Reasons for Judgment

Court File No.: CV-24-00716493-0000
Date: 2025-01-27
Ontario Superior Court of Justice

Between:
Nathramdas Chateramdas and Premwattie Chateramdas, Plaintiffs
– and –
Melissa Sanasie aka Melissa Chateramdas, Andrew James Sanasie, Ziba Heydarian o/a Heydarian Law Professional Corporation, RiverRock Mortgage Investment Corporation, and Director of Titles, Defendants
– and –
Melissa Sanasie aka Melissa Chateramdas, Plaintiff by Counterclaim
– and –
Nathramdas Chateramdas, Premwattie Chateramdas and Vanessa Shim Chim aka Vanessa Chateramdas, Defendants by Counterclaim

Appearances:
Darren Frank, for the Plaintiffs (Defendants by counterclaim)
David Conn, for the Defendants Melissa Sanasie aka Melissa Chateramdas, and Andrew James Sanasie
Christopher J. Staples, for the Defendant RiverRock Mortgage Investment Corporation
Adam Mortimer, for Director of Titles

Heard: November 4, 2024 and January 15, 2025

Brownstone J.

Introduction

[1] The plaintiffs move for summary judgment against the defendants Melissa Sanasie aka Melissa Chateramdas (Melissa), RiverRock Mortgage Investment Corp. (RiverRock), and Andrew James Sanasie (Andrew). Melissa consents to some of the relief sought.

[2] Melissa is the plaintiffs’ daughter. Andrew is Melissa’s husband. The plaintiffs have lived in a house with the municipal address of 152 Fawcett Trail, Scarborough (“the Fawcett Trail property”) since July 2000. The Fawcett Trail property was mortgage-free prior to December 2022.

[3] On November 21, 2022, title to the Fawcett Trail property was transferred to Melissa without the knowledge of the plaintiffs, ostensibly as a gift from parents to daughter. Melissa now acknowledges that she fraudulently transferred title.

[4] On December 8, 2022, Melissa registered a charge against the Fawcett Trail property in favour of RiverRock.

[5] The plaintiffs seek orders declaring the charge to be fraudulent and void as against them and discharging the charge. In the alternative, the plaintiffs seek orders that Melissa and Andrew pay damages in the amount necessary to discharge the RiverRock charge. They also seek an order for a trust claim in respect to Melissa and Andrew's property at 71 Betony Drive, Richmond Hill (Betony Drive), on the basis that Melissa used the funds from RiverRock to pay down the Betony Drive mortgages. The plaintiffs also seek damages related to a renovation on Betony Drive, and punitive damages against Melissa.

[6] Melissa consents to an order declaring that the transfer of the Fawcett Trail property to her on November 21, 2022, is a fraudulent instrument and void. She consents to orders (i) declaring that she has no interest, registered or otherwise, in the Fawcett Trail property, (ii) setting aside and/or rectifying the transfer, (iii) ordering that the Land Titles Office rectify title to remove her as registered owner; and (iv) requiring that she pay the costs ordered by Papageorgiou J. on May 17, 2024, plus interest, forthwith.

[7] Melissa opposes the remaining orders sought, including orders in respect of the RiverRock charge and an order that she pay aggravated, punitive and/or exemplary damages.

[8] RiverRock takes the position that the charge is valid. It asks that the plaintiffs’ motion against RiverRock be dismissed, and that summary judgment dismissing the plaintiffs’ claim against RiverRock be granted.

[9] The plaintiffs initially named two lawyers as defendants. The first was David Lawrence Todd, for whom Melissa worked. False documentation stated that Mr. Todd provided independent legal advice to the plaintiffs on the transfer. The second is the defendant Ziba Heydarian, operating as Heydarian Law Professional Corporation. Ms. Heydarian acted for Melissa on the transfer and the charge.

[10] By order of Dow J. dated August 12, 2024, the action against Mr. Todd was dismissed and Andrew was added as a defendant. Papageorgiou J. ordered that this motion for partial summary judgment proceed separately from the negligence claim against Ms. Heydarian. Accordingly, no relief is sought against Ms. Heydarian on this motion, and no one appeared on her behalf, other than on the return date of January 15, when counsel for Ms. Heydarian observed the proceedings.

[11] The Director of Titles was not initially named as a party. Under s. 57(14) of the Land Titles Act, RSO 1990, c L.5 (the LTA), the court shall not direct rectification of the register unless the applicant in the proceeding before the court has given notice of the proceeding to the Director of Titles and the Director of Titles is a party to the proceeding. At the court’s direction, the plaintiffs provided notice to the Director and amended the title of proceedings to include the Director. The matter returned on January 15, 2025, to enable the Director to make submissions. The Director’s submissions supported the plaintiffs’ position that both instruments, the transfer and the mortgage, are fraudulent.

Issues

[12] The court must determine:

a. Should Melissa’s affidavit be struck for failure to attend at her scheduled cross-examination?
b. Is this case appropriate for partial summary judgment? Judgment is sought against all parties other than Ms. Heydarian, Melissa’s lawyer.
c. Is the charge against the property a “fraudulent instrument” as defined by s. 1 of the LTA, and void against the plaintiffs and to be removed from title to the property?
d. If the charge is not a fraudulent instrument, should judgment issue against Melissa in favour of the plaintiffs for the amount owing under the RiverRock charge?
e. Should the plaintiffs be awarded an interest in the Betony Drive property?
f. Should there be an award of punitive damages against Melissa?
g. If the charge is not a fraudulent instrument, should the claim against RiverRock be dismissed?

