CITATION: Tanfi Limited v. Slade et al., 2015 ONSC 778
COURT FILE NO.: CV-11-427310
DATE: 20150203
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TANFI LIMITED.
Plaintiffs
- and -
JAMES HAROLD FREDERICK SLADE and NANCY JEAN SLADE
Defendants
Joseph Markin, for the Plaintiff and Defendant by Counterclaim Tanfi Limited
James Slade in person
AND B E T W E E N:
JAMES HAROLD FREDERICK SLADE and NANCY JEAN SLADE
Plaintiffs by Counterclaim
-and-
TANFI LIMITED and FRANK MANZO
Defendants by Counterclaim
HEARD: September 12 and December 18, 2014 and February 2, 2015
F.L. Myers J.
REASONS FOR decision
Background
[1] The plaintiff moved for summary judgment dismissing the defendants’ counterclaim and for judgment on two mortgages. By order dated September 12, 2014 the court granted judgment to the plaintiff for the principal amounts of the two mortgages but stayed the judgment pending a mini-trial on the counterclaim and to determine the applicable interest rate under the two mortgages. I exercised my discretion to order a mini-trial to consider if the defendants are able to raise an issue requiring a trial on the counterclaim and to determine if the counterclaim might be fairly and justly resolved more efficiently, affordably, and proportionately than by a full trial of all of the issues raised by the parties. A one-day mini-trial was held before me on December 18, 2014. By Endorsement dated December 19, 2014, I ordered that the plaintiff may call the evidence of a further witness to conclude the mini-trial on February 2, 2015.
[2] In all, for the reasons that follow, I am satisfied that the counterclaim against Tanfi Limited must fail. Tanfi loaned the defendants amounts of $560,000 and $50,000 in 2009 and 2010 respectively. The defendants have yet to repay any of the money that they borrowed. Despite making multiple, serious allegations of wrongdoing against the plaintiff, their own lawyers, and their mortgage broker, the defendants have not raised a factual or legal issue requiring a trial. To the contrary, it would be most unjust to the plaintiff to require it to wait any further to be paid. The plaintiff is a small, closely held family company. Absent a legal or factual basis to hold otherwise, the defendants are required to pay their debts. The plaintiff is entitled to exercise its mortgage security to compel that outcome.
The Background
[3] In its statement of claim issued in May, 2011, the plaintiff claims $775,646.22 under the two mortgage loans including interest accruing at 14% per year.
[4] The defendants delivered their statement of defence in late June, 2011. The defendants did not have the assistance of a lawyer. They represent themselves. In their statement of defence, they admit that they borrowed $560,000 from the plaintiff and that they granted the plaintiff a first mortgage on their property. The loan was to refinance a prior mortgage and to fund the final steps of the defendants’ construction of their new, innovative, insulated concrete form home.
[5] The first mortgage loan was to be advanced in three tranches of $490,000, $35,000 and $35,000. The loan agreement provides that once the first tranche has run out, the property will be appraised and the lender will visit the property to view the quality of workmanship. Then, the first $35,000 tranche will be advanced for brickwork and the second $35,000 will be advanced for “cabinetry and flooring etc.” The defendants claimed that the plaintiff failed to advance the last two tranches of the loan and that this devastated their project causing them massive losses. In subsequent negotiations, the plaintiff was willing to make some further advances. Then the defendants entered into a second mortgage to obtain another $50,000 from the plaintiff. They said they did so under extreme duress in their statement of defence. There was no counterclaim advanced at that time.
The Motion for Summary Judgment on the Claim
[6] On April 4, 2012, Stinson J. heard a motion for summary judgment brought by the plaintiff on its claim. He dismissed the motion by reasons dated May 31, 2012, 2012 ONSC 3221. In para. 4 of his reasons, Stinson J. noted that his comments regarding the issues should be viewed as a preliminary analysis only with the ultimate determination to depend on the evidence and findings at trial.
[7] At the time of Justice Stinson’s decision, the Supreme Court of Canada had yet to decide Hryniak v. Mauldin, 2014 SCC 7. Stinson J. did not consider whether another process could be formulated to resolve the case more efficiently, affordably, and proportionately than a full trial as that was not the law or practice at the time.
[8] At para. 12 of his decision, Stinson J. held:
Although the agreement provided for a further $70,000 to be drawn down in two $35,000 amounts, this did not occur. The reasons for this non-compliance with the agreement are not entirely clear on the record before me. In effect, each side blames the other in what is a complicated cause-and-effect relationship.
