Gamble v. The TD Bank, 2019 ONSC 5574

COURT FILE NO.: CV-15-54230900A1

DATE: 20191009

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LARRY E. GAMBLE

Plaintiff

– and –

THE TORONTO-DOMINION BANK and TD WATERHOSE CANADA INC.

Defendants

-and-

LORNA LOVIE and NICK BARISHEFF

Third Parties

Elizabeth S. Dipchand and Dan Pollack, Lawyers for the Plaintiff

Gillian B. Dingle and Alexandra Shelley, Lawyers for the Defendants, The Toronto-Dominion Bank and TD Waterhouse Canada Inc.

Farhad Shekib, Lawyers for the Third Parties, Lorna Lovie and Nick Barisheff

HEARD: August 15, 2019

G. DOW, J.

REASONS FOR DECISION

1The defendants seek summary judgment dismissing the claims against it by the plaintiff. As this would end the Third Party Claim for indemnity, the third parties support the submissions of the defendants. To that end, the third parties, Lorna Lovie and Nick Barisheff also served a motion record seeking summary judgment but essentially for the same reasons as the defendants.

Background

2In January, 2001, the plaintiff lent the third party, Nick Barisheff (“Mr. Barisheff”) $50,000.00 for one year at 10 percent. The principle and interest was repayable on January 31, 2002. The evidence of the plaintiff was this loan was to assist the third parties with living expenses given they had cash flow problems. Mr Barisheff’s evidence was the loan was how the plaintiff financed his purchase of the first franchise, located in Barrie, Ontario, of Mr. Barisheff’s water filtration business known as Millennium Water Technologies. Ms. Lovie is Mr. Barisheff’s spouse and the registered owner of the third parties’ residence.

3The plaintiff and Mr. Barisheff acknowledged being acquainted with each other through business dealings involving real estate and commodities investments. According to Mr. Gamble, they co-founded Bullion Management Group in 2002 but had a falling out over the business in 2005.

4The plaintiff was familiar with real property financing including mortgages. In this instance, the $50,000.00 loan was secured by a mortgage placed on the third parties’ residence, a large property in Cedar Valley, a small community east of Newmarket. The funds came out of the plaintiff’s retirement savings plan which evolved into a registered retirement investment fund. This was not the only mortgage the plaintiff granted within his retirement savings plan. It seems clear the plaintiff used his retirement savings plan and business acumen to make investments of this nature. Given government regulations, that account required an administrator or trustee.

5The administrator was originally Canada Trust and superseded by the defendant, TD Waterhouse Canada Inc. Given the funds advanced were from the retirement savings plan, the mortgage was registered in favour of the administrator, then Canada Trust.

6As a loan secured by a mortgage, the rights of repayment arose when the mortgage fell due. The plaintiff maintained the mortgage was periodically extended. He admits it was his obligation to enforce the mortgage (at page 32 question 108 of his cross-examination). The defendants sent the plaintiff notices that the funds had not been repaid as of January 31, 2002 and interest continued to accrue at 10% per annum.

7The plaintiff admits he took no steps to pursue enforcement given the loan was secured by a property which he believed had a far greater value.

8The individual who was responsible for the day to day management of the Barrie franchise was Jim Fraser who died of cancer in or about 2005. The plaintiff maintained that he was only a passive investor in Millennium Water Technologies with financial assistance made only and directly to Mr. Fraser.

9For reasons that may become relevant in my analysis below, the plaintiff and third parties agreed to postponements of the mortgage, the most recent being on August 9, 2005 in which the plaintiff authorized and directed the mortgage fall “in third place behind the existing first mortgage in favour of Maple Trust Company and the new second mortgage in favour of Thomas Arthur Beck” (Exhibit Q to Ms Currie’s affidavit, an attachment/consent to the August 4, 2005 letter from Owens, Wright LLP to TD Waterhouse. She deposed evidence on behalf of the defendants).

10In 2007, the third parties alleged they wanted to refinance the primary mortgage on their Cedar Valley property and approached the plaintiff to settle their debt with him. Mr. Barisheff testified the amount owed by the plaintiff arising from unpaid Millennium Water Technologies inventory exceeded the value of the mortgage and accrued interest. The third parties testified that the plaintiff agreed to this arrangement. The plaintiff denied any meeting or arrangement occurred.

