COURT FILE NO.: CV-18-00594075-0000
CV-18-00592224-0000
CV18-00594070-0000
DATE: 20191111
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ROYAL BANK OF CANADA
Plaintiff
Defendant to the Counterclaim
– and –
BAHARAK AZKIA, DIANA NEKONAM and NADER ZANDDIZARI also known as NADER ZAND
Defendants
Plaintiffs by Counterclaim
Jeffrey Kukla, for the Plaintiff, Defendant to the Counterclaim
David Shiller, for the Defendants, Plaintiffs by Counterclaim
HEARD: August 9, 2019
Koehnen J.
OVERVIEW
[1] Royal Bank of Canada (“RBC”) lent money to the defendants pursuant to a variety of credit facilities including mortgages, lines of credit, overdrafts and credit cards. The total principal and interest owing was approximately $4,852,286.02 as of October 5, 2018.
[2] RBC commenced three separate actions on the various debts and has brought a motion for summary judgment in each of the three actions. In addition to the debt claim, RBC claims a legal or equitable mortgage on two properties the defendants own.
[3] The defendants do not dispute the debt. They oppose summary judgment by virtue of a counterclaim they have advanced in one of the three actions[^1]. The statements of defence in the other two actions[^2] plead that there is a sufficiently close connection between RBC’s claims in the three actions that it would be inequitable to allow RBC to proceed in the action in which the defendants have brought a counterclaim without permitting the defendants to set off that counterclaim against any amounts owing in the other two actions.
[4] The counterclaim arises out of a certificate of pending litigation that RBC obtained against two properties owned by the defendants. RBC obtained the certificate of pending litigation on an ex parte motion. The defendants submit that RBC failed to make full and fair disclosure on that motion, that the certificate of pending litigation was improperly granted, that the certificate of pending litigation has caused the defendants damages and that the defendants’ claim for damages should proceed to trial.
[5] As set out in greater detail below, I order that the certificate of pending litigation be vacated because of the failure of RBC and its external counsel to make proper disclosure on the ex parte procedure they adopted to obtain the certificate. I nevertheless grant RBC summary judgment on its debt claims and dismiss the defendants’ counterclaim. The defendants’ only basis for resisting judgment is its counterclaim for damages allegedly arising from the wrongfully obtained certificate of pending litigation. The defendants have not demonstrated that there is any issue concerning those damages that requires a trial. The claim for damages is implausible and the defendants have not provided any evidence at all about their damages, let alone sufficient evidence to demonstrate that a trial is required on damages. I deny the bank’s claim for a legal or equitable mortgage. RBC has not demonstrated on a balance of probabilities that there was a mutual intention to grant a mortgage on the two properties in question. In addition, in light of RBC’s breach of its obligation to make full and fair disclosure on the ex parte motion for the certificate of pending litigation, I decline to award RBC its costs in any of the three actions and order RBC to pay the defendants’ costs in the amount of $13,442.40.
The Demand Loan
[6] The principal defendant is Nader Zanddizari (also known as Nader Zand). Mr. Zanddizari’s wife, Baharak Azkia, and his mother-in-law Diana Nekonam are also defendants and signatories to various loans. Mr. Zanddizari had all dealings with RBC in relation to the loans.
[7] The precipitating event that led to the breakdown of the relationship between RBC and the defendants appears to have been the demand loan at issue in action number CV-18-592224.
[8] The demand loan was intended to help the defendants purchase a property at 56 Hawksbury Dr. in Toronto. The proceeds of the loan were supposed to act as interim financing pending the sale of a second property that Mr. Zanddizari’s wife and mother-in-law owned at 326 Saint Clements Ave. in Toronto.
[9] RBC alleges that the demand loan was subject to the defendants granting a second ranking collateral mortgage in the amount of $1,400,000 on 326 Saint Clements Ave. RBC says that Mr. Zanddizari agreed to this condition. Mr. Zanddizari says it was his understanding that the demand loan was unsecured.
[10] On January 27, 2017, the defendants signed a Demand Loan Agreement in the principal amount of $1,338,800. The demand loan agreement is reflected in a standard form RBC document. The only reference to security is an entry headed “Security Registration Charges” beside which someone has entered “$0.00”. That would suggest that the loan is unsecured.
