ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-10-406104

DATE: 20150609

BETWEEN:

SIVAPRAGASAM BASKARAN and KARUNAWATHY BASKARAN

Plaintiffs

– and –

SANJAYKUMAR MADANLAL DOSHI and HOME TRUST COMPANY

Defendants

James Morton, for the Plaintiffs

Sean Dewart and Chris Donovan, for the Defendant Sanjaykumar Madanlal Doshi

HEARD: January 5, 6 and 7, 2015

REASONS FOR JUDGMENT

JUSTICE W. MATHESON

[1] In this action, the plaintiffs claim that the defendant lawyer discharged their mortgages without their authorization. Indeed, they claim that at the relevant time, they did not know the defendant lawyer, did not meet with him and did not sign the written authorizations to discharge that he has in his file. The defendant lawyer attests that the plaintiffs did come to his office and meet with him. He has, in his file, photocopies of the plaintiffs’ actual citizenship cards and their then current driver’s licences, as well as signed and witnessed authorizations to discharge their mortgages.

[2] The plaintiffs’ claim is in negligence. They submit that the defendant lawyer failed to take reasonable steps to ensure that he was in fact dealing with the plaintiffs before purporting to act for them and discharging their mortgages. The defendant lawyer responds that he did take reasonable care.

[3] This trial was characterized by factual disputes and alleged conduct, much of which would require some sort of fraud. However, it is not alleged that the defendant lawyer himself orchestrated a fraud.

[4] The claim against the second defendant, Home Trust Company, was settled prior to trial.

Key background

[5] The plaintiffs are a married couple and are both from Sri Lanka. They have lived in Canada for more than 25 years, and have a family here. Mr. Baskaran works as a cook in a restaurant. There was no evidence at trial that Mrs. Baskaran works outside the home.

[6] There is no dispute between the parties that the plaintiffs each held a mortgage on the property known as 32 Park Road, Toronto. The registered owner of that property was Sanchitha Panneerchelvan. Her husband, Panneerchelvan (Shelvan) Kannuthurai, plays a significant role in the events giving rise to this claim. He was called “Shelvan” by witnesses and counsel at trial and I will therefore do the same here.

[7] Mr. Baskaran testified he had a long-standing friendship with Shelvan, whom he has known for 25 years. Shelvan is also Sri Lankan by heritage although he came to Canada from England. As well, there is a family connection between the plaintiffs and Shelvan. Based upon the trial evidence, I find that Mr. Baskaran was very willing to do what Shelvan asked of him, and did so most if not all of the time.

[8] Shelvan was not called as a witness at trial. There was some evidence that the plaintiffs have lost track of where he is living at this point.

[9] Mr. Baskaran testified that starting many years ago, Shelvan asked him to loan him money for his businesses. Mr. Baskaran described Shelvan’s business in the early 1990s as providing tax refunds under the business name Pan-Tax. Later, Shelvan asked for money regarding a new business venture called the Canadian College of Business and Computers operating at 32 Park Road, Toronto. After that, the property in question was to be used for a Yoga business.

[10] Mr. Baskaran testified that he loaned Shelvan money from time to time and did receive repayments from time to time, at least in the earlier time periods. The amounts of the alleged loans are surprising given Mr. Baskaran’s very modest income. His income averaged about $40,000 annually over the 25-year period. He had a family to support. He did not have any other significant sources of income other than modest amounts received for living expenses from relatives who stayed with the plaintiffs for certain periods of time. Yet he claims to have made outstanding advances of over $500,000.

32 Park Road, Toronto

[11] The mortgages at issue were registered against 32 Park Road, Toronto. That property was purchased in August 2003 and was registered in the name of Shelvan’s wife. The purchase price was $520,000 and a first mortgage was given in favour of the TD Bank at the time of purchase in the amount of $390,000. In September 2003, a second mortgage was given to Babuhai Patel for $35,000. In February 2004, a third mortgage was given to the plaintiff Mr. Baskaran in the amount of $450,000. This $450,000 mortgage is one of the two mortgages that are the subject of this action.

