Court File and Parties
COURT FILE NO.: 4642/15 DATE: 2016-10-04 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
CONCENTRA FINANCIAL SERVICES ASSOCIATION Plaintiff – and – KENNETH RAWLING Defendant
Counsel: Benjamin Frydenberg, for the Plaintiff Michael S. Deverett, for the Defendant
HEARD: September 27, 2016
Reasons for Judgment
Gray J.
[1] There are cross-motions for summary judgment. Plaintiff moves for summary judgment on its mortgage, which is in default, and defendant moves for summary judgment on his counterclaim that he is entitled to a refund of all payments he made under the mortgage.
[2] It is evident that both parties take the position, and agree, that the record is such that I am able to deliver a final judgment, one way or the other.
[3] For the reasons that follow, summary judgment is granted in favour of the plaintiff, and the defendant’s counterclaim is dismissed.
Background
[4] The defendant, Mr. Rawling, executed a mortgage on January 16, 2008, with respect to a property in Arthur, Ontario. There is no dispute that the default on which the plaintiff relies commenced in September, 2015. There were earlier defaults that were remedied, which I will discuss in more detail later.
[5] Notice of Sale was issued on September 8, 2015. The plaintiff secured possession of the property on January 7, 2016.
[6] Mr. Rawling is an automobile mechanic, and has been employed by a number of dealerships. His current employer is Village Nissan, in Unionville.
[7] The story starts a short time before the mortgage was executed.
[8] Mr. Rawling had an acquaintance, one Orville D. Jones, who had helped him get a job at a dealership called Downtown Nissan. Mr. Jones asked Mr. Rawling to help him out. Mr. Jones was getting a new mortgage and he wanted Mr. Rawling to sign some documents to help him with the mortgage.
[9] Mr. Jones drove Mr. Rawling and some others to the law office of Henry Gertner, a lawyer in Toronto. They went into Mr. Gertner’s boardroom where they met Mark Edwards, who was introduced as Mr. Jones’ mortgage broker. Mr. Gertner presented some documents and asked Mr. Rawling and the others to sign them, which they did. Mr. Rawling provided his driver’s licence and perhaps his birth certificate, and Mr. Gertner had copies made.
[10] After Mr. Rawling left Mr. Gertner’s office, he heard nothing further about that transaction.
[11] Sometime later, he received a call from Mr. Jones and Mr. Edwards who told him he had a unique opportunity to make $5,000. All he had to do was sign some more documents at Mr. Gertner’s office. It was the same thing he did for Mr. Jones except this time he would get paid $5,000.
[12] Mr. Rawling swears that he trusted Mr. Jones and Mr. Edwards.
[13] Mr. Rawling deposes that Mr. Edwards came to visit him at Village Nissan. Mr. Edwards told him that Mr. Gertner would pay a $5,000 finder’s fee just for signing some documents.
[14] Mr. Rawling deposes that on January 16, 2008, he met Mr. Gertner at his law office. Mr. Gertner presented some documents and he signed them.
[15] Mr. Rawling deposes that he asked Mr. Gertner if the documents that he was requested to sign created any obligation to make any payments. He says Mr. Gertner assured him that Mr. Edwards would make all the payments and he had nothing to worry about. Mr. Rawling says he trusted and relied on the advice so he signed the documents. Mr. Gertner gave him a $5,000 cheque at the end of the meeting.
[16] Mr. Rawling deposes that he later learned that the transfer of the property into his name and the mortgage of the property was a fraudulent transaction arranged by Mr. Edwards and Mr. Gertner. He says he was tricked into signing the documents. He says they knew he had no intention to live at the property or to gain any benefit from the property. No arrangements were made for him to inspect the property. He says he did not arrange for nor pay for insurance.
[17] Mr. Rawling deposes that no arrangements were discussed for him to make the initial mortgage payments.
[18] Mr. Rawling deposes that mortgages subsequent to the one he signed in this case were placed on title to the property, but he did not sign them.
[19] Mr. Rawling deposes that he does not recognize most of the documents in the plaintiff’s motion record. He notes that his name on the Agreement of Purchase and Sale is misspelled “Rawlings”.
