COURT FILE NO.: 19-78797
DATE: 2019/10/04
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
John Przybytek
Applicant
– and –
3002071 Canada Inc.
Respondent
BETWEEN:
3002071 Canada Inc.
Applicant
-and-
John Przybytek
Respondent
COUNSEL:
George Boyd Aitken, Counsel for the Applicant
Claude-Alain Burdet, Counsel for the Respondent
Claude-Alain Burdet, Counsel for the Applicant
George Boyd Aitken, Counsel for the Respondent
HEARD: March 11, 2019, April 25, 2019 and June 4, 2019 (Ottawa)
REASONS FOR DECISION
H.J. Williams, J.
Overview
[1] The applicant, John Przybytek, seeks the discharge of a $50,000.00 mortgage in favour of the respondent, 3002071 Canada Inc., registered against a cottage property in Fenelon Falls, Ontario, Mr. Przybytek co-owns with his sister.
[2] The matter first came before me on March 11, 2019. It was adjourned for cross-examinations, to be heard April 25, 2019.
[3] On April 12, 2019, 3002071 commenced what it described as a “requête reconventionnelle et jonction” (counter-application and joinder). The notice of counter-application issued by 3002071 was assigned the same court file number as Mr. Przybytek’s application. The 3002071 counter-application sought 12 heads of relief, including an order to add 1457563 Ontario Inc. as an applicant, an order that its application be joined and heard with Mr. Przybytek’s application, an order converting Mr. Przybytek’s application into an action and its counter-application into a counterclaim, an order requiring Mr. Przybytek to pay, with interest, all monies borrowed from 3002071 and 1457563, an order to compensate 3002071 and 1457563 for the balance owing on loans made to Mr. Przybytek by “the creditor,”[^1] 3002071 and 1457563 and orders in respect of the sale of both the Fenelon Falls property and an Ottawa condominium owned by Mr. Przybytek.
[4] On April 25, 2019, court time reserved for the hearing of Mr. Przybytek’s application was devoted to submissions about the procedural and substantive appropriateness of the 3002071 counter-application and whether it should be heard with Mr. Przybytek’s application. The hearing was adjourned to June 4, 2019.
[5] In a May 3, 2019 endorsement, I said that 3002071’s counter-application would not be heard unless Mr. Przybytek’s sister, who had an interest in the Fenelon Falls property, was served with 3002071’s materials. I also said that, regardless of whether Mr. Przybytek’s sister was served, I would hear submissions on June 4, 2019 with respect to: (1) the merits of Mr. Przybytek’s application; (2) whether the proceedings of Mr. Przybytek and 3002071 should be joined; and (3) whether either proceeding or both proceedings should be treated as an action.
[6] 3002071 did not serve Mr. Przybytek’s sister with its materials prior to the June 4, 2019 hearing. The hearing proceeded on June 4, 2019; the parties filed further written submissions later in June.
[7] Below, I consider the issues listed in my May 3, 2019 endorsement, although in a different order.
Should the 3002071 counter-application be joined with Mr. Przybytek’s application?
[8] Mr. Przybytek’s application and the 3002071 counter-application effectively have been joined already in that the 3002071 counter-application was given the same court file number as Mr. Przybytek’s application. I consider the failure to assign a new court file number to 3002071’s proceeding to have been an error. As I noted in my May 3, 2019 endorsement, “counter-applications”, as such, do not exist. The term “counter-application” does not appear in the Rules of Civil Procedure, other than as a heading above rule 38.03(4). If a respondent wishes to commence an application, even if it is against the applicant, a new application must be issued. It may then be appropriate to consolidate the two applications or to convert them into an action and a counterclaim. (Norbett & Associates Inc. v. 1434267 Ontario Ltd., 2003 CanLII 22650 (ON SC), 63 O.R. (3d) 477 at paras. 4 and 7.)
