



COURT OF APPEAL FOR ONTARIO

CITATION: 2257573 Ontario Inc. v. Furney,
    2020 ONCA 742
DATE: 20201119
DOCKET: M51878 (C68734)

Jamal
    J.A. (Motions Judge)

BETWEEN

2257573
    Ontario Inc.

Plaintiff/Defendant by Counterclaim

(Respondent/Responding Party)

and

Alex Aiden Fitzgerald Furney also known as Alex Furney,
Maryam
  Furney and Hassan Hashemi

Defendants/Plaintiffs by
    Counterclaim
(Appellants/Moving Parties)
Richard K. Watson, for the moving
    parties
Howard W. Reininger, for the responding
    party
Heard: November 10, 2020 by video conference
REASONS FOR DECISION
Introduction
[1]

The appellants move to stay pending appeal parts
    of the orders of Turnbull J. (motion judge), dated October 14, 2020. The
    motion judge granted the respondent, a mortgage lender, summary judgment under several
    mortgages on the appellants properties found to be in default.
[2]

The motion judge ordered the appellants to pay
    the respondent $880,642.98 plus interest under the mortgage agreements. He also
    granted the respondent, as mortgagee, possession of two investment properties owned
    by the appellant Maryam Furney at 253 Four Mile Creek Road and 419 Progressive
    Avenue in Niagara-on-the-Lake, Ontario (Properties).
[3]

This stay motion relates only to the orders for
    possession of the Properties. It is not disputed that the orders to pay money were
    stayed by the appeal to this court: r. 63.01(1) of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194.
[4]

It is also not disputed that the appellants
    mortgage loans have all been in default for several years. The motion judge
    found the appellants have paid absolutely nothing on the mortgages for over
    three and one-half years  nor offered to do so  not one cent has been paid on
    any of these mortgages since the funds were advanced over three years ago. That
    remains true today.
[5]

For the reasons that follow, the motion to stay
    the orders for possession is dismissed.
Background Facts
[6]

The motion judge set out the background facts
    about the parties mortgage financing transactions in two detailed rulings: an
    initial ruling ordering
viva voce
evidence on the summary judgment
    motions (
2257573 Ontario Inc. v. Furney et al.
, 2020 ONSC 781), and a
    later ruling granting summary judgment (
2257573 Ontario Inc. v. Furney et
    al.
, 2020 ONSC 6002).

The essential facts are as follows.
[7]

The appellant Maryam Furney, a licensed mortgage
    agent and an experienced real estate investor, is the registered owner of the
    Properties. Her husband, the appellant Alex Furney, was the registered owner of
    a third property in Niagara-on-the-Lake. The appellant Hassan Hashemi is an
    acquaintance of the Furneys and was the registered owner of a property in
    Woodstock, Ontario.
[8]

In early 2017, the Furneys were having financial
    difficulties and wanted to refinance the mortgages on their properties. Hashemi,
    who was interested in investing in one of the Properties, introduced the
    Furneys to Anil Kingrani, the principal of the respondent, a mortgage lender,
    to obtain short-term financing.
[9]

In February and March 2017, the Furneys, Hashemi,
    and Kingrani negotiated several high-interest, short-term loans from the
    respondent  totalling almost $900,000  secured by mortgages on the appellants
    properties, to allow the Furneys to seek alternative financing on a longer-term
    basis. The appellants were represented by counsel in these transactions.
[10]

Unfortunately, the Furneys could not obtain
    longer-term financing. This led to the accumulation of interest, other charges,
    and penalties on the mortgage loans with the respondent. The appellants defaulted
    on their mortgage agreements from the outset. As the motion judge found, the
    appellants have neither paid nor offered to pay anything towards these mortgage
    loans since they were concluded in early 2017.
The Claims and Counterclaims
[11]

In late 2017, the respondent sued the appellants
    for defaulting under the mortgage agreements. It then moved for summary
    judgment, seeking orders for possession of all the properties and repayment of
    the principal advanced, accrued interest, and other penalties, fees, and charges
    under the agreements.
[12]

In response, the appellants claimed the
    respondent had breached an alleged oral agreement, forming part of the
    refinancing arrangements, under which the respondent agreed to discharge three
    executions against the Properties. They also claimed the respondent failed to
    provide them with timely and accurate mortgage discharge statements and that, once
    the penalties, fees, and charges were included in the calculation of the effective
    annual interest rate, the mortgage loans involved a criminal rate of interest contrary
    to s. 347 of the
Criminal Code
, R.S.C. 1985, c. C.46. Finally, the
    appellants counterclaimed against the respondent, alleging that they suffered
    damages when the respondent unreasonably refused to discharge the executions
    against the Properties under the oral agreement and provided them with inflated
    mortgage statements.
The Summary Judgment Decision
[13]

