Court File and Parties

COURT FILE NO.: CV-13-4558-00 DATE: 2016 06 10 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

G. GORDON MOHAN Applicant – and – BANK OF MONTREAL, CLIFFORD DE SILVA and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO as represented by the MINISTER OF GOVERNMENT SERVICES Respondents

Counsel: Mario Merrochi (Birenbaum, Steinberg, Landau, Savin & Corlaine, LLP), Counsel for the Applicant Allyson Fox (Rubenstein Siegel), Counsel for BMO Sarah Valair (Crown Law – Civil), Counsel for The Minister James C. Morton (Morton Karrass LLP), Counsel for De Silva

HEARD: April 27, 2016.

Endorsement

TRIMBLE J.

Nature of Application:

[1] In 2012, Mr. De Silva sold his home for approximately $2.2 million. The solicitor for the Purchaser requisitioned off title a mortgage that the Bank of Montreal (BMO) registered against the property (the 2006 mortgage) as well as a mortgage registered to a numbered company which as second in priority.

[2] Mr. Mohan, Mr. De Silva’s solicitor, procured a copy of the Land Titles Parcel Register for the property which showed only active charges; one to BMO (the 2006 mortgage) and one to a numbered company (the second mortgage). He gave his undertaking to remove the mortgages. He wrote to the mortgagees to obtain discharge statements. On closing Mr. Mohan, on behalf of Mr. De Silva, paid the mortgagees the amounts requested in their discharge statements.

[3] Unbeknownst everyone except BMO and Mr. De Silva, there was an earlier BMO mortgage (the 2004 mortgage) which had been deleted from title, mysteriously, before closing. BMO refused to provide its discharge of the first mortgage until it was paid in full for the 2006 mortgage. It applied the payment from Mr. Mohan to the 2004 mortgage that had been deleted from the Parcel Register.

[4] Mr. Mohan brings this Application for an order under section 12(8) of the Mortgages Act discharging the 2006 mortgage and rectifying the Parcel Register under section 159 or 160 of the Land Titles Act. BMO opposes Mr. Mohan’s Application, but brings its own Motion under Rule 14.05(3)(h), seeking judgment against Mr. De Silva under the 2006 mortgage.

[5] BMO points out that the real underlying issue is who should bear the consequences of the mistaken deletion from the Parcel Register of BMO’s 2004 mortgage? It might be:

a) Mr. Mohan, solicitor for the vendor who gave a solicitor’s undertaking to have BMO’s 2006 mortgage discharged and the charge removed from title, if the 2006 mortgage is not discharged;

b) BMO, if the 2006 mortgage is discharged;

c) Solicitor Sheikh, BMO and the purchaser’s solicitor, if BMO establishes that Mr. Sheik was negligent; or

d) The tax payer, if the 2006 mortgage is deleted from title and the compensation fund under the Land Titles system makes a payment because of what everyone agrees is the mistaken deletion of the 2004 mortgage from the Parcel Register by the Land Titles office.

[6] BMO may be correct with respect to the practical effect of the resolution of the question of the deletion of the 2004 mortgage. This is not the question before me. I am asked to deal with only the three issues, below. I do not address the possible liability in negligence or breach of duty by any of the parties, Mr. Rafiq or Mr. Sheik

Issues and Decision:

1. Should the 2006 mortgage be discharged? – Yes.
2. Should the Parcel Register be rectified by deleting the 2006 mortgage? – Yes.
3. Is BMO entitled to judgment against Mr. De Silva under the 2006 mortgage? – Yes.

Facts:

[7] The following are the relevant facts, none of which are contested.

[8] Beginning in 2004, Mr. De Silva was the registered owner of 1276 Mississauga Road, Mississauga, Ontario (the property), which is registered in Ontario’s Land Titles system.

[9] In March, 2012, Mr. De Silva agreed to sell his home to Shama Rafiq (not a party to this Application) for $2,165,000.00. After adjustments and real estate commissions Mr. De Silva was to receive $1,700,961. The sale was to close on April 30, 2012. Mr. De Silva actually received almost $1.8 million.