Background

[13] The plaintiffs have lived in their home on the Fawcett Trail property for over two decades. Melissa and her sister lived there with their parents for the later part of their childhood. By 2022, the house had been mortgage-free for many years.

[14] On November 19, 2022, unbeknownst to her parents and while they were not home, Melissa arranged for an appraisal of the Fawcett Trail property. On November 21, 2022, again unbeknownst to the plaintiffs, title to the Fawcett Trail property was transferred from them to Melissa. The documents that transferred title to Melissa for consideration of $2.00 are fraudulent. The plaintiffs’ signatures on those documents are forged. The fraudulent transfer was registered on title on about November 21, 2022.

[15] On November 23, 2023, Melissa submitted a mortgage application to RiverRock, which provided her with a mortgage commitment that same day, consistent with its commitment to a four-hour turnaround time.

[16] On December 8, 2022, Melissa registered the charge in the principal amount of $760,000 against the property. She took the funds for herself, or herself and Andrew, effectively appropriating much of the value of the plaintiffs’ home.

[17] At first, Melissa made the interest payments under the charge.

[18] The plaintiffs learned about the transfer and the charge in January 2024, when they received a City of Toronto bill for property taxes in Melissa’s name.

[19] In March 2024 they commenced this claim.

[20] Papageorgiou J. made several orders requiring Melissa to produce documents with respect to how the charge funds were used. Melissa produced documentation that shows that $113,517.19 was paid to her directly and that she used $515,938.29 to discharge and pay down Melissa and Andrew’s Betony Drive mortgages. Melissa has not produced all the documentation that was ordered. Some of the documentation Melissa did produce was falsified or doctored, including a closing funds summary and bank statement(s).

[21] On April 5, 2024, Papageorgiou J. granted the plaintiffs leave to issue a CPL in respect to Betony Drive. On May 17, 2024, Papageorgiou J. also granted the plaintiffs leave to issue a CPL in respect to the Fawcett Trail property. The court ordered Melissa to pay costs of the CPL motions in the amount of $6,000. She has not paid them.

[22] In May 2024 Melissa stopped making the mortgage payments under the RiverRock mortgage. The charge came due December 8, 2024. RiverRock has commenced enforcement proceedings seeking, among other things, possession of the property. RiverRock delivered a notice of sale under the mortgage on August 29, 2024.

[23] Papageorgiou J. then scheduled this urgent motion for partial summary judgment, which was heard in two appearances, given the required addition of the Director of Titles described above.

Issue One: Should Melissa’s affidavit be struck?

[24] The plaintiffs argue that Melissa's affidavit should be struck because she failed to attend for her cross examinations. Dates for all cross examinations were agreed to and incorporated into an order of Papageorgiou J.

[25] Andrew did not file an affidavit. He advised through counsel that he adopted the contents of Melissa’s affidavit. Although dates were initially scheduled for him to be examined, he took the position that, as he was not an affiant, he was not subject to examination. He did not attend.

[26] The parties agreed that Melissa would attend for cross-examination on October 10, 2024, one of the dates scheduled in the order of Papageorgiou J. Melissa failed to attend at 10:00 a.m. After waiting for a period, Melissa’s counsel asked that the parties wait until 11:00 a.m. for her attendance. They waited until 11:28 a.m. but still she did not attend. She has not provided a reason for her failure to attend.

[27] Melissa then offered to attend a few days later. As no reason had been provided for her absence from her scheduled cross-examination, the plaintiffs had no reasonable expectation that she would attend on the second date offered. They had already scheduled the examinations according to Melissa and Andrew’s schedules, and neither attended. They did not accede to Melissa’s request to reschedule the examination.

[28] The plaintiffs ask that Melissa's affidavit be struck under r. 34.15 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They rely on Cellular Rental Systems v. Bell Mobility Cellular Inc.. In the alternative, they argue that no weight should be given to Melissa's affidavit.

[29] Melissa’s affidavit contains many paragraphs about family dynamics, which are irrelevant to these proceedings. However, she did initially swear that the transfer was not fraudulent, and that her parents willingly and knowingly transferred the property to her. She concedes that this is false. She now admits the transfer was fraudulent.

[30] As will be discussed below, Melissa has furnished false information and doctored documents in response to court orders to provide documents. She failed to attend for cross-examination on an affidavit which she now concedes contains false statements. She failed to provide any explanation for failing to attend on an agreed-upon date for her cross-examination. Given these factors and given that her affidavit contains nothing of relevance to a determination of the issues in this motion, I give no weight to her affidavit. I do this rather than striking it because I refer to the fact that she falsely swore that the transfer was not fraudulent when considering whether punitive damages should be ordered against her.

Issue Two: Is this case appropriate for partial summary judgment?

[31] Under r. 20.04 of the Rules of Civil Procedure, the court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence, or if the parties agree to have all or part of the claim determined by summary judgment and the court is satisfied that it is appropriate to grant it. Rules 20.04(2.1) and (2.2) provide the court with expanded fact-finding powers to make this determination.

