COURT FILE NO.: CV-18-00592103-00CL

DATE: 20221124

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: COMFORT CAPITAL INC., THE BANK OF NOVA SCOTIA TRUST COMPANY, E. MANSON INVESTMENTS LTD., FENFAM HOLDINGS INC., 593651 ONTARIO LTD., 1031436 ONTARIO INC., ALRAE INVESTMENTS INC., BARRY SPIEGEL, SHARON NIGHTINGALE, DAVID SUGAR, PHYLLIS SUGAR, NATIONAL TIRE LTD., 1119778 ONTARIO LIMITED, 1415976 ONTARIO LIMITED, ALRAE INVESTMENTS INC., BAMBURGH HOLDINGS LTD., BEVERLEY GORDON, DIANE GRAFSTEIN, RICHARD GRUNEIR, B. & M. HANDELMAN INVESTMENTS LTD., RIDGEWAY OCCUPATIONAL CONSULTANTS INC., YERUSHA INVESTMENTS INC., MIHALTYLMAN, A. ELIEZER KIRSHBLUM, 593651 ONTARIO LIMITED, THE BANK OF NOVA SCOTIA TRUST COMPANY IN TRUST FOR BAILEY LEVENSON, THE BANK OF NOVA SCOTIA TRUST COMPANY IN TRUST FOR ROSEMONDE KELLY, ANNE HANDELMAN, YERUSHA INVESTMENTS INC., CELMAR INVESTMENTS CORP., BEVERLEY GORDON, PHILGOR INVESTMENTS LTD., BRILLIANT INVESTCORP INC., MAXOREN INVESTMENTS, 2227046 ONTARIO LIMITED, DAST PROPERTIES LIMITED, TOVA MARKOVZKI, JOSEPH SUCKONIC and B. & M. HANDELMAN INVESTMENTS LIMITED, Applicants

AND:

ANNIE YERETSIAN, TERRY WILSON, 2457674 ONTARIO INC.,

2399029 ONTARIO INC. and MOSS DEVELOPMENT LTD., Respondents

APPLICATION UNDER SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 C. C.43, AS AMENDED AND SECTION 243(1) OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, C. B-3, AS AMENDED

BEFORE: Cavanagh J.

COUNSEL: Eric Golden for Rosen Goldberg Inc. in its capacity as Receiver

Peter Smiley, for Money Gate Corporation (Moving Party)

P. James Zibarras and C. Mills for 2399029 Ontario Inc. and World Corporation Inc. (Responding Parties)

Eli Karp for Curah Capital Corporation (Responding Party)

HEARD: November 21, 2022

ENDORSEMENT

Introduction

[1] By Amended Order of McEwen J. dated February 28, 2018, Rosen Goldberg Inc. was appointed receiver and manager of the assets, undertakings and properties of the Respondents including the property municipally known as 65 Malmo Court, Vaughan, (the “Malmo Property”), a vacant industrial building formerly owned by the Respondent 2399029 Ontario Inc. (“029”).

[2] The Receiver sold the Malmo Property. The first mortgage held by the Applicants has been paid out. As of November 15, 2022, there remains $1,703,142 in undistributed proceeds of sale held by the Receiver.

[3] A non-party, Money Gate Corporation (“MGC”), asserts that it is the owner by assignment of the second mortgage registered on title to the Malmo Property. MGC brings this motion in the receivership proceeding for an Order authorizing the Receiver to make a distribution to MGC, as administrator, in the amount of $1,159,517.66 (representing principal and accrued interest as of December 10, 2021) plus accrued monthly interest thereafter on account of the mortgage indebtedness arising from the second mortgage.

[4] The motion is opposed by 029 and by Curah Capital Corporation (“Curah”), the owner of the third and fourth charges registered against title to the Malmo Property.

[5] For the following reasons, MGC’s motion is dismissed.

