ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2724582 ONTARIO INC., Plaintiff
– and –
RHONDA GOLD, Defendant
AND BETWEEN:
RHONDA GOLD, Plaintiff
– and –
SAM KAMRA, 877799 CANADA INC. o/a REAL ESTATE BAY REALTY,
SANA ABDALLAH, DANIELLE DESJARDINS, 2707551 ONTARIO INC.,
2724582 ONTARIO INC., and JITENDRA PANCHAL, Defendants
Jordan D. Sobel, for the Plaintiff/Defendant, 2724582 Ontario Inc. and for the Defendants, Sam Kamra, Sana Abdallah, Danielle Desjardins, 2707551 Ontario Inc.
J. Daniel McConville, for the Defendant/Plaintiff, Rhonda Gold
HEARD: August 21, 2024
PARGHI J.
REASONS FOR DECISION
1Three motions are brought before me. The issue in each of them is the validity of a release signed on May 6, 2022 by Rhonda Gold, the owner of two properties in Scarborough, Ontario, and various parties from whom she had obtained mortgages on those properties (“the Release”). The Release purports to waive Ms. Gold’s right to take legal action against those parties in connection with the mortgages. In these motions, I am asked to determine whether the Release precludes Ms. Gold’s action against those parties. The motions primarily engage rule 21.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), which enables a party to move for the determination, before trial, of a question of law raised by a pleading.
2For the reasons below, I find that the Release does not preclude Ms. Gold’s action against those parties. The Release is void and unenforceable because its execution was an unconscionable transaction and was part of an unconscionable mortgage scheme.
The Actions
3The motions before me arise from three actions that have now been consolidated.
4In the first action, the Plaintiff 2724582 Ontario Inc. (“272”), seeks to enforce its mortgage against the Defendant, Ms. Gold. 272 is the second mortgagee for Ms. Gold’s property. The mortgage from 272, in the amount of $235,000.00, is in default. I will refer to this mortgage and this action as the “272 Mortgage” and “272 Action” respectively.
5In the second action, Ms. Gold alleges various improprieties in her mortgage transactions with the Defendants, several of whom are parties to the Release. She seeks relief against an unconscionable transaction and against the Defendant Sam Kamra for breach of fiduciary duty. I will refer to this action as the “Gold Action”. The Defendants to the Gold Action are:
a. Mr. Kamra, Ms. Gold’s real estate broker and a party to the Release;
b. 877799 Canada, operating as Real Estate Bay Realty, where Mr. Kamra works;
c. 272, the second mortgagee, the Plaintiff in the 272 Action, and a party to the Release;
d. Sana Abdallah, the director of 272, a previous mortgagee in her personal capacity, and the mother of Sam Kamra;
e. 2707551 Ontario Inc. (“270”), a previous mortgagee and a party to the Release;
f. Danielle Desjardins, the director of 270, the then-girlfriend of Sam Kamra, and a party to the Release; and
g. Jitendra Panchal, the third mortgagee.
6The 272 Action and the Gold Action have been consolidated with a third action, which is a mortgage enforcement action brought by Ms. Gold’s third mortgagee, Mr. Panchal. The third mortgage, in the amount of $719,000.00, is also in default.
Procedural History
7272 initially brought a summary judgment motion in the 272 Action, seeking enforcement of the 272 Mortgage. That motion has now been converted to a motion and cross-motion regarding the enforceability of the Release. The motion is brought by 272, as Plaintiff in the 272 Action. The cross-motion is brought by the Defendants to the Gold Action who signed the Release – namely, Sam Kamra, 272, 270, and Danielle Desjardins. I will refer to these parties collectively as the “Kamra Parties”.
8In their motion and cross-motion, the Kamra Parties seek a declaration under rule 21.01(1)(a) upholding the Release as valid and enforceable. Rule 21.01(1)(a) allows a party to move before a judge for a determination before trial of a question of law raised by a pleading, where the determination of the question may dispose of all or part of the action, substantially shorten the trial, or result in a substantial savings of costs. The Release is pleaded in both the 272 Action and the Gold Action. I agree that a decision on the validity of the Release may dispose of all or part of both actions. The motions are therefore appropriately brought.
9The Kamra Parties move in the alternative under rule 21.01(1)(b) to strike out the Statement of Claim in the Gold Action on the basis that it discloses no reasonable cause of action as against them up to and including May 6, 2022, when the Release was signed. This would bar any claims pertaining to any second mortgages on Ms. Gold’s property prior to the 272 Mortgage.
10In the further alternative, the Kamra Parties move under rule 25.11(c) to strike out all or part of the Statement of Claim in the Gold Action and Ms. Gold’s Statement of Defence in the 272 Action. They do so on the basis that the Release estops Ms. Gold from making those claims and advancing those defences, and that the claims and defences are therefore an abuse of process of the court.
11Ms. Gold, meanwhile, brings a motion in the Gold Action seeking a declaration under rule 21.01(1)(a) that the Release is void and unenforceable because its execution was an unconscionable transaction and/or was part of an entire unconscionable mortgage scheme. In substance, this aspect of her motion is the same as the motion and cross-motion by the Kamra Parties.
12In the alternative, Ms. Gold seeks an order that whether the Release is enforceable is an issue to be determined at trial. This request for relief appears to be grounded in the summary judgment provisions of Rule 20.
13For the reasons below, I grant Ms. Gold’s motion for a declaration that the Release is void and unenforceable. I dismiss all the motions and cross-motions of the Kamra Parties.
Background and Factual Findings
Ms. Gold and her property
14Ms. Gold is a specialty cake baker. She runs her own small business. She dropped out of high school in grade 9 and began working as a baker to help her parents financially. She then went back to school and obtained her diploma in baking techniques when she was 20 years old. She has worked in the baking and pastry fields since that time.
15She owns a property in Toronto that includes two buildings. She bought the property with a friend in 1996. She lives in one of the buildings and used to rent out the other building, which is split into two units, to two separate tenants. She was able to manage financially based on her rent income and the money she earned as a baker.
2019: Ms. Gold and Mr. Kamra meet, he arranges the Abdallah Mortgages and the First 270 Mortgage
16Ms. Gold was introduced to Mr. Kamra in 2019. At the time, she was trying to refinance a second mortgage on her property of $120,253.73. Her property was also subject to a first mortgage in the amount of approximately $700,000.00. She says he told her he could obtaining financing for her, that she should stop dealing with her previous mortgage broker and only deal with him, and that he could help her stabilize and improve her finances. He denies this claim.
17Mr. Kamra became Ms. Gold’s real estate agent in March 2020 and remained her real estate agent until the end of 2021. Between 2019 and 2022, Ms. Gold entered into a number of mortgage transactions that Mr. Kamra brokered with purportedly arm’s-length mortgagees. The mortgagees were Mr. Kamra’s mother, Sana Abdallah; 270, which was directed by Mr. Kamra’s then-girlfriend, Danielle Desjardins; and 272, which was directed by Ms. Abdallah. Each new mortgage was intended to help Ms. Gold pay off the previous mortgage. As I discuss below, with each successive mortgage, Ms. Gold’s borrowing costs, and level of debt, increased. Through these mortgages, the Kamra Parties collectively advanced $267,055.63 in actual funds to Ms. Gold, either in cash or to pay off a prior mortgage or other debts. They say that, as of August 16, 2022, she owed them $848,679.31 on the mortgages.
18Mr. Kamra is not a licensed mortgage broker.