[20] Mr. Rawling deposes that he believes that Mr. Gertner acted as lawyer for both the buyer and seller of the property and for the mortgagee and mortgagor. He says Mr. Gertner did not discuss this with him.
[21] Mr. Rawling deposes that he never received a statement of account from Mr. Gertner, nor did he pay any funds for legal services. He notes that there is reference in the statement of account produced by the plaintiff to trust documents between himself and Mark Edwards. He says this is the first he has heard of those documents.
[22] Mr. Rawling notes that the plaintiff claims that a broker named Cameron Mackie was said to be a mortgage broker employed in connection with the mortgage transaction. Mr. Rawling said he never met Mr. Mackie, nor did he speak to him. The only broker he met or spoke to was Mr. Edwards.
[23] Mr. Rawling says he never met with any representative of Concentra.
[24] Mr. Rawling deposes that for several months after the mortgage was signed, he did not make any mortgage payments. He says several months later, a woman, representative of Concentra, contacted him and asked why payments were being made by an organization called Avcom, which is a company associated with Mr. Edwards. Mr. Rawling says the representative refused to provide him with copies of any relevant documents.
[25] Mr. Rawling says he went to Mr. Gertner’s office, who got Mr. Edwards on the phone and asked why he stopped making payments to Concentra. Mr. Edwards said he would continue to make the payments.
[26] Mr. Rawling says that about a month later, Mr. Edwards stopped making the mortgage payments and Mr. Rawling started getting harassing calls from Concentra. He said he was made to believe that he had no choice but to make the mortgage payments. He said he began making payments, and he drove to Arthur to look at the property. It was a mess. It looked like the house had not been inhabited for a long time.
[27] Mr. Rawling says he doubts that he signed a number of the documents in the plaintiff’s motion record, although he is unable to say for certain.
[28] Mr. Rawling says that is clear that Mr. Edwards impersonated him for some period of time after Mr. Rawling signed the mortgage.
[29] Mr. Rawling says that he was undergoing some health difficulties and was under considerable stress. He says the calls from Concentra were very distressing and he thought about killing himself.
[30] Mr. Rawling, in addition to signing various documents involving the mortgage transaction, signed a mortgage commitment. Furthermore he supplied an employment letter signed by a representative of Village Nissan, confirming his employment and his estimated earnings of $65,000. He also provided his Notices of Assessment from Canada Revenue Agency for the 2005 and 2006 tax years, showing total income of $71,588 in 2005, and $83,118 for 2006.
[31] Mr. Gertner acted for Concentra in registering the mortgage. Mr. Rawling signed a consent to Mr. Gertner acting on both sides of the transaction.
[32] Mr. Rawling was cross-examined on his affidavit. His testimony included the following:
Q. All right. So you were ultimately trusting Mr. Edwards to make the mortgage payments, correct? A. I was trusting Mr. Gurtner that he was a lawyer and telling me that I was not obligated to make the payments.
Q. Well, he was telling you that someone else would make the payment --- A. Yes.
Q. --- is that the case? A. So I was trusting him as a lawyer.
Q. Right But did – was he like Mr. – was he guaranteeing the payments on behalf of Mr. Edwards? Did he provide you with a guarantee that if Mr. Edwards failed to make the payments, that he would make the payments? Did he tell you that? A. No, but I trusted him as a – he’s a lawyer
Q. Right. A. --- so he’s supposed to have certain, whatever, morals or whatever.
Q. But he doesn’t have a crystal ball and he – A. No. No. No.
Q. --- doesn’t know what could happen financially to Mr. Edwards in the future . He couldn’t predict, for example, if Mr. Edwards were to have a financial, I guess, downfall that would prevent him from making the mortgage payments, correct? A. No, nobody can do that. ...
Q. You understood that if Mr. Edwards stopped making the payments, Concentra would be looking to you to make those payments? A. But certain people have insurance for these certain things.
Q. What does that mean? A. If you get hurt or injured on the job or unable to work, people have insurance.
Q. Okay. So you thought if Mr. Edwards became incapable of paying due an insurable even, he might have insurance coverage? A. Yes.
