Rescon Financial Corporation v. New Era Development (2011) Inc.

Rescon Financial Corporation v. New Era Development (2011) Inc. Collection Decisions of the Court of Appeal Date 2018-06-08 Neutral citation 2018 ONCA 530 Docket numbers C64834 Judges MacPherson, James C.; LaForme, Harry Smith; Roberts, Lois B. Subject Civil Decision Content 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 Era’s 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: RESCON’s 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 Era’s 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 Rescon’s 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 Alterna’s 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 appellant’s 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 respondent’s 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 Brime’s efforts. [13] We are not persuaded by this submission. The record before the motion judge discredited Razagh’s evidence on this point and supports the motion judge’s 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 Razagh’s proposed changes; (3) Brime insisted that Razagh return the agreement in the form provided without changes and Razagh did so. Brime’s insistence that the draft Second Exclusive Agency Agreement be returned signed by Razagh undermines Razagh’s 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 agent’s breach of duty. The factual foundation for this argument is the appellant’s assertion that it was not able to meet the Presale Test condition in Alterna’s 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 judge’s 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 judge’s review of the evidence on this issue establishes clearly that Razagh was far from being a neophyte shrinking violet in his relationship with Brime. Razagh’s language and conduct throughout the term of the contract justified the motion judge’s 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 agent’s 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.”