Ontario Superior Court of Justice
Court File No.: CV-19-00624942-0000
Date: 2025-03-05
Between:
Kyriakoula Arsalides, Eliana Arsalides and Theodore Arsalides and Kyriakoula Arsalides and John Bartzis as Estate Trustees of Theodore Bartzis
Plaintiffs
and
Maria Surovova, also known as Maria Sourovova, Maria Mortgage Services Inc., Konstantin Surovov, MA Mortgage Architects Inc., Homeguard Funding Ltd., 2236383 Ontario Inc. operating as Silver Line Mortgage Group, Krystian Catala, Clients Partners & Associates Inc. operating as Mortgage Alliance Accumetrix, IPB Realty & Finance Inc. o/a IPB Finance, MCC Mortgage Holdings Inc., MCC Asset Management Inc., New Haven Mortgage Corporation, Brightpath Capital Corporation, Ancon Investments Inc., HL Mortgage Investments Inc., Candida Carreiro, Natalie Rose Andrade, Epstein & Associates Professional Corporation, Mark Aaron Epstein, Roy Suk Hwang, Andrew Unger Professional Corporation, Andrew William Unger and Eric Howard Smoskowitz
Defendants
Marcus A. Knapp, for the Plaintiff
Maria Surovova, also known as Maria Sourovova, and Maria Mortgage Services Inc., self-represented defendants
Heard: January 30, 2025
Justice: Rohit Parghi
Reasons for Decision
Introduction
1The Plaintiffs Kyriakoula Arsalides and Eliana Arsalides (“Kyriakoula,” “Eliana,” and together the “Plaintiffs”) allege fraud against Maria Surovova and her company, Maria Mortgage Services Inc. (together, the “Surovova Defendants”). They say that the Surovova Defendants carried out a mortgage churning scheme through which Ms. Surovova induced them to place a series of mortgages on their properties and transfer the proceeds from those mortgages to her, and also induced Eliana to transfer proceeds from the sale of her condominium to her. Ms. Surovova did all this under the pretext that she would apply the funds transferred to her against the Plaintiffs’ mortgages. In fact, it is alleged, she made no payments against the mortgages, and simply misappropriated the funds for her personal use. The Plaintiffs say they suffered losses of approximately $2.6 million.
2This matter was tried before me virtually. For the reasons below, I grant judgment in favour of the Plaintiffs against the Surovova Defendants.
Preliminary Orders
3Ms. Surovova chose not to attend the trial. She was well aware of the trial dates and start time. She was copied on all correspondence regarding trial scheduling, including correspondence regarding the “to be spoken to” and long trial scheduling court attendances in February 2023, which she chose not to attend. The trial dates were set in March 2024, almost a year ago, at a pre-trial conference presided over by Wilson J. (as she then was). Ms. Surovova was made aware of the scheduled trial date at that time. In January 2025, Ms. Surovova requested an adjournment of the trial before Chalmers J. Her request was denied. In anticipation of the trial, she received affidavits from the Plaintiffs. One week before the trial, she received an email from court staff confirming the details of the trial.
4Seven minutes before the scheduled start of the trial, she emailed court staff to advise that she had a sore throat, could not speak, and therefore could not attend. Court staff told her via prompt email reply that she had to attend the trial hearing to request an adjournment. She emailed back, reiterating that she could not do so because she was unable to speak. Court staff once again informed her that she had to attend the trial hearing to request the adjournment.
5At the scheduled start time of trial, Ms. Surovova was not present. Court staff contacted her by telephone and told her, for the third time that morning, that she had to attend virtually to request an adjournment. She told court staff that she would do so. She did not. Court staff called a second time and she did not answer her phone. Matters were held down for an additional 15 minutes after she first advised she would join virtually. She did not ever join the hearing.
6I then ordered that the trial proceed without the Surovova Defendants being present, in accordance with rule 52.01(2)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 52.01(2)(b) provides that where an action is called for trial and the plaintiff attends trial but the defendant does not, the trial judge may dismiss any counterclaim and allow the plaintiff to prove the claim. In my view it is abundantly clear, based on the chronology set forth above, that Ms. Surovova knew that the trial would be held on January 30, 2025, commencing at 11 am, and chose not to appear.
7Additionally, I ordered that the Statement of Defence of the Surovova Defendants be struck pursuant to rule 52.01(2)(d), which provides that where an action is called for trial and a party fails to attend, the trial judge may also “make such other order as is just”. This court has held that the enumerated choices available to me as the trial judge in rule 52.01(2) “are not meant to be exhaustive,” and that the court also has “the inherent authority to strike the statement of defence” of a defendant who does not attend trial, as such a pleading “is of no assistance to the court and, on principle, should be struck. It is illogical that the pleading stand in place of the defendant” (Mignelli v. Scavo, para 5). To be sure, I am not required to strike Ms. Surovova’s defence (see Berky v. Cruz, 2016 ONSC 4067, paras 3-10). However, in light of Ms. Surovova’s blatant and intentional disregard of the court’s processes, I am of the view that striking her defence is appropriate. In the circumstances, it would not be fair or appropriate for Ms. Surovova to be able to choose not to attend trial and still derive the benefit of having a pleading before the court.