[10] The Agreement of Purchase and Sale contained standard wording requiring Mr. De Silva to remove all mortgages from title so that he could deliver to Mr. Rafiq clear title, unless Mr. Rafiq agreed to assume any of the existing charges. He did not. The sale closed on April 30, 2012, subject to conditions. Mr. Mohan delivered his undertaking to discharge the mortgages shown on the Parcel Register. It was not until July, 2012 that BMO said it would not deliver a discharge of its mortgage which appears on the Parcel Register because the money Mr. Mohan paid to BMO was used to satisfy the 2004 mortgage. Because BMO will not deliver its discharge, Mr. Mohan cannot fulfill his solicitor’s undertaking to deliver a discharge of the mortgage to Mr. Rafiq. Therein lays the problem giving rise to this Application.

[11] The property was registered in Land Titles by the PIN registration number 13449-1064.

[12] Mr. De Silva retained Mr. Mohan, a solicitor, to act on the sale for Mr. De Silva.

[13] Mr. Mohan obtained two copies of the Parcel Register (Abbreviated) for the parcel ending in PIN 1064: one on April 18, 2012 which showed only the current registrations on the property, and one on April 19 which showed current registrations and deletions of registrations against the property. Both showed only two active charges against the property: one by BMO, instrument number PR1099700 in the original amount of $800,000 (the 2006 mortgage), and one by 2015310 Ontario Inc., instrument number PR 1690801 in the original amount of $400,000. The more detailed Parcel Register obtained on April 19 showed an older BMO mortgage, instrument number PR591266 (the 2004 mortgage), which had been deleted from the Parcel Register. There is no indication on the Parcel Register that the 2004 mortgage had been discharged.

[14] Unbeknownst to everyone but BMO and Mr. De Silva, on February 16, 2004, BMO advanced to Mr. De Silva $325,250 for the purchase of the property and registered a mortgage on title, instrument number PR591266 (the 2004 mortgage). The 2006 mortgage was registered on title as security for a Home Owner’s Line of Credit of $800,000 which BMO extended to Mr. De Silva on June 16, 2006.

[15] Mr. Mohan, relying on the Parcel Register, proceeded on the basis that there was only one BMO mortgage secured against the property (the 2006 mortgage) and a second mortgage to the numbered company. The latter is not at issue in this Application.

[16] On April 23, Mr. Rafiq’s lawyer, Mr. Sheikh, wrote to Mr. Mohan and requisitioned a discharge of all outstanding mortgages registered against the property. He named the 2006 mortgage and the numbered company’s mortgage, specifically, giving the document registration number for each and the original loan amounts.

[17] On April 24, Mr. Mohan responded to the requisition letter. With respect to the 2006 mortgage, advised that he had requested the discharge statement and on closing would give his solicitor’s undertaking that he would pay it off from the proceeds of sale, obtain a discharge statement, and register it.

[18] Mr. Mohan requested a payout statement from the BMO branch from which Mr. De Silva borrowed the money for the 2006 mortgage (Brown’s Line, in Etobicoke). He did not refer to the 2006 mortgage by registration number nor did he attach the Parcel Register which he obtained showing the 2006 mortgage. Rather, he referred to the 2006 mortgage as BMO’s “first charge against the property” since BMO’s 2006 mortgage was first in priority according to the Parcel Register, and there were no other charges by registered BMO shown. He advised BMO that the transaction was to close April 30.

[19] On April 25, BMO’s Brown’s Line branch responded with a “Statement of Mortgage Loan Account for Payout Purposes” which identified the property and stated that the payout amount was $249,190.05, with a discharge fee of $200. This was amended by crossing out the two amounts and indicating that the payout was $248,990.05. In fact, this payout statement pertained to the amounts owing under unregistered 2004 mortgage, not the registered 2006 mortgage. The payout statement referred to BMO’s mortgage number, but did not refer to the registered instrument number.

[20] In addition, on April 30, 2012, Mr. Mohan obtained from Mr. De Silva a signed direction that the amount owing as set out in BMO’s payout statement would be paid to BMO from the closing funds and gave an undertaking to the purchaser to discharge the 2006 mortgage upon closing. On April 30, Mr. Mohan delivered a certified cheque to BMO for $249,013.83 to satisfy the BMO mortgage shown on the Parcel Register (the 2006 mortgage), and delivered to Mr. Sheikh, Mr. De Silva’s signed direction and his signed solicitor’s undertaking.

[21] BMO used the $249,013.83 and discharged its 2004 mortgage. In July, 2012, and only in response to Mr. Mohan’s follow up for the discharge, BMO, for the first time, raised the issue of its other mortgage and said it would not discharge the 2006 mortgage registered on title until it was paid in full. This was the first time BMO raised with anyone the existence of another mortgage.

