Court File and Parties
COURT FILE NO.: CV-14-507227 DATE: 20190628
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
KWEI HWA SENG and SAU KIN TSE Plaintiffs
– and –
DARA SENG aka DARA TAN LING SENG aka DARA TAN LING SENG ZHANG Defendant
COUNSEL: Lawrence S. Wong, for the Plaintiffs Ford W. Wong, for the Defendant
HEARD: July 17, November 5-6, December 10, 2018, February 6, March 8, and March 25, 2019
SUMMARY JUDGMENT
A. J. O’MARRA J.
1This is a dispute over the parties’ interest in a residential condominium property located at 3181 Bayview Avenue, Suite 513, Toronto, Ontario. The plaintiffs, Kwei Hwa Seng and Sau Kin Tse are the parents of the Defendant, Dara Seng. Title to the property is registered in the names of the plaintiffs and defendant held as joint tenants. The plaintiffs, in their mid-80s, have resided in the property as their principal residence since December 2001. The defendant, Dara Seng resides in Temecula, California, USA.
2The plaintiffs seek an order requiring the defendant to transfer her interest as a joint tenant in the property to them. Alternatively, they seek an order by the court to remove the defendant’s name from the title to the property on the grounds of breach of contract.
3The defendant in her cross-claim seeks a declaration that a loan agreement entered into between herself and her parents, dated November 12, 2001 is a valid and enforceable mortgage, albeit a disguised mortgage on which she wishes to exercise her right of redemption and take sole ownership of the property as mortgagor. The defendant claims that the plaintiffs, more specifically her father Kwei Seng, purchased the Bayview property on her and her husband’s behalf as an investment property through the loan agreement dated, November 12, 2001 in which the plaintiff agreed to advance a loan to the defendant in the amount of $350,000 US (CAD $561,000 at the time) to purchase the property.
4On a review of all of the materials provided by the parties on the motion, this is a matter in which there is a genuine issue requiring a trial, however, can be determined in avoidance of a trial utilizing the powers provided pursuant to Rule 20.04 (2.1) and (2.2) of the Rules of Civil Procedure. (See Hryniak v. Mauldin, 2014 SCC 7 at para. 6).
Background of the Litigants
5The plaintiffs, Kwei Seng and Sau Tse in their mid-80s, spouses of one another have five daughters from the marriage. The defendant is one of their five children. Two of the plaintiffs’ daughters reside in Toronto and the other two daughters reside in Hong Kong, from where the plaintiffs and family immigrated to Canada in 1989. The defendant is a U.S. resident living in California with her husband and child.
6The plaintiff, Kwei Seng comes from a family of nine brothers and sisters. He has a high school education from China. After high school he started working in the family clothing factory at 18 years of age. On immigrating to Canada he purchased and operated a clothing manufacturing business and a warehouse business, both located in Toronto.
7The defendant, born in Hong Kong completed high school and then proceeded to a secretarial training program, after which she worked for a number of years in a law firm. Since immigrating the defendant has resided in California from the early 90s with her husband. They have acquired substantial holdings - four restaurants, one farm property, two plazas and eleven investment properties, many of which were purchased as a result of loans in excess of $4 million dollars from her father, the plaintiff from 1991 to 2004.
Events Leading to the Purchase of the Bayview Property
8In 2001, the plaintiffs resided in a two-storey house in Mississauga, which due to its size and stairs between levels they found at age 65 to be physically challenging. They decided to buy a condominium. They engaged a real estate agent to look for different condominium apartments in Toronto.
9The defendant claims that in the fall of 2001, she and her husband were interested in buying an investment property in Toronto and to provide a place for her parents to “live out of love and respect for them”. Further, she asserts that her father on behalf of her and her husband entered into an Agreement of Purchase and Sale for the purchase of the Bayview property for $550,000. The plaintiffs assert that it was never purchased as an investment property for their daughter.
10It is uncontroverted that the plaintiff engaged the agent who sought out the desired property and on October 12, 2001 the plaintiff Kwei, as the purchaser, made an offer to purchase the property at 3181 Bayview Avenue, Suite #513 for $540,000 with a deposit of $30,000. On October 13, 2001 the plaintiff accepted the vendors’ counteroffer of $550,000 with a closing date scheduled for December 11, 2001. The defendant was not involved in the hiring of the agent, the search for the property, payment of the $30,000 deposit, the balance of the purchase price or the incidental expenses such as land transfer tax, closing adjustments and the legal fees in the total amount of $535,916.70, less the $30,000 deposit.