19Ms. Gold says that in general she did not understand the mortgage transactions that Mr. Kamra brokered on her behalf. She believed that he was acting in her best interests and that she could trust his advice. She describes herself as not financially sophisticated, which the Kamra Parties contest. She says she is dyslexic, has weak reading and writing skills, and is embarrassed to admit she has trouble spelling and reading large words; her evidence on this point is not contested.
20When the litigation started, Ms. Gold requested an accounting of all her mortgages from the Kamra Parties. Their counsel refused to provide one until a court order compelled them to do so. The analysis below is based on the record before me, including the accounting eventually provided by the Kamra Parties.
21The first mortgage that Mr. Kamra facilitated for Ms. Gold was entered into in June 2019 with Mr. Kamra’s mother, Ms. Abdallah, as lender. The amount of the mortgage was $155,000.00. From this amount, Ms. Gold’s existing mortgage of $120,355.76 was discharged. Arrears on property tax and Ms. Gold’s first mortgage (from a financial institution) were then paid out, together with various charges. Some of those charges are disbursements (such as a registration fee of $76.55) and several are fees paid to the Kamra Parties, including a lender fee ($15,000.00), legal fees to the Kamra Parties’ law firm Kalemi Law ($1,901.44), and an “interest adjustment” paid to Ms. Abdallah ($726.56).
22A separate mortgage was advanced by Ms. Abdallah in July 2019 in the amount of $45,000.00. The fees Ms. Gold paid out of this amount to the Kamra Parties included a lender fee ($4,000.00), prepaid interest ($3,869.79), and legal fees to the Kamra Parties’ counsel ($1,000.00).
23The two mortgages from Ms. Abdallah totalled $200,000.00. I will refer to them collectively as the “Abdallah Mortgages”. The net advance to Ms. Gold from the Abdallah Mortgages after the existing mortgage was discharged and the other fees were paid was $45,124.56.
24Ms. Gold’s evidence is that she did not know, when Mr. Kamra arranged the Abdallah Mortgages, that Ms. Abdallah is his mother. Mr. Kamra contests this claim. Ms. Gold also states she did not understand how much Ms. Abdallah’s second advance to her would cost or what additional fees and transaction costs it would entail.
25In October 2019, Ms. Gold contacted a different mortgage broker to explore her mortgage options in connection with renovation-related credit card debt on her property. She told Mr. Kamra that she was considering working with that mortgage broker. She says Mr. Kamra “came across as hurt and confused” that she would “want to go with someone else” and urged her to stay with him. She did, based on his promises that he would help her and she would be better off financially by taking his advice and working with him. Mr. Kamra denies that he dissuaded her from working with the other mortgage broker and that she was always free to do so.
26The Abdallah Mortgages were refinanced in November 2019 with a mortgage from Ms. Desjardins’ company, 270, for $410,000.00 (the “First 270 Mortgage”). From this amount, the Abdallah Mortgages were discharged after payment of their collective principal of $200,000.00 plus interest arrears ($9,666.66), three months of interest upon default ($7,250.00), an NSF fee ($350.00), a statement fee ($550.00), and a discharge administration fee ($450.00). In total, Ms. Gold paid $218,266.66 to discharge the Abdallah Mortgages.
27From the remaining amount of the First 270 Mortgage, Ms. Gold paid certain disbursements together with various fees to the Kamra Parties, including a lender fee ($36,500.00), prepaid interest ($57,359.00), and legal fees to the Kamra Parties’ counsel ($3,075.42). The net advance to Ms. Gold from the First 270 Mortgage was $94,392.02.
28Ms. Gold says Mr. Kamra did not disclose to her that 270 was directed by Mr. Kamra’s then live-in girlfriend and real estate brokerage partner, Ms. Desjardins. Mr. Kamra disputes this claim.
29Ms. Gold says she received legal advice on the First 270 Mortgage from a lawyer who came to her home with Mr. Kamra when Mr. Kamra presented the mortgage paperwork to her. Mr. Kamra told her that the lawyer was a good lawyer and she could use him as her lawyer for the mortgage. Ms. Gold states that the lawyer “explained virtually nothing to” her. She says she “took [Mr. Kamra] at his word that he was looking out for [her] best interests, and signed the paperwork.”
30Her evidence is that Mr. Kamra would periodically call her to say she had to sign more paperwork to renew the mortgage. He would tell her she needed to renew the mortgage so that the lender would not back out. He would not show the mortgage documents to her in advance. He would set up appointments for her to meet with the same lawyer whom he had brought to her home at the time of signing the First 270 Mortgage. That lawyer “would explain virtually nothing” to her about the transaction. She did not believe she had any other choice but to sign the mortgage paperwork, and accordingly entered into the Second 270 Mortgage and the 272 Mortgage, as described below.
31Mr. Kamra contests the claim that he introduced her to the lawyer who advised her on the mortgages.
2020: Mr. Kamra arranges the Second 270 Mortgage
32In November 2020, the First 270 Mortgage was “internally refinanced,” according to the accounting provided by the Kamra Parties, by a second mortgage from 270 in the amount of $650,000.00 (the “Second 270 Mortgage”). From this amount, the First 270 Mortgage was discharged after payment of its principal of $410,000.00 plus interest arrears ($1,954.52), three months of interest upon default ($14,862.50), an inspection fee ($700.00), a statement fee ($550.00), a discharge administration fee ($450.00), and a default administration fee ($350.00). In total, Ms. Gold paid $428,867.02 to discharge the First 270 Mortgage.
33From the remaining amount of the Second 270 Mortgage, Ms. Gold paid certain disbursements in addition to various fees to the Kamra Parties, including prepaid interest ($15,078.12), an appraisal fee ($900.00), and legal fees to the Kamra Parties’ counsel ($2,398.98). A sizeable portion ($167,500.00) of the mortgage value was not actually advanced to her, but nonetheless formed part of her debt going forward; this sum is described in the mortgage documentation as “collateral registration not advanced”. The net advance to Ms. Gold from the Second 270 Mortgage was $909.84.
2021: Mr. Kamra arranges the 272 Mortgage, Ms. Gold raises concerns
34The Second 270 Mortgage was refinanced in October 2021 by a mortgage from 272 in the amount of $1,000,000.00. This was the 272 Mortgage, which is sought to be enforced in the 272 Action. From this amount, the Second 270 Mortgage was discharged after payment of a series of charges reflecting sequential three-month mortgage renewals. The following amounts were paid: the amount of the Second 270 Mortgage due on February 12, 2021 ($482,500.00); a three-month renewal fee to renew the 270 Mortgage for three months to May 12, 2021 ($33,775.00), prepaid interest for February 12 to May 12, 2021 ($15,078.12), a three-month renewal fee to renew the 270 Mortgage for another three months to August 12, 2021 ($37,194.72), prepaid interest for May 12 to August 12, 2021 ($16,604.78), a three-month renewal fee to renew the 270 Mortgage for another three months to November 12, 2021 ($40,960.68), prepaid interest for August 12 to November 12, 2021 ($18,286.02), a statement fee ($500.00), a discharge administration fee ($599.00), and three inspection fees, presumably one for each renewed three-month term ($2,100.00). In total, Ms. Gold paid $647,598.32 to discharge the Second 270 Mortgage.
35From the remaining amount of the 272 Mortgage, Ms. Gold paid certain disbursements together with various fees to the Kamra Parties, including a lender fee ($54,250.00), prepaid interest ($61,961.25), and legal fees to the Kamra Parties’ counsel ($2198.08). Additionally, $225,000.00 of the mortgage amount was not advanced to her but still formed part of her debt; it is described in the mortgage documentation as “collateral registration not advanced”. The net advance to Ms. Gold from the 272 Mortgage was $1,282.93.
