Court File and Parties

COURT FILE NO.: 13-38875 DATE: 2017/06/06

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

ROYAL BANK OF CANADA J. Kukla, for the Plaintiff Plaintiff

• and -

WAHEED MICHAEL AND NABILA NASHID J. Radnoff, for the Defendant, Waheed Michael Defendants

• AND BETWEEN -

WAHEED MICHAEL Plaintiff by Counterclaim

• and -

NABILA NASHID AND ROYAL BANK OF CANADA Defendants by Counterclaim

HEARD: November 17, 2016, March 22, April 27 and May 26, 2017 A. J. Goodman J.

Reasons for Judgment

[1] The plaintiff and defendant to the Counterclaim, Royal Bank of Canada ("RBC") seeks an Order granting summary judgment against Waheed Michael (“Michael”) for possession of the premises municipally known as 8 Miles Road, in the City of Toronto, Ontario (“the property”) along with leave to issue a Writ of Possession in respect of the property, dismissal of the Counterclaim along with other corollary relief.

[2] The plaintiff also seeks an Order that the net proceeds of the sale of 220 Finch Avenue East, Toronto, ON, being the sum of $596,450.29 which are currently being held by solicitor, Yigal Rifkind in trust, be paid to RBC to be credited towards RBC's judgment as against the defendant, Nabila Nashid ("Nashid").

[3] Michael vigorously disputes RBC’s claim and entitlement to the property and the Bank’s reliance on the Charge and Transfer documents.

[4] On February 25, 2013, Nashid was noted in default.

[5] There is no dispute amongst the parties that this matter can be determined by way of a Rule 20.04 summary judgment motion. However, what was expected to be a half-day summary judgment motion morphed into a proceeding that spanned a period of six months, additional hearing days and requiring limited viva voce evidence.

[6] For the reasons that follow, summary judgment is granted in favour of RBC.

Background

[7] The defendants were married when they originally purchased the subject property as joint tenants on October 18, 1994.

[8] On September 11, 2006, the property was transferred from the defendants jointly to Nashid alone. The transfer of the property was made pursuant to a Power of Attorney (“POA”) purportedly granted by Michael to Nashid on December 12, 1995. The consideration for the transfer of the property was the assumption of a mortgage by Nashid (unrelated to RBC), in the sum of $400,000. Mr. D’Mello, the lawyer involved in the transaction, effected the transfer based on Nashid’s personal capacity and the POA. [^1]

[9] Nashid’s July 30, 2009 sworn Financial Statement, filed in the Family Court proceedings disclosed that the property was solely owned by her. On December 9, 2010, more than four years after Nashid took title to the property, Nashid approached RBC for the purpose of refinancing and paying out the then existing Bank of Nova Scotia (“BNS) Charge. Nashid entered into a credit line/mortgage loan with RBC (Homeline Plan Mortgage) for the amount of $1.5 million secured by a registered charge. RBC relied on certain representations made by Nashid including that she had no knowledge of any claim or interest adverse to her sole title to the property.

[10] Michael is now the sole registered owner of the subject property by virtue of an Order made in a Family Court proceeding on August 5, 2011.

[11] On May 18, 2012, Kruzick J. awarded equalization payments in favour of Michael, which included an equalization payment of $438,395.99 that took into account the transfer of the former matrimonial home to Michael (at para. 1); along with a sum of $978,141.65 to compensate him inter alia, for the increase in the RBC Homeline Plan mortgage (at para. 3).

[12] Default in payment under the RBC Charge occurred on November 17, 2012, and continues to date.

Positions of the Parties

[13] RBC submits that Michael is the sole registered owner of the subject property by virtue of a court Order. At the relevant time, the property was encumbered by a Charge in favour of RBC.

[14] RBC submits that Michael's explicit position in the Family Court proceeding that resulted in the aforementioned Order, was that he would "take over" the indebtedness secured by RBC's Charge. RBC says that the Order transferring the property to Michael was made on the basis that Michael would become liable for that indebtedness.

