COURT FILE NO.: CV-13-3955-00SR
DATE: 2014-08-25
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FATIMA FARZANA
Ralph Swaine, for the Plaintiff
Plaintiff
- and -
AHMAD ABDUL-HAMID
Self-represented
Defendant
HEARD: May 29, 2014,
at Brampton, Ontario
Price J.
Reasons For Order
NATURE OF MOTION
[1] Ahmad Abdul-Hamid moves to set aside a default judgment which Fatima Farzana obtained against him for re-payment of a loan from her, for which Mr. Abdul-Hamid gave her a second mortgage as security. Mr. Abdul-Hamid submits that the monthly payments of $205 that he made to Ms. Farzana over a six year period were re-payments of principal, and not payments of interest, which his Moslem faith forbids, and which his mortgage expressly disclaims.
[2] The Sharia-compliant mortgage that Mr. Abdul-Hamid entered into with Ms. Farzana characterizes his monthly payments as "profit". Ms. Farzana argues that his payments left the principal amount of her loan intact, and payable on demand after the term of the mortgage elapsed.
[3] For the reasons that follow, I find that Mr. Abdul-Hamid has satisfactorily explained his initial failure to deliver a defence to Ms. Farzana's action, that he moved promptly to set aside the default judgment she obtained against him and that he has a potentially meritorious defence. The evidence raises substantial issues as to the amounts owing on the mortgage, and as to how the payments that Mr. Abdul-Hamid made should be characterized, especially after the initial term of the mortgage elapsed, and Mr. Abdul-Hamid should have an opportunity to have the court determine these issues based on a full evidentiary record.
BACKGROUND FACTS
[4] On July 28, 2005, UMF Financial, a financial services company ("UMF"), entered into an agreement known as a "Mudarabah" (meaning "participatory financing") Agreement with Ms. Farzana, a Moslem woman who had money to invest. Under the Mudarabah Agreement ("the Lender's Financing Agreement"), Ms. Farzana agreed that she would lend money to home-buyers, secured by a Sharia-compliant second mortgage, which UMF would manage.
[5] A Sharia-compliant mortgage, or "Murabahah" (meaning "capital + profit based"), is one that provides for payments of "profit", rather than interest, as Sharia law forbids adherents to Islam from charging or paying interest on loans. Under the terms of the Lender's Financing Agreement, each home-buyer was to pay a "profit" of 10% on the amount loaned. The profit was to be shared by Ms. Farzana, as lender, and UMF, as manager.
[6] Mr. Abdul-Hamid, upon receiving Ms. Farzana's assurance that she would lend him the money he needed, entered into an Agreement of Purchase and Sale to buy a residential property at 42 Barrydale Crescent in London, Ontario ("the property") from its developer, for a price of $246,000. The scheduled closing date of the transaction was July 29, 2005.
[7] Mr. Abdul-Hamid's wife, Sofia Saeed, ostensibly acting on her husband's behalf, entered into a "Murabahah" Home Financing Agreement with UMF ("the Borrower's Financing Agreement"). It provided that Mr. Abdul-Hamid, as purchaser, would assign his Agreement of Purchase and Sale of the property to UMF, which would "re-sell" it back to him on a deferred payment basis. The total purchase price would be $308,308.24. This amount consisted of the initial purchase price of $246,000.00, charged by the developer, and a profit margin of $62,308. The Agreement did not specify how this profit, representing 25% of the initial purchase price, was to be distributed between UMF and Ms. Farzana.
[8] Mr. Abdul-Hamid paid the developer a deposit of $1,000 and agreed to pay a further deposit of $35,900 to UMF. The two deposits combined (in the amount of $36,900) equaled 15% of the initial purchase price of the property ($246,000). The Borrower's Financing Agreement that Mr. Abdul-Hamid's wife had signed with UMF provided that UMF would deduct the deposits of $36,900 from the total purchase price ($308,308.24), leaving a balance of $271,408.24 to be financed. This represented the initial purchase price of $246,000 + the profit of $62,308.24, less the deposit amount of $36,900.