Q. And could be a further level of protection for you, correct? A. Yes.
Q. Did he show you an insurance policy? A. No, Martin – Mr. Edwards wasn’t there at that time.
Q. Did you ask Mr. Edwards to show you whether he had, like, disability insurance or accident insurance or anything? A. No.
Q. So basically you had no information as to whether he might have insurance to protect himself in the event of some sort of situation that might prevent him from making the payments? A. No. ...
Q. So you thought he was a good risk, Mr. Edwards, basically? A. Yeah.
Q. Okay. A. Sure. If you want to put it that way. ...
Q. Okay. For $5,000 you put yourself forward as the face of this purchase and mortgage transaction, isn’t that the case? You were paid for that? A. Yes.
Q. Right. A. With the understanding that I had no legal obligation.
Q. With the understanding --- A. From a lawyer, professional lawyer.
Q. And that means – and when you say that, what you’re saying is the lawyer told you that the payments that you were – that were referred to in the mortgage that you were signing were going to be paid by Mr. Edwards? A. Yes.
Q. So that’s what you understood by having no legal obligation? A. Yes.
Q. Is that some other person would pay the obligation for you, right? So long – you understood that so long as the payments were being made by Mr. Edwards, you would have no problem, correct? A. Yes.
Q. So the risk you took for the 5,000 was simply whether Mr. Edwards would make the payments and you calculated that that risk was marginal because you figured he probably had some sort of insurance to prevent against calamities that might befallen? A. Okay, you can put it that way.
Q. Okay. A. And plus, he was a – plus, the lawyers – like I said, he’s a lawyer and he’s supposed to be trustworthy.
Q. Right. So you thought these people seem trustworthy --- A. Yeah.
Q. --- I can rely on your creditworthiness, I don’t have to worry about a default, is that right? A. Yes, you can ---
Q. Okay. A. --- you can put it that way, yes.
Q. Okay. A. That’s a better way to put it, yes. ” [Emphasis added]
[33] On his cross-examination, Mr. Rawling also acknowledged as follows:
a) He did not read the documents before signing them; b) He did not ask Mr. Gertner questions about the documents, although he had the opportunity to do so; c) He entered the transaction voluntarily; d) He could have left Mr. Gertner’s office without signing anything; e) Mr. Edwards made only a few payments; when Mr. Edwards stopped making payments, Mr. Rawling began making the payments; he brought the mortgage into good standing in 2009, and then made regular payments of over $121,000 over a seven-year period; f) He set up an automatic payment plan to do so; g) At the time of the first default in 2009, Mr. Rawling had discussions with a representative of Concentra; he said nothing about having been paid $5,000 to front the mortgage transaction; at no time did he disavow having an obligation to Concentra; instead he made the payments without protest.
[34] Mr. Gertner was disbarred sometime after the mortgage transaction.
Submissions
[35] Mr. Frydenberg, counsel for the plaintiff, submits that summary judgment should be granted in favour of the plaintiff. He submits that the mortgage is clearly in default and the plaintiff is entitled to judgment.
[36] Mr. Frydenberg submits that the principles set out by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, have been met. The facts are largely not in dispute. The court is well able to fairly and justly decide all matters in dispute without the need for a trial.
[37] Mr. Frydenberg submits that Mr. Rawling was a direct party to a fraudulent transaction, and it is not open to him to argue that the mortgage is unenforceable. Indeed, Mr. Rawling was a paid participant in the fraudulent transaction.
[38] Mr. Rawling knew full well, as disclosed by his evidence on cross-examination, that he was executing a mortgage. He assumed he would bear no liability because Mr. Edwards would be making the payments. However, he was well aware that if Mr. Edwards did not make the payments he would be called upon to do so.
[39] Furthermore, it is clear from Mr. Rawling’s conduct that he knew he was liable on the mortgage. When he was contacted about the mortgage being in arrears, he had every opportunity to advise that he bore no liability because he had been tricked into signing a document without knowing about his liability. Instead, he said nothing to the plaintiff, and made payments on the mortgage for seven years.
