Court File and Parties
COURT FILE NO.: CV-18-0001-0000
DATE: 20191002
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Surendra Walia
Plaintiff
– and –
2155982 Ontario Inc., Prem Chand Sharma, Agin Mollaj and Armoclan Engineering Ltd.
Defendants
Amandeep Sidhu and Charles Lun, for the Plaintiff
Mario Kalemi, for the Defendants
HEARD: August 16, 2019
RULING ON COSTS AND PRINCIPAL PAYABLE ON MORTGAGE
HEBNER J.
[1] The plaintiff brought a motion for summary judgment wherein the issues were the enforceability, or otherwise, of an interest clause in a mortgage commitment and the enforceability, or otherwise, of a purported agreement to renew the mortgage. The plaintiff sought interest at the rate of 21 percent. The defendants took the position that the appropriate interest rate was 12 percent. For reasons released February 13, 2019 I found in favour of the defendants. Specifically, I found that the interest payable was 12 percent.
[2] In my reasons, I gave the parties specific timelines for submissions on costs. I also indicated that, if the parties could not agree on the amount payable, I could be spoken to on the issue. The parties could not agree on the amount payable. The date of August 16, 2019 was set for argument on the issue. The parties agreed to extend the time for costs submissions and filed their written submissions on costs when they appeared before me on August 16, 2019.
[3] These are my reasons for determining the amount payable and costs.
Amount Payable Under the Mortgage
[4] The plaintiffs take the position that the principal amount due on the mortgage is $350,000.00, the amount identified in the second mortgage commitment. The defendants take the position that the principal amount due on the mortgage is $337,755.00 as $12,245.00 had not been advanced.
[5] The first mortgage commitment dated October 27, 2014 provided for a loan in the amount of $208,500.00. The lender fee and a broker’s fee were identified to be three percent, which calculate to $6,255.00. According to the solicitor’s trust ledger statement, $208,500.00 was paid by the plaintiff into Amandeep Walia’s (solicitor’s) trust account. As set out in my ruling on the motion, the parties were represented by two lawyers, Amandeep Walia and Ranjeet Walia, who are father and son and work out of the same space. Amandeep Walia and Ranjeet Walia are related to the plaintiff. The sum of $200,000.00 was paid to the mortgagor (2155982 Ontario Inc.) and $4,170.00 was refunded to the plaintiff mortgagee. The balance appears to have been paid to Amandeep Walia ($1,245.00) and Ranjeet Walia ($3,085.00).
[6] On December 23, 2014 the second mortgage commitment was signed increasing the mortgage amount to $350,000.00. The reference to a renewal fee, in paragraph 11, was crossed out. There is no other reference to a broker’s fee or a lender’s fee in the second mortgage commitment. The plaintiff asserts that there was an oral agreement that the defendants would pay a four percent lender fee. The defendants deny any such agreement. The plaintiff mortgagee paid the total sum of $129,255.00 with the net amount of $125,000.00 being paid to the defendant mortgagor. The balance appears to have been paid to the lawyers, Amandeep Walia ($3,125.00) and Ranjeet Walia ($1,130.00).
[7] The plaintiff acknowledges that he advanced only $337,755.00. He takes the position that the full $350,000.00 ought to be payable and relies on the doctrines of proprietary estoppel and part performance. In the alternative, the plaintiff submits that the principal amount owing is $345,010.20 comprised of principal of $337,755.00, an outstanding lender’s fee from October 2014 in the amount of $2,085.00 and a four percent lender’s fee from December 2014 being $5,170.20.
[8] The defendants say the full three per cent lender/broker fee was paid on the first mortgage commitment. They assert that the amount received by one of the lawyers, Ranjeet Walia, was excessive for the transaction. Ranjeet Walia received $3,085.00. The defendants submit that $2,085.00 must have been the balance of the lender fee. The defendants point to the fees received by Ranjeet Walia for the second mortgage loan being $1,130.00. The defendants therefore say that the principal amount is $337,755.00.