[15] In July 2011, RBC exercised its rights under the agreement and declined Michael’s request to assume the Charge on the subject property.

[16] While Michael claims that the Charge is fraudulent, RBC responds that there is no evidence to sustain such an allegation. Further, Michael's allegations regarding the validity of the POA lack any credibility.

[17] By virtue of the default, RBC is entitled to payment under the Charge and possession of the property. As Michael's interest in the property is subject to the Charge, RBC submits that it is entitled to the orders requested.

[18] Alternatively, RBC submits that by virtue of the payout and discharge of the previous BNS Mortgage, it is entitled, at the very least, to stand, as against the property, in the shoes of the Bank of Nova Scotia, and enforce its claim to possession of the property, and to sell it under power of sale.

[19] Michael submits that RBC’s motion must fail as the Bank seeks to enforce a mortgage that is unenforceable against him in that it was obtained through fraud. The bank is not entitled to judgment against him.

[20] Michael argues that there has been, in the course of the Family Court proceedings, in effect, a finding that the various transfers and mortgage in favour of Nashid are fraudulent. Therefore, the Bank cannot, based on the legal principle of issue estoppel, deny the fraudulent nature of either the transfer or the mortgage.

[21] Michael’s position is that in the mid-1990's Nashid and he both prepared mutual POA’s. During the summer of 2006, Michael was living in Florida and conducting business for Nashid and himself at the time of the relevant transfer. Michael says that he was in frequent communication with Nashid and she never discussed such transfers.

[22] Michael submits that on August 23, 2006, Nashid unilaterally and fraudulently transferred his interest in certain properties to herself for nominal consideration. According to the transfer documents, Mr. D'Mello was the lawyer that completed the transfer(s). Michael did not know this lawyer and the first time Michael had ever heard his name was when he was reviewing the transfer documents, which were requested subsequent to the marriage breakdown. In the transfer documents, Nashid specifically stated the following:

The property is not ordinarily occupied by me and my spouse, who is not separated from me, as our family residence. I, Nashid say that to the best of my knowledge and belief, the power of attorney is still in full force and effect and the principal had the capacity to give the power of attorney when giving it and was at least 18 years of age when the power of attorney was executed...

[23] According to the transfer documents, they indicate that Nashid was to pay Michael $400,000 in consideration for the transfer. Michael says he never received such monies nor does he believe that Nashid had any intention of paying these monies. [^2]

[24] Michael submits that he did not find out about these various transfers until well after they occurred. Michael does not recall the exact date, however he believes it was sometime in the fall or winter of 2009.

[25] In this hearing, Michael disputes the authenticity of the POA presented in the Notice of Motion as it pertains to clause 4 of the document. Michael submits that it is a clear abuse of power and inappropriate for someone to exercise a POA in order to purely benefit themselves, which is precisely what Nashid did. The various transfers were made without his knowledge or consent. The Bank and Nashid improperly and fraudulently obtained financing against the property.

[26] Specifically, Michael submits that he never crossed out para. 4 of the POA (that dealt with incapacity) and he was in no way incapable of managing his property. He did not want either of these two properties transferred out of his name. Michael was not a party to either of the transfer documents. Michael was not incapacitated in any manner for Nashid to invoke and rely on the POA for any purpose. Michael and Nashid were communicating on an almost daily basis. Michael says that despite these communications with each other, never once did Nashid consult with him about transferring the various properties into her sole name. The transfers invoked by Nashid were entirely against his will and was an abuse of the POA.

[27] Michael submits that the Bank acted improperly. The Bank had actual knowledge of Nashid’s divorce from Michael; however RBC relied entirely on the title register showing Nashid was the registered owner. The Bank could have, but failed to take steps to protect its interests. There was no basis upon which the Bank, after due diligence and/or using its own policies, procedures or guidelines, would have ever approved and advanced this financing to Nashid given her financial circumstances.

[28] Michael acknowledges that RBC is entitled to an interest in the property by virtue of equitable mortgage rights.