[9] Mr. Abdul-Hamid retained a lawyer, Najeeb Ali Nawab, who prepared his mortgage to Ms. Farzana. The mortgage was registered on the title to the property on August 18, 2005. The mortgage was in the principal amount of $24,600, with no interest, but with amounts of $205.00 per month payable on the 15th day of each month.
[10] The rest of the facts surrounding Ms. Farzana's loan to Mr. Abdul-Hamid, and the second mortgage that Mr. Abdul-Hamid gave to Ms. Farzana as security, are foggy. The Borrower's Financing Agreement stipulates, at paragraph 7, that the mortgage shall be repayable in 60 equal monthly installments of $1,360. It divides the installments into amounts of $1,155.13 and $205, and calls for the payments to be made until July 29, 2010; that is, over a five year term. This division presumably reflects the fact that a portion of the profit was for UMF, and a portion was for Ms. Farzana. However, this is not explicitly stated in the Agreement. The Agreement directs that Mr. Abdul-Hamid is to make all of his payments to UMF, not to Ms. Farzana.
[11] Mr. Abdul-Hamid attaches, as an exhibit to his second affidavit sworn May 26, 2014, a letter entitled "Second Mortgage Renewal Agreement," which appears to have been signed by the President of UMF, Ms. Farzana, and Mr. Abdul-Hamid. It states that the payments of $205 per month, payable under the 2nd mortgage, shall continue beyond the initial balance due-date specified in the mortgage.
[12] The "Renewal Letter", dated November 6, 2007, states that from September 18, 2005, to August 18, 2007, there were second mortgage payments of $4,920 made to Ms. Farzana. Mr. Abdul-Hamid attaches, as an exhibit to an affidavit in support of his motion, a "table of customer transactions" that UMF's Receiver, Grant Thornton, gave to Mr. Abdul-Hamid. This table discloses that Mr. Abdul-Hamid made payments to UMF until July 20, 2012.
[13] Ms. Farzana, in an affidavit she filed in response to Mr. Abdul-Hamid's motion, states that she gave credit to Mr. Abdul-Hamid for all the payments he made, and "gave him the benefit of the doubt for any payments after 2011." In her Statement of Claim, she charged him for 11 months of "profit/interest" to June 30, 2013, which she says "is less than the amount he could have been charged under the mortgage."
[14] UMF went into receivership and its Receiver stopped accepting monthly payments from Mr. Abdul-Hamid. Ms. Farzana then caused a Statement of Claim to be issued on September 11, 2013, to begin the present action against Mr. Abdul-Hamid.
[15] A process server delivered the Claim to the property on October 2, 2013. I find that the person served was not Mr. Abdul-Hamid. Mr. Abdul-Hamid states that he was separated from his wife at the time, and was living at another address. The process server, in his notes, describes a vehicle in the driveway that Mr. Abdul-Hamid says his wife was driving at the time.
[16] Mr. Abdul-Hamid says that he first became aware of a proceeding against him in relation to the matter on August 16, 2013. At that time, an execution search arising from an unrelated business transaction disclosed a Notice of Sale Under Mortgage which had been registered on behalf of Ms. Farzana on July 23, 2013. Mr. Abdul-Hamid then attempted to contact Mr. Swaine, the lawyer listed on the Notice of Sale, to ask about the nature of the claim.
[17] Mr. Abdul-Hamid states that on September 4, 2014, he spoke with Mr. Swaine, who advised him to get a lawyer and hung up. Mr. Abdul-Hamid later checked at the courthouse in London, where he assumed that any proceeding involving a property in London would be commenced. He was told by the court clerk that there were no proceedings against him at that courthouse.
[18] On October 21, 2013, after his wife advised him that an unknown person had attended at the property to ask for him, Mr. Abdul-Hamid sent an e-mail to Mr. Swaine, explaining that he was not residing at the property and asking Mr. Swaine to contact him to make arrangements to deliver any documents to him. He received no response.