36Ms. Gold’s evidence is that after Mr. Kamra facilitated the 272 Mortgage, she “started to distrust” him and “thought he was no longer looking out for” her. She describes feeling “trapped and pressured by the situation.” She says she complained to him that the arrangement seemed unfair because she did not understand how the principal had gone so high. When she raised these concerns, she says, Mr. Kamra’s “tone changed. Instead of acting like a salesman wanting to help me, he started threatening me that the lender would put me in power of sale if I didn’t pay the mortgages back.”
37In late 2021, Ms. Gold hired a lawyer, Roy Tofilovski, to assist her. Mr. Tofilovski briefly corresponded with Mr. Kamra and his lawyers, but Ms. Gold was not able to afford the costs of challenging Mr. Kamra or the mortgages.
2022-2023: Mr. Kamra threatens unrelated criminal proceedings, Ms. Gold signs the Release, Mr. Kamra arranges the Panchal Mortgage, power of sale proceedings and litigation commence
38In early 2022, Ms. Gold complained to the Real Estate Counsel of Ontario (“RECO”), because she did not believe that Mr. Kamra had been honest with her about the mortgages or in how he acted as her real estate agent.
39In March 2022, Mr. Kamra sent an email to one of Ms. Gold’s tenants, copying Ms. Gold, in which he threatened Ms. Gold with criminal proceedings and asked the tenant to tell him about any “dishonest actions” on Ms. Gold’s part:
Rhonda [Ms. Gold] also took part in orchestrating criminal activity against the previous tenant in the front … which I'm sure you know about but I'll keep quiet for the time being. If Rhonda continues to contact me or threaten me with legal action to try to get money out of me then I will be happy to contact [the previous tenant] to let her know the truth about what Rhonda disclosed to me as she could face jail time for what she had done to [the previous tenant]. Rhonda was laughing about everything at the time when the “situation” happened because the police didn’t check the cameras. Feel free to email me back confirming whether what I was told today from Rhonda is correct or not as I'd like to have it in writing. If you can also email me and let me know your opinion about her honesty and whether you're aware of her lying about things for financial gain. I know from speaking to her in the past that you know a lot about her dishonest actions against the previous tenants and possibly yourself so if you can be honest and disclose to me what you know about Rhonda I would appreciate that.
40Mr. Kamra does not deny having sent this email to Ms. Gold’s tenant.
41By April 14, 2022, according to 272, Ms. Gold owed $775,000.00 in principal on the 272 Mortgage, in addition to interest arrears ($42,099.69), three months of interest upon default ($30,980.62), and a statement fee ($599.00), for a total debt of $848,679.31.
42In May 2022, Ms. Gold withdraw her complaint to RECO about Mr. Kamra in exchange for payment of $200. The parties disagree as to the exact timing and nature of her complaint withdrawal.
43On or about May 6, 2022, Mr. Kamra presented Ms. Gold with a release to sign. Ms. Gold signed it in amended form (the “Release”). The Release refers to the First 270 Mortgage, Second 270 Mortgage, and 272 Mortgage, and goes on to state in relevant part:
AND WHEREAS Sam Kamra introduced the Mortgagor to both lenders:
AND WHEREAS Mario Kalemi and Kalemi Law Professional Corporation represented both lenders in the above transaction;
AND WHEREAS the Borrower is complaining about the terms of the mortgages she entered into and disputing fees she has paid, including renewal and default fees, despite receiving independent legal representation and threatening litigation and complaints;
AND WHEREAS the Borrower is in default of the existing mortgage with 2724582 and liable to pay default fees of 3 month interest plus additional fees for the enforcement of the mortgage;
AND WHEREAS the Borrower is desirous of extending the mortgage to allow her time to complete a refinance of the Property;
AND WHEREAS the Mortgagor, 2724582, 2707551, Sam Kamra, Danielle Desjardins Mario Kalemi and Kalemi Law Professional Corporation (collectively, the “Parties”) wish to settle any and all matters of dispute, including the terms of the mortgage or the fees charged under the mortgages, any matters of complaints or litigation and the extension of the existing mortgage;
NOW THEREFORE, IN CONSIDERATION of a payment to the Mortgagor in the amount of $700.00, and the waiver of the default fees due under the existing mortgage and extending the maturity date of the existing mortgage to June 14, 2022, I, Rhonda Gold hereby accept the amount and the terms as above as a full and final settlement and I do hereby release and forever discharge 2724582, 2707551, Sam Kamra, Danielle Desjardins, Mario Kalemi and Kalemi Law Professional Corporation … from any and all actions [etc.] which I, had, now have or may hereafter have against [them] by reason of any cause, fact, matter or thing whatsoever, in consequence of any events or issues that could arise in connection with the above mortgage transactions, the terms of the mortgage transactions, the fees charged under the said mortgage transactions or any actions with respect to the mortgage trasnactions [sic].
AND FOR THE CONSIDERATION OF THE AFORESAID SUM the Parties do hereby agree and undertake that they will not leave any negative online reviews, make any complains to any regulatory body including RECO, FSCO, FSRA and LSO… . Furthermore, if any complaints have been initiated, the Parties agree to rescind the complaint immediately following execution of this Release.
THE MORTGAGOR ACKNOWLEDGES AND UNDERSTANDS THAT any default fees incurred to date on the existing mortgage are waived and the mortgage is hereby extended to June 14, 2022 at which time principal and accrued interest will be due and payable;
44A handwritten provision of the Release states that 272 consents to the registration of a third mortgage. Another handwritten provision states that there will be no discharge or administrative fees when the 272 Mortgage is discharged.
45In essence, the Release provides that Ms. Gold would be paid $700.00, that the maturity date of the 272 Mortgage would be extended, and that 272 would consent to the registration of a third mortgage on the property (which would turn out to be the Panchal Mortgage). It further provides that default fees would be waived under the 272 Mortgage and that there would be no discharge or administrative fees when the 272 Mortgage was discharged. In exchange, Ms. Gold released the Kamra Parties “from all claims” and promised not to make any complaints to any regulatory body.
46Ms. Gold’s evidence is that since she could not afford to pay Mr. Tofilovski to dispute the mortgages, she thought she had no choice but to agree with Mr. Kamra and sign the Release. She says she did not understand the Release when she signed it. Mr. Kamra convinced her that the Release was a way out of her situation – that if she signed it, she would not have to pay any more penalties or default fees, there would be no power of sale proceedings, the mortgage debt would stop increasing, and she would hopefully save her house.
47Ms. Gold met with Mr. Tofilovski, her lawyer, when she signed the release. The record shows that Ms. Gold requested that the Release be modified to reduce or waive the administrative and discharge fees associated with the 272 Mortgage and to consent to the registration of a third mortgage. She discussed the fee issue with Mr. Tofilovski during the meeting and with Mr. Kamra via phone call from Mr. Tofilovski’s office. The Release was amended to incorporate both requested changes.
48Shortly after Mr. Tofilovski and Ms. Gold met, he sent her an email stating, “Hi Rhonda, as I stated but did not record, you cannot sue anyone regarding the last two second mortgages on your house. Not just the people and entities named, but anyone whatsoever. This is the crux of what you just signed.” The last two second mortgages were the 270 Mortgage and the 272 Mortgage.
49As of August 16, 2022, according to 272, the total owed by Ms. Gold on the 272 Mortgage was $848,679.31.