11The defendant claims that she was the purchaser and owner of the property by the loan agreement of November 12, 2001 in which the plaintiff agreed to loan the defendant $350,000 USD ($561,000 CAD) on which the defendant’s claim is premised. The agreement, written by the defendant reads as follows:
This loan agreement is made between Xiang Kai Zhang and Dara Zhang (hereinafter called “the Borrowers”) of the one part and Mr. Kwei Hwa Seng (hereinafter called “the Lender”) of the other part.
Both parties hereby agree as follows:
Purpose of the loan: To purchase an unit at 3181 Bayview Avenue, Suite #513, North York, Ontario M2K 2Y2, Canada
Name of property: It will be in the names of Mr. and Mrs. Kwei Hwa Seng and Dara Seng as temporary on the title. The names of Mr. and Mrs. Seng will be deleted or transferred or whichever way is appropriate to the Borrowers once the repayment of the loan is fully paid to the Lender.
Principal of loan: US$350,000.
Purchase price: CAN $560,000 (US $361,000)
Interest: 5% per annum. Interest for the amount of $1,458.33 per month shall be payable to the Lender starting January 2002. Interest will be deducted if (sic) every $50,000 of principal’s repayment is paid to the Lender.
US$11,000 will be deposited into to Mr. Seng’s account sometime in November 2001.
The above terms are agreed by the said parties and signed on the 12th day of November 2001.
Signed by: Xiang Kai Zhang and Dara Zhang (“the Borrowers”) and Kwei Hwa Seng (“the Lender”).
12On the same date, November 12, 2001 the plaintiffs and the defendant entered into a second loan agreement for the purchase of a farm property in California with a principal amount of $400,000 USD with interest at 5 percent per annum in the amount of $1,666.67 per month payable to the Lender starting in January 2002.
13Both loan agreements, and as many as 18 others between father and daughter were prepared by the defendant, most of which were written in English.
14On November 15, 2001 the defendant also executed a first continuing power of attorney naming the plaintiff as her attorney.
15On December 11, 2001 the transfer of the property to the parties was registered in which the plaintiffs and the defendant took title under all of their names as joint tenants.
16The plaintiff contends that his daughter’s name was added as a joint tenant because she was the most educated and familiar with legal matters, having worked as a legal secretary and, “as a security measure as we believe that in the event that I and my wife passed away Dara would take care of my estate and distribute it, including the Bayview property in accordance with our Last Will and Testament”. He further contends that he did not understand that joint tenancy would entitle her to unconditionally take ownership of the Bayview property if she were alive at their deaths. Had he known that he would not have added her as a joint tenant.
17It would appear from the limited banking records the defendant was able to obtain after the commencement of the action she paid $11,000 in November 2001 by two deposits in the amount of $5,000 and $6,000 to a joint Wells Fargo account held with her father, the plaintiff. Further, she made monthly deposits to the account in the amount of $1,460 until July 2003 when they stopped.
18On June 29, 2002, the defendant executed a second continuing power of attorney naming the plaintiff as her attorney. On July 13, 2002 the plaintiffs obtained a mortgage on the property for $300,000 CAD, and it was refinanced and increased on March 19, 2003 to $450,000. He claims the mortgage was arranged at a lower interest rate at the urging of his bank manager in order to repay his line of credit with a higher interest he had used to advance the loan to his daughter for the purchase of the California property.
Terminating the Agreement
19In her affidavit, sworn January 29, 2018 the defendant stated that she stopped payments on the Bayview property loan agreement in July 2003 because her father said he was not going to transfer ownership of the condominium wholly to her: “I stopped making payments for the first loan and for other expenses related to the Bayview property because I stood to lose all the principal and interest and common expense payments I had made towards the Bayview property amounting to approximately US $98,740.
20The plaintiff claimed initially that he was unaware of the November 12, 2001 agreement as it had been written in English, which he had little knowledge of and as a result unaware of what he signed at the time he had signed the other loan agreement for the farm property in California. Notwithstanding, he claims to have come to an understanding later as to the nature of a joint tenancy and its true consequences in 2003 when he spoke to a lawyer about the preparation of a Will. He asked his daughter as a result to relinquish any interest she had in the property.