[19] On November 4, 2014, Mr. Abdul-Hamid contacted another lawyer at Mr. Swaine's office, who told him that he was unable to give him any information as Mr. Swaine had carriage of the file. On November 14, 2014, Mr. Abdul-Hamid received an e-mail from Mr. Swaine, who informed him that he had a signed default judgment against him for $28,769.38 plus costs, and would be taking steps to enforce the judgment if he did not receive payment of that amount by November 28, 2014.
[20] Mr. Abdul-Hamid asked Mr. Swaine to forward the relevant documents to him, as he had not received the Statement of Claim, and he urged Mr. Swaine not to take enforcement actions until he could inform himself as to the nature of the proceeding and determine how default judgment had been signed against him. Mr. Swaine did not send any documents to him.
[21] Later in November, Mr. Abdul-Hamid consulted a lawyer, Charles Mackenzie, who called Mr. Swaine. Mr. Swaine advised Mr. Mackenzie that the court file could be inspected in Brampton, but that he would not reply to any further inquiries unless Mr. Mackenzie went on record.
[22] On February 27, 2014, the Sheriff delivered a notice to Mr. Abdul-Hamid, advising him that he and his family were to vacate their home by March 7, 2014, pursuant to a default judgment that Ms. Farzana had obtained against him on October 23, 2013, and a Writ of Possession that the court had granted to her on February 21, 2014. Ms. Farzana's mortgage was a second mortgage and, as far as Mr. Abdul-Hamid knew, he had made all the payments required under it and the first mortgage, and neither had ever been in default.
[23] Eventually, Mr. Abdul-Hamid obtained the information he needed from the court house in Brampton, and retained a lawyer, Ethan Rogers, who moved on his behalf on March 5, 2014, to set aside the default judgment. On the following day, Mr. Rogers obtained an order from Daley J., staying execution of the Writ of Possession.
[24] On May 20, 2014, Mr. Rogers obtained an order from Seppi J. removing himself as Mr. Abdul-Hamid's solicitor of record in the action. The order was apparently based on an affidavit from Mr. Rogers' law clerk, which stated that Mr. Abdul-Hamid had failed to pay invoices from Mr. Rogers' law firm, and that Mr. Rogers and Benjamin Hahn, both of whom had acted on behalf of Mr. Abdul-Hamid, had begun having concerns about the veracity of information he was providing to them, particulars of which were not disclosed due to solicitor-client privilege.
[25] Mr. Abdul-Hamid proceeded, self-represented, with the motion that Mr. Rogers had begun on his behalf, to set aside the default judgment against him. The motion was argued on May 29, 2014, after which the court reserved judgment until today.
ISSUES
[26] The court must decide whether to set aside the default judgment against Mr. Abdul-Hamid. A decision as to whether to set aside a default judgment involves an exercise of the court's discretion. The factors that the court considers in exercising its discretion vary, depending upon the circumstances, but include the following:
a) How long the plaintiff delayed, after the defendant defaulted, before noting pleadings closed.
b) How long the defendant delayed, after learning of the default judgment, before moving to set it aside;
c) The reasons for the defendant's delay;
d) The prejudice, if any, that the defendant's delay caused the plaintiff;
e) Whether or not the material filed by the defendant discloses a defence to the action.[^1]
[27] I will address each of these factors in the reasons that follow.
THE PARTIES' POSITIONS
[28] Mr. Abdul-Hamid submits that he did not defend the action because the Statement of Claim was not properly served on him and did not come to his attention until November 14, 2013. He submits that he moved with reasonable dispatch to inform himself of the proceeding and to retain counsel to move on his behalf to set the default judgment aside, and that the delay was caused by the plaintiff's lawyer's initial refusal to provide necessary information to him. He submits that he has a defence to the action, based on the fact that the mortgage provided that no interest would be charged, that the payments he made satisfied the profit portion of the loan, and that he should have been given credit for his remaining payments, in reduction of the principal amount that he owed.
