HL Mortgage v. Atlas Fin-Quest Inc. . 2021 ONSC 2509

Court File and Parties

COURT FILE NO. CV-19-00628155-0000

DATE: 20210525

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HL MORTGAGE INVESTMENTS INC.

Plaintiff

– and –

ATLAS FIN-QUEST INC., ATLAS (BRAMPTON) LIMITED PARTNERSHIP, ATLAS HEALTHCARE (BRAMPTON) LTD., PETER GRIGORAS, TJT FINANCIAL CORPORATION and KUMAR JAIN

Defendants

Counsel:

Lawrence Wallach and Shaun Rotman, lawyer for the Plaintiff

Jeffrey A. Kaufman, lawyer for the Defendants, Atlas Fin-Quest Inc., Atlas (Brampton) Limited Partnership, Atlas healthcare (Brampton) Ltd., and Peter Grigoras

HEARD: APRIL 1, 2021

REASONS FOR DECISION

G. DOW, J.

1The plaintiff, HL Mortgage Investments Inc. ("HL mortgage") seeks partial summary judgment against the defendants, Atlas Fin-Quest Inc. ("Atlas Fin-Quest"), Atlas (Brampton) Limited Partnership ("Atlas Brampton"), Atlas Healthcare (Brampton) Ltd. ("Atlas Healthcare") and Peter Grigoras (or collectively the "Grigoras defendants") arising from a loan stated to be in the amount of $1.25 million for 60 days between March 6, 2019 until May 6, 2019. A brokerage fee of $50,000.00 was paid to the defendants TJT Financial Corporation ("TJT Financial") operated by the defendant, Arun Kumar Jain as part of the total amount. No relief was sought against these two defendants. They filed no materials and no one appeared before me on their behalf.

2The components of the loan included pre-paid interest of 30% per year for the 60 days, being $62,500.00, a lenders fee of $62,500.00 and a "rapid processing" premium of $75,000.00 such that the actual amount of funds advanced to the Grigoras defendants was only $1 million.

Background

3The parties agreed the evidence from Mr. Grigoras is not disputed in that:

a) he was the principal of the named borrower, Atlas Fin-Quest;

b) he and his other companies, Atlas Brampton and Atlas Richmond Hill guaranteed the loans;

c) as of December 3, 2018, the Court had appointed a receiver for Atlas Brampton making it ineligible to be a guarantor without court consent, something Mr. Grigoras was aware of and did not try to obtain;

d) Mr. Grigoras used the loan to pay other lender fees of more than $600,000.00 to TJT Financial or Mr. Jain;

e) without replacement refinancing, the Grigoras defendants had no way to pay off the loan;

f) Mr. Grigoras maintained the loan was a sham between he and Mr. Jain;

g) the Grigoras defendants seek contribution and indemnity from TJT Financial and Mr. Jain for the loan in its pleading;

h) following a September 6, 2019 written demand for repayment, this action was issued on September 27, 2019; and

i) there are other proceedings involving the Grigoras defendants in the Superior Court of Justice.

4The Grigoras defendants opposed the motion in accordance with the Court of Appeal's three part test as set out in Malik v. Attia, 2020 ONCA 787 (at paragraph 62). That is, partial summary judgment requires the moving party to:

"i) Demonstrate that dividing the determination of this case into several parts will prove cheaper to the parties;

ii) Show how partial summary judgment will get the parties' case in and out of the court system more quickly; and

iii) Establish how partial summary judgment will not result in inconsistent findings by the multiple judges who will touch the divided case".

5Counsel for the Grigoras defendants relied on the Endorsement in Lakefield Properties Ltd. v. The Otonabee Region Conservation Authority, 2020 ONSC 1061. That Endorsement appears to be the result of a Civil Practice Court appearance where the request for a motion date was screened and not provided. That decision stated there is "a bright line rule that partial summary judgment is not available when there is any risk at all of duplication of findings or inconsistent verdicts at a proposed motion and the trial" (at paragraph 16).

6Unfortunately, counsel for the Grigoras defendants did not raise its concerns in Civil Practice Court when this motion was scheduled. As a result, materials were prepared, cross-examinations held and submissions made before me. I have difficulty concluding how this determination of one issue will make the proceeding cheaper for the parties. It may of benefit to HL Mortgage. However, HL Mortgage is not willing to abandon its claim against TJT Financial and Mr. Jain. It wishes to protect its right to seek recovery against them in the event it is unable to collect any partial judgment granted. Thus, it also appears that partial summary judgment will not get the parties "in and out of the court system more quickly".