50That month, Mr. Kamra sourced another mortgage for Ms. Gold, this time from the Defendant Mr. Panchal, for $632,179.02 (the “Panchal Mortgage”). From this amount, Ms. Gold paid certain disbursements together with various fees to the Kamra Parties, including a lender renewal fee ($4,700.00), prepaid interest ($9,400.00), per diem interest ($679.02), and legal fees ($3,641.90).
51The remaining amount of the Panchal Mortgage ($613,679.31) was then applied against the 272 Mortgage, leaving $235,000.00 in principal still owed on the 272 Mortgage. Ms. Gold and 272 entered into a written loan amending agreement providing that Ms. Gold owed $235,000.00 to 272 and extending the maturity date of the charge.
52Ms. Gold’s evidence is that she thought it was in her interest to let Mr. Panchal lend more money to her and that it would end her dispute with Mr. Kamra. She believed the Panchal Mortgage “would resolve everything”. She therefore agreed to it.
53In February 2023, the 272 Mortgage went into default. In April 2023, 272 delivered a notice of sale to Ms. Gold and issued the Statement of Claim in the 272 Action.
54In June 2023, Mr. Panchal issued a notice of sale and issued the Statement of Claim in his action. Additionally, through his legal counsel, Mr. Kamra instructed Ms. Gold’s tenants to deliver rent payments to him personally based on an assignment of rents from the Panchal Mortgage. Ms. Gold has received no rent income since that time and says she has experienced “significant financial difficulty” as a consequence.
Mr. Kamra’s role in the mortgages
55Mr. Kamra insists that the mortgages he arranged for Ms. Gold were all at arm’s length. He states that the lenders – Ms. Abdallah, Ms. Desjardins, and their companies, 270 and 272 – were all independent entities, that he simply introduced Ms. Gold to them, and that he is not responsible for the terms of the mortgage loans they made to her.
56I reject this claim outright.
57The cross-examination of Mr. Kamra’s mother, Ms. Abdallah, who ostensibly was behind the Abdallah Mortgages and the 272 Mortgage, makes abundantly clear that she has no expertise in, or even familiarity with, the lending business. She acknowledged in cross-examination that did not understand basic concepts central to her or 272’s purported relationship with Ms. Gold, such as what a mortgage enforcement action is or what “private second mortgage” means.
58Her cross-examination also makes clear that she does not understand basic factual information contained in her own affidavit about the relationship between 272 and Ms. Gold. She was taken to various statements in her affidavit describing the history of Ms. Gold’s loans from Ms. Abdallah and 272. She stated that she did not know what those statements meant. I very much doubt that Ms. Abdallah drafted her own affidavit or reviewed it before signing it.
59The cross-examination of Mr. Kamra’s girlfriend, Ms. Desjardins, who was ostensibly behind the First 270 Mortgage and the Second 270 Mortgage, is similarly revealing. Ms. Desjardins admitted in cross-examination that during the time her company, 270, advanced mortgages to Ms. Gold, she was living with Mr. Kamra – a fact that, notably, is mentioned nowhere in Mr. Kamra’s affidavit – and practicing at the same real estate brokerage as him. She was unable or unwilling to provide basic information about how money flowed through 270, from her company to Ms. Abdallah, or to her company when her mortgage was discharged. She refused to answer why her company was incorporated. (Of note, it was incorporated shortly before the 270 mortgages were made to Ms. Gold.) Like Ms. Abdallah, Ms. Desjardins had little or no knowledge of how the mortgages were made or administered.
60Their evidence is entirely inconsistent with Mr. Kamra’s assertion that the mortgagees acted independently and at arm’s length to him. It is simply not credible to claim, as the Kamra Parties do, that either Ms. Abdallah or Ms. Desjardins was in the mortgage lending business independently. The evidence makes clear that they could not have been.
61Based on the record before me, I find that Mr. Kamra was the directing mind behind the loan arrangements between Ms. Gold and Ms. Abdallah and Ms. Desjardins and their companies. I find that it was his own money that was loaned to Ms. Gold, through the vehicle of Ms. Abdallah and Ms. Desjardins and their companies. Mr. Kamra was behind the mortgages and is the real lender. He concealed this fact from Ms. Gold. He did his best to conceal it from this court.
Mr. Kamra’s and Ms. Gold’s credibility
62My finding that Mr. Kamra was in fact behind the mortgages goes to the core of these motions. It is squarely relevant to the issue of unconscionability, as I discuss below. It is also essential to my assessment of Mr. Kamra’s credibility. He portrayed himself to Ms. Gold, and to this court, as an honest broker between Ms. Gold and various arm’s-length mortgagees. In fact, as the evidence of Ms. Abdallah and Ms. Desjardins makes clear, his family members and their numbered companies were not at arm’s length to him. He was not an honest broker. In my view, his deception, before Ms. Gold and in these proceedings, vastly undermines his credibility.
63In making this finding, I am informed by the principle, articulated by this court in Christakos v. De Caires, 2016 ONSC 702, that the factors I may consider in assessing witness credibility include whether there is independent evidence to contradict a witness’ evidence (at para. 10). The independent evidence of Ms. Abdallah and Ms. Desjardin unequivocally contradicts Mr. Kamra’s evidence on the foundational issue of whether he brokered arm’s-length mortgages for Ms. Gold. It reveals a glaring credibility issue for Mr. Kamra on an issue that is central to these motions.
64In addition, Mr. Kamra omits from his affidavit the fact that Ms. Desjardin was his live-in girlfriend and practiced at the same real estate brokerage as him at the time the First 270 Mortgage and Second 270 Mortgage were advanced to Ms. Gold. This evidence is plainly relevant to the issue of whether the mortgages were truly at arm’s length and whether he truly acted as Ms. Gold’s fiduciary. The courts have held that when considering the credibility of written evidence from witnesses, the omission of significant facts that should be addressed is a relevant factor (Konstan v. Berkovits, 2023 ONSC 497, at paras. 8-12; Prodigy Graphics Group Inc. v. Fitz-Andrews, 2000 CarswellOnt 1178 (S.C.), at para. 46). I am of the view that Mr. Kamra’s omission of this significant fact raises yet another credibility issue for him.
65By contrast, I find Ms. Gold’s evidence to be candid and credible. Her evidence about the evolution of her relationship with Mr. Kamra is forthright and clear. She candidly expresses regret over the trust she placed in him early in their relationship. She describes their interactions with a degree of granularity and precision. For instance, she remembers with some detail the meeting when he first encouraged her to work with him instead of her current mortgage broker. She recalls what he said when he later discouraged her from considering working with a different mortgage broker. She recalls that she was baking a cake when Mr. Kamra first came to her home with the lawyer whom he suggested she retain for advice on the mortgages. In my assessment, her evidence about their dealings together was credible. The presence of supporting detail bolsters its credibility (Konstan, at para. 8; Prodigy Graphics, at para. 46).
66For these reasons, where Ms. Gold’s evidence differs from that of Mr. Kamra, I prefer the evidence of Ms. Gold. The issues on which their evidence differs include whether Mr. Kamra persuaded Ms. Gold to stop working with her existing mortgage broker (I find that he did), whether he discouraged her from working with another mortgage broker (I find that he did), whether he introduced her to the lawyer who advised her on the mortgages (I find that he did), and whether he told her that Ms. Abdallah was his mother, that 272 was Ms. Abdallah’s company, that Ms. Desjardins was his then live-in girlfriend and realty colleague, or that 270 was Ms. Desjardin’s company (I find that he told her none of these things).