[12] Thus, as of February 2004, mortgages totaling $875,000 had been registered against the property, which had been purchased less than a year before for $520,000.

[13] In early 2006, the second mortgagee enforced his mortgage and obtained a writ of possession. The mortgage in favour of Mrs. Baskaran was then given in July of 2006, in the amount of $85,628. This is the other mortgage that is the subject of this action. At that time, the TD Bank mortgage was also in default. As well, there was no fire insurance on the property and property taxes were in default.

[14] There is no issue that $50,000 was advanced on the $85,628 mortgage, nor that those funds were used to satisfy the second mortgagee. The balance of that mortgage was described as representing the arrears on the $450,000 mortgage in Mr. Baskaran’s name. There is considerable dispute about whether any funds, other than the above $50,000, were actually advanced on either of the plaintiffs’ mortgages.

[15] After these transactions, the TD Bank was still the first mortgagee, and the plaintiffs held the second and third mortgages on 32 Park Road, Toronto.

[16] On May 31, 2007, TD Bank gave a further notice of sale due to default. Later in 2007, steps were taken in furtherance of a plan to sell the 32 Park Road property to Mr. Baskaran, although the sale did not ultimately take place. Mr. Baskaran conceded in his testimony that Shelvan’s plan was to transfer the property to Mr. Baskaran but have Shelvan’s wife remain the beneficial owner of the property. Mr. Baskaran would apply for and receive a loan to finance the purchase, and then give the loan proceeds to Shelvan. At some later date, legal title to the property would be conveyed back to Shelvan’s wife. This plan was fairly described by defendant’s counsel at trial as “garden-variety mortgage fraud.”

[17] Mr. Baskaran did apply for a loan. He gave conflicting accounts about why he did not ultimately proceed with the plan. He initially testified that when he learned that Shelvan essentially wanted to keep both the property and the proceeds of the loan, he decided not to proceed because he had wanted to resell the property himself. However, in cross-examination another reason surfaced – he decided not to proceed because he became aware that the two transfers would mean two significant land transfer tax payments would have to be made. In any event, the sale did not occur.

[18] Mr. Baskaran testified that Shelvan then asked him for a $100,000 loan so that he could make improvements to the property, but the plaintiffs did not have the money. Shelvan then asked Mr. Baskaran to postpone the plaintiffs’ mortgages in order that Shelvan could borrow the $100,000 from someone else. In December 2007, a further mortgage was put on the 32 Park Road property in the amount of $100,000 in favour of a numbered company. The plaintiffs postponed their mortgages to this mortgage, which meant that they were in third and fourth place behind the TD Bank mortgage and the new $100,000 mortgage.

[19] In February 2008, Shelvan and his wife obtained a commitment from Home Trust for a $630,000 loan, with a final funding date of March 14, 2008. It was a condition of the Home Trust financing that discharges be registered in regard to the TD Bank mortgage and the plaintiffs’ mortgages. Home Trust interviewed Shelvan, and noted that he said that the plaintiffs’ mortgages were “in name only”, and were registered on title as “collateral in their business relationships.”

[20] On March 7, 2008, the plaintiffs’ mortgages were discharged, which was necessary to obtain the Home Trust loan. The circumstances of those discharges are discussed below.

[21] Shortly after the plaintiffs’ mortgages were discharged, the new mortgage was given in favour of Home Trust for $630,000. The proceeds were used, in part, to discharge the TD Bank mortgage. The recent $100,000 mortgage was postponed to Home Trust. The Home Trust mortgage therefore generated more than $200,000 for Shelvan and his wife.

[22] In June 2008, yet another mortgage was registered against 32 Park Road, in the amount of $250,000 in favour of Altaf Soorty. There were now mortgages against the property totalling $980,000, not including the plaintiffs’ discharged mortgages.

[23] In August 2008, Home Trust began power of sale proceedings. The property was sold in August 2009 for $926,000. The closing proceeds were $862,707. No proceeds were paid to the plaintiffs.

