COURT FILE NOS.: FS-13-388522 CV-13-476682 CV-19-618833
DATE: 20220517
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ARTHUR FROOM
Applicant
– and –
SONIA LAFONTAINE
Respondent
– AND BETWEEN –
1285310 ONTARIO LIMITED
Applicant
– and –
RAHIRNA PANES SHEICK-ALI and ASR MEDICAL RESEARCH CORPORATION
Respondents
– AND BETWEEN –
ROBIN SELIGMAN
Plaintiff
-and-
1285310 ONTARIO LIMITED and SONIA LAFONTAINE also known as SONIA LAFONTAINE FROOM
Defendants
– AND BETWEEN –
1285310 ONTARIO LIMITED
Plaintiff by Counterclaim
-and-
ROBIN SELIGMAN and THE DIRECTOR OF LAND TITLES
Defendants by Counterclaim
Self-represented, Applicant, Arthur Froom
H. Keith Juriansz, for the Respondent Sonia LaFontaine
Lawrence Hansen, for the Applicant 1285310 Ontario Limited
No one appearing for Respondents, Rahirna Panes Sheick-Ali and ASR Medical Research Corporation
James Butson, for the Plaintiff, Robin Seligman
Lawrence Hansen, for the Defendant, 1285310 Ontario Limited
H. Keith Juriansz, for the Defendant Sonia Lafontaine also known as Sonia Lafontaine Froom
Lawrence Hansen, for the Plaintiff by Counterclaim, 1285310 Ontario Limited
James Butson, for the Defendant by Counterclaim, Robin Seligman
Andi Jin, for the Defendant by Counterclaim, The Director of Land Titles
HEARD: October 29, 2021
REASONS FOR DECISION
faieta J.:
[1] The plaintiff, Robin Seligman, brings a motion for summary judgment in respect of her mortgage enforcement action (Court File No. CV-19-618833) against 1285310 Ontario Limited (the “Company”) and Sonia Lafontaine.
[2] The Company, supported by Lafontaine’s estranged husband, Arthur Froom, asks that the motion for summary judgment be dismissed on the basis the mortgage was void as it is a “fraudulent instrument” under the Land Titles Act. R.S.O. 1990, c. L.5 (“LTA”). The Company alleges that Lafontaine was a “fraudulent person” under the LTA because she fraudulently held herself out to Seligman to be an officer and director of the Company. The Company submits that Froom was its sole shareholder, officer, and director. The Company also submits that the motion should be dismissed on the basis that it amounts to a request for partial summary judgment.
[3] Seligman, supported by Lafontaine, submits that Lafontaine is not a “fraudulent person” within the strict language of the LTA as she did not forge the mortgage, is not a fictitious person, nor did she hold herself out to be the registered owner of the property affected by the mortgage. Seligman submits that even if Lafontaine fraudulently held herself out as an officer and director of the Company, she did not hold herself out to the registered owner of the property and thus fraudulent activity is not one of the categories of fraudulent activity that is captured by the definitions of “fraudulent person” and “fraudulent instrument”.
[4] For the reasons described below, I have granted Seligman’s motion for summary judgment.
BACKGROUND
The Pleadings
[5] On April 26, 2019, Seligman commenced this mortgage enforcement action for possession and payment of $303,279.21 due under a mortgage with interest in respect of a condominium, municipally known as 1402-15 McMurrich Street, Toronto, (the “Property”).
[6] Lafontaine delivered a short Statement of Defence that denies all the allegations in the Statement of Claim and pleads that that the remedies sought are “unreasonable, excessive, remote and not recoverable at law …”.
[7] The Company delivered a Statement of Defence, Crossclaim and Counterclaim that also denies all of the allegations in the Statement of Claim. Amongst other things, the Company alleges that:
• The Company purchased the Property in 2003.
• The Company was cancelled in 2006 for failing to file corporate tax returns.
• The Company continues to be the registered owner of the Property.
• In 2010 Lafontaine, without authority, arranged for the Company to be revived.
