2343680 Ontario Inc. v. Bazargan, 2021 ONSC 6752

COURT FILE NO.: CV-18-1806

DATE: 20211013

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2343680 ONTARIO INC.

Plaintiff

– and –

MAHSHID BAZARGAN and SHAHRYAR MOHAMMADI

Defendants

Pieter Verbeek for the Plaintiff

Aryan Kamyab for the Defendants

HEARD: September 14, 2021 by Zoom Videoconference

ruling on plaintiff’s summary judgment motion

boswell j.

I. INTRODUCTION

[1] The plaintiff moves for summary judgment on a mortgage claim.

[2] On December 8, 2017, the defendants granted a second mortgage of $371,250 to the plaintiff and a first mortgage to another lender in the amount of $1,608,750 against their personal residence in Whitchurch-Stouffville.

[3] By the fall of 2018, both mortgages were in default. The plaintiff bought out the first mortgage on December 14, 2018. Since that time, the defendants have not made any payments on either mortgage, save for a one-time lump sum of $50,000 paid on December 14, 2020 as a condition imposed by the court as a term of an adjournment of the plaintiff’s summary judgment motion.

[4] All parties agree that this is an appropriate case for summary judgment. They do not agree, however, on what the terms of the judgment should be. They disagree in two broad respects.

[5] First, they do not agree on the amounts presently owing on the first and second mortgages for principal, accrued interest, fees and costs.

[6] Second, they do not agree about what, if any, reduction should be made to any amounts otherwise found to be owing to compensate the defendants for an alleged breach of the plaintiff’s duty of honest contractual performance. The defendants contend that the plaintiff should be awarded no interest on either mortgage from and after December 14, 2018 as, in effect, a disgorgement of any profit it would have realized as a result of its malfeasance. The plaintiff responds that there is no merit to the assertion of bad faith and argue that judgment should be fixed without regard to the defendants’ allegations in this regard.

[7] For the reasons that follow, I find that there is no genuine issue requiring a trial regarding the amount outstanding on the mortgages and I fix that amount at $2,472,567.91 as of October 11, 2021. Furthermore, I reject the defendants’ assertions that the plaintiff breached its duty of honest contractual performance and that the breach led to compensable damages.

[8] In the result, judgment is granted in favour of the plaintiff in the sum of $2,472,567.91 as of October 11, 2021, with per diem interest accruing thereafter at $477.44.

II. THE LIVE ISSUES

[9] The live issues can, again, be organized in two broad categories.

A. THE OUTSTANDING MORTGAGE BALANCE

[10] As I will explain, throughout much of the litigation there was a significant issue between the parties regarding the interest rate applicable to the first mortgage after it was bought out by the plaintiff. That issue was resolved by the time the motion was argued. That issue aside, calculating the outstanding balance owing on both mortgages is relatively straightforward. There are some minor differences between the parties and otherwise a bit of sloppy accounting to overcome.

[11] The few factual issues that remain to be sorted are all, in my view, readily capable of being addressed on this motion. They include:

(a) Determining the principal amount of the first mortgage;

(b) Calculating the amount of interest the defendants actually paid during the one-year term of the second mortgage; and,

(c) Assessing the fees to be paid on account of late, missed or NSF payments on the second mortgage.

B. THE DUTY OF HONEST CONTRACTUAL PERFORMANCE

[12] This second broad area of dispute between the parties is somewhat more difficult to resolve. It engages issues that include:

(a) Whether the court has jurisdiction to entertain the defendants’ request for summary judgment, in the absence of a defence motion for that relief;

(b) Whether the plaintiff breached its duty of honest contractual performance; and,

(c) Whether the defendants suffered any compensable damages.

[13] Going forward, I intend to set out the legal principles that apply to summary judgment motions in general and to assertions of a breach of the contractual duty of honest performance. I will then turn to my analysis of the two areas of dispute. I will set out whatever factual background is necessary to understand the issues as I address them in turn.

III. THE GOVERNING PRINCIPLES

SUMMARY JUDGMENT

[14] It is unnecessary to spill much ink on the principles that guide the court in the determination of summary judgment motions. They are well-settled and not in dispute.

[15] Summary judgment is a procedure made available to litigants through r. 20 of the Rules of Civil Procedure. It is one of a cluster of rules that litigants may utilize for the purpose of determining cases, or issues, without the need of a trial.

[16] Rule 20.04 (2) and (2.1) provide as follows:

(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence.

[17] The application of r. 20.02 came before the Supreme Court for consideration in 2014 in Hyrniak v. Mauldin, 2014 SCC 7. The Court used the opportunity to make a very blunt assessment of the state of access to civil justice in Ontario. It said that a culture change was required – a fundamental shift needed in the way the court does business – if access to justice was to be improved. Justice Karakatsanis, writing for a unanimous court, described this culture shift, at para. 2 of the ruling, as follows:

This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.

[18] There was a time, prior to Hyrniak, when the utility of r. 20 was limited to weeding out clearly unmeritorious claims or defences. But the addition of r. 20.04(2.1) in 2010 and the Supreme Court’s guidance in Hryniak make those limits a footnote to history. Rule 20 now represents a “significant alternative model of adjudication”. (Hyrniak, para. 45).

[19] Justice Karakatsanis provided the following guidance about the circumstances in which a motions judge might determine that there is no genuine issue requiring a trial:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. (Para. 49).

[20] Although the rule does not, on its face, appear to require a staged analysis, Hryniak instructs that rule 20.04(2) should, in fact, be applied in two stages.

[21] First, the motions judge must determine if there is a genuine issue requiring a trial based only on the evidence filed on the motion, without resort to the enhanced fact-finding powers described in rule 20.04(2.1). No genuine issue requiring a trial will exist if the evidence permits the motions judge to fairly and justly adjudicate the dispute in a timely, affordable and proportionate manner. If no genuine issue requiring a trial exists, judgment should be rendered accordingly.

[22] If the motions judge concludes at the first stage that a genuine issue for trial exists, then stage two is triggered. At stage two, the motions judge is directed to consider whether the need for a trial may be avoided by resort to the enhanced fact-finding powers set out in r. 20.04(2.1). The motions judge may utilize those powers, in his or her discretion, unless doing so would be contrary to the interests of justice.

[23] A great deal of jurisprudence has developed in relation to summary judgment motions, both before and after the 2010 amendments. Much of the pre-2010 jurisprudence remains valid. In addition to the principles enunciated in Hyrniak, the following others have emerged over the years and continue to apply:

(a) The moving party continues to bear the legal and persuasive burden to establish that there is no genuine issue requiring a trial to resolve;

(b) The responding party continues to bear an evidentiary burden to establish that there is a genuine issue requiring a trial;

(c) Each party must “put their best foot forward”. Neither may rest on the allegations in their pleadings; and,

(d) The court is entitled to assume that the record before it contains the core substance of the evidence that the parties will present at trial.