Discharge of plaintiffs’ mortgages

[24] Mr. Baskaran testified that he was following the power of sale proceedings in 2008/2009. He testified that in June 2009 he called the real estate agent, who confirmed that the property was up for sale. He also called Shelvan, who told him that it would not sell because there was a lease and no one could buy it unless the lessor agreed. Shelvan also told him that the plaintiffs would be paid when the property was sold.

[25] Mr. Baskaran testified that he later found out that the property had been sold. On August 15, 2009, he emailed counsel to Home Trust. Mr. Baskaran said that he and his wife had the second and third mortgages. He asked that Home Trust’s counsel contact him or his lawyer before releasing the sale proceeds. Counsel replied indicating that he had no record of the plaintiffs’ mortgages and would contact their lawyer. Mr. Baskaran testified that it was as a result of these inquiries that he learned that the plaintiffs’ mortgages had been discharged.

[26] Mr. Baskaran then contacted Shelvan and his wife and asked what happened. He testified that Shelvan told him the following:

“Yeah Baskaran I discharged the mortgage. Please don’t tell anyone. I am going to give the money for you. Don’t worry about it. So I am going to give the money. Don’t tell anyone.”

[27] Mr. Baskaran testified that he got mad, and did not answer a couple of later calls from Shelvan. He talked to his lawyer, who suggested that he go to the defendant Mr. Doshi and get the papers, and they would see what happened.

[28] Mr. Baskaran testified that he then went to Mr. Doshi’s office demanding a copy of the file; Mr. Doshi said he was busy and to try the following week. He testified that he went a second time with a lawyer’s letter, but again did not receive copies of the file. Mr. Baskaran’s account of what happened when he asked for the file is disputed by Mr. Doshi, who attested that copies of the file were given more than once.

[29] The lawyer’s letter requested copies of the “signed Authorizations and Directions from March 2008” and “copies of my clients’ identification, presented at the time of their attendance at your office.” The letter did not assert that the plaintiffs had never attended at Mr. Doshi’s office, presented ID or signed the authorizations.

[30] Mr. Baskaran testified that he and his wife did not instruct Mr. Doshi to discharge their mortgages in March 2008, or at all. He testified that they did not attend at Mr. Doshi’s office on March 7, 2008, and did not sign the written authorizations to discharge that form part of Mr. Doshi’s file. He offered no explanation for the presence of photocopies of the plaintiffs’ citizenship cards and driver’s licences (“ID”) in Mr. Doshi’s file. He agreed in cross-examination that he kept his ID in his wallet, that it had not been reported lost or been replaced, and that he had not loaned it to another person. He testified that he always had it. Mrs. Baskaran testified to the same effect.

[31] I accept Mrs. Baskaran’s testimony about her ID and her evidence that her husband was in charge of finances. However, I conclude that her evidence about the mortgage and its discharge should not be given any weight. In her examination in chief she denied that she even had a mortgage.

[32] With respect to the ID, there was some evidence that copies had been taken by other lawyers in the ordinary course of other retainers and copies were given to the Royal Bank, but there was no suggestion that those copies somehow came into the possession of Mr. Doshi. Nor was it suggested that Shelvan had any dealings with Mr. Doshi.

[33] The defendant’s evidence conflicts with Mr. Baskaran’s account of events. Mr. Doshi is a lawyer who was first qualified as a lawyer in India and then came to Canada. He was licensed to practice in Ontario in 2004. In 2008 he was in sole practice doing primarily real estate work and other commercial work, with the assistance of a law clerk and an articling student. His wife also assisted in his law practice doing various administrative tasks including reception responsibilities and photocopying.

[34] Mr. Doshi testified that he received a call on March 6, 2008, from Tom Thiru, an individual from whom he received referrals. Mr. Thiru was in the lending/financing business. He gave Mr. Doshi the plaintiffs’ name and their home telephone number and said that they would be coming in the next day to discharge their mortgages. He also gave Mr. Doshi the instrument numbers of the two mortgages in order that Mr. Doshi could prepare the mortgage discharge documentation in advance of the meeting. Mr. Doshi’s file contains mortgage discharge statements dated March 6, 2008, and notes confirming the above. Mr. Thiru also said he would take care of the legal costs.