[11] On the same day, Mr. Zanddizari’s wife and mother-in-law also signed a Security Agreement that the bank had sent. Mr. Zanddizari explains that he did not sign the Security Agreement because it did not list him as a debtor. The Security Agreement was also a standard form RBC document. The subtitle of the document reads “SECURITY INTEREST IN CONSUMER GOODS”. Section 12 of the Security Agreement is meant to describe the nature and location of the collateral being secured. The version that RBC sent to the defendants and that Mr. Zanddizari’s wife and mother-in-law signed had section 12 left blank. As a result, the Security Agreement provided security against nothing.
[12] Three days later, on January 30, 2017, the defendants signed an Irrevocable Assignment of Sales Proceeds which provides among other things:
“The undersigned acknowledges and agrees, upon the request of the Bank, to deliver and execute in favour of the Bank such further and other assurances and any security (including mortgage security) as the Bank may from time to time require in respect of the Lands or in respect of any lands being acquired by the undersigned.”
[13] Mr. Zanddizari deposes that the defendants did not receive the Irrevocable Assignment together with the Demand Loan Agreement or the Security Agreement but that the defendants signed it at their lawyer’s office on a later date.
[14] RBC never sent any mortgage documents to the defendants for their signature.
[15] The Demand Loan went into default in November 2017. There followed a lengthy exchange of email correspondence in which Mr. Zanddizari constantly told the bank he would bring the loan into a good standing within a day or two but never did. Based on my review of the correspondence it would not be unfair to describe Mr. Zanddizari’s conduct as “stringing the bank along”. Despite this conduct on Mr. Zanddizari’s part, the bank never presented Mr. Zanddizari with mortgage documentation to sign.
The Certificate of Pending Litigation
[16] On March 6, 2018 RBC moved ex parte to obtain certificates of pending litigation against both 56 Hawksbury Dr. and 326 Saint Clements Ave.
[17] When proceeding without notice, the moving party must make full and frank disclosure of all material facts: Robert J. Sharpe, Injunctions and Specific Performance, Thomson Reuters (loose-leaf) at para. 2.40. The moving party may not present only its side of the case as it would if the other side were present. Instead, the moving party must make a balanced presentation of the facts and the law. The moving party must state its own case fairly and must inform the court of any points of fact or law known to it which would favour the other side: United States v. Friedland, 1996 CarswellOnt 5566, [1996] O.J. No. 4399 at para. 27.
[18] Sharpe J., as he then was, explained the reasons for this in Friedland at para. 26:
“The Judge hearing an ex parte motion and the absent party are literally at the mercy of the party seeking injunctive relief. The ordinary checks and balances of the adversary system are not operative. The opposite party is deprived of the opportunity to challenge the factual and legal contentions advanced by the moving party in support of the injunction. The situation is rife with the danger that an injustice will be done to the absent party. As a British Columbia judge noted recently:
‘There is no situation more fraught with potential injustice and abuse of the Court’s powers than an application for an ex parte injunction.’ (Watson v. Slavik, August 23rd, 1996, paragraph 10.)”
[19] In Morris v. Lazaridis, 2009 669796 Stinson J. applied that standard to certificates of pending litigation:
“Although a party is entitled under rule 42.01 (3) to move without notice to obtain leave to issue a CPL, where one does so there is a corresponding duty (as in any motion brought without notice) not just to disclose all material facts, but also, in effect, to argue why the relief should not be granted; otherwise the court is left in the unhappy position of pondering the inadequacies of the case and the potential arguments against granting the relief, on its own.”
[20] If the disclosure that the moving party made is subject to later review, the test is not to determine whether the certificate of pending litigation would have been granted had the proper disclosure been made but to determine whether the facts that were omitted might have had an impact on the original granting of the order: Shahbaz v. Mizrahhi 2018 ONSC 1915 at para 18.
[21] Where proper disclosure has not been made, that alone may constitute grounds to lift the ex parte order: Sharpe, Injunctions and Specific Performance at para 2.40; Shahbaz, at para. 31.