The Doctrine of Unconscionability
67Ms. Gold relies on the doctrine of unconscionability and the provisions of the Unconscionable Transactions Relief Act, R.S.O. 1990, c. U.2, to assert that the execution of the Release was an unconscionable transaction and was part of an unconscionable mortgage scheme.
68Unconscionability is a doctrine in equity that may be used to set aside unfair agreements that result from an inequality of bargaining power (Uber Technologies Inc. v. Heller, 2020 SCC 16, 447 D.L.R. (4th) 179, at para. 54; see also Sanders v. Canada’s Choice Investments Inc., 2023 ONSC 195, at para. 68; Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, at pp. 405 and 412; and Norberg v. Wynrib, 1992 CanLII 65 (SCC), [1992] 2 S.C.R. 226, at p. 247)). The purpose of the doctrine of unconscionability, in the words of Dickson C.J., is “the protection of the weak from over-reaching by the strong” (Syncrude Canada Ltd. v. Hunter Engineering Co., 1989 CanLII 129 (SCC), [1989] 1 S.C.R. 426, at p. 462).
69The leading Supreme Court of Canada authority on unconscionability is Uber. The Court in Uber observed that a case may present “serious flaws in the contracting process that challenge the traditional paradigms of the common law of contract, such as faith in the capacity of the contracting parties to protect their own interests”. It held that such flaws should not be ignored; the court should intervene in such cases to protect vulnerable contracting parties from improvident bargains. The Court cited examples of situations warranting intervention on the basis of unconscionability, including that of “the vulnerable couple who signs an improvident mortgage with no understanding of its terms or financial implications”. It reasoned that “these and similar scenarios bear little resemblance to the operative assumptions on which the classic contract model is constructed” (at para. 58).
70As Justice Centa put it in Sanders, intervention in such cases “strikes the proper balance between fairness and commercial certainty. Parties cannot expect courts to enforce improvident bargains formed in situations of unequal bargaining power” (at para. 69).
71To demonstrate unconscionability, a party must show an inequality of bargaining power and a resulting improvident bargain (Uber, at para. 65; Sanders, at para. 72). These concepts are “interrelated.” As an example, evidence of a manifestly unfair bargain may support the inference that one party could not adequately protect their interests in the bargaining process (Sanders, at para. 72).
72There is an inequality of bargaining power where one party cannot adequately protect their interests in the contracting process, for instance due to cognitive, deliberative, or informational capabilities that leave them unable to make a worthwhile judgment about their best interest. The inequality of bargaining power need not be “overwhelming”. It does not require that an individual altogether lack capacity to enter into a contract. However, if they are personally vulnerable or suffer from disadvantages specific to the contracting process, and are therefore unable to understand and appreciate the full impact of the contractual terms, this “cognitive asymmetry” may give rise to inequality of bargaining power (Uber, at paras. 66-72). In these circumstances, “weaker parties may be vulnerable to exploitation in the contracting process and courts can provide relief from an improvident bargain” (Sanders, at para. 73).
73An improvident bargain is one that unduly advantages the stronger party or unduly disadvantages the more vulnerable party. In assessing the terms of the bargain, the courts should consider the surrounding circumstances at the time the contract was entered into, including the market price and the position of the parties (Uber, at paras. 73 to 79).
74The fact that an individual may have had independent legal advice before signing a contract does not mean that it cannot be an unconscionable transaction (Uber, at para. 83; Sanders, at para. 79). Independent legal advice “is relevant only to the extent that it ameliorates the inequality of bargaining power experienced by” the claimant (Sanders, at para. 79). Advice that is pro forma or ineffective may not enhance a person’s ability to protect their interests (Uber, at para. 83).
75The Unconscionable Transactions Relief Act grants the court power to take remedial steps “[w]here, in respect of money lent, the court finds that, having regard to the risk and to all the circumstances, the cost of the loan is excessive and that the transaction is harsh and unconscionable” (s. 2).
Whether the Release and mortgages were unconscionable transactions
76I find that the execution of the Release was an unconscionable transaction and was part of an unconscionable mortgage scheme.
Inequality of bargaining power
The mortgages
77In my view, there was a clear inequality of bargaining power between Ms. Gold and Mr. Kamra, in relation to both the mortgages and the Release itself.
78It is undisputed that Mr. Kamra is an experienced private mortgage lender.
79Ms. Gold’s unchallenged evidence is that she is dyslexic, has weak reading and writing skills, and has trouble spelling and reading large words. She attests that in general she did not understand the transactions that she entered into with Mr. Kamra between 2019 and 2022. For example, she did not understand how much Ms. Abdallah’s second advance to her would cost or what additional fees and transaction costs it would entail. She did not understand how the Second 270 Mortgage resulted in such significant fees.
80Mr. Kamra established, and fostered, a relationship of trust with Ms. Gold. He first met her when she was experiencing financial difficulties and needed to refinance a mortgage. He persuaded her that he could help her. He dissuaded her from using the services of other mortgage brokers. I accept Ms. Gold’s evidence that she trusted Mr. Kamra and believed he would act in her best interests. I accept her evidence that, in the early stages of their relationship, she believed he was in fact protecting her interests and genuinely helping her. It was only after Mr. Kamra arranged the 272 Mortgage that she “started to distrust” him and “thought he was no longer looking out for” her.
81By the time of the 272 Mortgage, she felt “trapped and pressured by the situation.” That was mere months before she signed the Release. In this context of economic pressure, it strains credulity to claim, as the Kamra Parties do, that the bargaining relationship between Ms. Gold and Mr. Kamra was one of equals. Indeed, Ms. Gold’s evidence is clear that she considered both the Release and the Panchal Mortgage to offer a way out of her spiraling debt and escalating conflict with Mr. Kamra.
82The Kamra Parties assert that Ms. Gold is financially sophisticated, noting that she had entered into over 15 mortgages prior to theirs, some of which were private mortgages. They also observe that Ms. Gold acknowledged during cross-examination that she understood in March and April 2022 that the 272 Mortgage had matured. She also acknowledged that she was aware of the nature and extent of her debts in respect of the 272 Mortgage and that 272 claimed she owed them upwards of $776,000.00.
83I agree that Ms. Gold was not new to mortgage loans, including private mortgage loans, and that she understood that she was in significant debt. I am not persuaded, however, that this means she was financially sophisticated. The fact that a borrower may understand the “bottom line” that they are in extensive debt does not in itself mean that they are sophisticated in financial matters. One can understand the end result of a series of mortgage loans without having an understanding of the mechanics, or true costs, of any one of them. In my view, based on the record before me, Ms. Gold did not have an understanding of the true costs of the mortgages, particularly the Second 270 Mortgage and the 272 Mortgage.
84Ms. Gold’s evidence is that, in retrospect, she wishes she had scrutinized the loan arrangements more closely, but that she trusted Mr. Kamra to protect her interests. She “took [Mr. Kamra] at his word that he was looking out for [her] best interests” and signed the mortgage paperwork. That she held this view underscores that she was not the sophisticated borrower the Kamra Parties describe her to be and that her relationship to Mr. Kamra was not one of equal bargaining partners.
85My findings on unequal bargaining power are reinforced by the fact that Mr. Kamra was working as Ms. Gold’s real estate agent during much of this time frame. As her real estate agent, he was her fiduciary and obligated to act in her best interest. He was her agent when he brokered the Second 270 Mortgage. He was her agent when he brokered the 272 Mortgage. He was her agent when she complained to him afterward that the 272 Mortgage seemed unfair, and he began threatening her that 272 would put her in power of sale if she did not repay the money. That Mr. Kamra was her fiduciary when negotiating these mortgages and making these threats simply underscores that his bargaining power significantly exceeded hers. It is implausible, in the face of this fiduciary relationship and the record as a whole, to suggest otherwise.
