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- In 2006 Dhanraj Lowtan and Sumatie Lowtan purchased a property in Ontario. Two years later, in 2008, they borrowed $280,801 from Computershare, granting Computershare a first priority mortgage on the property.<\/li>\n
- In 2009, a year after granting\u00a0first priority to Computershare, the Lowtan\u2019s fraudulently registered a discharge of Computershare\u2019s mortgage.<\/li>\n
- Since the Lowtan\u2019s continued making monthly payments to Computershare, the lender remained unaware that its mortgage had been discharged.<\/li>\n
- \u00a0In 2011, the Lowtans granted a mortgage in the amount of $252,800 to CIBC and in 2012, they granted a mortgage of $32,000 to Secure Capital Mic Inc.<\/li>\n
- Both CIBC and Secure Capital, believed that they had, respectively, first and second priority mortgages.<\/li>\n
- In early\u00a02013, the Lowtans defaulted on all three mortgages and Computershare discovered that its mortgage had been fraudulently discharged.<\/li>\n
- \u201cThe Lowtans vacated the property, made assignments into bankruptcy, and the property was sold by CIBC with the consent of Computershare and Secure Capital. When the proceeds of the sale were insufficient to satisfy all three debts, Computershare, CIBC, and Secure Capital all commenced applications in the Superior Court for a determination of priorities as between the three mortgages\u201d<\/li>\n<\/ul>\n
Application Judges Decision<\/h3>\n
In Short, Zuk states that \u201cIn CIBC Mortgage Inc. v Computershare Trust Co. of Canada (2015 ONSC 543), the application judge held that Computershare\u2019s mortgage would be reinstated in first priority and that the CIBC and Secure Capital mortgages ranked second and third, respectively.\u201d<\/p>\n
Divisional Court\u2019s Decision<\/h3>\n
Zuk goes on to explain, \u201cThe Divisional Court disagreed with the application judge\u2019s findings and concluded that CIBC held the first priority mortgage. Accordingly, CIBC was entitled to the first proceeds distributed from the sale of the\u00a0property. \u201d<\/p>\n
For a lay person, the outstanding point is, as explained by Zuk \u2013\u00a0that while the Divisional Court acknowledged that the Lowtans perpetrated a fraud on CIBC and Secure Capital by concealing the existence of the Computershare mortgage, this did not make the Lowtans \u201cfraudulent persons\u201d.<\/em><\/p>\n
That\u2019s where I got a bit confused. Am\u00a0I understanding this correctly, someone who conceals information that puts a lender at financial loss are not \u201cfraudulent persons\u201d? I must be misunderstanding this. Can someone please clarify this isn\u2019t the case. Otherwise, wouldn\u2019t it be open season on all lenders?<\/p>\n
Furthermore, why wasn\u2019t the onus put on the CIBC or Secure Capital to verify with Computershare that in fact the mortgage had been discarged, especially after such a short period? I\u2019d like to hear your comments about this.<\/p>\n
Confused? Zuk does a great job at explaining the decisions\u00a0in his article \u201cOntario Divisional Court Reviews Priorities Among Mortgagees that were Victims of Mortgage Fraud\u201d<\/a><\/p>\n
Disclaimer: I\u2019m not a lawyer, legal professional or consider myself competent in law. Please read the original article yourself and consult a lawyer for guidance in dealing with matters such as these. Any understanding I have from reading the article is as a lay person and only reflects my own opinions, thoughts (or questions) and no one else\u2019s.<\/p>\n
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