The Senac Group Incorporated and Steve Nembhard v. Shorin Samuda, 2023 ONSC 3438
Court File No.: CV-22-2600-0000 Date: 2023-06-07
Superior Court of Justice – Ontario 491 Steeles Avenue East, Milton ON L9T 1Y6
Re: The Senac Group Incorporated and Steve Nembhard, Applicants And: Shorin Samuda, Respondent
Before: C. Chang J.
Counsel: O. Ogunniyi, for the Applicants F. Hassan, for the Respondent
Heard: May 29, 2023 (in-person)
Endorsement
1The applicants bring this application for various orders related to the corporate applicant’s mortgage to the respondent. Among other things, the applicants seek relief from the obligation to pay various fees charged by the respondent, which they say are improper due to those fees being in breach of s. 8 of the Interest Act, R.S.C. 1985, c. I-15 and s. 347 of the Criminal Code, R.S.C. 1985, c. C-46. They also seek orders requiring the respondent to produce various documents.
2The respondent submits that the disputed fees are properly collectable under the Mortgage and that he is not required to produce the documentation demanded by the applicants.
Preliminary Concerns
3Despite the clarity of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the provincial Notice to the Profession, Parties, Public and the Media (the “NPPPM”) and the Central West Region’s Notice to the Profession and Parties (the “NPP”) respecting the requisite procedure on long motions and applications, neither side chose to follow same.
4In breach of rule 37.10(2)(a) of the Rules of Civil Procedure, the indexes of the application record, the applicants’ supplementary application materials and the responding application record provide no useful descriptions of their contents.
5In violation of the NPPPM and the NPP, neither side uploaded a confirmation form or a compendium. In further violation of the NPPPM, the applicants uploaded unnecessary affidavits of service for every single document that they served on the respondent’s legal counsel. In yet further violation of the NPPPM, the parties failed to hyperlink any of the authorities in their respective factums and the applicants uploaded a book of authorities containing the full text of the authorities contained in it.
6If that wasn’t enough, not a single document in the hundreds of pages of application materials was bookmarked or hyperlinked in any way, shape or form.
7To top all of that off, both counsel attended the hearing with only hard copies of their documents, no access to CaseLines and no CaseLines page numbers. This meant that, for every reference to the evidence, the court was required to waste time trying to match the hard copy page numbers provided by counsel to the corresponding pages on CaseLines.
8It remains truly baffling and beyond troubling that counsel continue to disregard the requirements set out in, among other things, the Rules of Civil Procedure (which can be accessed online at https://www.ontario.ca/laws/regulation/900194), the NPPPM (which can be accessed online at https://www.ontariocourts.ca/scj/notices-and-orders-covid-19/notice-profession-parties-public-media/), the NPP (which can be accessed online at https://www.ontariocourts.ca/scj/practice/practice-directions/central-west/cw-notice-profession-parties/) and CaseLines in the Superior Court of Justice: A Guide to Requirements (which can be accessed online at https://www.ontariocourts.ca/scj/caselines/cl-guide/). The Office of the Chief Justice has even released a CaseLines Quick Tips guide (which can be accessed online at https://www.ontariocourts.ca/scj/caselines/quick-tips/).
9In the case-at-bar, both counsel pled ignorance of these easily accessible procedural requirements of the court (or, at least, of the likely consequences of non-compliance with them), but, as the old adage goes, ignorance of the law is no defence. That blissful ignorance would best be brought to an immediate and complete end.
10When counsel come before the court – whether in-person, remotely or in writing – they are required to be knowledgeable of the substantive and procedural law applicable to their matter and to be in compliance with it. Failure to know and comply with that law rightly attracts consequences, some of which can be quite severe.
11Fortunately, the parties’ extensive breaches of the procedural law did not prevent this matter from being heard on its merits, but same will, most certainly, factor into the issue of costs.
Facts
12The facts relevant to this application are undisputed and can be summarized as follows:
a. the corporate applicant (“Senac”) gave to the respondent (“Samuda”) a mortgage dated January 22, 2019 (the “Mortgage”) charging the property municipally known as Suite 409, 1585 Markham Road, Toronto, Ontario to secure a loan from Samuda to Senac in the amount of $220,000.00;
b. the loan was also secured by a personal guarantee from the individual applicant (“Nembhard”);
c. the loan was to be for a term of six months at an annual interest rate of 12% with monthly interest-only payments in the amount of $2,200.00;
d. Senac defaulted on the loan;
e. the applicants made payments toward the indebtedness on October 15, 2020 and May 5, 2021 in the amounts of $120,000.00 (applied toward the principal amount) and $10,000.00 (the allocation of which is disputed), respectively;
f. Samuda provided Senac with various discharge statements both before and after he issued a notice of sale dated October 31, 2022;
g. of the discharge statements that he issued, Samuda relies only on the one dated November 30, 2022; and
h. Senac, as the mortgagor, and Nembhard, as the guarantor, dispute Samuda’s entitlement to almost all of the claimed fees and to the amount claimed for legal fees.
