


COURT OF APPEAL FOR ONTARIO

CITATION:
Estates Associates Inc. v. 1645112 Ontario
    Ltd., 2012 ONCA 75

DATE: 20120206

DOCKET: C54242

Laskin, Sharpe and Juriansz JJ.A.

BETWEEN

Estates Associates Inc.
and Musharaff
    Iqbal

Appellant

and

1645112
    Ontario Ltd.; 1793411 Ontario Ltd.; Mr. Ronald McCowan
; Mr.
    Bryon C. Cohen; Remax (All Stars Realty Inc. Brokerage);  Reine Schickedanz

Respondents

Tolulope Adewumi, for the appellant

Jeffrey W. Kramer and S. Kuruganty, for the respondents 1645112
    Ontario Ltd.; 1793411 Ontario Ltd.; and Mr. Ronald McCowan

Heard: January 13, 2012

On appeal from the judgment of Justice Kevin Whitaker of
    the Superior Court of Justice, dated July 26, 2011.

Juriansz
    J.A.:

[1]

This is an appeal from the order of Whitaker J. granting summary
    judgment to the defendants 1645112 Ontario Ltd. (164), 1793411 Ontario Ltd.
    (179) and Ronald McCowan, three of the six defendants in an action arising
    out of a real estate transaction.

[2]

The appellant, Estates Associates Inc.
(Estates),
    was the vendor of the real estate. Musharraf Iqbal is the owner of the
    appellant. 164 was the purchaser, and on closing, 179. provided two mortgages
    to Estates as partial payment for the real estate. McCowan owns both 164 and
    179. Estates sued 164, 179 and McCowan, as well as its real estate agency, real
    estate agent and solicitor. Only 164, 179 and McCowan moved for summary
    judgment. Their motion was successful. Estates appeals the decision of the
    motion judge. For the reasons below, I would grant the appeal.

A.

Facts

[3]

On January 15, 2009, Estates entered into an agreement to sell
    certain property to 164 for $1.4 million. The parties agreed that the purchase
    price would be paid, in part, by the assignment of two mortgages in the amount
    of $350,000 and $300,000 respectively on two properties owned by 179. At the
    time, those two properties were under agreements of purchase and sale between
179 as vendor and Daniel Barnabic as purchaser for $450,000
    and $350,000 respectively.
[1]

[4]

Estate did not have 179s two properties appraised before accepting
    the assignment of the two mortgages as part of the purchase price.
    Subsequently, it turned out that the values of the two properties were well
    below the face values of the two mortgages. In the action, Estates alleges that
    the respondents fraudulently misrepresented the values of the two mortgaged
    properties thus, inducing Estates to accept the mortgages as part payment in
    the real estate transaction.

Decision of the motion judge

[5]

The motion judge applied a four part test for fraudulent
    misrepresentation. I paraphrase the test he set out:

(i) the defendant made a false statement through words or
    conduct;

(ii) the defendant knew the statement was false or was reckless
    as to its truth;

(iii) the defendant made the representation with the intention
    that it would be acted upon by the plaintiff;

(iv) the plaintiff relied upon the statement; and suffered
    damage as a result.

[6]

The motion judge concluded, Having reviewed the detailed record
    which includes the discovery of Iqbal and the examination of [Estates solicitor],
    I cannot find (nor can Estates point to) any false representation made by
    [McCowan, 164 or 179] to Estates during the course of the transaction (at
    para. 27).

[7]

The motion judge observed that Iqbal was warned repeatedly by his
    solicitor to act with more prudence and diligence, to obtain appraisals and to
    visit the properties, and take other steps to be assured of the true value of
    the mortgages. The motion judge went on to find, without discussion, that none
    of the four elements of fraudulent misrepresentation was made out and granted
    summary judgment to McCowan and his two companies.

Analysis

[8]

While the appellant may have failed to identify the relevant
    evidence before the motion judge, the record does contain evidence that McCowan
    made representations to Iqbal as to the value of the mortgaged properties. In
    addition, there is evidence in the record that could support a finding that
    McCowans conduct constitutes a representation as to the value of the mortgaged
    properties. The test applied by the motion judge recognizes that false
    representations can be by conduct.

[9]

The theory of the plaintiffs case, succinctly set out in paras.
    30 and 31 of the statement of claim, is that McCowan made available to Estates
    the agreements of purchase and sale between 179 and Barnabic for the two
    mortgaged properties to convince Iqbal that the two properties were more
    valuable than they turned out to be. The plaintiff pleads that these
    agreements are phony and fraudulent and it was intended to deceive the
    Plaintiff into agreeing to close the transactions if he has doubts regarding
    the value of the properties.