[9] It is this very issue that I am able to resolve due to the mini-trial as I discuss below.
[10] At paras. 16 and 17 of his decision, Stinson J. discussed the issues that were raised before him and for which he viewed a trial as being required as follows:
[16] The foregoing overview highlights a number of interconnected issues that, in my view, required a detailed examination and analysis of the factual matrix that can only take place at a trial. This is not an obvious case where a defaulting debtor defendant has raised specious arguments by way of defence to a collections action. Rather, this case involves a series of questions that cannot properly be determined on a motion such as this. These include the following:
(a) What were the plaintiff's obligations to advance funds under the financing agreement?
(b) Did the plaintiff fail to make timely advances of funds or otherwise to perform its obligations under the construction loan agreement, or was the plaintiff justified in disbursing the funds as it did?
(c) Were the defendants at fault for either misapplying the mortgage funds, non-payment of mortgage interest and cost overruns, or were they put into the positions they were by the plaintiff's failures?
(d) What were the causes of the delays and cost overruns on the construction project, and who should bear them?
(e) Are the defendants required to pay the mortgages in full by their very terms or are they justified in not paying some of the interest or principal by reason of the alleged defaults of the lender?
(f) What is the proper payout number for each mortgage in light of the answers for the foregoing questions?
[17] In relation to each of these questions, the record before me does not permit me to dismiss the defendants' position as unfounded. That is not to say that, following a proper trial, the findings of fact made by the trial judge will necessary favour the defence's position. That said, on the evidence before me, I am not satisfied that there is no genuine issue requiring a trial with respect to either the plaintiff's claim or the defendants' defence (and potential counterclaim).
The Counterclaim
[11] At the time that the matter was before Stinson J., the defendants had yet to deliver a counterclaim. They only delivered their amended statement of defence and counterclaim in March, 2013. The counterclaim adds as a defendant Frank Manzo, the mortgage broker on the transaction. In the counterclaim, the defendants pleaded that they and Mr. Manzo knew that they could not carry the mortgage that they had Mr. Manzo arrange for them. The mortgage was taken to pay out their prior mortgage that was under power of sale. They claim that Manzo was to have told Tanfi that their mortgage payments were going to be made from the $35,000 tranches that Tanfi was agreeing to advance for brickwork and cabinetry. At para. 33 of their counterclaim, the defendants plead expressly:
- Frank Manzo failed to notify Tanfi Ltd. that the interest payments from James and Nancy Slade would be financed by Tanfi Ltd.
The Motion for Summary Judgment on the Counterclaim
[12] As noted above, the plaintiff moved for summary judgment to dismiss the counterclaim on September 12, 2014. If the counterclaim was dismissed, then there would be no defence left to the action, so judgment on the mortgages was sought as well.
[13] By the time the motion came on before me, the action had fallen into a procedural quagmire. The plaintiff had refused to attend examination for discovery because the defendants had not paid outstanding costs awards. The plaintiff had also set the action down for trial. The defendants adduced little or no evidence before me. They had made no payments at all in four years from the advance and had done little to prepare their documentary case for trial. I listened to Mr. Slade’s submissions as if they had been given under oath. Like Stinson J., I could hear the germ of a counterclaim in the submissions – especially the concern that the plaintiff’s delay in making required advances put the Slades at such financial distress that their project faltered. But, there was not any real documentary evidence presented, nor was I any closer than Stinson J. to understanding what happened to the two $35,000 advances.
[14] One thing that was clear was that left to their own devices, the parties were going to have a long, expensive, and disorganized pre-trial process. There was no useful communication between the plaintiff’s counsel and Mr. Slade. It seemed to me that if I could determine the single fact of why the $35,000 advances were not made on a timely basis, I might be able to determine all of the issues in the case or, at least, move the case forward to trial more efficiently, certainly more quickly, and hopefully more affordably than the parties might do by themselves.
[15] The defendants are incurring interest at as much as 14% per annum, so it is very much in their interests to have the case finally decided. The plaintiff is a family company and one of the owners, Mr. Ieraci, is terminally ill. It is in the plaintiff’s interest to obtain some recovery on its loans four years later too. There was no issue raised by Mr. Slade with the principal amounts of the two mortgages that were outstanding. His issues went to the interest rate applicable and to the existence of a counterclaim that might be set off against the debts. Accordingly, for reasons dictated orally that day in open court, I granted judgment on the principal amounts of the two mortgage loans and I stayed the judgment pending determination of the interest rate and the counterclaim.