[35] In his testimony, Mr. Baskaran acknowledged having heard of Mr. Thiru. He said he had not met or done any business with him, but had heard from Shelvan that he could do anything including arrange a mortgage.

[36] Mr. Doshi testified that he remembered the plaintiffs coming to see him at his office about the mortgage discharges because they brought a copy of the parcel register. The copy is in his file. The meeting was on March 7, 2008. He testified that he advised the plaintiffs of the ramifications of discharging their mortgages, however, Mr. Baskaran told him that the mortgages had been satisfied. They then each signed a document entitled, “Acknowledgment and Direction” that authorized the mortgage discharges. Those documents were each witnessed by Mrs. Doshi. After the discharges were complete, copies were faxed to a lawyer at the plaintiffs’ request.

[37] The plaintiffs do not allege that Mr. Doshi is lying about meeting with them; they submit that he is mistaken. Mr. Doshi had a busy real estate practice in 2008. He had approximately 500 new clients that year. He might see one or two or more new clients in a business day.

[38] Mr. Doshi testified about his normal practice regarding the identification of new clients. He testified that he invariably asked each new client for their original identification, which would be photocopied for his file. As part of this practice, he would compare the photographs in the ID with the person in his office. Mr. Doshi’s wife also testified, describing her practice. It was her responsibility to do the photocopying. She testified that she would greet all new clients at the front desk. Later, she would make the photocopies of the ID. In doing so, she would also compare the photographs on the ID with the appearance of the new clients.

[39] Both Mr. and Mrs. Doshi testified that their practice was employed in March 2008. Both were confident that it was the plaintiffs who attended at their offices on March 7, 2008, and provided their ID for photocopying in the usual manner.

[40] Mr. Doshi does not have a specific recollection of what would have been a relatively short meeting amongst hundreds of others in 2008. However, I give significant weight to his testimony about his normal practice with respect to new clients, bearing in mind the presence of the photocopies of the plaintiffs’ actual ID that it is agreed form part of his file.

[41] Mrs. Doshi testified that she remembered the plaintiffs but agreed in cross-examination that she was relying at least in part on her invariable practice regarding new clients as described above. In addition, she testified that she in fact witnessed each of the plaintiffs’ signatures as they appear on the written authorizations, and that evidence was unshaken on cross-examination.

[42] Both Mr. and Mrs. Doshi further testified that the plaintiffs attended at their law office on the following day, March 8, and asked for and were given a copy of all the documents in the file. Lastly, they testified that the plaintiffs and one younger person attended at their office twice in the summer of 2009, each time asking for a copy of the file (and being provided with one) and on the second occasion threatening to sue them.

[43] Mr. Doshi testified that Mr. Thiru agreed to pay Mr. Doshi’s account. For this reason, no account or reporting letter was prepared and sent to the plaintiffs. The failure to do a reporting letter was obviously not prudent, but does not form part of the plaintiffs’ negligence claim. Ultimately, Mr. Thiru did not pay and Mr. Doshi had to pay the small disbursements himself. He was prepared to do so given that Mr. Thiru provided regular referrals.

[44] In cross-examination of Mr. Doshi, and in final argument, plaintiffs’ counsel suggested that Mr. Doshi might have been doing a favour for Mr. Thiru by agreeing to discharge the mortgages without actually meeting with the plaintiffs. This suggestion, which was denied by Mr. Doshi, does not explain the presence of copies of the plaintiffs’ ID in Mr. Doshi’s files. Further, the plaintiffs did not call Mr. Thiru as a trial witness. The defendant therefore submits that I should conclude that Mr. Thiru has no evidence helpful to the plaintiffs.

[45] No other evidence was called to explain how Mr. Doshi could have come into possession of photocopies of the plaintiffs’ ID. Mr. Baskaran testified that the signature on the authorization looked like his, but was not his. No expert evidence was put forward.