• Lafontaine has no interest in the Company, or the Property and she was not a shareholder, officer or director of the Company.
• Lafontaine fraudulently revived and attempted to take over the Company for the purpose of appropriating its asset, including the Property, for her own benefit.
• Froom is the real owner as well as an officer and director of the Company.
• Froom did not know about, nor did he authorize the registration of the mortgage
• The Company did not authorize the registration of the mortgage
• The mortgage is fraudulent and a fraudulent instrument within the meaning of the Land Titles Act, R.S.O. 1990, c. L.5 and should be deleted from title to the Property along with the other instruments related to it.
• Seligman sustained no loss.
[8] The Company crossclaims against Lafontaine for, amongst other things, contribution and indemnity for any amount found to be owing to Seligman and a declaration that Froom is the sole officer and director of the Company, and that Lafontaine is not.
[9] The Company counterclaims against Seligman for, amongst other things, a declaration that the mortgage is fraudulent, void and a fraudulent instrument as are the related instruments and an order rectifying the Land Registry to delete the mortgage and related instruments.
[10] Seligman’s Reply and Defence to the Counterclaim denies that the mortgage is fraudulent and alleges that she obtained all requisite approvals and confirmation of the Company’s status from the Province of Ontario, Ministry of Government Services and that such records identify Lafontaine as the sole President, Secretary and Treasurer of the Company since March 11, 1998. Seligman relies on the “indoor management rule” and alleges that the Company and its registered officers and directors authorized the registration of the mortgage and obtained the benefit of all funds advanced. Seligman states that Froom purchased the Property at Lafontaine’s direction, and in the limited capacity as an authorized agent of the Company, with all costs associated with the purchase paid for by Lafontaine.
[11] The Company’s Reply to the Defence to Counterclaim alleges that the indoor management rule does not apply to the fraud alleged in the Company’s Statement of Defence and Counterclaim. It also alleges that the funds were not for the benefit of or used by the Company in that such funds were diverted to Lafontaine or to others.
[12] In her Defence to the Crossclaim, Lafontaine alleges that she paid for the Company to be incorporated in 1998 by her former solicitor, Elliott Pearl. At that date, all shares issued by the Company were registered in Pearl’s name and held in trust for Lafontaine. Froom was incarcerated in Toronto, Ontario at that time. He had no assets. No shares of the Company were issued to Froom. Froom did not have a beneficial interest in the shares. In 2000, Lafontaine was incarcerated in the United States of America. While incarcerated, Lafontaine granted Froom a limited right to act as agent of the Company and was required to obtain and follow her express instruction. Froom, at Lafontaine’s direction, purchased the Property for the Company. He made no financial contribution to the purchase. Lafontaine paid for all costs. Froom failed to keep the Company in good standing as he failed to file the Company’s income tax returns. In 2009, Pearl resigned as an officer of the Company and transferred his shares and ceded control of the Company to Lafontaine. In 2010, Pearl transferred all of the shares that he had previously held in trust to Lafontaine. In 2011, Lafontaine revoked the limited authorization that she had granted Froom. As the registered owner of all of the issued shares of the Company, Lafontaine alleges she was entitled to mortgage the Property and that Froom, who has never been a director or shareholder, never had any such right. The mortgage given to Seligman was not fraudulent. Froom has no standing or authority to act on behalf of the Company. Froom has fabricated corporate records which purport to transfer shares of the Company to him.
[13] The Company’s Reply to the Defence to Crossclaim denies Seligman’s allegations and alleges that: (1) Froom is an officer, director, and the sole shareholder of the Company and that he directed Pearl to incorporate the Company and paid for the costs of incorporation; (2) Froom paid for the costs associated with the purchase of the Property and that Lafontaine contributed no funds.
Consolidated of the Proceedings
[14] In July 2013, at Lafontaine’s direction, the Company commenced a civil proceeding (Court File No. CV-13-476682) to evict Sheick-Ali from the Property.