[16] I was prepared to do so despite the fact that the action had been set down by the plaintiff. The defendants had to be cajoled to get their documentary case together to move forward one way or the other. Moreover, the fact that Stinson J. had dismissed a motion for summary judgment on the claim did not impact the jurisdiction of the court to hear a motion on the counterclaim that did not even exist at the time the matter was before Stinson J. Furthermore, with the change in the law in Hryniak, supra, the emphasis is now on providing the most efficient and affordable outcome available to the parties in the interests of justice. Both sides need an answer and in my view a single fact finding (why the $35,000 was not advanced) might resolve the bulk of the case.
[17] Mr. Slade asked me to hear the evidence of Mr. Manzo at the mini-trial. I had not appreciated from the pleadings and especially from Mr. Slade’s narrative, that Mr. Manzo’s role was so relied upon as a basis for requiring the subsequent advances. Therefore, I initially declined to include Mr. Manzo in the mini-trial.
The Mini-Trial - Part I
[18] Mr. Slade attended the mini-trial on December 18, 2014 with multiple volumes of documents that he had disclosed to the plaintiff only days before and in some cases only in court that morning. I had issued directions previously to require the parties to exchange documents in advance of the mini-trial. The plaintiff was given the choice of an adjournment or proceeding and Mr. Markin chose to proceed. Accordingly, I heard the oral evidence of Nella Ieraci for the plaintiff and of Mr. Slade.
[19] Mrs. Ieraci testified that Tanfi agreed to loan $560,000 to the defendants based on the equity in their property. It did not know the Slades’ personal circumstances. Both sides used a lawyer and agreed to a one year term, open on three months penalty. Monthly payments were for interest only commenced one month after the initial advance. Interest was calculated on the full $560,000 at 14% compounding monthly or $6,533.33 per month.
[20] The loan agreement did not say anything about monthly payments coming from the further advances from Tanfi. The further advances were expressly earmarked to brickworks and cabinetry.
[21] As the first advance under the mortgage was made on October 30, 2009, the defendants provided six (6) post-dated cheques to the plaintiff for monthly interest for the first six months of the term commencing December 1, 2009. After the first two cheques bounced, counsel for the plaintiff wrote to the defendants demanding payment and stating that “No further advances on the mortgage will be made until all arrears are paid in full”. The defendants never asserted a contractual right to satisfy their monthly payment obligation from future advances. In fact all six post-dated cheques have bounced.
[22] Mrs. Ieraci says that she was frantic as her savings were tied up in Tanfi and the loan was tied to the value of the property. They wanted to help get the property completed, but they were not willing to just advance more money to the defendants. After the defendants’ very first cheque bounced, there were negotiations among counsel, the mortgage broker and the Slades so that some further money was advanced to be ear-marked to specific expenditures. The defendants say that the plaintiff had no expertise and no right to involve itself in their construction project. The net effect of the plaintiff’s meddling, they say, was that they lost tradesmen whom they needed; their careful scheduling of expenses and tradesmen was thrown off; and they too were frantic.
[23] The defendants were not professional builders. Mr. Slade was doing much of the work himself with his sons. It is apparent in retrospect that he may have built too little leeway (temporal and financial) into his schedule as he had little resiliency when matters did not proceed as expected. For example, there were liens on title from unpaid tradesmen. They were removed by court order dated January 6, 2010. However it took some time for the Slades’ lawyers to confirm that all of the proper payments had been made to the trades so as to formally clear title. This impacted the Slades’ ability to re-finance as they said they wished to do. There was a question in the evidence about whether the Slades could have done brickwork in February if they had had the money that they needed. Mr. Slade said that it was too late in the winter to do so but then said that he had a trade who was willing to do it but for more money. There is much uncertainty as to the losses sustained by the Slades and the reasons for those losses when Tanfi declined to advance the two further mortgage loan tranches of $35,000 to them. As I suspected, however, I do not need to resolve the issues of what losses the Slades say they have suffered or whether the plaintiff’s deferred advances caused those losses.
Was there an Agreement that Tanfi would finance the Slades’ monthly interest payments?