What Happened to the 2004 Mortgage Registration?

[22] What Happened to the 2004 Mortgage Registration? Therein hangs a tale.

[23] As indicated above, in order to purchase the property, Mr. De Silva he gave BMO the 2004 mortgage of $326,250. On June 16, 2006, he gave BMO the 2006 mortgage as collateral to secure the $800,000 line of credit.

[24] When Mr. De Silva purchased the property, the property had a PIN of 13449-0332. The 2004 mortgage was registered on title in the Land Titles register against the property bearing PIN ending 0332.

[25] On July 21, 2004, Mr. De Silva transferred a small portion of the property to the City of Mississauga. This required the property to be split into two separately registered parcels. The PIN for the old property (ending 0332) was cancelled and the parcel split into two new ones. Mr. Da Silva’s parcel now bore the PIN ending 1064, and the City’s parcel the PIN ending 1063.

[26] BMO registered a discharge of its 2004 mortgage registered against the property PIN ending 0332. The discharge for the 2004 mortgage registered on title to the pre-split parcel stated that it applied only to the part of the property on Part 1 on Plan 43R2933 (PIN ending 0332) that Mr. De Silva retained. When the discharge re the BMO’s 2004 mortgage was registered on title to the property bearing PIN 0332, it discharged the 2004 mortgage against both the City’s Parcel (PIN ending 1063) and Mr. De Silva’s Parcel (PIN ending 1064). The 2004 mortgage was never registered against Mr. De Silva’s Parcel (PIN ending 1064). Hence, the 2004 mortgage did not appear on the Parcel Registers Mr. Mohan obtained.

[27] According to Kenneth Crawford, Senior Legal and Technical Analyst, Regulatory Services Branch who filed an affidavit on behalf of Her Majesty, the deletion of BMO’s 2004 mortgage from Mr. De Silva’s parcel, or the failure to re-register the mortgage after the parcel ending in PIN 0332 was split, was inadvertent.

What did the Parties Know about the 2004 Mortgage at the time of the 2012 Sale?

[28] What did the Parties Know about the 2004 Mortgage at the time of the 2012 Sale?

[29] Mr. Mohan knew nothing of the 2004 mortgage at the time he acted. Mr. De Silva did.

[30] Mr. De Silva attended at Mr. Mohan’s office to sign the closing documents. When Mr. Mohan told him that he was to receive approximately $1.89 million, Mr. De Silva told Mr. Mohan that he thought there was a line of credit with BMO. He did not say that it was secured. Mr. Mohan showed Mr. De Silva the Parcel Register and BMO’s payout statement. He said that the Register and payout statement only refer to one mortgage.

[31] According to Mr. De Silva’s evidence and that of a friend he brought with him (who swore an Affidavit) Mr. De Silva said nothing more to Mr. Mohan about the line of credit. He knew that he had a line of credit. Presumably he had in his possession the documents that he signed at the time the line was extended to him. Presumably he knew it was secured by a collateral mortgage. He had been making payments on it.

[32] De Silva’s sale to Rafiq completed. In order to allow it to do so, BMO’s 2006 mortgage remains on the property pending whatever I may do in this case.

[33] Despite owing approximately $780,000 on the line of credit, it appears that Mr. De Silva thought that any mistake was BMO’s responsibility and did not think it necessary to contact them. He knowingly received $780,000 more than he was supposed to from the sale of the property.

[34] At the hearing of the Application, I was advised that the approximately $1.8 million Mr. De Silva received from the sale of the property “is no longer available” to pay the line of credit.

[35] BMO knew about its two mortgages, but did not said nothing to Mr. Mohan until July 2012, when Mr. Mohan followed up with respect to the discharge he requested in April. BMO said that the mortgage was not yet paid in full. BMO had expected it to be paid on closing. It was then that Mr. Mohan discovered the 2006 mortgage was still outstanding.

[36] It is of significance that BMO did not mention that it had two mortgages, either when it responded to Mr. Mohan’s letter requesting a payout schedule, or any time between then and April 30 when Mr. Mohan gave his solicitor’s undertaking. BMO made both the 2004 and 2006 loans and registered mortgages on title to each. Both the loans were made by the Brown’s Line BMO branch.