[46] Nor was there any expert evidence about the standard of practice required of a solicitor. The defendant concedes the standard as set out in Yamada v. Mock (1996), https://www.canlii.org/en/on/onsc/doc/1996/1996canlii8024/1996canlii8024.html, 29 O.R. (3d) 731 (Gen. Div.), which addresses client identification as discussed below. The defendant takes the position that expert evidence was otherwise required, with one exception. All agree that if I find that in fact no one attended at Mr. Doshi’s office at all nor provided any authorization at all, expert evidence would not be required to find negligence.

[47] In 2009, the plaintiffs pursued a number of avenues of relief, including complaints to the police, the Law Society of Upper Canada and the Director of Titles. Those complaints did not give rise to either criminal or disciplinary charges. The plaintiffs applied for compensation from the Land Titles Assurance Fund, but did not pursue that claim because they brought this lawsuit. That compensation fund is intended to be a last resort.

Evidence regarding advances under the mortgages

[48] The plaintiffs claim that the full amount was advanced and unpaid under both of their mortgages. This was not substantiated on the trial evidence.

[49] With respect to the $450,000 mortgage, the plaintiffs mainly rely upon a selection of entries from bank books over a period of several years. Some of the bank book entries refer to cheques, most of which were not produced. An explanation was provided for the absence of copies of most of the cheques, which was accepted by the defendant and is therefore not an issue.

[50] Mr. Baskaran testified about a lengthy series of individual bank pass book entries, suggesting that those individual amounts were all advances to Shelvan that were secured by his mortgage. In his testimony, Mr. Baskaran was following a handwritten list of entries, which is not in the trial evidence. There was no objection to him using the list as a guide, however, it became apparent to me in observing him giving his evidence that he was relying on it entirely. He did not appear to have any first-hand knowledge based upon which the series of individual entries from the bank pass books were attributed to loans to Shelvan.

[51] The list Mr. Baskaran was using was not prepared by him and was largely unsupported by other evidence explaining the amounts, the timing or the source of funds. Further, his evidence was inconsistent with answers to undertakings given in 2013 when the plaintiffs agreed to review the bank records and specify which items were advances.

[52] The bank books show large deposits shortly before most of the items identified as advances. For example, they show a single deposit of $30,000 before one advance, and two deposits totaling over $40,000 just before another advance. These entries are inconsistent with Mr. Baskaran’s admittedly modest salary and limited sources of income.

[53] The balance of Mrs. Baskaran’s mortgage was said to be the arrears on Mr. Baskaran’s mortgage at that time, yet there was not sufficient evidence establishing those arrears. Further, it was incumbent on the plaintiffs to establish that all advances they seek compensation for were not repaid. This was also not established on the evidence.

[54] I therefore find that the plaintiffs have not established the claimed outstanding advances under either of the mortgages.

Discussion

[55] Over the course of the trial, counsel to the plaintiffs put forward these potential factual scenarios for consideration:

(1) that the plaintiffs did meet with Mr. Doshi and give instructions, which is denied, but if so found plaintiffs’ counsel concedes that the action fails;

(2) that imposters met with Mr. Doshi, leading to the question of whether Mr. Doshi complied with the required standard of care;

(3) that Mr. Doshi was doing a favour for Mr. Thiru and proceeded without seeing his clients, leading to the question of whether Mr. Doshi complied with the required standard of care; or

(4) that no one met with Mr. Doshi and he was acting without instructions.

[56] I conclude that the plaintiffs have failed to provide a credible account of what transpired. They say they did not go to Mr. Doshi’s office. Yet, on their own evidence, there is no other explanation for how copies of their ID were in Mr. Doshi’s file. Mr. Baskaran attests that Shelvan essentially admitted that he discharged the mortgages, but provided no explanation for how Shelvan could have done so without the plaintiffs’ involvement. And Mr. Baskaran had previously done a number of things simply because Shelvan asked him to. Further, Mr. Baskaran questioned the signatures on the authorizations to some degree, but they are not plainly forgeries and no expert evidence of forgery was put forward at trial. The plaintiffs further suggest Mr. Thiru could be involved but did not call him as a witness.