11There is a letter dated July 31, 2007 to the lawyers representing the third parties, that the defendant, Toronto-Dominion Bank, on behalf of “The Canada Trust Company authorizes you to electronically register a Complete Discharge” of the mortgage (Exhibit S to Ms. Currie’s affidavit). There is no evidence of the plaintiff giving those instructions to the defendants.

12However, while the defendants accept the plaintiff’s position he was never made aware of this step, the defendants also continued to show the lapsed, unpaid mortgage in its statements to the plaintiff.

13It was not until November, 2014 that the plaintiff met with Mr. Barisheff regarding Bullion Management Group matters and was told by him the mortgage had been discharged. The plaintiff contacted TD Waterhouse who does not admit it to him until August 26, 2015 that it had authorized discharge of the mortgage. As stated, there was no evidence as to how the direction of July 31, 2007 occurred. The value of the mortgage with accrued interest had risen to $200,075.69 at that point.

14The Statement of Claim contained in the Motion Record indicates it was issued on December 9, 2015.

Analysis

15Simplistically, the defendants’ position is that the plaintiff knew from February 1, 2002 that he had an actual claim against the third parties for the failure to repay the mortgage which started the limitation period. The mortgage was in default and the plaintiff was aware that he could take steps to enforce it. However, the situation is not that simple. The mortgage was not held directly by the plaintiff. It was registered in the name of Canada Trust in accordance with the parameters of the plaintiff’s registered retirement savings plan. This consisted of an agreement between the plaintiff and (what became) the defendants and made the defendants a trustee. This has legal repercussions, the primary one of which is to act in the best interests of the beneficiary.

16This is why counsel for the defendants relied on the terms of the agreement in place for a self-directed retirement savings plan and that it was the plaintiff’s “sole responsibility to choose the investments of the PLAN, and to determine whether investments should be purchased, sold or retained by the trustee as part of the PLAN” (at paragraph 4(e) of the Self-Directed Retirement Savings Plan Declaration of Trust).

17Further, in the “Arm’s Length Mortgage Agreement”, the defendants rely on the terms of the agreement that “responsibility in administrating the mortgage is limited to receiving, recording and reporting on payments under the mortgage with the same degree of care and skill as a reasonably prudent corporate mortgagee would exercise” (at paragraph 1 of that document). In addition, the defendants “will not exercise any discretion or pursue any remedy under the Mortgage or by the provisions of any applicable law” (at paragraph 12 of that document). I am prepared to conclude these terms in the agreement between the plaintiff and the defendants are sufficient to exclude application of usual trust law principles. The essence of the trust between the parties is to ensure the taxpayer holds only government approved investments in the plan.

18This in turn leads to what I would call the defendants failure to document or advise the plaintiff of it providing instructions to the third parties’ lawyer discharging the mortgage in July, 2007. This failure was compounded by the defendant continuing to provide the plaintiff with periodic statements showing the mortgage as still in existence and accumulating interest.

19The defendants rely on the expiry of a limitation period to maintain the action should be dismissed as the plaintiff has no remedy in law. That is, Section 43 of the Real Property Limitations Act, R.S.O. 1990 c. L.15 which “limits claims based on a covenant contained in an indenture of mortgage” to ten years after the day in which the cause of action arose. With the mortgage having gone to default on February 1, 2002, the plaintiff was unable to successfully claim against the third parties after January 31, 2012. Thus, the plaintiff has no recoverable loss.

20The plaintiff raised Section 23 of the Real Property Limitations Act, supra as applicable which provides 10 years to bring an action “after a present right to receive at accrued to some person capable of giving a discharge for, or release of” what I would call the debt. This is due to refinancing of the third parties property in August 9, 2005. At that time, the plaintiff authorized and directed the mortgage fall “in third place behind the existing first mortgage in favour of Maple Trust Company and the new second mortgage in favour of Thomas Arthur Beck” However, even if this resets the limitation period, it only does so to August 9, 2015 or four months before the Statement of Claim was issued.

21It does, however, bring into play the defendants conduct upon the plaintiff’s inquiry as to the status of the mortgage. It also potentially raises discoverability as, if Section 23 of the Real Property Limitations Act, supra, applies, it is clear the plaintiff had discovered his claim either by February 1, 2002 when it was not repaid or August 9, 2005 when he agreed to postpone enforcement. Regardless, both of those dates are out of time for an action on the debt against the third parties.