[37] In addition, BMO’s employee, Melville Maciel, who provided the payout summary on April 25, 2012, was the same loans officer who was involved in the two loans secured by the 2004 and 2006 mortgages. The Brown’s Line branch maintained one file on containing the documents on all of Mr. De Silva’s loans from BMO. It knew that it had two mortgages. It knew that the 2006 mortgage was in second position. BMO knew that the property was being sold. It knew at the time that it gave its payout statement for the 2004 mortgage that there was another mortgage for which no payout statement was requested, and for which no request for assignment had been made so that for the 2006 mortgage could be assigned to or assumed by Mr. Rafiq.

[38] Further, Mr. Kulwant Sodhi, a loans officer at BMO’s Brown’s Line branch was processing the mortgage for Mr. Rafiq so that he could purchase the property from Mr. De Silva. Mr. Sodhi was also involved in processing both of Mr. De Silva’s loans in 2004 and 2006.

[39] BMO and Mr. Rafiq were both represented by the same lawyer, Mr. Sheikh. It was Mr. Sheikh who requisitioned the BMO and the numbered company’s mortgages off title. Mr. Sheikh obtained the Parcel Register which showed the existing charges and deletions. He requisitioned off title only the 2006 mortgage and the numbered company’s mortgage using in his requisition letter with respect to those mortgages using the identical description of the mortgages contained in the Parcel Register.

[40] In cross examination of its representative, BMO acknowledged that Mr. Mohan could not have known that the 2004 mortgage still existed and that it was deleted by mistake. BMO says Mr. Mohan is not at fault for the deletion of the 2004 mortgage.

[41] Finally, BMO has sued Mr. Sheikh for damages in a separate action, which is in abeyance pending my decision in this case. I speculate that Mr. Mohan has also been sued. The parties advise that a claim has been made and refused under the compensation fund set up to address errors in the Land Titles system. The Crown takes the position that the compensation fund is the last stop for BMO, once it exhausts all other avenues, including pursuing Mr. De Silva.

Analysis:

[42] Many of the submissions made at the hearing addressed whether Mr. Mohan, and to some extent, Mr. Sheikh did enough to determine the status of the 2004 mortgage. I made it clear to counsel that any finding I might make in these Applications was for the sole purpose of the request to discharge the 2006 mortgage and rectify the Land Titles register. I would not make any finding of negligence of either solicitor as such a finding was not necessary to address the issues required in these Applications. In any event, Mr. Rafiq is not bound by any finding I might make as he was not a party to these proceedings.

Issue 1: Should the 2006 mortgage be discharged?

[43] Mohan argues that the court should order a discharge of the mortgage under s. 12(8) of the Mortgages Act, which reads:

12(8) Death of mortgagee, order for discharge When a mortgagee has died and all money due upon the mortgage was paid to him or her in the mortgagee's lifetime or has been paid to a person entitled to receive the same after the mortgagee's death or where in any other case it appears that all money due upon the mortgage has been paid and for any reason a discharge or reconveyance cannot be obtained without undue delay and expense the court may make an order discharging the mortgage. [Emphasis added]

[44] Mr. Mohan says that a discharge cannot be obtained because BMO refuses to provide one.

[45] Mr. Mohan argues that BMO should be estopped from taking the position that the 2006 mortgage is not discharged. BMO, by providing the payout statement in respect of the only mortgage BMO registered on title, made a representation with the intention, actual or presumptive, of inducing Mr. Mohan to alter his position to his detriment.

[46] Mr. Mohan says that he relied on this representation to his detriment. Mohan says that had he been made aware that there was another mortgage, he would have asked for a payout statement and retired that other mortgage out of the proceeds of sale for the property. He also would not have given the undertaking to Mr. Rafiq had he been advised that the mortgage for which BMO provided a payout statement was NOT the mortgage listed on the Parcel Register. Mr. Mohan relies on Piche v. Niagara Credit Union Ltd. (1988), 66 O.R. (2d) 93 and Mutual Life Assurance Company of Canada v. Canada Trustco (1994), 51 A.C.W.S. (3d) 343 (Ont. Gen. Div.).