Procedural Background

[6] 029 was the registered owner of the Malmo Property until its sale by the Receiver on August 31, 2018. The Applicants held a first mortgage over the Malmo Property. The indebtedness secured by the Applicants’ first mortgage was paid when the Malmo Property was sold.

[7] The Malmo Property was also encumbered by other mortgages including a mortgage was registered as instrument number YR2120848 in the face amount of $450,000 in favour of 2405015 Ontario Inc., 2374715 Ontario Inc, 2418047 Ontario Inc. and Olga Domunyan that was taken by them by assignment on July 3, 2014 and then on July 24, 2014 (the “Second Mortgage”). The Second Mortgage ranks in second position as a result of postponements of other registered charges.

[8] MGC contends that the Second Mortgage was assigned to MGC, as administrator, by the then holders of the Second Mortgage, 2405015 Ontario Inc., Olga Domunyan, 2418047 Ontario Inc., and 2374715 Ontario Limited (“2374715”).

[9] This motion was originally scheduled to be heard in January 2020. The motion was adjourned pending the outcome of a proceeding to determine the identity of the owner of 029 (and two other corporations). Morteza Katebian (also known as Ben Katebian) claimed to be the owner of 029. Laila Alizadeh claimed that 029 was part of a group of companies (described by 029 on this motion as the “Laila Group”) that are subsidiaries of World Corporation Inc. of which she is the sole shareholder. A trial was directed to determine the ownership issues. The trial was held over eleven days in 2020 before Dietrich J.

[10] On April 8, 2021, Dietrich J. released her Reasons for Judgment and held that Morteza Katebian is the legal owner of the shares of 029 but that he holds these shares on a resulting trust for World Corporation Inc. as the beneficial owner.

[11] The Receiver gave an opinion dated October 9, 2022, subject to the qualifications expressed therein, that the Second Mortgage constitutes a legal, valid and binding obligation of 029, enforceable against 029 in accordance with its terms and would be valid and enforceable against a trustee in bankruptcy of 029.

Analysis

Positions of the parties

[12] MGC’s position is that on or about October 10, 2015, MGC, as administrator, purchased an assignment of the Second Mortgage by way of a series of payments made to the then mortgage holders.

[13] In support of its motion, MGC relies on three affidavits sworn by Payam Katebian, an authorized officer of MGC. Payam Katebian is the son of Morteza Katebian who is also an authorized officer of MGC and its principal mortgage broker.

[14] At the time of each purchase, there was a certificate of pending litigation registered against title to the Malmo Property. Payam Katebian’s evidence is that, for this reason, the transfers were not registered on title to the Malmo Property.

[15] MGC submits that as assignee of the Second Mortgage in the capacity as administrator of the Second Mortgage, it is entitled to payment of the indebtedness secured by the Second Mortgage out of the remaining proceeds held by the Receiver from the sale of the Malmo Property.

[16] The position of 029 is that MGC has failed to show that it is an assignee for value of the Second Mortgage because it has failed to show that it paid any of the four holders of the Second Mortgage the amounts secured by the Second Mortgage using MGC’s money (or money raised from private investors). 029’s position is that the indebtedness secured by the Second Mortgage was paid out by 029 using 029’s funds and using other funds belonging to the Laila Group. 029 submits that it satisfied the indebtedness secured by the Second Mortgage and, therefore, it is entitled to a discharge of the Second Mortgage.

[17] In response to this motion, 029 relies on the affidavit of Troy Wilson. Mr. Wilson is the director of 029 who has been managing assets of the Laila Group since 2010.

[18] Neither Payam Katebian nor Mr. Wilson was cross-examined on his affidavit evidence.

[19] Each of MGC and 029 made submissions attacking, generally, the credibility of the witness who gave evidence on behalf of the opposing party based on findings of credibility made in other legal proceedings. In the absence of cross-examination, I do not make general findings of credibility in respect of either witness.

