CITATION: Farzana v. Abdul-Hamid, 2015 ONSC 597

COURT FILE NO.: CV-13-3955-00SR

DATE: 20150127

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Fatima Farzana

Plaintiff

AND:

Ahmad Abdul-Hamid

Defendant

BEFORE: Ricchetti, J.

COUNSEL: R. Swaine, Counsel for the Plaintiff

A. Abdul-Hamid, self-represented

HEARD: January 22, 2015

ENDORSEMENT

THE SUMMARY JUDGMENT MOTION

[1] This is a summary judgment motion by the Plaintiff (Farzana) for judgment pursuant to a Mortgage dated August 18, 2005 (Second Mortgage) and for possession of 42 Barrydale Crescent, London, Ontario N6G 2X3 (Property).

The FACTS

[2] Farzana and Mr. Abdul-Hamid (Abdul-Hamid) are Muslims. Muslims are not permitted, by their religion, to pay or charge interest. This creates borrowing and lending issues since most lenders will only loan money for a return on their loan.

[3] However, it is permitted for Muslims to enter into a partnership where one party gives money to another for investing it into an enterprise and to share the “profit” with the person who provided the money. This is called a Mudarabah. These “profit” arrangements are Sharia law compliant.

[4] Along comes UM Financial Inc. (UM) to facilitate loans for Muslims. UM finds borrowers who are prepared to pay a “profit” on the monies loaned to them to buy their homes. UM finds Muslim lenders who want a return on their loans. UM matches the Muslim lender with the Muslim borrower. UM receives a fee (based on a % of the “profit”) for arranging the transaction.

[5] In 2005 Abdul-Hamid wanted to buy a home.

[6] The home cost $246,000. Abdul-Hamid needed to finance the purchase of his home. These loans were necessary for Abdul-Hamid to purchase his home. He went to UM. UM agreed to loan Abdul-Hamid $165,200 by way of a first mortgage and $24,600 by way of a second mortgage from a Muslim lender prepared to loan money.

[7] A written agreement was executed between Abdul-Hamid and UM (Borrower Agreement). The Borrower Agreement was signed by Abdul-Hamid’s wife but he takes no issue that the Borrower Agreement was signed for him by his wife and he is bound by the Borrower Agreement.

[8] Under the terms of the Borrower Agreement, Abdul-Hamid, agreed that, for a five year term, there would be a "profit" of $50,008 on the first mortgage loan and $12,300 on the second mortgage loan. Although not expressly stated in the Borrower Agreement, with respect to the second mortgage, this "profit" amounts to 10% per annum on the second mortgage loan of $24,600 ($2,460 per year X 5 years = $12,300).

[9] Paragraph 7 of the Borrower Agreement is central to the issues before this court as it demonstrates exactly what and how Abdul Hamid was to repay the Second Mortgage. It clearly sets out what he agreed were the terms of the Second Mortgage. The relevant portion of paragraph 7 is:

...Said Mortgage shall be interest free and shall be repayable in 60 equal monthly installments of $1,155.13 + $205.00/month commencing on August 29, 2005 and ending on July 29, 2010 (the “Maturity Date”). On the Maturity Date, the Purchaser shall pay UMF the sum of $165,200.25 + $24,600, being the balance due under the Mortgage.

[10] The reference to $1,155.13 per month and $165,200.25 refer to the first mortgage. The reference to $205 per month and the $24,600 refer to the Second Mortgage. It is clear from paragraph 7 that Abdul-Hamid knew that he would be paying monthly amounts on the mortgages and at maturity would have to pay the full amount of the mortgages.

[11] In the case of the Second Mortgage, Abdul-Hamid understood and agreed that:

a) the loan was for $24,600;

b) the loan would have no interest;

c) he would pay $205 per month over the 5 year loan period generating “profit” of $12,300; and

d) at the end of the loan period, he would repay the entire amount of the principal loan advanced.

[12] Abdul-Hamid acknowledged at the hearing that he knew he was paying interest/profit on the first mortgage. The first mortgage has since been re-financed with a Credit Union and he is paying interest to the Credit Union for this loan.

[13] At about the same time in 2005, Farzana had gone to UM. Farzana testified that she didn’t know Abdul-Hamid prior to the Second Mortgage and she did not and would never have agreed to an “interest free” loan to a stranger such as Abdul-Hamid. I accept this evidence.