[40] Mr. Frydenberg submits that, assuming Mr. Gertner made false representations to Mr. Rawling as to his liability under the mortgage, it is evident that Mr. Rawling did not rely on them. Once again, his conduct after being advised that the mortgage was in default belies any reliance.
[41] In any event, this is not a case where a principal would be liable as a result of conduct by the principal’s agent. Where the agent enters into a fraudulent conspiracy to conceal something from the principal, the principal is not bound by the actions of the agent, particularly where it can be shown that it is in the interests of the agent to conceal the truth from the principal. That is clearly the case here, as it was in Mr. Gertner’s interests that the transaction close and his fees be paid.
[42] Mr. Frydenberg submits that the defendant cannot establish the defence of non est factum. In order to do so, a party must show that the document he signed is fundamentally different than what he thought he was signing. In this case, Mr. Rawling knew he was signing a mortgage. Furthermore, where a person signs a document without reading it, he cannot claim that he did not understand the document.
[43] Mr. Frydenberg submits that, in any event, Mr. Rawling is estopped from denying the validity of the mortgage. He points out that Mr. Rawling never protested his obligations under the mortgage, and made payments for approximately seven years. As a result, he is now estopped from denying liability under the mortgage.
[44] Mr. Deverett, counsel for Mr. Rawling, submits that Concentra is not able to base its claim on a mortgage that was fraudulently procured. He submits that the fraud was committed, in part, by Mr. Gertner, the plaintiff’s agent, and the plaintiff is bound by Mr. Gertner’s conduct.
[45] As a consequence of the invalidity of the mortgage, Mr. Rawling is entitled to a refund of all payments made under the mortgage. Mr. Deverett also claims full indemnity costs.
[46] Mr. Deverett submits that the plaintiff is a sophisticated mortgage lender, and Mr. Rawling is an inexperienced dupe. He submits that Concentra was in the better position to detect and prevent the fraud.
[47] Mr. Deverett notes that seven years before this transaction, Mr. Gertner was suspended by the Law Society for two months. On January 4, 2010, he was disbarred. At the very least, because of Mr. Gertner’s earlier suspension, Concentra should have been more diligent in placing its affairs in the hands of Mr. Gertner.
[48] Mr. Deverett submits that there were a number of suspicious circumstances that should have alerted Concentra to the fact that there was something untoward about the transaction. He notes that Mr. Rawling’s name was misspelled on the Agreement of Purchase and Sale. He notes that the $2,500 deposit was to be made out to a solicitor rather than a real estate agent. He notes that the agreement was conditional on arranging financing and an inspection, failing which the agreement would be null and void. The conditions were not waived. He notes that the date of birth of Mr. Rawling on the mortgage application did not match the date of birth on a credit bureau document. He notes that the agreement was scheduled to close on January 18, 2008, and the mortgage was registered on that date. The mortgage funds were not actually advanced by Concentra until January 21, 2008.
[49] Mr. Deverett notes that Mr. Gertner’s statement of account, which was apparently received by Concentra on the date the funds were advanced, makes specific reference to a trust agreement between Mr. Edwards and Mr. Rawling.
[50] Mr. Deverett submits that from all these indicia, Concentra should have been suspicious about the transaction, and should have taken steps to make inquiries. It did not.
[51] Mr. Deverett submits that fairly shortly after the mortgage was executed, Concentra became aware of the involvement of Mr. Edwards, and the fact that he was impersonating Mr. Rawling. Concentra also became aware that the property was not being occupied by Mr. Rawling and was in a deplorable state. Notwithstanding, Concentra bullied Mr. Rawling into bringing the mortgage into good standing and making payments which Concentra knew, or should have known, that Mr. Rawling was not obligated to make.
[52] Mr. Deverett submits that the affidavit filed on behalf of the plaintiff is improper. The deponent has no personal knowledge of any of the facts deposed to. An adverse inference should be drawn. Furthermore, relevant documents were not produced on the cross-examination of the deponent.
[53] Mr. Deverett submits that there has been delay in selling the property. Furthermore, no attempt has been made to collect on any insurance that may be available.