[22] In this case, the ex parte materials RBC used to obtain the certificate of pending litigation were woefully inadequate. At a high level, it appears that the bank made a series of internal mistakes with respect to the demand loan for which it tried to blame the defendants in its ex parte materials.
[23] RBC’s lack of disclosure begins with the supporting affidavit. It was sworn by Jodi Zimmerman who begins her affidavit by saying:
“I am an employee of the Plaintiff and as such have knowledge of the matters hereinafter deposed to.”
[24] That paragraph and the rest of the affidavit suggest that Ms. Zimmerman is the bank employee with whom the defendants dealt. This is not correct. Ms. Zimmerman is a “litigation associate” at RBC who had no dealings with the defendants. Any knowledge Ms. Zimmerman has is based on information and belief. That is not disclosed in the affidavit.
[25] The factum and the affidavit on which RBC relied on the ex parte motion states:
“The loan application confirms that the loan was approved subject to the defendants granting a second ranking collateral mortgage, in the amount of $1,400,000, to be registered on title to 326 St. Clements.”
[26] That paragraph suggests that the defendants knew they would have to provide a second mortgage on 326 St. Clements Ave. in order to obtain the demand loan because it was referred to on their “loan application.” Neither the factum nor the affidavit discloses that the “loan application” is something the defendants never saw. Instead it is located on an internal record-keeping and communication tool housed on RBC’s computer system. What the “loan application” reveals is that the frontline loan officer approved a loan without security. Her superior then told her on this internal communication tool that she should obtain a second mortgage for the loan.
[27] RBC’s factum on the ex parte motion then contained the following statement at paragraph 8:
“Despite the condition of the loan requiring the Defendants to grant a second ranking collateral mortgage on title to 326 St. Clements, and unbeknownst to the Plaintiff, the Defendants Baharak Azkia and Diana Nekonam, had already granted a second ranking mortgage in the original principal sum of $850,000 to Baybank Capital Inc.”
[28] The factum cites paragraph 19 of Ms. Zimmerman’s as support. That paragraph contains essentially the same phraseology.
[29] These passages in the factum and the supporting affidavit lead the reader to believe that the defendants had undermined RBC’s position by granting a mortgage to Baybank instead of granting a mortgage to RBC. Master Suganasiri, who granted the certificate of pending litigation, understandably had that impression. She stated at paragraph 10 of her reasons granting the certificate of pending litigation:
Not only did the loan documents not reflect the collateral mortgage to be given to RBC for the loan but no such mortgage was ever given. Instead, RBC alleges that Azkia and Zand granted a second ranking mortgage to Baybank Capital Inc. in the amount of $850,000 and a construction lien has been registered against 326 St. Clements.
[30] What RBC did not tell Master Suganasiri was that the mortgage in favour of Baybank was registered on June 20, 2016; six months before the defendants signed documentation with RBC for the demand loan.
[31] The mortgage to BayBank was not given “despite” any obligation to RBC. The mortgage to BayBank was given six months before RBC extended the demand loan.
[32] While RBC tries to shelter behind the idea that it did not know about the BayBank mortgage by using language such as “unbeknownst to the bank”, RBC did not tell Master Suganasiri that the only way the BayBank mortgage could be “unbeknownst” to the bank was because the bank either did not conduct or did not review a title search of the St. Clements Avenue property when it extended the loan.
[33] When confronted with this lack of disclosure, counsel for RBC made two submissions. First, he submitted that it was not his obligation to argue against himself on the certificate of pending litigation. That is clearly wrong based on the authorities cited above.
[34] Second, he submits that the Master was not misled because the mortgage registration document associated with the Baybank loan was attached as an exhibit to Ms. Zimmerman’s affidavit. Ms. Zimmerman’s affidavit contained just over five pages of text. Attached to the affidavit were 98 pages of exhibits. The mortgage registration for Baybank is found at page 82 and indicates that the mortgage was registered on June 20, 2016.
[35] RBC’s submission would require the Master to assume that the moving party’s affidavit on an ex parte motion is misleading, thereby obliging her to review all supporting exhibits to measure them against the text of the affidavit. That is untenable. The court is entitled to rely on the truth of a sworn or affirmed affidavit in support of a motion: Shahbaz, at para. 28. The obligation on ex parte motions is for the moving party to make full and fair disclosure. It is not for the Master to conduct a forensic examination of the materials with which she is presented.
