Court File and Parties

2026 ONSC 897

Court File No.: CV-24-00000299-0000

Date: 2026-02-13

Ontario

Superior Court of Justice

Between:

RSSJ INVESTMENTS INC., KEWAL MINHAS and KARSHAN MINHAS

Michael Katzman, for the Plaintiffs

Plaintiffs

— and —

SONNET INSURANCE COMPANY

Eric Zadro, for the Defendant

Defendants

Heard: February 6th, 2026

Reasons for Judgment

LEMAY J

[1] The Plaintiffs, RSSJ Investments Inc. and Kewal and Darshan Minhas held a mortgage on a property on Ivorwood Crescent in Palgrave, Ontario. The mortgagor signed the standard mortgage terms, which required the mortgagor to name the Plaintiffs as insureds under the mortgagor's insurance policy. The mortgagor named a different lender under the insurance policy, which was underwritten by the Defendant, Sonnet Insurance.

[2] In November of 2022, there was a fire that destroyed the property. At the time of the fire, the mortgage was in default. Sonnet rescinded the policy and denied coverage to the mortgagor.

[3] The Plaintiffs commenced this action against Sonnet, seeking the coverage that the mortgagee would be entitled to under the policy. Sonnet has denied coverage to the Plaintiffs on the basis that the Plaintiffs were not named in the insurance policy and, therefore, are not covered by it. The Plaintiffs have sued Sonnet and claimed for their losses in contract. In the alternative, the Plaintiffs argue that if there was no contract, they are entitled to rectification. In the further alternative, the Plaintiffs argue that permitting Sonnet to avoid liability would result in an unjust enrichment.

[4] The Defendant, Sonnet has defended the action. In addition, the Defendant has brought this motion under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to have this action dismissed on the basis that the Plaintiffs' claim has no reasonable basis for success.

[5] For the reasons that follow, the Defendant's motion is dismissed.

Background

a) The Underlying Facts

[6] For the purposes of this motion, the Defendant is required to accept the facts as pled in the Plaintiffs' pleadings as provable. In addition, the pleading must be read generously. As a result, the factual summary that follows is based on the Plaintiffs' claims alone. It should not be read as binding on any other judge that considers the merits of this case.

[7] The Plaintiffs were lenders who were given a mortgage on the property known as 4 Ivorwood Crescent in Palgrave Ontario. The mortgage was registered against the title to the property. The borrower, who held title to the property, was Yogeshire Sewdarsan ("the borrower"). By 2022, the mortgage on the property was in default. During the fall of 2022, the borrower was seeking alternative financing, and the Plaintiffs had begun power of sale proceedings.

[8] The borrower never brought the mortgage back into good standing. As a result, judgment in connection with the power of sale action was entered against the borrower on January 5th, 2023.

[9] The mortgage included a provision requiring the borrower to maintain insurance coverage on the property. That provision required the Insurance Bureau of Canada standard mortgage clause, which provided protections to the mortgagee.

[10] The Defendant, Sonnet Insurance, insured the property pursuant to a homeowners' insurance policy that they issued. This policy was effective from November 14th, 2022. The standard mortgage clause as contained in the insurance policy reads as follows:

This insurance and every documented renewal thereof, as to the interest of the mortgagee only therein, is and will be in force notwithstanding any act, neglect, omission or misrepresentation attributable to the mortgagor, owner or occupant of the property insured, including transfer of interest, any vacancy or non-occupancy, or the occupation of the property for purposes more hazardous than specified in the description of the risk;

Provided always that the Mortgagee will notify forthwith the Insurer (if known) of any vacancy or non-occupancy extending beyond thirty (30) consecutive days, or of any transfer of interest or increased hazard that will come to his knowledge; and that every increase of hazard (not permitted by the policy) will be paid for by the Mortgagee- on reasonable demand from the date such hazard existed, according to the established scale of rates for the acceptance of such increased hazard, during the continuance of this insurance.