[54] In the final analysis, Concentra was in a better position than Mr. Rawling to detect and prevent the fraudulent conduct of Mr. Edwards and Mr. Gertner. Accordingly, Concentra’s claim to enforce the mortgage should be dismissed, and Mr. Rawling should be entitled to judgment for the payments he should not have had to make.
[55] Authorities relied on by both parties include 215222 Ontario Ltd. v. 2173435 Ontario Inc., 2016 ONSC 2978; Bank of Nova Scotia v. Villafuerte, [2007] O.J. No. 3330 (S.C.J.); First National Financial JP Corp v. Kulaga, 2012 ABQB 8 (Master); Gold v. Rosenberg, [1997] 3 S.C.R. 767; Holmes v. Amlez International Inc., [2009] O.J. No. 4513 (S.C.J.); Letkeman v. Zimmerman, [1978] 1 S.C.R. 1097; MCAP Service Corp. v. Allen, [2007] O.J. No. 627 (S.C.J.); Royal Bank of Canada v. Simpathkumar, 2012 ONSC 5483; Scotia Mortgage Corp v. Aab, 2012 ABQB 464 (Master); Bank of Nova Scotia v. Allin, 2014 ONSC 899; CIBC Mortgages Inc. v. Vieira, 2013 ONSC 6789; Royal Bank v. Cammock, [2008] O.J. No. 2490 (S.C.J.); National Bank of Canada v. Meneses, [2008] O.J. No. 2108 (Master); Royal Bank v. Polei, [2009] O.J. No. 4443 (S.C.J.); Isaacs v. Royal Bank, [2010] O.J. No.: 2620 (S.C.J.); affd., 2011 ONCA 88; Scotia Mortgage Corp. v. Anwar, [2006] O.J. No.1735 (S.C.J.); Smith v. Hunt (1901), 2 O.L.R. 134 (H.C.J.); affd., 4 O.L.R. 653 (C.A.); Sharpe v. Foy (1868), 4 Ch. App. 35; Durbin v. Monserat Investments Ltd. (1978), 20 O.R. (2d) 181 (C.A.); Horvath v. Young (1980), 15 R.P.R. 266 (Ont. H.C.J.); Granville Savings and Mortgage Corp. v. Slevin (1992), 93 D.L.R. (4th) 268 (Man. C.A.); Royal Bank of Canada v. Poisson (1977), 26 O.R. (2d) 717 (H.C.J.); Marvco Color Research Ltd. v. Harris, [1982] 2 S.C.R. 774; and Bank of Montreal v. Featherstone (1987), 58 O.R. (2d) 353 (H.C.J.).
Analysis
[56] In my view, it is not open to the defendant to claim that the mortgage, on which the plaintiff sues, was fraudulent. If it was fraudulent, the defendant was a party to the fraud.
[57] There is no doubt from the perspective of the plaintiff the mortgage was, to all appearances, valid. The mortgage was duly executed and registered. The mortgagor was, at the time the mortgage was granted, the registered owner of the property. Funds were advanced on the strength of the mortgage.
[58] Unbeknownst to the plaintiff, except perhaps through the agency of Mr. Gertner, which I will discuss in a moment, the mortgage was not what it appeared to be. Mr. Rawling was a straw man. He was not the true owner of the property. He did not live in the property. He did not get the proceeds of the mortgage.
[59] The true owner, and the true mortgagor, was Mr. Edwards. However, it would appear that Mr. Edwards would not have qualified for a mortgage. That is why he had to use a straw man, in this case Mr. Rawling.
[60] Mr. Rawling was a direct participant in the shady transaction, and he was paid for his efforts.
[61] Mr. Rawling had provided his photo identification to Mr. Gertner through an earlier transaction. When he entered into this transaction, he went to the trouble of getting a letter from his employer that confirmed his employment and his income. He furnished copies of his income tax returns. As disclosed on his cross-examination, he knew he was executing a mortgage, and he knew that if Mr. Edwards did not make the payments he might be called upon to make them, although he was assured that that was unlikely.
