7550111 Canada Inc. v. Charles, 2020 ONSC 7036

Court File and Parties

COURT FILE NO.: 8295/18-A1 DATE: 2020-11-17 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 7550111 CANADA INC., Plaintiff AND: NATALIE CHARLES, Defendants AND: COURTNEY AKINWALE KAZEMBE, KAZEMBE & ASSOCIATES PROFESSIONAL CORPORATION, JERUSHA MAACHA STUPART, STUPART LAW PROFESSIONAL CORPORATION, HUDIANNE GRANT and OSHEINA WAN, Third Parties

BEFORE: Kurz J.

COUNSEL: Doug Bourassa, for the Plaintiff Natalie Charles, Self-represented Defendant Jordan Katz, for Third Parties, Courtney Akinwale Kazembe and Kazembe Associates Professional Corporation Alexander Melfi, for Third Parties, Jerusha Maacha Stupart and Stupart Law Professional Corporation

HEARD: November 5, 2020

ENDORSEMENT

Introduction

1This is a motion by the third parties, Courtney Akinwale Kazembe and Kazembe & Associates (“the Kazembe parties”) to strike the Defendant’s third-party claim. The third-party claim is also made against Jerusha Maacha Stupart and Stupart Law Professional Corporation (“the Stupart parties”) as well as Hudianne Grant and Osheina Wan (“Grant and Wan”), the principals of the Plaintiff. For the reasons that follow, I grant that motion.

I will not Adjourn this Motion

2The parties appeared before Conlan J. on February 5, 2020. At that time, Conlan J. granted the Defendant’s request for an adjournment of this motion, to April 1, 2020. The adjournment was marked peremptory on the defendant, Ms. Charles, and was to proceed with or without counsel. Conlan J. was explicit in stating “No more adjournments at her request.” Conlan J. ordered that Ms. Charles pay costs to each third party within 30 days. Those costs have not been paid.

3On or about September 14, 2020, Ms. Charles filed a notice of motion and unsworn affidavit with the court. In those documents, she sought to discontinue the third-party claim “on a without cost and without prejudice basis.” The fact that she was able to file those materials is surprising in that she never served them on any of the third parties. Counsel for the third parties first learned of the Defendant’s motion during the argument of this contested adjournment request.

4On the date that this motion was returnable, Ms. Charles requested another adjournment for two main reasons. First, she spoke to a lawyer just that morning. That was her first contact with that lawyer. The lawyer advised her to seek an adjournment of this motion so that the lawyer could review the motion materials. The key issue for the lawyer’s review would be the difference between a “without prejudice” withdrawal of the third-party claim and an ordinary dismissal in accord with the request in the Kazembe parties’ motion. That dismissal would likely raise the bars of issue estoppel and res judicata should Ms. Charles seek to sue the third parties again for the cause of action raised in this proceeding.

5In support of her adjournment request, Ms. Charles also cited mental health concerns. She produced a screen shot of what appears to be a two-line note from a family doctor. The note states that Dr. B. Herman certifies that Ms. Charles has experienced unspecified mental health issues since her mother’s death in 2007 and that this has increased since June 2020. No diagnosis is offered, and no statement of incapacity is proffered. Dr. Herman does not claim to have any expertise in mental health issues.

6Ms. Charles has had more than sufficient time to consult with a lawyer both before and after the pandemic set in. The fact that she first spoke to a lawyer this morning (with no evidence that she has or will retain that counsel) offers me no reassurance that if another adjournment is granted, this motion will proceed at a newly adjourned date.

7Ms. Charles claims that she is now homeless and has none of the motion materials before her. She was clearly served with them. She clearly understands the relief sought. In fact, she attempted to bring her own motion to discontinue the third-party claim without prejudice and without costs. The only issue then is whether the end of the third-party claim should be by a withdrawal without prejudice and costs or a with prejudice dismissal and all that entails. Further, I instructed Mr. Katz, counsel for the Kazembe parties, to email another copy of his motion materials to Ms. Charles (which he did). I then gave Ms. Charles time to review those materials before the argument of this motion.