[29] Further, and in addition, Michael has an execution in the amount of $1,650,441.50 registered against Nashid. The Bank also has an execution registered against Nashid. The amount of $596,450.29 is being held in the trust account of Mr. Rifkind for payment of the executions. Michael seeks his pro rata share payment of this amount.

Analysis

[30] I have considered counsels’ submissions and have reviewed the evidence and extensive materials filed.

[31] The December 12, 1995 POA is at the root of the transactions giving rise to the various transfers and the dispute in this summary judgment motion.

[32] At the material time, Nashid represented to RBC that she was the absolute owner of the property and that she had no knowledge of any claim or interest in the property adverse or inconsistent with title. It is clear that RBC relied on these representations.

[33] Michael acknowledges having granted and executed a continuing POA to Nashid in the mid-1990's. As mentioned, the scope and purpose of the impugned POA is in dispute.

[34] There are essentially two scenarios advanced with respect to the impugned POA. One such interpretation was to permit Nashid to deal with property owned by Michael while he was living and working outside of the country. Another interpretation is that the POA was to be used only in the event of Michael’s incapacity.

[35] The Supreme Court of Canada in the seminal case of Hryniak v Maudlin, 2014 SCC 7, overturned the “full appreciation” test promoted by the Ontario Court of Appeal in summary judgment matters. The Supreme Court held that there will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits. A trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.

[36] Rule 20.04(2.1) provides:

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

[37] In summary judgment matters, a motions judge may evaluate the credibility of a deponent and draw any reasonable inference from the evidence. As the Supreme Court endorsed at paras. 44 and 45 of Hryniak:

The new powers in Rules 20.04(2.1) and (2.2) expand the number of cases in which there will be no genuine issue requiring a trial by permitting motion judges to weigh evidence, evaluate credibility and draw reasonable inferences.

These new fact-finding powers are discretionary and are presumptively available; they may be exercised unless it is in the interest of justice for them to be exercised only at a trial; Rule 20.04(2.1). Thus, the amendments are designed to transform Rule 20 from a means to weed out unmeritorious claims to a significant alternative model of adjudication.

[38] As the ambit and scope of the POA is at the heart of this motion, a limited assessment of the evidence surrounding the granting of the POA, viva voce testimony was required. As provided by the jurisprudence, I conducted a limited scope trial to assess the issues surrounding the drafting and nature of the POA as it related to the parties’ intentions and the subsequent transfer of the property.

[39] Mr. Walter Petryshyn, former solicitor, testified that, while he did not have specific recall, he recognized the POA. He prepared the POA document and struck out clause four based on client directions at that time. If Michael was not requesting the striking out of the clause, he would not have placed his initials next to the clause.

[40] Ms. Ruth Chamarro testified that she recognized her initials and the POA as a witness to the document’s signing. She did not specifically recall the clause being struck out but if Michael was not in agreement with it, she would not have initialed the relevant clause.

[41] Nashid testified that clause four was crossed out when the POA was signed and that she initialed the POA to confirm the change.

[42] Being presented with his various admissions in the Family Court proceedings, Michael now admits that he and Nashid prepared mutual Powers of Attorney. Despite Michael's acknowledgement of having granted a POA to Nashid, his Statement of Defence and Counterclaim asserts that Nashid fraudulently created this POA. During the course of this litigation, Michael’s position changed to an assertion that the POA was altered. Michael then contended that the POA was valid but exercised improperly. From the assertion of a fraudulent document, Michael now purports to state that the POA never had clause four crossed out.

[43] Not only has Michael’s position vacillated throughout these proceedings, but his testimony stands in contrast to that of all of the other witnesses. While recognizing the passage of time since the creation of the POA, I accept the evidence of Mr. Petryshyn and Ms. Chamarro. Clearly they have no vested interest in these proceedings.

[44] Moreover, Michael’s conduct or acquiescence in relation to the powers granted in the POA to Nashid related to other matters conducted by her on his behalf during his time out of Canada are contrary to his testimony about the scope and nature of the POA. For example, in his March 15, 2011 affidavit at para. 20, Michael admitted preparing mutual Powers of Attorney to deal with a previous partner of his while he was essentially living out of the country at the time.