[24] The defendants let their December 1, 2009 mortgage payment bounce. They could have saved $6,533.33 from the $490,000 that had already been advanced to them in order to make the payment. But they chose to spend it all. When they received the first mortgage advance, Mr. Slade said “We went crazy” in a bout of spending to try to pay bills and buy supplies to get back on schedule in November, 2009. In their spending frenzy, the Slades did not save $6,533,33 to pay their first mortgage payment when it came due on December 1, 2014.
[25] Neither side obtained the appraisal that was a precondition to the two advances of $35,000.
[26] The only real issue is whether Tanfi was obligated to advance the first $35,000 tranche despite the Slades’ failure to make their first monthly payment on December 1, 2009. If it was required to advance, then it is in breach of contract for failing to do so and a damages claim will lie for the defendants’ provable losses under applicable principles of damages. I am not in a position to assess those damages as Mr. Slade presented no comprehensive and defined evidence on the proper quantification of their losses. I would have ordered a reference to a Master had I determined that the Slades were entitled to damages.
[27] Mr. Slade has two related arguments as to why Tanfi was in default for not advancing the first $35,000 in face of his failure to pay the first monthly mortgage payment. First, he argues, that the loan agreement between the parties provided for interest payments to be financed by Tanfi. Tanfi knew that the Slades were in power of sale proceedings with their prior lender. The mortgage rate is at 14% due to the poor credit risk that the Slades represented. Tanfi had to know that the Slades could not afford to pay so the loan agreement should be read accordingly. His second argument is that the mortgage broker Frank Manzo had agreed that the interest would be paid from future advances and this agreement bound Tanfi.
The Interpretation of the Written Loan Agreement
[28] The words of the loan agreement belie the Slades’ first argument. The written agreement provides that interest will be paid monthly starting after the first advance in the amount of $6,533.33. There is some degree of conditionality of the advance of the next two $35,000 tranches as they only get advanced after an appraisal is conducted and after the lender views the property. It is not clear how much discretion the lender might have if it was dissatisfied with either the appraisal or its view of the “quality of workmanship”, but the conditioning of the tranches on these events suggests that they cannot have been understood to be payable in any event to fund interest payments. Moreover, the purpose and use of the two $35,000 tranches are specified in the contract. They are expressly earmarked for brickwork and “cabinetry and flooring etc.” That is not consistent with the advances being kept by the lender for interest.
[29] The fact that the Slades gave Tanfi six post-dated cheques for interest is near determinative of this issue. If advances were to be used to fund interest, the agreement would have provided for hold-backs or another mechanism. Absent express words, it is not commercially reasonable to interpret a loan agreement as requiring a lender to advance funds to a borrower where the parties intend the lender to keep the funds.
[30] In, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 47, the Supreme Court if Canada provided the following description of the proper approach to interpreting contracts:
[47] Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27 per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65 per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:
No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
(Reardon Smith Line, at p. 574, per Lord Wilberforce)
[31] The interpretation proposed by Mr. Slade is neither practical nor consistent with common sense, business practice. Mr. Slade argues that Tanfi was a predatory lender and owed him a duty of care to inquire as to his ability to pay. Tanfi argues that it lent against the equity value of the property so that it was not concerned with the Slades’ ability to pay. Mr. Manzo, the broker, was required to bring the borrower’s ability to pay to the attention of the lender. He says that he did so orally but that it did not matter because there was so much equity in the property. I suspect that the real answer is somewhat more nuanced. Tanfi knew about the Slades’ credit issues as they extracted a 14% interest rate from them. However, a lender is entitled to lend to an adult who may have cash flow problems. That is why the Slades were borrowing from a Tanfi at 14% and not from a bank.
[32] In light of the express wording of the contract, I am unable to conclude that Tanfi had bound itself to advance funds to be used by the Slades to pay their monthly interest payments. Both sides had lawyers on the transaction. That is too fundamental a term to have been ignored. While Tanfi likely was concerned with the risk associated with the Slades’ ability to pay, they knew that they were advancing them $490,000 up front with only $447,000 earmarked for prior lenders and lien claimants. The Slades would have over $50,000 available to pay the first $6,533.33 but for the Slades’ decision to spend all of that money and default on their mortgage.
Did Frank Manzo Bind Tanfi to an Agremeent?
[33] In their counterclaim, the Slades identify Mr. Manzo as a broker whom they contacted and retained. They plead in paragraph 20 of the counterclaim that they told Manzo that they could not pay interest payments so that Manzo was to have the interest payments financed by Tanfi. As noted above, at paragraph 33 of the counterclaim, the Slades plead:
Frank Manzo failed to notify Tanfi Ltd. that the interest payments from James and Nancy Slade would be financed by Tanfi Ltd.