8Conlan J. was clear that his adjournment was peremptory on the Defendant. He made it clear that the motion would proceed whether or not Ms. Charles has counsel. He made it clear that there would be no further adjournments. Ms. Charles understood this. Due to the pandemic, she had a further seven months to deal with the matter.

9Ms. Charles understood that the Kazembe parties’ motion seeks to finally dismiss the third-party claim. Her response was to seek to withdraw her claim in the hopes of fighting another day. She understood that the difference between the two is her right to revisit the issue and potentially, costs.

10Dr. Herman appears to be a family doctor. His or her brief note does not qualify as expert evidence, even from what may be described as a participation expert. Dr Herman says nothing about any expertise in what s/he vaguely described as “mental health issues”. If s/he has such expertise, s/he has not indicated it.

11I note that in Baig v. Mississauga, 2020 ONCA 597, the Ontario Court of Appeal cited its decision in Carmichael v. Glaxo SmithKline Inc., 2020 ONCA 447 at paras. 77-78, to the effect that “a plaintiff is presumed to have been capable of commencing a proceeding, unless the contrary is proved on a balance of probabilities.” (para. 15). That principle of capacity applies here with equal strength to each of bringing a third-party claim, and a motion, as well as responding to a motion within a proceeding. I add that nothing in the materials or submissions before me points to any inability by Ms. Charles to understand or participate in this motion, as well as the one she intended to bring.

12The third parties have waited some nine months to have this motion heard. The last adjournment was explicitly peremptory on Ms. Charles. The pandemic gave her extra time to respond and if she so chose, obtain new counsel. She did nothing until the morning scheduled to argue this motion. Her defence to this motion is essentially that she does not wish to determine the issues right now, but rather to punt them to some indefinite future time of her choosing. That is not fair to the third parties, who have been the subject of the third-party claim for some time. If they are entitled to judgment now, they should receive it. If not, that should be made clear to the parties as well.

13Accordingly, I did not find that it is in the interests of justice to further adjourn this motion. Accordingly, I have proceeded with it.

Background

14The main action is a mortgage action brought by the Plaintiff mortgagee against Ms. Charles as the Defendant. In her defence, Ms. Charles argued that she was a victim of a mortgage fraud carried out by the Plaintiff, its principals (Grant and Wan), its lawyers (the Stupart parties) and her lawyers (the Kazembe parties). (collectively “the third parties”). She principally alleged that the third parties fraudulently changed the term of the mortgage that she granted to the Plaintiff, from twelve months to one month. She stated that she never signed mortgage documents for a one-month mortgage.

15The Plaintiff moved before Fitzpatrick J. for summary judgment. During the course of the motion, Ms. Charles admitted that at the end of February 2018, she sought and obtained a mortgage loan of $120,000. The funds were advanced by the Plaintiff. She used them to pay personal debts and debts that she had guaranteed. She never repaid the mortgage loan.

16Fitzpatrick J. granted the Plaintiffs’ summary judgment against Ms. Charles. He found that there was no meaningful evidence “to suggest any misconduct let alone fraud on the part of [the Plaintiff].” While Ms. Charles raised inconsistencies in the loan documents, Fitzpatrick J. found that “these inconsistencies do not amount to fraud or anything close to it.” Rather, he ascribed the inconsistencies to “sloppy paperwork” on behalf of the Plaintiff (and, implicitly its lawyers, the Stupart parties) as well as Ms. Charles’ lawyers, the Kazembe parties. Ultimately, Ms. Charles had received and benefitted from exactly what she had bargained for. That decision was later upheld by the Ontario Court of Appeal, 2020 ONCA 386.

