



COURT OF APPEAL FOR ONTARIO

CITATION: 7550111 Canada Inc. v. Charles,
    2020 ONCA 386

DATE: 20200616

DOCKET: C67479

Rouleau, van Rensburg and Roberts
    JJ.A.

BETWEEN

7550111 Canada Inc.

Plaintiff (Respondent)

and

Natalie Charles

Defendant (Appellant)

Kevin Sherkin, for the appellant

Doug Bourassa, for the respondent

Heard: in writing

On appeal from the judgment of
    Justice Dale F. Fitzpatrick of the Superior Court of Justice dated August 29,
    2019.

REASONS FOR
    DECISION

A.

Overview

[1]

The appellant appeals from the judgment granted in
    favour of the respondent in the amount of $164,820.86. The respondent
    successfully brought a motion for summary judgment to enforce its mortgage rights
    against the appellant.

[2]

At the request of the panel, the parties
    provided further written submissions, including the appellants draft
    counterclaim and the revised calculation of the amounts owing under the
    mortgage that formed the basis for the judgment.

[3]

For the following reasons, we allow the appeal for
    the narrow purpose of addressing calculation errors in the amount of the award
    and otherwise dismiss the appeal.

B.

Background

[4]

The appellant admitted on the hearing of the motion
    that in or about the end of February 2018, she sought a mortgage loan of $120,000
    from the respondent and entered into a mortgage for that amount. She also
    admitted that funds were advanced under the mortgage and used to pay off her personal
    debts and other debts she had guaranteed. It was common ground that she has never
    repaid any of these monies. She disputed that the respondent had made a further
    $3,300 advance and the respondent abandoned its claim for this amount at the hearing
    of the motion.

[5]

However, the appellant argued before the motion
    judge that she was the victim of an elaborate fraud carried out by the respondent,
    its principals and lawyers, and Kazembe Law, the firm purporting to represent
    her in the mortgage transaction. Her principal allegation was that the
    respondent and the others fraudulently changed the term of the mortgage from 12
    months to one month. She denied signing mortgage documents setting out a one-month
    term and claimed her signature was forged, relying on expert evidence. She pointed
    to various inconsistencies among the different versions of the mortgage commitment
    letters that were produced and highlighted the fact that the mortgage
    registered on title on March 2, 2018 provided for a 15-month term.

[6]

The motion judge rejected the appellants fraud
    allegations and determined that there was no meaningful evidence to suggest
    any misconduct let alone fraud on the part of 7550111 in relation to the
    mortgage transaction. While acknowledging that the loan documents present inconsistencies,
    the motion judge concluded that these inconsistencies do not amount to fraud
    or anything close to it but rather suggested sloppy paperwork by the respondent
    and the lawyer representing the appellant in the transaction. In any event, he
    found the discrepancies among the differing terms of the mortgage to be moot: even
    if the mortgage term was for 12 months, as the appellant alleged, or 15 months,
    as provided for in the registered mortgage, there was no question that the mortgage
    had long since matured, had not been repaid, and was in default.

[7]

The motion judge determined that the various inconsistencies
    pointed out by the appellant provided no defence to the respondents claim nor raised
    any triable issues. The appellant had received exactly what she bargained for
    and benefitted from the advance of the mortgage funds which she had never
    repaid. Accordingly, the motion judge concluded there was no genuine issue
    requiring a trial and granted judgment to the respondent.

C.

Issues and Analysis

[8]

The appellant submits that the motion judge erred
    in granting judgment to the respondent and that the judgment should be set
    aside. She raises the following three issues, which we consider in turn.

(1)

Did the motion judge err by denying the
    appellants request for an adjournment of the respondents motion and for leave
    to file additional materials?

[9]

We see no error. In the context of these proceedings,
    the motion judges decision was reasonable and within his discretion to make.

[10]

The hearing date was set, with the appellant
    present, to proceed with or without counsel and it was made peremptory on her. She
    retained counsel the week before this hearing date. Her new counsel appeared an
    hour late because he was putting together affidavit evidence, not knowing what
    affidavit evidence had already been filed. The motion judge declined the
    request for an adjournment and refused the new affidavit evidence, allowing counsel
    time to review the filed materials. Having done so, counsel for the appellant
    did not submit that the new affidavit would provide additional material that was
    not already in the record nor that he required more time to prepare for the motion.
    As reflected in the transcript and as the motion judge noted in his reasons, counsel
    for the appellant proceeded to make full submissions.

[11]

In our view, there was no unfairness to the appellant
    in the circumstances of this case. It was within the reasonable exercise of the
    motion judges discretion to decline an adjournment and additional materials
    that did not appear to be necessary. The appellant was well aware that the motion
    date was peremptory to her whether or not she had counsel. The issues were relatively
    straightforward. The motion judge accommodated newly retained counsel by
    granting further preparation time. There is no indication that the appellant
    was prejudiced in any way.