[62] Once the fraudulent nature of the transaction came out into the open, Mr. Rawling did not disavow his involvement. He did not tell Concentra that he was a straw man, and that he should not have to make payments. Rather, he brought the mortgage into good standing and he made payments on the mortgage for seven years.
[63] The defence of non est factum does not avail Mr. Rawling. As noted, he knew he was signing a mortgage. If he neglected to read or understand the various documents, the judgment of the Supreme Court of Canada in Marvco, supra, makes it clear that he is bound by them nevertheless.
[64] In cases where a party, claiming to be innocent, was in fact a paid participant in a fraudulent scheme, the courts have shown little sympathy. This is clear, in my view, from the cases cited by the plaintiff, particularly Vieira, supra and Isaacs, supra. Of particular significance, in my view, is the decision of the Court of Appeal in Isaacs, which, if not on all fours with this case, is very close to it. The Court of Appeal held in that case that a paid participant in a fraudulent transaction was in a better position to prevent the fraud than the mortgagee. That is also the case here.
[65] What has given me the most difficulty is the involvement of Mr. Gertner. He acted as the solicitor for both parties, and there is an issue as to whether his representations and involvement bind the plaintiff. In the final analysis, I have concluded that Mr. Gertner’s involvement does not assist Mr. Rawling.
[66] While technically Mr. Gertner was the solicitor for both parties, he actually was not recruited by the plaintiff. Mr. Gertner had been involved in the earlier transaction in which Mr. Rawling and Mr. Edwards had been involved, and his involvement in this transaction was arranged by Mr. Edwards. As is not uncommon in some mortgage transactions, the mortgagee simply used the same solicitor as a means of saving fees.
[67] The case on which Mr. Rawling primarily relies is my earlier decision in MCAP Service Corp. v. Allen, supra. In that case, similar to this one, the defendant had been duped into becoming part of a fraudulent transaction under which she would notionally be the owner of property, and a mortgagor. The defendant received none of the mortgage funds, and the fraudsters disappeared with the money. As was the case here, the fraud was facilitated, in part, by the involvement of a solicitor, who acted on both sides of the transaction.
[68] The plaintiff moved for summary judgment on its mortgage. The motion was brought under the former rules, which were much more restrictive in their terms as to when summary judgment could be granted instead of a trial. I held, in the circumstances, that it was necessary to have a trial so that the issues could be determined on a full record. At para. 17, I stated that as the solicitor, Ms. Barrett, was the agent of the plaintiff, it was at least arguable that the plaintiff was bound by the fraudulent misrepresentations of its agent. At para. 22, I referred to Bowstead & Reynolds on Agency (18th Ed. 2006) where the following appeared at page 367:
An act of an agent within the scope of his apparent authority does not cease to bind his principal merely because the agent was acting fraudulently and in furtherance of his own interests.
[69] I noted that the authors appeared to suggest that there may be exceptions to this principle but I stated that their applicability could not be ascertained without the consideration of a full record, and full argument after a trial.
[70] I am now in the position of considering the issue based on a full record. In the circumstances of this case, I am not prepared to hold that Concentra is bound by any misrepresentations, including fraudulent misrepresentations, that may have been made to Mr. Rawling by Mr. Gertner.
[71] Mr. Frydenberg notes, in his factum, that there are cases in which it has been held that knowledge acquired by a solicitor will not be deemed to have been given to the principal where motives exist in the mind of the agent which make it in his interest to conceal the truth from the principal. Included in those cases, are Smith v. Hunt, supra; and Durbin, supra.
[72] A good example, dealing with an insurance agent, is the English decision of Biggar v. Rock Life Assurance Company, [1902] 1 K.B. 516. In that case, an applicant for an insurance policy purported to fill out an application for the policy, which was actually filled out by the insurance company’s agent. The application form contained a number of falsehoods. The insured made a claim on the policy, and the insurance company took the position that the falsehoods barred the claim.
[73] It was argued by the plaintiff that the falsehoods were those of the defendant’s agent, and it was not open to the insurance company to rely on them. That position was rejected by Wright J.