[15] In August 2013, Froom commenced a family law proceeding (Court File No. FS-13-388522) for a divorce from Lafontaine along with a claim for equalization of net family property and a declaration that he owns the Company.
[16] On July 7, 2014, Chapnik J. ordered that all claims arising from the breakdown of the marriage between Lafontaine and Froom, including the ownership of the Company, must be consolidated in the family law proceeding: 1285310 Ontario Limited v. Sheick-Ali, 2014 ONSC 4116.
[17] In April 2019, this mortgage enforcement action was commenced by Seligman. The first two proceedings appear to have languished until that time.
[18] On July 8, 2021, at LaFontaine’s request, I ordered that the mortgage enforcement action be consolidated with the other two proceedings.
Evidence on this Motion
[19] The Company and Froom filed more than six volumes of affidavit evidence on this motion in support of their position that the mortgage is a “fraudulent instrument” within the meaning of the LTA. The evidence can be summarized as follows.
[20] Lafontaine and Froom met in 1991 and were married in 1992. There are no children of the marriage.
[21] Froom operated several businesses. Froom and Lafontaine operated a cosmetic surgery clinic in Toronto and New York.
[22] Lafontaine was convicted of healthcare fraud offences, including insurance fraud, perjury and witness tampering, which led to her incarceration in the U.S.A starting in 1998.
[23] In March 1998, the Company was created while Lafontaine was incarcerated and Froom was living in Toronto.
[24] Given the media scrutiny in respect of their fraudulent activities, Froom states that he created the Company to shield assets from litigation. He enlisted a lawyer and friend, the late Elliott Pearl, to create the Company. Froom paid Pearl in cash “for his trouble”. Froom asked Pearl to identify himself as the sole officer and director. On March 11, 1998, Froom was appointed the only director and officer. One thousand shares were issued to Froom. No one else was issued shares or appointed to a position with the Company.
[25] In 2003, while Lafontaine was incarcerated, Froom arranged for the purchase of the Property. The Company is the registered owner of the Property. He used his own funds to purchase the Property.
[26] The Company was cancelled in 2006 for failure to file returns.
[27] Sometime later Froom moved into the Property. In 2007, Rahima Panes Sheick-Ali, moved into the Property with Froom which was followed by the birth of their daughter in December 2008.
[28] Froom was charged with various healthcare fraud offences for which he was convicted. And and incarcerated in August 2008. Froom has not returned to Canada since 2008.
[29] While incarcerated Froom directed Sheick-Ali to revive the Company. On October 4, 2010 the Company was revived.
[30] After the revocation of her bail, Lafontaine was in custody from February 24, 2000 until she was released in June 2008 and then remained on probation until November 2011 when she was allowed to leave Miami and move to Toronto.
[31] In December 2011, Lafontaine arranged for a change notice to be registered with the Ministry of Government Services so that the records would make it look like she was the sole officer and director of the Company.
[32] Lafontaine also took steps to take over the Company’s banks accounts on the basis that she was the sole director and signing officer.
[33] A share certificate that shows Lafontaine as the registered holder of 100 common shares of the Company is not authentic. A transfer of shares document purportedly signed by Pearl was forged.
[34] By letter dated January 14, 2013, a lawyer wrote to Sheick-Ali on behalf of the Company and Lafontaine, demanding that she move out of the Property within three weeks.
[35] In July 2013. the Company, at Lafontaine’s direction, commenced an Application for an order for possession of the Property.
[36] In August 2013, Froom commenced a proceeding under the Family Law Act for a divorce and a declaration that he owns the Company, other businesses such as Medical Group Research Associates and other properties (including two other condominiums at 15 McMurrich Street, Toronto) and an order for the equalization of their net family property.
[37] Lafontaine, through a mortgage broker, applied for a loan to be secured against the Property.