86My findings are also supported by the evidence, unchallenged by the Kamra Parties and summarized above, that when Ms. Gold began to question the mortgage loan arrangements, Mr. Kamra threatened her with criminal prosecution. To put it mildly, it was not appropriate for Mr. Kamra, her real estate agent and her fiduciary, and a licensed professional, to make these threats. It was all the more inappropriate that he made these threats to a borrower who was clearly in over her head financially, stressed about her borrowing costs, and raising questions about the loans he had brokered. I find that Mr. Kamra was trying to intimidate and bully Ms. Gold, to stop her from asking or complaining about the loan arrangements.
87I am satisfied that, in respect of the mortgage negotiations, Ms. Gold was in a position of unequal bargaining power relative to Mr. Kamra.
The Release
88I find the same in respect of the Release. Based on the record before me, Ms. Gold’s understanding of the Release, and the implications for her of signing it, was limited. Moreover, she signed it largely out of desperation and the misguided view that it would help to extricate her from her difficult circumstances. I accept her evidence that she did not understand the Release, but thought that because she could not afford to pay Mr. Tofilovski to dispute the mortgages, she had no choice but to sign it. I also accept her evidence that Mr. Kamra convinced her that the Release was a way out of her situation, including the power of sale proceedings and spiraling mortgage debt.
89The Kamra Parties assert that Ms. Gold had equal bargaining power in respect of the Release, based in part on the fact that she had independent legal advice when she signed it.
90I do not agree. As discussed above, the jurisprudence is clear that the fact that an individual had independent legal advice before signing a contract “is relevant only to the extent that it ameliorates the inequality of bargaining power experienced by” the claimant. Advice that is pro forma or ineffective may not enhance a person’s ability to protect their interests (Uber, at para. 83; Sanders, at paras. 79-80).
91The advice Ms. Gold received from Mr. Tofilovski, the lawyer who was representing her when she signed the Release, was, in my assessment, both pro forma and ineffective. Her meeting with him was recorded. The meeting lasted approximately eleven minutes. I would characterize that as quite brief, given the significance of the matter on which Mr. Tofilovski was to be advising Ms. Gold.
92During the meeting, their discussion focused in large part on whether the Kamra Parties would agree to amend the Release to reduce or waive the administrative and discharge fees payable upon discharge of the 272 Mortgage. In the context of all the dealings between Ms. Gold and the Kamra Parties, her level of indebtedness, and the very high fees she had been paying to date on the mortgages, as detailed below, this was a rather minor point on which to focus. It strongly suggests that Ms. Gold did not understand the significance of the Release, and that Mr. Tofilovski either did not understand it, or understood it but did not advise her on it.
93After the meeting, Mr. Tofilovski sent Ms. Gold an email indicating that the Release meant that she could not sue anyone regarding the 270 Mortgage and the 272 Mortgage – the two mortgages with the most onerous borrowing costs, as I discuss below. His email suggests that he discussed this during the meeting too, although for reasons that are unexplained, this part of the meeting was not recorded.
94This was a cursory comment about what Mr. Tofilovsky himself described as the “crux” of the Release. It was sent via email, after his meeting with Ms. Gold and after the Release was signed. There is no evidence that Mr. Tofilovsky cautioned Ms. Gold, in this email or otherwise, about what it would mean, practically speaking, for her to relinquish her right to sue. There is no evidence that he advised her on whether it was worthwhile to give up the right to sue. Without the benefit of such advice, it was impossible for Ms. Gold to meaningfully understand his brief comment or adequately assess whether the Release was a worthwhile bargain. I find that Mr. Tofilovsky did not adequately advise Ms. Gold on an essential, and likely the most crucial, aspect of the Release. Drawing on the language of Uber, he did not provide Ms. Gold with legal advice that enhanced her ability to protect her interests.
95The legal advice Ms. Gold received on the mortgages was also pro forma and ineffective. She received legal advice on the First 270 Mortgage, the Second 270 Mortgage, and the 272 Mortgage. However, this was not independent legal advice: Mr. Kamra introduced Ms. Gold to the lawyer, told her she could use him as her lawyer, arranged many of her meetings with the lawyer, and indeed was present for at least one of them. Nor would I call it “advice,” given Ms. Gold’s evidence, uncontroverted on this point, that the lawyer “explained virtually nothing” to her about any of the mortgage transactions.
96Finally, the Kamra Parties state that Ms. Gold’s equal bargaining power is reflected in the facts that she negotiated certain amendments to the Release and obtained certain consideration from the Release.
97It is true that Ms. Gold requested and obtained a reduction or waiver of the administrative and discharge fees to be paid upon discharge of the 272 Mortgage upon discharge. However, I question whether this was of any real value to her, or reflective of actual bargaining power on her part, given that there was no indication that she would ever be able to discharge the 272 Mortgage. Indeed, even when she obtained the Panchal Mortgage, she could not discharge the 272 Mortgage in full.
98I also acknowledge that she obtained consideration in the form of the Kamra Parties’ consent to the registration of a third mortgage. Certainly this was of some value to her. Yet the third mortgage turned out to be the Panchal Mortgage, which, like its predecessors, charged significant fees to Ms. Gold and earned significant money for the Kamra Parties. It is not clear to me that the right to take out the Panchal Mortgage actually benefited Ms. Gold, or truly “cost” the Kamra Parties much at all. I am therefore not persuaded that it reflected true consideration or reveals any real bargaining power on Ms. Gold’s part.
99Finally, Ms. Gold was paid $700 for signing the Release. I agree that this payment was proper consideration. It was extremely modest in quantum, however, both in absolute terms and relative to what she gave up by signing the Release, and what the Kamra Parties gained by setting Ms. Gold up to take out the Panchal Mortgage. I am unable to view this $700 payment as evidence of Ms. Gold’s equal bargaining power. If anything, it is evidence of the opposite.
Resulting improvident bargain
The mortgages
Borrowing costs
100Whether this inequality of bargaining power resulted in an improvident bargain is to be assessed in the context of the surrounding circumstances at the time of contract formation, including market price and the position of the parties (Uber, at paras. 75-76, Sanders, at para. 92).
101In Sanders, the court began its analysis of improvidence by calculating the cost of the loan at issue to the plaintiff (at para. 93). I do the same here.
102Under section 1 of the Unconscionable Transactions Relief Act, the cost of a loan is defined to mean
the whole cost to the debtor of money lent and includes interest, discount, subscription, premium, dues, bonus, commission, brokerage fees and charges, but not actual lawful and necessary disbursements made to a land registrar, a local registrar of the Superior Court of Justice, a sheriff or a treasurer of a municipality.
103Thus, in calculating the total cost of the loans to Ms. Gold, I am to include all interest, fees, brokerage fees and charges. I am to exclude disbursements such as registration fees.
104The mortgages at issue for the purposes of the Release are the First 270 Mortgage, the Second 270 Mortgage, and the 272 Mortgage. I focus on those three mortgages in this analysis.
105The amount of the First 270 Mortgage was $410,000.00. When calculating the cost to Ms. Gold of the First 270 Mortgage, I include the following fees and charges to Ms. Gold, all of which are set forth in the Kamra Parties’ own accounting:
Fee:
Amount:
Lender fee
$36,500.00
Legal fees
$3,075.42
3 months’ interest upon default
$7,250.00
NSF fee
$350.00
Statement fee
$550.00
Discharge administration fee
$450.00
Prepaid interest
$57,359.00
Interest arrears
$9,666.66
Total borrowing cost
$115,201.08
106Thus, Ms. Gold paid $115,201.08 to borrow $410,000.00 for approximately 12 months. Her annual borrowing costs were 28.1% for approximately one year.