8My view is underscored by the fact that in June 2023, Ms. Surovova was ordered to either retain new counsel or serve a notice of intention to act in person within 30 days, failing which the court could strike out her defence. To this day, Ms. Surovova has taken neither step. Maria Mortgage Services Inc. was likewise ordered to appoint new counsel or seek an order granting it leave to be represented by a person other than a lawyer within 30 days, failing which the court could strike out its defence. To this day, Maria Mortgage Services Inc. has taken neither step. It would be open to me to strike the Surovova Defendants’ Statement of Defence on these bases alone, even if Ms. Surovova had attended at trial.
9As a consequence of their Statement of Defence being struck, the Surovova Defendants are noted in default and are deemed to admit the truth of the allegations against them in the Statement of Claim.
10I further ordered that the Plaintiffs could provide their trial evidence by way of affidavit. A previous Endorsement of Chalmers J. granted leave to the Plaintiffs to provide their evidence in chief by way of affidavit, subject to the trial judge’s discretion. I ordered that it was appropriate to proceed on this basis, and we did so.
Analysis
Factual Findings
11I grant judgment in the Plaintiffs’ favour. Although I have struck the Statement of Defence of the Surovova Defendants, I have, nonetheless, put the Plaintiffs to the proof of their claim. The evidence contained in the affidavits they tendered at trial supports a judgment on liability and damages.
12Based on the evidence before me, I make the following factual findings:
a. In fall 2015, Kyriakoula Arsalides needed to find funds to pay property taxes owed by her son on his home. Ms. Surovova suggested that Kyriakoula put a mortgage on her home and use the mortgage funds to pay the taxes owed. Kyriakoula agreed. Ms. Surovova arranged for a private mortgage for Kyriakoula of $130,000.00 in December 2015. She told Kyriakoula that all dealings with the lender would be through her, Ms. Surovova. Kyriakoula received $75,328.77 in proceeds from the mortgage.
b. In late 2015, Kyriakoula again contacted Ms. Surovova because her daughter, Eliana, needed money to purchase a condominium. Ms. Surovova again encouraged Kyriakoula to borrow against her home. In April 2016, Kyriakoula took out a mortgage of $627,500.00 against her home, from which she received proceeds of $433,069.22.
c. In 2016, Eliana, who is Kyriakoula’s daughter, contacted Ms. Surovova about obtaining a mortgage against her condominium to borrow money she needed to help with expenses for her upcoming wedding. Ms. Surovova told her that a private loan was not available for such a small amount but that Eliana could take out a mortgage for a larger amount, and then provide Ms. Surovova with the excess funds for the purpose of repaying the loan. In June 2016, Eliana took out a mortgage of $125,000.00 from which she received proceeds of $120,219.28. On Ms. Surovova’s direction, she wrote a cheque for $95,219.28 to “Maria Mortgage Service”.
d. Shortly after Eliana’s wedding, Ms. Surovova told her that the lender needed immediate repayment of the money she had borrowed. Eliana took out a significant cash advance on her credit card and transferred $20,000.00 to Ms. Surovova.
e. In the months and years that followed, the Plaintiffs took out additional mortgages or renewed or extended existing mortgages on their properties, all on the urging of Ms. Surovova, and often on the initiative of Ms. Surovova, who would tell them that they needed to provide more “collateral” to their existing lenders. On each occasion, the Plaintiffs transferred all or almost all of their net mortgage proceeds to Ms. Surovova, after she told them that she would direct those funds to be paid against their mortgages. On each occasion, Ms. Surovova kept the funds herself, rather than directing them towards the Plaintiffs’ mortgages as she promised she would do. On each occasion, Ms. Surovova handled all aspects of the mortgage administration, including finding the lenders, preparing the paperwork for the Plaintiffs to sign, and requiring that all communications between the lenders and the Plaintiffs flow through her.
f. On this basis, in October 2016, Eliana increased the existing mortgage on her condominium by $100,000.00 and Kyriakoula took out mortgages against her home in December 2016 for $1,365,000.00 and again in March 2017 for $386,400.00.
g. The March 2017 mortgage went into default and enforcement proceedings were commenced. Kyriakoula was “shocked” and did not understand what was happening or why her mortgage payments, at $15,000.00 per month between the two mortgages, were so high. Ms. Surovova assured Kyriakoula that she would “take care of everything” and suggested another mortgage against Eliana’s condominium. Eliana agreed, and took out another mortgage against her condominium in June 2017 for $125,000.00.