[9] As I noted above, the relief sought by 3002071 includes a request that its “counter-application” be joined with Mr. Przybytek’s application. I consider the issue now before me to be whether the proceedings should be heard together even if, technically, they are already joined.
[10] Most of the relief sought by 3002071 in its counter-application does not appear under Rule 14.05(3), which lists the categories of relief available on an application. Further, the issues raised by 3002071 involve material facts that are likely to be seriously in dispute, including the identity of the person or entity that lent money to Mr. Przybytek, how much was lent, the terms of the loan and the extent of Mr. Przybytek’s knowledge and understanding of the loan or loans and its or their terms. The proceeding cannot, therefore, be brought under Rule 14.05(3)(h), despite the recent amendment to tack on a three-word phrase so that it now permits applications in respect of “any matter where it is unlikely that there will be any material facts in dispute requiring a trial.” I consider it more than likely that these issues will require a trial.
[11] In contrast, the relief claimed by Mr. Pryzbytek is available on an application. Mr. Pryzbytek seek the discharge of a mortgage. The relief claimed by Mr. Przybytek is available under both Rule 14.05(3)(d), a determination of rights that depend on the interpretation of a deed, will, contract or other instrument and Rule 14.05(3)(e), the declaration of an interest in or charge on land, including the nature and extent of the interest or charge.
[12] The proceedings of Mr. Przybytek and 3002071 have parties and factual and legal issues in common and, in different circumstances, there would be good reasons for joining them, among them, economy of court time and avoiding the risk of inconsistent findings.
[13] Despite the reasons that might weigh in favour of joining the proceeding, I have concluded that it would be unfair to delay the adjudication of Mr. Przybytek’s application until 3002071’s proceeding is ready to be heard. Mr. Przybytek issued his notice of application in December 2018 and was prepared to argue it on March 11, 2019. The hearing was adjourned for cross-examinations and was to have been heard April 25, 2019 but was derailed by 3002071’s counter-application, which was commenced less than two weeks before the hearing date. I had made it clear in my May 3, 2019 endorsement that I would not hear 3002071’s counter-application on June 4, 2019 if 3002071 did not serve Mr. Przybytek’s sister with its materials; 30002071 did not serve Mr. Przybytek’s sister. Further, on June 4, 2019, I heard submissions on the merits of Mr. Przybytek’s application.
[14] In these reasons, I will decide Mr. Przybytek’s application and set a timetable for the next steps in 3002071’s application, which will be assigned a different court file number and treated as an action.
Mr. Przybytek’s application
[15] The facts relevant to Mr. Przybytek’s application are the following:
- In 2010, Mr. Przybytek retained lawyer Claude-Alain Burdet to assist him with a Canada Revenue Agency audit, severance of the ownership of the Fenelon Falls property he co-owned with his sister and an impending eviction from his condominium.
- On September 27, 2010, Mr. Przybytek signed a “Loan Request and Application” presented to him by Claude-Alain Burdet.
- The Loan Request and Application was on the letterhead of 11457563 (sic) Ontario Inc.[^2] The address on the letterhead was “ETRE Real estate department”.
- The uncontradicted evidence before me was that ETRE is an abbreviation for “Entreprise Ted Rubac Enterprises Inc.” and that ETRE is a company controlled by lawyer Claude-Alain Burdet and/or his family members.
- As Ontario’s Court of Appeal observed in Carleton Condominium Corporation No. 396 v. Burdet, 2016 ONCA 394 at para. 10, Ted Rubac is C. A. Burdet spelled backwards.
- By signing the Loan Request and Application, Mr. Przybytek requested a loan of $75,000.00. The document stated that the loan was to be broken down into two components, a lump sum payment of just under $25,000.00 and a line of credit of just over $50,000.00.
- The Loan Request and Application stated that the $75,000.00 loan would be secured by a mortgage against Mr. Przybytek’s Ottawa condominium. The mortgage would have an interest rate of 10.5 percent calculated semi-annually, not in advance.