[32] In accordance with Hryniak v. Mauldin, 2014 SCC 7, at para. 57, in order to be appropriate for summary judgment, the evidence before the court must be such that a judge is confident that she can fairly resolve the dispute.

[33] The court must first determine if there is a genuine issue requiring trial based only on the evidence before it, without using the extended fact-finding powers in r. 20.04. There is no genuine issue requiring trial if the evidence allows the court to fairly and justly adjudicate the dispute through this proportionate procedure: Hryniak, at para. 66.

[34] If there appears to be a genuine issue requiring a trial, the court must determine if the need for a trial can be avoided by using the powers in rr. 20.04(2.1) and (2.2). These powers may be used if it would not be against the interests of justice to do so: Hryniak, at para. 66.

[35] The moving party bears the evidentiary burden of showing there is no genuine issue requiring a trial. Parties are required to put their best foot forward: Canada (Attorney General) v. Lameman, 2008 SCC 14, at para. 11.

[36] When considering whether to grant partial summary judgment, the court must consider whether dividing the case will prove cheaper for the parties, will get the case through the court system more quickly, and will not result in inconsistent findings by the multiple judges who will touch the divided case: Malik v. Attia, 2020 ONCA 787, at para. 62. Partial summary judgment is a rare remedy. It is not available where the facts under consideration overlap with those that may be left for trial or if there is a risk of inconsistent verdicts. Butera v. Chown, Cairns LLP, 2017 ONCA 783, at para. 34.

[37] Melissa argues the case is not appropriate for partial summary judgment because the plaintiffs are seeking aggravated, punitive and/or exemplary damages from Melissa and Ms. Heydarian, jointly and severally. Melissa relies on Mason v. Perras Mongenais, 2018 ONCA 978 and argues this issue cannot be determined without considering Ms. Heydarian's liability, if any, for punitive damages.

[38] Melissa acknowledges that all the facts relevant to the issues between Melissa and the plaintiffs are before the court. She states that but for the solicitor’s negligence claim against Ms. Heydarian, this would be an appropriate case for summary judgment. Although Melissa has brought a counterclaim, she does not argue that the existence of the counterclaim militates against summary judgment. The counterclaim is largely based on her prior position, now abandoned, that the transfer to her was legitimate. Melissa now acknowledges, through her admissions and through her counsel’s submissions, that she owes “someone” (presumably either RiverRock or her parents) the funds at issue in this proceeding.

[39] RiverRock supports having the case determined by way of summary judgment.

[40] I find that this case is appropriate for partial summary judgment. I agree with the parties that all the facts needed to determine the issue between the plaintiffs and three of the four defendants are before the court such that the matter is suitable for summary judgment. The material facts are not in dispute. I am confident that I am able to find the facts on the evidence before me, and that I am able to fairly and justly adjudicate this dispute using this proportionate procedure.

[41] The motion, if successful, will dispose of the action between three of the four parties. The claim against Ms. Heydarian is a separate cause of action. It will not lead to inconsistent results. Papageorgiou J. undoubtedly considered this when scheduling the motion to proceed as a partial summary judgment motion. Melissa has acknowledged her role and responsibility vis-à-vis the funds. Whether Ms. Heydarian also had a role is a separate matter. Melissa does not crossclaim against Ms. Heydarian. The case is closer to Froom v. Lafontaine, 2023 ONCA 519 than to Mason; the claim against Ms. Heydarian can be easily bifurcated without duplication or risk of inconsistent results. The claim against Ms. Heydarian is a negligence claim. There is no allegation in the pleading that she knew of Melissa’s fraud. Although punitive damages are claimed against her, it would be rare to obtain a punitive damages award based on negligence.

[42] Partial summary judgment will achieve the objectives of proportionate, timely and affordable justice. There is no reason for RiverRock, for example, to be involved in the claim against Ms. Heydarian. There is no reason for delay, and there would be substantial prejudice to the plaintiffs if they must wait for trial when the facts before the court are clear and can readily be ascertained. Furthermore, there is potentially imminent action to be taken under the charge which should be addressed as soon as possible. There will not be inconsistent findings in the Heydarian action; the question of her liability is a separate issue.

Issue Three: Is the charge against the property a “fraudulent instrument” as defined by s. 1 of the LTA, and void against the plaintiffs and the property?

Governing Legislation

[43] The provisions of the LTA are central to this dispute.

[44] The Court of Appeal has described the purpose of legislation like the LTA is to “provide the public with security of title and facility of transfer”: Froom at para. 21.

[45] The three basic principles of the LTA are described as the “mirror, curtain, and insurance” principles. That is, the register reflects (mirrors) title accurately and completely; no party need to search behind the curtain of the registry to investigate title; and the state guarantees the accuracy of the registry and compensates loss from inaccuracy: Froom at para. 21.

[46] Prior to 2006, as will be discussed beginning at paragraph 61 below, s. 78(4) of the LTA led to the finding that instruments were generally effective and indefeasible upon registration. That section provides:

(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register.

[47] The LTA was amended in 2006 to add provisions aimed at protecting against some, but not all, types of fraud: Froom at para. 28. The legislature added s. 78(4.1) and (4.2):

(4.1) Subsection (4) does not apply to a fraudulent instrument that is registered on or after October 19, 2006.

