



COURT OF APPEAL FOR ONTARIO

CITATION: Rescon Financial Corporation v. New Era Development
    (2011) Inc., 2018 ONCA 530

DATE: 20180608

DOCKET: C64834

MacPherson, LaForme and Roberts JJ.A.

BETWEEN

Rescon Financial Corporation

Plaintiff (Respondent)

and

New Era Development (2011) Inc.

Defendant (Appellant)

AND BETWEEN

New Era Development (2011) Inc.

Plaintiff by Counterclaim (Appellant)

and

Rescon Financial Corporation and Ebrahim Bulbulia

Defendants to the Counterclaim (Respondents)

David Keith Alderson and Andrew Ottaway, for the
    appellant

Scott Crocco and Peter H. Smiley, for the respondents

Heard: June 6, 2018

On appeal from the judgment of Justice Mario Faieta of
    the Superior Court of Justice, dated January 10, 2018.

By the Court:

[1]

The appellant, New Era Development (2011) Inc. (New Era), appeals from
    the judgment of Faieta J. of the Superior Court of Justice granting summary
    judgment to the respondent Rescon Financial Corporation (Rescon) and
    dismissing New Eras counterclaim against Rescon and its founding principal,
    Ebrahim Bulbulia (Brime).

[2]

Rescon is a mortgage broker. Rescon claimed $400,000 in fees from New
    Era for arranging construction financing for a condominium project. New Era
    denied that it owed fees and submitted on the motion that Rescon failed to
    perform the terms of the contract between the parties resulting in $4 million
    in damages.

[3]

In February 2010, Razagh Vaseghi (Razagh) incorporated New Era which purchased
    a parcel of land (the Bristol Lands) for $2.8 million. In September or October,
    2012, Razagh approached Rescon to obtain replacement mortgage financing for the
    Bristol Lands. On October 20, 2012, Razagh signed a one-page retainer prepared
    by Rescon in relation to the Bristol Lands.  Razagh declined to pursue the
    options presented by Rescon.  He refinanced without going through Rescon and
    started working with another mortgage broker to obtain additional financing.  In
    June 2014, Razagh again approached Rescon to arrange about $40 million in
    financing for the construction and development of the Bristol Lands. On July 8,
    2014, Razagh delivered a signed copy of the retainer agreement between the
    parties.

[4]

The crucial provision of the contract provided for payment to Rescon in
    these circumstances:

RESCONs fee for arranging mortgage financing will be 1.0% of
    any proposed Development Construction and Letter of Credit loan facilities
    earned by RESCON upon producing an acceptable Commitment Letter and payable
upon
    the earlier of 90 days from the execution of the Commitment Letter
. 
    [Emphasis added.]

[5]

The parties approached Alterna Savings and Credit Union Limited
    (Alterna) for financing to develop the Bristol Lands. Alterna delivered a
    Letter of Intent dated September 30, 2014, for Construction Financing of the
    Bristol Project which was returned with handwritten changes and a cheque for
    $50,000 payable to Alterna. Rescon obtained a Commitment Letter from Alterna
    (the Second Commitment Letter) proposing a Construction and Development loan
    of $39 million, as well as a Letter of Credit facility of $1 million on terms
    that largely reflected the terms found in the Alterna LOI.

[6]

After concerns were expressed the Project Monitor, required by Alterna
    in the Commitment Letters, regarding the conditions precedent for funding,
    budget overruns, and mezzanine financing, the relationship between New Era and
    Rescon began to sour. On June 19, 2015, New Era sent an email to Alterna
    terminating the Second Commitment Letter. Later that day Alterna forwarded New
    Eras email to Rescon. On July 2, 2015, Rescon sent an email to New Era
    containing an invoice for $400,000. After further discussions between Rescon
    and New Era regarding the continuation of their relationship, New Era informed
    Rescon, via text, that its services were no longer required.

[7]

New Era refused to pay the $400,000 sought in Rescons invoice. Rescon
    commenced an action. New Era responded with a defence and counterclaim.

[8]

The motion judge dealt with eight issues:

1.
Was commission payable
    to Rescon only after funding was received by New Era?
The motion judge
    concluded that it was clear that Rescon was entitled to be paid a commission
    after 90 days from the execution of a commitment letter.

2.
Was the second Alterna
    Commitment letter an acceptable commitment letter?
The motion judge
    found that it was.

3.
Did the Second
    Exclusive Agency Agreement expire on or about January 7, 2015?
The
    motion judge found that it had not.

4.
Is the Second Alterna
    Commitment Letter Unenforceable for breach of statute?
The motion
    judge found that it is not. First, non-compliance with the disclosure
    requirements in the relevant Regulation does not render a contract
    unenforceable. Second, in the circumstances, a breach of the Regulation did not
    occur.

5.
Is Rescon barred from bringing the action because it has not proven it
    was licensed under the
Mortgage
    Brokerages, Lenders and Administrators Act, 2006
?
The
    motion judge explained that the court should proceed on the assumption that
    there was no such breach, and New Era has not led any evidence to show that
    Rescon was not regulated under the Act for the relevant period.

6.
Is Rescon disentitled
    from collecting a fee on the ground that it breached its fiduciary duty to New
    Era?
The motion judge found that there was little trust, confidence
    and reliance demonstrated by New Era in its relationship with Rescon. Thus,
    there was no fiduciary relationship. The relationship of a mortgage broker with
    his or her client is not
per se
a fiduciary relationship.