h. This pattern continued. In November 2017, Eliana took out a further mortgage on her condominium for $415,000.00. In April 2018, Kyriakoula took out two additional mortgages on her home for $1,770,000.00 and $590,000.00 respectively. In June 2018, Kyriakoula’s son took out a mortgage against his home for $125,000.00. Later that year, Ms. Surovova suggested that Eliana sell her condominium to assist Kyriakoula; she did so in September 2018, and provided the net proceeds from the sale of $83,080.87 to Ms. Surovova.
i. In January 2019, faced with further enforcement proceeds on the mortgage on her home, Kyriakoula consulted a lawyer and learned that she owed a total of $2,172,269.66 on the two April 2018 mortgages. She had believed she owed no more than $780,000.00.
j. In May 2019, Ms. Surovova provided Kyriakoula with a mortgage discharge statement that said that Kyriakoula only owed her $367,085.23 on the $1,770,000.00 mortgage from April 2018, when in fact she owed $1,801,547.13.
k. Kyriakoula eventually had to sell her home and use the proceeds to discharge mortgages on her own and her son’s properties, as both were subject to enforcement proceedings.
13I find, based on the record before me, that the Plaintiffs trusted and relied on Ms. Surovova and transferred mortgage proceeds to her in the belief that she would direct those funds to the mortgage lenders to pay down the mortgages.
14I further find that Ms. Surovova provided no information to the Plaintiffs about how she used the funds they paid to her, despite repeated requests. She has not repaid any of the amounts to the Plaintiffs. There is no evidence to suggest that she directed any of the funds to the lenders.
Liability and Damages
15I am satisfied that the elements of civil fraud are made out in the record before me. These elements are well established: (a) there must be a false representation made by the defendant; (b) there must be some level of knowledge of the falsehood of the representation on the part of the defendant, whether through knowledge or recklessness; (c) the false representation must have caused the plaintiff to act; and (d) the plaintiff’s actions must have resulted in a loss (Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, para 21).
16The first of these elements is clearly established in the record. Ms. Surovova made several false representations to the Plaintiffs that the mortgages were necessary and that the money the Plaintiffs paid to her would be applied against their mortgages.
17Turning to the second element, Ms. Surovova knew those statements to be false at the time she made them. She never applied the payments against the Plaintiffs’ mortgages, and it is clear that she never intended to. The record contains emails which demonstrate that she was trying to deceive them.
18The third element is also satisfied. Her false representations to the Plaintiffs are what caused them to act. It was only in response to her representations that they took out additional mortgages, extended or renewed their existing mortgages, and sold Eliana’s condominium. It was only in response to the representations that they forwarded the net proceeds from these mortgages and the condominium sale to her.
19It is clear that the Plaintiffs’ actions resulted in a loss to them. The record establishes that between 2016 and 2018, the Plaintiffs transferred $1,611,886.43 to Ms. Surovova, through ten payments made between June 15, 2016 and September 20, 2018. These amounts went from the Plaintiffs’ bank accounts to Ms. Surovova’s accounts and were received by Ms. Surovova. Additionally, the Plaintiffs incurred $1,054,172.70 in fees, interest, penalties, and other charges on the various mortgages. Their total damages are $2,666,059.13.
20I am accordingly satisfied that the record demonstrates that the Surovova Defendants committed civil fraud against the Plaintiffs.
21I am also satisfied that the elements of breach of fiduciary duty are made out.
22The Supreme Court of Canada has identified three characteristics of a fiduciary relationship: (a) the fiduciary has scope for the exercise of some discretion or power, (b) the fiduciary can unilaterally exercise that discretion or power so as to affect the beneficiary’s legal or practical interests, and (c) the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary (Lac Minerals Ltd. v. International Corona Resources Ltd., pp. 645-646).
23These elements are all found in the relationship between the Surovova Defendants and the Plaintiffs. She was their mortgage broker. She had scope to exercise her power, and did so by acting on the Plaintiffs’ behalf when setting up the various mortgages. She arranged for the mortgages from start to finish, including by finding the lenders and preparing the mortgage paperwork. She insisted that communications between the Plaintiffs and the lenders flow through her. She could, and did, unilaterally exercise her power so as to affect the Plaintiffs’ interests, including by telling the Plaintiffs that they needed to extend, renew, or take out additional mortgages, and by negotiating mortgage terms that affected the Plaintiffs’ interests (such as by imposing penalties and fees upon discharge). The Plaintiffs were vulnerable to her: it is clear that they trusted her when she told them they needed to increase their mortgage debt, and that they relied on her and trusted her to deal with the mortgage proceeds as she said she would. She had a fiduciary duty to them. It is a tremendous understatement to say that her conduct, described above, violated that duty.
