ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-21821
DATE: 2012-09-27

B E T W E E N:

ROYAL BANK OF CANADA

Leigh Ann Sheather, Counsel for the Plaintiff

Plaintiff

• and -

PRIYADARSHINI SAMPATHKUMAR

Martin P. Zarnett, Counsel for the Defendant

Defendant

• and -

KUMAR SRISKANDA AND KANAGARANJAN KANDIAH

Antonios T. Antoniou, Counsel for Kumar Sriskanda

Third Parties

HEARD: September 10, 2012

RULING ON MOTION

GLITHERO J.

[ 1 ] The plaintiff bank moves for summary judgment for the deficiency owing on a mortgage together with the dismissal of the defendant’s counterclaim. The deficiency following the sale of the property pursuant to power of sale provisions in the mortgage amounted to $129,538.10.

[ 2 ] The defendant was 26 years of age in November of 2004 and was romantically involved with the third party, Kandiah between December 2002 and early 2007. In November 2004, the plaintiff agreed to take title to a property 30 Coltman Crescent, Scarborough (“Coltman”) so as to assist Kandiah, who was having financial problems, and who could not pay the mortgage, and who had made an assignment in bankruptcy. On November 24, 2004, title to “Coltman” was transferred to the defendant for a stated consideration of $269,000. That same date, the defendant granted a mortgage on the property to the Bank of Nova Scotia in the amount of $246,942.

[ 3 ] As between the defendant and Kandiah, it was agreed that Kandiah would make all mortgage payments, but they were to be paid through a bank account in the defendant’s name.

[ 4 ] In January 2007, the defendant approached the Royal Bank to refinance the property. She met with a Royal Bank mortgage specialist, Gary Wong, to provide documentation in support of her application for a Royal Bank mortgage. The meeting took place at a Tim Hortons restaurant. Following the meeting, the defendant provided further documentation to Mr. Wong confirming her employment and salary.

[ 5 ] The plaintiff bank agreed to advance the sum of $313,344 to the defendant to be secured by a first mortgage on the property. Both the defendant and the plaintiff bank retained the third party, Kumar Sriskanda (“Sriskanda”), to act as the lawyer for both of them. The plaintiff bank forwarded several documents to Mr. Sriskanda with respect to the mortgage.

[ 6 ] The defendant attended Mr. Sriskanda’s office on January 22, 2007, and signed a number of documents, which showed her to be the mortgagor and set out the financial details of the mortgage. She read the documents and did not ask any questions. The plaintiff bank required the third party lawyer, Mr. Sriskanda, to obtain the plaintiff’s signature on a document detailing how the funds advanced to the defendant under the mortgage were to be applied. The bank required that all of the proceeds be applied to retire the prior Bank of Nova Scotia mortgage, a bank credit card debt and 4 other bank loans. The defendant signed to acknowledge those payments. In the result, the net amount actually paid to the defendant was $19, 256.12, after the account of Mr. Sriskanda had also been deducted.

[ 7 ] Default occurred under the mortgage on May 24, 2010, and the plaintiff bank sold the property pursuant to power of sale provisions, with the result being the aforementioned deficiency.

The Defendant’s Position

[ 8 ] The defendant admits signing the mortgage documentation and admits that the monies advanced under the mortgage were used to pay off debts that she owed for the most part, and that the balance was paid to her. Nevertheless, she resists summary judgment on the basis of the following allegations.

[ 9 ] The defendant gives evidence that she never lived on the “Coltman” property and that at all times it was Kandiah who lived there with his family. She claims that Kandiah was older than her and exerted undue influence over her, claiming to have money problems, family problems and influenced her to “temporarily take title to the property until such time as he found a job”. The defendant did not use her own money to make the payments relating to the property. Kandiah did.