7.
Is
    Rescon disentitled from collecting a fee on the ground that it negligently
    performed its duties under the second exclusive agency agreement?
The
    motion judge was not satisfied that the evidence demonstrated the facts relied
    on by New Era in claiming that Rescon acted negligently. Further, he was not
    satisfied that New Era suffered a loss as a result of the alleged negligence.

8.
Should
    the counterclaim be dismissed?
The motion judge concluded that, given his
    conclusion that the allegations and defences raised in the Statement of Defence
    do not raise a genuine issue requiring a trial, the Counterclaim should be
    dismissed for the same reason.

[9]

The appellant appeals on seven grounds.

[10]

First,
    the appellant contends that the motion judge erred by finding that Alternas
    Second Commitment Letter was acceptable. It says that this letter included a
    Presale Test requirement of 124 sold units with deposits of at least 20 per
    cent and that it was objectively impossible for the appellant to meet this
    requirement.

[11]

We
    do not accept this submission. In our view, it is a red herring. The
    appellants sparse financial information does not support its position.
    Moreover, there was nothing preventing the appellant from negotiating this
    point with Alterna. In addition, no one  the appellant, the respondent,
    Alterna  raised this issue as they tried to negotiate an agreement. Finally,
    as the motion judge stated:

[T]here is no genuine issue requiring trial regarding whether
    the Second Alterna Commitment Letter was an acceptable commitment letter  as
    New Era had accepted it not only once, but twice.

[12]

Second,
    the appellant submits that the motion judge erred by failing to make
    credibility findings on key issues, especially disputed oral discussions
    between Razagh and Brime. The appellant asserts that there was a contest of
    credibility between Razagh and Brime over the term of their contract making the
    respondents commission payable upon the earlier of 90 days from the execution
    of the Commitment Letter or upon the initial funding of the loan. The
    appellant submits that Brime orally assured Razagh, prior to signing the
    agreement, that his commission would be payable only on the actual funding of a
    loan obtained through Brimes efforts.

[13]

We
    are not persuaded by this submission. The record before the motion judge
    discredited Razaghs evidence on this point and supports the motion judges
    conclusion:

[T]he emails exchanged between Brime and Razagh at the time
    that the Second Exclusive Agency Agreement was signed provide a contemporaneous
    record of the parties interactions. From these emails, I find that it is clear
    that: (1) Razagh carefully read the two page agreement, as reflected by the
    numerous proposed changes that he had made in the form of digital sticky notes,
    before he signed it; (2) Brime had rejected all of Razaghs proposed changes;
    (3) Brime insisted that Razagh return the agreement in the form provided
    without changes and Razagh did so.  Brimes insistence that the draft Second
    Exclusive Agency Agreement be returned signed by Razagh undermines Razaghs
    assertion that Brime agreed to terms of payment other than as described in that
    document.

As a result, I find that Brime and Rescon did not represent to
    Razagh that the payment of their brokerage fee was conditional upon Razagh
    being advanced funds by a lender.

[14]

Third,
    the appellant contends that the motion judge erred in rejecting its defence of
    the agents breach of duty. The factual foundation for this argument is the
    appellants assertion that it was not able to meet the Presale Test condition
    in Alternas Second Commitment Letter.

[15]

We
    reject this argument. It essentially covers the same factual terrain as the
    first issue and must be rejected for the reasons set out above in relation to
    that issue.

[16]

Fourth,
    the appellant submits that the motion judge erred by concluding that there was
    not a fiduciary relationship between the parties and that the respondent
    beached its duty.

[17]

We
    disagree. The motion judges decision on this point is entitled to significant
    deference: see
Hodgkinson v. Simms
, [1994] 3 SCR 377, at para. 96. In
    our view, the motion judges review of the evidence on this issue establishes
    clearly that Razagh was far from being a neophyte shrinking violet in his
    relationship with Brime. Razaghs language and conduct throughout the term of
    the contract justified the motion judges conclusion that there was little
    trust, confidence and reliance demonstrated by New Era in its relationship with
    Rescon.

[18]

Fifth,
    the appellant asserts that the motion judge erred in law by determining
    causation before making findings on standard of care on the agents breach of
    duty issue and in the absence of any expert evidence filed by the respondents
    establishing the standard of care.

[19]

We
    do not accept this argument. There is no conceivable standard of care analysis
    that could have made a difference, given that the motion judge correctly found
    that the respondent did not breach its duty.

[20]

Sixth,
    the appellant submits that the motion judge erred in effectively reversing the
    onus that the respondents carried in requiring that the appellant demonstrate
    that there was no genuine issue for trial.

[21]

In
    our view, the motion judge did not so err. The respondents having discharged
    their evidentiary burden of proving that there was no genuine issue requiring a
    trial for its resolution, the onus shifted to the appellant to show that the claim
    had a real chance of success and that there were genuine issues requiring a
    trial:
Sanzone v. Schechter
, 2016 ONCA 566, at para. 30

[22]

Finally,
    the appellant argued that the motion judge erred by dismissing the counterclaim
    on a summary judgment basis.

[23]

We
    disagree. There is a pronounced overlap between the defence and the
    counterclaim. The motion judge was not wrong to conclude:

Given my conclusion that the allegations and defences raised in
    the statement of Defence do not raise a genuine issue requiring a trial, I find
    that the Counterclaim should be dismissed for the same reason.

[24]

The
    appeal is dismissed. The respondent is entitled to its costs of the appeal
    fixed at, $29,000, inclusive of disbursements and HST.

Released: JM JUN 8 2018

J.C. MacPherson J.A.

H.S. LaForme J.A.

L.B. Roberts J.A.