See Dawson v. Rexcraft Storage & Warehouse Inc., 1998 CanLII 4831 (ON CA), [1998] O.J. No. 3240 (C.A.) at para. 17; Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 at paras. 26 and 32; and Penretail Management Ltd. v. 2380462 Ontario Inc. (o/a Bolton Health Centre), 2016 ONSC 600, at para. 10.

THE DUTY OF HONEST CONTRACTUAL PERFORMANCE

[24] A trilogy of cases released by the Supreme Court in the last seven years have firmly established good faith contractual performance as an organizing principle of the common law of contracts. See Bhasin v. Hrynew, 2014 SCC 71; C.M. Callow Inc. v. Zollinger, 2020 SCC 45; and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7.

[25] The good faith principle is rooted in the idea that a basic level of honest conduct is necessary for the proper functioning of commerce.

[26] Recognizing good faith as an organizing principle was an attempt by the court to correct what Cromwell J. described in Bhasin as the piecemeal approach to good faith in the common law. It is not a free-standing rule. Rather, it manifests itself in existing good faith doctrines. Having said that, the decision in Bhasin makes it clear that the categories of good faith doctrines are not closed.

[27] The trilogy of cases, in fact, establish two new good faith doctrines: the duty to act honestly in the performance of contractual obligations and the duty to exercise contractual discretion in good faith.

[28] While these good faith doctrines demand different things in different contexts, their contours have begun to take shape through the trilogy of cases. The following principles, amongst others, have emerged:

(a) Canadian common law has a long history of respecting private ordering and the freedom of contracting parties to pursue their own self-interest. The principle of good faith must be applied in a manner consistent with this history. The pursuit of economic self-interest, often at the expense of others, is not necessarily contrary to the principle of good faith. (Bhasin, para. 70; Wastech, para. 73);

(b) The principle of good faith performance simply requires that parties generally perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. (Bhasin, para. 63);

(c) While the duty of honest performance does not require parties to act “angelically”, they must refrain from lying or knowingly misleading another contracting party (Bhasin, para. 86).

(d) A duty of honest contractual performance does not impose obligations of loyalty or trust. It is not a fiduciary duty. It does not mean that parties cannot legitimately take advantage of bargains they have reached. But it does mean that parties must not lie or knowingly mislead each other (Bhasin, paras. 60 and 65);

(e) The duty of honest performance is not an obligation of honesty at large. It is directly linked to performance of the contract. Absent a linkage requirement, the duty would be to simply not tell a lie, which would broaden the scope of liability beyond acceptable limits (Callow, para. 49);

(f) Tethering the good faith analysis to a consideration of what was reasonable according to the parties’ own bargain tends to prevent the analysis from “veering into a form of ad hoc judicial moralism or ‘palm tree’ justice.” (Wastech, para. 74.);

(g) The duty of honest performance “constrains the manner in which all contractual rights and obligations are exercised or performed, as a matter of contractual doctrine.” (Callow, para. 54). By extension, exercising a discretionary power dishonestly is a breach of contract; and,

(h) Honest performance requires that the exercise of contractual discretion be carried out in a manner consistent with the purposes for which it was granted. Said another way, that it be carried out reasonably. The assessment of reasonableness may be expressed in the following question: was the exercise of discretion unconnected to the purpose for which the contract granted discretion? If the answer is yes, then the exercise of discretion has not been carried out in good faith. (Wastech, para. 69).

[29] Having set out the general legal principles that govern motions for summary judgment and assertions of dishonest performance, I will move on to an analysis of the two principle issues raised on the motion. First, whether the balance outstanding on the plaintiff’s mortgage can justly and fairly be determined without the need of a trial. Second, whether the defendants’ assertion of a breach of the plaintiff’s duty of honest contractual performance raises a genuine issue for trial.

IV. ANALYSIS

A. THE OUTSTANDING BALANCE

The Facts

[30] The defendants are the registered owners of a large, single-family residence in an affluent neighbourhood in Whitchurch-Stouffville, known municipally as 43 Grayfield Drive (“Grayfield”).

[31] On December 8, 2017, the defendants placed a first mortgage on Grayfield in favour of MCC Mortgage Holdings Inc. in the amount of $1,608,750. The mortgage accrued interest at the rate of 7.29%. It was payable, interest only, in the amount of $11,557.45 per month, due on the first day of each month, commencing February 1, 2018. It was due in full on January 1, 2019.

[32] On the same date the defendants placed a second mortgage on Grayfield. This mortgage was in favour of the plaintiff. It was in the amount of $371,250. Interest accrued at the rate of 13.99% per annum. The mortgage was payable, interest only, in the amount of $4,328.16 per month, commencing January 1, 2018, with the balance due in full on December 8, 2018.

[33] In total then, the defendants mortgaged Grayfield on December 8, 2017 in the amount of 1,980,000. Their monthly, interest only, payments on the mortgages was a combined $15,885.61.

[34] The defendants struggled to make the payments on the second mortgage in a timely way almost from the get-go. By the summer of 2018 they were struggling to keep either mortgage current.

[35] The defendants made the following payments on towards the interest owing on the second mortgage:

January 15, 2018 $1,996.49

January 17, 2018 2,331.67

February 12, 2018 4,328.16

March 8, 2018 1,996.49

March 12, 2018 2,331.67

May 14, 2018 2,331.67

May 22, 2018 1,996.49

May 24, 2018 2,331.67

May 28, 2018 1,996.49

June 8, 2018 2,331.67

June 25, 2018 1,996.49

July 9, 2018 4,328.16

August 13, 2018 1,996.49

October 17, 2018 3,992.98

Total $36,286.59

[36] No further interest payments were made on the second mortgage after October 17, 2018 and the principal was not repaid when it came due on December 8, 2018.

[37] The defendants fell into arrears on their first mortgage in September 2018. Ms. Bazargan deposed, in an affidavit sworn December 22, 2020, that she received a letter from counsel to the first mortgagee on October 18, 2018. The letter notified her that the defendants had missed the payments due on the first mortgage on September 1, 2018 and October 1, 2018, both in the amount of $11,557.45. Power of sale proceedings were commenced.

[38] On October 22, 2018, the plaintiff paid $25,726.43 to the first mortgagee to bring the first mortgage into good standing. That figure was comprised of the outstanding amounts not paid on September 1 and October 1, 2018 plus costs and fees associated with the defendants’ default. The power of sale was averted.

[39] At the request of the plaintiff, the defendants delivered to it the sum of $10,000 on October 25, 2018 and the sum of $1,500 on October 29, 2018, which sums were to be directed to the first mortgagee. The plaintiff used those funds, and added some of its own, and remitted $11,557.45 to the first mortgagee on November 6, 2018 to cover the payment due November 1, 2018 and to again bring the first mortgage into good standing.