107The amount of the Second 270 Mortgage was $650,000.00. When calculating the cost of the Second 270 Mortgage, I include the following fees and charges to Ms. Gold:
Fee:
Amount:
Lender fee
$33,775.00
Legal fee
$2,398.98
3 months’ interest upon default
$14,862.50
Statement fee
$550.00
Discharge administration fee
$450.00
Inspection fee
$700.00
Default administration fee
$350.00
Prepaid interest
$15,078.12
Collateral registration not advanced
$167,500.00
Appraisal fee
$900.00
Interest arrears
$1,954.52
Total borrowing cost
$238,519.12
108I pause to comment briefly on the “collateral registration not advanced” fee of $167,500.00. There is little documentation describing it, although the Statement of Receipts and Disbursements for the Second 270 Mortgage and the accounting from the Kamra Parties both make clear that it was an amount deducted from the mortgage principal, along with other fees such as lender fees and prepaid interest. It formed part of the mortgage principal, and part of what Ms. Gold continued to owe going forward, but did not form part of the monetary advance made to her. It therefore functioned as a charge or fee paid by Ms. Gold, and I treat it as such.
109Based on the above, Ms. Gold paid $238,519.12 to borrow $650,000.00 for 12 months. Her borrowing costs were 36.7% for one year.
110Finally, the amount of the 272 Mortgage was $1,000,000.00. When calculating the cost of the 272 Mortgage, I include the following fees and charges to Ms. Gold:
Fee:
Amount:
Collateral registration not advanced
$225,000.00
Lender fee
$54,250.00
Legal fee
$2,198.08
Prepaid interest
$61,961.25
Renewal fee 3 months
$33,775.00
Prepaid interest
$15,078.12
Renewal fee 3 months
$37,194.72
Prepaid interest
$16,604.78
Renewal fee 3 months
$40,960.68
Prepaid interest
$18,286.02
Statement fee
$500.00
Discharge administration fee
$599.00
Inspection fees x3
$2,100.00
Total borrowing cost
$508,507.65
111Thus, Ms. Gold paid $508,507.65 to borrow $1,000,000.00 for approximately 10 months. Her borrowing costs were 50.9% for that ten-month period.
112The “collateral registration not advanced” fee for the 272 Mortgage, like the one for the Second 270 Mortgage, was an amount deducted from the mortgage principal before money was advanced to Ms. Gold. The documentation for the 272 Mortgage makes clear that the mortgage was registered in the amount of $1,000,000.00 and that the amount of the loan was $775,000.00. I therefore consider the “collateral registration not advanced” amount of $225,000.00 to be a charge or fee.
113I accept that there were some risks to the Kamra Parties associated with the three mortgages. Ms. Gold was indeed in debt and had limited ability to pay her loans. On the other hand, these fees, including $392,500.00 reflecting “collateral registration not advanced” and $184,367.29 in prepaid interest, were generally deducted at the outset when each new advance was made to Ms. Gold, either before the prior mortgage was paid out or before the net advance was made. These quick returns, in my view, mitigated much of the risk associated with the loans. Moreover, by securing their loan against the value of the property, a mortgagee carries less risk than a lender of unsecured debt.
114I find that the Second 270 Mortgage, whose borrowing costs were 36.7% for the year, and the 272 Mortgage, whose borrowing costs were 50.9% over a ten-month period, were objectively very high – the 272 Mortgage egregiously so. Indeed, on an annualized basis, the borrowing costs on the 272 Mortgage were over 60% and thus constitute a criminal rate of interest under section 347 of the Criminal Code. No evidence was presented by the Kamra Parties to suggest that these borrowing costs are on par with what one would find in the market. I cannot imagine that they are. In Sanders, this court found a one-year mortgage with borrowing costs of 34.2% to be “much higher than the usual market price for such a mortgage” (at para. 98, citing Uber, at paras. 73 to 79). I make the same finding in respect of these mortgages, whose borrowing costs are even higher and, in the case of the 272 Mortgage, over the 60% threshold established in the Criminal Code. These mortgages were, in my view, manifestly unfair bargains. This fact supports the inference that Ms. Gold was unable to protect her interests adequately.
115I also note the following about the fees charged to Ms. Gold by the Kamra Parties on the three mortgages:
a. Each mortgage entailed lender fees, which together totalled $124,525.00. Additionally, the 272 Mortgage was treated as a series of three-month mortgages that were automatically renewed, with each separate three-month mortgage entailing its own sizeable three-month renewal fee. These three-month renewal fees together totalled $111,930.40. The lender and renewal fees combined totalled $236,455.40.
b. The total interest that Ms. Gold paid on the mortgages, including prepaid interest and interest arrears, was $195,988.47. Additionally, the First 270 Mortgage and Second 270 Mortgage imposed fees for “3 months of interest upon default” that together totalled $22,112.50. As discussed below, these fees are illegal. The interest fees, including the “3 months of interest upon default” fees, together totalled $218,100.97.
c. The mortgages also imposed NSF fees, statement fees, discharge administration fees, default administration fees, and inspection fees, which together totalled $6,599.00. In addition, each mortgage required Ms. Gold to pay legal fees to the Kamra Parties’ lawyer, Kalemi Law, totalling $7,672.48. Together, such fees totalled $14,271.48.
d. The “collateral registration not advanced” amounts for the Second 270 Mortgage and 272 Mortgage total $392,500.00.
Illegal fees
116I find that the improvidence of the bargain is underscored by the numerous illegal charges levied by the Kamra Parties on the First 270 Mortgage, Second 270 Mortgage, and 272 Mortgage.
117For example, the Kamra Parties charge numerous “3 months of interest upon default” fees on the First 270 Mortgage and Second 270 Mortgage. Together, these add up to $22,112.50. Such penalties are considered by law to be penalties and therefore unenforceable. Mortgagees often invoke section 17(1) of the Mortgages Act, R.S.O. 1990, c. M.40, as authority to impose such fees. That provision states in relevant part that a mortgagor in default may redeem the mortgage upon paying three months of interest. Importantly, however, the courts have held that section 17(1) does not permit such charges to be imposed after a mortgage has matured and gone into default. When these charges are imposed at that stage, they are “nothing more than a penalty” and are improper, because “the lender has already received (or is entitled to receive) the whole of the income stream contracted for” (Lee v. He, 2018 ONSC 5932, 2 R.P.R. (6th) 154, at para. 27; see also NRD Management Services Ltd. v. Dorothy Litwin, 2021 ONSC 3238, 155 O.R. (3d) 729, at paras. 56-57).
118The jurisprudence also limits the scope of other permitted charges upon default. While a mortgagee “is generally entitled to be indemnified for the costs that are incurred to respond to a default by a mortgage,” those costs must “be reasonable and properly incurred” (Chong v. Kaur, 2013 ONSC 6252 at para. 40). Thus, the lender may seek to recover from the borrower the administrative costs they incur that were caused by the default; such costs can generally be pre-estimated and fixed in the contract. However, charges imposed upon default “that are not genuine pre-estimates of costs actually incurred by a lender are penalties that can be void at common law and may violate the statute” (Litwin, at para. 44, citing BMMB Investments Limited v. Naimian, 2020 ONSC 7999, at paras. 35-37).
