Abrams v. Neumann no. 2, CITATION: 2016 ONSC 6564

COURT FILES NO.: 10378/15

DATE: 2016-10-21

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Marion Abrams and Michael Abrams, Plaintiffs

AND: Gary Neumann, Niagara Regional Mortgages, Blair Rose, Rose and Rose Barristers and Solicitors, Community Trust Company Ltd., New Haven Mortgage Corporation, Robert Dinning and Marilyn Dinning,

BEFORE: Mr Justice Ramsay

COUNSEL: Margaret Hoy for the plaintiffs; Natalia Vandervoort for New Haven Mortgage Corporation

HEARD: October 19, 2016 at Welland

ENDORSEMENT

[1] The defendants, New Haven Mortgage Company and Robert and Marilyn Dinning move to strike the statement of claim and to dismiss the action as frivolous, vexatious and an abuse of process.

[2] The plaintiffs refinanced their house in 2013 by giving the defendants a first mortgage and Community Trust Company a second mortgage. The plaintiffs made payments for a year and a month. The first mortgage was due after one year. The defendants declined to renew it. The plaintiffs have not made payments since October 2014. The defendants sued on the mortgage. The second mortgagee, Community Trust Company, sued on its mortgage. The plaintiffs then issued the present action which names as defendants both mortgagees, New Haven’s solicitors on the mortgage and the plaintiffs’ own mortgage broker. Maddalena J. denied the plaintiffs’ motion to consolidate the three actions finding that there were no issues in common to the three actions. I denied leave to appeal [2016 ONSC 5992]. The plaintiffs then brought motions to amend their pleadings in the mortgagees’ actions to add the other mortgagee and the mortgage broker to each action. I dismissed those motions on October 19, 2016 on the basis that they constituted a collateral attack on the order of Maddalena J. and therefore an abuse of process. I also granted summary judgment to New Haven on its action.

[3] The results of the previous motions are all based on the fact that the two mortgages were contracts made by the plaintiffs with each mortgagee separately and separate from any of the alleged misconduct of the plaintiffs’ mortgage broker and the disputed charge claimed by New Haven’s solicitor. The questions before me now are whether the statement of claim alleges a cause of action that could possibly succeed, assuming the truth of the averments contained therein, whether it is adequately pleaded and whether the action is frivolous and vexatious or an abuse of the process of the court.

[4] The statement of claim, after identifying the parties, alleges the following:

a. The plaintiffs hired the mortgage broker to refinance their house. They owed $106,000 on a previous mortgage and they had personal debt to repay.

b. The terms of the two mortgages he arranged were not what he told them they would be.

c. They signed the mortgage documents without proper advice from their own lawyer.

d. After making a mortgage commitment it took New Haven too long to close the deal and advance the money.

e. The total due on the mortgages in light of the total advanced by both lenders results in an interest rate of 65.9% per annum, which is a criminal interest rate.

f. Certain fees and charges are not proper.

g. The plaintiffs’ own lawyer did not explain the mortgage documents to them.

h. The mortgagees colluded or conspired with the mortgage broker to obtain mortgages at an unconscionable rate of interest.

i. As a result the plaintiffs suffered financially and from psychological injury and are due damages, punitive damages and an unencumbered title to the house.

[5] There is no doubt that the claim is inadequately pleaded. The allegation that the mortgagees colluded with the mortgage broker is a conclusory statement unsupported by any specific alleged facts. The defendants have no way of knowing what they are supposed to have done to inflict harm on the plaintiffs. No recognized psychological injury is identified. Nothing identifies the “high-handed” acts of the New Haven defendants that would attract punitive damages. The calculation in the statement of claim is flawed on its face. The rate of interest should be calculated for each loan by dividing amounts paid or payable for the advancing of credit by the credit advanced. The statement of claim, however, lumps both mortgages together, adds amounts payable to both lenders not only for the advancing of credit but also as a result of defaulting on the loans, and divides that total by the total amount claimed by the first and second mortgagees.

[6] The statement of claim elsewhere alleges that New Haven charged $8,724.40 interest and $12,495 in charges for advancing credit. The amount advanced by New Haven according to the statement of claim can be deduced as $90,000 on the basis of the averments as to the interest claimed and the principal reduced over the period of time in question. The calculation of interest rate using the correct formula would result in an interest rate just under 24%.

[7] At the very least, then, the defendants are entitled to particulars.

[8] I am of the view however that the claim is radically defective and cannot be cured by amendment or particulars. First, breach of a statute by itself is not a tort: Singer v. Schering-Plough Canada Inc., 2010 ONSC 42 (Strathy J.), paragraph 96. No statute or common law doctrine makes constitutes a breach of s.347 of the Criminal Code as a tort. Lending at an excessive or unconscionable interest rate could not in any event relieve the plaintiffs of the duty to repay the principal and reasonable interest.

[9] The plaintiffs argue that the defendants breached the duty of good faith in execution of the contract. The duty to act honestly is set out in Bhasin v. Hrynew, 2014 SCC 71. In that case Cromwell J. speaking for the court said:

73 In my view, we should. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one's contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith: see Swan and Adamski, at s. 8.135; [further citations omitted].

[10] But the defendants do not allege any acts in support of their allegation of dishonesty or conspiracy. As far as the New Haven defendants are concerned, what they do allege is that they entered into a contract under which New Haven would lend them money on certain terms and that at the end of the contract New Haven demanded repayment on the contractual terms, all of which cost them 24% annual interest.

[11] The statement of claim does not disclose a reasonable cause of action and cannot succeed. Furthermore, now that the amount due under the contract has been determined in New Haven’s action, proceeding against the New Haven defendants on the present action would constitute an abuse of process because it would re-litigate the same issues bewtween the same parties.

[12] The motion is granted. The statement of claim is struck as against the New Haven defendants without leave to amend. The parties may address costs in writing, the defendants within 10 days of issue of this endorsement, the plaintiffs within 20 days.

J.A. Ramsay J.

Date: 2016-10-21