ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-13-115686

DATE: 20140402

BETWEEN:

CMZ Equity Corporation

Plaintiff

– and –

Bataar Group Inc., 2308732 Ontario Inc., Glanworth Developments Inc., Aidan Furney and Maryam Furney

Defendant

Leo Klug, for the Plaintiff

Michael McQuade, for the Defendants

HEARD: March 14, 2014

REASONS FOR DECISION

EDWARDS j.:

[1] The plaintiff is in the business of lending mortgage money, using private funds from a limited pool. The plaintiff commenced four separate actions against the defendants. The defendants Aidan Furney and Maryam Furney are husband and wife, who personally guaranteed the mortgages by the corporate defendants. There is no dispute between the parties that the principal amount of the various mortgages are due and owing, and that interest is also due and owing on the mortgages at the prescribed rates. With these admissions, I advised counsel that I would be granting partial summary judgment with respect to the agreed upon principal and interest due and owing under the various mortgages, and reserving on the disputed issues primarily relating to various renewal fees, now claimed by the plaintiffs.

[2] As such, in action number 115686, partial summary judgment has been awarded to the plaintiff as against the defendants in the amount of $250,000, plus interest at the rate of 15% from June 23, 2013. In action number 116168, partial summary judgment has been awarded for the principal amount of $212,000, plus interest at the rate of 15% from September 1, 2013. In action number 115868, partial summary judgment has been awarded to the plaintiff in the amount of $30,000, together with the unpaid fee of $4,500, which is admitted by the defendant. In dispute in action number 115868 is the date upon which interest becomes due and payable. The dispute relates to whether the due and payable date is March 5 or March 22, 2013. With the evidence before me, this court is unable to conclusively determine the appropriate date, but given the relatively small amount that flows from the determination of this issue, I am determining that the appropriate date upon which interest shall become due and payable is March 5, 2013.

[3] In action number 116167, partial summary judgment has been awarded to the plaintiff in the amount of $113,300, an amount which is admitted by the defendant. The plaintiff argues that the appropriate principal that is due and owing is $116,600. It is agreed that interest will run on the principal amount that this court awards from September 1, 2013 at the rate of 15%. In action number 116167 therefore the amount that is in dispute as far as the principal is concerned is $3,300. The defendants maintain that this amount has been paid and not properly credited. This is denied by the plaintiff. The defendants are ordered to produce evidence of the payment of the aforesaid $3,300 amount within 10 days from the date of receipt of these reasons, failing which the principal amount to be repaid in action number 116167 shall be $116,600. If the parties cannot agree upon whether the evidence satisfies the plaintiff of such repayment, written submissions can be made to the court to determine this discreet issue, limited to two pages in length.

The Renewal Fee in Action Number 115686

[4] In this action, the parties entered into a commitment agreement, pursuant to which the plaintiff would lend the defendants $250,000 as a fourth mortgage with interest at the rate of 15%, payable monthly for a term of three months. The commitment agreement also called for a mortgage fee of $20,000, payable upon closing from the funds advanced. The real issue now before this court flows from the fact that the mortgage was “not renewable” and that if the mortgage was not paid in full by the due date, the defendants agreed to a new mortgage contract for a period of no more than one month at a fee of 3%.

[5] As events transpired, the mortgage was not repaid by the defendants on the due date. On April 23, 2013 Maryam Furney, by email, sought an extension of the mortgage for a further sixty days. This email was responded to by Miss Fafalios who is the President of the plaintiff corporation. Miss Fafalios agreed to extend the mortgage for two months only, and concluded her email to Mrs. Furney by indicating that the mortgage therefore became due and payable on June 23, 2013.

[6] The renewal request that was granted by Miss Fafalios required an extension fee of $7,500, which was ultimately paid by the defendants, albeit after the defendants cheque was returned NSF.

[7] Since the initial extension and payment of the extension fee, there was no written agreement between the parties, pursuant to which the mortgage was extended, nor any agreement pursuant to which the defendants would pay any further monthly extension fees of $7,500. It is this $7,500 monthly extension fee that is the essence of the disagreement between the parties.