[74] Wright J. referred with approval to the judgment of the Supreme Court of the United States in New York Life Insurance Co. v. Fletcher, 117 U.S. 519 (1885). At page 524, he stated:
I agree with the view taken by the Supreme Court in that case, and apparently in other cases there cited, that if a person in the position of the claimant chooses to sign without reading it a proposal form which somebody else filled in, and if he acquiesces in that being sent in as signed by him without taking the trouble to read it, he must be treated as having adopted it. Business could not be carried on if that were not the law. On that ground I think the claimant is in a great difficulty. But, further, it seems to me that here, as in the case of New York Life Insurance Co. v. Fletcher, it would be wrong to treat Cooper, the company’s agent, as their agent to suggest the answers which Biggar was to give to the questions in the proposal. Cooper was an agent to receive proposals for the company. He may have been an agent, as Lindley and Kay L.JJ. put it in Bawden v. London, Edinburgh and Glasgow Insurance Co., [1892] 2 Q.B. 534, to put the answers in form; but I cannot imagine that the agent of the insurance company can be treated as their agent to invent the answers to the questions in the proposal form. For that purpose, it seems to me, if he is allowed by the proposer to invent the answers and to send them in as the answers of the proposer, that the agent is the agent, not of the insurance company, but of the proposer. [Emphasis added]
[75] At page 525, in referring again to the judgment of the United States Supreme Court, Wright J. continued:
Then, speaking of the agent’s conduct, they say: “His conduct in this case was a gross violation of duty, in fraud of his principal, and in the interest of the other party. To hold the principal responsible for his acts, and assist in the consummation of the fraud, would be monstrous injustice. When an agent is apparently acting for his principal, but is really acting for himself or third persons and against his principal, there is not agency in respect of that transaction, at least as between the agent himself, or the person for whom he is really acting, and the principal.... The fraud could not be perpetrated by the agent alone. The aid of the plaintiff or the insured, either as an accomplice or as an instrument, was essential.” [Emphasis added]
[76] In my view, this reasoning applies here. The actions of Mr. Gertner were not those of Concentra; rather, they represented those of Mr. Edwards and Mr. Rawling, in fraudulently representing to Concentra that the mortgage was what it appeared to be, and that Mr. Rawling was the true mortgagor and was responsible for the payments.
[77] I do not agree with Mr. Deverett that Concentra should have been put on its inquiry by anything suspicious that occurred before the mortgage was executed. The rather minor deficiencies in the documentation were not enough to suggest that there may be a fraudulent transaction underway. The reference to a trust agreement in Mr. Gertner’s bill, that was apparently received by Concentra the same day it advanced the funds, is too ambiguous to put someone on their inquiry as to whether a fraudulent transaction is underway.
[78] I am not persuaded that Mr. Gertner’s difficulties with the Law Society affect the matter. He was not disbarred until after the transaction was completed. The fact that he had been suspended several years earlier is hardly a reason to suspect that this transaction was fraudulent.
[79] Concentra’s discovery of the true state of affairs after the fact does not affect the matter. Mr. Rawling had signed the mortgage and did not disavow his status as the mortgagor or his obligation to make the payments. Indeed, he brought the mortgage into good standing and made the payments for seven years.
[80] The potential availability of insurance does not relieve Mr. Rawling of liability. Presumably, Concentra can only collect on any insurance if it cannot collect from Mr. Rawling.
[81] In the circumstances, I am not persuaded that the use of the particular deponent of the affidavit material filed by Concentra affects the matter. There is no real dispute as to the facts to which she deposes. There is no dispute that Mr. Rawling signed the mortgage.
[82] In the final analysis, the plaintiff is entitled to summary judgment on its mortgage, and the counterclaim must be dismissed.
Disposition
[83] For the foregoing reasons, I order that the plaintiff shall have summary judgment as requested. The counterclaim is dismissed.
[84] I will entertain brief written submissions as to costs, not to exceed three pages together with a costs outline or bill of costs. Mr Frydenberg shall have five days and Mr. Deverett shall have five days to respond. Mr. Frydenberg shall have three days to reply.
Gray J.
Released: October 4, 2016