(4.2) Nothing in subsection (4.1) invalidates the effect of a registered instrument that is not a fraudulent instrument described in that subsection, including instruments registered subsequent to such a fraudulent instrument.

[48] Definitions of fraudulent instrument and fraudulent person were also added:

“fraudulent instrument” means an instrument, (a) under which a fraudulent person purports to receive or transfer an estate or interest in land, (b) that is given under the purported authority of a power of attorney that is forged, (c) that is a transfer of a charge where the charge is given by a fraudulent person, or (d) that perpetrates a fraud as prescribed with respect to the estate or interest in land affected by the instrument;

“fraudulent person” means a person who executes or purports to execute an instrument if, (a) the person forged the instrument, (b) the person is a fictitious person, or (c) the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument;

[49] Section 155 was also amended. It now reads: “Subject to this Act, a fraudulent instrument that, if unregistered, would be fraudulent and void is, despite registration, fraudulent and void in like manner.”

Positions of the Parties

[50] Melissa concedes that she is a fraudulent person vis-à-vis the transfer. She forged her parents’ signature. The transfer is therefore a fraudulent instrument, and title must be rectified.

[51] The parties also agree that whether the mortgage is a fraudulent instrument turns on whether Melissa falls within the definition of a fraudulent person vis-à-vis the mortgage.

[52] The parties agree that the first two parts of the definition of fraudulent person do not apply. That is, with respect to (a), Melissa did not forge the mortgage, forgery being an issue of authenticity not truth: 1168760 Ontario Inc. v. 6706037 Canada Inc., 2019 ONSC 4702, at para. 42, Froom at para. 50. Second, with respect to (b) Melissa is not a fictitious person, she is a real person: 1168760 Ontario Inc., at para. 37; Froom at paras. 55-57.

[53] The third way in which Melissa can be a fraudulent person is if she “holds [herself] out in the instrument to be, but knows that [she] is not, the registered owner of the estate or interest in land affected by the instrument” in accordance with para (c) of the ‘fraudulent person” definition. It is here that the parties part company.

[54] The plaintiffs argue that Melissa held herself out as the registered owner of the property, but knew the registration was based on false documents. Therefore, they say she knew she was not the “true” or “rightful” owner of the property. Because she was not the true owner, she could not grant an interest in, or charge on, the land. All transactions arising from the fraud are void. The charge is therefore void against them and the property.

[55] The Director of Titles supports the plaintiffs’ position. It argues that the fraudulent transfer did not make Melissa the true registered owner capable of issuing valid charges that burden the innocent homeowner. The Director argues that the amendments were added to the LTA to codify the doctrine of deferred indefeasibility. Under the doctrine, discussed below, the intermediate owner (RiverRock), is not protected from a claim by the true, innocent owner (the plaintiffs).

[56] RiverRock argues that, while the transfer is a fraudulent instrument, the charge is a separate transaction, and the charge does not fall within the LTA’s definition of a fraudulent instrument. Melissa supports RiverRock’s arguments. The mortgage was registered after the fraudulent transfer, and Melissa and RiverRock argue that s. 78(4.2) provides that the mortgage, a subsequent instrument, is unaffected by the fraud pertaining to title.

[57] RiverRock relies on Hillmount Capital Mortgages Inc. v. Onsori-Saisa, 2024 ONSC 4481 at para. 41 and argues that “registered” must mean only that. Parties are entitled to rely on registered title and no inquiry into “true” ownership is contemplated by the legislation. This is the intended consequence of the mirror and curtain principles, two of three foundational principles on which the land titles regime is based.

[58] RiverRock argues that subsection 78(4.2) specifically provides that instruments registered subsequent to a fraudulent instrument are not invalidated. Thus, if the transfer is fraudulent, the subsequent mortgage is not invalidated if it is not itself a fraudulent instrument.

Governing Law

[59] The modern approach to statutory interpretation requires the words of an act “to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of [the legislator]”: Bell ExpressVu Limited Partnership v. R., 2002 SCC 42, at para. 26. The court must consider the text, context, and purpose of the legislation: Froom at para. 20.

[60] A review of the leading case law that applies the former and current relevant provisions of the LTA sheds important light on the words, object, context, and intention of the legislation.

i) Household Realty Corporation Ltd. v. Liu

[61] The predecessor provisions to those at issue in this case were considered by the Court of Appeal in Household Realty Corporation Ltd. v. Liu. As alluded to in paragraph 46 above, the Court determined that a registered mortgage given on the authority of a fraudulent power of attorney was valid and enforceable. As between two innocent parties – the homeowner and the mortgagee - the Court found the legislation protected the mortgagee’s interest. The mortgages had been given for valuable consideration without notice of the fraud. Once they were registered, the mortgages were effective.

[62] The legislature then amended the LTA to add ss. 78(4.1) and (4.2), set out in paragraph 47 above, and the definitions of fraudulent person and fraudulent instrument, set out in paragraph 48 above.

ii) Lawrence v. Wright; Lawrence v. Maple Trust Company, 2007 ONCA 74

[63] In the meantime, however, prior to the passage of the amendments, the Ontario Superior Court, holding it was bound by the Court of Appeal’s decision in Household Realty, dismissed an application to declare a fraudulent mortgage void and of no force and effect in Lawrence v. Wright. The Court stated at para. 2:

The Court of Appeal decided unequivocally that s. 155 of the Land Titles Act is “subject to” and must yield to s. 78(4). Despite Mr. Cooper’s admirable efforts, I cannot distinguish Household Realty in any way that will be of assistance to his client. In my view, Household Realty is determinative and dispositive of the issues regarding the Mortgage and its validity. The application with respect to the Mortgage is therefore dismissed.