7However, I have even greater difficulty in dismissing the motion on the basis it has not met parts of the three part test when there are undisputed facts that will not lead to inconsistent findings as the other issues progress. It is undisputed HL Mortgage lent Atlas Fin-Quest at least $1 million for 60 days or until May 6, 2019. It is undisputed it has not been repaid. It is undisputed an additional $50,000.00 was directed by the Grigoris defedants to be and was paid to TJT Financial operated by Mr. Jain and included in the loan.

8The remaining $200,000.00 sought to be recovered gives rise to submissions by the Grigoras defendants that it exceeds the 60 percent per year level set by Section 347 of the Criminal Code. That section makes it clear "interest" is not limited to what the parties call interest but is widely defined to include a "fee, fine, penalty, commission or other similar charge or expense". It is a definition wide enough to capture the components of this loan in excess of the $1 million advanced to the Grigoras defendants.

9Whether the funds in excess of $1 million interest is greater than 60 percent per year is not left to counsel or the Court to calculate. Under subsection 347(4) of the Criminal Code, its states "In any proceedings under this section, a certificate of a Fellow of the Canadian Institute of Actuaries stating that he has calculated the effective annual rate of interest" is required.

10This matter is not a proceeding under that section of the Criminal Code. However, in Great America Leasing Corp. v. Yates, 2003 16128 (ON CA), [2003] O.J. No. 4689 (C.A.), a civil matter involving enforcement of a foreign judgment, the Court appeared to apply "the evidentiary burden on him to present evidence capable of supporting his defence based on s. 347 of the Criminal Code" (at paragraph 29). This issue was also reviewed in 7550111 Canada Inc. v. Charles, 2020 ONCA 386 where the Court stated "the impact of such fees and charges on the interest rate is not a simple calculation that the court can make on the submissions of counsel" (at paragraph 22). The Grigoras defendants failed to tender a certificate as contemplated by subsection 347(4) of the Criminal Code.

11I agree with the submission of counsel for HL Mortgage that the failure to obtain and submit a certificate should not be used to buttress submissions in favour of dismissal of the motion in its entirety. To do so would be contrary to the principles set out in Hryniak v. Mauldin, 2014 SCC 7, 2014 SCC7 which include the obligation of each party to put their best foot forward.

12To the extent I can decide a portion of this action without risking an inconsistent finding of the remaining issues, I conclude HL Mortgage is entitled to judgment with regard to the funds it actually forwarded which have not been repaid in accordance with the loan documentation executed by the Grigoras defendants. That is, $1,050,000.00.

13As part of the consideration as to what remedy is available if a contract includes a rate of interest that contravenes Section 347 of the Criminal Code, counsel for the Grigoras defendants relied on Transport North American Express Inc. v. New Solutions Financial Corp., 2004 SCC 7. That decision detailed the range of remedies available based on the various contexts in which such loans arise. That is, from "exploitive loan-sharking arrangements and contracts that have a criminal object" (at paragraph 6) which should be declared void ab initio to the otherwise unobjectionable contracts where the effective rate of interest exceeds 60 percent per year which ought to be reduced to 60 percent per year. I am satisfied on the evidence before me that the nature of this contract is at the otherwise unobjectionable (if at all) end of the spectrum. As a result, it is appropriate and not at risk of an inconsistent finding to award 30 percent per year interest on the $1,050,000.00 from May 6, 2019 to issuance of the Statement of Claim on September 27, 2019. I calculate that amount of interest for that 144 days at 30 percent per year to be $124,188.91.

14As a result of issuance of the Statement of Claim, it is clear that HL Mortgage wishes to utilize the procedural and collection remedies available to it in the Superior Court of Justice. Thus, I have concluded it ought to abide by the rate of interest provided for in the Courts of Justice Act. The applicable rate of interest is 2 percent per year and HL Mortgage is awarded same on the $1,050,000.00 from September 27, 2019 to the date of this decision. I rely on and exercise the discretion afforded to me under Section 130 of the Courts of Justice Act, R.S.O. 1990 c. C.43 in this regard.

Conclusion

15HL Mortgage is awarded partial judgment in the amount of $1,050,000.00 plus interest of $124,188.91. HL Mortgage is also awarded pre-judgment interest at 2% per year on $1,050,000.00 from September 29, 2019 to the date of this decision. This partial judgment is against only the Grigoras defendants.

16The parties failed to prepare Costs Outlines as required under Rule 57.01(6) but agreed on costs of $15,000.00 inclusive of fees, HST and disbursements to the successful party. While neither party was completely successful, HL Mortgage was largely successful and I award it costs of $13,500.00 inclusive of fees, HST and disbursements as against the Grigoras defendants.