[36] The first step a deponent or counsel should take before suggesting that a defendant has granted a mortgage “despite” its obligation to the bank is to verify the accuracy of that statement by looking at the mortgage registration documents. RBC and its counsel clearly had those documents because they included them in their ex parte materials. Either RBC and counsel did not check the materials or worse, they did check the materials and crafted language aggressively and carefully to avoid a misstatement in only the strictest sense of the word.
[37] That might account for the language in paragraph 8 of the factum and paragraph 19 of Ms. Zimmerman’s affidavit to the effect that:
“Despite the condition of the loan requiring… a second mortgage the defendants… had already granted a second ranking mortgage in the original principal sum of $850,000 to Baybank capital Inc.” (Emphasis added)
[38] Whether this statement is the product of not having looked at the title register or of highly aggressive, misleading language that falls short of a deliberate misstatement in only the most technical sense, or is the product of some other cause is something I do not need to decide. Whatever the underlying reason for the language, it does not meet the requirement for full and fair disclosure on the ex parte motion.
[39] In the circumstances of this case there was no need for RBC to proceed ex parte even if it believed that the defendants were untrustworthy. RBC had registered a caution on title on February 8, 2018. The ex parte motion was heard March 6, 2018. The Master released her reasons March 7, 2018. Once RBC had registered its caution, it was protected. It could have brought the motion for a certificate of pending litigation with notice to the defendants without risk that the defendants would dispose of or encumber the property before the motion was disposed of on March 7, 2018.
[40] Failure to make disclosure has been dealt with severely by courts and may result in the order being set aside as a punitive measure: Sharpe: Injunctions and Specific Performance at para. 2.40. Dissolution of the order does not, however, automatically follow on a lack of disclosure. Courts must appreciate that ex parte applications are often brought urgently with little time to prepare supporting materials. Courts should not set aside ex parte orders because of imperfections in the affidavits or because inconsequential facts have not been disclosed: Sharpe: Injunctions and Specific Performance, at para. 2.45.
[41] These mitigating concerns do not apply here. As noted, there was no particular urgency to RBC in bringing the motion. The caution they had registered on title had already fully protected them. The deficiencies in disclosure here are not mere imperfections. They involve serious matters. In essence, RBC tried to cover up its internal shortcomings by attacking the honesty of the defendants. There is no doubt in my mind that the various omissions from the ex parte materials are matters that might have had an impact on the motion: Shahbaz at para 18.
No Damages from Certificate of Pending Litigation
[42] The breach by the bank and its counsel of its obligations to make full and fair disclosure does not, however, dispose of the motions for summary judgment.
[43] The only basis on which the defendants resist the motion for summary judgment is their counterclaim which arises out of the certificate of pending litigation.
[44] The defendants claim compensatory damages of $3,500,000 as well as punitive, exemplary and aggravated damages of $150,000.
[45] The defendants have not, however, put forth any credible evidence to demonstrate damages.
[46] The gist of the defence is that the defendants were renovating 326 St. Clements in order to sell it. They had a buyer, but the sale did not close because the certificate of pending litigation prevented the defendants from obtaining a small amount of additional financing from a third party which would have enabled them to complete the renovations.
[47] The full extent of the defendants’ evidence on the counterclaim is found in paragraphs 25 – 27 of the affidavit of Mr. Zanddizari sworn January 29, 2019 where he deposes as follows:
… When the CPL was registered, I was in the final stages of negotiating a loan to be secured by a second mortgage on 326 St. Clements. When the lender learned that a CPL had been registered, it refused to advance the funds. I needed about $100,000 of the financing negotiated to pay for the small amount of work and appliances needed to finish 326 St. Clements before the March 29, 2018 closing date. I intended to use the rest to bring the arrears owed to RBC in good standing.