2In addition, at the commencement of the hearing, the parties confirmed the following:
a. the applicants are no longer pursuing the claims set out in the paragraphs 1(d) and (g) of the notice of application;
b. of the various fees set out in the applicable discharge statement, Samuda only claims entitlement to the renewal fees, the administration fees, the NSF fees and the legal fees (collectively the “Disputed Fees”); and
c. the parties consent to an order that, should I find any of the Disputed Fees to not be chargeable under the Mortgage, the March 30, 2023 order of Kurz J. staying enforcement of the Mortgage be continued until thirty days following Samuda’s delivery of a discharge statement that reflects my determination of the Disputed Fees.
Issues
13The two issues to be determined on this application are:
a. Are the Disputed Fees properly chargeable to and collectable from the applicants?
b. Should the court make the requested declaration that Samuda “has acted in a manner that is prejudicial to the interests of the applicants”?
Issue 1: The Disputed Fees
Parties’ Positions
14The applicants admit that the Mortgage (and, by extension, Nembhard’s guarantee) expressly provides that they are responsible to pay the Disputed Fees. However, they argue that there is no evidence that Samuda actually incurred any of those fees and, as such, his ability to charge and/or collect same is proscribed by s. 8 of the Interest Act.
15Samuda admits that there is no evidence that he actually incurred any of the Disputed Fees, but argues that they are still properly chargeable to and collectable from the applicants because the Mortgage expressly says so. He further submits that, in any event, the renewal fees are chargeable and collectable without proof that he incurred any related cost because they are payable on each renewal of the Mortgage independent of any applicable expenditure by him.
16Neither side directed any argument to s. 347 of the Criminal Code or provided any applicable calculations showing the presence or absence of a criminal rate of interest in the case-at-bar. In addition, for the following reasons, I can determine the propriety of the Disputed Charges without regard to s. 347 of the Criminal Code.
Law
17Section 8 of the Interest Act provides:
8 (1) No fine, penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.
- Nothing in this section has the effect of prohibiting a contract for the payment of interest on arrears of interest or principal at any rate not greater than the rate payable on principal money not in arrears.
18In P.A.R.C.E.L. Inc. v. Acquaviva, 2015 ONCA 331, at paras. 52-56, the Court of Appeal for Ontario set out four prerequisites that trigger the application of s. 8 of the Interest Act:
a. the subject covenant must impose a fine, penalty or rate of interest;
b. the fine, penalty or rate of interest must relate to arrears of principal or interest secured by a mortgage on real property, whether before or after maturity of the applicable debt instrument;
c. the subject covenant must have the effect of increasing the charge on arrears beyond the rate of interest payable on principal money not in arrears; and
d. the arrears of principal or interest must be secured by a mortgage on real property.
19Charges claimed under a mortgage for which there is no evidence showing that they “reflect real costs legitimately incurred…for the recovery of the debt” constitute a fine, penalty or rate of interest to which s. 8 of the Interest Act applies (see: P.A.R.C.E.L. Inc., at para. 96).
20A mortgagee seeking to charge a mortgagor with its legal fees in connection with the mortgage debt “must be able to ascertain, assert, and finally defend its right” to those legal fees (see: Rokhsefat v. 8758603 Canada Corp., 2019 ONCA 273, at para. 10).
Decision
Renewal Fees, Administration Fees & NSF Fees Are Not Chargeable or Collectable
21I find that none of the Renewal fees, administration fees and NSF fees is properly chargeable to or collectable from the applicants.
22As admitted by Samuda, there is no evidence before me that he actually incurred any costs or expenses in relation to any of those fees. I therefore find that s. 8 of the Interest Act applies and precludes any recovery of them.
23I do not accept Samuda’s argument that provision in the Mortgage for the Disputed Fees, without anything else, automatically renders them chargeable to and collectable from the applicants because that is what the parties negotiated and agreed to at the time of contracting. As stated by the Court of Appeal in P.A.R.C.E.L. Inc., at para. 51, s. 8 of the Interest Act “creates an exception to the general rule that lenders and borrowers are free to negotiate and agree on any rate of interest on a loan”. In addition, the onus is on mortgagees to prove that their claimed charges and fees reflect “real” costs that were actually and legitimately incurred pursuant to their mortgages (see: Morex Capital Corp. v. Kubah, 2023 ONSC 3185, at para. 11).
24Given the lack of any evidence that Samuda actually and legitimately incurred any costs or expenses related to the renewal, administration or NSF fees, he has failed to discharge his onus of proof, rendering those fees not chargeable to or collectable from the applicants.