[64] The Court of Appeal decided the appeal in Lawrence in 2007. Although the appeal was decided after the LTA amendments came into force, it was of course determined under the previous provisions, which were in effect at the time of the transaction at issue. The Court of Appeal determined that Household Realty had been incorrectly decided. The Court of Appeal opens its decision in Lawrence v. Maple Trust Company, 2007 ONCA 74 as follows:

[1] Ownership of a person's home is fraudulently transferred. The property is then mortgaged. In a contest between the two innocent parties -- the homeowner and the lender of mortgage moneys -- who wins? This appeal answers that question in favour of the homeowner.

[65] The Court considered the pre-amendment LTA provisions having regard to their legislative history and context, and with reference to the policy reasons behind the provisions. The doctrine of deferred indefeasibility played an important part in the Court's reasoning. Under that doctrine, an intermediate owner, who takes the interest from the person who committed the fraud, is subject to having its interest defeated by the true owner. A subsequent, or deferred, owner, however, obtains an indefeasible interest.

[66] The Court determined at paragraphs 56 and 57 of its decision that the LTA had to be interpreted in accordance with the doctrine of deferred indefeasibility. The Court stated in part as follows, at para. 58:

By interpreting the Act in accordance with the theory of deferred indefeasibility, the law encourages lenders to be vigilant when making mortgages and places the burden of the fraud on the party that has the opportunity to avoid it, rather than the innocent homeowner who played no role in the perpetration of the fraud.

[67] The Court found that Household Realty had incorrectly failed to recognize that the statutory provisions gave effect to the doctrine of deferred indefeasibility. It found both the result and the reasoning in Household Realty to be incorrect.

[68] Lawrence, like the case now before the court, involved a fraudulent transfer and subsequent mortgage to a third party. The Court of Appeal explained its application of the doctrine of deferred indefeasibility to those facts as follows:

[67] The theory of deferred indefeasibility accords with the Act and must be taken into consideration in an analysis of s. 155 and its relationship with other provisions in the Act. Under this theory, the party acquiring an interest in land from the party responsible for the fraud (the "intermediate owner") is vulnerable to a claim from the true owner because the intermediate owner had an opportunity to avoid the fraud. However, any subsequent purchaser or encumbrancer (the "deferred owner") has no such opportunity. Therefore, in accord with s. 78(4) and the theory of deferred indefeasibility, the deferred owner acquires an interest in the property that is good as against all the world.

[68] Wright never took valid title to the Property because he obtained it by fraud. He was, therefore, not a registered owner. In accordance with s. 68(1) of the Act, only a registered owner may give valid charges on land. Maple Trust is the intermediate owner of an interest in the Property. It had an opportunity to avoid the fraud. It did not take from a registered owner. Therefore, despite registering its charge, Maple Trust loses in a contest with the true registered owner, Ms. Lawrence. Accordingly, the charge against the Property in favour of Maple Trust should be set aside.

[69] RiverRock argues that Lawrence has no application because there, the Court was dealing with the interplay between then ss. 78(4) and 155. The former subsection provided (and still provides) that once registered, an instrument can be relied on, while the latter then provided that despite registration, a fraudulent document remains void. The Court had to reconcile those two provisions. RiverRock argues that the approach to the new provisions since Lawrence is to interpret them narrowly. The courts have been clear that “fraudulent instrument” and “fraudulent person” are narrowly defined terms: Froom at para. 37.

[70] The Director argues that the Court of Appeal’s basic finding at para. 68 of Lawrence that a person who becomes an owner by fraudulent means cannot then give a valid charge or interest on the land remains good law after the LTA amendments. The Director points to Computershare at paragraph 47 and footnote one. It argues that the plaintiffs cannot be worse off post-amendments than they would have been before the amendments. This is consistent with the doctrine of deferred indefeasibility, discussed below. For the reasons explained below, I agree with this submission.

iii) Case law considering the amended LTA provisions

[71] As noted, the new provisions had come into effect by the time the Court of Appeal decided Lawrence. The history and context of the amendments have been the subject of judicial consideration in several cases. In Computershare the Divisional Court had the following comments about the advent of the provisions:

[28] If the intent of the legislature is not clear from the words of these provisions, it is certainly clear from the statement made by the Honourable Mr. Gerry Phillips, the Minister of Government Services, when introducing Bill 152 when it was tabled for first reading on October 19, 2006. The legislation was intended to protect innocent homeowners. He said:

One of these important areas is an issue of real concern to property owners across the province: real estate fraud. The people of this province work hard to make a house into a home. They deserve to know that their property is secure. This legislation will ensure that property owners do not lose their home as a result of real estate fraud or become responsible for fraudulent mortgages. If passed, this legislation would ensure that ownership of a property cannot be lost as a result of the registration of a falsified mortgage, fraudulent sale or a counterfeit power of attorney. Instead, an innocent homeowner’s title will be restored to them and the fraudulent document will be nullified. [Emphasis added.]