[14] A written agreement was executed between Farzana and UM (Lender Agreement). Under the Lender Agreement, Farzana gave UM $100,862 as her “investment” into mortgages. The Appendix to the Lender Agreement showed that $24,600 of her “investment” would be loaned to Abdul-Hamid on the following terms:

a) Farzana would receive a Second Mortgage from Abdul-Hamid;

b) There would be a 10% return on her loan;

c) The “return” would be paid on a monthly basis;

d) the principal would be paid back in full at the end of the term of her loan.

[15] As a result, the terms of the loan for the Second Mortgage are mirrored in both the Borrower Agreement and the Lender Agreement. Essentially, this was an “interest” only mortgage, but using “profit” instead of interest, at the rate of 10% per annum. In this way, the payment of “interest” was avoided as only "profit" would be paid. Sharia law was complied with.

[16] Abdul-Hamid completed the purchase of the Property. Through UM, the loans were advanced to him for the first and second mortgages. The Property was registered in the name of Abdul-Hamid. Mortgages were registered on title to the Property by Abdul-Hamid in favour of the first and second mortgagees.

[17] In Farzana’s case, the Second Mortgage for $24,600 was granted by Abdul-Hamid to Farzana and was, on its face, for a period of two years. This Second Mortgage was prepared and registered by Najeeb Ali Nawab, a lawyer acting on behalf of Abdul-Hamid. The terms of the Second Mortgage in the registration provided for 0% interest and payments of $205 monthly. There is no mention in the registered Second Mortgage of the “profit” that Abdul-Hamid had agreed to pay in the Borrower Agreement, but it does refer to the payment of $205 per month despite there being no interest.

[18] Standard Charge Terms were incorporated into the Second Mortgage. These terms provide the usual remedies for the mortgagee, including payment of interest after default, rights of possession, payment of the mortgagee’s disbursements to enforce the mortgage and so forth. Clause 19 of the Standard Charge Terms which forms part of the Second Mortgage, provides that no extension of time or dealing with the “charge” “shall in any way affect or prejudice the rights of the Chargee against the Chargor...”

[19] Abdul-Hamid commenced to pay the $205 per month payments. UM took its fee and the balance was paid to Farzana. This continued for two years.

[20] In 2007 the Second Mortgage matured. As Farzana had made a 5 year investment commitment to loan the monies, UM proceeded to renew the Second Mortgage directly with Abdul-Hamid.

[21] After some communications, on November 6, 2007 a further written agreement was executed between UM, Farzana (as “Lender”) and Abdul-Hamid (as “Mortgagee”), to renew the Second Mortgage, continuing the monthly payments of $205 per month and 0% interest (Renewal Agreement). The Renewal Agreement set out the amount paid by Abdul-Hamid over the 2 year period - $4920 ($205 X 12 months X 2 years) but refers to them as “second mortgage payments P/I”. There was no explanation offered as to what “P/I” meant.

[22] There is reference to a “second mortgage renewal agreement” to be executed and returned, but Abdul-Hamid did not provide a copy of this document, if it exists.

[23] There is no evidence in the documents that suggests either Farzana or Abdul-Hamid intended to vary the original terms of the Second Mortgage granted in 2005. This was a simple renewal or extension of the Second Mortgage.

[24] In my view, the only interpretation for what occurred in 2007 is that the Second Mortgage was renewed or extended on the same terms as in the Borrower Agreement – the $205 monthly “profit” payments, 0% interest, and the loan in its entirety to be paid on maturity.

[25] Abdul-Hamid continued to pay the $205 per month for the second mortgage.

[26] In 2011, UM advised it was closing due to financial difficulties. It went into receivership.

[27] Abdul-Hamid dealt with the first mortgage but the details are not before this court on this motion.

[28] As for the Second Mortgage, shortly after the receiver for UM was appointed, Abdul-Hamid stopped paying the $205 per month.

[29] By court order dated January 6, 2012 in the receivership proceedings, Justice Morawetz essentially required UM to turn over the second mortgagees files to the second mortgagees, turn over any payments received on the second mortgages to the second mortgagees and left it to the mortgagees and mortgagors to deal with these mortgage loans.

[30] In October 2012, Farzana's husband emailed Abdul-Hamid seeking to deal with the Second Mortgage. Abdul-Hamid responded that UM had "scammed" both of them and he understood the Second Mortgage had been paid off. After further communications, Abdul-Hamid said that the Second Mortgage had been paid off in the first two years of the loan. However, Abdul-Hamid didn't explain why, if that were true, he would have continued to make payments on the Second Mortgage for an additional 4 more years. At no time during the exchange over approximately one month did Abdul-Hamid suggest that it was an "interest" only mortgage - he simply said it had been paid off and wanted nothing else to do with it.