25I also do not accept Samuda’s argument that the renewal fees are properly chargeable independent of actual costs he incurred because they are fees payable on each renewal of the Mortgage unrelated to any such expenditure. Samuda relies on the decision of Fragomeni J. in Roopchand v. Ghuman, 2021 ONSC 3163, at paras. 21-24, but nothing in that decision supports his argument. Furthermore, and in any event, the Mortgage expressly requires that any renewals must be requested in writing; however, as Samuda admits, none of the alleged renewals was dealt with in writing. Therefore, even were I to accept Samuda’s argument, on his own evidence, there were no renewals under the Mortgage to which a renewal fee could apply.
Legal Fees Are Chargeable and Collectable
26I would have made the same determination on the claimed legal fees that I did respecting the other Disputed Fees, as Samuda failed to discharge his onus of proof as set out in P.A.R.C.E.L. Inc., at para. 96. In addition, he has also failed to adduce any evidence that would, per Rokhsefat, permit him to “ascertain, assert, and finally defend [his] right” to those legal fees.
27However, the applicants admit their responsibility to pay the applicable legal fees and only take issue with the claimed quantum of $12,846.33, which they say is excessive. The applicants submit that the proper quantum is the all-inclusive amount of $3,500.00.
28Given the applicants’ admission respecting the legal fees, I am compelled to find, and do find, that same are chargeable to and collectable from the applicants in the all-inclusive amount of $3,500.00.
Issue 2: The Request for Declaratory Relief
29In addition to the requested determinations respecting the Disputed Fees, the applicants also seek a declaration that Samuda “has acted in a manner that is prejudicial to [their] interests”.
Parties’ Positions
30When I inquired of the applicants’ counsel as to the need for this declaratory relief, he advised that the declaration is required for the determination of both this application and one or more issue(s) in the mortgage enforcement action that Samuda has commenced. The latter has not advanced beyond service of the statement of claim and, in any event, is not before me.
31Samuda did not address this issue in any of his submissions except to deny that he had acted improperly in any way.
Law
32Section 97 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides:
97 The Court of Appeal and the Superior Court of Justice, exclusive of the Small Claims Court, may make binding declarations of right, whether or not any consequential relief is or could be claimed.
33The court’s jurisdiction to grant declaratory relief “is only to be used when the declaration will have an effect on an existing dispute between the parties [and] is not to be given as an opinion on a hypothetical set of facts, or as an academic exercise to settle what may happen in the future” (see: 1472292 Ontario Inc. (Rosen Express) v. Northbridge General Insurance Company, 2019 ONCA 753, at para. 22). Declaratory relief must be determinative of parties’ rights and “courts do not have jurisdiction to simply declare facts, detached from the rights of the parties” (see: Rosen Express, at para. 30).
Decision
34In my view, granting the declaratory relief sought by the applicants would serve no practical purpose and I decline to do so.
35In the case-at-bar, I do not need to consider, let alone grant, the requested declaration before deciding whether some or all of the Disputed Fees are properly chargeable or collectable. I have already made those determinations without first needing to grant that declaratory relief.
36Beyond this, the applicants are also asking that I predetermine an issue that would govern the rights of the parties in the mortgage enforcement action, which rights are contingent on the future adjudication of that dispute. That predetermination ought not be made and I decline to do so.
Costs
37Neither side provided a costs outline or a bill of costs, which further violation of procedure can simply be added to the very large pile already amassed by the parties in this matter. Given that baffling and troubling pile, I am inclined to order that there be no order as to costs and require that the parties bear their own.
38However, counsel advised that there are relevant offers to settle that bear on the issue of costs and, as such, I will reserve my decision on costs until after I have received those offers to settle and the parties’ costs submissions. That said, I caution the parties that, given their conduct in this application, I may still order that they bear their own costs.
39The parties would be well advised to prepare their costs submissions with the above comments in mind.
Summary and Disposition
40For the reasons above, I find that the renewal, administration and NSF fees are not properly chargeable to or collectable from the applicants. I also find that, based on the applicants’ admission, the legal fees are properly chargeable to and collectable from the applicants in the all-inclusive amount of $3,500.00. Samuda should deliver to the applicants a new discharge statement accordingly and, as agreed by the parties, any enforcement of the mortgage should be stayed until thirty days after that discharge statement is delivered. The application should otherwise be dismissed.
41I therefore make the following orders:
a. the renewal fees, the administration fees and the NSF fees are not properly chargeable to or collectable from the applicants;
b. on consent, the legal fees are properly chargeable to and collectable from the applicants in the all-inclusive amount of $3,500.00;
c. on consent, the March 30, 2023 order of Kurz J. staying enforcement of the Mortgage is continued until thirty days after Samuda’s delivery of a new discharge statement that reflects my findings above;
d. the applicants and Samuda shall each make written submissions on costs (a maximum of two pages plus costs outline and offer(s) to settle) to be sent to me through the Milton Administration Office as follows:
i. the applicants’ submissions by no later than June 16, 2023,
ii. Samuda’s submissions by no later than June 23, 2023, and
iii. there shall be no reply; and
e. the application is otherwise dismissed.
“C. Chang J.”
Date: June 7, 2023