[45] It is not lost on me that Michael does not have the original POA, supporting documentation or any other materials related to the POA and in support of his position. I do not accept his evidence that clause four of the POA was not crossed out at the relevant time of its signing. I find Michael’s evidence not to be credible and his subsequent actions related to Nashid’s authority to deal with other property or assets belie his assertions.

[46] Subsequent to the registration of the Charge, and more than two years after Michael had discovered the transfer of the property, Michael made a successful application to the Family Court transferring the property to him. What is significant is his position as detailed in his July 25, 2011 affidavit in support of his request to the court. Michael proposed to assume the Charge, stating, inter alia:

17. In order for the home to be transferred into my name, I propose that I take over the RBC line of credit attached to the home, which I believe is approximately $1,200,000. At the date of separation the line of credit was only $800,000, however, the Applicant increased it to approximately $1,200,000, with the potential of her increasing it to $2,400,000. I have already contacted RBC regarding this. However, prior to doing so, I require the Applicant or RBC to provide me with the exact balance of the RBC line of credit. RBC is unwilling to do so.

18. In my Affidavit dated June 24, 2011, I detail my one half interest in the home. Other than taking over the full line of credit. I do not believe I should have to pay to the Applicant any monies in order for the home to be transferred into my name. Under normal circumstances, I would have to pay the Applicant approximately $400,000 for the home after taking over the full line of credit at $1,200,000. However, the Applicant increased the line of credit by approximately $400,000 since the date of separation, which I am willing to take over…

[47] Justice Herman rendered her decision involving both defendants in Nashid v. Michael, [2011] CarswellOnt 8140 (S.C.). It is apparent to me that the learned judge relied upon Michael’s affidavit. In the end, the judge granted an order in favour of Michael transferring the property from Nashid to him. In her decision, Herman J. stated at paras. 18 and 19:

Mr. Michael's reasoning is as follows. The parties agreed to a purchase price of $2,050,000 and agreed to split the net proceeds of sale. If one deducts the real estate commission, transaction fees and the current line of credit, the net proceeds of sale would be about $500,000, of which Mr. Michael's portion would be about $250,000. However, unbeknownst to Mr. Michael, Dr. Nashid placed an additional charge on the property of $700,000 for her sole benefit. Mr. Michael will be liable for the debt when he assumes title. In the result, he submits that he should not have to pay any amount into court.

I agree with Mr. Michael's position. Dr. Nashid's half-interest in the former matrimonial home will be transferred to Mr. Michael. Paragraphs 4 and 5 of my order of April 17, 2011 are set aside so that Mr. Michael is not required to place any monies in trust for his purchase. Dr. Nashid will provide vacant possession of the home by August 31, 2011. The purchase price of $2,050,000 will be credited and accounted for in the determination of the equalization payment.

[48] I observe that when requesting that title to the property be transferred to him by the Court, Michael proposed to "take over the RBC line of credit attached to the home... the Applicant [Nashid] increased the line of credit by approximately $400,000 since the date of separation, which I [Michael] am willing to take over."

[49] In agreeing to permit the transfer of the property from Nashid to Michael, it is clear to me that Herman J. accepted that Michael was liable for the debt when he assumed title. Michael did take title to the property subject to the Charge. However, it seems that one year after representing to the court in the Family Court proceedings that he would assume the charge, Michael disclaimed any obligation to RBC and shortly thereafter the charge went into default.

[50] I also agree with RBC that Michael could have taken steps to protect himself from the registration of the Charge, but did nothing. There is no evidence to suggest that Michael ever revoked the POA, nor did he register a Caution on title to the property. Moreover, Michael took no steps to pursue any claims as against Mr. D'Mello, the lawyer who registered the POA for Nashid.