[31] In March 2013 the communications continued and Abdul-Hamid appeared to acknowledge the debt but questioned the amount owed: "...also I need info on the accountability of the amount of the mortgage I still owe." By the middle of March 2013 Abdul-Hamid stated, for the first time on the record before me, that there was to be no interest on the Second Mortgage but stated on March 15, 2013 "I have an Email from a while back that states the 2nd mortgage is payed off..". Abdul-Hamid has produced no such email in this motion.

[32] Abdul-Hamid appeared to be taking various, even inconsistent positions, in an effort to avoid payment of the Second Mortgage.

[33] Despite attempts to resolve the issue, the parties were unable to do so.

[34] On September 11, 2013 Farzana issued a Statement of Claim.

[35] No defence was filed. Abdul-Hamid was noted in default.

[36] Abdul-Hamid sought to set aside the noting in default. The motion was heard by Justice Price on May 29, 2014. Reasons setting aside the noting in default were released on August 25, 2014.

[37] On September 23, 2014 Abdul-Hamid filed a Statement of Defence.

THE LAW

[38] Rule 20.04 of the Rules of Civil Procedure provides:

(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment

(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent

3. Drawing any reasonable inference from the evidence

(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.

[39] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court set out when summary judgment motions should be granted where there is “no genuine issue requiring a trial”.

[49] There will be no genuine issue requiring trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[40] At paragraph 50 of Hyrniak the Supreme Court went on to say that the overarching issue to be answered is “whether summary judgment will provide a fair and just adjudication.” and that “the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.”

[41] The first question is whether there is a genuine issue requiring trial based on the evidence before me. I am satisfied that the evidence before me will permit a fair and just adjudication of the issues in dispute. The documentary record permits a just and fair determination on the terms of the Second Mortgage loan. Further, this determination will result in a timely, affordable and proportionate procedure, given the legal/factual issues and the amount at issue. The amount in dispute is approximately $17,000 (which is the difference between the two positions) which has been outstanding since November 2011 and the legal costs already incurred on this matter.

[42] The defence is required to "put its best foot forward" or "lead trump or risk losing". While the onus is on the moving party, there is an evidentiary burden on a defendant in responding to a summary judgment motion to lead clear, credible evidence as to its defence.

At the summary judgment stage, the court wants to see what evidence the parties have to put before the trial judge, or jury, if a trial is held. Although the onus is on the moving party to establish the absence of a genuine issue for trial, as rule 20.04(1) requires, there is an evidentiary burden on the responding party who may not rest on the allegations or denials in the party's pleadings, but must present by way of affidavit, or other evidence, specific facts showing that there is a genuine issue for trial. The motions judge is entitled to assume that the record contains all the evidence which the parties will present if there is a trial.

Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 1998 4831 (ON CA), 164 D.L.R. (4th) 257 at para 17 (Ont. C.A.)

Transamerica Life Insurance Co. Of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.)

1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 1995 1686 (ON CA), 77 O.A.C. 196 (C.A.)

THE POSITION OF THE DEFENCE

[43] Abdul-Hamid seeks to have the claim dismissed or, at a minimum, have this summary judgment motion dismissed.

ANALYSIS

[44] Abdul-Hamid raises a number of issues, some of which can be dealt with quickly:

a)Abdul-Hamid states he was not aware of the arrangements with Farzana. This is not true. I reject this evidence, given that Abdul-Hamid’s lawyer prepared and registered the Second Mortgage in 2005 and that Abdul-Hamid himself signed the Renewal Agreement in 2007, which showed himself as the Lender and Farzana as the Mortgagee. This is also supported by Abdul-Hamid’s Statement of Defence at para 4 where he states “On or about August 18, 2005, the defendant and UM Financial entered into an agreement to facilitate a second mortgage of $24,500 from the plaintiff at zero percent interest”. This acknowledges that Abdul-Hamid knew the monies were loaned by Farzana for the Second Mortgage.

b) Abdul-Hamid states that the Borrower Agreement makes no mention of Farzana. That is true. However, for the same reasons set out in (a), he clearly knew that the Second Mortgage monies came from Farzana and that the $205 per month payments were being paid directly or indirectly to Farzana. Abdul-Hamid admits in his pleading that he knew and agreed that the loan was structured through UM to facilitate his “Second Mortgage”. After 6 years of complying with the monthly payments for the “Second Mortgage”, he now takes the position that he has no agreement with Farzana. The issue of estoppel would clearly apply in this case, given the course of conduct of the parties and the equities. See paras 57 -59 High Tower Homes Corporation v. Stevens, 2014 ONCA 911.