[40] Ms. Bazargan deposed, at para. 35 of her December 22, 2020 affidavit, that she learned, to her surprise, on December 13, 2018, that the first mortgage was in arrears in the amount of $11,557.45. The default should not have been a surprise to her, given that the defendants failed to remit the monthly interest payment due on December 1, 2018.

[41] In any event, the defendants paid $11,557.45 to bring the first mortgage into good standing on December 13, 2018.

[42] The second mortgage included a number of additional terms beyond the usual payment provisions. Most significant for the purposes of this motion is the following, found at para. 7 of the Schedule of Additional Provisions to the mortgage:

In the event that the within Charge is a first or subsequent Charge upon the subject property, and default occurs in relation to any Charge registered in priority to the within Charge, the Mortgagor acknowledges that the Mortgagee shall have the option of bringing the said prior Charge into good standing or alternatively paying the entirety of the principal amount then due and owing upon the said prior Charge, and all monies so paid by the Mortgagee shall bear interest at the interest rate specified in the within Charge from and after the date of such payment or payments by the Mortgagee and the Mortgagor shall be responsible to repay all such monies to the Mortgagee in addition to the principal amount hereby secured, together with all accrued interest due and owing hereunder.

[43] On December 14, 2018, the plaintiff paid out the first mortgage for a negotiated amount of $1,598,782.35.

[44] The defendants do not appear to have made any payments towards the outstanding mortgages since December 13, 2018, with one exception. The plaintiff’s summary judgment motion was initially returnable on December 8, 2020 before Cameron J. The defendants sought and obtained an adjournment of the motion to January 12, 2021. As a term of the adjournment, Cameron J. ordered them to pay the plaintiff $50,000. That payment was made December 14, 2020.

The Amounts Claimed

[45] When the motion was commenced, in November 2020, the plaintiff was seeking judgment in the amount of $2,675,154.79. The calculation is not particularly easy to follow. On Appendix “A”, I have duplicated the calculation reflected in the affidavit of Carlos Araujo sworn November 18, 2020 filed in support of the plaintiff’s motion.

[46] By the time the motion was argued, on September 14, 2021, the plaintiff was seeking $2,481,321.84. I have set out, on Appendix “B”, the plaintiff’s calculations of this balance. These amounts are taken from the plaintiff’s revised Factum. The interest calculations appear to be current to May 31, 2021 even though the Factum is dated August 31, 2021.

[47] There are some noticeable differences between the plaintiff’s damage calculations as at November 18, 2020 and May 31, 2021. Apart from the accrual of additional interest they include:

(a) The plaintiff now claims to have paid the first mortgagee $1,612,387.94 to discharge the first mortgage, when previously it was $1,598,782.35;

(b) The plaintiff has not included the amounts she says she paid to the first mortgagee to keep it current. Specifically, $25,726.43 on October 22, 2018 and $11,577.45 on November 6, 2018 (though to be clear, the defendants paid $11,500 of this latter amount);

(c) The plaintiff is no longer seeking 13.99% interest on the amount paid to discharge the first mortgage. She is now seeking 7.29% in accordance with the terms of the first mortgage; and,

(d) The plaintiff is no longer seeking three months’ bonus interest in the amount of $89,489.53.

The Disputed Amounts

[48] The biggest ticket item in dispute between the parties has been, throughout most of the litigation, the interest rate payable on the first mortgage. The negotiated rate was 7.29%. Until recently, the plaintiff took the position that it was entitled to charge 13.99% interest on the amount it paid to buy out the first mortgage from and after December 14, 2018. In other words, the plaintiff’s position was that it was entitled to charge interest on the combined first and second mortgages at the rate applicable to the second mortgage. The defendants have always taken the position that the plaintiff is entitled to charge only 7.29% on that amount.

[49] At some point prior to the launching of the summary judgment motion, the plaintiff retained new counsel, Mr. Rotman. During the course of Mr. Rotman’s May 14, 2021 cross-examination of Ms. Bazargan in relation to this motion, he advised the defendants’ counsel that the plaintiff accepted that it could not charge more than 7.29% interest on the balance outstanding under the first mortgage. The plaintiff accepts that any attempt to charge more than 7.29% would offend s. 8(1) of the Interest Act, R.S.C. c. I-15.

[50] Given the plaintiff’s change in position on the interest issue, the amounts in dispute are pared back to the following:

(a) The amount paid by the plaintiff to discharge the first mortgage. The plaintiff claims $1,612,387.94 and the defendants say it was $1,598,782.35; and,

(b) The amount of interest paid on the second mortgage in 2018. The plaintiff claims it was $15,492.90 while the defendants say it was $36,286.59.

(c) NSF fees of $13,000; and,

[51] Apart from these few amounts in dispute there remain a number of other amounts that have not been, but need to be, properly accounted for. They include the credit to the defendants for the $50,000 paid pursuant to the order of Cameron J.; the amounts paid by the plaintiff to the first mortgagee in October and November 2018 to keep the first mortgage current; and the recalculation of interest owing on both the first and second mortgages.

Discussion

[52] The areas in dispute in relation to the calculation of the outstanding balances owing on the first and second mortgages are few and are readily capable of resolution with regard only to the evidentiary record before the court. In other words, they are readily capable of being resolved at the first stage of the Hyrniak analysis. In terms of calculating the outstanding balance, I agree with the parties – there is no genuine issue requiring a trial.

(a) The First Mortgage

[53] It is entirely unclear to me why the plaintiff presently claims that the principal balance outstanding on the first mortgage is $1,612,387.94.

[54] At para. 8 of his November 18, 2020 affidavit Carlos Araujo deposed as follows:

…The Plaintiff, after some readjustments by the first mortgagee paid to the solicitor for the first mortgagee the sum of $1,598,782.35.

[55] Mr. Araujo attached a copy of the bank transfer in the amount of $1,598,782.35 at Exhibit “E” to his affidavit.

[56] At para. 17 of her January 29, 2021 affidavit, Luisa Araujo deposed as follows:

When the MCC mortgage went into arrears a third time on December 14, 2018, the Plaintiff paid MCC $1,598,782.35 to pay the mortgage off to prevent further defaults.

[57] The evidence is clear. The sum of $1,598,782.35 was paid to discharge the first mortgage. The principal balance outstanding on the first mortgage as of December 14, 2018 was $1,598,782.35.

(b) The Interest Paid on the Second Mortgage in 2018

[58] It is similarly entirely unclear to me how the plaintiff calculated that only $15,492.90 was paid towards interest on the second mortgage throughout 2018.

[59] It is common ground that the amount of interest that should have been paid in 2018 was $51,937.92. The defendants claim that they paid interest of $36,286.59. The plaintiff says it was $15,492.90.

[60] The defendants submitted evidence confirming the payments made. Sometimes they were paid by cheque. Other times by email transfer. I have done the math. They total $36,286.59.