[29] In addition, the explanatory note for Bill 152 makes clear that the manner in which the new provisions were intended to protect innocent homeowners was by denying the ordinary benefit of registration to fraudulent instruments. The explanatory note reads, in part:

The Bill amends section 78 of the [LTA] so that a fraudulent instrument will not have any effect on the title register. Instruments registered subsequent to a fraudulent instrument are deemed to be effective. A fraudulent instrument is defined to be one under which a fraudulent person purports to receive or transfer an estate or interest in land, one that is given under a forged power of attorney, a transfer of an instrument that is a charge given by a fraudulent person or a type of fraudulent instrument specified by the regulations made under the Act. If an instrument registered on or after October 19, 2006 is fraudulent, the Director of Titles can delete it from the title register. A person prescribed by the regulations made under the Act who thereby suffers a loss can recover compensation from The Land Titles Assurance Fund if the person has demonstrated due diligence and is not otherwise restricted from recovering compensation from the Fund. [Emphasis added.]

[72] The Court of Appeal recently commented at para. 26 of Froom,

[26] The 2006 amendments to the LTA were passed in the wake of this court’s decision in Household Realty and before the court overruled that decision in Lawrence. The amendments were aimed at ensuring that fraudulent instruments would not be given effect in the title register. The legislative debates evidence a concern about real estate fraud and the attendant risk that a property owner might lose their property or become responsible for a fraudulent mortgage….

[73] The amendments were not aimed at, and do not have the effect of, dealing with fraud at large: 1168760 Ontario Inc., at para. 32; CIBC Mortgages Inc. v. Computershare Trust Company of Canada, 2016 ONSC 7094 (Div. Ct.), at para. 61; and Froom at paras. 28, 42. As explained by the Divisional Court in 1168760 Ontario Inc., referring to its previous decision in Computershare, “[T]he provisions prevent certain kinds of fraudulent activity with respect to title, addressing the situation where someone purports to transfer an interest or estate in land that they do not legally possess – for example, by taking on a false identity or by forging a document, including a power of attorney.”

[74] The courts have also been clear that “at the end of the day, it is not the theories of the LTA that determine what is and what is not valid; it is the LTA itself that does so.”: Computershare at para. 42, citing Household Realty Corporation Ltd. v. Liu, 261 D.L.R. (4th) 679, at para. 41.

The Effect of the Doctrine of Indefeasibility

[75] The doctrine of deferred indefeasibility has been found to be relevant to the interpretation of the LTA both pre- and post-amendments. When the Court of Appeal considered the amended LTA provisions in Froom, it stated that “there is little doubt that the Act incorporates the doctrine of deferred indefeasibility and should be interpreted accordingly. The Act operates to put the obligation on the party acquiring the interest in land to ensure that it acquires that interest from the true owner.” (Froom para. 70) The Court cautioned that the analysis of deferred indefeasibility must be determined by having regard to the language of the LTA: Froom at para. 72.

[76] In Froom, the registered owner of the property at issue was a corporation that had been controlled at various times by one spouse (Froom) or the other (Lafontaine). The couple’s relationship broke down. The corporation mortgaged the property. Froom alleged that Lafontaine, who was the registered director and officer at the time the corporation granted the mortgage, had fraudulently become the corporation’s officer and director.

[77] On a motion for partial summary judgment, the Court found in favour of the mortgagee. It noted that there was no dispute that the corporation was a real, not fictitious corporation, and that it owned the property in respect of which the mortgage was given. Consistent with the indoor management rule, there was no requirement for the mortgagee to go behind the corporate register to ensure that Lafontaine had actual authority to bind the corporation. There was no doubt that the corporation was the true registered owner of the condominium, so the Court of Appeal found that the definition of fraudulent person in s. 1(c), at issue in this case, did not apply in Froom.

[78] The Court in Froom held that the doctrine of deferred indefeasibility did not assist the corporation or the personal parties as, unlike in Lawrence, there was no fraudulent instrument. The court also pointed out that the doctrine of deferred indefeasibility is premised on the theory that, as between two innocent parties, the party who had the opportunity to discover the fraud by due diligence should be the party who bears the risk of the fraud. In the case before it, that party was the corporation, not the mortgagee.

[79] The plaintiffs argue that under the doctrine of deferred indefeasibility, RiverRock is the intermediate owner, and the burden falls on RiverRock as the party who had the opportunity to avoid the fraud, not on the innocent homeowner who played no role at all in the fraud: see Chang v. Chen, 2022 ONSC 870, at para. 33, citing to Lawrence, at paras. 1, 58.

[80] The plaintiffs argue that RiverRock could have exercised better due diligence before advancing the funds to Melissa, although they do not go so far as to argue that RiverRock had actual or imputed knowledge of the fraudulent transfer. The plaintiffs argue that RiverRock missed “important telltale signs” of fraud including that it was the plaintiffs, not Melissa, who were named as the borrowers on the appraisal on which RiverRock relied to advance funds to Melissa.

[81] The Director takes the position that, incorporating the doctrine of deferred indefeasibility into the interpretation of the LTA, it is the intermediate owner who generally has the opportunity to discover the fraud, as it is dealing directly with the person who engaged in the fraud. The innocent homeowner has no such opportunity. RiverRock, as the intermediate owner, is the one who bears the risk, not the plaintiffs who are the innocent homeowners.