c)Abdul-Hamid states there is no privity of contract between Abdul-Hamid and Farzana. I disagree. The registered Second Mortgage, the Renewal Agreement and the acknowledgement in the Statement of Defence are sufficient to establish privity between Farzana and Abdul-Hamid for the Second Mortgage. Further, if necessary, the entire transaction was clearly a use of an agent (UM), known to both parties and agreed to by both parties, to facilitate the Second Mortgage on terms known and agreed to by both parties. It is also inconsistent for Abdul-Hamid to acknowledge the creditor-debtor relationship between himself and Farzana as an “interest” or profit free loan and also submit there is no privity of contract between these parties. In fact, Abdul-Hamid states in his affidavit that when UM went into receivership “the second mortgage payments were to be between the two parties...”. Paragraph 12 of Abdul-Hamid's Statement of Defence alleges that he paid $16,605 to Farzana. All the facts clearly establish that Farzana and Abdul-Hamid knew they were dealing with each other, agreed to the arrangements through UM for the Second Mortgage and knew the terms of the Second Mortgage loan, including the repayment obligations. There is no merit to this submission.

d) Abdul-Hamid states that Sharia laws do not permit this type of arrangement. There was no expert evidence before me as to what Sharia law permits or does not permit. Further, there was no evidence as to why or how Sharia law would supersede Ontario law in this case. There is no authority that has been brought to my attention where Sharia law would apply in these circumstances in lieu of Ontario law. Besides, the Borrower Agreement clearly states that the agreement is governed by the laws of Ontario.

e)Abdul-Hamid raises an issue that the Borrower Agreement requires arbitration. However, there is no motion before me to stay this action and directing that the matter proceed to arbitration. In addition, given the extensive delay since the commencement of this action, such a motion would be unlikely to succeed at this time.

f) Abdul-Hamid submits that Mr. Swaine, Farzana's counsel, has a conflict of interest in that he previously acted for the prior owner of the home. However, Abdul-Hamid could not identify what confidential information Mr. Swaine might have or how Abdul-Hamid would be prejudiced by Mr. Swaine acting for Farzana.

g) Abdul-Hamid did not question the number of $205 monthly payments set out by Farzana. Nor could he as Farzana has given him credit for all the $205 payments which Abdul-Hamid made or alleged he made. As a result, the financial issue is properly described as :

i. Farzana states that the $205 monthly payments were “interest” or “profit” payments until November 2011 when Abdul-Hamid ceased to make any further payments. The principal amount became due at that time. To be added to the principal amount of the mortgage is pre-judgment interest and costs to enforce the power of sale; or

ii. Abdul-Hamid states that the $205 monthly payments were principal payments on a 0% “interest” mortgage, which principal repayments were made until November 2011 and, therefore, after credit for these payments, $7,995 is owing under the Second Mortgage.

The Defence position that this was a principal only loan

[45] There is nothing in the Borrower Agreement that the Second Mortgage was an interest (or profit) free loan.

[46] At best, Abdul-Hamid points to the registered Second Mortgage which states on the pre-printed form beside "Interest Rate, 0.0%". But this must be considered in light of all the circumstances, dealings and documents involving the transaction. Abdul-Hamid needed and wanted a 0% interest loan but he also knew that he would have to pay "profit" for the loan - a specified amount which was a 10% return on the loan. The reference to "0% interest" was the only reference that could be inserted in the standard form used for the registered Second Mortgage. It would be wrong in law to ignore the rest of the loan transaction agreed on by the parties and simply focus on the 0% interest reference in the registered Second Mortgage. Abdul-Hamid knew and agreed he would pay 0% interest. So did Farzana. However, they also knew that Abdul-Hamid would be paying $205 per month as “profit” and pay the entire principal amount of the loan amount on maturity. When considering the entire transaction, there is no inconsistency in what is set out in the registered Second Mortgage as it relates to the “O% interest”.

[47] There is much to establish that the Second Mortgage was a 10% "interest" or "profit" only payment until maturity loan;

a) The Borrower Agreement clearly and unambiguously provides that Abdul-Hamid would pay $205 per month for the Second Mortgage and at maturity, pay the entire principal loan of $24,600;

b) The Renewal Agreement provided that the mortgage loan continued past the maturity date. There was no interest but the $205 monthly payments were to continue. The registered Second Mortgage terms weren't expressly changed and there is no evidence that either party intended in 2007 to make any change to the terms of the Second Mortgage agreed to in 2005;

c) Abdul-Hamid's action to stop paying the Second Mortgage after UM went into receivership is inconsistent with an "interest free loan". He knew there was a substantial balance, even if his payments were principal repayments. Paragraphs 12 and 23 of the Statement of Defence admits that only "$16,605 has been paid by the defendant by[to] the plaintiff." and that $7,995 is owing under the Second Mortgage; and

d) Abdul-Hamid's suggestion that the Second Mortgage was repaid within the first two years (and he had confirmation of this) is also inconsistent with his version of the terms of the repayment of the Second Mortgage. Abdul-Hamid’s actions are consistent with someone seeking to take advantage of the situation he was involved in creating, in an effort to avoid his legal obligations on his Second Mortgage loan to Farzana.