(c) NSF Fees

[61] To be fair, the defendants’ counsel did not argue about the fees charged by the plaintiff and set out on its current ledger of outstanding amounts.

[62] I am satisfied, having reviewed the terms of the mortgage and the evidence submitted by the plaintiff that the plaintiff is entitled to $2,500 as a fixed administrative fee on default on both the first and second mortgages. I am further satisfied that the plaintiff is entitled to correspondence fees of $1,050 and a discharge statement fee of $495. And I am satisfied that it is entitled to legal fees associated with the commencement of default proceedings totalling $9,948.70.

[63] The second mortgage includes a provision entitled NSF/MISSED PAYMENT. It provides as follows:

In the event that if the mortgagor shall fail to provide and/or make any payment due under the mortgage by virtue of such payment being returned to the Mortgagee unpaid for any reason whatsoever, or payment shall be late, or the mortgagor shall fail to provide the payment the mortgagor shall pay a fee in the amount of $500 in respect of each cheque, which fee shall immediately become due to all payments outstanding both be a charge upon the lands. The NSF shall apply to all payments outstanding both before and after any mortgage enforcement proceedings.

[64] It is immediately apparent that the NSF payment provision is not a grammatically sound paragraph. That said, in my view it clearly provides for a $500 fee to be paid for each payment that is missed, late or returned NSF.

[65] The difficulty I have with this part of the plaintiff’s claim is not so much the poor drafting of the mortgage, but with the absence of evidence to support the claim that there were 26 payments that were missed, late or returned NSF.

[66] The mortgage was for a one-year term. There were payments of $4,328.16 due once per month – on the 8^th of each month – for 12 months.

[67] The plaintiff has submitted no evidence of any cheques being returned NSF.

[68] On the basis of the evidence submitted by the defendants, I conclude that their payments were missed or late in each of the 12 months that comprised the term of the mortgage. By my calculation the plaintiff is therefore entitled to charge fees on 12 missed or late payments. At $500 each, that is $6,000, not the $13,000 charged by the plaintiff.

(d) Miscellaneous Accounting Issues

The $50,000 Credit

[69] The plaintiff’s motion first came before Cameron J. on December 8, 2020. The defendants sought an adjournment. The adjournment was granted, on consent, on the condition that the defendants pay $50,000 to the plaintiff in partial consideration of the amount claimed.

[70] The $50,000 was to be paid by December 11, 2020. It was paid December 14, 2020. The fact that it was late appears to me to be inconsequential. It is still an amount that must be accounted for.

Amounts Paid by the Plaintiff to the First Mortgagee

[71] For reasons unclear to me, the plaintiff did not include in its current ledger, the sum of $25,726.43 it paid to the first mortgagee on October 22, 2018 to bring the first mortgage into good standing. It paid a further $11,557.45 to the first mortgagee on November 6, 2018 to cover the payment due on that mortgage on November 1, 2018. The defendants provided $11,500 of that amount, so the plaintiff’s contribution was $57.45. Between the two payments, the plaintiff is entitled to recover the sum of $25,783.88.

The Interest Calculation

[72] I have added the $25,783.88 plus unpaid interest in 2018 of $15,492.90 to the principal of the second mortgage and I have calculated interest on that amount ($412,526.78) between January 9, 2019 and October 11, 2021 (1007 days inclusive), at the rate of 13.99%. The per diem rate is $158.12. The total amount of interest owing to October 11, 2021 is $159,226.84.

[73] I have calculated interest owing on the principal sum outstanding on the first mortgage ($1,598,782.35) at 7.29% from and after December 15, 2018 to and including October 11, 2021. The per diem rate is $319.32. The number of days between December 15, 2018 to October 11, 2021, inclusive, is 1,032. The total interest accrued on the first mortgage is, accordingly, $329,538.24.

[74] My recalculation of the amount outstanding as of October 11, 2021 is $2,472,567.91. My calculations are set out on Appendix “C”. Subject to an assessment of the defendants’ bad faith argument, this is the sum they must pay to discharge the plaintiff’s mortgage. The per diem interest accrual after October 11, 2021 is $477.44.

[75] Before I move on to the next broad disputed issue, I should comment on the state of the pleadings in this action. The statement of claim was issued in November 2018, prior to the time when the plaintiff bought out the first mortgage. It seeks judgment for the outstanding balance on the second mortgage and possession of the mortgaged premises. For reasons best known to the plaintiff, the claim was not amended after it paid out the first mortgage. There is no reference at all to the first mortgage in the Statement of Claim.

[76] During argument of the motion, I raised the deficiency in the pleadings with counsel. No one but me appeared troubled by it. Given the positions of the parties, and in particular the evident desire of both sides to have the issues between them determined here and now, on this record, I proceeded to determine the issues between them on both the first and second mortgages. I am treating the failure to amend the claim to add the balance owing on the second mortgage as an irregularity. To the extent necessary, I am proceeding on the basis that the claim either (i) is drafted broadly enough to include the balance owing on the first mortgage; or (ii) is deemed to be amended to include the amount outstanding on the first mortgage.

B. THE DUTY OF HONEST CONTRACTUAL PERFORMANCE

The Pleadings

[77] The Statement of Claim was issued on November 13, 2018. The defendants delivered a Statement of Defence on or about December 13, 2018.

[78] In their original Statement of Defence, the defendants asserted that the amounts claimed by the plaintiff were inflated and unjustified. They did not, however, raise any allegations of bad faith or dishonest dealing.

[79] An Amended Statement of Defence was delivered on or about January 20, 2021. The defendants maintained their assertions of inflated and unjustified amounts being claimed by the plaintiff. But they added a number of new allegations. The new allegations include the following:

(a) The interest sought by the plaintiff was unlawful and excessive and in breach of s. 8 of the Interest Act;

(b) In discharging the first mortgage, the plaintiff breached its duty of honest contractual performance;

(c) They were not given an opportunity to negotiate the terms of the Additional Provisions of the second mortgage. They assert reliance on the doctrine of contra proferentum;

(d) The assertion that the plaintiff owed them fiduciary duties and breached those duties repeatedly;

(e) The plaintiff induced them to breach the first mortgage;

(f) The plaintiff’s conduct breached the terms of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29. They assert reliance on the doctrine of illegality;

(g) The plaintiff made an election under s. 7 of the Schedule of Additional Provisions to the second mortgage and are estopped from exercising any other option under the said clause; and,

(h) The plaintiffs and its officers, directors and shareholders had a conflict of interest arising from the second mortgage and the first mortgage, which they failed to disclose to the defendants.

[80] I understand that there was no Reply filed in response to the Amended Statement of Defence.