[47] BMO says that it would be inequitable to impose on it the full consequences or effects of the Land Registry Office’s error. BMO says that, regardless of what Mr. Mohan thought about the mortgage on the Parcel Register, the mortgage listed on the Parcel Register (with respect to which Mr. Mohan gave an undertaking) was the 2006 mortgage used to secure the line of credit. BMO was not paid out for that loan following the close of the sale of the property. It remains in force. BMO is not required to give a discharge statement for the 2006 mortgage, since it was not asked for one. Similarly, it is not required to provide a discharge of the 2006 mortgage as it is still outstanding. Mr. Mohan asked for a payout schedule for its “first mortgage”. Since it held two mortgages on the property, it provided its payout schedule for its first mortgage, the 2004 mortgage.

[48] BMO says that in order to obtain a discharge under s. 12(8) of the Mortgages Act, the applicant must first establish that all money due upon the mortgage has been paid: see Piche. In the absence of evidence demonstrating that all money due under the mortgage has been paid, the Court has no jurisdiction to order a discharge. BMO argues that the cases Mr. Mohan relies on are distinguishable. They deal with errors in discharge statements. There was no error in the discharge statement provided by BMO. BMO was never asked to provide a discharge statement relating to the 2006 mortgage. Further, BMO made no representations regarding the 2006 mortgage. Mr. Mohan’s estoppel argument, therefore, does not apply.

[49] The Crown said that it takes no position on the merits of the matter. It says it is present in this matter purely as someone affected by the Order made (as there will be a claim against the fund that addresses errors on the Register), and wished to be a resource to the Court. The Crown, however, did take a position. It said that Mr. Mohan could have done a more extensive search to discover the 2004 mortgage. The Crown admits that the 2004 charge was deleted from the Parcel Register. The fact that it had been deleted was noted in the Parcel Register showing the deleted entries. This would have visible to Mr. Mohan upon reviewing the register. Although the fact that it was deleted in error was not revealed by the Parcel Register itself, Mohan should have seen that there was no discharge of the 2004 mortgage registered on title, which ought to have indicated to him that further inquiries were necessary.

[50] De Silva appears to take no position on this issue.

[51] For the reasons that follow, I order that BMO’s 2006 mortgage is discharged.

a) The Effect of Registration

[52] Any discussion of discharge of BMO’s 2006 mortgage must begin with a discussion of what registration in Land Titles means.

[53] Section 78(4) of the Land Titles Act reads:

78(4) Effect of registration When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register.

[54] Subsections 4.1 and 4.2 of section 78(4) of the Land Titles Act, and section 155 except from the ambit of section 78(4) fraudulent documents and fraudulently registered documents. Those exceptions do not apply here.

[55] In CIBC Mortgages Inc. v. Chan, [2005] O.J. No. 5001, 2005 CarswellOnt 6726 (C.A.), the Court of Appeal considered s. 78(4) in the context of creditors to a wife trying enforce mortgages against the couple’s home which the wife obtained and registered fraudulently, and which she let go into default. The Court accepted that the Land Titles abstract or register is a mirror of the state of title, and that a purchaser need not investigate the history of past dealings with the land or search behind what is on the register (see Marsha Neave, “Indefeasibility of Title in the Canadian Context” (1976) 26 U.T.L.J. 173 at 174, as adopted by Blair J.A. in Regal Constellation Hotel Ltd., Re (2004), 71 O.R. (3d) 3555 (Ont. C.A.).

[56] In other words, the register page is the accurate title to the property.

b) What is “the mortgage” under s. 12(8) of the Mortgages Act?

[57] Under section 12(8) of the Mortgages Act, ”… where in any other case it appears that all money due upon the mortgage has been paid and for any reason a discharge or reconveyance cannot be obtained without undue delay and expense the court may make an order discharging the mortgage.”

[58] The central question on this aspect of the Application is what constitutes “the mortgage” under the section? Mr. Mohan says that in the circumstances of this case, “the mortgage” means the one registered on title. He says that BMO represented the payout at a certain amount, which he paid to BMO. Therefore, BMO is estopped from its position in refusing to issue the discharge certificate.

[59] BMO says “the mortgage” must mean the existing mortgage or mortgages, irrespective of registration. Since it had two mortgages and Mr. Mohan only asked for a payout statement for BMO’s “first mortgage”, the mortgage for which they gave a payout statement is the 2004 mortgage.

[60] I disagree. “The mortgage” referred to in the section of the Act must be the mortgage on title, at least in the circumstances of this case.