[38] On August 8, 2014, Seligman and Lafontaine, on behalf of the Company, entered into a mortgage loan agreement. In her sworn declaration, Lafontaine represents that she is unaware of any other claim or interest in respect of the Property, something which cannot be true in light of the family law proceeding that had been issued by Froom. The Mortgage, for a principal amount of $100,000, with interest at a rate of 7% annually, with a one-year term was registered against the Property in favour of Seligman (the “Mortgage”). The Mortgage was guaranteed by Lafontaine. On the same day, as further security for this loan, an Assignment of Rents was registered against the property.
[39] On September 25, 2015, the Mortgage was amended to increase the principal amount to $300,000, increased the monthly payment from $583.33 to $1,750.00 and changed the maturity date from August 8, 2015, to October 1, 2016.
[40] The Mortgage was renewed and amended by several renewal and amendment agreements. The last renewal and amendment agreement changed the maturity date to October 1, 2019
[41] Default in payment of the Mortgage occurred on or about March 1, 2019. As of April 26, 2019, Seligman states that there was $300,000 due for principal and $3,279.21 due for interest.
[42] Seligman submits that the Company and Lafontaine are liable to pay the sum of $303,279,21 and interest thereon at a rate of 7% annually from April 26, 2019, to the date of judgment or payment.
[43] Froom states that Seligman was in the best position to prevent fraud and failed to exercise due diligence. There were no requirements to prevent against identity fraud. She appears to have known nothing about the use or occupancy of the Property. There does not appear to have been an appraisal for the Property. Seligman has commenced an action against her lawyer alleging, amongst other things, that he failed to exercise due diligence in vetting the mortgage transaction.
Preliminary Matters
[44] At the outset of the hearing of the motion for summary judgment, Froom indicated that he wished to bring a motion for an order that Lafontaine not be permitted to participate in any future proceedings and that her pleadings be struck on the grounds that she is allegedly in violation of three court orders. Prior to bringing this motion, Froom failed to obtain leave of this court to do so as required by this Court’s Order dated July 19, 2021 and failed to properly schedule this motion to be heard. There is no good reason why Froom could not have sought to obtain leave earlier. Froom’s motion was dismissed for these reasons.
[45] Lafontaine did not file a responding motion record on this motion. She supports Seligman’s position on this motion. Further, Mr. Juriansz advised the Court that Lafontaine does not contest that Judgment should be granted against her based on the guarantee that she gave Seligman.
[46] The Director of Land Titles appeared as a statutory party pursuant to s. 57(13)(b) of the LTA and took no position on the motion. However, at the Court’s request, the Director did provide the Court with submissions in respect of the only case that the Director is aware of where a corporation is the registered owner of land where a person pretending to be an officer and director of a company executes a mortgage on behalf of that company.
ISSUE #1: SHOULD THE MOTION FOR SUMMARY JUDGMENT BE DISMISSED ON THE BASIS THAT: (1) THERE IS A GENUINE ISSUE REQUIRING A TRIAL AS TO WHETHER THE MORTGAGE IS A FRAUDULENT INSTRUMENT, AND (2) PARTIAL SUMMARY JUDGMENT SHOULD NOT BE GRANTED
[47] Under Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[48] The test for determining whether there is “no genuine issue requiring a trial” is as follows:
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. Hryniak v. Mauldin, 2014 SCC 7, 1 S.C.R. 87 at para. 49.
[49] In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial: see Rule 20.02(2).
[50] Rule 20.04(2.1) provides that in determining whether there is a genuine issue requiring a trial, 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 trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence.
[51] Serious credibility concerns relating to material facts can support a finding that a genuine issue requiring trial is warranted. Bald allegations without supporting evidence do not raise a genuine issue requiring a trial: Edward Groves et al v. UTS Consultants Inc., 2022 ONSC 2318, para. 29.
[52] A novel question of law may be determined on a motion for summary judgment particularly where it is in the interests of justice to do so: Wilk v Arbour, 2016 ONSC 1179, rev’d on the merits, 2017 ONCA 21, 407 D.L.R. (4th) 222 (C.A.).
[53] Summary judgment “remains the exception, not the rule” and is only appropriate where it leads to “a fair process and just adjudication”: Mason v. Perras Mongenais, 2018 ONCA 978 (C.A.), para. 44.