[ 10 ] In 2007, Kandiah approached the defendant again with a tale of more financial difficulties and advised that he had arranged for a new mortgage for an increased amount on the “Coltman” property. The defendant gives evidence that, as a result, she met with Mr. Wong, the plaintiff banks “Mobile Mortgage Specialist” at a Tim Hortons on January 17, 2007. At that meeting, she testifies that advised Wong that she was assisting Kandiah, that he was the real owner of the property and that it would be he who would be responsible for the mortgage and that she would not be making the monthly payments. Her evidence is that Wong was satisfied with this arrangement. Based on his acknowledgement, she then signed the mortgage application papers.

[ 11 ] Wong was cross-examined and testified that he cannot recall anything about the meeting and that he does not remember the defendant. He agreed that his remuneration was based on commission, so that if a mortgage was not approved, he was not paid. Mr. Wong eventually resigned his employment with the plaintiff bank because of issues with “corporate security”.

[ 12 ] The third party Mr. Sriskanda undertook to act for both the plaintiff bank and the defendant on the mortgage. The defendant testifies that she advised the lawyer, Mr. Sriskanda, that Kandiah was the true owner of the property and would be financially responsible for the mortgage, and that she provided him with the address where she actually lived, thereby showing she did not live on the “Coltman” property.

[ 13 ] Her evidence is that at the meeting with Mr. Sriskanda, the purpose of which was to sign the mortgage documents, shortly after it started he excused himself from the meeting, returned 5 minutes later and asked the defendant about a property known as 9 Peace Drive (“Peace”). The defendant’s evidence is that she told him she had no knowledge of that property, following which the lawyer Mr. Sriskanda and Kandiah began to argue loudly and in a heated fashion in the Tamil language. The defendant does not speak Tamil. The lawyer then asked Kandiah to leave his office, but Kandiah refused to do so. The defendant’s evidence is that the lawyer then presented the documents to the defendant and had her sign.

[ 14 ] In the spring of 2010, the defendant claims that she discovered that her identity had been fraudulently used to purchase the “Peace” property and that it had been the same lawyer Mr. Sriskanda who acted for whoever it was who impersonated the defendant as the purchaser. The defendant’s position is that the argument between the lawyer and Kandiah, in the lawyer’s office, obviously related to the fact that somebody had impersonated the defendant in the purchase of the “Peace” property, that Sriskanda had acted for the imposter, and that it was conducted in the Tamil language to keep that knowledge from the defendant.

[ 15 ] The defendant’s evidence is that at no time did Mr. Sriskanda advise her that she had been impersonated in this other transaction. Her position is that the lawyer should not have proceeded with the mortgage to the plaintiff, as lawyer for both. Her position is that she would not have proceeded with the mortgage had she known that she had been impersonated in a prior transaction arranged by Kandiah, in which someone was used to impersonate her and fraudulently use her name in a transaction handled by the same lawyer.

[ 16 ] The defendant’s position continues that it had to be obvious to Sriskanda that Kandiah was exerting undue influence over the defendant, that he had been involved in the previous fraudulent personation, that he refused to leave the meeting so that the defendant would be kept in the dark.

[ 17 ] Mr. Sriskanda refused to answer questions on cross-examination regarding to be said are said to be clear and apparent discrepancies in the signatures purported to be that of the defendant as between the “Peace” transaction and the “Coltman” mortgage transaction.

[ 18 ] While Mr. Sriskanda in his responding affidavit denies speaking Tamil with the boyfriend Kandiah, on cross-examination he admitted that, in fact, they did speak Tamil at the meeting, but claims that he believed that the defendant understood Tamil. Mr. Sriskanda does agree that he asked Kandiah to leave the meeting at his office.

[ 19 ] By way of fulfillment of an undertaking given on cross-examination, the defendant obtained an appraisal of the “Coltman” property as of the date of the mortgage, which showed a value of between $202,000 and $212,000, whereas the mortgage in question was for $313,344.

[ 20 ] Essentially, the defendant’s position is that she was unduly influenced by Kandiah with respect to the mortgage in question, and that the bank through its representative, Wong, and through their joint lawyer, Mr. Sriskanda, knew of the undue influence, and knew of a prior fraud perpetrated on the defendant, but did not make that known to her.

Position of The Third Party Solicitor

[ 21 ] Mr. Sriskanda responded to the summary judgment motion only to ensure that the motion did not result in any findings of fact detrimental to him.