(2)

Did the motion judge err by failing to find that
    the interest, fees and charges sought by the respondent were in violation of s.
    347 of the
Criminal Code
and s. 8 of the
Interest Act
?

[12]

The appellant submits that the motion judge erred
    by failing to consider whether the mortgages one-month term, ten percent
    interest rate, and $12,000 lender fee, as well as the other fees and charges, amounted
    to a criminal rate of interest contrary to s. 347 of the
Criminal Code
,
    R.S.C. 1985, c. C-46, and whether they contravened s. 8 of the
Interest Act
,
    R.S.C. 1985, c. I-15, by increasing the charge on the arrears beyond the rate
    of interest payable on principal money not in arrears. In support of this argument,
    appended to her factum, the appellant proffers a calculation using an online Basic
    APR Calculator tool that produces an effective annual percentage interest rate
    of 131 percent.

[13]

We agree with the respondents submission that
    this court should not entertain these arguments raised for the first time on
    appeal.

[14]

As a general rule, appellate courts do not
    permit an issue to be raised for the first time on appeal: see
Kaiman v.
    Graham
, 2009 ONCA 77, 75 R.P.R. (4th) 157, at para. 18;
R. v. Reid
,
    2016 ONCA 524, 132 O.R. (3d) 26, at paras. 37-44, leave to appeal refused,
    [2016] S.C.C.A. No. 432. The reasons for this general prohibition are obvious. Typically,
    the evidentiary record is inadequate to permit an appellate court to properly determine
    the new issue. Moreover, the introduction of a new issue on appeal is usually prejudicial
    to

the respondent
    and runs counter to the societal interest in finality and the expectation that
    cases will be disposed of fairly, fully and expediently at first instance. Accordingly,
    the burden falls squarely on the appellant to satisfy the court that it should exercise
    its discretion to permit the argument to be advanced.

[15]

In our view, the appellant has failed to meet
    this onus.

[16]

First, since these issues
    were not raised before the motion judge, he did not make the findings necessary
    to determine them.

[17]

The motion judge made
    no finding about what qualifies as interest under the impugned mortgage. Interest
    under s. 347 of the
Criminal Code
comprises certain charges and expenses
    under a mortgage
but excludes
    others. As a result, before any effective rate of interest calculation can be prepared,
    a determination must be made as to whether the various charges and expenses in
    issue are interest under s. 347 of the
Criminal
    Code
.

[18]

Further, a violation of s. 8 of the
Interest
    Act
requires the court to find that the effect of the mortgages terms is
    to impose a higher rate on arrears than on money not in arrears:
Krayzel
    Corp. v. Equitable Trust Co.
, 2016 SCC 18, [2016] 1 S.C.R. 273, at para.
    25. As this was not argued before the motion judge, he did not make such a
    finding.

[19]

Second, the evidentiary record does not permit
    this court to determine these issues.

[20]

With respect to the criminal rate of interest
    submission, the question is whether the terms of the mortgage, including the ten
    percent interest rate and the various fees and charges, exceed an effective annual
    rate of interest of 60 percent as prohibited under s. 347 of the
Criminal
    Code
. On its face, the mortgage provides for a ten percent interest rate.

[21]

Under s. 347(2) of the
Criminal Code
, interest
    is broadly defined to include the aggregate of all charges and expenses,
    whether in the form of a fee, fine, penalty, commission or other similar charge
    or expense or in any other form, paid or payable for the advancing of credit but
    does not include any repayment of credit advanced or any insurance charge, official
    fee, overdraft charge, required deposit balance or, in the case of a mortgage
    transaction, any amount required to be paid on account of property taxes.
A

criminal
    rate of interest

means an
    effective annual rate of interest calculated in accordance with generally
    accepted actuarial practices and principles that exceeds sixty per cent on the
    credit advanced under an agreement or arrangement.

[22]

As a result, where, as
    here, a mortgage does not contain on its face a criminal rate of interest, the
    party alleging that a mortgage contravenes s. 347 must identify the fees or
    other charges that it alleges are interest, and then provide evidence that the
    effective annual rate of interest calculated in accordance with generally
    accepted actuarial practices and principles exceeds sixty percent. Because the
    appellant did not challenge the various fees charged by the respondent in response
    to the motion for summary judgment, there was no evidence that would permit the
    court to determine whether they are properly considered interest. Moreover, the
    impact of such fees and charges on the interest rate is not a simple
    calculation that the court can make on the submissions of counsel. Even if all
    of the fees and charges here were considered interest (which has not been
    determined), the appellant has not tendered fresh evidence of a calculation of
    the rate of interest in accordance with generally accepted actuarial practices
    and principles. The calculation submitted by the appellant, which assumes a 10%
    interest rate per month, appears wrong on its face, and in any event falls far short
    of the required evidentiary standard.