17While the decision of Fitzpatrick J. was pending, Ms. Charles issued her third-party claim. Soon after, the Kazembe parties moved to strike the third-party claim at large, i.e. as against all of the third parties. At the attendance before Conlan J., the other third parties advised the court that they are supporting the Kazembe parties’ motion as it applies to the dismissal of Ms. Charles’ third-party claims against them. Counsel for the Stupart parties put that position in writing in a latter to Ms. Charles. She does not claim to be taken by surprise by this position.

18In making his argument, counsel for the Kazembe parties raises three arguments:

1. The third-party claim was issued too late and without leave.
2. The third-party claim is an abuse of process, as the main issue that it raises, the involvement of the third parties in a fraud against the Defendant, has been definitely rejected by Fitzpatrick J. in a decision upheld by the Ontario Court of Appeal; and
3. It is plain and obvious that this third-party claim has no chance of success, in light of the findings of Fitzpatrick J.

19Counsel for the Kazembe parties’ fellow third parties echo their arguments. Counsel for the Stupart parties adds that if, as two levels of court found, the Plaintiff mortgagees did not participate in a fraud, the counsel who carried out the mortgagees’ instructions could hardly be said to have done so. Similarly, counsel for Grant and Wan echoes that argument. He states that if the mortgagee was found not to have participated in a fraud, its principals could not be found to have done so.

20For her part, Ms. Charles does not oppose the end of the third-party claim, at least for now. She just states that if she is allowed to withdraw her third-party claim, she will attempt to reinstate it once she retains new counsel. Presumably, she would do so as a free-standing action.

21Ms. Charles also argues that a dismissal of her third-party claim would infringe her Charter rights. She argues that she has a Charter right to bring an action against anyone if she feels that her rights are infringed upon, as she does here. She says that she has evidence that she was charged a “criminal” rate of interest on the one-month mortgage and in regard to the conduct of the motion before Fitzpatrick J.

Why I Reject Ms. Charles’ Arguments

22I must reject the Defendant’s arguments for four reasons. First, to allow this third-party proceeding to be withdrawn in the face of a motion to strike would violate r.1.04 of the Rules of Civil Procedure. It would simply put off the determination of the propriety of this proceeding and its factual/legal underpinnings to another date. Yet, the third parties asked the court to rule on the propriety of this proceeding some none months ago. The third-party claim has been outstanding for some two years. To allow the claim to be withdrawn or dismissed on some “without prejudice” basis would simply kick the metaphorical can down the road. However, once some new action were commenced, this court would again face the same issues that it does today. That result would not be the “just, most expeditious and least expensive determination of the facts and law raised in this proceeding.” The issue can be decided now.

23Second, put simply, as McIntyre J. did on behalf of the Supreme Court of Canada in Retail, Wholesale and Department Store Union, Local 580 v. Dolphin Delivery Ltd., 1986 CanLII 5 (SCC), [1986] 2 S.C.R. 573 at para. 33, “the Charter does not apply to private litigation.”

24Third, any issues with regard to the conduct of the motion before Fitzpatrick J. should have been raised on appeal.

25Finally, the issue of whether the interest rate was criminal under s.347 of the Criminal Code was raised on appeal. The court found that the issue had not been raised below. Further, the court found that the mortgage in question “does not contain on its face a criminal rate of interest.”

Why the Third-Party Claim must be Dismissed

26Moving on to the arguments of the third parties, I agree that the third-party claim must be dismissed and that there be no “without prejudice” aspect to that dismissal. I say that for four reasons that follow.

1. The third-party claim was issued late and without leave

27Sub-rule 29.02 requires the issuance of a third-party claim within ten days after the deliverance of a statement of defence. Here, the third-party claim was issued some eleven months after the delivery of the statement of defence. It is true that under r.29.01(1.2), a third-party claim may be issued at any time with leave and that leave shall be granted unless there is prejudice. But here, no leave was sought before the issuance of the third-party claim. Even today, no such leave is sought. Further, the third parties claim that they would be prejudiced by the late issuance of the third-party claim in that they could not be part of the motion before Fitzpatrick J. Even now, Ms. Charles seeks a result that leaves the determination of the Defendant’s claims against them in abeyance.