[82] RiverRock takes the position that Chang was wrongly decided and should not be relied upon, noting it was a default judgment case. Further, RiverRock argues that there were no “telltale signs of fraud” in this case. RiverRock did not know Melissa but had had previous dealings with the mortgage broker. Even if there had been an error in naming the borrower, it would not be problematic because the proper parties would be referenced when the mortgage loan was applied for, and documents were prepared for, registration.

[83] RiverRock states that it is entirely unrealistic to suggest that it failed to conduct due diligence in confirming that the appraisal was conducted with the consent of the plaintiffs. The appraisal was prepared by an accredited appraiser, and no lender would question an appraiser as to whether they had consent of the owner to conduct the appraisal. From the photographs attached to the appraisal, the appraiser clearly was given access to the property. Nor was there any note from the appraiser indicating any issues with access or otherwise with dealing with the property. There was no reason for RiverRock to question the appraisal or to think there was anything untoward behind the different names on the appraisal and the mortgage application.

[84] I find that RiverRock had the opportunity to discover the fraud. The plaintiffs did not. It is not necessary to find, and I make no finding, as to whether RiverRock failed to exercise due diligence or should have discovered the fraud. It is enough to find it could have done so. I note the following exchange at its cross-examination:

Q. Thank you. Is it standard practice for RiverRock to approve a mortgage by way of mortgage commitment on the same day as receiving the application?
A. 100 percent, that is one of our selling features. We say four hour turnaround time, maximum.

[85] If a lender commits to a maximum four-hour turnaround time, it is undoubtedly exposing itself to some risk as an intermediate owner.

[86] I agree with RiverRock that the amendments were not intended to deal with all aspects of real estate fraud. Indeed, in both Computershare and 1168760 Ontario Inc. the Divisional Court reversed decisions that had found fraud based on false or fraudulent statements in affidavits by the person who purported to convey an interest in the land. In both cases, however, the Divisional Court found that the conveyancer had proper authority to make the conveyance. Similarly, the possibly fraudulent conduct in Froom related to a notice of change registered with the government in respect of officers and directors of a corporation. The fraudulent activity was not with respect to title – the corporation had title to the property in issue and was therefore able to convey an interest in the land. There was no dispute that the corporation was the registered owner. The indoor management rule meant that the mortgagee was entitled to assume that the corporation had complied with its internal policies and procedures. In none of these cases was the fraud or fraudulent statement referable to the documents on title.

[87] As stated above, RiverRock also relies on Hillmount. I do not find that Hillmount assists RiverRock. The facts in Hillmount are different from this case in important ways. In that case, the court found that the grantor of the mortgages at issue, Mr. Onsori, was the registered owner of the property. He consented to the first mortgagee’s request to appoint a receiver over the property. A second respondent, Ms. Afkari, alleged she was the owner of the property, and that the property had been transferred to Mr. Onsori through fraudulent transactions by “the notorious Arash Missaghi”. Ms. Afkari had been the registered owner, but Mr. Onsori became the registered owner in power of sale proceedings. Ms. Afkari wanted the court to adjourn the application to appoint the receiver to allow her time to investigate the incident and initiate legal proceedings regarding the conveyance.

[88] The court found that even if Ms. Afkari were believed, her evidence was that she was not making mortgage payments and there was no evidence anyone else was making those payments on her behalf, despite the fact that she thought someone was doing so. Therefore, even if the mortgage that led to the power of sale proceedings was fraudulent, the transfer to Mr. Onsori was not and he became the registered owner of the property. The court found Mr. Onsori was not a fraudulent person. He was the registered owner of the property in question.

[89] The case now before the court is markedly different from Computershare, 1168760 Ontario Inc., Froom, and Hillmount. Here, the fraud goes to the very issue of title, and the issue of whether Melissa was the “true” owner and therefore legally able to convey an interest in land. I note that in both Computershare and Froom, the Divisional Court and Court of Appeal respectively used the language of “true owner” in their analyses of the LTA provisions (Computershare para. 53, Froom para. 70). Melissa’s actions in this case are exactly the kind of fraud the amendments were meant to protect against. The definition of fraudulent person is intended to, and does, capture this very situation. Melissa knew she had no legal interest in the property. She held herself out to be, but knew she was not, the true registered owner of the land. She purported to take title by fraud and then convey an interest she knew she did not have. She meets the definition of fraudulent person as defined in clause (c) of the LTA definition vis-à-vis the charge.

[90] Given that Melissa is a fraudulent person, the mortgage is a fraudulent instrument and void against the property and the plaintiffs. The register must be rectified to delete it from title.

Issue Four: If the charge is not a fraudulent instrument, should judgment issue against Melissa in favour of the plaintiffs for the amount owing under the charge?

[91] Having found that the charge is a fraudulent instrument and ordering its deletion from title, there is no issue of damages owing to the plaintiffs from Melissa for the amount owing under the charge.

Issue Five: Should the plaintiffs be awarded an interest in the Betony Drive property?

[92] The plaintiffs claim damages against Melissa and “inclusive of their [Andrew and Melissa’s] respective interests … in the Betony Drive property”. Melissa acknowledges, and Andrew does not dispute, that more than $465,000 of the RiverRock charge funds was used to discharge or pay down mortgages on Betony Drive.