- The Loan Request and Application stated that the line of credit was to have an interest rate of 1.5 percent per month on its outstanding balance.
- The Loan Request and Application said that “by the present notarized document” Mr. Przybytek pledged his half-interest in the Fenelon Falls property as additional collateral security for the $75,000.00 loan which he authorized and declared to be registrable as a lien.
- There was no notarized copy of the Loan Request and Application in evidence. In one of his three affidavits filed on behalf of 3002071 and 1457563, Luc Andre Burdet said that the original signed and notarized document had been archived by 3002071 as security. He did not offer an explanation as to why a copy could not have been made for the court.
- Significantly, the Loan Request and Application signed by Mr. Przybytek made no reference to 3002071.
- On December 6, 2010, a $75,000.00 mortgage in favour of 11457563 (sic) Ontario Inc. was registered against Mr. Przybytek’s condominium.
- On December 7, 2011, a $50,000.00 mortgage in favour of 3002071 was registered against the Fenelon Falls property. This is the mortgage Mr. Przbytek seeks to discharge.
- In one of his affidavits, Luc Andre Burdet explained that in December 2011, because of a threatened sale of Mr. Przybytek’s condominium due to unpaid municipal taxes, it had become necessary to consolidate and increase the credit available to Mr. Przybytek by creating a second line of credit.
- There were cheques in evidence which showed that from December 2011 until May 2015, 3002071 had paid the fees on the Ottawa condominium belonging to Mr. Przybytek against which 11457563 Ontario Inc. had registered a $75,000.00 mortgage.
- Luc Andre Burdet said that 3002071 and 1457563 Ontario Inc. are corporations that make up his lending company.
- Luc Andre Burdet said that 11457563 Ontario Inc. does not exist and that the use of that corporation number may have been a typo.
- Luc Andre Burdet said that his lending company has an arrangement with Claude-Alain Burdet’s law firm to assist clients of the law firm who need short-term loans. Luc Andre Burdet said that he has never seen nor communicated with Mr. Przybytek; his communications were through Claude-Alain Burdet’s law firm.
- The mortgage to 3002071 registered against Mr. Przybytek’s Fenelon Falls property was signed by Claude-Alain Burdet.
- In its notice of counter-application, 3002071 did not specify the amount now owed by Mr. Przybytek, pleading only that he owes “the creditor” more than $250,000.00.
- The “creditor” is described in the notice of counter-application as being a private loan enterprise operating through incorporated divisions such as 3002071 and 1457563.
- Three spreadsheets were attached to one of Luc Andre Burdet’s affidavits, each showing a different closing balance for Mr. Przybytek’s line of credit as of April 12, 2019, one in the amount of $421,588.57, a second in the amount of $307,357.19 and a third in the amount of $259,845.72. One of the spreadsheets used the 1.5 per cent per month interest rate on the line of credit referred to in the September 27, 2010 Loan Request and Application; the other two spreadsheets used an interest rate of 1.9 per cent per month.
- 3002071 takes issue with a second mortgage which was registered against the Fenelon Falls property on June 18, 2018. The second mortgage is in the amount of $75,000.00 and is in favour of Law Loans Ltd., a company which shares its address with that of the law firm now representing Mr. Przybytek.
Analysis
[16] In his notice of application, Mr. Przybytek pleaded that the mortgage to 3002071 should be discharged because it was granted for no consideration. In argument, Mr. Przybytek took the position that the mortgage was invalid because he had no loan agreement with 3002071 and that any funds that may have been advanced were not advanced pursuant to any agreement with him or any direction by him. Mr. Przybytek also argued that the mortgage was unconscionable. Although Mr. Przybytek did not amend his notice of application, because the new arguments were clearly set out in his factum, because he explained that his argument had evolved based on documents produced by 3002071 in response to his application record, because 3002071 did not object to the new arguments on the basis that they had not been pleaded and because Mr. Przybytek had pleaded in his notice of application his intention to rely on “such further and other grounds as counsel may advise and this Honourable Court may permit”, I consider the arguments that the mortgage was invalid and unconscionable to have been properly before me.