[54] A motion for partial summary judgment runs the risk of duplicative proceedings or inconsistent findings of fact: Hryniak, para. 60. Partial summary judgment should only be granted in the clearest of cases where the issue on which summary judgment is sought is clearly severable from the balance of the case: Butera v. Chown, Cairns LLP, 2017 ONCA 783, para. 34. The factors to be considered include: (1) whether the matter to be resolved by summary judgment can be bifurcated from the remaining litigation; (2) dealt with in an expeditious and cost-effective manner; and (3) whether the possibility of inconsistent findings by different courts can be avoided: Feltz Design Build Ltd. v. Larson, 2022 ONCA 150, para. 18.
[55] The Company submits that there is a genuine issue requiring a trial as to whether the Mortgage is a “fraudulent instrument” under the LTA. It also submits that the determination of whether the Mortgage is a “fraudulent instrument” is inextricably linked to other ownership disputes between Lafontaine and Froom that are raised in the other two consolidated proceedings.
[56] I agree with the Company’s submission with one exception.
[57] Given the unusual circumstances of this case, including the credibility issues that surround Froom and Lafontaine, I find that I would not be able to reach a fair and just determination on the issue of whether Froom or Lafontaine owns the Company on this motion for summary judgment and that a trial is required.
[58] However, Seligman’s claim as presented on this motion does not engage these disputed ownership issues. Seligman submits that the ownership issue is irrelevant based on her view that even if Lafontaine fraudulently held herself out as an officer and director of the Company, which she nevertheless denies, the Mortgage is not, as a matter of law, a “fraudulent instrument” under the LTA. In my view, the partial summary judgment motion brought by Seligman: (1) raises an issue that is easily bifurcated from the remaining litigation; (2) can result in her mortgage enforcement being dealt with in an expeditious and cost-effective manner particularly having regard for how slowly these proceedings have moved over the years; (3) given that no findings of facts are being made in determining whether the Mortgage is a “fraudulent instrument” the possibility of inconsistent findings is avoided.
ISSUE#2: IS THE MORTGAGE VOID ON THE BASIS THAT IT IS A “FRAUDULENT INSTRUMENT”?
[59] The purpose and principles of the LTA were described by Epstein J. in Durrani v. Auger (2000), 2000 CanLII 22410 (ON SC), 50 O.R. (3d) 353, at paras. 40-42 as follows:
40 The land titles system was established in Ontario in 1885 and was modeled on the English Land Transfer Act of 1875. It is currently known as the Land Titles Act, R.S.O. 1990, c. L.5. Most Canadian provinces have similar legislation.
41 The essential purpose of land titles legislation is to provide the public with security of title and facility of transfer: Di Castri Registration of Title to Land vol. 2 looseleaf (Toronto: Carswell, 1987) at 17-32. The notion of title registration establishes title by setting up a register and guaranteeing that a person named as the owner has perfect title, subject only to registered encumbrances and enumerated statutory exceptions.
42 The philosophy of a land titles system embodies three principles; namely, the mirror principle, where the register is a perfect mirror of the state of title, the curtain principle, which holds that a purchaser need not investigate the history of past dealings with the land, or search behind the title as depicted on the register, and the insurance principle, where the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy. These principles form the doctrine of indefeasibility of title and is the essence of the land titles system: Marcia Neave “Indefeasibility of Title in the Canadian Context” (1976), 26 U.T.L.J. 173 at 174.
[60] Section 155 of the LTA states:
Subject to this Act, a fraudulent instrument that, if unregistered, would be fraudulent and void is, despite registration, fraudulent and void in like manner.
[61] Subsection 78(4) of the LTA guarantees that an instrument is effective once registered. It states:
Effect of registration
(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register.
[55] Subsections 78(4.1) and (4.2) of the LTA were added in 2006. These provisions establish an exception to the guarantee of title for fraudulent instruments. They state:
Exception
(4.1) Subsection (4) does not apply to a fraudulent instrument that is registered on or after October 19, 2006. 2006, c. 34, s. 15 (10).