The motion judge ruled that it was essential to
    hear
viva voce
evidence from Kingrani, Maryam Furney, and Hashemi. After
    hearing that evidence, the motion judge granted summary judgment for the
    amounts owing under the mortgage loans. He also granted orders for possession
    of the Properties and for those of Alex Furney and Hashemi.
[14]

The properties of Alex Furney and Hashemi were
    sold under powers of sale by prior mortgagees. The only remaining properties
    are the Properties of Maryam Furney.
[15]

The motion judge rejected the appellants claim
    that the respondent orally committed to discharge three executions against the
    Properties as part of the refinancing arrangements. He found it was
    inconceivable that a mortgagee would agree to refinance properties for amounts
    and upon terms which had not been specified. He also noted the appellants
    lawyer on the transactions did not file an affidavit on the summary judgment motion
    to support the claimed oral commitment, which he would have expected in the
    circumstances.
[16]

The motion judge accepted that if the other
    penalties, fees, and charges set out in the respondents discharge statements were
    included in the calculation of the effective annual interest rate, that rate
    would exceed the criminal rate of interest under s. 347 of the
Criminal
    Code
. He noted, however, that the respondent was now seeking repayment of only
    the principal and interest under the mortgage loans. In the circumstances, the motion
    judge was prepared to order severance of each of the mortgage loan agreements to
    allow the respondent judgment on only the principal advanced, with interest at
    the rates agreed to, which while high (24% and 18%) were below the criminal
    rate (exceeding 60%). He found that [t]his was a risky commercial transaction.
    The parties bargained for the interest rates reflected in the registered
    mortgages.
[17]

The motion judge allowed the counterclaims to
    proceed because the respondent did not seek their dismissal. He observed,
    however, there was no evidence before the court of any the damages alleged and
    the pleadings were sadly deficient of particulars.
[18]

The
motion
    judge suggested the appellants might have avoided the orders for possession by paying
    the disputed amounts into court, as the respondent had proposed, subject to an
    accounting and the courts decision. But they never did so.
The Test for a Stay Pending Appeal
[19]

To obtain a stay of a judgment pending appeal, a
    moving party must meet the three-part test for an interlocutory injunction: (1)
    there is a serious question to be determined on the appeal; (2) the moving
    party will suffer irreparable harm if the stay is denied; and (3) the balance
    of convenience favours granting the stay:
RJR-MacDonald Inc. v. Canada
    (Attorney General)
, [1994] 1 S.C.R. 311, at p. 334;
Wilfert v.
    McCallum
, 2017 ONCA 895, 54 C.B.R. (6th) 249, at para. 6; and
Starkman
    v. Home Trust Company
, 2015 ONCA 436, at para. 7.
[20]

In applying this test, the court is mindful that
    [t]hese three criteria are not watertight compartments. The strength of one
    may compensate for the weakness of another. Generally, the court must decide
    whether the interests of justice call for a stay:
Circuit World
    Corporation v. Lesperance
(1997), 33 O.R. (3d) 674 (C.A.), at p. 677.
Application to This Case
[21]

The
appellants
    meet none of the criteria for a stay.
(1)

Serious question to be determined on the appeal
[22]

The threshold to establish a serious question on
    the appeal is low. The court must make a preliminary assessment of the merits of
    the case and determine whether the issue on appeal is neither frivolous nor vexatious:
RJR-MacDonald
, at p. 337;
Circuit World Corporation
, at p.
    677.
[23]

Here, the appellants allege the motion judge erred
    in law and fact by: (1) failing to find an oral contract for the respondent to
    discharge executions against the Properties; (2) failing to apply the doctrine
    of good faith and honest performance to a contract; (3) failing to properly
    consider the legal consequences of the respondents prolonged and unlawful
    attempt to collect more than the criminal rate of interest; (4) misapplying the
    doctrine of severance by awarding the respondent a grossly excessive amount of interest;
    (5) failing to give the appellants a reasonable period of time to pay the
    amounts ordered; and (6) risking inconsistent results and substantial injustice
    by granting the respondent immediate possession before adjudicating the
    counterclaims.
[24]

All the appellants grounds of appeal address
    whether the motion judge erred in determining the total amount due under the
    mortgage loans. They do not dispute that the mortgage loans are in default and
    have been for several years. Even if the appellants succeed on appeal in
    reducing the interest payable, their mortgage loans will still be in default. That
    default triggers the respondents right to possession. There is thus no serious
    question on the appeal about the respondents right to possession of the
    Properties: see
Starkman
, at para. 9.
[25]