Evidence upon which MGC relies

[20] Payam Katebian’s evidence is that between April 4, 2015 and October 10, 2015, MGC, acting as mortgage administrator, purchased the interests of the four mortgagees under the Second Mortgage by providing to MGC’s lawyers, Meridien Law Professional Corporation (“Meridien”), four bank drafts issued by Royal Bank of Canada and made payable to Meridien in Trust in the amounts of $200,000 (dated April 24, 2015), $30,000 (dated June 3, 2015), $155,000 (dated July 28, 2015), and $65,000 (dated October 7, 2015). Copies of these bank drafts are appended as exhibits to Payam Katebian’s first affidavit.

[21] Payam Katebian’s evidence is that the holders of the Second Mortgage were clients of MGC and that when the certificate of pending litigation was registered by other parties against title to the Malmo Property, the mortgage holders indicated to Morteza Katebian that they were uncomfortable with their funds being invested in a property on which a certificate of pending litigation was registered and, consequently, MGC and Payam Katebian arranged financing to buy out the interests of the mortgage holders.

[22] MGC’s position is that as a mortgage broker and administrator, MGC did not hold mortgages on its own account nor fund them with its own funds. MGC raised the financing to purchase the assignment from its own pool of private lenders. At the hearing, MGC accepted that it brings this motion in the capacity as trustee for the investors who provided financing to enable MGC to purchase the Second Mortgage.

[23] Rasik Mehta was the Meridien lawyer who acted on this matter for MGC.

[24] MGC relies on evidence of email correspondence dated August 14 and 15, 2018 between Payam Katebian and Mr. Mehta in which Payam Katebian asked Mr. Mehta to confirm with his trust ledger that the funds from the four bank drafts that were provided to Mr. Mehta to “buy/take assignment of” the Second Mortgage on the Malmo Property were paid to the four mortgagees who held interests in the Second Mortgage. Mr. Mehta confirmed in his email that the amounts went out as outlined by Payam Katebian in his email.

[25] Mr. Mehta did not give evidence on this motion. His email is inadmissible as proof of the truth of its contents because it is hearsay. Even if Mr. Mehta’s email were to be admitted into evidence, the email is silent about the source of the money used to pay the holders of the Second Mortgage which is a central issue on this motion.

[26] MGC relies on an email dated August 15, 2018 from the principal of 2418047, Amir Abdella, to the Receiver’s counsel stating that “the mortgage syndicated group assigned its interest [in the Second Mortgage] to Money Gate Corp. in 2015”. Mr. Abdella confirms being bought out of his portion of the Second Mortgage in July of 2015. The email from Mr. Abdella is inadmissible as proof of the truth of its contents because it is hearsay. Mr. Abdella did not provide evidence on this motion. If the email were to be admitted into evidence to prove the statements made by Mr. Abdella, the email is silent about the source of the money used to pay the four holders of the Second Mortgage.

[27] MGC relies on evidence of an email dated August 17, 2018 from the lawyer for 2374715 to the Receiver’s counsel stating that 2374715 was bought out of the mortgage for the Malmo Property by Mr. Katebian in 2015. Again, the email from the lawyer for 2374715 is inadmissible as proof of the truth of its contents because it is hearsay. Again, the email is silent about the source of the money used to pay the four holders of the Second Mortgage.

[28] MGC relies on the following documents appended as exhibits to Payam Katebian’s affidavits:

a. A written Assignment of Mortgage dated April 1, 2015 that, on its face, is executed by 2405015 as assignor and MGC as assignee and states that in consideration of $200,000 paid by MGC, 2405015 assigns to MGC all right, title and interest of 2405015 in and to the Second Mortgage and all money due or to become due thereon.

b. A written Full and Final Release dated June 3, 2015 that, on its face, is executed by Olga Domunyan as Releasor in favour of Morteza Katebian as Releasee which states that “[i]n consideration of the assignment from Olga Domunyan to Money Gate Corp. of the sum of $30,000 ...”, the Releasor releases the Releasee from all claims of the Releasor as a consequence of the Second Mortgage.

c. A written Full and Final Release dated July 29, 2015 that on its face is executed by 2418047 as Releasor in favour of Morteza Katebian as Releasee which states that “[i]n consideration of the assignment from 2418047 to Money Gate Corp. of the sum of $150,000 ...”, the Releasor releases the Releasee from all claims of the Releasor as a consequence of the Second Mortgage.