As a result of the CPL, I was unable to finish work and the buyer was not prepared to close. Luckily, the buyer agreed to extend the time to complete the transaction to February 28, 2019 attached hereto and marked as exhibit “D” is a copy of the agreement of purchase and sale for 326 St. Clements with the amended closing date. However, I still cannot get the financing needed to finish the work on 326 St. Clements as a result of the CPL being registered.
I also arranged a $270,000 [loan] from another lender in March, 2018 but the lender refused to advance any funds unless the CPL was removed from title to 326 St. Clements.”
[48] This explanation makes little commercial sense.
[49] If it is true that Mr. Zanddizari needed only $100,000 to complete the renovation of 326 St. Clements, one might have expected Mr. Zanddizari to explain that to RBC and try to arrange additional financing. RBC had a material interest in completing the sale of 326 St. Clements because that would free up money to repay the demand loan. There is no evidence of any efforts by Mr. Zanddizari to enter into arrangements like this with RBC and no explanation for his failure to do so.
[50] If Mr. Zanddizari had two other lenders whose loans would fund the renovation and bring the demand loan into good standing, one might expect him to advise RBC of that fact and try to enter into an arrangement whereby the additional loan to complete construction of 326 St. Clements would have priority over the certificate of pending litigation. Once again there is no evidence to suggest that Mr. Zanddizari tried to make such an arrangement and no explanation for his failure to do so.
[51] Mr. Zanddizari provides no information about these other lenders. He does not disclose the lenders’ names, the loan documentation or the terms of the loans.
[52] Mr. Zanddizari does not describe what work was left to be completed on 326 St. Clements Avenue beyond describing it a “small amount of work and appliances”. He has not produced any photographs that would allow me to compare the renovations that had already been completed with the work that remained.
[53] While he was discussing bringing the demand loan back into good standing between September 2017 and January 2018, Mr. Zanddizari sent the bank a screenshot of an account he had at CIBC showing a balance of $137,016.05. Mr. Zanddizari told RBC that when this deposit cleared within a few days, he would transfer the money into his RBC account to cover his overdue loan balance of $70,000. He never did so.
[54] If Mr. Zanddizari was being honest in his statements to RBC, he in fact had funds that exceeded the approximately $100,000 he needed to finish off the renovations on 326 St. Clements Avenue. Mr. Zanddizari provided no explanation for why the funds in his CIBC account could not be used to complete the renovations on St. Clements.
[55] Mr. Zanddizari also made no efforts to set aside the certificate of pending litigation. If this were truly a case of losing a sale of St. Clements Avenue, Mr. Zanddizari had ample time to set aside the certificate of pending litigation. According to Mr. Zanddizari, the purchaser extended the closing to February 28, 2019. This gave Mr. Zanddizari just short of 12 months to set the certificate of pending litigation aside, obtain additional funds and sell the property. He took no steps to set aside the certificate of pending litigation until the end of January 2019. Even then he did so only in response to RBC’s motion for summary judgment.
[56] Similarly, Mr. Zanddizari has provided no explanation for his damage claim of $3,500,000. On the record before me, it is simply a number that has been inserted into a counterclaim. That of course says nothing of the fact that the bank’s principal claims against him exceed the amount of his counterclaim.
[57] The rules of summary judgment are well-known. The defendants must put their best foot forward now. They cannot merely assert uncorroborated facts: Canadian Imperial Bank of Commerce v. Mitchell 2010 ONSC 2227, [2010] O. J. No. 1502 at paras. 18-19. At a minimum they must demonstrate that their counterclaim raises an issue that requires a trial. That would mean giving the counterclaim at least an air of credibility. The defendants have failed to do so.
[58] In these circumstances, the defendants have not demonstrated that they have suffered any damages from the certificate of pending litigation as a result of which I dismiss their counterclaim.
[59] In light of the fact that the defendants do not contest the loans or the amounts received, RBC is entitled to judgment on its claims.
Equitable Mortgage
[60] RBC submits that, whatever the circumstances may have been surrounding the certificate of pending litigation, it is entitled to a legal charge on the two properties by virtue of sections 159 and 160 of the Land Titles Act, R.S.O. 1990, c. L. 5. Those sections provide:
“159. Subject to any estates or rights acquired by registration under this Act, where a court of competent jurisdiction has decided that a person is entitled to an estate, right or interest in or to registered land or a charge and as a consequence of the decision the court is of opinion that a rectification of the register is required, the court may make an order directing the register to be rectified in such manner as is considered just.
