Key Issues

1. Motion by Borrowers: The Borrowers sought to discharge a mortgage, arguing it was fully paid to First Swiss Mortgage Corp. (First Swiss), which misappropriated the funds instead of forwarding them to Olympia Trust Company (Olympia), the assignee of the mortgage.
2. Opposition by Olympia and Investor (Loucks): Olympia and investor Loucks refused to consent to the discharge, asserting that the payment to First Swiss was not valid.

Key Facts

• Mortgage Details: Borrowers obtained a mortgage from First Swiss in 2019, which was later assigned to Olympia without the Borrowers’ knowledge.
• Payment Made: Borrowers paid off the mortgage in full in 2020, wiring funds to First Swiss per its instructions.
• Fraudulent Activity by First Swiss: First Swiss failed to remit funds to Olympia and continued to make fictitious payments until late 2022.
• Receivership: First Swiss was placed into receivership in March 2023 following regulatory action by the Financial Services Regulatory Authority of Ontario (FSRA).

Court’s Analysis

• Authority of First Swiss: The court found First Swiss acted as Olympia’s agent, having both actual and apparent authority to collect payments and issue payout statements based on:
  • Historical conduct, including a similar transaction in 2014 where First Swiss administered and discharged another mortgage assigned to Olympia.
  • Agreements between Loucks (investor) and First Swiss authorizing the latter to administer the mortgage.
• Lack of Notice of Assignment: Olympia failed to notify the Borrowers of the mortgage assignment, undermining its position.
• Equitable Considerations: The court held that the misappropriation of funds by First Swiss should not prejudice the Borrowers, who acted reasonably and in good faith.

Decision

• Motion Granted: The mortgage was declared paid, and the court ordered its discharge.
• Costs Awarded: The Borrowers were awarded $30,000 in costs, split between Loucks ($20,000) and Olympia ($10,000).