[48] For the reasons set out above, I find that the Second Mortgage was a "profit" only repayment mortgage loan at the rate of $205 per month with the full principal payment to be paid at maturity. There is no genuine issue requiring a trial.

[49] As a result, the Second Mortgage went into default when Abdul-Hamid stopped making the $205 per month payments in November 2011. The full principal amount of the Second Mortgage was outstanding on December 1, 2011, was due and remains outstanding today. Accordingly, $24,600 remains owing by Abdul-Hamid to Farzana under the Second Mortgage since the end of November 2011.

[50] As the Second Mortgage does not provide an interest rate, pre-judgment interest shall be payable on this amount under the Courts of Justice Act from December 1, 2011 until payment.

Justice Price's Reasons

[51] Abdul-Hamid points to the reasons of Justice Price on his motion that a trial is required. There are a number of reasons why Justice Price's reasons do not impact on the decision in this motion:

a) The record before Justice Price was different than the record before me. What is before me is the Affidavit of Fatima Farzana dated November 26, 2014 and the affidavit of Ahmad Abdul-Hamid dated January 19, 2015. Justice Price had different affidavits before him;

b) Justice Price's review of the documentation and proposed defences of Abdul-Hamid was for a different purpose. Whether or not there is a genuine issue requiring a trial is required is not the test on a motion to set aside a noting of default. Whether the proposed defence could or would survive a Rule 20 summary judgment motion is not an issue for the determination of the motions judge, on a motion to set aside a noting in default;

c) Justice Price makes reference that the motion before him required Abdul-Hamid to establish that "the material filed by the defence disclose a defence to the action". On a motion to set aside a noting of default, a review of the proposed defence was described by the Court of Appeal in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at para 48 as a review “whether the facts establish that the defendant has an arguable defence on the merits” (emphasis added) on the record before the motions judge. The issue before me is whether, on the record before me, there is a genuine issue requiring a trial;

d) Where Justice Price’s reasons make comments regarding the expectations of the parties or the clarity of the documents, they express his views on the record before him. I am not bound by Justice Price’s views or statements regarding the documents and I am required to consider only the record before me to the issues raised by the parties;

e) Justice Price makes a number of calculations regarding Abdul-Hamid's loans for his first and Second Mortgage and suggests that there are numerous questions regarding the amounts paid and at issue. No such disputed issue is before me. Abdul-Hamid agrees at paragraph 12 of the Statement of Defence that he has paid $16,605 in $205 monthly payments (81 payments) and at paragraph 23 agrees that $7,995 is owing under the Second Mortgage. Farzana accepts the accuracy of the calculations set out in Abdul-Hamid's Statement of Defence. The only issue is whether the monthly $205 payments by Abdul-Hamid were for "profit" or repayment of principal.

Additional amounts and relief

[52] Pursuant to the terms of the Second Mortgage, Farzana is also entitled to her full costs of enforcing the Second Mortgage. Abdul-Hamid shall also pay to Farzana the sum of $1,695 being the legal fees incurred by Farzana for the Power of Sale proceedings. No issue was raised questioning this amount.

[53] Counsel for Farzana submitted a Costs Outline of $6,049 on a full indemnity basis for this motion. However, this Costs Outline only deals with costs of the motion rather than costs of the action. Unfortunately, Justice Price had not yet released his reasons on costs of the motion before him to set aside the noting in default. Unless the parties can settle the issue of costs, I will deal with costs of the action by way of written submissions after Justice Price has released his costs decision.

[54] The Second Mortgage provides that upon default, Farzana is entitled to possession of the Property. As default continues on the Second Mortgage, the judgment will include an order for possession of the Property by Farzana.

Conclusion

[55] Judgment to issue in favour of Farzana as follows:

a) in the amount of $24,600;

b) prejudgment interest from December 1, 2015 until payment in accordance with the Courts of Justice Act;

c) in the amount of $1,695 all inclusive of HST;

d) in the amount of costs to be assessed by written submissions; and

e) possession of the Property.

Ricchetti, J.

Date: January 27, 2015