160 Subject to any estates or rights acquired by registration under this Act, if a person is aggrieved by an entry made, or by the omission of an entry from the register, or if default is made or unnecessary delay takes place in making an entry in the register, the person aggrieved by the entry, omission, default or delay may apply to the court for an order that the register be rectified, and the court may either refuse the application with or without costs to be paid by the applicant or may, if satisfied of the justice of the case, make an order for the rectification of the register.”
[61] In the alternative, RBC submits that it is entitled to an equitable charge on the properties.
[62] Equitable charges are based on the maxim that “equity looks on that as done which ought to be done.” They seek to enforce a common intention of the parties to secure property where that intention is unenforceable under the strict demands of the law: Elias Markets Ltd., Re [2006] O.J. N. 3689 at paras. 64 – 65.
[63] Equitable charges can be created in a variety of ways including by virtue of the fact that the mortgagor has not executed an instrument sufficient to transfer the legal estate although he or she has demonstrated an intention to create security.
[64] The remedies under sections 159 and 160 of the Land Titles Act and under the law of equitable charges require some level of intention by the titleholder to grant a mortgage or charge. RBC has not satisfied me on a balance of probabilities that such an intention existed or that the circumstances are such that relief should be granted in the absence of such intention.
[65] In this case there is considerable ambiguity surrounding any intention to grant a mortgage.
[66] The bank had the defendants sign a document for, what is on its face, an unsecured demand loan. Although RBC also had the defendants sign a Security Agreement; it was not for a collateral mortgage but for security against consumer goods which were left undescribed.
[67] RBC’s reliance on the Irrevocable Assignment of Sales Proceeds is also problematic. As noted earlier, it was signed three days after the Demand Loan Agreement. The defendants submit that this makes the Irrevocable Assignment and its entitlement to a mortgage, unenforceable for want of consideration.
[68] Regardless of my views on the consideration issue, although RBC takes the position that it was a term of the demand loan that the defendants provide a collateral mortgage, RBC advanced the full amount of the demand loan before receiving a mortgage. It is highly unusual for a bank to advance money on a mortgage against land without first or simultaneously receiving the mortgage. RBC has provided no explanation for this incongruity.
[69] Even if I assume the Irrevocable Assignment is enforceable, on the record before me, RBC did not comply with that document because it never requested a mortgage.
[70] The only first-hand evidence from the bank about its request for a mortgage is found in the affidavit of Mahelgha Ardehali sworn October 10, 2018 in which she deposes that she told Mr. Zanddizari at a meeting on December 21, 2017 that he would need to provide a mortgage on his properties. That, however, was 10 months after the demand loan had been advanced. Mr. Zanddizari contests this evidence and states that no one at the bank ever told the defendants that they needed to provide a mortgage for the demand loan.
[71] Even then the bank never sent the defendants any mortgage documents for their signature. It would have been easy, particularly after the demand loan went into default, to send the defendants such documentation by email and ask that they sign it pursuant to the Irrevocable Assignment or whatever other obligation RBC believe the defendants were under. The bank failed to do so and has provided no explanation for its failure.
[72] I agree that the bank had the right to demand mortgage security on December 21, 2017 as a term of extending the demand loan. By that time the loan was in default. After default, the bank could demand whatever terms it wanted to extend the loan regardless of whether the Irrevocable Assignment is enforceable. However, the mere fact that the bank has a right to demand mortgage security after a loan goes into default does not give it the right to a legal or equitable mortgage if the debtor refuses to grant a mortgage.
[73] Given the conflict in evidence between RBC and the defendants about whether a collateral mortgage was a term of the demand loan and given the bank’s failure to explain why it did not act in a manner consistent with its alleged rights even after the term loan went into default, I am not satisfied on a balance of probabilities that the bank is entitled to a legal or equitable mortgage.
Costs
[74] The bank seeks costs on a full indemnity basis. The bank bases its claim on its various commercial agreements with the defendants. Those agreements provide for substantial indemnity, not full indemnity.