The Evidence

[81] Ms. Bazargan swore an affidavit on December 22, 2020 in response to the summary judgment motion in which she set out the evidence in support of the defendants’ allegation that the plaintiff breached its common duty of honest contractual performance. She said as follows:

(a) She spoke to Luisa Arauju, one of the principals of the plaintiff, by phone on June 18, 2018. They talked about Ms. Bazargan’s immigration practice and her investments. Ms. Arauju suggested that she could help her and her husband obtain a better first mortgage;

(b) On October 18, 2018 she received an email from Ms. Arauju indicating that a notice of sale had been issued by the first mortgagee. She says Ms. Arauju asked her to get the funds collected to pay her as she was working on getting the power of sale cancelled to allow the defendants time to refinance or sell their home;

(c) On October 18, 2018 someone from the first mortgagee advised them that Ms. Arauju was one of their investors;

(d) She spoke to Ms. Arauju nightly between October 18, 2018 and October 23, 2018. Over the course of these discussions, Ms. Arauju told her that she needed $11,577.45 from the defendants to put the first mortgage back into good standing and end the power of sale. She asked that those funds be deposited to her husband, Carlos Arauju’s bank account. Ms. Arauju told her, she says, that she would take possession of her home and change the locks if she failed to remit the $11,577.45 to her as asked;

(e) On October 21, 2018 Ms. Arauju emailed her and asked her to please get the funds and they would “get thru this storm”. She said “I will be on your side if you want my help. Let’s stay focus (sic) and will regroup again tomorrow. Let me know when the deposit [of the $11,577.45] is made and pls send confirmation.” About ten minutes later Ms. Arauju emailed her again and asked her to send a schedule of when the defendants would be making the rest of the payments to bring the first mortgagee into good standing. The first mortgagee was claiming something in the order of $30,000 in arrears for interest and fees at this time. Ms. Bazargan deposed that she emailed Ms. Arauja back and asked her if there was any way they could negotiate the penalties. She said she was grateful for Ms. Arauju’s help;

(f) On October 22, 2018, Ms. Arauju emailed her back and told her to make the payments quickly and not to disagree about what was then due. She went on to say, “also I’m working with you so the 2^nd is not going legal as they can and should go asap. Please understand that I’m guiding you to the best and most efficient way”;

(g) Ms. Bazargan said she went to the bank on October 22, 2018 to deposit a cheque to cover the $11,577.45 to be sent to Carlos Arauju’s account. The bank, she said, wanted to put a hold on it. She advised Ms. Arauju of her predicament. Ms. Arauju replied, “we are both under lots of pressure. I’m here to help and bail you out, however you need to cooperate with the $’s. thanks.”;

(h) On October 24, 2018 Ms. Bazargan made a cash deposit to Mr. Arauju’s account in the amount of $10,000. The next morning, Ms. Arauju emailed her asking for the balance. She advised Ms. Arauju that she was at her maximum daily transaction limit and would transfer the remining $1,500 the next day. In fact, it was not until October 29, 2018 that she made the further transfer;

(i) On November 2, 2018, Ms. Arauju came to the defendant’s home to conduct an inspection. While there she asked the defendants to make up their mind about what they wanted to do. She reiterated that she was there to help them;

(j) On November 6, 2018, Ms. Arauju submitted $11,577.45 to the first mortgagee;

(k) The next day Ms. Arauju asked Ms. Bazargan to obtain a payout statement from the first mortgagee and she advised that she “needed to pay it out asap”. She asked when she might expect more funds and what was happening with the defendants’ plans to refinance. She told Ms. Bazargan that she need to “make decisions here and fast”. Later that same day she told Ms. Bazargan not to bother requesting the payout statement as she had done so herself. She urged Ms. Bazargan to “stay focus (sic) on getting funds, and refinancing or perhaps the sale”;

(l) Later in the day on November 7, 2018 Ms. Bazargan spoke by phone with Ms. Arauju. She says Ms. Arauju told her to refrain from speaking with the representative for the first mortgagee. Ms. Arauju, she says, told her that she would deal directly with the first mortgagee, who she described as a “greedy lender” that did not have the defendants’ best interests at heart. Ms. Arauju said she would protect the defendants from the first mortgagee and obtain a renewal of the first mortgage without any additional fees;

(m) On November 13, 2018, the plaintiff commenced this action;

(n) On November 19, 2018, the defendants were advised by counsel to the first mortgagee that the mortgage had been brought into good standing and the power of sale was being discontinued;

(o) On December 14, 2018 the plaintiff discharged the first mortgage by paying $1,598,782.35 to the first mortgagee. Ms. Bazargan deposed that she was surprised by this because she was under the impression that Ms. Arauju had been making payments to keep the first mortgagee in good standing. She said she believed Ms. Arauju was acting in her best interests.

[82] Ms. Arauju swore an affidavit on January 29, 2021 in response to Ms. Bazargan’s December 22, 2020 affidavit. She deposed, amongst other things, that:

(a) The plaintiff is not a mortgage broker. It lends its own money;

(b) She has no relationship with the first mortgagee and she denies the suggestion that she was an investor in that lender;

(c) She had no direct communication with the defendants regarding their interest in obtaining a second mortgage. The mortgage transaction between the plaintiff and defendant was handled by an independent mortgage broker. The defendants received independent legal advice with respect to the second mortgage;

(d) All of her interactions with the defendants were aimed at protecting her own interests;

(e) Within four months of the advance of funds on the second mortgage the defendants began to default on both the first and second mortgages;

(f) Under the terms of the second mortgage, if the second mortgagee redeemed the first mortgage, it was entitled to credit that amount to the second mortgage and charge interest at the rate applicable to the second mortgage;

(g) She was concerned about how a default under the first mortgage would affect her equity position in the second mortgage. She acted in good faith. She encouraged the defendants to get the funds together to bring the first mortgage into good standing. At no time did she advise the defendants that they need not continue to make the payments due on the first mortgage;

(h) She eventually paid out the first mortgage to protect her interests;

(i) She denied that any of her communications with the defendant were a ruse to gain the defendants’ trust or to gather information about their financial affairs to use to their detriment;

(j) She genuinely was trying to assist the defendants as much as possible by reducing the amount owing on the first mortgage and with their refinancing needs;

(k) She managed to get the balance due on the first mortgage reduced from $1,628,447.48 to $1,598,782.35; and,

(l) The defendants were attempting to refinance their outstanding mortgages through a mortgage agent, Cynthia Salomon, but were unable to do so.

[83] Ms. Bazargan swore a supplemental affidavit on May 13, 2021. She doubled down on some of the content of her December 22, 2020 affidavit saying:

(a) Throughout the fall and winter of 2020 (sic) Ms. Arauju “constructed an elaborate ruse to obfuscate what she intended to do with the first mortgage”;

(b) Ms. Arauju represented herself as having an ability to persuade the first mortgagee to not charge extra fees for the default of the first mortgage and she urged Ms. Bazargan not to contact the first mortgagee, but to leave that to her; and,

(c) She learned to her surprise in December 2018 that the first mortgage was in arrears, despite Ms. Arauju’s representations to the contrary.