21The defendant contends that she felt she was under duress due to the pressure she felt as a result of her father’s decision to take the Bayview property and agreed to accept $91,000 USD.
22On April 11, 2004 the defendant prepared the following letter in Chinese setting out her willingness to relinquish her interest in the property for a payment of $91,000 USD, as the amount she claimed to have contributed as a result of the loan agreement, (later revised to $98,740 after the actions were commenced). In the letter she states:
According to the November 12, 2001 agreement, now Daddy does not want to transfer name to Ling Ling (the defendant) only. Therefore, to avoid dispute, Ling Ling is willing to give up property to Daddy and Siu Mom both jointly (underlined by defendant). Ling Ling will not ask for the payment of past interest – from 1/2002-4/2004 and, monthly expenses of $500 – additional monthly common expenses from 8/2002-4/2004.
Now, Daddy agrees to purchase at an original price US $361,000 – to Ling Ling for the transfer of the property to Daddy and Siu Mom.
Up to now, March, Ling Ling still owes a total of US $270,000 – to Daddy.
(3) April’s interest and additional common expenses (US $500) are already paid. 7/2003 (handwritten) (US $1,350)
- Daddy needs to pay the following amount to Ling Ling:
$361,000 (property price)
-$270,000 (debt)
Daddy needs to pay difference: $91,000.
- From the beginning of this year, on May 1 (5/1/2004), Ling Ling is not required to pay the property interest and the common expenses of $500. Daddy can send out a cheque of US $91,000 – balance to Ling Ling, Ling Ling can transfer the name to Daddy and Siu Mom at any time.
Ling Ling respectfully submits, April 11, 2004.
23The letter was copied to her mother Siu Mom and sisters Siu Ming, Ying Ying, Kan Kan.
24On April 20, 2004 the plaintiff transferred $91,000 USD to the defendant, which she acknowledged receipt of in her letter of April 21, 2004 written in Chinese:
Daddy, how are you! Acknowledged that you already sent the monies to USA, Wells Fargo bank account, I will withdraw the amount $91,000 today.
About the title to the property, I want to sign the transfer out as soon as possible, since I already received the balance of $91,000, this property no longer belongs to me, (underlined by defendant) I also do not want to benefit . . .
25In addition, it would appear that as a result of another written agreement reached in August 2004, with her father about her California properties the defendant received an additional $40,000 for the Bayview property.
26The plaintiff claimed the $40,000 was to get the defendant to provide the transfer, which the defendant denies. The defendant claims that any reference to the Bayview property in the agreement was a mistake, as it only related to the California property which her father had agreed to sell to her at the original 1991purchase price, USD $123,470, less $40,000 USD “regarding Bayview Avenue property”.
27The plaintiff testified on the motion that the defendant wanted the $40,000 deducted from the 1991 price for the California property for “all the other sundry expenses on the condo”.
28It is difficult to understand the claim by the defendant that reference to the Bayview property was a mistake as it was referenced twice in the agreement she prepared. In any event, it was a benefit to the defendant as it reduced the amount owed on the California property at the 1991 price by $40,000 USD.
29The defendant states that when the plaintiff wanted her to transfer her interest in the condo she refused because she had learned her father had arranged mortgages on the property unknown to her using her power of attorney, which she alleged was fraudulent on his part. She had also been told by “some people that the property market in Canada was going up”. She claims to have offered to return the $91,000 to her father, which he rejected. Despite her claim, the $91,000 was not returned.
30The plaintiff claims that from 2005 to 2013 he requested repeatedly that the defendant transfer her interest in the Bayview property to him and his wife.
31Neither the daughter’s claim of offering to return the $91,000 or father’s requests for a transfer of her interest was documented.
32However, on December 30, 2012 the plaintiff did write to the defendant giving her a one month deadline to transfer her interests in the Bayview property. Just over a month later in a letter dated February 3, 2013 he repeated the request:
. . . I wrote to you in the year 2012 on December 30 giving you a deadline of January 30, 2013 to reply, since you borrowed monies, the new mall is already built, you can pay back and do not delay. You borrowed more than US $2.1 million, I also acted as your guarantor for your credit, but how much did you pay back? You said you wanted to be fair, not to be greedy and not to be greedy about money. Please finish the transfer of property as soon as possible by February to settle this matter. You can do it, if you have any difficulties you can discuss it with Xiang Kai, (her husband, Johnny) to get a resolution. He has a bad temper but has good principle and clear mind.
