clearly was. If he had thought that the Ellinismos Foundation had the right to contest the mortgage action, he could have instructed counsel to raise the issue when the motion first came before me on January 11, 2012. For reasons known only to himself, he did not see fit to do so.

[55] Further, in retaining Mr. McGregor to communicate with the court for the purpose of trying to persuade the court to consider the Ellinismos Foundation lease, Mr. Diamond is attempting to do indirectly what the court was not prepared to allow him to do directly when it refused to allow his counsel to file his responding affidavit. This conduct constitutes an abuse of process by Mr. Diamond.

[56] I also do not approve of Mr. McGregor’s conduct in communicating with the court directly in relation to a proceeding pending before it. Rule 1.09 states as follows:

1.09 When a proceeding is pending before the court, no party to the proceeding and no party’s lawyer shall communicate about the proceeding with a judge, master or case management master out of court, directly or indirectly, unless,

(a) all the parties consent, in advance, to the out-of-court communication; or

(b) the court directs otherwise.

[57] Mr. McGregor states in his letter of May 4, 2012 that rule 1.09 does not apply to these circumstances because the rule refers to a “party to the proceeding” and Ellinismos Foundation and 2135616 Ontario Limited were not before the court. The fact is that Mr. McGregor knows that Mr. Diamond was before the court both in his own capacity and as the principal of the corporate defendant and in communicating with the court on behalf of Ellinismos Foundation, he is also doing so on behalf of Mr. Diamond, a party to the proceeding. He is in breach of both the letter and the spirit of rule 1.09.

[58] In addition, although it is a relatively minor matter, Mr. McGregor should be aware that Masters of the Superior Court are not addressed as Your Worship.

[59] The defendants also submit that the plaintiff’s representative and Mr. Walman had no right to enter the mortgaged premises without notice to the tenant, and their doing so caused a breach by the corporate defendant of its lease with the tenant. The pleading at paragraph 30 of the defendants’ “crossclaim” (which is really part of the counterclaim and henceforth I will refer to the crossclaim and counterclaim collectively as the counterclaim), is that on June 23, 2011, the defendant by counterclaim Walman and his agents broke into, burglarized, vandalized and took illegal possession of the mortgaged premises. However, this is a pleading in support of the defendants’ claim for damages arising out of the alleged vandalism. It is not a pleading in defence of the claim for recovery of the amount owing under the mortgage and specifically, it is not a pleading that the alleged conduct constitutes a breach of the terms of the mortgage. Accordingly, even if these facts were proven, they would not provide a defence to the motion for judgment on the mortgage.

[60] With respect to the claim, I conclude that the plaintiff’s evidence establishes that there is no genuine issue requiring a trial and the defendants, who have no evidence before the court, have not raised any such issue. The plaintiff shall have judgment for $102,353.27 plus the interest accrued since April 30, 2012, plus costs.

[61] From the standpoint of the counterclaim, the allegations that the defendant by counterclaim Walman and his agents vandalized the mortgaged premises are denied in Walman’s statement of defence to counterclaim but not in Mr. Walman’s affidavit. Mr. Walman does depose that “there was no trespass, and there are no damages” but does not specifically address the allegations of burglary and vandalism.

[62] The issue with respect to the allegations of trespass, vandalism and burglary is whether the words “there was no trespass and there are no damages” are sufficient to refute those allegations. Given the obligation of a party on a summary judgment motion to “put its best foot forward”, (See Transamerica Life cited in Combined Air, supra) this bald statement is too vague to constitute evidence that the alleged vandalism and burglary did not occur and the motion to dismiss that portion of the counterclaim is dismissed.

[63] The counterclaim also contains a claim for return and repayment of the sum of $8,497.80 deducted from the mortgage loan advanced on closing and received and paid either to the plaintiff or to Mr. Walman. The counterclaim also contains claims for damages for breach of contract and conspiracy.

[64] The plaintiff’s affidavit evidence and factum do not address these claims and the motion to dismiss them is dismissed.

[65] The counterclaim also contains a claim for damages for breach of fiduciary duty, based on allegations that Mr. Walman used confidential information to his advantage and benefit and to Mr. Diamond’s benefit. The counterclaim does not contain any particulars of what confidential information Mr. Walman is alleged to have used.

[66] The plaintiff’s affidavit does include evidence setting out the nature of the other matters in which Mr. Walman acted for Mr. Diamond’s company Diamond + Diamond MBG Inc.. Based on the evidence in paragraphs 30 and 31 of Mr. Walman’s affidavit, which is set out at paragraphs [33], [34] and [35] above, I am satisfied both that the other matters are unrelated to the matter before me and that Mr. Walman did not obtain any confidential information from Mr. Diamond in the unrelated matters that he used in the prosecution of this action. In the absence of any evidence from the defendants that would raise a genuine issue requiring a trial, the plaintiff is hereby granted summary judgment dismissing the counterclaim for breach of fiduciary duty.

Costs

[67] The plaintiff was successful on the motion for summary judgment on its claim, but succeeded in obtaining a dismissal of only one of the claims advanced against it in the counterclaim. The bulk of the material and the argument on the motion related to the main action and accordingly, the plaintiff should be awarded the costs of the motion, reduced to a small extent to take into account the fact that only one part of the counterclaim was dismissed.

[68] The plaintiff provided a costs outline. The plaintiff seeks total costs including HST of $23,990.94, which includes $920.94 for disbursements. These costs are on a solicitor and client scale based on the term of the mortgage, referred to at paragraph [45] above, which makes “all legal costs on a solicitor and client basis, which may be incurred in endeavoring to collect any monies overdue under this charge” a charge upon the mortgaged premises in favour of the mortgagee. I accept that on this basis, the plaintiff is entitled to the costs of enforcing the mortgage on a solicitor and client or full indemnity scale.

[69] The costs sought by the plaintiff include the costs of the defendants’ motion to remove the plaintiff’s solicitors of record that did not proceed because the defendants failed to confirm it and then failed to reschedule it. These include the costs of reviewing Mr. Diamond’s affidavits in support of the motion, preparing a responding affidavit, preparing for and attending at cross-examinations and preparing a factum.

[70] As the defendants’ motion to remove the plaintiff’s solicitor was brought in the context of this summary judgment motion, and did not proceed owing to the actions or inaction of the defendants, the plaintiff should be awarded the costs associated with that motion as part of the costs of this motion. The costs incurred by the plaintiff to respond to the defendants’ motion to remove its solicitors of record in this action are directly related to its action to recover the funds owing under the mortgage and are therefore also payable on a full indemnity basis.

[71] To take into account the fact that the plaintiff was not fully successful on the summary judgment motion, in that only one of the claims advanced in the counterclaim was not dismissed, but also considering that the written material and oral argument relating to the counterclaim was a relatively small part of the motion, I would reduce the plaintiff’s costs as set out in its costs outline to $20,000.00. Accordingly, the defendants shall pay the costs of this motion fixed at $20,000.00, payable within 30 days.

Master Graham

DATE: May 24, 2012