[29] I do not accept that these documents prove that MGC used its own money (or money it raised from investors) to satisfy the indebtedness owed to the holders of the Second Mortgage. The holders of the Second Mortgage may have been told that MGC intended to take an assignment of the Second Mortgage. Even if they were, these documents do not assist me to determine the source of the money used to pay the four holders of the Second Mortgage.

[30] MGH also relies on a reporting letter from Mr. Mehta to MGC dated October 14, 2015 that was produced by MGC in response to written questions asked by 029 for production of documents. In this letter, Mr. Mehta reports that the transaction in relation to the transfer of the Second Mortgage to MGC was completed. Mr. Mehta’s letter states that Assignment Agreements and other documents are enclosed.

[31] 029 objects to admissibility of this letter as hearsay. In response, MGC says that it was precluded from filing reply evidence by an endorsement of this Court and that the reporting letter should be received in evidence. I accept that the reporting letter is properly admissible on this motion as evidence that Mr. Mehta reported to MGC on the matters described in his letter. The reporting letter does not address the source of the money used to pay the four holders of the Second Mortgage and it is not evidence, one way or the other, in respect of this issue.

Evidence upon which 029 relies

[32] Mr. Wilson’s evidence is that properties at 133 Boake Trail, Thornhill (the “Boake Property”) and 11 King High Drive, Vaughan (the “King High Property”) were beneficially owned by Hazelton Homes Corporation (“Hazelton”) (a company that is part of the Laila Group) and, pursuant to written trust agreements, were put into the name of Morteza Katebian as trustee. One of the trust agreements was appended as an exhibit to Mr. Wilson’s affidavit and his evidence is that the other trust agreement is in the same terms.

[33] Mr. Wilson’s evidence is that in early April 2015, the Laila Group instructed Morteza Katebian, in his capacity as trustee over the Boake Property and the King High Property and as a licenced mortgage broker with MGC and Money Gate Mortgage Investment Corporation (“MGMIC”), a private lender controlled by Morteza Katebian and Payam Katebian, to finance these properties in order to pay out the Second Mortgage, and for other business expenses.

[34] Mr. Wilson’s evidence is that Morteza Katebian arranged for MGMIC to provide mortgage financing in the amount of $500,000 secured by a mortgage registered against title to the Boake Property and the King High Property. Mr. Wilson’s evidence is that his recollection is that at the time, Morteza Katebian worked closely with the Laila Group (in the same offices) and there was a level of trust. Mr. Wilson’s evidence is that the mortgage advances from the MGMIC mortgage were paid earlier in April 2015 (than the date the mortgage was registered) and that it was a common practice for mortgage funds to be made available prior to the actual registration of the mortgage. Mr. Wilson’s evidence is that the mortgage proceeds from the MGMIC mortgage (registered against the Boake property and the King High Property) were directed to Mr. Mehta at Meridien who was the lawyer for MGC and for the Laila Group.

[35] Mr. Wilson provided evidence that 2389303 Ontario Corporation is a company incorporated by Payam Katebian that was the administrator of the Second Mortgage under a Syndication Agreement dated April 23, 2014 made by the initial holders of the Second Mortgage. 029 relies on a mortgage statement provided by Payam Katebian on behalf of 2389303 Ontario Corporation to 2399029 Ontario Inc. and its lawyer on December 11, 2017 that shows a principal balance of $500. Mr. Katebian’s letter accompanying this statement states “[i]n regards to the 2nd Mortgage on 65 Malmo Court, Vaughan Ontario, Instrument Number YR2120848, please note that this mortgage of $450,000 has been paid down to $500.”