[51] Despite Herman J.’s Order, RBC does not take the position that Michael is liable for the indebtedness. As mentioned, RBC declined Michael's request to assume the Charge in July 2011 as was within its rights. I observe that the terms of the Charge provide, in part, as follows:

7.3 Results of a Default

(1) If a Default occurs, in addition to any other rights we may have, we can, if we choose and subject to the applicable law, do any one or more of the following, in any order we choose:

(i) Take Possession -take possession of your Property, without any interference by you or anyone else living on your Property, and free from any other mortgages, charges, liens or easements, limitations or restrictions that we did not approve...

[52] In terms of the underlying POA at the heart of this motion, I note that in Gagnon v. Pritchard, 2002 CarswellOnt 750 (S.C.) Stinson J. stated at para. 24:

In law, the grantee of a power of attorney is the agent of the grantor, the principal. In his text Powers of Attorney (London: Sir Isaac Pitman & Sons Ltd., 1935), F. Bower Alcock defined the concept as follows:

An Attorney is “one that is set in the stead or place of another,” and is authorised to do a certain act or certain acts in the place of, and on behalf of, that other. He is therefore merely a particular type of agent, and to him and to his acts the general rules of law governing the relationship of principal and agent apply.

All acts done by the attorney which are within the scope of authority conferred by the principal bind both the principal and the third parties who deal with the attorney as validly and effectually as though the principal had done them himself, and the principal is liable in respect of such acts to third parties dealing with the attorney on the principle qui facit per alium facit per se [he who acts through another acts through himself].

[53] I accept that where the scope of authority is limited by the principal, but that limitation does not appear on the face of the power of attorney, the principal is nevertheless bound by the acts of the agent if a third party, relying on the power of attorney, had no notice of the limitation imposed by the principal. Outlook Farm Equipment Sales Ltd. v. Belchamber, 1984 CarswellSask 328, (Sask. Q.B.) at para. 10.

[54] Michael, as the grantor of the POA in this case, is bound by the acts of the grantee even in circumstances where the grantee has exercised the power of attorney for their own personal benefit without the knowledge or consent of the grantor: Canadian Pacific Railway v. R., 1917 CarswellNat 49 (S.C.C.) at para. 67, Outlook Farm Equipment Sales Ltd. v. Belchamber, 1984 CarswellSask 328, (Sask. Q.B.) at para. 16.

[55] Notwithstanding the net family property equalization awards in the Family Court proceedings, as it pertains to the rights of RBC in relation to the property, I am satisfied that the POA authorized Nashid to provide consent, on behalf of Michael, to any transactions where Nashid disposed of or encumbered any interest in their matrimonial home and was therefore within the scope of authority given by Michael. The case of Reviczky v. Meleknia, 2007 CarswellOnt 8258 is distinguishable as it dealt with the immediate parties to the litigation and does not purport to address the impact of a fraudulent document on third-party creditors.

[56] I am persuaded that the transfer is consequently binding on Michael and anyone else dealing with the property. There is no evidence establishing that anyone had notice of any limit imposed on the power of attorney. Michael remains bound by the acts of his attorney, despite his claim that he did not consent to, or know about the transfer of the property. If Michael had imposed a term on the POA that required his consent to, or prior knowledge of a transfer, it is not found on the face of the POA.

[57] Michael also argues that Nashid was a fraudulent person within the meaning of the Land Titles Act and therefore the Bank's mortgage was a fraudulent instrument and he is entitled to relief: See CIBC Mortgages Inc. v. Computershare Trust Co. of Canada, [2015] CarswellOnt 1053 (S.C.). With respect, that case is distinguishable on its facts.

[58] It is true that my judicial colleague concluded that Michael did not know about the transfer nor the increase of the mortgage and that Nashid agreed to the fraudulent mortgage when she knew, or ought to have known that Waheed was seeking an order to set aside the transfer: Nashid v. Michael, at para. 17. However, as mentioned, concurrent with this determination, Michael made certain explicit representations to the Family Court and is now attempting to resile from those specific assertions. It was clearly understood by Herman J. - and to an extent, Kruzick J. - and all those implicated in the family law proceedings, that Michael's interest in the property was subject to the pre-existing Charge in favour of RBC.