[34] The Slades did not plead that Manzo bound Tanfi to any agreement. Rather, they are suing him as an alternative for failing to do so. Under cross-examination during the mini-trial Mr. Slade adopted evidence that he gave on discovery that he paid Mr. Manzo to find funding for him and that the written agreement represented the terms that Mr. Slade had negotiated. Thus, on the pleadings and on Mr. Slade’s evidence, there was no triable issue of Manzo having made a deal about the use of subsequent advances to pay interest payments that might bind Tanfi. On the Slades’ evidence Manzo was their agent and the written terms of the loan agreement were the terms they had agreed upon. On these facts, even if there were discussions between the Slades and Mr. Manzo, Mr. Manzo could not and did not bind Tanfi.
[35] But, in closing argument, Mr. Slade made reference to a written answer provided by Mr. Manzo to a written discovery interrogatory. The question asked Mr. Manzo why he did not recorded his retainer by the Slades in the books of his brokerage business. The answer provided was that Mr. Manzo said that he was the agent of Tanfi and that he had told Mr. Slade that Manzo was agent for Tanfi three to five times during the piece. It was not clear to me why the identity of Mr. Manzo’s client was relevant to whether he took cash on the side or recorded the retainer through his brokerage. Be that as it may, Mr. Manzo seemed to be admitting that he was the agent of Tanfi. If that is correct, there may be a triable issue as to whether he bound Tanfi to a deal as alleged by Mr. Slade either as its express or ostensible agent.
[36] I should note in passing that I can readily see that Tanfi may have some frustration with the manner in which the process played out. The court did make many allowances for the fact that the Slades are not represented. For example, Mr. Slade argued that his construction schedule was tight so that the contract was “fixed in stone”. In fact, his whole argument concerning Mr. Manzo is based on there being a side-deal, an oral representation, or some collateral warranty that changes the meaning of the words of the contract. It is the opposite of being fixed in stone. Yet the court followed the side deal issue and added a day to the mini-trial. Mr. Slade was unable to articulate the legal basis for the relevancy of Mr. Manzo’s role. The court did so in its endorsement of December 19, 2014 in which the mini-trial was adjourned to allow Mr. Slade to call Mr. Manzo as a witness. While I had refused to include Mr. Manzo in the mini-trial both at the original hearing and at the outset of the mini-trial, once the court saw the potential factual issue of Mr. Manzo binding Tanfi, the court expanded the mini-trial to hear his testimony.
The Mini-Trial – Part II
[37] Frank Manzo testified on February 2, 2015. He denied being part of any side-deal under which the Slades would pay their monthly interest payments from further advances. Mr. Manzo was retained by Mr. Slade and did not record the retainer through his brokerage. He claimed that since he was acting in a private capacity, he was freed of his obligations as a broker under the regulations under the Mortgage Brokers Act. As such, he did not tell his clients in writing for whom or for which of them he was acting as required by the regulations. Neither did he tell the lender in writing the things required of a broker concerning a borrower’s creditworthiness. He said that he was approached by Mr. Slade to find him a lender for $10,000 cash and that he did as asked. The Slades knew and agreed to the terms of the loan agreement and the mortgage with their lawyer. Mr. Manzo said that he told Tanfi orally about the state of the Slades’ prior mortgage. He said that Tanfi did not care because it was loaning into a debt to equity ratio of only 55% to 60%. He said that he was supposed to be paid his fee on closing but Mr. Slade was only willing to pay $5,000. Mr. Manzo ultimately gave back the $5,000 cash to Mr. Slade in return for a release.
[38] I leave Mr. Manzo’s business practices to his regulator. Whether he has a valid release from the Slades may be an issue in the counterclaim against him down the road. He described himself as acting as “broker” and agent for both sides of the deal. But he was resolute and unshaken in cross-examination that no matter whom his client was there was no side deal for Tanfi to fund the Slades’ interest payments. His evidence was that the deal was the written deal and it makes no sense to think that Tanfi was financing the Slades’ interest payments. That was not the terms negotiated or accepted by the Slades and their lawyer. The deal structure does not provide for it and the provision of post-dated cheques is completely inconsistent the side-deal alleged.