[29] Ms. Farzana submits that the Claim was properly served on Mr. Abdul-Hamid on October 2, 2013, and that he should have retained counsel at that time to defend the action. Alternatively, she argues, if he did not learn of the action until November 14, 2013, he should have retained counsel at that time, and his counsel should have taken the necessary steps more quickly to obtain the court documents and move to set aside the judgment. Ms. Farzana submits that Mr. Abdul-Hamid's material does not disclose a meritorious defence, since the Borrower's Financing Agreement that Mr. Abdul-Hamid's wife signed on his behalf with UMF sets out the payment that would be due on maturity of the mortgage, and Mr. Abdul-Hamid did not make that payment.
ANALYSIS AND EVIDENCE
a) The plaintiff's delay between his default and the noting of pleadings closed
[30] I am satisfied, on a balance of probabilities, that:
i) Mr. Abdul-Hamid was not living at the property on October 2, 2013;
ii) The process server delivered the Statement of Claim to another person at the property on that date;
iii) The Claim did not come to Mr. Abdul-Hamid's attention until November 2013, when Mr. Swaine informed him that a default judgment had been signed against him.
[31] Ms. Farzana moved quickly to sign judgment against Mr. Abdul-Hamid based on the process server's affidavit of service. I find that the Claim was not effectively served on Mr. Abdul-Hamid on the date indicated in the process server's affidavit of service and that default judgment was therefore signed prematurely.
b) The defendant's delay after learning of the default judgment before moving to set it aside, and the reason for his delay
[32] There was a delay of three and a half months from November 14, 2013, when Mr. Abdul-Hamid learned that default judgment had been signed against him, to March 5, 2014, when he moved to set the judgment aside. Mr. Abdul-Hamid has explained this delay, to the court's satisfaction, by reference to the following:
i) The action, which concerned a property in London, was commenced in Brampton.
ii) Mr. Swaine, when contacted by Mr. Abdul-Hamid, failed to provide adequate information to him about the proceeding.
iii) It was reasonable for a person in Mr. Abdul-Hamid's situation to expect that an action that concerned a property in Brampton would be commenced in that jurisdiction.
iv) Mr. Abdul-Hamid reasonably required time to retain a lawyer who could ascertain from Mr. Swaine where the action had been commenced, secure the court documents from the court house in Brampton, secure other relevant documents from UMF's Receiver and from the lawyer who had prepared his mortgage for him, inform himself as to the nature of the Claim, and as to how default judgment had been obtained against him, and retain a new lawyer qualified to move to set the default judgment aside.
c) The prejudice, if any, that the delay would cause to the plaintiff
[33] Ms. Farzana argues that the delay has prejudiced her in three ways, namely:
i) Her action concerns a second mortgage, and her ability to enforce her judgment against the property is subject to potential default on the first mortgage, and enforcement actions that may be taken by the first mortgagee.
ii) The mortgage does not provide for interest, so the value of Ms. Farzana's claim is eroded by inflation and not offset by interest payable to her.
iii) Mr. Abdul-Hamid has not paid the property taxes on the property since 2010, which exposes Ms. Farzana's interest in the property to the risk of enforcement proceedings by the Municipality.
[34] There is no evidence that the first mortgagee has begun enforcement proceedings. The Tax Department of the City of London has written a letter demanding payment of arrears, but the first mortgagee or Ms. Farzana could bring the tax account into good standing and there is no evidence before me that this has not been done or that the Municipality has commenced enforcement proceedings.
[35] Mr. Abdul-Hamid's motion to set aside the judgment seeks, in effect, an accounting of the money that he had paid toward the mortgage loan, and the amount that he still owed. As discussed below, the Mortgages Act entitles him to this information. The effect of inflation can be taken into account in that accounting. I am not satisfied that the potential effect of inflation will result in such prejudice to Ms. Farzana as to justify depriving Mr. Abdul-Hamid of an opportunity to defend himself in her action against him.
d) Does the material disclose a meritorious defence?