[59] Overall, I agree with RBC that Michael's bald allegation that RBC obtained financial compensation in relation to the Charge lacks any supporting evidence. In my opinion, RBC was entitled to rely on the property’s title abstract.

[60] While it is suggested that the bank failed to discharge its duties in this matter, I must respectfully disagree. I am not persuaded that RBC’s responsibility in this case required that they conduct an independent investigation or inquiry including a review of the instrument(s) that transferred the property into Nashid’s sole name, or had a duty to view or seek the original POA. Despite counsel’s able submissions, in this case RBC did not have a further obligation to go behind the original transfers.

[61] I also do not accept the submission that the Bank was required to conduct a review of the title abstract and improperly relied entirely upon the representations and the documents provided by Nashid. I am not persuaded by arguments that the lender ought to have taken more care or exercised greater due diligence related to this case that might have ensured the borrower's capacity to repay the loan and to confirm the value of the security. Indeed, there are obligations on the bank to ensure a borrower's capacity to repay the loan, and the validity of documents presented to it, but not to the extent or in the manner suggested here. I do not find support in the jurisprudence that relates to these facts that these are obligations or duties required by the lender: National Bank of Canada v. Meneses at para. 36.

[62] In my opinion, there is no genuine issue requiring a trial. I find that there was no fraud with respect to the POA or previous transfer of property as against RBC’s rights; and the bank did not act or fail to act in any manner to otherwise defeat its interests. As I have determined that a legal mortgage and charge registered against the property exists in favour of RBC, I need not get into the equitable doctrine of subrogation.

[63] At this stage, I am not prepared to opine as to whether it would be unfair to permit RBC to enforce the entirety of the BNS charge against Michael, and then enforce the balance of its claim against Nashid's interests in the property. As Michael has not taken responsibility for the Charge, it may be that the prior equalization payment of $438,395.99 in favour of Michael is inflated. However, counsel were not in a position to provide reliable or definite amounts to substantiate their respective clients’ claims to the sums held in trust in relation to 220 Finch Ave., Toronto.

[64] It may be that a determination as to the appropriate distribution of amounts that are subject to executions and being held in trust in relation to the proceeds of 220 Finch Ave., Toronto will need to be addressed by a further motion to the Court and on a full and complete record.

Conclusion

[65] RBC’s motion for summary judgment is granted.

[66] Order to go granting RBC judgment for:

(a) possession of the lands and premises described as follows:

PT LT 1-2 PL 1705 ETOBICOKE AS IN CA311713; TORONTO (ETOBICOKE); CITY OF TORONTO.

Property Identification Number 07626-0071 (LT)

Municipally known as 8 Miles Road, Toronto ON, M8V 1V3;

(b) leave to issue a Writ of Possession in respect of the Property;

(c) the proceeds of the sale of 220 Finch Avenue East, Toronto, held in trust by Mr. Rifkind, to be credited and paid towards RBC’s judgment as against Nashid in amounts to be arranged by agreement of the parties, together with any interest accrued thereon; with the balance to be paid in favour of Michael.

(d) if the parties cannot agree on the distribution of funds held in trust pursuant to para. (c), a further motion to this Court may be brought on notice to determine the true state of accounts of the parties and their entitlement to sums owing in respect of the outstanding execution(s).

[67] If the parties cannot agree on the issue of costs, I will consider written submissions. These cost memoranda shall not exceed three pages in length, (not including any bill of costs or offers to settle). RBC shall file its costs submissions within 15 days of the date of this judgment. Michael may file his costs submissions within 15 days of the receipt of RBC’s materials. RBC may file a brief reply within five days thereafter.

A.J. Goodman J.

Released: June 6, 2017

[^1]: The action against Mr. D’Mello was dismissed by the Registrar on April 5, 2016. [^2]: However, I query whether this argument can be sustained when considering Kruzick J.’s May 18, 2012 order.