[23]

Similarly, since the appellant did not submit the
Interest Act
argument at the motion, the
necessary
    evidence on this point does not form part of the record. Specifically, it is
    not clear from the record that the impugned charges were levied to effect a
    higher rate on the arrears, rather than reflecting the appellants actual administrative
    costs:
P.A.R.C.E.L. Inc. v. Acquaviva
, 2015 ONCA 331, 126 O.R. (3d)
    108, at para. 96.

[24]

Third,
    it would be unduly prejudicial to the respondent and entirely contrary to the principles
    of procedural fairness to permit the appellants to advance these issues on
    appeal.

[25]

These
    interest rate allegations constitute completely new defences to the respondents
    claim. They are not pleaded. They were not raised before the motion judge. On
    the motion, the appellant did not contest the mortgages rate of interest or
    any of the fees, charges or penalties. Counsel did not indicate to the motion
    judge that the appellant needed an adjournment in order to raise these issues. There
    is no motion for fresh evidence nor any explanation as to why they are being
    raised for the first time on appeal. It is not challenged that had these issues
    been raised at first instance, the respondent would have provided an
    evidentiary response.

[26]

Fairness to the respondent and respect for the due administration
    of justice require finality in these circumstances.
In consequence,
    we decline to consider these issues on appeal.

(3)

Did the motion judge err by granting summary
    judgment in favour of the respondent?

(a)

Will summary judgment lead to inconsistent
    findings?

[27]

The appellant submits that the motion judge
    erred by granting summary judgment in the face of a counterclaim and a third party
    claim in which she alleges fraud against the respondent and others. She says summary
    judgment is inappropriate because of the possibility of inconsistent findings.

[28]

We disagree.

[29]

It was open to the motion judge to determine on
    a summary judgment motion the validity of the mortgage and the question of the
    respondents alleged participation in a mortgage fraud. The well-settled purpose
    of summary judgment motions is to dispose of any issues that do not require a trial:
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 47;
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194, r. 20.4(2).

[30]

The prospect of inconsistent findings does not
    come into play here. It is not clear to us that a counterclaim has actually been
    filed or that it was in the record before the motion judge. Regardless, whatever
    determination may be made in relation to the appellants related claims will
    not be inconsistent with the motion judges conclusion that the mortgage is valid,
    and the respondent did not participate in any fraud. Those issues have been
    finally determined and the appellant is bound by those conclusions.

(b)

Are there errors in the calculation of the
    judgment?

[31]

Finally, the appellant challenges the amount of
    the judgment. She submits that she should not have to pay any of the charges
    and penalties levied under the mortgage, especially not those related to the $3,300
    advance abandoned by the respondent at the motion. She says she should only be
    personally liable for $101,352.94, comprised of amounts that she acknowledges receiving
    from the respondent to pay out her indebtedness under second mortgages, a loan
    and a first mortgage. She disputes liability for $4,147.06 paid for legal fees
    related to the mortgage transaction which was disbursed by the respondent to Kazembe
    Law against whom she has commenced a third party proceeding.

[32]

It was open to the motion judge to find that the
    mortgage was valid. As a result, there is no basis to relieve the appellant
    from her liability to the respondent for any of the principal, interest, or
    other charges, including the lenders fee of $12,000, provided for under the
    mortgage, that relate to the advances made by the respondent, other than the additional
    $3,300 advance abandoned by the respondent. These amounts include the payment by
    the respondent on behalf of the appellant of Kazembe Laws legal fees for the
    mortgage transaction, which the motion judge upheld. As the motion judge noted
    in his reasons, any issues that the appellant has with the representation she
    received by Kazembe Law are between her and that firm.

[33]

However, we agree that there are errors in the
    calculation of the judgment. The revised mortgage calculation submitted by the
    respondents erroneously includes interest, charges and other fees related to
    the abandoned $3,300 advance. While the abandoned $3,300 advance to the appellant
    was not included in the revised calculation that formed the basis for the
    judgment, the related interest and other charges, such as the $150 in fees for
    the second advance, remained. The interest and other charges related to the abandoned
    second advance also should have been removed from the mortgage calculation.

[34]

We expect that the parties should be able to
    agree on a revised amount owing based on these reasons. If they cannot agree,
    they shall each submit a revised calculation, with brief submissions of no more
    than two pages, electronically to
coa.e-file@ontario.ca
within ten days of the release of these reasons.

D.

Disposition

[35]

We allow the appeal and modify the amount to be
    paid by the appellant to the respondent in accordance with the reasons above. The
    appeal is otherwise dismissed.

[36]

The respondent was largely successful on this
    appeal and is entitled to its costs. If the parties cannot agree, they shall
    submit brief costs submissions of no more than two pages, addressing scale and quantum,
    plus a costs outline, electronically to
coa.e-file@ontario.ca,
within ten days of the release of these reasons.

Paul
    Rouleau J.A.

K.
    van Rensburg J.A.

L.B.
    Roberts J.A.