[84] She went on to provide a list of lawsuits the plaintiff is, or has been, involved in, in an apparent effort to demonstrate that the plaintiff is a sophisticated lender and litigant.

The Parties’ Positions

[85] The defendants’ factum asks that the motion for summary judgment be dismissed for three reasons:

(a) The plaintiff failed to demonstrate that there is no genuine issue for trial;

(b) The plaintiff failed to establish a legal basis to charge 13.99% interest on the balance it paid out on the first mortgage; and,

(c) The plaintiff failed to demonstrate that it did not breach its duty of good faith and honest contractual performance as alleged by the defendants. I take this submission to mean that there is a triable issue about whether the plaintiff breached its duty of honest performance and about what damages might flow from such a breach.

[86] During oral argument of the motion, the defendants’ counsel took a decidedly different tack. He argued that this is an appropriate case for summary judgment. He submitted that the balance owing on the mortgage was readily capable of being determined on this evidentiary record, or by directing a reference. Moreover, he expressed the view that the defendants’ assertion of a breach of the duty of honest performance could fairly and justly be decided at this time, on this evidentiary record, along with the damages flowing therefrom.

[87] The defendants’ position with respect to the assertion of dishonest performance is that Ms. Arauju misled them into believing she was working in their best interests to sort out a renewal of the first mortgage when in fact she was really looking to take over the first mortgage and apply a 13.99% interest rate to it. They could have, they say, arranged new financing at a more attractive rate, but were thwarted because the plaintiff provided them with an inflated discharge statement, based on the application of a 13.99% interest rate to the balance owing on the first mortgage.

[88] I note that the defendants’ alleged in their Amended Statement of Defence that the plaintiff owed them fiduciary duties. That assertion was abandoned in oral argument.

[89] In the defendants’ submission, their damages should be assessed at an amount equivalent to all of the interest that is otherwise owing on the first and second mortgage from and after December 14, 2018. I calculate that sum to be roughly $447,500. The defendants’ justify that position by arguing that the plaintiff ought not to be able to profit in any way in light of its wrongdoing.

[90] The plaintiff’s position is that the duty of honest contractual performance has not been breached in this case. The plaintiff submits that it did not do anything improper in looking out for its own interests. It says that the duty of honest performance does not require it to look out for the interests of the defendants and it did not do so. There is nothing improper about that.

[91] The plaintiff urges the court to approach this action as a relatively straightforward mortgage enforcement proceeding, to fix the amount owing to the plaintiff and to reject any assertion of a breach of the plaintiff’s obligation to deal honestly and in good faith with the defendants.

Discussion

(a) The court has jurisdiction to hear the motion

[92] The defendants seek summary judgment on their assertion that the plaintiff’s conduct ran afoul of the common law doctrine of honest contractual performance and their claim to a gains-based remedy.

[93] The defendants did not specifically move for summary judgment. It must be determined, therefore, as a preliminary matter, whether their failure to do so is an impediment to the hearing of their argument.

[94] The defendants argue that it is not necessary for them to file a counter motion seeking summary judgment on their own terms, in the face of an opposing party’s motion for judgment. They cite the decision of Perell J. in Karahalios v. Conservative Party of Canada, 2020 ONSC 3145. He held, at para. 75 of that decision:

I agree with the Defendants’ submission that where the evidence on a summary judgment motion demonstrates that there are no genuine issues requiring a trial or where there are genuine issues that can be fairly and justly resolved by way of a summary judgment motion, judgment may be granted in favor of either the moving party (sic) and there is no requirement for a formal cross-motion to be brought by the responding party.

[95] Perell J. cited a number of decisions in support of his conclusion including, Klein v. Dick, 2016 ONCA 8 at para. 5; Hunter-Rutland Inc. v. Huntsville (Town), 2015 ONCA 353 at para. 5; and Whalen v. Hillier, 2001 CanLII 24070 (ON CA), 53 O.R. (3d) 550 at para. 13 (C.A.).

[96] In Klein v. Dick, as above, the Court of Appeal observed that the “case law is clear that summary judgment may be granted against the moving party in the absence of a motion from the responding party”.

[97] In view of the prevailing jurisprudence, I am satisfied that I have the jurisdiction to entertain the defendants’ claim to summary judgment. I am, moreover, of the view that there is no unfairness in doing so on the record before me. Both parties’ factums fully engaged in the issues raised by the defendants and both sides made fulsome oral submissions on those issues.

(b) The plaintiff did not breach the duty of honest contractual performance

[98] In accordance with the first step of the Hyrniak analysis, I must begin my analysis by determining if there is a genuine issue requiring a trial based only on the evidence filed on the motion, without resort to the enhanced fact-finding powers described in r. 20.04(2.1).

[99] In my view, having regard only to the record before me, the defendants’ assertion that the plaintiff breached its duty of honest contractual performance lacks merit and fails to raise a genuine issue that requires a trial to resolve. The evidence adduced on the motion permits me to fairly and justly adjudicate the issue without the need for the full machinery of a trial.

[100] Looking broadly at the defendants’ assertions, my impression is that they tend to be somewhat meandering and generally fail to focus on the impact of any alleged impropriety on the actual terms of the contract and its performance. Moreover, no damages are made out on the evidence before the court. The suggestion that the plaintiff ought to be denied interest on either the first or second mortgage over the past three years is simply untenable. There is no basis for it in fact or in law.

[101] The defendants’ position on the breach issue changed significantly from its pleadings to its argument on this motion. I will, out of an abundance of caution, address their positions at both stages, beginning with the pleaded allegations.

[102] I find that the evidence adduced on this motion fails to make out any of the assertions of wrongdoing as particularized the Amended Statement of Defence. I will explain how I reach that conclusion with reference to each of the pleaded allegations.

The Inflated Interest Allegation

[103] I agree that the plaintiff initially sought to recover 13.99% on the balance it paid to buy out the first mortgage. Both parties agree that the plaintiff’s initial position was incorrect. That said, it appears that the plaintiff’s position was consistent with the wording of clause 7 of the Schedule of Additional Provisions. It does not strike me as dishonest to take a position consistent with the terms of the parties’ express bargain. I make two additional observations. First, the defendants have never paid 13.99 % on the outstanding balance of the first mortgage. Second, the plaintiff fairly abandoned its position on this issue when it received legal advice about the way in which the term conflicted with s. 8 of the Interest Act. The plaintiff seeks no more than the rate of interest applicable to the first mortgage as originally negotiated.

The Take it or Leave it Terms

[104] I accept that the defendants may not have been given an opportunity to negotiate the terms of the Schedule of Additional Provisions. It was, as plaintiff’s counsel described it, a “take it or leave it” schedule. Perhaps that’s hard bargaining. But it is not dishonest performance. The defendants always had the option of “leaving it”.