[11] The policy named Community Trust Company as the party entitled to recover reimbursement under this provision. Community Trust Company never held a mortgage on the property, but the mortgagor had been in discussions with Community Trust Company to provide a mortgage to address the ongoing default.

[12] On November 23rd, 2022, a house fire occurred at the property and caused substantial damage to the property. The borrower made a claim on the policy. After initially extending coverage and making advance payments to the borrower, the Defendant rescinded the policy. The Defendant took the position that the borrower had made material misrepresentations.

[13] The Plaintiffs then requested confirmation that they would be a co-payee of any proceeds that were paid out. The Defendant took the position that the Plaintiffs had no insured interest at the time of the fire and refused to pay out any monies.

[14] The building on the property was ultimately demolished and sold. The agreement of purchase and sale was entered into on July 5th, 2023, and the sale was completed on October 27th, 2023. The sale proceeds did not satisfy the value of the mortgage.

[15] Given the shortfall and the fact that the Defendants had denied any claim of either the homeowner or of the Plaintiffs, this claim was ultimately commenced.

b) The Litigation History

[16] A notice of action was issued by the Plaintiffs on November 15th, 2024. The Statement of Claim in this matter was issued on December 13th, 2024. In this action, the Plaintiffs advance the following claims:

a) A claim for the losses in contract.

b) In the event that the Court finds that the Plaintiffs are not covered by the contract of insurance, an order for rectification so that they are covered by the contract of insurance.

c) In the event that the claims for damages in contract and for rectification fail, a claim of unjust enrichment.

d) A claim that the Defendant has behaved in a bad faith manner in its' adjudication of this claim and should pay damages.

[17] There is a companion action that has been brought by the mortgagor, in Court File No. CV-23-273. The Defendant denied coverage to the mortgagor on the basis of material misrepresentations. Those misrepresentations included a claim that the borrower did not advise the Defendant that the mortgage was in default, and that the borrower advised the Defendant of the wrong mortgagee in her applications. The Defendant also alleged that the borrower set the fire deliberately, with the intent of defrauding the Defendant.

[18] On June 10th, 2024, Miller J. granted the Plaintiffs status as intervenors in the CV-23-273 action. The Plaintiffs were provided with extensive rights in this second action, and the Plaintiff's claims in that action also include a claim for unjust enrichment.

[19] While the second action is not before me, it is relevant to the matters I have to determine as the Plaintiffs have advanced a claim for unjust enrichment in both actions.

The Parties' Positions

[20] The Defendant argues that the Plaintiffs' claim should be struck under Rule 21. Specifically, since the Plaintiffs are not named in the policy, the Defendant says that they cannot advance a claim in contract as they are not a party to the contract. The Defendant also argues that the Plaintiff has not pled sufficient facts to establish a claim for rectification. Finally, the Defendant argues that the Plaintiff's claim for unjust enrichment should fail on the basis of the juristic reason portion of the test or it should be dismissed as it is already subsumed into the CV-23-273 action.

[21] The Plaintiffs, on the other hand, argue that the law in Ontario is not clear-cut on the question of whether it is essential for the precise mortgagee to be named in the policy of insurance. In addition, the Plaintiffs argue that their contractual claim should survive on the basis that they have asked for rectification and have properly pled the facts necessary to support this claim. Finally, the Plaintiffs argue that it is not plain and obvious that their claim for unjust enrichment will be unsuccessful. They also argue that this action is not the same as the action in Court File No. CV-23-273.

Issues

[22] The positions of the parties require me to determine the following issues:

a) Whether the contract is only valid in respect of the specific, named mortgagee.

b) Whether the doctrine of rectification is properly pled in this case, and whether sufficient facts are pled to sustain the claim.

c) Whether the unjust enrichment claim should be dismissed, either because it is the subject-matter of another action or because the Plaintiffs cannot succeed on the test for unjust enrichment.

[23] I will deal with each issue in turn. Before turning to the specific issues, I will briefly set out the test to be applied on this motion.