[75] The bank’s total cost claim is for $60,075.99. Of that amount, $37,850.33 is on account of the proceeding in which it obtained the certificate of pending litigation. A significant amount of its costs in that proceeding relate to the costs of obtaining the certificate of pending litigation.
[76] The defendants submitted a costs outline for all three actions in a total amount of $13,442.40.
[77] Although success on the legal issues has been divided, it is fair to say that the bank was successful on the most substantial portion of the claim, that being the right to a money judgment and dismissal of the counterclaim.
[78] That said, in my view this is a case where it is appropriate to deprive RBC of its costs in all three actions and instead toward the plaintiff costs of $13,442.40 as it requests.
[79] Rule 57.01 (2) provides that:
“The fact that a party is successful in a proceeding or a step in a proceeding does not prevent the court from awarding costs against the party in a proper case.”
[80] This is such a case.
[81] It is well accepted that full indemnity costs may be awarded where an ex parte injunction is set aside for want of full disclosure: Sharpe, Injunctions and Specific Performance at para 2.30.
[82] One accepted ground for awarding costs against a successful party is to sanction misconduct which might bring the administration of justice into disrepute: Bogoroch & Associates v. Sternberg, 2007 41889 at paras. 19-20 (Div. Ct.); Polowin v. Dominion of Canada General Insurance, 2008 ONCA 703, 2008 ONCA703 at para. 32.
[83] For a party to mislead the court as seriously as RBC did and suffer no consequences would bring the administration of justice into disrepute. Failing to impose a consequence only incentivizes parties in the future to breach the obligation.
[84] Denying RBC its costs in only the proceeding in which it sought the certificate of pending litigation does not reflect with sufficient force the disapprobation the conduct warrants. Even the full cost consequences here are of trifling significance to RBC or its external counsel. In addition, each of the other two actions did relate, in part, to unsecured loans in respect of which the certificates of pending litigation would have been of assistance to the bank.
[85] The bank submits that it should not have costs awarded against it. It relies on TD Bank v. Yousefie, 2014 ONSC 561 at para. 81 for the proposition that a moving party on an ex parte motion cannot be expected to anticipate every possible defence and to disclose those to the court. While I agree with that proposition, that is not the situation here. The bank is not being criticized because it failed to disclose every possible defence. It disclosed none. Moreover, it presented facts to the court in a misleading manner.
[86] The bank further submits that it should not be punished for omissions of its counsel and that it acted in good faith. The bank is a sophisticated, institutional litigant. There is no unfairness in imposing on the bank the ordinary assumption that all are presumed to know the law. In my view the failure to make full and fair disclosure without a sanction that stings, would bring the administration of justice into disrepute. It would risk turning the obligation into a hollow one which would only encourage its breach in the future.
Disposition
[87] I set out below my disposition of the various actions as a result of the reasons above. In all cases the sums I refer to are the amounts owing as of October 5, 2018. Further pre-judgment interest will accrue on those sums to today’s date at the rates specified. Post judgment interest will accrue after that at the rates specified.
[88] In respect of action number CV-18-00592224 I order that:
(a) The defendants shall pay the plaintiff the sum of $1,436,029.89. Pre and post judgment interest shall accrue on this sum at the rate of 7.2% per year.
(b) The certificates of pending litigation registered as instrument No. AT 482-0333 against 326 Saint Clements Ave. and instrument No. 4820328 against 56 Hawksbury Dr. shall be deleted.
(c) The counterclaim is dismissed.
(d) The plaintiff shall pay the defendants their costs fixed at $13,442.40 on account of all three actions.
[89] In respect of action number CV-18-00594070 I order that:
(a) The defendants Baharak Azkia and Nader Zanddizari also known as Nader Zand shall pay the plaintiff the sum of the $2,219,731.42 on account of mortgage loan No. 18831678-001. Pre and post judgment interest shall accrue on this amount at the rate of 3.2% per year.
(b) The defendants Baharak Azkia and Nader Zanddizari also known as Nader Zand shall pay the plaintiff the sum of $40,364.51 on account of Royal Credit Line # 18831702-001. Pre and post judgment interest on this amount shall accrue at the rate of 3.95% per year.