119I find that some of the default-related charges levied by the Kamra Parties do not reflect the true fees they incurred due to Ms. Gold’s default and are therefore improper. These include, for example, the default fees and likely also the NSF fees, as there is no evidence before me that the Kamra Parties incurred such fees.
120In addition, the sequential three-month renewals for the Second 270 Mortgage, and their sizeable fees, are not explained in any of the documents for the Second 270 Mortgage. Mr. Kamra acknowledged in cross-examination that those renewals were never put to Ms. Gold in writing. Rather, he says, Ms. Gold “verbally” agreed to those renewals and fees – a claim in support of which he offers no particulars – or should have known they were being charged because her mortgage was in default.
121I do not accept this rather astonishing claim. A loan agreement should explain in writing when the loan becomes due and what charges will be imposed if it is not paid when due. This is a basic proposition. A borrower cannot be expected to divine this important information. This is particularly important where, as here, default seems to have resulted in a series of additional short-term loans, each more expensive than the last, and none of them clearly explained to Ms. Gold. In my view, this seemingly secret regime of automatic loan renewals, at ever-increasing cost to Ms. Gold, was illegal and a further reflection of the unconscionable nature of the mortgage loans.
Concealment of non-arm’s-length nature
122As discussed above, I find that Mr. Kamra did not disclose to Ms. Gold the reality of his relationships with each of her lenders – that is, that Ms. Abdallah was his mother, that 272 was Ms. Abdallah’s company, that Ms. Desjardins was his then live-in girlfriend and realty colleague, or that 270 was Ms. Desjardin’s company. These are material facts for anyone in a fiduciary role to disclose to a person who places their trust in them. He ought to have disclosed these facts to Ms. Gold.
123Additionally, I reject altogether Mr. Kamra’s claim that the mortgages he arranged for Ms. Gold were all arm’s-length. I find, to the contrary, that Mr. Kamra was the directing mind behind the loan arrangements between Ms. Gold and Ms. Abdallah and Ms. Desjardins and their companies. He was behind the mortgages, but concealed this fact from Ms. Gold.
124By doing so, Mr. Kamra made it seem as though he arranged for Ms. Gold’s mortgages from lenders who were at arm’s length to him. In fact, however, he was not negotiating on her behalf with arm’s-length lenders. Indeed, he was not negotiating at all: he was simply giving himself Ms. Gold’s business.
125He also created the false impression that he was arranging loans that reflected market rates and were similar to what Ms. Gold would be able to obtain if she worked with someone other than Mr. Kamra. In fact, the mortgages did not reflect market rates, and Ms. Gold almost certainly would have been better off working with someone other than Mr. Kamra.
126Finally, Mr. Kamra’s deception created the false impression that he was helping Ms. Gold to pay off each successive debt. In reality, he was helping her to pay off one debt to him by taking on a new, and even more expensive, debt to him. He benefitted himself, while pretending to protect her interests. His conduct magnifies the unconscionable nature of the mortgage transactions.
The Release
127In considering whether the Release was an improvident bargain, I make several observations.
128First, as discussed above, the consideration that Ms. Gold ostensibly obtained by signing the Release was in my view of little or no actual value to her.
129Second, the Release purported to extinguish Ms. Gold’s right to sue in respect of either the 270 Mortgage or the 272 Mortgage. I have found that she entered into both of those mortgages from a position of unequal bargaining power and that they were both improvident bargains. The Release itself was also an improvident bargain, as it purported to deprive her of the right to try to remedy the improvident bargains of the mortgages.
130Third, the Release contained an illegal provision purporting to bar Ms. Gold from making any regulatory complaints in respect of the Kamra Parties. Such a provision is void for public policy and unenforceable. It is also most unethical for any licensed professional, like Mr. Kamra, to ask a client or former client to give such an undertaking. The fact that the Release contained such a provision in my view further demonstrates that Ms. Gold’s signing of it was an unconscionable transaction.
Conclusion
131For the reasons above, I conclude that there was an inequality of bargaining power as between Ms. Gold and Mr. Kamra, and a resulting improvident bargain, in respect of the mortgage transactions and the Release. I find that the Release is void and unenforceable because its execution was an unconscionable transaction and was part of an entire unconscionable mortgage scheme.
132I accordingly dismiss 272’s motion (in the 272 Action) and the Kamra Parties’ cross-motion (in the Gold Action) for a declaration under rule 21.01(1)(a) upholding the Release as valid and enforceable. I grant Ms. Gold’s motion (in the Gold Action) for a declaration under rule 21.01(1)(a) that the Release is void and unenforceable.
133For the same reasons, I dismiss the Kamra Parties’ motion under rule 21.01(1)(b) to strike out the Statement of Claim in the Gold Action on the basis that it discloses no reasonable cause of action as against them. I also dismiss the Kamra Parties’ motion under rule 25.11(c) to strike out all or part of the Statement of Claim in the Gold Action and Ms. Gold’s Statement of Defence in the 272 Action. The Release is void and unenforceable; these motions therefore necessarily fail.
134In light of my findings, it is not necessary for me to consider Ms. Gold’s request, framed in the alternative, for an order that whether the Release is enforceable is an issue to be determined at trial.
Costs
135In exercising my discretion to fix costs under section 131 of the Courts of Justice Act, R.S.O. 1990, c C.43, I may consider the factors enumerated in Rule 57.01. Those factors include the result achieved, the amounts claimed and recovered, the complexity and importance of the issues in the proceeding, the principle of indemnity, the reasonable expectations of the unsuccessful party, and any other matter relevant to costs.
136In the recent case of Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, the Ontario Court of Appeal restated the general principles to be applied when courts exercise their discretion to award costs. The Court held that, when assessing costs, a court is to undertake a critical examination of the relevant factors, as applied to the costs claimed, and then “step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable”. The overarching objective is to fix an amount for costs that is objectively reasonable, fair, and proportionate for the unsuccessful party to pay in the circumstances of the case, rather than to fix an amount based on the actual costs incurred by the successful litigant.
137Applying these principles here, I note that Ms. Gold was entirely successful in her motion and in the Kamra Parties’ motions. She had to do considerable work to put together the evidentiary record given the various transactions and interactions at issue, and given the Kamra Parties’ counsel’s refusal to disclose any accounting of the mortgage loans until required to do so by court order. It is appropriate that she be indemnified for her costs.
138Ms. Gold seeks $15,271.20 in costs on a partial indemnity basis, plus HST, the counsel’s fee for attendance at the hearing, and disbursements, for a total of $23,575.33, inclusive of HST and disbursements. These costs are reasonable, fair, and proportionate. I order the Kamra Parties to pay them within 30 days.
Order Granted
139Ms. Gold’s motion seeking a declaration under rule 21.01(1)(a) that the Release is void and unenforceable is granted.
140All the motions brought by 272 and the Kamra Parties are dismissed.
141The Kamra Parties are to pay Ms. Gold $23,575.33, inclusive of HST and disbursements, within 30 days.
Parghi J.
Released: December 6, 2024
COURT FILE NO.: CV-23-00698487-0000 and CV-23-00703334-0000
DATE: 2024-12-06
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2724582 ONTARIO INC., Plaintiff
– and –
RHONDA GOLD, Defendant
AND BETWEEN:
RHONDA GOLD, Plaintiff
– and –
SAM KAMRA, 877799 CANADA INC. o/a REAL ESTATE BAY REALTY,
SANA ABDALLAH, DANIELLE DESJARDINS, 2707551 ONTARIO INC., 2724582 ONTARIO INC., and JITENDRA PANCHAL, Defendants
REASONS FOR DECISION
Parghi J.
Released: December 6, 2024