[61] Section 78(4) says that the register is an accurate reflection of title, at least as of the day that the register is searched. Registration is notice to the world of the state of title. Therefore, insofar as strangers to the property are concerned such as Mr. Mohan, “the mortgage” that s. 12(8) of the Mortgages Act refers to must be the mortgage registered on title.

c) Is BMO Estopped from Taking the Position that the 2006 Mortgage was not paid?

[62] BMO is estopped from saying that the 2006 mortgage is not paid. The 2006 is discharged.

[63] Mr. Mohan relies on s. 12(8) of the Mortgages Act to obtain a discharge. Section 12(8) provides that a party is entitled to an order discharging the mortgage once s/he can establish that “all money due upon the mortgage has been paid”. He also relies on Piche v. Niagara Credit Union Ltd. (1988), 66 O.R. (2d) 193 at p. 195 (Ont. S.C.), Mutual Life Ass. Co. v. Canada Trustco Mortgage Co., 1994 CarswellOnt 3314, at para5 to 7 (Ont. Gen. Div.).

[64] BMO says that Piche and Mutual Life are cases that deal with errors in the mortgage payout statement and are distinguishable since there is no error in BMO’s mortgage statement. Instead, BMO relies on CIBC Mortgages Inc. v. Computershare Trust Co of Canada, 2015 ONSC 543 (S.C.J.), which BMO says is analogous.

[65] Piche and Mutual Life apply to this instance; Computershare does not. In Mutual Life, McLean, J. notes that two lines of cases have developed from s. 12(8): a) those involving erroneous mortgage statements where the recipient could have discovered the error by calculation or checking the statement itself, and b) those in which the mortgage statement in and of itself is correct, but is in error due to an outside false assumption (see Mutual Life at para. 8 and 9). Piche and Mutual Life fall within the second category.

[66] This case, too, falls within the category of cases in which the mortgage statement in and of itself is correct, but it is in error due to an outside false assumption; namely that the BMO payout statement was for the 2006 mortgage. This assumption is external to the payout statement.

[67] CIBC v. Computershare involves the fraudulent discharge of Computershare’s mortgage. Murray J. held that although no one knew who discharged the mortgage, the property owners registered what they knew to be a fraudulent discharge. Murray, J. held that Computershare and CIBC ought not to have been aware that the mortgage had been discharged fraudulently and that the discharge had been registered (para. 29). He also held that Computershare’s mortgage retained its priority as the first charge, and that the Parcel Register should be rectified to show this by deleting the fraudulent mortgage, and restoring Computershare’s charge as if the fraudulent discharge had not been registered.

[68] Computershare does not apply for two reasons. First, there was no material before the court in that case to suggest that Computershare or CIBC had any way of rectifying the situation. BMO had that ability in this case. Second, Computershare is the subject of an appeal. CIBC appealed to the Court of Appeal. The Court of Appeal ordered that the appeal from Murray, J. ought to have been to the Divisional Court, and transferred the appeals there (see CIBC Mortgages Inc. v. Computershare Trust Co of Canada, 2015 ONCA 846).

[69] In order for BMO to be estopped by its mortgage payout statement from taking the position that the 2006 mortgage was not paid in full, BMO must a) have made a representation by word or deed to Mr. Mohan, b) with the intention, actual or presumptive, that Mr. Mohan would rely on it, c) Mr. Mohan did so reasonably, d) and in so doing acted to his detriment (see Piche, p. 196 and Mutual Life, para. 9) To put it more simply, did BMO take a statement to which it ought to be held?

[70] BMO says estoppel does not apply. It made no representation about the 2006 mortgage. Its representation was with respect to the payout value of the 2004 mortgage. Further, it says that it was not reasonable for Mr. Mohan to have relied on it.

[71] I disagree.

[72] Mr. Mohan acted reasonably in relying on BMO’s discharge statement. He searched title. He obtained a copy of the Land Titles Parcel Register. He relied on title as set out in the Land Titles Parcel Register, as he was entitled to do. He requested a payout statement for the first of the two registered mortgages, which was held by BMO. BMO responded by providing a payout statement. Mr. Mohan, in good faith, dealt with BMO and relied on the payout statement. BMO’s representative agreed on cross examination that Mr. Mohan was not at fault for the deletion from the Parcel Register of BMO’s 2004 mortgage and had no other way of determining from the correspondence and Parcel Register that the 2004 mortgage remained outstanding or even bound the property.