33He wrote to her again on March 10, 2013 asking her to transfer. Not receiving a reply, the plaintiffs had their lawyer write to her on August 16, 2013 to demand that she transfer her interests in the Bayview property to them.
34On August 24, 2013 she replied to the demand stating, “Sorry, I do not consent to the transfer of title”. Then on September 20, 2013 the defendant’s lawyer wrote: “My client has invested a significant sum of money in the property, and wishes to retain her joint ownership of the property”.
35There is no evidence of any additional payments or investment by the Defendant on the loan agreement after July 2003 and payment of the $91,000 to her.
36On June 26, 2014 the plaintiffs filed their statement of claim for a declaration that the defendant had breached her agreement of April 2004 and for an order requiring her to transfer her interest in the property to the plaintiffs, or in the alternative, for an order to delete her name from the title of the property.
37Subsequently, the defendant in her amended, amended statement of defence and counterclaim, dated October 22, 2014 asserted:
- The November 12, 2001 loan agreement was “in essence a common law disguised mortgage” and as such she has fundamental rights including but limited to the right of redemption and the right of re-conveyance of the Bayview Property.
- The plaintiffs action is statute barred to recover land for mortgage and arrears under the Real Property Limitations Act R.S.O. 1990, c.L.15, s. 22 and further is precluded from recovering any monies owing pursuant to subsection 23(1) of the said Act for failing to commence an action within ten years after the plaintiffs’ right to receive it.
- Any agreement that the defendant made in 2003/2004 and any payments the defendant received from the plaintiffs to release her interest in the property and to have her name removed is invalid and unenforceable because it is an attempt to deny her right of redemption under the disguised mortgage.
- Additionally, there is no Agreement of Purchase and Sale or any contract regarding the Bayview property from the defendant to the plaintiffs contrary to the Statute of Frauds, R.S.O. 1990 c.S.19, s. 4; there is no consideration; the agreement is void for vagueness; it was unconscionable due to wrongful use of her power of attorney; and it was made under economic duress and/or undue influence.
38In addition to multiple affidavits and discovery testimony of the parties filed on the motion, the plaintiff and defendant testified on the motion as directed pursuant to Rule 20.04 (2.2) of the Rules of Civil Procedure. They were clearly antagonistic toward the other in their claims and testimony, alleging fraudulent conduct by the other. The differences in their recollection of events were irreconcilable.
39The plaintiff claimed that the defendant had “conspired” against him by drafting the Bayview property loan agreement in English, which he did not understand, and slipping it in with the California farm property $400,000 loan agreement written in Chinese at the time he signed them. He disputed that the defendant even made the stipulated $11,000 deposit contribution, claiming there is nothing to indicate that the two deposits of $5000 and $6000 at the end of November, 2001 reflected in the bank records she produced of their joint Wells-Fargo account in California was for that purpose. He offered that she used the account for her business and those amounts could have been used for that purpose. The defendant responded that she made two deposits as it saved her money.
40He argued that the monthly deposit amounts of $1460 to their account, was not the $1428.33, as stated in the agreement. She responded that the amounts were simply rounded up. He claimed she “cooked the books” in reference to their joint account.
41Notwithstanding, in April 2004 he repaid his daughter the $91,000 she claimed to have paid on the loan.
42After receipt of the funds and her statement that the property no longer belonged to her the defendant refused to transfer title claiming her father had committed fraud by subsequently arranging two mortgages on the property unbeknownst to her using the power of attorney she had executed in November 2001. The power of attorney had been signed by her in California with only one person as witness to it, but which required two witnesses. After it was returned to Ontario, rather than send it back or have another prepared, her father out of convenience, which he claims she agreed to, but she denies, arranged for his accountant to sign as the second witness in her absence.