The Fiduciary Duties Allegation

[105] A mortgagee does not stand in the position of a fiduciary to a mortgagor. It is a creditor-debtor relationship. See XPG v. Royal Bank, 2017 ONSC 2598 at paras. 362-364. The defendants concede, in fact, that the plaintiff owed it no fiduciary duties.

The Inducement Allegation

[106] I do not understand the assertion that the plaintiff induced the defendants to breach the terms of the first mortgage. The defendants’ main obligation under the first mortgage was to make timely interest payments. They failed to do. Their failure had nothing to do with the actions of the second mortgagee. There is no evidence that the plaintiff, or its principal, Ms. Arauju, encouraged, much less induced, the defendants not to make payments to the first mortgagee as they fell due. Indeed, Ms. Bazargan’s evidence appears to me to be that Ms. Arauju repeatedly encouraged her to make those payments.

[107] It is not in the interests of a second mortgagee for a first mortgage to go into default. In my view, it would have been contrary to the plaintiff’s interests to induce the defendants to breach the first mortgage. The evidence here falls well short of satisfying me that the plaintiff acted contrary to its own interests and, for whatever reason, induced the defendants to breach the first mortgage.

[108] In any event, the plaintiff did not need to induce the defendants to breach the terms of the first mortgage. They did that all on their own.

The Illegality Allegation

[109] I am not satisfied that the plaintiff, or its principal, Ms. Arauju, breached any of the terms of the Mortgage Brokerages, Lenders and Administrators Act, 2006. The defendants failed to develop this argument in either their factum or their oral arguments. I allow for the possibility that there may have been a breach. There appears to be no dispute that the plaintiff is not licensed under that Act as a mortgage broker, mortgage lender or mortgage administrator. It is possible that a license is required to conduct the business the plaintiff is engaged in. But the evidence and arguments are not clear on this point. It is not the court’s responsibility to develop or substantiate allegations loosely made by parties.

[110] In any event, it is entirely lost on me how any breach of the Act would excuse the defendants from repaying the principal sums they borrowed, together with the interest thereon that they agreed to.

The Estoppel Argument

[111] I am similarly puzzled by the assertion that the plaintiff was estopped from exercising the option to pay out the first mortgage because it previously exercised the option to bring the mortgage into good standing.

[112] The defendants fell behind on the payments due on the first mortgage in September and October 2018. The plaintiff opted to bring the first mortgage into good standing, as it was entitled to do.

[113] The defendants had trouble making their November 2018 payment. The plaintiff helped them do so.

[114] The defendants failed to make their December 2018 payment. In the face of that default, the plaintiff decided just to pay out the first mortgage altogether, as it was entitled to do. I appreciate that the defendants made the December 2018 payment on December 13, but by then the die was cast. The plaintiff had already committed to purchasing the first mortgage and the transaction was completed on December 14, 2018.

The Conflict of Interest Allegation

[115] I do not accept the defendants’ position that Ms. Arauju was in a conflict of interest. The best the defendants offered was a hearsay utterance that suggested Ms. Arauju was an investor in the first mortgagee. She denied that she is or was. I am not prepared to put any weight on the hearsay utterance without some other admissible evidence to corroborate it.

[116] Having rejected the assertions advanced in the Amended Statement of Defence, I will turn my focus to the assertions advanced in argument on the motion.

[117] . The defendants assert now that the court should draw an inference that the plaintiff duped them into allowing the first mortgage to go into default so that the plaintiff could take it over and charge them 13.99% interest on the combined value of the first and second mortgages. They say that the conduct of Ms. Arauju caused them to “slow” their efforts to refinance the first mortgage. They have, in the result, accrued unwarranted interest on the two mortgages.

[118] In my view, the defendants’ assertions cannot succeed for two principal reasons.

[119] First, the evidence does not support the inference urged upon the court by the defendants.

[120] Second, the defendants have suffered no damages.

[121] I will explore these two reasons in more detail.

[122] I will say, at the outset, that Ms. Arauju was, at times, somewhat careless with her language. She did tend to mislead the defendants to some degree. In particular, I think she went a little overboard in terms of selling the idea that she was there to help, that she was on the defendants’ side, and she was going to help protect them against the first mortgagee. That said, none of this bravado was linked to the performance of her contractual obligations.

[123] The fact is, Ms. Arauju was out to protect her own interests. If she was concerned about the first mortgage, it was because a default under the first mortgage tended to increase the plaintiff’s risk of loss.

[124] Having said that, on the defendants’ own evidence, I find that there was not, or ought not to have been, any uncertainty about the plaintiff’s position. Ms. Bazargan is not a naïve person. She is a successful immigration consultant and she has some legal training. In addition, Ms. Arauju was clear at all times that the defendants needed to keep both the first and second mortgages current. She expressed a clear sense of urgency about that, even on the defendants’ evidence.

[125] The notion that Ms. Arauju duped the defendants into allowing the first mortgage to go into default is simply not borne out in the evidence. The defendants, without any encouragement or input from the plaintiff, failed to remit the interest payments due on the first mortgage in September and October 2018. If the plaintiff wanted to swoop in and scoop up the first mortgage, it could have done so right then.

[126] Instead, the plaintiff did assist the defendants. Ms. Arauju contacted counsel to the first mortgagee and arranged to bring the first mortgage into good standing. While the first mortgagee was seeking, in mid-October, some $30,286.43 in interest, fees and expenses, Ms. Arauju managed to negotiate that figure down to $25,726.43 and she paid that on the defendants’ behalf in order to bring the first mortgage into good standing and to bring an end to power of sale proceedings.

[127] In late October 2018, Ms. Arauju had to repeatedly press the defendants to get the interest payment together to pay the November 1, 2018 payment due on the first mortgage. They got most of it together, but she had to top it up using her own funds.

[128] It wasn’t until the December 2018 payment was missed on the first mortgage that the plaintiff finally elected to pay out the first mortgage altogether. Even then, Ms. Arauju managed to negotiate the balance outstanding down to $1,598,782.35. That figure is roughly $10,000 less than the principal originally advanced on the mortgage, even though the defendants made no payments towards the principal prior to the time the plaintiff paid it out.

[129] To the extent that Ms. Arauju left the impression with the defendants that she was trying to help them, I find that expression to have been true.

[130] On the basis of the evidence now before the court, I find no basis to conclude that the plaintiff failed to perform the contract honestly. While Ms. Arauju may have overplayed the idea that she was on the defendants’ side, I find that there was no dishonesty directly related to the performance of any of the terms of the mortgage. The plaintiff did not mislead the defendants with respect to any of the terms of the mortgage contract. The plaintiff did not opt to pay out the first mortgage arbitrarily or capriciously. I find that the plaintiff’s purchase of the prior encumbrance was for a good faith purpose – the protection of its interests as a second mortgagee.