22The defendants have produced an email chain between May 4, 2015 to August 14, 2015 wherein it was clear the defendants were aware that the mortgage had been discharged without any direction from the plaintiff but did not confirm that information to the plaintiff. This leads to the cause of action the plaintiff alleges against the defendants. It includes the defendants’ breach of its contract with the plaintiff to be directed by the plaintiff as to whether “investment should be purchased, sold or retained by” them and to “reporting on payments under the mortgage”.

23The defendants failed to do so. The evidence is the plaintiff only learned of this breach of the terms of their agreement and their negligent conduct on August 26, 2015.

24I would analogize the situation to that which occurred in Eastside Apartments Limited v. Aird Berlis, 2015 ONSC 1379. In that matter, Eastside was a defendant in an action commenced by a mortgagee and instructed its counsel to commence third party proceedings against the law firm which had acted on its behalf in the mortgage transaction. For a variety of reasons, and unknown to Eastside and its principal, that claim was not issued within the applicable two-year limitation period. After it was issued, it was dismissed on a motion for summary judgment as out of time.

25As a result, despite the defendants’ negligence, I conclude they are correct and the plaintiff has no recoverable claim against them. It is not necessary to determine whether time began to run for the plaintiff to commence an action against the third parties as of February 1, 2002 or August 9, 2005. The fact the defendants continue to show the mortgage as an asset in the plaintiff’s plan does not change that the plaintiff was aware the debt was secured by a mortgage, that no payments had been made which resulted in a default and the plaintiff was aware of his actionable claim as early as February 1, 2002 which may have been renewed as late as August 9, 2005. The statements issued by the defendants only reflected the potential value of his claim.

26Further (and alternatively), I also prefer the evidence of Mr. Barisheff and find that Mr. Gamble agreed to discharge the mortgage in 2007 as part of the settlement of offsetting debts. I do so for the following reasons:

a) The plaintiff was knowledgeable about mortgages as investments given his business background and the undisputed evidence this was not the only mortgage he had arranged within his registered retirement plan;

b) The existence of the Barrie retail outlet for Millennium Water Technologies in which the plaintiff admitted his financial involvement that ended when Jim Fraser passed away which resulted in the closing of that operation. This was shortly before the discharge of the mortgage occurring in 2007;

c) While not persuasive on its own, the subsequent locating and production of a draft consulting agreement by Mr. Barisheff between Millennium Water Technologies and the plaintiff along with invoices undermines Mr. Gamble’s denial of direct dealings with Mr. Barisheff in Millennium Water Technologies; and

d) The refusal by the plaintiff to produce his tax returns between 2000 and 2007 in response to whether he deducted expenses related to Millennium Water Technologies.

Conclusion

27The action by the plaintiff is dismissed. As a result, the action against the third parties is also dismissed.

Costs

28The third parties have been successful in having the Third Party Claim dismissed as against it and they are entitled to costs. The Costs Outline provided by the third parties sought $29,864.05 on a partial indemnity basis. There does not appear to be any compelling reason to depart from awarding partial indemnity costs. The amount appears reasonable given the reduced effort required in supporting the position of the defendants and the Costs Outline prepared by the defendants in the amount of $70,697.73 for its partial indemnity costs. I award the third parties its partial indemnity costs of $29,864.05 inclusive of fees, HST and disbursements payable by the defendants. I decline to permit the defendants to recover these costs from the plaintiff.

29This entire action could have been avoided or resolved without the level of expense incurred had the defendants documented why and how it authorized the discharge of the mortgage in 2007. Further, the defendants have failed to reflect the discharge in its statements to the plaintiff subsequent to July 31, 2007. It also failed to inform the plaintiff in a timely way of its awareness the mortgage had been discharged when asked about its status by the plaintiff in late 2014 or early 2015.

30As a result, I have concluded this is a proper case where the successful defendant not be awarded costs. Further, this is why the defendants should not recover the costs awarded to the third parties from the plaintiff.

31For completeness, the plaintiff’s Costs Outline was in the amount of $64,449.47 for partial indemnity costs inclusive of fees, HST and disbursements. This included $7,458.00 for attending to argue the motion which I find to be excessive. This may be the result of it being claimed at a substantial indemnity rate. Otherwise the amount compares favourably to the amount identified as incurred by the defendants.

32Should any party wish to seek to vary this disposition on costs as a result of a Rule 49 Offer to Settle, and the parties are unable to agree, the party seeking the variance may request same in writing to me within the next fifteen days. That request shall not exceed three typewritten pages in a readable font. The responding parties shall have fifteen days to respond, with the same limitation as to length and font.