Analysis
[9] The plaintiff’s argument under the doctrines of proprietary estoppel and part performance are essentially the same. The plaintiff asserts that as the defendants paid interest on $350,000.00 at 12 percent ($3,500.00 per month), the defendants are estopped from asserting that the principal is something other than $350,000.00. I reject that argument.
[10] Proprietary estoppel requires three things: a representation or assurance on the basis of which the claimant expects to enjoy a right or benefit of property, a reasonable reliance on that expectation, and a detriment as a result of the reliance (Cowper-Smith v. Morgan, 2017 SCC 61, [2017] 2 SCR 754 at para 23).
[11] In his affidavit, the plaintiff states,
I would not have agreed to lend money to the mortgagor had I known the mortgagor and/or guarantors would dispute the principal amount and interest payable under the mortgage.
[12] In the affidavit of Agim Mollaj, a 50 per cent shareholder of the defendant, 2155982 Ontario Inc. (the mortgagor) he states,
The borrower made payments in the amount of $3,500.00 per month based on a $350,000.00 loan, unaware of the shortfall that was not advanced. The shortfall only came to light when the mortgage documents were received in response to undertakings.
[13] I do not accept the plaintiff’s assertions of a four percent lender’s fee on the second mortgage commitment. The commitment was in writing and did not provide for a lender/broker fee. The first mortgage commitment, also in writing, provided for a lender’s fee. It seems to me that if such a fee was payable on the second commitment, it would have been included in the written document. Indeed, the active striking out of the mortgage renewal fee indicates no such fee was payable. Other than the plaintiff’s assertions of a four percent broker’s fee on the second mortgage commitment, there is no evidence of a representation that the mortgagor would repay a principal in excess of the amount advanced.
[14] Similarly, there is no evidence of a detriment to the plaintiff. The plaintiff will receive the return of his investment plus interest at 12 per cent. There is no evidence of a more lucrative investment that would have been available for the plaintiff to invest his monies. Accordingly, given insufficient evidence of a required representation or assurance, and given insufficient evidence of a detriment, the doctrine of proprietary estoppel does not apply.
[15] As for the doctrine of part performance, that doctrine was created in order to “prevent the Statute of Frauds from being used as a variant of the unconscionable dealing which it was designed to remedy” (Erie Sand and Gravel Ltd. v. Seres’ Farms Ltd. (2009), 2009 ONCA 709, 97 OR (3d) 241 at para 49). Moreover, the doctrine of part performance also requires a detrimental reliance. At paragraph 79 of Erie Sand and Gravel Ltd, Gillese JA said,
The first aspect is detrimental reliance which, as has been noted, requires a party to prove its acts of part performance. Without detrimental reliance there can be no inequity in relying on the Statute of Frauds, thus, it is the first hurdle to be met.
[16] In my view, the doctrine doesn’t apply to this case. I do not accept the plaintiff’s evidence that a fee was payable on the second mortgage commitment. Moreover, as explained above, there is no detrimental reliance. Rather, in my view, it is a matter of interpreting and applying the language in the two written mortgage commitments.
[17] I conclude that the broker fee paid to the plaintiff in respect of the first mortgage commitment was $4,170.00. That figure is clearly identified in the solicitor’s trust ledger statement as an amount that was refunded to the plaintiff and there is no indication that it could be anything other than the broker fee. That leaves the amount owing on the broker fee to be $2,085.00. Without some evidence on the basis of the payment to Ranjeet Walia in the amount of $3,085.00, I am not prepared to conclude that the payment includes an element of the broker fee. In respect of the second mortgage commitment, there is no indication in the mortgage commitment that a broker fee is payable. There is a required administration fee of $4,500.00 upon default in the mortgage, which I have already found to be payable in my ruling dated February 13, 2019 and so it ought not to be included in the principal amount. Given the absence of a broker’s fee required in the second mortgage commitment, I find that none is payable.