[93] When asked in oral argument if the plaintiffs intended to pursue this relief if the charge were declared fraudulent, counsel submitted that they should be entitled to this relief to secure any costs and punitive damages that were ordered against Melissa and/or Andrew. Melissa and Andrew dispute the plaintiffs’ entitlement to this relief for this purpose.

[94] A constructive trust is an available remedy where property is obtained by fraud or other wrong: Soulos v. Korkontzilas, at paras. 38-39. It is also an available remedy for unjust enrichment. If the mortgage were not declared to be a fraudulent instrument and ordered deleted from title of the plaintiffs’ property, such a remedy may well have issued. However, I decline to order that remedy as security for a costs order and possible punitive damages award.

Issue Six: Should punitive damages be awarded against Melissa?

[95] The plaintiffs seek an order for punitive damages given Melissa’s malicious, oppressive, and highhanded behaviour that represents a marked departure from the ordinary standards of behaviour and offends the court’s sense of decency: Whiten v. Pilot Insurance Co., 2002 SCC 18, at para. 36.

[96] Melissa argues that an award of punitive damages is not appropriate where the very nature of the proceeding is one that includes deceit, as she is already being sanctioned for this. However, she acknowledges having engaged in additional wrongs, including the production of falsified documents in response to court orders. These included a doctored Heydarian Closing Funds Summary, a misleading and/or doctored Scotiabank statement, a doctored Triangle Mastercard statement, and various doctored documents she gave to the Betony Drive mortgagees. Melissa also created a false email address to impersonate Mr. Todd in emails to Ms. Heydarian to authorize the transfer. Her sworn affidavit contained false statements, insofar as she sought to maintain the transfer was not fraudulent but was done with her parents’ consent until late in these proceedings. Counsel for Melissa rightly acknowledged that these are actions that need to be denounced and deterred.

[97] Punitive damages have historically been intended to serve the objectives of punishment, deterrence and denunciation: Whiten at paras. 43, 68. Punitive damages are to be resorted to “only in exceptional cases and with restraint”: Whiten at para. 69; they are very much the exception and not the rule: Whiten at para. 94. If they are awarded, they must be assessed proportionately taking into account other penalties suffered by the defendant for the misconduct. Compensatory damages must be insufficient. Where they are to be awarded, moderate awards are generally sufficient: Whiten para. 94.

[98] I find that this is a rare case in which punitive damages are appropriate. Melissa stole her own parents’ equity. She has acknowledged she will have to repay the funds she took. But that does not denounce the heinousness of her attack on her own family. The production of falsified documents in response to the court order is also conduct that must be deterred in the strongest terms. The impersonation of counsel, her employer, and the establishment of a false email address in his name must likewise be denounced and deterred. So, too, must swearing a false affidavit. These are actions that go to the very heart of the justice system and the administration of justice. They are actions which deserve punishment in the form of punitive damages.

[99] In fixing quantum, I assess Melissa’s blameworthiness to be high. Her fraudulent conduct was persistent and deliberate. The plaintiffs are vulnerable seniors. Melissa put their ability to live in their home in jeopardy. The need for deterrence is high. Melissa’s conduct goes to the heart of the administration of justice. In light of these factors, I order Melissa to pay punitive damages to the plaintiff in the amount of $150,000.

Issue Seven: Should the claim be dismissed against RiverRock?

[100] Given my finding that RiverRock’s charge is a fraudulent instrument because Melissa is a fraudulent person, and the charge is therefore void against the plaintiffs and the property, RiverRock’s request for a “boomerang” summary judgment order dismissing the claim against it is dismissed.

Disposition

[101] The plaintiff’s motion for summary judgment against all parties other than Ms. Heydarian is granted. The claim against Ms. Heydarian shall proceed in the usual course. I make the following orders and declarations:

1. The transfer of the Fawcett Road property from the Plaintiffs to Melissa on November 21, 2022, Instrument AT6227149, is a "fraudulent instrument", as defined by Section 1 of Land Titles Act, RSO 1990, c L.5 and is void against the property and the plaintiffs;
2. Melissa has no interest, registered or otherwise, in the property;
3. The register shall be rectified by deleting Instrument AT6227149 from the register under s. 57(13)(b) of the LTA;
4. The mortgage instrument AT6242925 is a fraudulent instrument and void against the property and the plaintiffs;
5. The register shall be rectified by deleting mortgage instrument AT6242925 from the register under s. 57(13)(b) of the LTA;
6. Melissa shall pay to the Plaintiffs punitive damages in the amount of $150,000, forthwith;
7. Melissa shall pay the costs order of the Honourable Justice Papageorgiou, dated May 17, 2024, including interest, to the Plaintiffs, forthwith;
8. Post-judgment interest shall accrue in accordance with the Courts of Justice Act, RSO 1990, c C.43.

Costs

[102] The parties are strongly encouraged to agree on costs. If they are unable to do so, they may make written submissions, including with respect to costs of the motion to add Andrew before Dow J., of no more than 4 pages each, plus offers to settle. Submissions are to be sent to my judicial assistant at linda.bunoza@ontario.ca within seven days.

Brownstone J.
Released: January 27, 2025