[24] The Defendant has brought their motion under Rule 21 of the Rules of Civil Procedure. The Defendant has moved primarily under Rule 21.01(1)(b). The Defendant also moves under Rule 21.01(1)(a) insofar as they claim that there are certain discrete questions of law that can be determined on this motion and Rule 21.01(1)(c) in respect of the unjust enrichment claim. The Rule 21.01(1)(c) claim is, in essence, that unjust enrichment is claimed in both actions and should not be allowed to proceed in this action.

[25] Under Rule 21.01(1)(b), a court may strike out a claim as disclosing no reasonable cause of action where it is plain and obvious, assuming the facts that are set out in the Statement of Claim to be true, that the claim has no reasonable prospect of success: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45.

[26] Evidence is not admissible on a motion under Rule 21.01(b). However, where a document is expressly pled in a Statement of Claim, reference to that document in the motion is permitted. The reason for this is that the Plaintiff's claims are deemed to include the contents of documents incorporated by reference and they are part of the facts, and not evidence within the meaning of the Rule: Web Offset Publications Ltd. v. Vickery (1999), (1999) 43 O.R. (3d) 802 at 803, Cerieco Canada Corp v. Mizrahi, 2024 ONSC 7001 at para. 111.

Issue #1 — Can the Contract Claim Succeed?

[27] In support of this argument, counsel for the Defendants points to the specific language of the standard mortgage clause. That clause states that it is "the Mortgagee" that is entitled to coverage. The Defendant argues that, as a question of law, the phrase "the Mortgagee" means the single person who is named in the insurance policyt. The Defendant points to the policy, which is incorporated to the Statement of Claim by reference and argues that the Plaintiff is not the named party in the policy.

[28] In support of this position, the Defendant relies on Farmers Mutual Insurance Co. (Lindsay) v. Pinder, 2009 ONCA 831, (2009) 100 O.R. (3d) 200, where the Court states (at paras. 16-17) that, even if the policy holder (mortgagor) breaches the insurance policy and the insurance company rescinds it, the mortgagee is protected by a second and separate contract between the mortgagee and the insurance company. In the Defendant's view, there is a separate contract between the mortgagee and the insurer.

[29] Since the Plaintiffs were not named on the policy of insurance, the Defendants argue that there is no privity of contract and the Plaintiffs, as a matter of law, are not entitled to recover damages in contract from the Defendants. In support of this proposition, the Defendants point to two cases: Builders Capital (2014) Ltd. v. Aviva Insurance Company of Canada, 2022 ABCA 120 and Roumiani et. al. v. Fowler et. al., (1998) 172 Nfld. & P.E.I.R. 337.

[30] I start with the Builder's Capital decision. In that case, Builders held a mortgage on a property. However, they were not named on the policy that Aviva had issued to the homeowner. As a result, Aviva denied coverage and, after a trial, the trial court found for Aviva. Builders appealed, and on the appeal the Court noted that the meaning of the phrase "the Mortgagee" is ambiguous (paras. 31-32). However, the Alberta Court of Appeal went on to interpret the meaning of the phrase and found that Builders was not the mortgagee and not entitled to coverage under the policy.

[31] The underlying factual matrix in Builders is important. In Builders, the mortgagor had made inquiries of Aviva to determine whether Aviva would cover Builders as a mortgagee under the policy (para. 15). Aviva had confirmed that they would not cover Builders under the policy. Given that the phrase was ambiguous, the interpretation is anchored in the facts that were found at trial, and specifically the fact that Aviva turned its mind to a possible different mortgagee and told the mortgagor that it was not prepared to write a policy for that mortgagee.

[32] Then, there is the decision in Roumiani. Again, this decision was rendered after trial. In this case, Mr. Roumiani had a house that was destroyed by fire. Again, he had made material misrepresentations to the insurance carrier, and the insurance policy was voided. The policy named the Royal Bank as the mortgagee. The Royal Bank had never had a mortgage on the property, although Mr. Roumiani had obtained financing from the Royal Bank. Instead, Mr. Roumiani had financing from Household Finance. They were not named on the insurance policy.