2. The third-party claim is an abuse of process

28Under r.21.01(3)(d), the court can dismiss an action on the grounds that it is “frivolous or vexatious or is otherwise an abuse of the process of the court.” The test for doing so is a strict one. It shall only be done “in the clearest of cases and where it is plain and obvious that the case cannot succeed.” (Badavian v. Alexanian, 2016 ONCA 533, at para. 15). The purpose of such a motion is to weed out cases that have no chance of success (ibid at paras. 14 and 160).

29Here, the reason that the test is met is that the Defendant’s arguments of fraud were completely determined in the decision of Fitzpatrick J., as upheld by the Ontario Court of Appeal. Specifically, it has already been determined, in a process in which Ms. Charles participated, that:

a. The mortgage in question is valid; b. It was not the product of fraud; c. Ms. Charles received the mortgage funds and distributed them as she saw fit; d. Ms. Charles was obliged to repay the mortgage funds.

30In its decision on the Defendant’s appeal of the Fitzpatrick J. order, the Ontario Court of Appeal stated at para. 30, in regard to any potential counterclaims or third-party claims (which were not before the court):

Regardless, whatever determination may be made in relation to the appellant’s related claims will not be inconsistent with the motion judge’s conclusion that the mortgage is valid and the respondent (i.e. the Plaintiff) did not participate in any fraud. Those issues have been finally determined and the appellant is bound by those conclusions.

31To allow this third-party action to continue would invite a re-litigation of those issues. That would be an abuse of process.

32In Toronto (City) v. Canadian Union of Public Employees, Local 79, 2003 SCC 63, the Supreme Court found that in a civil context, the doctrine of abuse of process can be extended beyond re-litigating criminal convictions (at para. 49). None of the reasons that could prevent the application of the doctrine of abuse of process apply in this case. Rather, this action amounts to a collateral attack on Fitzpatrick J.’s findings.

33Put simply, in order for the third-party claim to succeed, some, if not all of Fitzpatrick J.’s findings must be re-litigated and effectively overturned. As the Supreme Court of Canada stated in Toronto (City) v. CUPE Local 70, at para. 51:

If the result in the subsequent hearing is different from the conclusion reached in the first, on the very same issue, the inconsistency, in and of itself, will undermine the credibility of the entire judicial process, thereby diminishing its authority, its credibility and its aim of finality.

3. It is plain and obvious that the third-party claim discloses no reasonable cause of action

34The third reason is really an outgrowth of the second. In light of the decision of Fitzpatrick J., it is plain and obvious that the third-party claim discloses no reasonable cause of action (r.21.01(1)(b)). Normally a motion under this subrule is determined without reference to evidence. The allegations in an originating pleading are to be taken as true or capable of being proven unless patently absurd or incapable of proof. They are to be read generously. Yet here, certain facts, as set out above, are already proven and binding on Ms. Charles. In sum, Ms. Charles was not defrauded in regard to the term of mortgage in question. She obtained the benefit of the bargain into which she entered with the Plaintiff. Those facts are not properly subject to re-litigation.

35In light of those findings, the court cannot find that Ms. Charles was defrauded by the actions of the third parties or that she suffered any loss as a result of their actions.

Conclusion

36For the reasons set out above, this third-party claim is dismissed.

Costs

37During the hearing of the motion, I informed the parties of my decision to dismiss the third-party claim, with reasons to follow. I also heard their costs submissions. I find that the following costs of this motion are fair, reasonable, proportionate and within the reasonable expectations of the Defendant. She shall pay costs to the following parties in the following amounts:

1. To the Kazembe parties: $2,776
2. To Grant and Wann: $900
3. To the Stupart parties: $2,500