[ 22 ] Mr. Sriskanda filed an affidavit indicating that he acted for the defendant, the actual defendant and not an impostor, in May of 2003 when she purchased “Peace”.

[ 23 ] He agrees that he acted for both the defendant and the plaintiff bank in respect of the mortgage in question. He claims that he was not involved at all in the negotiation of the mortgage, but rather given instructions by the plaintiff bank in respect of the execution and registration of the mortgage. He agrees that Kandiah attended with the defendant at the January 22, 2007 meeting in his office. He claims that he asked the defendant if she wished to meet with him alone without Kandiah, but she declined and said Kandiah was there to assist her.

[ 24 ] Mr. Sriskanda’s evidence is that he fully explained all the mortgage documents to the defendant in English and made sure that she understood each and that she wished to proceed, and specifically authorized payment of her aforementioned debts out of the mortgage proceeds. Mr. Sriskanda denies questioning the defendant about the “Peace” property. His evidence is that he did not remember that he had acted for the defendant in respect of the “Peace” property until two years later, in December of 2009, when the defendant and Kandiah attended at his office requesting to review the “Coltman” file. His evidence is that he neither remembered acting for the defendant on the “Peace” property, nor was that brought to his attention at the January 22, 2007 meeting.

[ 25 ] Yet when questioned about the “Peace” transaction, Mr. Sriskanda has testified that he specifically remembered that it was the actual defendant he dealt with, as he specifically remembers her face, as she was pretty. His position is that it was definitely her that he acted for in respect of the “Peace” transaction, rather than an imposter posing as the defendant.

Position of the Third Party Kandiah

[ 26 ] This individual has taken no part in the proceedings and has been “noted in default”.

Position of the Plaintiff

[ 27 ] The plaintiff’s position is that on her own account the defendant was privy to a scheme to mislead the bank in terms of the real owner of the property and accordingly she can’t complain now. The bank says it had no knowledge of any misrepresentation or any undue influence. It says the lawyer acted properly throughout. In short the plaintiff says it only did what the defendant asked it to do, that she received appropriate advice throughout, that she understood what she was doing, and that she received the benefit of the entire proceeds of the mortgage and there is no reason she should not have to repay the deficiency after the sale.

Discussion

[ 28 ] The plaintiff relies on the decision in Royal Bank of Canada v. Cammock , [2008] O.J. No. 2490 (S.C.J.) . There it was held that a defendant who had knowingly accepted $10,000 for taking title to a condominium unit in her own name, knowing that she was not the beneficial owner of the property and that the purpose of the scheme was to induce the bank to advance money. A fundamental difference is that there the defendant did not advise the bank or the lawyer of the true state of affairs. In this case, the evidence of the defendant is that she did so advise the bank’s representative, Mr. Wong, and the lawyer.

[ 29 ] The plaintiff asserts that there is no evidence whatsoever that Kandiah exerted undue influence over the defendant. She says he did. She has given evidence that she so advised the bank’s representative and the lawyer as to the true nature of the arrangement. More importantly, on her account of the evidence, the lawyer for the bank, as well as for her, was aware that Kandiah had been part of a scheme whereby some imposter was used to purchase the “Peace” property in the defendant’s name. If that is accepted at trial, it is significant evidence of manipulation of the defendant on the part of Kandiah, to the knowledge of the plaintiff through its solicitor.

[ 30 ] While the plaintiff asserts that there is no evidence of “deficient, substandard and negligent” legal advice provided by Mr. Sriskanda, in my view that is simply not correct if one were to accept the defendant’s evidence to the effect that the lawyer acting for both knew that she had been the subject of an impersonation with respect to the “Peace” transaction.

[ 31 ] As was held in Martin v. Goldfarb , 1997 12430 (ON SC) it was held that where a solicitor assumes a dual role, acting for two parties in a transaction, it is at his or her own risk, with the solicitor having the onus to establish that the client had the advantage of the best professional assistance. Such a lawyer cannot keep information from one client because disclosure would be detrimental to the other. Here, on the defendant’s evidence, the lawyer knew that she had been impersonated to her potential detriment on an earlier occasion, and that the individual purporting to assist her on this transaction had been part and parcel of the prior dishonest transaction. On the basis of the defendant’s evidence, had she known of this situation, it seems fair to conclude she would not have entered into this mortgage transaction.