(c) The defendants have suffered no damages

[131] The defendants have further failed to satisfy me that they have suffered any damages as a result of the purported breach.

[132] In Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, at para. 50, the Supreme Court confirmed that the ordinary approach to the assessment of damages for breach of contract is to award expectation damages. In other words, to put the defendants back in the position they would have been in, but for the breach. Expectation damages were confirmed as the norm for breaches of the duty of honest performance in Callow, at page 107.

[133] The defendants took out two mortgages on December 8, 2018. A first mortgage in the amount of $1,608,750 at 7.29% interest and a second mortgage in the amount of $371,250 at 13.99% interest. The defendants reasonably expected to have to repay the principal and interest at the prescribed rates. They are being asked to do no more than that.

[134] The defendants are not, however, seeking expectation damages, presumably because they do not have any. Instead, they seek the gain-based remedy of disgorgement. In particular, they submit that the plaintiff should be compelled to disgorge any profits made on the first and second mortgages from and after December 14, 2018. Since the plaintiffs have not actually been paid any interest over that period, what the defendants are actually seeking is an order that they be relieved of paying any interest subsequent to mid-December 2018.

[135] Disgorgement is a recognized remedy for some forms of wrongful conduct, even where there is no proof of loss. It is available in breach of contract cases, but only in exceptional circumstances: Atlantic Lottery, at para. 51.

[136] The defendants did not fully develop the argument as to why they ought to be awarded gain-based damages. They did not establish that the circumstances of this case are exceptional.

[137] I have found no wrongdoing capable of supporting any award of damages. The wrongdoing alleged, in any event, is not, in my view, exceptional. The plaintiff did not act in bad faith, but rather self-interest. The relationship between the plaintiff and defendants was of a lender and borrowers. There was no relationship of trust, confidence or vulnerability.

[138] The situation here is that the defendants got in way over their heads. They bought a big, beautiful home that they could not afford. To pay for the home they took out mortgages at rates well beyond the generally prevailing market rates for mortgage financing. They could not afford to pay the mortgages and they quickly fell into arrears.

[139] The defendants have taken negligible steps to refinance the property. Their assertion that the plaintiff has foiled their efforts to refinance is not borne out in the evidence. They have been content to sit in their home, paying nothing on the roughly $2 million in financing they obtained to fund their purchase. They had a disagreement with the plaintiff about what interest was payable on the first mortgage. But they took no steps to bring the dispute to court; no action to have the court determine what was properly due and owing on the outstanding mortgages.

[140] In my view, the assertion of bad faith dealing is the equivalent of a “Hail Mary” pass. If anyone is guilty of bad faith it is the defendants, in my view, who have simply chosen not to honor their contractual obligations.

V. CONCLUSIONS

[141] By way of summary, I agree with and accept the parties’ shared position that this case is one suitable for summary judgment. I am satisfied that there is no genuine issue for trial in relation to the amount owing on the first and second mortgages.

[142] I am further satisfied that the defendants’ assertion of a breach by the plaintiff of its duty of honest performance does not raise a genuine issue requiring a trial to resolve. In my view, that assertion is not supported by the evidence.

[143] Judgment shall accordingly issue in favour of the plaintiff in the amount of $2,472,567.91 as of October 11, 2021, with interest accruing thereafter at the per diem rate of $477.44.

C. Boswell J.

Released: October 13, 2021

APPENDIX “A”

November 18, 2020 Plaintiff’s Outstanding Balance Calculation

Principal as of April 8, 2018 $371,250.00

Missed interest payments for April,

August, September and October 2018 17,312.64

Less payments received as follows:

• August 31, 2018 (1,996.49)

• October 17, 2018 (1,996.49)

• October 25, 2018 (10,000.00)

• October 29, 2018 (1,500.00)

(15,492.98)

Interest owing on $371,250 + 17,312.64

less 15,492.98 ($373,069.66) @13.99%

from October 9, 2018 to October 22, 2018 1,858.90

Paid to first mortgagee October 22, 2018 25,726.43

Paid to first mortgagee November 6, 2018 11,577.45

Interest owing on $373,069.66 + 1,858.90

• 25,726.43 + 11,577.45 ($412,232.44)

@13.99% from October 23, 2018 to

December 14, 2018 8,216.18

Paid first mortgage December 14, 2018 1,598,782.35

Interest owing on $1,598,782.35 + 412,232.44

• 8,216.18 @ 13.99% from December 15, 2018

to November 18, 2020 539,440.59

Three months’ bonus interest on

$2,558,671.56 89,489.53

NSF Fees ($500 x 26) 13,000.00

Administration Fee for default on

first mortgage 2,500.00

Administration Fee for default on

second mortgage 2,500.00

Correspondence Fees (3 x $350) 1,050.00

Lender’s Discharge Fee 495.00

Legal Fees 9,948.70

TOTAL $2,675,154.79

Plus per diem interest of $1,025.35

APPENDIX “B”

May 31, 2021 Plaintiff’s Outstanding Balance Calculation

Principal – first mortgage $1,612,387.94

Principal – second mortgage 371,250.00

Interest on second mortgage @ 13.99%

for 2018: $51,937.92 (amount contracted for)

less $15,492.90 (amounts paid) 36,444.98

Interest on second mortgage, January 8,

2019 to May 10, 2021 133,763.90

Interest on first mortgage @ 7.29%

December 15, 2018 to May 2021 297,981.32

NSF fees (26 x $500) 13,000.00

Default proceedings – first mortgage 2,500.00

Default proceedings – second mortgage 2,500.00

Lender’s Discharge Fee 495.00

Correspondence Fees (3 x $350) 1,050.00

Legal Fees 9,948.70

TOTAL $2,481,321.84

APPENDIX “C”

BALANCE AS OF OCTOBER 11, 2021

Principal – first mortgage $1,598,782.35

Interest on first mortgage @ 7.29%

December 15, 2018 to October 11, 2021 329,538.24

Principal – second mortgage 371,250.00

Unpaid interest on second mortgage for 2018

@ 13.99%: $51,937.92 (amount contracted for)

less $36,286.59 (amounts paid) 15,492.90

Amounts paid to keep first mortgagee current 25,783.88

Interest on principal amount of second mortgage

• unpaid interest in 2018 + amounts paid to

keep first mortgage current (total $412,526.78)

from January 9, 2019 to October 11, 2021 159,226.84

NSF fees (12 x $500) 6,000.00

Default proceedings – first mortgage 2,500.00

Default proceedings – second mortgage 2,500.00

Lender’s Discharge Fee 495.00

Correspondence Fees (3 x $350) 1,050.00

Legal Fees 9,948.70

Paid $50,000 December 14, 2020 (50,000.00)

TOTAL $2,472,567.91