[73] Further, Mr. Mohan’s reliance on the statement was to his detriment. He gave a solicitor’s undertaking to the purchaser that the mortgages registered against the property would be discharged. He did all he could reasonably do to fulfill that obligation. He is bound by his undertaking should he not be able to fulfill it. BMO prevents him from fulfilling his undertaking as it will not issue a discharge of the 2006 mortgage. Hence, Mr. Mohan brings his Application.

[74] The real issue is whether BMO made a representation by word or deed to the effect that the 2006 mortgage would be fully paid once it received $248,990.05. BMO made such a representation.

[75] As indicated above, Mr. Mohan asked for a payout statement for the BMO mortgage listed on the Land Titles Parcel Registry. He was entitled to rely on that Parcel Registry as an accurate statement of the state of the title at the time he did his search. BMO’s mortgage was first in priority to that held by a numbered company. Hence it was a “first mortgage”.

[76] I find that BMO did make a representation to Mr. Mohan that the 2006 mortgage shown on the Parcel Register would be fully satisfied on the payment of approximately $249,000.00. BMO failed to protect its own interest. It knew that it had two mortgages. Its file, which someone must have, or ought to have reviewed before giving the discharge statement, is organized by debtor, not by transaction. Therefore, it contained all of the documentation concerning both the 2004 and 2006 mortgages. Further, Mr. De Silva dealt with BMO’s Brown’s Line branch for each of the loans that were secured by the 2004 and 2006 mortgages. The employee at the Brown’s Line branch that gave the discharge statement was involved in both the 2004 and 2006 loan transactions secured by the two mortgages. There was another Brown’s Line branch employee who was also involved in Mr. Rafiq’s mortgage, who was also involved in the two loans transactions with Mr. De Silva.

[77] At the time that BMO gave the payout statement it knew a) that the property was being sold, b) what the closing date for the sale was, c) that it had two mortgages secured on title (although BMO did not know that one had been deleted from the Parcel Register in error), and d) that if the property were sold and the purchaser did not assume the other of BMO’s two mortgages it might lose its security. It did not receive any request that the purchaser wanted to assume the mortgage. In fact, BMO knew exactly the opposite. BMO was the mortgagee for Mr. De Silva’s purchaser, Mr. Rafiq, and was providing in excess of $1.2 million in financing to Mr. Rafiq for the purchase. Therefore, at the time that BMO gave its payout statement, it was the only person with the knowledge to, and who could have avoided the problem the parties now face. It could have done so with a two word response to Mr. Mohan’s request for a mortgage payout statement: “Which mortgage?”

[78] The above is sufficient to establish that BMO is estopped from refusing to discharge its 2006 mortgage.

[79] It is likely, however, that BMO had constructive knowledge of the state of the Parcel Register before closing, and had the ability to rectify the situation before closing.

[80] It is arguable that BMO, by April 23, 2012, at the latest, had constructive knowledge that the Parcel Register did not show its 2004 mortgage. How did BMO have constructive knowledge that the 2004 mortgage had been deleted from the Parcel Register?

[81] On April 23, 2012, Mr. Sheikh, solicitor for Mr. Rafiq and for BMO, provided his requisition letter to Mr. Mohan. As solicitor for BMO in the transfer of the property from Mr. De Silva to Mr. Rafiq, Mr. Sheikj’s job was to register BMO’s mortgage to Rafiq and make sure that it was not subject to other charges with priority. In this capacity, he is the agent for BMO. Information he received within the scope of his retainer that is material to the task he is to perform, is information in BMO’s possession (see Fridman, G.H,.L. Canadian Agency Law. LexisNexis (Toronto, 2009) p. 206 - 209).

[82] Mr. Sheikh’s requisitions 17 and 18 described the two mortgages registered on title using the same descriptions of the two mortgages as they appeared on the Parcel Register. As BMO’s lawyer, Mr. Sheikh made no requisition with respect to the 2004 mortgage. After BMO refused to discharge the 2006 mortgage, Mr. Sheikh indicated that in preparing his requisition letter he obtained a copy of the Parcel Register showing the deletions. He did not mention any other BMO mortgage to Mr. Mohan. As Mr. Mohan said, had he been made aware of the other BMO mortgage, he would have satisfied it, as there were sufficient funds to do so. Had Mr. Mohan been told of the other mortgage and that the mortgage payout statement pertained to it and not the mortgage shown on the Parcel Register, he would not have promised to give the undertaking in his April 24, 2012 letter answering the purchaser’s requisitions, and would not have given the undertaking to obtain and register the discharge of the 2006 mortgage which he gave on April 30, 2012.