[39] Both Mr. Manzo and Mrs. Ieraci denied the alleged side deal. It was not alleged contemporaneously by the Slades. There were heated discussions at the time because the Slades wanted the money and the lender was unhappy with the status of the project and was not willing to advance. But there was no discussion about Tanfi being required to advance to fund the Slades’ payments. Moreover, the counterclaim pleads the opposite – that Manzo failed to make that deal. There is simply no basis in the facts for the Slades to say that Tanfi agreed or must be taken to have agreed to fund the Slades’ monthly payments due to the acts of Manzo. It might have been the Slades’ hope or desire or a convenient ex post facto justification for their own failure to save the money needed to meet their mortgage obligation, but regardless, the evidence does not bear out an allegation that Tanfi made a binding agreement.
[40] Mr. Slade argues that because a broker is required to disclose to a lender issues concerning the borrower’s creditworthiness, Manzo breached his duty of care. That may well be. It may be that the lender Tanfi has grounds for complaint. That does not help the Slades however. Whatever rights the Slades may have against Mr. Manzo, if any, there is no basis to conclude on the pleadings or the evidence, including Mr. Slade’s discovery and his contemporaneous conduct, that the Slades’ monthly interest payments were to be financed by Tanfi.
[41] Therefore when the Slades failed to make their December 1, 2009 payment, they were in default of the mortgage.
Is there a Duty to Advance to a Borrower in Default?
[42] Mr. Slade did not argue the point but in considering the case from the defendants’ perspective, it occurred to me that an argument might lie that the lender was obligated to advance or to give notice prior to refusing to advance the first $35,000.
[43] The mortgage has a standard “No Obligation to Advance” clause in para. 7 of the Standard Charge Terms. Moreover, in Royal Bank of Canada v. Hallmark Golf Developments Inc., 1993 ABCA 255 the Alberta Court of Appeal dealt with a similar issue with commercial practicality as follows:
The mortgagee argues that it would take a formal declaration of default and advance notice before it could refuse to permit draws under the revolving line of credit. We see no clause or condition to that effect. That the mortgagee would be obliged to advance more money to a borrower in default and shaky, and whose loan could be called at once, offends common sense. When counsel for the mortgagee was asked whether he really wanted this Court to put such a proposition of law into a judgment, he backpedalled, but we cannot disentangle the two questions. There was no obligation, on the facts of this case, to permit the further draws after the liens.
[44] While the security of the mortgage required 15 days default and 35 days’ notice for enforcement by power of sale, the debt obligation required no such notice (compare Standard Charge Terms at para. 9 to 13). Particularly given the conditionality of the two advances in the express terms of the agreement, I see nothing in the contract that obliged the lender to advance the $35,000 when the borrower was already in default. Technically, the Slades’ failure to pay amounted to a repudiation of the contract and Tanfi’s refusal to advance thereafter was an acceptance of the repudiation by conduct. The advances made thereafter were consensual and did not oblige Tanfi to do more. It has been trying to get paid ever since.
The Equities
[45] Mr. Slade made several submissions that the lender was trying to run up its 14% interest rate and was predatory. Mr. Slade referred to a letter in which counsel for Tanfi suggested that Tanfi assist the Slades with a refinancing so as to enable Tanfi to report to the market place that the Slades were in good standing and in that way enable the Slades to obtain replacement financing. Mr. Slade read the letter as a threat by Tanfi to defame the Slades unless they refinanced at Tanfi’s usurious interest rates. The benefits of independent and experienced legal counsel and the prejudice from the lack of experience and legal knowledge are evident in this argument.
[46] Mr. Slade gave no evidence of any basis to avoid the second mortgage that the defendants agreed upon to obtain another $50,000 from Tanfi ($47,000 after fees etc.). In their pleading they claim “extreme duress”. They do not make out any wrongdoing by Tanfi who continued to try to protect its investment including worsening its exposure by providing more funding to the Slades.
[47] In all, despite the rhetorical eloquence of Mr. Slades’ submissions before Stinson J. and then before me, when pushed to expose the evidence and the underlying, contemporaneous documents, the Slades’ counterclaim does not withstand analysis. They were in urgent circumstances with their prior lender. To avoid a sale, they chose to take a high rate mortgage that they could not carry and they put their equity at risk to do so. They could have let the property be sold by the prior lender and kept the equity themselves. They chose to refinance with Tanfi. Upon receiving Tanfi’s advance, they did not manage their cash flow. In the hurly burly of their scheduling and debt crises, they spent all of their money and let their mortgage go into default. Nothing in the mortgage or the loan agreement required Tanfi to advance to the Slades when they were in default. Neither the Slades nor Tanfi obtained the appraisal that was a condition precedent to an advance in any event.