[8] Having reviewed the documentation put before me on this motion for summary judgment, I am not satisfied that there is any evidence, let alone a written agreement between the parties pursuant to which the defendants agreed to pay a monthly renewal fee of $7,500. The commitment agreement between the parties is very clear, that the mortgage is not renewable and that if the mortgage was not paid in full by the due date that the mortgagor agreed to a new mortgage contract for a period of no more than one month at a fee of 3%. If the plaintiff was going to insist upon a monthly mortgage renewal fee of 3% that should have been specifically provided for in the agreement, and it was not. As such, the plaintiff is only entitled to the one mortgage renewal fee which, on the evidence, it would appear has been paid and thereafter the claims for the monthly mortgage fees of $7,500 are denied.

[9] This then leaves the question of the legal fees charged by the solicitor for the plaintiff. In that regard, the commitment agreement between the parties provides “all legal fees incurred in order to recover the face value of the mortgage and/or any fees due or interest payable will be payable by the borrower”. The legal fees that may be charged by counsel retained for the plaintiff in this regard must still been seen as reasonable. A reasonableness standard must be implied in this regard, otherwise a defaulting defendant could be exposed to legal fees that potentially could bear no resemblance to the actual time and effort put into the collection efforts of the plaintiff’s solicitor.

[10] The lawyer for the plaintiff submitted an account in the amount of $7,315.07. This account was broken down as follows:

Our Fee (power of sale proceedings)
Our Fee (notice of sale)
Total Fees
HST
Disbursements Total

$2,500.00
$3,200.00
$5,700.00
$741.00
$681.99
$7,211.65

[11] There is no breakdown with respect to how the fee charged by counsel was arrived at other than the mere statement of “Our Fee”. In order to determine what is reasonable in terms of the legal fees contemplated by the mortgage, something more than a statement of “Our Fee” is required. Recognizing, however, that there would undoubtedly have been considerable amount of time and effort put into collection efforts made by counsel for the plaintiff, I am exercising my discretion in awarding legal fees, disbursements, and HST in the amount of $5,000. This does not include the claim for costs made by Mr. Klug in this motion.

Daily Fee of $100 in Action Number 115868

[12] In this action, the plaintiff advanced $30,000 at a rate of 15% from March 22, 2013. This is admitted by the defendants and, as previously noted, partial summary judgment in this regard has been granted by the court. What is in dispute is a daily fee of $100, which if this was found to be due and owing, as of the date of argument of the motion, would result in a $30,000 loan now requiring a payment of $78,000. The prescribed rate of interest for the loan is 15%. It will readily be appreciated that if the court was to allow the $100 per day fee, that the real rate of interest on this loan would substantially exceed 100% and by any stretch of the imagination would exceed the criminal rate of interest provided for in section 347 of the Criminal Code of Canada (i.e., 60% per annum).

[13] If for some reason I am wrong in my conclusion with respect of the effective rate of interest under this loan exceeding the criminal rate prescribed by the Criminal Code of Canada then this court may exercise its jurisdiction under the Unconscionable Transactions Relief Act, R.S.O. 1990 c.U. 2, as amended. In that regard, the court may, where it finds having regard to the risk and all of the circumstances, that the cost of the loan is excessive and that the transaction is harsh and unconscionable, set aside or revise the contract. I have no difficulty in coming to the conclusion that, with an effective rate of interest, that is well in excess of 100% if the $100 per day was to be allowed, that this transaction falls well within the definition of a loan that is excessive, harsh, and unconscionable and that this court should exercise its discretion to revise the contract accordingly. As such, the defendants are to repay the $30,000 at the prescribed rate of interest of 15% from March 5, 2013, together with the agreed upon unpaid fee of $4,500.

[14] Counsel have agreed that this court’s determination of the monthly renewal fee of $7,500 will be determinative of the same issue in the other actions. If counsel require further assistance of the court in this regard, I may be spoken to through my assistant. As to the question of the legal costs now claimed with respect to the result in the summary judgment motion, I will receive written submissions from counsel, limited to three pages in length, to be received no later than April 15, 2013. Counsel are, however, encouraged to resolve the question of costs.

Justice M.L. Edwards

Released: April 2, 2014