NEWMARKET COURT FILE NO.: CV-13-112819-00

DATE: 20130906

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1769656 Ontario Inc., Plaintiff (Responding Party)

AND:

Simone Watson and Michelle Brown, Defendants (Moving Parties)

BEFORE: THE HON. MR. JUSTICE P.H. HOWDEN

COUNSEL:

N. Silver, Counsel for the Plaintiff (Responding Party)

J. Jones, Counsel for the Defendants (Moving Parties)

HEARD: August 29, 2013

ENDORSEMENT

[1] This is a motion brought by the defendants to set aside a summary judgment dated July 2, 2013. They bring it under Rule 37.14 (1) (b) on the ground that they or their counsel failed to appear on the motion for judgment brought by the responding party through accident or mistake The factors to be weighed by the court in the exercise of its discretion in applying Rule 37.14(1)(b) were set out in the helpful judgment of Strathy J. of this court in Ontario (Att. Gen.) v. 15 Johnswood Crescent et al, 2009 50571 (SCJ). They are:

(i) proof of accident or mistake;

(ii) motion must be brought forthwith after the order comes to the party’s attention;

(iii) length of delay and reason for it;

(iv) presence or absence of prejudice; and

(v) underlying merits of the moving parties’ case.

[2] In this case, counsel was retained within a week of the judgment coming to the defendants’ attention on July 4, 2013, and two large motion records were put together and the motions were brought by August 12, one for an interim injunction in respect of enforcement of the judgment for possession and the second under the rule 37.14 as well as rule 59.06. I am satisfied as to the motion being brought forthwith in the circumstances and that the parties and their present counsel acted without unnecessary delay including the gathering of the evidence to bring this motion.

[3] I am also satisfied that that the failure to appear on the original motion was due to the mistaken belief that the law firm the defendants thought they had retained to defend this action was to attend on their behalf. It is obvious that between the defendants and the law firm (not Mr. J. Jones’ firm) there was a mistaken apprehension as to what they were to do which has led to serious consequences for them because the judgement is for possession of the house they reside in. Strangely, the motion record of the mortgagee corporation fails to attach the judgment as an exhibit to its material, though the judicial endorsement is before me showing that no one appeared for the defendants.

[4] No prejudice was raised by counsel for the mortgagee except to ask for continuation of the mortgage payments which have ceased with the February 2013 payment because the mortgagee’s counsel returned their cheques for that month and for March 2013. Copies of the defendants’ cheques are enclosed showing that they were negotiated by the mortgagee at least to November 15, 2012, the month when the mortgagee’s notice of sale was served. The defendant Simone Watson’s affidavit states that they continued to pay on the mortgage when they were told it wanted payment in full. This issue can be resolved through an order requiring the payments to continue, if the motion is found to be otherwise substantiated.

[5] As to the underlying merits of the defendants’ case, there is a serious issue. Counsel for the mortgagee states that there is simply no defence made out to the mortgage claims. The mortgagee provided a mortgage for one year and renewed it for two years at a slightly lower interest rate of 7. 75%. Following that period, the mortgagee decided that it wanted payment in full, which was within its rights to do, there being no further renewal terms granted or agreed to.

[6] According to the defendants, their dealings were all with one Tom Thiru who acted for them in obtaining a house and a mortgage for them. He represented himself as being with an independent financial agency called VKT Financial. To get the deal, they had to join the club by paying $3,000. Thereafter he arranged everything, house, purchase price, mortgage terms, and closing though vacant possession on closing was not provided until later due to tenants’ remaining and the house was provided in a poor condition (roof leaking, mould in the bathroom and basement, and no functioning kitchen) requiring them to pay a substantial sum for renovations.

[7] The following are the misrepresentations alleged by the defendants:

(a) Mr. Thiru never disclosed to them that he, as an agent with VKT Financial, was also a director and the directing mind of the mortgagee corporation;

(b) he never disclosed the relationship between the previous owner of the subject house property, VKT and the mortgagee: the prior owner’s address on letters was the same as the address used by the agent/director, VKT and the mortgagee corporation(see ex. G, H, and J;

(c) vacant possession was not provided when it was represented;

(d) the condition of the house after the tenants vacated was less than they had been led to expect by Tom.

[8] If this evidence is correct, and it is not contradicted, Mr. Thiru acted as financial advisor, mortgage broker, and real estate agent without ever disclosing the true facts to the defendants who discovered most of them through the work of their present counsel since they received notice of the judgment. There is a heavy onus on persons holding themselves out as independent agents and advisors to disclose when they are acting on both sides of a purchase to their principals.

[9] The authoritative text, Canadian Agency Law, by G. Fridman, 2nd Ed., Lexis Nexis Canada Inc., 2012 states, at paras. 4.30-4.32:

4.30 Generally speaking, this obligation of loyalty means that the agent must not let his own personal interests conflict with the obligation of loyalty that he owes to the principal. An agent who allows his interests to prevail over those of his principal is guilty of a breach of the duty of loyalty. At all times an agent is obliged to act in the interests of the principal. ...

4.31 Therefore, an agent is obliged to make a full disclosure of all material circumstances relating to the performance of the undertaking. The duty to disclose requires disclosure of everything which, to the agent’s knowledge, might affect the principal’s judgment. ...

4.32 An important illustration of the agent’s obligation to make full disclosure is provided by the situation that arises when the agent purports to purchase for himself the property he is engaged to sell on the principal’s behalf. In such situations the agent is obliged to make a full and fair disclosure of all material circumstances. Another illustration is to be found in cases dealing with the situation when the agent acts for both parties to a transaction. Normally, this is not allowed, as such conduct is inconsistent with what an agent is employed to do, namely, act for and on behalf of the principal who engaged him. ...

[10] It can be argued that due to the non-disclosure of the true situation, the defendants have been victimized unknowingly by a person with control of all the facts and financial expertise who profited from the house purchase and the mortgage at their expense. As well, there is no renewal in writing, or at least none is in evidence before me. In my view, after considerable deliberation, I find that the validity of the mortgage is in issue here, as well as the purchase terms of the house in a condition well below what was represented to the defendants.

[11] As was stated years ago by Justice Middleton in Russell v. Osler (1921), 20 OWN 178 (SC),

The question is one for the exercise of the sound discretion of the Court in each particular case; and where there is any accidental slip or omission or where there has been any miscarriage of justice by reason of misadventure upon the part of the litigant, the court will always be found ready to grant relief upon proper terms.

[12] The judgment of July 2, 2013 is set aside and the defendants have leave to amend the statement of defence filed by their predecessor within 20 days hereof and to defend this action in a timely process. In the circumstances, they must make the payments that they agree are in arrears and continue to keep the mortgage in good standing. The order shall not issue until the appeal filed by the defendants is withdrawn, to be done forthwith.

HOWDEN J.

Date: September 6, 2013