Non-fraudulent instruments
(4.2) Nothing in subsection (4.1) invalidates the effect of a registered instrument that is not a fraudulent instrument described in that subsection, including instruments registered subsequent to such a fraudulent instrument. 2006, c. 34, s. 15 (10).
[62] The terms “fraudulent instrument” and “fraudulent person”, also added to the LTA in 2006, are defined in s. 1 of the LTA as follows
“fraudulent instrument” means an instrument,
(a) under which a fraudulent person purports to receive or transfer an estate or interest in land,
(b) that is given under the purported authority of a power of attorney that is forged,
(c) that is a transfer of a charge where the charge is given by a fraudulent person, or
(d) that perpetrates a fraud as prescribed with respect to the estate or interest in land affected by the instrument.
“fraudulent person” means a person who executes or purports to execute an instrument if,
(a) the person forged the instrument,
(b) the person is a fictitious person, or
(c) the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument.
[63] Prior to the 2006 amendments, it was understood that the interpretation of s. 78(4) and s. 155 of the LTA, read together, was informed by the theory of deferred indefeasibility. In Lawrence v. Wright, 2007 ONCA 74, at para. 67, the Ontario Court of Appeal stated:
The theory of deferred indefeasibility accords with the Act and must be taken into consideration in an analysis of s. 155 and its relationship with other provisions in the Act. Under this theory, the party acquiring an interest in land from the party responsible for the fraud (the "intermediate owner") is vulnerable to a claim from the true owner because the intermediate owner had an opportunity to avoid the fraud. However, any subsequent purchaser or encumbrancer (the "deferred owner") has no such opportunity. Therefore, in accord with s. 78(4) and the theory of deferred indefeasibility, the deferred owner acquires an interest in the property that is good as against all the world.
[64] The deferred indefeasibility theory contrasts with the common law and the immediate indefeasibility theory:
(1) As reflected by the principle nemo dat quod non habet, at common law only the true owner of land can grant an interest in, or charge on, the land and all transactions arising from fraud are void. This approach may be described as infinite indefeasibility given that an owner may lose their property if historical fraud in the chain of title is discovered at any time in the future. The use of this approach defeats the purpose of a registry and the LTA: Lawrence, paras. 15, 41, 42; CIBC Mortgages Inc. v. Computershare Trust Co. of Canada, 2016 ONSC 7094, paras. 33.
(2) Under the immediate indefeasibility theory, once an instrument is registered it is effective even if procured by fraud. This theory protects the interests of innocent parties who rely on the land titles register rather than “true owners”. As a result, once an instrument is registered it is effective even if procured by fraud: Lawrence, paras. 16, 57; CIBC Mortgages Inc. v. Computershare Trust Co. of Canada, 2016 ONSC 7094, para. 34.
[65] With the 2006 amendments to the LTA and the addition of subsections 78(4.1), 78(4.2) and the definitions of “fraudulent person”, “fraudulent instrument”, the LTA does not generally address fraud in real estate transactions but rather only addresses certain types of fraudulent activity. In 1168760 Ontario Inc. v. 6706037 Canada Inc., 2019 ONSC 4702, the Ontario Divisional Court stated at paras. 31-32:
31 The trial judge failed to properly understand the holding in Computershare. Whether the fraud was on the face of the CIBC mortgage or whether CIBC was an intermediate or deferred owner under the doctrine of deferred indefeasibility was not determinative of whether that mortgage was a fraudulent instrument. That case held that the 2006 amendments codified the doctrine of deferred indefeasibility, but the amendments apply only if there has been a fraudulent instrument as defined in the LTA.
32 In accordance with the holding in that case, the 2006 amendments do not address fraud in real estate transactions in general. Rather, the provisions prevent certain kinds of fraudulent activity with respect to title, addressing the situation where someone purports to transfer an interest or estate in land that they do not legally possess — for example, by taking on a false identity or by forging a document, including a power of attorney.