[10]

There is evidence in the record that McCowan arranged and
    attended the meeting between Iqbal and Barnabic; that at that meeting, Barnabic
    told Iqbal what he was agreeing to pay for the properties; that McCowan claimed
    he had renovated the properties and described to Iqbal in detail the
    renovations he claimed to have made; that those renovations, for example
    putting in a new kitchen and flooring, were not in fact made; that McCowan told
    Iqbal that the properties had very good potential and that there is big
    chances for this and that this property will be a million dollar, that he had
    sold the property for the amount and over the mortgage price, and that he had
    given the value of maybe $500,000 for [one of the properties] and $300,000
    [for the other property]; that subsequent appraisals suggest that these
    figures are well above the properties market value; that Barnabic and McCowan
    had known each other for many years; that the transactions between Barnabic and
    McCowan did not close before the institution of Iqbals lawsuit; and that
    Barnabic and McCowan offered contradictory versions of why the closings were
    delayed.

[11]

In my view, the foregoing evidence makes it a genuine issue for
    trial whether the transactions between McCowan and Barnabic were phony and
    intended to mislead Estates as to the value of the mortgages. A trial judge
    could infer from all the circumstances that McCowan, by words and/or conduct,
    made a representation that he knew was false; namely, that the mortgaged
    properties were of the values indicated in the agreements of purchase and sale
    with Barnabic.

[12]

The other factors considered by the motion judge, i.e. that Iqbal
    did not heed the advice of his solicitor, and that Iqbal was not concerned
    about the value of the mortgaged properties, did not provide the motion judge
    with a basis to conclude that it was appropriate to grant summary judgment.

[13]

First, whether Iqbals solicitor gave him wise advice cautioning
    him to be more careful in assuring himself about the value of the mortgaged
    properties has no logical bearing on whether McCowan made a false
    representation to Iqbal. In fact, Iqbals decision to proceed without following
    his solicitors advice could strengthen the inference that he relied on the
    representations of McCowan. In any event, Iqbals action against the solicitor
    is proceeding to trial. It will be for the trial judge to decide whether to
    believe the solicitors assertions that he gave such advice to Iqbal or Iqbals
    assertion that he did not.

[14]

Second, in my view, the motion judge made too much of the
    evidence that Iqbal was not concerned with the value of the two mortgaged
    properties. Iqbal was asked, The two properties, was it important to you to
    know
exactly
how much those properties were worth? (emphasis added).
    Iqbal responded that he was interested in the mortgage only. Clearly, Iqbal
    was interested in the value of the two mortgages, and he made clear he expected
    they would provide him with income of $6,000 every month and repayment of the
    principle of $650,000 after two years. It is not possible to divorce the value
    of the mortgages from the value of the underlying real estate.

[15]

The respondents argued on appeal that even if the discrepancies
    between the purchase prices and appraised values of the two mortgaged
    properties considered in all the circumstances supported an inference of a
    false representation of their value, the appellant suffered no damages. The
    respondents point out that the appellant, on receiving the mortgages in the
    transactions, immediately reassigned them. The appellant assigned one mortgage
    to McCowan as security for a $132,000 loan, and assigned the other mortgage to
    the real estate agent as security for commissions.

[16]

I would not give effect to this argument. The appellant suffered
    damage by receiving mortgages of less value than the amount credited to the
    purchaser in the real estate transaction. The quantification of the damage he
    suffered in light of his subsequent dealing is a question for trial.

Conclusion

[17]

I would allow the appeal, set aside the order of the motion judge
    and replace it with an order dismissing the respondents motion for summary
    judgment. The motion judges award of costs in the amount of $40,000 against
    the appellant and Iqbal is replaced by a costs award of $20,000 in the
    appellants favour. The appellants costs of the appeal are fixed in the amount
    of $12,500 including disbursements and applicable taxes.

R.G. Juriansz J.A.

I agree John Laskin
    J.A.

I agree Robert J.
    Sharpe J.A.

Released: February 6, 2012





[1]
These are the facts found by the trial judge, which reflect the content of the
    affidavits, cross-examinations and discoveries of the parties. The agreements
    of sale in the record, however were between a company 1083018 Ontario Ltd. and
    Barnabic in trust for a company to be incorporated. Neither party provided any
    explanation.