43While it was improper for the plaintiff to have done so, the defendant’s claim that it caused her to refuse to provide the requested transfer is at best fatuous and more likely motivated by her awareness of the increased market value of the property. There is conflicting evidence as to when she actually learned of the mortgages arranged by the plaintiff. She stated in evidence that it was late 2004 when she first learned of the mortgage, but at one point in cross-examination on discovery agreed that she did not learn of the HBSC mortgage until after the action had been commenced.
44The defendant argued that she only agreed to accept payment from her father in April 2004 and have her name removed from title because she was under duress due to the pressure of family relations and acceded to her father’s demand to keep the peace in the family.
45I do not accept the defendant’s claim that she acted under duress at the time. It is clear that she had an ongoing financial/commercial relationship with her father over many years in which she negotiated multiple loans and repayment plans for millions of dollars. Moreover, in my view, any notion of duress was dispelled by the fact that the defendant resisted the removal of her interest from the title of the property over an extended period of time.
46Her testimony that she was actually owed more than $98,000, but rounded it down to $91,000 was incomprehensible, just as was her explanation for accepting the $40,000 reduction as against the 1991 price of the California property. She said she was actually owed more than $58,000 on the California property, but “rounded it down” to $40,000.
47With respect to the loan agreement, the position taken by the plaintiff that he did not fully understand the English language and that it was slipped in there as part of the defendant’s plan to deceive him during the signing of the other November 12, 2001 loan agreement on the farm property in California lacks any credibility given his willingness to pay her the requested $91,000. I do not accept that the plaintiff, brought up in Hong Kong, an English speaking British protectorate at the time, and with more than twenty years’ experience operating businesses in Canada, did not have a sufficient grasp of English to understand the nature of the agreement he signed. I consider as well that all of the loan documents between father and daughter included in the plaintiffs’ supplementary motion record of April 30, 2018 are in English. Between 1991 and 2004 the plaintiff and defendant principally used English as the language of their financial dealings.
48The further argument that the defendant did not pay the $11,000 deposit or monthly interest payments is belied by the bank records showing deposits to the joint account totalling $11,000 and monthly deposits of $1,460 for interest, which the defendant has said rounded – a more reasonable explanation.
49By any measure, both father and daughter, given their respective commercial successes were sophisticated and astute entrepreneurs, even if deficient in their record keeping.
50In this instance, greater reliance will be made of the existing documentation, rather that the testimony of the plaintiff and defendant, which I found in conflict and irreconcilable on multiple points, but equally self-serving, unreliable in their narration of events and eager to impute improper motives and conduct of the other.
Breach of Contract
51The plaintiffs contend they are not only the purchasers, but the owners of the property at 3181 Bayview Avenue by virtue of the October 13, 2001 Agreement of Purchase and Sale. The explanation given by the plaintiff Kwei that he and his wife wanted the defendant on title in order to administer the property as part of the estate after both of their demise without an understanding as to the consequences of a joint tenancy is untenable, and more likely a contrived explanation.
52Regardless of how the defendant ended up on title, the plaintiffs contend in the alternative, if the loan agreement is valid and enforceable that it was terminated by agreement as of April 21, 2004. The defendant acknowledged receipt of $91,000 USD in her favour as requested and undertook to remove her name from title to the property on April 21, 2004 by her declaration “I want to sign the transfer out as soon as possible, since I already received the balance of $91,000, this property no longer belongs to me. . .”
53The plaintiffs argue that the correspondence between the parties in April 2004 together with the transfer of $91,000 USD shows that there was an agreement that the plaintiffs would buy out the defendant’s interest in the property. Payment was requested and payment was received. The defendant’s failure to provide the transfer is a breach of contract.
Disguised Mortgage and Limitation Periods
54The defendant asserts she bought the property as an investment and that the loan agreement created a common law disguised mortgage and that she must be allowed her right of redemption upon payment of the full balance owing. She claims that the loan agreement having created a mortgage that the April 2004 agreement would have interfered improperly with her right of redemption and should be set aside.
55Further, since the loan agreement is a disguised mortgage, the plaintiffs’ case is really a mortgage enforcement action which would be barred by the ten year limitation period of the Real Property Limitations Act.
56Alternatively, she claims that the two year limitation period under the Limitations Act ought to have started running in 2004 because of the alleged agreements between the parties in that year and the fact that she did not immediately transfer title to the property. She submits that the usual two year limitation period clearly bars the plaintiffs’ action.