[36] MGC responds that on July 3, 2014, 2389303 Ontario Corporation assigned its interest in the Second Mortgage to 2418047 Ontario Inc. by way of assignment registered against title to the Malmo Property as instrument number YR2149859. MGC submits that on the date of the mortgage statement, there was nothing owed to 2389303 Ontario Corporation or on mortgage instrument YR2120848 because 029’s indebtedness under YR2120848 had been superseded by its indebtedness under two subsequent registered assignments of the Second Mortgage.

[37] In the absence of cross-examination of Payam Katebian with respect to the mortgage statement, I do not consider this mortgage statement or the accompanying letter to be evidence that supports the position taken by 029 on this motion.

Sources of funds used to pay the holders of Second Mortgage

[38] The parties agree that payments totalling $450,000 were made to the four mortgagees in amounts sufficient to satisfy the indebtedness owed to each of them under the Second Mortgage. I find on the evidence that such payments were made.

[39] The disagreement on this motion is about whether, as MGC contends, the payments were made by MGC as mortgage administrator using funds raised from private investors to enable MGC to purchase, as assignee, the interests of the four holders of the Second Mortgage, or, as 029 contends, the payments were made using 029’s money, or money directed by the Laila Group to be used from mortgage advances on the MGMIC mortgage against the Boake Property and the King High Property, to discharge the Second Mortgage.

[40] MGC submits that 029 has failed to tender evidence that calls into question MGC’s evidence that the payments made to the four holders of the Second Mortgage (to obtain an assignment of their interests in the Second Mortgage) were made using funds obtained from investors (and not using 029’s funds or funds of Hazelton, another company in the Laila Group). MGC points out that there is no documentary evidence to verify Mr. Wilson’s evidence that the Laila Group instructed Morteza Katebian to finance the Boake Property and the King High Property in order to pay out the Second Mortgage.

Records obtained pursuant to Order of this Court dated February 15, 2022

[41] Mr. Wilson’s evidence is that 029 was unable to have access to its banking records while the issue involving ownership of 029 was unresolved. 029 sought and obtained an Order dated February 15, 2022 authorizing disclosure of banking information from banking institutions that held accounts for 029 and from the Receiver. In response to this Order, Royal Bank of Canada provided bank records relating to a business account maintained by 029.

[42] Mr. Wilson’s evidence is that based on his review of the 029 RBC account statements, he was able to track payments from that account to two of the holders of the Second Mortgage, namely 2374715 and Olga Domunyan.

[43] With respect to the payment to 2374715, the banking records disclose a deposit of a cheque into 029’s RBC account in the amount of $65,000 on September 4, 2015. A copy of the front and back of a cheque drawn on Meridien’s account and payable to 029 in the amount of $65,000 dated September 3, 2015 shows, on the reference line, “Re: 133 Boake Trail - Final Draw”. The records include a copy of a cheque dated September 4, 2015 drawn on 029’s account and payable to 2374715 in the amount of $65,000.

[44] The RBC records include a bank draft from The Toronto-Dominion Bank in the amount of $30,000 payable to 029 and dated June 4, 2015. The RBC account records include a deposit slip dated June 5, 2015 which indicates that a deposit was made in the amount of $30,000. The name referenced on the deposit slip is “Olga”. An RBC bank draft dated June 5, 2015 is payable to “Olga Domunya” in the amount of $30,088.76. 029’s RBC account statement shows a debit on June 5, 2015 described as “BR to BR – 6142” in the amount of $30,096.26.

[45] MGC submits that even if I were to find that $95,000 was paid using funds in 029’s RBC bank account, this does not determine the question of entitlement to the money held by the Receiver because the source of the money on deposit with RBC in 029’s account is contested. MGC relies on other legal proceedings before the Court on the civil list (CV-19-629030) in which Faieta J. wrote in a decision that it is unclear how findings made by the Ontario Securities Commission in another proceeding involving the Katebians inform whether Hazelton or the Katebians were the beneficial owners of the Boake Property and the King High Property and that a trial is required to ascertain the merits of the case before him. See Hazelton Homes Corporation v. Katebian, 2021 ONSC 1167, at para. 8.