[17] A mortgage consists of two things: (a) a contract on the part of the mortgagor for the payment of a debt to the mortgagee; and (b) a disposition…of an estate or interest of the mortgagor to the mortgagee as security for the repayment of the debt. Every mortgage implies a debt (quantified or ascertainable) and an obligation on the part of the mortgagor to pay it. A repayable mortgage debt is a vital element of a mortgage. (Bank of Montreal v. Orr, 1986 CanLII 1088 (BC CA) at para. 25.)
[18] In this case, in respect of Mr. Przybytek and 3002071, neither of the two requirements for a mortgage identified in Bank of Montreal v. Orr existed.
a. There was no contract on the part of Mr. Przybytek for the payment of a debt to 3002071
[19] There was no contract of any kind between Mr. Przybytek and 3002071.
[20] Although there was evidence that for a period of 3.5 years, 3002071 had paid the fees for Mr. Przybytek’s condominium unit, against which 11457563 Ontario Inc. had registered a mortgage, there was no evidence that Mr. Przybytek had ever agreed to borrow money from 3002071 or that Mr. Przybytek was aware that 3002071 was paying his condominium fees.
b. Mr. Przybytek was unaware of any disposition of an estate or interest to 3002071 as security for the repayment of a debt
[21] Although a mortgage in favour of 3002071 was registered against the Fenelon Falls property in December 2011, there was no evidence that Mr. Przybytek was aware of this mortgage until many years later.
[22] Although when he signed the Loan Request and Application, Mr. Przybytek may have agreed to have a “lien” registered against the Fenelon Falls property, this lien was to have been additional collateral security for the $75,000.00 loan secured by the mortgage against his condominium and not a mortgage for a discrete loan of $50,000.00.
[23] Mr. Przybytek said that he was not consulted about the registration of the mortgage against the Fenelon Falls property and that independent legal advice was not suggested.
[24] Mr. Przybytek did not sign the mortgage to 3002071; it was signed by Claude-Alain Burdet.
[25] Mr. Przybytek had retained Claude-Alain Burdet to be his lawyer. Claude-Alain Burdet was aware that Mr. Przybytek was facing a Canada Revenue Agency audit and eviction from his condominium.
[26] Claude-Alain Burdet arranged for Mr. Przbytek to borrow money from a company operated by Claude-Alaion Burdet’s son.
[27] Claude-Alain Burdet’s son operated 3002071.
[28] The Loan Request and Application signed by Mr. Przybytek on September 27, 2010 stated that Mr. Przybytek had been offered but had declined a second legal opinion. However, there was no evidence that Mr. Przybytek was aware that his lawyer at the time was also representing the lender or that the lender was operated by the lawyer’s son.
[29] There was no evidence that Mr. Przybytek conveyed an interest in the Fenelon Falls property to 3002071 for the repayment of any debt or that any quantified or ascertainable debt was owed to 3002071 by Mr. Przybytek.
Conclusion
[30] For the above reasons, I find that the mortgage registered in favour of 3002071 against Mr. Przybytek’s Fenelon Falls property is not a valid mortgage.
[31] For the above reasons and, more specifically, because the mortgage was registered in the absence of any written agreement between Mr. Przybytek and 3002071 and because of the undisclosed relationship between Mr. Przybytek’s lawyer, Claude-Alain Burdet, and the lender, I also find the mortgage to be unconscionable.
[32] I order that the mortgage in favour of 3002071 Canada Inc., which was registered in Land Registry Office 57 as Instrument # KL57530 on December 7, 2011 be discharged. I also direct the Land Registrar of Land Registry Office 57 to delete Instrument # KL57530 from the title of the Fenelon Falls property.