[36] On a motion to set aside default judgment, it is improper for the court to engage in a detailed analysis of the merits of the proposed defense.[^2] In Xpress View Inc. v. Daco Manufacturing Ltd., Nordheimer J. stated:
The plaintiff asserts that the proposed defences do not raise any triable issues. I do not agree with that assertion. First, the defendant does not have to show it will succeed in its defence. Rather it must show there are issues that require a trial for their determination. A motion under Rule 19 cannot be used as some form of surrogate summary judgment motion. To do otherwise, would effectively mean that a motion to set aside a default judgment would itself end the litigation because the defendant would have to show that it would succeed in its defence in order to be allowed to file its defence.[^3] [Emphasis added]
Ambiguity of the Financing Agreement
[37] Neither Mr. Abdul-Hamid nor Ms. Farzana had their expectations met in their mortgage transaction. Ms. Farzana relies on her Lender's Financing Agreement with UMF, to which Mr. Abdul-Hamid was not a party. Mr. Abdul-Hamid relies on his mortgage to Ms. Farzana, whose terms do not reflect the terms of the Borrower's Financing Agreement, which his wife signed with UMF. Each of Mr. Abdul-Hamid and Ms. Farzana had an agreement with UMF, to which the other was not a party. There may never have been a true meeting of their minds.
[38] Mr. Abdul-Hamid asserts that his monthly payments of $205 were re-payments of principal. He relies, in this regard, on his mortgage, which states that no interest is payable, but this is not determinative as to whether his payments were re-payments of principal. The Borrower's Financing Agreement characterizes his monthly payments as "profit", calculated as 10% of the purchase price of the property.
[39] Ms. Farzana argues that, however one characterizes Mr. Abdul-Hamid's monthly payments, the Borrower's Financing Agreement states, in paragraph 7, that on the Maturity Date of the mortgage, the Purchaser will owe UMF the sum of $165,200.25 + $24,600.00. Ms. Farzana argues that the $24,600 referred to was the principal amount of her loan, secured by Mr. Abdul-Hamid's second mortgage to her, and that this amount was never paid.
[40] The amounts which the Borrower's Financing Agreement required to be paid on the Maturity Date are not readily reconciled with the other terms of that Agreement. They also do not appear to reflect the terms of Mr. Abdul-Hamid's mortgage to Ms. Farzana. The Borrower's Financing Agreement states that the mortgage shall be repayable in 60 equal monthly payments of $1360.13, but the total of these payments, $81,607.80, does not correspond to the amount of the loans that UMF and Ms. Farzana made to Mr. Abdul-Hamid. If the monthly payments do not correspond to the principal amount of the loans, it is not clear to what extent they were on account of profit and to what extent they were on account of principal. It is also not clear what proportion of Mr. Abdul-Hamid's monthly payments were attributable to UMF's loan and what proportion were attributable to Ms. Farzana's loan.
[41] The parties' material also leaves the following questions unanswered:
a) Does the fact that Mr. Abdul never signed the Borrower's Financing Agreement have any significance? He does not explicitly deny that his wife, who ostensibly signed the Agreement on his behalf, had his authority to act as his agent, but he raised this issue in his oral argument. Ms. Farzana relies on the fact that Mr. Abdul-Hamid states, in his affidavit, "Attached hereto and marked as Exhibit "L" is a true copy of the [Borrower's] Home Financing Agreement between myself and UMF." (Emphasis added). Mr. Abdul-Hamid attributes this to careless drafting by his then lawyer. Whether or not this is the case, I am not satisfied that the statement in his affidavit is determinative of the issue. While it could be argued that Mr. Abdul-Hamid, by making payments to UMF, adopted and affirmed the Borrower's Financing Agreement, it is not clear whether he made the payments pursuant to that Agreement, or to his mortgage, or to both.