[33] Mr. Roumiani fully paid off the Household Finance mortgage, but argued that he was entitled to recover on their behalf even though his insurance policy had been voided. The trial judge disagreed, finding on the facts that there was no contract of insurance between Household Finance and the insurer. The trial judge specifically rejected Mr. Roumiani's evidence that he had told his insurer that Household Finance held the mortgage on his property. These facts are distinguishable from the case before me in part because there was a full evidentiary record on which the interpretation of the clause could be founded.

[34] Both decisions are also distinguishable on the basis that neither of them considered the doctrine of rectification. In my view, that is a significant distinguishing feature, as rectification is specifically pled in this case. I will address rectification in the next section. For the purposes of the issues in contract, I would simply note that it would be difficult to dismiss the contractual claim while the rectification claim remained a live issue. There is also no case-law that I was directed to that suggests that rectification is not available on these facts.

[35] I also note that counsel for the Plaintiffs argued that the terms of the contract must be commercially reasonable, and that it would not be commercially reasonable to have a mortgagee and an insurer who are strangers to each other. The problem with this argument is that it also depends on Court dismissing the rectification claim.

[36] Finally, counsel for the Plaintiff argues that neither of these decisions are binding, and that there is no Ontario authority on point. As a result, he argues that the Court should not be dismissing this action on a preliminary motion.

[37] The Courts have held that a claim should not be struck just because it is novel, or because the underlying law is unsettled or because the chances of the claim succeeding are slim: Rivard v. Ontario, 2025 ONCA 100 at para. 22. In this case, there is no Ontario precedent on point. Further, while Roumiani suggests that the language in the standard mortgage clause is clear on its' face, the Builders decision states that the language appears to be ambiguous.

[38] As discussed below, I have concluded that the rectification claim cannot be dismissed at this stage and, as a result, the contractual claim should continue to apply. The lack of Ontario case-law on the point, the fact that rectification was not addressed in either of the two decisions that the Defendant relied on and the fact that there is at least some suggestion that the language is ambiguous are all additional reasons not to dismiss this claim at the pleadings stage.

[39] For all of the foregoing reasons, the Defendant's motion to dismiss the claim in contract is dismissed.

Issue #2 — Can the Rectification Claim be Dismissed?

[40] Counsel for the Plaintiff argues that rectification has not been properly pled. He argues, correctly, that the test for rectification is a high one, as the Courts should not be rewriting contracts except in the clearest of cases.

[41] The test for rectification is analyzed in detail in Performance Industries Ltd. v. Sylvan Lake Golf and Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678 at paras. 37-41. The points made in Sylvan are summarized by the Court of Appeal in Public Service Alliance of Canada v. Nav Canada (2002) 59 O.R. (3d) 284. In that decision, the Court set out the test as follows (at para. 45):

[45] The preconditions for rectification are not easy to meet. They are designed to ensure that the remedy does not become an escape route for contracting parties seeking to get out of improvident bargains. Thus, Performance Industries lays down four "high hurdles" that must be overcome. The party seeking rectification must:

-- ". . . show the existence and content of the inconsistent prior oral agreement" (para. 37);

-- ". . . show that the written document does not correspond with the prior oral agreement" and that permitting the other party to take advantage of the mistake in the written document would be fraud or equivalent to fraud. "Equity acts on the conscience of [a party] who seeks to take advantage of an error which he or she either knew or ought reasonably to have known about at the time the document was signed (para. 38);

-- ". . . show 'the precise form' in which the written instrument can be made to express the prior intention". The equitable jurisdiction to rectify does not permit speculation about the parties' unexpressed intentions but "is limited to putting into words that -- and only that-- which the parties had already agreed to" (para. 40); and

-- establish all of these requirements on a standard of convincing proof (para. 41).