57Further, there was no valid agreement in writing concerning an interest in land, contravening the Statute of Frauds.
Discussion
58First, is it a disguised mortgage? As discussed in Falconbridge on Mortgages, 5th ed. (Toronto: Canada Law Book, loose-leaf) at s. 3.30, the question of whether a transaction is a disguised form of mortgage is one of fact. Where the document on its face suggests that it is not what it purports to be, evidence of the surrounding circumstances of all oral and written communications between the parties is admissible for the purpose of showing the real nature of the agreement: Creswell v. Raven Bay Holdings Ltd. (1984), 1984 CanLII 842 (BC SC), 53 B.C.L.R. 183 (S.C.) at 187. The evidence that the transaction is really a mortgage must be clear and conclusive.
59In considering all of the evidence:
- on the face of the November 12, 2001 document it is stated to be an agreement for a loan. It does not provide for the property to be secured as a mortgage;
- there was no mortgage registered on title in which the plaintiffs are the mortgagees and the defendant the mortgagor;
- the claim of an existing disguised mortgage appears to have only arisen two years after the commencement of the action in an amended counterclaim;
- the plaintiffs and the defendant are on title of the Bayview property with right of survivorship, and there is no evidence that the plaintiffs or the defendant intended the loan to be in fact a mortgage.
- the defendant in her writing of April 11, 2004 set the terms for the termination of the outstanding loan.
60How can defendant’s purported right of redemption co-exist with the right of survivorship as a joint tenant? It is important to note that the property was not held as security by any of the parties since all the parties were on title as joint tenants with right of survivorship. The defendant could not mortgage the plaintiffs’ interest in the property, with her as the mortgagor and them as mortgagees while joint tenants. Moreover, the language of the loan agreement does not clearly express an intention that any security would be required from the defendant for the loan. It is also of relevance that the defendant was never in possession of the property, which is inconsistent with a typical mortgage.
61It is undisputed that the plaintiff serviced the original and renewed mortgages on the property, since discharged, as well as paid all maintenance fees and any other service charges.
62Since July 2003 the defendant has contributed nothing in repayment of the loan, and received and acknowledged payment of $91,000 USD, relief from the outstanding debt of $270,000 USD, and stated in her signed letter of April 21, 2004 with underlined emphasis, “this property no longer belongs to me”.
63It is not clear and conclusive on the documentation that the loan agreement was a disguised mortgage.
64Not being a disguised mortgage, the ten year limitation period under the RPLA is inapplicable.
65With respect to the defendants other limitation period argument, in 2004 the defendant agreed to provide the requisite transfer of interest however, failed to do so. It was only on August 24, 2013 in response to the plaintiffs’ lawyers request to provide it that there is evidence of her definitive refusal: “I do not consent to the transfer of title”. Accordingly, the action commenced by the plaintiffs in 2014 was within the limitation period.
66In terms of the defendant’s argument that the agreement reached in April 2004 is invalid because it contravenes s. 4 of the Statute of Frauds as an agreement concerning an interest in land, which must be evidenced in writing, in this instance, the letter of April 11, 2004 from the defendant, and the transfer of funds she accepted from the plaintiff, confirmed April 21, 2004 constitutes evidence in writing. See Hoj Industries Ltd. v. Dundas Shapard Ltd., 1978 CanLII 1627 (ONSC) in which the court held that an offer to lease and a cheque provided to pay first and last month’s rent constituted documentation in writing sufficient to satisfy the Statute of Frauds requirements. As such, the agreement in this case does not contravene the Statute of Frauds.
67I consider as well that the defendant, in addition to her confirmation in writing of receipt of the funds, which was good consideration, and her acknowledgment she had no interest in the property, breached the agreement by her refusal to transfer her interest.
68In the result, summary judgment is granted to the plaintiffs and an order will issue for the removal of Dara Seng, aka Dara Tan Ling Seng, aka Dara Tan Ling Seng Zhang from title to the property known municipally as 3181 Bayview Avenue, Suite 513, Toronto, Ontario.
69Costs are awarded to the plaintiffs. If the parties cannot agree between themselves as to costs, brief submissions no longer than 4 pages including costs outline may be submitted within 15 days of this ruling.
A.J. O’MARRA, J.
Released: June 28, 2019