The appellants say, however, that they are now
    ready, willing, and able to satisfy their monetary obligations. They provided
    evidence on this motion that they have a commitment of alternative financing on
    the Properties and are prepared to pay the principal and three months interest
    into court. But the financing commitment letter they filed shows that their proposed
    new lender insists on a blanket first and second mortgage on the Properties as
    security. The respondent would therefore have to subordinate or relinquish its
    mortgages on the Properties. The respondent does not accept this proposal. In
    any event, the proposal does not detract from my conclusion that there is no
    serious issue on appeal as to the respondents right to possession of the
    Properties.
(2)

Irreparable harm
[26]

I also do not accept the appellants submission that
    they would suffer irreparable harm if the stay is denied.
[27]

Irreparable harm is harm which either cannot be
    quantified in monetary terms or which cannot be cured, usually because one
    party cannot collect damages from the other:
RJR-MacDonald
, at p.
    341.
[28]

The appellants posit three claims of irreparable
    harm if the stay is denied.
[29]

First, they say the respondent would engage in
    an improvident sale of the Properties, destroying the appellants equity and
    leaving them with a deficiency in what they owe the respondent and third-party
    judgment creditors. But in any sale, the respondent as mortgagee has a legal
    obligation to take reasonable precautions to obtain the true market value of
    the Properties as of the date of sale:
Centurion Farms Ltd. v.
    Citifinancial Canada Inc.
, 2013 ONCA 79, at para. 4;
Manufacturers
    Life Co. v. Granada Investments Ltd.
(2001), 150 O.A.C. 253 (C.A.), at
    para. 67, leave to appeal refused, [2001] S.C.C.A. No. 637;
Oak Orchard
    Developments Ltd. v. Iseman
, [1987] O.J. No. 361 (H.C.), affd [1989] O.J.
    No. 2394 (C.A.); and Joseph E. Roach,
The Canadian Law of Mortgages
, 3rd
    ed. (Toronto: LexisNexis, 2018), at pp. 136-139. Nothing before the court
    suggests the respondent will breach this legal obligation.
[30]

Second, the appellants say they will have no effective
    remedy against the respondent if they succeed on the appeal or counterclaims,
    because the respondent is a numbered company whose assets and financial
    condition are unknown. They fear Kingrani may deplete the respondents assets
    between now and the final determination of the appeal or counterclaims. Again,
    however, there is no evidence before the court to justify this fear.
[31]

Third, the appellants claim that if the stay is
    denied they will lose their right to redeem the mortgages and repurchase the
    Properties. I do not accept this submission. To date, the appellants have not sought
    to exercise their right to redeem the mortgages. Nor, on the evidence before
    the court, is there is any realistic prospect of them doing so in the
    foreseeable future. The evidence on this motion establishes that the appellants
    are heavily indebted: the Properties are encumbered with over $1.4 million in
    executions and liens by the Canada Revenue Agency, the Town of Niagara, and
    other judgment creditors. In the circumstances, I see no irreparable harm to
    the appellants in allowing the respondent to take possession of the Properties
    now, as permitted by the motion judge.
(3)

Balance of convenience
[32]

Finally, I do not accept the appellants
    submission that the balance of convenience favours granting a stay.
[33]

The balance of convenience involves a
    determination of who would suffer the greater harm from granting or refusing
    the stay, pending a decision on the merits of the appeal:
RJR-MacDonald
,
    at p. 342.
[34]

This factor overwhelmingly favours the
    respondent. If the stay is denied, the appellants will lose their right to
    redeem the mortgages. But on the evidence before me I have concluded there is
    no realistic prospect of such redemption in the foreseeable future. The
    appellants have significant indebtedness under loans from the respondent that allowed
    them to continue to own and perhaps earn income from the Properties for three-and-a-half
    years. Yet they made no payments, even under protest, as they challenged the
    quantum of their indebtedness. The respondent lent money to the appellants in
    exchange for mortgage security it now seeks to realize upon, after an extended period
    of default, and after the motion judge has ruled in its favour. In these
    circumstances, the respondent would suffer greater harm if its right to
    possession is delayed any more.
[35]

I therefore conclude the appellants have not met
    the test for a stay.
Disposition
[36]

The appellants motion to stay the orders for
    possession is dismissed.
[37]

The respondent is entitled to costs on a
    substantial indemnity basis under the standard mortgage terms in the claimed
    amount of $12,309.94, inclusive of disbursements and HST, to be paid within 30
    days of this order.
M.
    Jamal J.A.