[48] I reject the argument that Tanfi breached a duty of care to the Slades by agreeing to lend to them based on the value of their equity in the collateral without paternalistically ensuring that the Slades could afford to make their mortgage payments. While one can raise one’s eyebrows at the willingness of a lender to take that kind of risk, it bargained for a 14% return and a 2% fee and it was willing to put its funds at risk to obtain the rewards that it negotiated. The law provides for freedom of contract. None of the recognized limits of such freedom are invoked in this case. Tanfi did not have a duty to protect the Slades from their own decisions.
[49] The Mr. Slade actually made no legal arguments against the applicable contractual rates of interest except that 14% was a high rate. I see no basis to relieve against it. It was a high risk loan as subsequent events have proven.
[50] As to Tanfi running up its interest, if Mr. Slade wished to stop interest from accruing, he could have repaid the principal at any time. If he was worried about the risk of prejudice by an admission, he could have brought a motion. The fact that he still has paid not a cent to the plaintiff does not put any equities on his side of the ledger.
Judgment
[51] I am satisfied on reading the affidavits filed, the multiple documents briefs filed by the Slades, and hearing the evidence of Mrs. Ieraci, Mr. Slade, and Mr. Manzo, that I can have confidence that I have the evidence to resolve the issues identified by Stinson J. and by me. I have heard the relevant witnesses to the formation of the contract. The documents are the contemporaneous documents. A fuller trial on other issues is not necessary to reach a fair and just outcome in the counterclaim. If Tanfi was not obliged to advance, as I have found, then the counterclaim must be dismissed. The one finding of fact or mixed fact and law drives the answers to the six questions set out by Stinson J. A trial on other issues would not change the outcome and would not be the most efficient, affordable or proportionate process.
[52] Mr. Markin filed amortization tables with no objection from Mr. Slade. The table for the first mortgage ends at January 1, 2013 at $871,633.56. The table for the second mortgage ended at January 1, 2015 at 108,079.46. Both tables include a $250 per month late charge. While I might have been inclined to consider the charge a penalty, given its regularity, I am satisfied that it is effectively a fixed interest on arrears. As it does not bring the effective interest rate near to usurious limits, and it is provided for in the agreement, I am satisfied that Tanfi is entitled to the full amounts claimed.
[53] The mortgage provides for the Slades to fully indemnify Tanfi for legal fees and disbursements. Mr. Markin advises that his costs calculated on a substantial indemnity basis are $22,187 for the motion and mini-trial plus $4,000 for the rest for the action. He also seeks a further $1,250 for an appearance that he made before a Master in a motion brought by the Slades that was abandoned. The time for seeking those costs was before the Master on the wasted appearance. In addition to the costs that are already owing from the Slades to Tanfi, I fix Tanfi’s costs on a substantial indemnity basis under the mortgage at $26,000.
[54] Tanfi is entitled to judgment in the aggregate amounts set out in para. 52 above plus interest after judgment at 14% per annum compounded monthly. Tanfi is entitled to issue a writ of possession for the premises municipally described as 5400 Sideline Road 32, Pickering, Ontario, Part Lot 33, Concession 9, Parcel 5, Hamlet of Clairmont, City of Pickering. The stay of the judgment on the main claim is lifted. The counterclaim is dismissed as against Tanfi. Mr. Markin may send a draft order directly to me for signature. I dispense with need for the Slades to approve a draft order as to form and content.
F.L. Myers J.
Released: February 3, 2015
CITATION: Tanfi Limited v. Slade et al., 2015 ONSC 778
COURT FILE NO.: CV-11-427310
DATE: 20150203
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
TANFI LIMITED.
Plaintiffs
- and -
JAMES HAROLD FREDERICK SLADE and NANCY JEAN SLADE
Defendants
AND B E T W E E N:
JAMES HAROLD FREDERICK SLADE and NANCY JEAN SLADE
Plaintiffs by Counterclaim
-and-
TANFI LIMITED and FRANK MANZO
Defendants by Counterclaim
REASONS FOR DECISION
F. L. MYERS, J
Released: February 3, 2015