3002071’s counter-application: Next steps
[33] In its application, 3002071 had asked that Mr. Przybytek’s application be converted into an action and that its counter-application be converted into a counterclaim. Mr. Przybytek’s application has now been heard and decided. As I noted above, 3002071’s counter-application raises issues in respect of which many material facts requiring a trial are likely to be in dispute; it shall be treated as an action.
[34] I make the following orders under Rule 38.10(1)(b):
a. The application of 3002071 shall be treated as an action;
b. As Mr. Przybytek’s application has now been heard and decided and as the court file number assigned to 3002071’s application was the same as that of Mr. Przybytek’s application, 3002071’s action shall be assigned a new court file number, 18-78797A. 3002071 shall request that the new court file be opened. A copy of these reasons and the associated issued and entered judgment shall be provided to the registrar’s office when the request to open the file is made.
c. The plaintiffs in the action shall be 3002071 and 1457563 Ontario Inc., the party 3002071 sought to add as an applicant to its counter-application.
d. Within 30 days, 3002071 and 1457563 shall serve on Mr. Przbytek and file an unissued statement of claim setting out the relief sought and a concise statement of the material facts on which they relief for their claim. If they do not do so, the action shall be deemed to have been discontinued under Rule 23.
e. Within 30 days of the date of service of the statement of claim, Mr. Przbytek shall serve on 3002071 and 1457563 and file a statement of defence.
f. 3002071 and 1457563 may serve and file a reply within 10 days of the date of service of Mr. Przbytek’s statement of defence.
g. The parties shall exchange sworn affidavits of documents within 30 days of the date of the close of pleadings.
h. The cross-examinations of Mr. Przybytek and Luc Andre Burdet shall be considered examinations for discovery in the action. A further examination for discovery of each may be arranged if required.
i. Mediation shall take place in accordance with Rule 24.1.
j. The action may be set down for trial under Rule 48.01.
k. This timetable is not intended to preclude any necessary interim motions.
[35] Although Mr. Przybytek raised in argument that Claude-Alain Burdet is acting against him in these proceedings in relation to a matter in respect of which Claude-Alain Burdet had previously represented him, Mr. Przybytek did not request an order removing Claude-Alain Burdet as the lawyer of record for 3002071 and 1457563. I will leave that issue to another court and another day.
Costs
[36] The parties have already filed bills of costs.
[37] If the parties cannot agree on the costs of the proceedings to date,
- Mr. Przybytek may deliver written costs submissions of no more than three pages in length within 14 days of the date of this decision;
- 3002071 may deliver written costs submissions in response of no more than three pages in length within 14 days of the date of receipt of Mr. Przybytek’s submissions;
- Mr. Przybytek may deliver any reply costs submissions of no more than three pages in length within seven days of the date of receipt of 3002071’s submissions.
[38] The bills of costs already filed shall be considered in conjunction with any further written costs submissions the parties may file.
[39] The parties’ costs submissions may be filed by sending them to me, care of the trial coordinator.
Date: October 4, 2019
Madam Justice H. J. Williams
COURT FILE NO.: 19-78797
DATE: 2019/10/04
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
John Przybytek
Applicant
-and-
3002071 Canada Inc.
Respondent
BETWEEN:
3002071 Canada Inc.
Applicant
-and-
John Przybytek
Respondent
BEFORE: Madam Justice H.J. Williams
COUNSEL:
George Boyd Aitken, Counsel for John Przybytek
Claude-Alain Burdet, Counsel for 3002071 Canada Inc.
REASONS FOR DECISION
Madam Justice H. J. Williams
[^1]: The “creditor” is defined in the application as a private loan company operated by Luc Andre Burdet which made the loans to Mr. Przybytek
[^2]: 1457563 Ontario Inc. (a company with seven digits in its number), and not 11457563 Ontario Inc. (a company with eight digits in its number), is the company which seeks to be added as a party to the 3002017 counter-application and a company which, according to the evidence before me on the application, exists, unlike 11457563 Ontario Inc.