[57] In contrast, Mr. Doshi’s evidence was consistent with his practice and the contemporaneous documentation in his file. It was supported by the evidence of his wife, and her practice. Although Mrs. Doshi is obviously not a disinterested witness, I found her evidence straightforward and credible. And it was she who witnessed the plaintiffs’ signatures on the key documents.

[58] For all these reasons, and bearing in mind all of the trial evidence, I prefer the evidence of Mr. and Mrs. Doshi to that of the plaintiffs and accept the defendant’s account of the events.

[59] In accepting the defendant’s evidence, I allow for the possibility that imposters could have attended at his office, holding themselves out as the plaintiffs. He had not previously met the plaintiffs. He could have been fooled. However, the imposters would have had to be sufficiently similar in appearance to the photos on the ID, do a reasonable facsimile of the plaintiffs’ signatures and have the plaintiffs’ original citizenship cards and driver’s licences with them. On the plaintiffs’ own evidence, this is very unlikely. In any event, the legal result is the same. The defendant met the standard of practice.

Applicable standard

[60] Both sides put forward the decision in Yamada v. Mock as the relevant authority. That case involved the forgery of a signature on a mortgage by a person posing as the co-mortgagor. The lawyer acting for the mortgagors was not aware that one of them was an imposter but never made any inquiry. He took the position that it would have been above and beyond the call of duty to ask for identification. He said he never had any reason or “red flag” to indicate that he should check this out. Expert evidence was tendered regarding the obligations of the solicitor in the circumstances. The Court found as follows, at paragraphs 8 and 9:

While the solicitor should not be expected to act as guarantor, he or she should take reasonable steps to protect the interest of the party which he or she is serving. While the eliciting of identification may not prevent fraud, it would make it much more difficult. The likelihood of someone producing false documentation is far less than someone simply asserting that they are someone other than who they are. It would have been an easy step to take. …

I find that the failure to ask for identification is below the standard of care of solicitors in this situation. Indeed, if the practice were not to ask for identification in such circumstances, I see the risk in these circumstances to be plainly foreseeable and, regardless of the practice, the law would impose liability on the solicitor to deal with the foreseeable risk. [Emphasis added.]

[61] Defendant’s counsel concedes, based upon this case, that there is an affirmative duty to ask for identification. On the evidence, the defendant fulfilled this duty and met the relevant standard of practice. He obtained two forms of identification, both from independent and reliable sources – specifically the citizenship cards and driver’s licences. He compared the photographs to the persons in his office. He retained photocopies.

[62] Although not raised by the plaintiffs, in October of 2007, a by-law was made under the https://www.canlii.org/en/on/laws/stat/rso-1990-c-l8/latest/rso-1990-c-l8.html regarding client identification and verification, specifically By-law 7.1.

[63] By-law 7.1 did not come into force until December 31, 2008, after the events at issue here. Although the By-law is not directly relevant, Mr. Doshi substantially complied with what is now required under it with respect to the collection of information and verification of the identity of clients. He took reasonable steps to verify the identity of the plaintiffs using their original ID. The By-law provides examples of what types of documents are suitable for the purpose of client verification. Both of the types of identification obtained by the defendant fall within the By-law.

[64] Thus, the defendant met the standard of practice. Negligence has not been established.

Judgment

[65] This action is therefore dismissed. If the parties are unable to agree on costs, the defendant shall make his submissions by brief written submissions together with a costs outline to be delivered by June 24, 2015. The plaintiffs may respond by delivering brief written submissions by July 10, 2015. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by June 24, 2015.

[66] There is also a third party claim in this proceeding against the property owner, Shelvan’s wife, who has been noted in default. As discussed at the conclusion of the trial, the defendant shall make written submissions regarding his proposed disposition of the third party claim on the same timetable set for his costs submissions.

Justice W. Matheson

Released: June 9, 2015

COURT FILE NO.: CV-10-406104

DATE: 20150609

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

SIVAPRAGASAM BASKARAN and KARUNAWATHY BASKARAN

Plaintiffs

– and –

SANJAYKUMAR MADANLAL DOSHI and HOME TRUST COMPANY

Defendants

REASONS FOR JUDGMENT

Justice W. Matheson

Released: June 9, 2015