[18] For these reasons, I find that the principal amount payable under the mortgage is the amount advanced of $337,755.00 plus $2,085.00 owing on the broker’s fee for the first mortgage commitment for a total of $339,840.00.
Costs
[19] The issue before me was the applicable interest rate on the plaintiff’s mortgage. The plaintiff took the position that an interest rate of 21 per cent was payable. The defendants took the position that an interest rate of 12 per cent was payable. The defendants were successful in the argument and claim costs totaling $32,694.14 on a substantial indemnity basis.
[20] The plaintiff claims to be entitled to its costs on a full indemnity basis based on the provisions of the mortgage and the standard charge terms. Alternatively, the plaintiff claims to be entitled to costs on a full indemnity basis based on unproven allegations of fraudulent activity regarding the backdating of the purported renewal agreement. The plaintiff claims to have been successful in his alternative claim of 12 per cent interest. The plaintiff claims full indemnity costs of $29,524.84.
[21] The defendants were entirely successful on the argument before me that the appropriate interest-rate payable was 12 per cent. They are prima face entitled to their costs. Should they be disentitled, or liable to play costs to the plaintiff, by reason of the defendants’ allegations respecting the renewal agreement? In my ruling dated February 13, 2019 I said the following at paragraphs 46 – 47:
Counsel for the defendants suggests that the renewal agreement was prepared subsequent to events and was backdated. He points out that the first statement of claim issued September 26, 2017, made no reference to the renewal agreement. He points out that the application brought by Sharma dated October 26, 2017, makes no reference to the renewal agreement. He points out that the payout statement provided by the plaintiff dated October 26, 2017, calculates interest at the rate of 12 percent. There is no mention of a 21 percent interest payable. When asked why on his cross-examination, the plaintiff said that he prepared the payout statement himself and it was an “accounting mistake”. The renewal agreement did not come to light until a request for an up-to-date payout statement was made by Mollaj on December 13, 2017. Counsel for the defendants was not provided with a copy of the renewal agreement signed by the plaintiff until the date of the plaintiff’s cross-examination. The previously produced copy had only Sharma’s signature on it.
Certainly, the sequence of events raises suspicion of collusion on the part of the plaintiff and Sharma to collect an inflated amount of interest. However, it is my view that a finding of wrongdoing on the part of these two gentlemen is not necessary for the purpose of resolving this motion. Given my finding that the indoor management rule does not apply, as Mollaj did not sign the renewal agreement, it is of no force and effect.
[22] I did not make a finding of wrongdoing on the part of the plaintiff. However, similarly, I did not find that there was no wrongdoing. Rather, after acknowledging that the events raised suspicion of collusion, I declined to make a finding one way or another. In my view, my ruling on this point does not operate so as to disentitle the defendants to their costs. Similarly, my ruling on this point does not operate so as to entitle the defendants to substantial indemnity costs. I therefore grant the defendants their costs on a partial indemnity basis.
[23] As to quantum, the defendants’ costs outline details partial indemnity fees at $17,811.00. The defendants claim additional partial indemnity fees of $2,940.00 incurred in dealing with the argument on the principal owing under the mortgage and preparing costs submissions. The total is $20,751.00. I find this to be a reasonable sum, and to have been in the reasonable contemplation of the losing party according to the costs outline of the plaintiff. I add to that HST of $2,697.63 and disbursements of $1,429.30 for a total of $24,877.93.
Disposition
[24] For the foregoing reasons, I make the following order:
The principal amount payable under the mortgage is $339,840.00.
The plaintiff shall pay to the responding defendants their costs in the amount of $24,877.93.
“Original signed by Justice Hebner”
Pamela L. Hebner
Justice
Released: October 2, 2019
COURT FILE NO.: CV-18-0001-0000
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Surendra Walia
v.
2155982 Ontario Inc., Prem Chand Sharma, Agim Mollaj and Armoclan Engineering Ltd.
RULING ON COSTS AND PRINCIPAL PAYABLE ON MORTGAGE
Hebner J.
Released: October 2, 2019