b) Was UMF entitled to profit for managing the mortgage, or for granting Mr. Abdul-Hamid a mortgage, or both?
c) The Borrower's Financing Agreement states that the difference of $62,308 between the initial purchase price that Mr. Abdul-Hamid paid for the property and the amount that he paid when he re-purchased it from UMF is "profit margin". What portion of this profit was owed to UMF, and what portion was owed to Ms. Farzana?
d) The Lender's Financing Agreement states that profits will be distributed on "an agreed upon basis between the Lender and UM Financial." It further states that the "profit ratio of 90% and 10% will be shared by Lender and UM Financial, respectively (Lender will receive an annual return of +/- 10% on a monthly basis)" [sic]. How is the profit ratio 90% and 10% to be shared? How are those percentages to be reconciled with the percentage of "profit margin" referred to in the Borrower's Financing Agreement? What does an annual return of "+/-" 10% on a monthly basis mean? Was a 10% return guaranteed?
e) The 60 monthly payments of $1,360 each, provided for in the Borrower's Financing Statement, total $81,600, which is greater than the profit due to UMF and Ms. Farzana, so what portion of the payments that Mr. Abdul-Hamid made were applied to the principal amount of each of the loans?
f) The Borrower's Financing Agreement states that on the Maturity Date of the Agreement (July 29, 2010), a lump-sum payment of $189,600 is due. Although this amount is less than the $271,408 that was stated to be owed by Mr. Abdul-Hamid immediately after he bought the property, what portion of this amount, and of Mr. Abdul-Hamid's payments, were for principal, and what portion were for profit, and what portion were attributable to the loan from UMF, and what portion to the loan from Ms. Farzana?
g) The lump-sum payment provided for in the Borrower's Financing Agreement ($189,600) is divided into amounts of $165,200 and $24,600. Assuming that the $24,600 reflects Ms. Farzana's share of "profit", which is not stated in the Agreement, why were Mr. Abdul-Hamid's payments not applied to both amounts?
h) Ms. Farzana states in her affidavit that her mortgage was to be for only 2 years, so why does the Borrower's Financing Agreement that Sophia Saeed, ostensibly on her husband's behalf, signed with UMF provide for a 5 year term?
i) The Borrower's Financing Agreement states, in paragraph 10, that UMF shall grant the purchaser a mortgage, but it does not mention Ms. Farzana, who did not sign the Agreement. Since the Agreement is silent on the issue, what was UMF's role in relation to Mr. Abdul-Hamid's mortgage to Ms. Farzana?
[42] Ms. Farzana's Affidavit does not resolve the ambiguity surrounding the mortgage transaction. Rather, it gives rise to further unanswered questions:
a) Ms. Farzana states that Mr. Abdul-Hamid's mortgage to her came due on August 15, 2007, and that it was then renewed by UMF and Mr. Abdul-Hamid "without her input". Did Ms. Farzana authorize the renewal and, if so, on what terms?
b) Ms. Farzana states, in her affidavit, that she was to loan $24,600, and was to receive a return of 10% per year on her loan, in accordance with her Lender's Financing Agreement with UMF. Once Mr. Abdul-Hamid's payments exceeded the profit amount specified in the Lender's Financing Agreement, or the Borrower's Financing Agreement, how were they applied?
c) Although there appears to have been a letter of renewal, it does not set out any details as to how payments made after the renewal were to be applied. Were a portion of the payments, at least, applied to the principal amount of Ms. Farzana's loan?
Was the Mortgage renewed and, if so, on what terms?
[43] While the Lender's Financing Agreement provided for a mortgage with a two-year term, Mr. Abdul-Hamid made payments for six years. The Lender's Financing Agreement does not address the effect of a renewal, or of a continuation of payments by Mr. Abdul-Hamid.