[83] In finding estoppel and ordering that the 2006 mortgage must be discharged, I repeat the words of Fleury, D.C.J. (L.J.S.C.) in Piche at p. 197:

In any event, this case is not about the duty of care to be expected of a solicitor, but about whether or not representations were made and were acted upon to the detriment of the applicants.

Issue 2: Should the Parcel Register be rectified by deleting the 2006 mortgage?

[84] Section 159 of the Land Titles Act says that “subject to any estates or rights acquired by registration under this Act” where a court decides that a person is entitled to an estate, right or interest in or to registered land, or a charge, and if the court decides that rectification of the register is required, the court may make an order as is just. Section 160 says that “subject to any estates or right acquired by registration under this Act”, if there is a registration made, or omission of an entry from the registrar if the court is satisfied that it is just, make an order rectifying the register.

[85] Mr. Mohan submits that once the Court orders that the 2006 mortgage must be discharged, the Court should make an order directing that the Parcel Register be rectified by deleting the 2006 mortgage.

[86] BMO says that because the 2006 mortgage should not be discharged, there is no reason to order a rectification of the Parcel Register. The mortgage itself still exists. Therefore, it is an estate or right that BMO has, and the rectification of the register is subject to the estate or right that BMO has by virtue of its mortgage. Further, discharging the 2006 mortgage would create a completely different set of rights among the parties.

[87] The Minister and De Silva take no position on this issue.

[88] I order, having found that the 2006 mortgage should be discharged, that the register be rectified by showing that BMO’s 2006 mortgage, registered as instrument number PR1099700 in the original amount of $800,000, be discharged as of April 30, 2012.

Issue 3: Is BMO entitled to Judgment for the 2006 Mortgage against De Silva?

[89] Mr. De Silva raises a preliminary issue. He claims that the actions of BMO give rise to proprietary estoppel. BMO, Mr. De Silva says, permitted him to believe his property was not encumbered by a mortgage to secure the line of credit, and De Silva altered his position to his detriment as a result. This issue involves the credibility of Mr. De Silva. Therefore, his liability in terms of BMO’s application against him for judgment on the line of credit must proceed to trial. Implicitly, he also says that he is protected by the same representation and estoppel as Mr. Mohan.

[90] I disagree.

[91] In the circumstances of this case, BMO’s representation and estoppel apply to the registration of the mortgage and its discharge under s. 12(8) of the Mortgages Act. BMO did not represent that the Line of Credit had been fully satisfied. Mr. De Silva knew this.

[92] There are no material facts in dispute. Mr. De Silva did not rely on BMO’s representation. If he did, such reliance was not reasonable.

[93] The 2006 mortgage was granted to secure a homeowner’s line of credit with BMO. Mr. De Silva admitted on his cross examination or did not dispute that there is an outstanding amount under the line of credit of $784,135.29. He knew that BMO demanded that Mr. De Silva pay the amount owing. Mr. De Silva acknowledged that he owes the money. If BMO made a representation, it was only with respect to waving its security in its registration. I have ruled that the mortgage should be discharged. It is appropriate that Mr. De Silva’s liability to BMO on the covenant should be dealt with by way of Application.

[94] On the merits, based on the facts that Mr. De Silva admits or does not dispute, and notwithstanding the discharge of BMO’s 2006 mortgage securing the line of credit, BMO is entitled to judgment as against Mr. De Silva, personally, in the amount of $784,135.29 on the covenant on the mortgage, and under the agreement for the line of credit. Judgment shall issue against him, accordingly.

Costs:

[95] Mr. Mohan was wholly successful on his Application and BMO wholly successful against Mr. De Silva in its motion. The parties may address the issue of who should pay whom costs, in writing. Costs submissions are not to exceed 3 double spaced, typed pages, excluding cases or bills of costs. They are to be served and filed on the following schedule:

a. Mr. Mohan: 4 p.m., July 4, 2016 b. BMO: 4 p.m., July 11, 2016 c. Mr. De Silva: 4 p.m., July 18, 2016 d. Her Majesty: 4 p.m., July 25, 2016.

Trimble J. Released: June 10, 2016