[ 32 ] Where evidence is led of a misrepresentation on the part of a lawyer acting for both the lending institution and the borrower, a triable issue arises as to whether the lender is saddled with responsibility for the misrepresentation by its agent: MCAP Service Corp. v. Allen , [2007] O.J. No. 627 (S.C.J.) ; Bank of Nova Scotia v. Vallafuerte , (2007) 52 R.P.R. (4 th ) 148 (S.C.J.) .

[ 33 ] The test for summary judgment as set forth in amended rule 20.04 was considered by the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch (2011), 2011 ONCA 764 , 108 O.R. (3d) 1. There the court approved a “full appreciation test” and approved phrases suggesting that summary judgment would be appropriate where the motion judge has “total familiarity with the “case as a whole”, “extensive exposure to the evidence”, and “familiarity with the case as a whole”. The court held that where the case requires multiple findings of fact on the basis of conflicting evidence from several witnesses, that a motion judge cannot have a full appreciation of the evidence and that a trial is required.

[ 34 ] A problem also exists in situations where a judge is asked to find facts for purposes of a summary judgment motion, but in circumstances where other issues will nevertheless remain to be tried. Such a situation can create the risk of inconsistent verdicts as between the motion and a trial result, and may undermine the ability of a party to present its case in a fair and just manner with respect to other issues. That concern arises in this case where this summary judgment, if granted, would only determine the issue as between the plaintiff and the defendant, but may well prejudice those involved in the third party proceedings. Regard may be had to Aronowicz v. EMTWO Properties Inc. (2010), 2010 ONCA 96 , 98 O.R. (3d) 641.

[ 35 ] An initially attractive submission on the part of the plaintiff is that none of these problems should matter in that that the defendant received all of the money advanced under the mortgage either by reason of it being used to retire valid debts that she owed, or as paid directly to her in the case of the final balance. Hence, it is argued, she received the funds, so why shouldn’t she have to repay them? It seems to me that that logic could be used in any case involving the collection of an unpaid debt. It would render undue influence and misrepresentation and fraud as immaterial.

[ 36 ] In this case, if it is established that the defendant was impersonated in respect of the “Peace” transaction, to the knowledge of the lawyer acting for her and the bank, and with the knowledge of the boyfriend Kandiah, who purported to assist her during these transactions, it seems highly likely that the defendant would not have entered into the mortgage. If she had not, it is true that her then existing debts would not have been paid off using the proceeds of the mortgage, so that she would still owe those. That, of course, would have been her choice.

[ 37 ] In my opinion, the materials presented leave many questions unanswered and involve the credibility of many witnesses in a context of some quite unusual factual allegations. I am of the view this is not an appropriate case for summary judgment, that a trial is required, and the motion is accordingly dismissed.

[ 38 ] As to costs, if the parties are unable to agree upon that issue between themselves, written submissions on costs may be made. Those of the defendant are to be delivered within 21 days of the release of this ruling, and those of the other parties within 21 days of receipt of the defendant’s submissions. All such submissions are to be forwarded to Judges’ Chambers, Court House, 45 Main Street East, Hamilton, Ontario, L8N 2B7 to my attention and that of Donald Montgomery. If submissions are not received within the above time lines, the parties will be deemed to have settled the matter of costs as between themselves.

Glithero J.

Released: September 28, 2012

COURT FILE NO.: 10-21821
DATE: 2012-09-28

SUPERIOR COURT OF JUSTICE B E T W E E N: ROYAL BANK OF CANADA Plaintiff - and – PRIYADARSHINI SAMPATHKUMAR Defendant - and – KUMAR SRISKANDA AND KANAGARANJAN KANDIAH Third Parties RULING ON MOTION Glithero J. CSG // dm

Released: September 28, 2012