(c) The plaintiff is entitled to possession of the lands and premises municipally known as 56 Hawksbury Dr., Toronto and is granted leave to issue a writ of possession.
(d) The defendant Nader Zanddizari also known as Nader Zand shall pay the plaintiff sum of $2,070.91 on account of Overdraft Lending Agreement #01291 5049325. Pre and post judgment interest on this amount accrues at the rate of 22% per year.
(e) The defendants Baharak Azkia and Nader Zanddizari also known as Nader Zand shall pay the plaintiff the sum of $3,096.17 on account of Overdraft Lending Agreement # 01291 505-4689. Pre and post judgment interest on this amount shall accrue at the rate of 22% per year.
(f) The defendant Nader Zanddizari also known as Nader Zand shall pay the plaintiff sum of $63,914.72 on account of a visa credit card ending in the numbers 0011 4108. Pre and post judgment interest accrues on this amount at the rate of 19.99% per year.
[90] In respect of action number CV-18-00594075 I order that:
(a) The defendants Diana Nekonam and Baharak Azkia shall pay the plaintiff the sum of $307,837.47 on account of mortgage loan 11016136-001. Pre and post judgment interest on this amount shall accrue at the rate of 2.85% per year.
(b) The defendants Diana Nekonam and Baharak Azkia shall pay the plaintiff the sum of $650,272.94 on account of mortgage loan # 11016169-001. Pre and post judgment interest on this amount shall accrue at the rate of 3.59% per year.
(c) The defendants Diana Nekonam and Baharak Azkia shall pay the plaintiff the sum of $63,965.45 on account of Royal Credit Line # 11016227-001. Pre and post judgment interest on this amount shall accrue at the rate of 3.95% per year.
(d) The plaintiff is entitled to possession of the lands and premises municipally known as 326 St Clements Ave., Toronto and is granted leave to issue a writ of possession.
(e) The defendant Baharak Azkia shall pay the plaintiff the sum of $35,477.18 on account of Royal Credit Line No. 13574389-001. Pre and post judgment interest shall accrue on this amount at the rate of 11.42% per year.
(f) The defendant Baharak Azkia shall pay the plaintiff the sum of $24,487.62 on account of a visa credit card ending with a number 0714 2823. Pre and post judgment interest on this amount shall accrue at the rate of 24.99% per year.
(g) The defendants Diana Nekonam and Baharak Azkia, carrying on business as Baharak Design shall pay the plaintiff the sum of $5,037.74 on account of a visa credit card ending in number 0004 2222. Pre and post judgment interest shall accrue on this amount at the rate of 19.99% per year.
[91] During argument on the motions, the defendants admitted the debt but reserved the right to confirm calculations concerning the precise amounts owing, including interest. I will remain seized of the matter to resolve any disputes about the specific amounts owing if the defendants take issue with the amount set out in the preceding three paragraphs. Either party may contact me through Judges’ Reception to arrange for an attendance to address the amounts owing.
Post Script
After I prepared draft reasons, I advised counsel of my disposition of the motions and invited submissions on costs. In particular I invited submissions on why the bank should not have costs awarded against it. During the course of those submissions, I received information which indicates that there were without prejudice negotiations to partially lift the certificate of pending litigation to enable Mr. Zanddizari to complete the renovations on the St. Clements property. That information does not change my view of the manner in which Mr. Zanddizari behaved after registration of the certificate of pending litigation. The bank made reasonable offers to accommodate Mr. Zanddizari on which he did not act.
Koehnen J
Released: November 11, 2019
COURT FILE NO.: CV-18-00594075-0000
CV-18-0059224-0000
CV18-00594070-0000
DATE: 20191111
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ROYAL BANK OF CANADA
Plaintiff
Defendant to the Counterclaim
– and –
BAHARAK AZKIA, DIANA NEKONAM and NADER ZANDDIZARI also known as NADER ZAND
Defendants
Plaintiffs by Counterclaim
REASONS FOR JUDGMENT
Koehnen J.
Released: November 11, 2019.
[^1]: Court file number CV-18-592224
[^2]: Court file numbers CV-18-00594070 and CV-18-00594075