[66] The Company relies on s. 78(4.1) of the LTA and submits that the Mortgage is a “fraudulent instrument” and that Lafontaine’s alleged fraudulent actions in this case bring her within the scope of clauses (b) and (c) of the definition of “fraudulent person”.
Assuming 128’s allegations are true, is Lafontaine a “fictitious person” within the meaning of the LTA?
[67] The Company submits that Lafontaine is a “fictitious person” within the meaning of the LTA as she allegedly falsely pretended to be an officer and director of the registered owner when she signed the Mortgage.
[68] This phrase was explained in 1168760 Ontario Inc., at paras. 36-37:
36 … The Oxford English Dictionary (online edition, 2019) defines "fictitious" as "not real or true; imaginary or fabricated". Thus, applying the ordinary meaning of a "fictitious person," the term would mean a person who does not exist. It would apply, for example, where someone has created a false identity in order to transfer the title or interest in the land that he or she purports to convey. It would not encompass an existing person like Bertrand, who was the true registered owner of the property that he conveyed.
37 Moreover, interpreting "fictitious person" to mean a person who does not exist is consistent with the purpose of the 2006 amendments, which sought to deal with title fraud committed using fraudulent instruments. When one looks to the cases decided before the amendments, it is evident that a major legislative concern was fraud accomplished by someone who assumed a false identity in order to sell or mortgage property (see for example Lawrence and Rabi v. Rosu (2006), 2006 CanLII 36623 (ON SC), 83 O.R. (3d) 37 (Ont. S.C.J.) .
[69] Lafontaine exists and is a real person.
[70] I find that even if the Company’s allegations are assumed to be true, Lafontaine is not a “fictitious person” within the meaning of the LTA.
Assuming 128’s allegations are true, is Lafontaine a person who held herself out in the instruments to be, but knows that she is not, the registered owner of the estate or interest in land affected by the instrument?
[71] The Company submits that the allegations against Lafontaine bring her within clause (c) of the definition of “fraudulent person” as being “the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument”.
[72] Seligman and Lafontaine submit that Lafontaine did not hold herself out to be the registered owner of the Property and therefore she does not meet the test for a “fraudulent person”.
[73] While clause (c) does not expressly deal with situations where a corporation owns the land in question, the Company submits that this provision should apply given that a corporation can only act through its officers and directors. Therefore, by claiming she was an officer and director of the Company, Lafontaine held herself out as the Company and the registered owner of the Property, when, in fact, she was not.
[74] At the request of the Court, the Director provided the only decision that counsel was aware that has dealt with this issue. In that case, a hearing under s. 57(16) of the LTA to rectify the registry, the Director determined that a mortgage granted in respect of land owned by a corporation and executed by an individual that was not authorized to bind the corporation was a “fraudulent instrument”. The rectification of title by the deletion of the mortgage was ordered. See 2659954 Ontario Inc. et al., Decision of the Deputy Director of Titles, February 1, 2021, Toronto, Ontario. In that case, a person using stolen identification filed Corporation Information Notices showing that he was the sole officer and director of a company before he executed a mortgage on behalf of that company. The Director stated:
As a corporation can only act through its Directors and Officers, holding oneself out to be a Director and Officer of a corporation and granting a charge on its behalf is equivalent to holding oneself out to be the registered owner.
… The definition of “fraudulent instrument” is narrow. The impersonation that is relevant to the determination of whether the Charge is a fraudulent instrument occurred when Mr. Disimone, or someone calling himself Mr. Disimone, filed Change Notices to make himself the Director and Officer of 265, and authorized the Charge on behalf of 265 when he knew he was not entitled to do so. In doing so, he held himself out to be but knew he was not a Director and Officer of 265. …
As Mr. Disimone held himself out to be a Director and Officer of 265 and authorized the registration of the Charge on title to the Property on behalf of 265, I find that he meets the definition of fraudulent person within s. 1 of the Land Titles Act and the Charge is therefore a fraudulent instrument.