[44] Mr. Abdul-Hamid's mortgage to Ms. Farzana did not require Ms. Farzana to make a demand before exercising her remedies. As a matter of law, she was, during the term of the mortgage, entitled to commence an action at any time.[^4] The fact that she did not make a demand and commence an action immediately when the mortgage matured and Mr. Abdul-Hamid did not pay the balance due, did not foreclose her from exercising her rights later.
[45] Had the parties expressly agreed to continue the mortgage on different terms, this would have constituted a renewal. The evidence discloses an intention to renew, but no agreement as to the terms. In these circumstances, the mortgage may have been renewed on terms to be determined.
[46] Alternatively, in the absence of a renewal agreement, Mr. Abdul-Hamid's continuation of payments may have affected an implicit extension of the mortgage on the same terms.[^5] If the mortgage was extended, Ms. Farzana, as a matter of law, was not required to extend it for "a reasonable time"; rather, she was entitled to demand payment at any time.[^6]
[47] Mr. Abdul-Hamid is entitled to an accounting for the amounts that he paid to UMF after the "renewal" of the mortgage, and to know what amounts, if any, were applied in re-payment of the principal amount of Ms. Farzana's loan to him. Additionally, he should be given the opportunity to deliver a defense articulating what other relief he is seeking; whether it is to set aside the second mortgage altogether, based on the fact that there was no "meeting of the minds" between him and Ms. Farzana as to its essential terms, or whether it is for restitution of the amount he paid after the renewal, or for some other relief.
[48] The Mortgages Act provides, in part:
- (1) Despite any agreement to the contrary, where default has occurred in making any payment of principal or interest due under a mortgage or in the observance of any covenant in a mortgage and under the terms of the mortgage, by reason of such default, the whole principal and interest secured thereby has become due and payable,
(a) at any time before sale under the mortgage; or
(b) before the commencement of an action for the enforcement of the rights of the mortgagee or of any person claiming through or under the mortgagee,
the mortgagor may perform such covenant or pay the amount due under the mortgage, exclusive of the money not payable by reason merely of lapse of time, and pay any expenses necessarily incurred by the mortgagee, and thereupon the mortgagor is relieved from the consequences of such default. Statement of arrears, expenses, etc.
(2) The mortgagor may, by a notice in writing, require the mortgagee to furnish the mortgagor with a statement in writing,
(a) of the amount of the principal or interest with respect to which the mortgagor is in default; or
(b) of the nature of the default or the non-observance of the covenant,
and of the amount of any expenses necessarily incurred by the mortgagee.
(3) The mortgagee shall answer a notice given under subsection (2) within fifteen days after receiving it, and, if without reasonable excuse the mortgagee fails so to do or if the answer is incomplete or incorrect, any rights that the mortgagee may have to enforce the mortgage shall be suspended until the mortgagee has complied with subsection (2).[^7] [Emphasis added]
[49] Ms. Farzana attaches, as an exhibit to her affidavit, e-mail correspondence between her husband, Mohammed Zainul Abideen, and Mr. Abdul-Hamid, referring to a demand that Ms. Farzana and her husband had made to Mr. Abdul-Hamid for $24,600, being the full amount they had initially loaned to him in 2005, and which they said was still outstanding. That amount appears to be inaccurate, having regard to the payments that Mr. Abdul-Hamid had already made, and this may entitle Mr. Abdul-Hamid to relief under the Mortgages Act.
[50] Mr. Abdul-Hamid has a potentially meritorious defence based on the following:
a) The Lender's Financing Agreement between UMF and Ms. Farzana is ambiguous;
b) Ms. Farzana appears to contradict herself in her affidavit concerning the renewal of the mortgage after the initial 2-year term elapsed.
c) Mr. Abdul-Hamid paid more than the profit amount provided for in the Borrower's Financing Agreement that his wife and UMF signed. Neither that Agreement, nor the Renewal Letter, specifies how moneys paid in excess of the profit provided for were to be applied, and Ms. Farzana has not accounted for how Mr. Abdul-Hamid's payments were, in fact, applied.