Conclusion
24I find the Surovova Defendants liable for civil fraud and breach of fiduciary duty.
25The total damages to the Plaintiffs are $2,666,059.13, as detailed above. The Plaintiffs previously settled this litigation against some of the defendants other than the Surovova Defendants for $1,000,000.00. I accordingly award the balance of the damages incurred by the Plaintiffs, in the amount of $1,666,059.13, to be paid by the Surovova Defendants.
26I find that the Surovova Defendants obtained these funds from the Plaintiffs by false pretences and/or fraudulent misrepresentation, and through fraudulent misrepresentations by Ms. Surovova while she was acting as the Plaintiffs’ fiduciary.
Costs
27In 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 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. 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.
28In Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, the Court of Appeal for Ontario 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” (at para. 60; see also Boucher v. Public Accountants Council (Ontario), para 24). 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.
29Applying these considerations here, I am of the view that the Plaintiffs are entitled to recover costs from the Surovova Defendants. The Plaintiffs were entirely successful against the Surovova Defendants in this action. It is appropriate that they receive their costs.
30The costs sought are reasonable. Having regard to the action as a whole, the hourly rates and amounts billed by counsel for the Plaintiffs are reasonable given the complexity and nature of the file. Counsel allocated work on the file to more junior team members where appropriate. Having regard to the trial specifically, the affidavit evidence tendered at trial was of great assistance to the court and enabled the matter to be heard efficiently.
31The disbursements are also reasonable and the Plaintiffs are entitled to recover them from the Surovova Defendants.
32As discussed above, prior to trial, the Plaintiffs settled this action against some of the other defendants. Up until that settlement was reached, the Surovova Defendants were two of several defendants. It is therefore appropriate that they pay their pro-rated share of costs for that time period, calculated based on their judgment apportion of 62.5%.
33However, once the settlement with the other defendants was reached, the Surovova Defendants became the only remaining Defendants. From that point onward, all of the Plaintiffs’ costs were incurred in relation to the prosecution of the case against the Surovova Defendants alone. It is therefore appropriate that those costs be allocated to the Surovova Defendants alone.
34Having regard to the scale of costs, in my view the pre-settlement costs are properly calculated on a partial indemnity basis. Although the Surovova Defendants’ conduct was not exemplary during this time frame – for instance, Maria Mortgage Services Inc. did not comply with a court-imposed deadline for obtaining counsel – generally, their conduct did not rise to the level that warrants sanction in the form of a substantial indemnity costs award.
35However, the conduct of the Surovova Defendants in relation to the trial is another story altogether. As detailed above, Ms. Surovova was copied on all correspondence regarding the scheduling of this trial. Despite this, she did not attend various court dates. She did not attend at trial. She tried to get this trial adjourned once before Chalmers J. and twice before court staff on the morning of trial itself. She was told three times by court staff that she had to attend in person. She told them that she would do so. She did not. She tried to obstruct the prosecution of the Plaintiffs’ claim. She absented herself from important court attendances. She sought repeated and eleventh-hour adjournments. This conduct reflects a lack of respect for the judicial process. It is appropriate for this court to show its disapproval of Ms. Surovova’s conduct through an award of substantial indemnity costs.
36I accordingly order that the Surovova Defendants pay the Plaintiffs costs and disbursements of $215,603.52, inclusive of HST, within 30 days of the date of this judgment. This amount breaks down as follows:
a. For the time frame up to the settlement of the action against some of the other defendants, the Surovova Defendants are to pay 62.5% of the Plaintiffs’ total costs, on a partial indemnity scale. This works out to 62.5% of $188,562.45, or $117,851.53, inclusive of HST.
b. For the subsequent time frame, during which the Surovova Defendants were the only defendants, they are to pay 100% of the Plaintiffs’ total costs, on a substantial indemnity scale. This amount is $91,250.32, inclusive of HST.
c. The Surovova Defendants are to pay all of the Plaintiffs’ disbursements, in the amount of $6,501.67, inclusive of HST.
Order Granted
37The Surovova Defendants are to pay the Plaintiffs damages in the amount of $1,666,059.13. The Surovova Defendants obtained these funds from the Plaintiffs by false pretences and/or fraudulent misrepresentation, and through fraudulent misrepresentations by Ms. Surovova while she was acting as the Plaintiffs’ fiduciary.
38The Surovova Defendants are to pay the Plaintiffs their costs in the amount of $215,603.52, inclusive of HST, within 30 days of the date of this judgment.
39The Plaintiffs may provide me with a draft order reflecting these Reasons and the discontinuance of the action against the Surovova Defendants by Theodore Arsalides.
Rohit Parghi
Released: March 5, 2025