[75] A shareholder, officer or director of a corporation is not the owner of that corporation’s land. No principle of law was provided by the parties for the proposition that holding oneself out as an officer or director of a corporation and granting a charge on its behalf is equivalent to holding oneself out to be the registered owner of the corporation’s land.
[76] The Company submits that Ontario is a jurisdiction of deferred indefeasibility and that the financial burden of fraud, as between an innocent lender and an innocent owner, rests with the lender given that it can avoid making the mortgage.
[77] The Company also submits that a broad interpretation of clause (c) of the definition of “fraudulent person” is consistent with the intent of the legislation as set out in the statement made by the Honourable Mr. Gerry Phillips, the Minister of Government Services, on first reading of Bill 152 on October 19, 2006.
One of these important areas is an issue of real concern to property owners across the province: real estate fraud. The people of this province work hard to make a house into a home. They deserve to know that their property is secure. This legislation will ensure that property owners do not lose their home as a result of real estate fraud or become responsible for fraudulent mortgages. If passed, this legislation would ensure that ownership of a property cannot be lost as a result of the registration of a falsified mortgage, fraudulent sale or a counterfeit power of attorney. Instead, an innocent homeowner's title will be restored to them and the fraudulent document will be nullified: See CIBC Mortgages Inc., para. 28.
[78] However, these submission fails to recognize that the 2006 amendments to the LTA did not codify the theory of deferred indefeasibility nor does the LTA address fraud in real estate transactions in general but rather, after the 2006 amendments, only address certain types of fraudulent activity: 1168760 Ontario Inc., paras. 31, 32.
[79] The limited scope of the LTA to remedy fraudulent activity was again recognized by the Divisional Court noted in CIBC Mortgages Inc., at para. 52:
I do not doubt that the [registered owners] perpetrated a fraud on CIBC and Secure Capital … . But that is not enough to make the [registered owners] fraudulent persons. To be fraudulent persons in this circumstance, the [registered owners] had to have knowingly and falsely held themselves out, in the two mortgages, to be the registered owners of the estate or interest in the land affected by the mortgage.
[80] Given that Lafontaine was not the registered owner of the Property, I find that even if the Company’s allegations were true, the Company has failed to demonstrate that Lafontaine meets the test as set out in clause (c) of the definition for a “fraudulent person” and thus has also failed to establish that the Mortgage is a “fraudulent instrument” within the meaning of the LTA.
ORDER
[81] Order to go as follows:
(1) Judgment to be granted to Seligman in accordance with the Statement of Claim.
(2) A Writ of Possession to be issued forthwith.
(3) Costs submissions to be delivered by Seligman within May 30, 2022. Responding costs submission to be delivered by June 13, 2022. Reply costs submissions to be delivered by Seligman by June 27, 2022. Each costs submission shall be no more than three pages exclusive of a Bill of Costs and Offers to Settle.
(4) A Case Conference shall be held on July 28, 2022, at 10:00 am.
Mr. Justice M. D. Faieta
Released: May 17, 2022
COURT FILE NOS.: FS-13-388522 CV-13-476682 CV-19-618833 DATE: 20220517
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ARTHUR FROOM
Applicant
– and –
SONIA LAFONTAINE
Respondent
– AND BETWEEN –
1285310 ONTARIO LIMITED
Applicant
– and –
RAHIRNA PANES SHEICK-ALI and ASR MEDICAL RESEARCH CORPORATION
Respondents
– AND BETWEEN –
ROBIN SELIGMAN
Plaintiff
-and-
1285310 ONTARIO LIMITED and SONIA LAFONTAINE also known as SONIA LAFONTAINE FROOM
Defendants
– AND BETWEEN –
1285310 ONTARIO LIMITED
Plaintiff by Counterclaim
-and-
ROBIN SELIGMAN and THE DIRECTOR OF LAND TITLES
Defendants by Counterclaim
REASONS FOR DECISION
Mr. Justice M. D. Faieta
Released: May 17, 2022