[46] The competing claimants to beneficial ownership of the Boake Property and the King High Property are Hazelton, a member of the Laila Group, and Morteza Katebian who is registered on title. The evidentiary record before me in respect of this issue is not complete.

[47] I do not make a finding of the identity of the beneficial owner of the Boake Property or the King High Property. It is not necessary for me to do so because even if it were to be determined in another proceeding that Morteza Katebian is the beneficial owner of these properties, MGC does not assert on this motion that the money used to purchase the Second Mortgage was Morteza Katebian’s money or came from him. MGC’s evidence is that the money was raised from private investors.

[48] The RBC bank records for the 029 bank account show that the payments to two of the holders of the Second Mortgage, 2374715 and Olga Domunyan, to satisfy the mortgage indebtedness owed to them, were made using funds that were on deposit in 029’s bank account at RBC. I so find.

[49] MGC has failed to show that the payments totalling $95,000 were made to purchase an assignment of the Second Mortgage using MGC’s funds or funds it raised from private investors.

Questions asked pursuant to Endorsement of Penny J. dated June 22, 2022

[50] MGC submits that despite having access to the entirety of 029’s account records, Mr. Wilson was only able to identify the “alleged” source of funds totalling $95,000 and he is silent on the source of the remaining $355,000. MGC submits that if I were to accept that a portion of the Second Mortgage valued at $95,000 was paid out with funds belonging to 029, there is no evidentiary basis for me to make a similar finding with respect to the remaining balance of the indebtedness under the Second Mortgage. MGC submits that in the event I make such a finding with respect to the payments totalling $95,000 to 2374715 and Olga Domunyan, the portion attributable to the remaining $355,000 face value of the Second Mortgage should be paid out to MGC in the amount of $1,091,281.34.

[51] In order to address this submission by MGC, I consider the evidence in relation to the endorsement of Penny J. dated June 22, 2022. On that day, Penny J. considered issues raised by the parties in respect of document production. The particular issue was production of documents by MGC. In his endorsement, Penny J. ordered that parties with document requests of MGC (referred to by Penny J., generically, as “Katebian”) shall provide a detailed, specific list of documents requested by June 28, 2022 and Katebian shall respond by July 5, 2022.

[52] Pursuant to the endorsement of Penny J., 029 made document requests of MGC. One of the requests, number 5, was in relation to Payam Katebian’s evidence that he and MGC arranged financing to buy out the interests of the four holders of the Second Mortgage. The following questions were asked by 029 as part of question number 5:

For each person or persons that provided the financing to pay out the GMB [holders of the Second Mortgage] how much they gave, when they gave it, where it was deposited, the terms for such financing, any repayments, any correspondence between the lawyers, what security if any was given, any security documents, any security registrations and all instructions to Mehta or any other legal counsel regarding same.

[53] By letter dated July 6, 2022, counsel for MGC provided its responses. MGC’s answer to question number 5 was: “See Tab 2(b) to the Money Gate Motion Record”. The documents to which the response referred are the copies of four bank drafts made payable to Meridien in trust totalling $450,000 and the email correspondence between Payam Katebian and Mr. Mehta on August 14 and 15, 2018 in which Mr. Mehta confirmed that the payments were made to the four mortgagees in the amounts and on the dates stated by Payam Katebian in his email.