d) Ms. Farzana states in her affidavit that her loan to Mr. Abdul-Hamid was to be for 2 years. The Borrower's Financing Agreement indicates that it was for 5 years (60 months ending July 29, 2010). The Renewal Letter suggests that there may have been a renewal. Based on the material before me, I cannot determine whether there was a renewal or not, or whether a renewal was necessary.
e) The terms of the Borrower's Financing Agreement do not correspond to those of the mortgage registered on Mr. Abdul-Hamid's property.
f) The Borrower's Financing Agreement does not provide clear terms that make out the fundamental elements of a mortgage agreement between Ms. Farzana and Mr. Abdul-Hamid. The only facts that are certain are that Ms. Farzana advanced $24,600 to Mr. Abdul-Hamid, who used the proceeds to purchase the property, and that he gave a mortgage as security for the amount advanced.
[51] Mr. Abdul-Hamid has discharged his onus of establishing that he may have a meritorious defence. There are issues that need to be set out in a Statement of Defence and, if necessary, a Reply, as to what the parties say was agreed to between Ms. Farzana and Mr. Abdul-Hamid. It is not clear, from the evidence now before the court, what the terms of the mortgage between Mr. Abdul-Hamid and Ms. Farzana were, what the principal amount was, whether the mortgage was renewed, and how much of the principal amount, if any, was re-paid.
[52] There is no evidence from Ms. Farzana as to how the payments that Mr. Abdul-Hamid made after the possible renewal, amounting to approximately $17,000, was or should be characterized. If they were payments toward principal, Mr. Abdul-Hamid should have an opportunity to pay the amount still outstanding and, in any event, he is entitled to a mortgage discharge statement, pursuant to the Mortgages Act, setting out the amount that Ms. Farzana says is still owing, and on what basis it is owed.
CONCLUSION AND ORDER
[53] Setting aside the default judgment will result in both parties incurring further costs in an action. If Ms. Farzana considers that the Statement of Defence to be delivered by Mr. Abdul-Hamid does not disclose a genuine issue for trial, that issue may have to be determined in a motion for summary judgment. At this point, however, Mr. Abdul-Hamid should have the opportunity to deliver a defence to the action. The motion must therefore be allowed and the default judgment set aside.
[54] Based on the foregoing, it is ordered that:
a) The defendant's motion to set aside default judgment is allowed.
b) Mr. Abdul-Hamid shall deliver his Statement of Defence by September 23, 2014.
c) If the parties are unable to agree on the costs of the motion, they may make written submissions, not to exceed four pages, with a Costs Outline, by September 30, 2014.
Price J.
Released: August 25, 2014
COURT FILE NO.: CV-13-3955-00SR
DATE: 2014-08-25
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FATIMA FARZANA
Plaintiff
- and -
AHMAD ABDUL-HAMID
Defendant
REASONS FOR ORDER
Price J.
Released: August 25, 2014
[^1]: Earl v. Koloszar, [1991] O.J. No. 45 (ON C.A.)
[^2]: RBC v. Hejna, 2009 CanLII 55111 (ON SC), at para. 12
[^3]: Xpress View Inc. v. Daco Manufacturing Ltd, [2002] OJ No 4078 at para. 11 (ON SC).
[^4]: Prudential Assurance Co. (Trustee of) v. 90 Eglinton Ltd., 1994 CanLII 7256 (ON SC)
[^5]: Citadel General Assurance Co. v. Iaboni, 2004 CanLII 1525 (ON CA), 71 O.R. (3d) 817 (C.A.), applying Manulife Bank of Canada v. Conlin, 1996 CanLII 182 (SCC), [1996] 3 S.C.R. 415
[^6]: Carevest Capital Inc. v. Belle Harbour Developments Inc., 2009 CanLII 15439 (ON SC), para. 58
[^7]: Mortgages Act, RSO 1990 c M 40, s. 22