[42] The Plaintiffs argue that all of these elements are pled in paragraphs 41 and 42 of the Statement of Claim. Those paragraphs read as follows:

41. The specific, common and continuing intentions of the Borrower and the Defendant were to cause the first mortgagee with a mortgage actually registered against title to be protected and covered by the Policy in connection with its secured interest, and in particular to have all of the rights and entitlements conferred upon secured interest holders by the Standard Mortgage Clause.

42. The inclusion of Community Trust Company does not reflect the common intentions of the Borrower and the Defendant. The common intention of the Borrower and the Defendant was not to provide entitlements and the benefit of the Standard Mortgage Clause to a corporation which was not a mortgagee on title and which held no secured or other interest in the Property.

[43] I am of the view that these paragraphs plead the necessary elements of a claim for rectification. For the first element, it is clear that the existence and content of the inconsistent prior oral agreement was the 'continuing and common intention' that Sonnet and the mortgagor were intending to protect the Plaintiffs and not the Community Trust Company.

[44] On the second element, the written document does not correspond to this agreement as it names the Community Trust Company instead of the Plaintiffs.

[45] On the third element, all that needs to be done to rectify the prior agreement is to substitute the Plaintiffs' names for the Community Trust Company. In that respect, I reject the submission at paragraph 42 of the Defendant's factum that the claim in paragraphs 41 and 42 of the Statement of Claim requires the Standard Mortgage clause to apply to any mortgagee. The pleading makes it clear that it is this mortgagee that it applies to.

[46] On the final element, the establishment on a standard of convincing proof, that is a matter for trial. I note, parenthetically, that the Supreme Court's decision in FH v. MacDougall, [2008] 3 S.C.R. 41, 2008 SCC 53 was decided after Sylvan and Nav Canada. MacDougall stands for the proposition that there is one standard of proof, balance of probabilities, in civil cases. That principle has now been adopted in the context of rectification, with the understanding that the standard to be met is different from the quality of the evidence required to meet that standard: Canada (Attorney General) v. Fairmont Inc., 2016 SCC 56 at paras 34-37.

[47] Returning to the issue before me, the rectification claim is properly pled. The specific evidence in support of that claim is something that can be ascertained at discovery. The motion to strike the rectification claim is also dismissed.

Issue #3 — The Unjust Enrichment Claim

[48] Given that the contractual and rectification claims remain to be determined, I am of the view that the unjust enrichment claim should not be struck at this point. The fact that there is a similar claim in the other action can be managed by ensuring that the two actions are either tried together or heard one after the other as the trial judge may direct.

Conclusion and Costs

[49] For the foregoing reasons, the Defendant's motion is dismissed.

[50] The parties are encouraged to agree on the costs of this motion. Failing agreement, they are to provide submissions on the following timetable:

a) The Plaintiffs are to serve, file and upload costs submissions of no more than two (2) single-spaced pages, exclusive of bills of costs, offers to settle and case-law within fourteen (14) days of the release of these reasons.

b) The Defendant is to serve, file and upload costs submissions of no more than two (2) single-spaced pages, exclusive of bills of costs, offers to settle and case-law within fourteen (14) days thereafter.

c) In addition to serving, filing and uploading their costs submissions, counsel is to provide a copy of the submissions to my attention through the e-mail address: SCJ.CSJ.General.Brampton@ontario.ca. The e-mail should be sent to my attention and should contain the name and file number of the case.

d) There are to be no reply submissions. If I do not receive costs submissions in accordance with these deadlines, then there will be no order as to costs. There are also to be no extensions to the deadlines for filing costs submissions, even on consent, without my leave.

[51] I advised counsel in this matter that, if I denied the Defendant's motion, it was essential that this action and the action in Court File No. CV-23-273 be either heard together or one after the other as the trial judge may determine. Counsel are to consult with the counsel in Court File No. CV-23-273 and are, within thirty (30) days of today's date, to submit a motion to the Court office in Orangeville to address that issue. In the event that there is any dispute over that issue, I may be spoken to.

LEMAY J

Released: February 13, 2026