[54] The questions asked by 029 clearly and directly requested information and documents relating to the sources of the financing arranged by Payam Katebian and MGC to buy out the interests of the four mortgage holders. Although MGC’s answer purports to be responsive, it is not responsive because the questions were not answered and no responsive documents were produced. The answer does not say that the documents requested do not exist or are not available. MGC does not contend that the questions call for answers that are irrelevant. It could hardly do so when the central issue on this motion is whether MGC provided value for the assignment of the Second Mortgage by, as Payam Katebian asserts in his affidavit, using money obtained through financing he arranged to pay the amounts to the four mortgagees. The questions are clearly a proper ones that called for a response. Instead, MGC refused to produce answers or documents responsive to the questions.

[55] At the hearing of this motion, counsel for MGH did not offer an explanation to justify his client’s refusal to provide responsive answers to the questions asked by 029 at question number 5 of its written questions. In the absence of such an explanation, I draw an adverse inference that MGC refused to answer the questions because the answers would have conflicted with the position advanced by MGC that it used money from private investors obtained through financing arranged by MGC and Payam Katebian to buy out the interests of the holders of the Second Mortgage. I infer that truthful and responsive answers and production of the requested documents, or confirmation that there are no such documents, would have disclosed that MGC did not raise money from private investors that was used to buy out the interests of the four holders of the Second Mortgage.

[56] I rely on this adverse inference to conclude that none of MGC’s money, whether raised from private investors or otherwise, was used to purchase the interests of the four mortgage holders. Because no value was given by MGC, as trustee for private investors, to the four mortgage holders, MGC did not take an enforceable assignment of the Second Mortgage.

Effect of s. 53(1) of the Conveyancing and Law of Property Act

[57] 029 submits that MGC’s motion should be dismissed because MGC did not give written notice to 029 of the assignment of the Second Mortgage as required by s. 53(1) of the Conveyancing and Law of Property Act.

[58] The response of MGC is that Morteza Katebian was a director of 029 and Mr. Mehta was a lawyer who represented 029, and they had knowledge of the assignment of the Second Mortgage, such that no notice of assignment was necessary. MGC submits that, in any event, there is insufficient evidence in the record to allow a finding to be made that no written notice of the assignment was given.

[59] Because of my conclusion that the purported assignment of the Second Mortgage to MGC as trustee is not effective, it is not necessary for me to decide this issue.

Effect of non-registration under Land Titles Act of MGC as owner of the Second Mortgage

[60] At the hearing, counsel for Curah made submissions. Curah submits that whether or not MGC, as trustee for private investors, provided valuable consideration for an assignment of the Second Mortgage, MGC in trust, as assignee, would not have priority over the third and fourth charges held by Curah because the purported transfer of the Second Mortgage to MGC as trustee was not registered under the Land Titles Act on the register of title for the Malmo Property.

[61] In support of this submission, Curah relies on ss. 101(1) to (5) of the Land Titles Act which provide:

101(1) The registered owner of a registered charge may, in the prescribed manner, transfer the charge to another person as owner.

(2) The transfer shall be completed by the land registrar entering on the register the transferee as owner of the charge transferred.

(3) The transfer, when registered, confers upon the transferee the ownership of the charge free from any unregistered interest therein, and the transfer of part of the sums secured by a charge confers upon the transferee the ownership of such part free from any unregistered interest therein.

(5) The transferor shall be deemed to remain owner of the charge until registration of the transfer of charge has been completed in accordance with this Act.

[62] MGC is not registered as owner of the Second Mortgage on the register of title to the Malmo Property. As a result, under s. 101(5) of the Land Titles Act, the four holders of the registered Second Mortgage are deemed to remain the owners of the Second Mortgage.

[63] Even if MGC had shown that, as trustee for private investors, it provided valuable consideration to the four holders of the Second Mortgage, MGC does not have a registered interest as owner of the Second Mortgage that ranks in priority to the registered third and fourth charges owned by Curah. For this reason, as well, MGC’s motion must be dismissed.

Disposition

[64] For these reasons, MGC’s motion is dismissed.

[65] If the parties are unable to resolve costs, they may make brief written submissions according to a timetable to be agreed upon and provided to me for approval.

Cavanagh J.

Date: November 24, 2022