The Ontario Court of Appeal’s recent decision in 2724582 Ontario Inc. v. Gold, 2025 ONCA 531, serves as a stark reminder to real estate practitioners about the dangers lurking in complex mortgage schemes and the limits of releases in protecting parties from their consequences. This case offers several important takeaways for transactional lawyers who may encounter similar fact patterns in their practice.
The Facts: A Web of Connected Transactions
Rhonda Gold owned two properties and found herself entangled in a series of mortgage transactions between 2019 and 2022, all brokered by realtor Sam Kamra. What appeared to be arm’s length refinancing transactions were anything but. The initial lender was Kamra’s mother, Sana Abdallah. When those mortgages were refinanced, the new lender was a company controlled by Kamra’s girlfriend and business partner, Danielle Desjardins. The pattern continued with subsequent refinancings involving other connected entities.
Critically, Gold was unaware of these relationships. With each refinancing, her borrowing costs and debt levels increased substantially. By the end of the scheme, the appellants claimed Gold owed $848,679.31, despite only approximately $267,000 in actual funds being advanced to her.
Following a complaint to the Real Estate Council of Ontario, Kamra prepared a release in May 2022. In exchange for Gold paying $700 and waiving default fees, she released all parties from “any and all actions” related to the mortgage transactions. The release also contained a provision barring the parties from making complaints to regulatory bodies.
The Legal Issues: When Rule 21 Becomes Summary Judgment
The case centered on whether the release was valid and enforceable. The parties agreed to treat this as a threshold issue and brought motions under Rule 21.01(1)(a) of the Rules of Civil Procedure, which allows determination of questions of law before trial.
The motion judge declared the release void and unenforceable, finding it contained an illegal provision (the regulatory complaint bar) and was part of an unconscionable mortgage scheme.
The Appeal: Three Arguments, Three Failures
The appellants raised three main arguments on appeal, all of which were rejected:
- Procedural Objection
The appellants argued that the threshold question wasn’t truly “a question of law” suitable for Rule 21 determination, since it involved factual disputes and credibility findings that should go to trial.
The Court of Appeal gave this argument short shrift. The appellants themselves had framed the motion under Rule 21, filed extensive evidence, and fully participated in what was essentially summary judgment proceedings. Having acquiesced to the process when they thought it might favor them, they couldn’t later object simply because the outcome was unfavorable.
- Scope of Findings
The appellants worried that the motion judge’s adverse findings about the mortgage scheme could lead to inconsistent determinations at trial, since a different judge would ultimately hear the consolidated action.
The Court clarified that the formal order dealt only with the validity of the release and was silent on the unconscionability of the mortgage scheme. The motion judge’s comments about the scheme were made in the context of determining whether the release was enforceable, not as binding determinations about the mortgages themselves. Future proceedings remained free to examine the mortgage scheme on its merits.
- Treatment of Evidence
Finally, the appellants argued the motion judge misapprehended material evidence in her unconscionability analysis. The Court of Appeal found the motion judge’s reasons “thorough and careful” with no errors in her treatment of the evidence.
Key Takeaways for Transactional Lawyers
This decision offers several important lessons:
Releases Have Limits
A release cannot cure an unconscionable transaction or contain illegal provisions. Here, the provision barring regulatory complaints rendered the entire release void. Practitioners drafting releases should ensure they don’t overreach by attempting to shield clients from legitimate regulatory oversight.
Disclosure Matters
The connected nature of the lenders, hidden from Gold, was central to finding the transactions unconscionable. This underscores the importance of proper disclosure in mortgage transactions, particularly where lenders or brokers have relationships that might not be apparent to borrowers.
Procedural Caution
Parties should be careful about the procedural vehicles they choose for dispute resolution. Once you’ve agreed to treat something as a Rule 21 motion and participated fully in the process, you can’t later object to the procedure simply because you don’t like the result.
Connected Party Risks
The case illustrates the dangers of mortgage schemes involving connected parties. The substantial increase in debt relative to funds advanced ($848,679 claimed versus $267,000 advanced) demonstrates how quickly such arrangements can spiral beyond reasonable commercial bounds.
Conclusion
2724582 Ontario Inc. v. Gold serves as a cautionary tale about the limits of releases and the importance of transparency in mortgage transactions. For transactional lawyers, it reinforces the need for careful due diligence regarding the relationships between parties in mortgage transactions and the importance of ensuring any releases are properly scoped and legally compliant.
The decision also highlights that courts will look beyond the formal structure of transactions to their substance, particularly where there’s evidence of concealment or unconscionable dealing. In an era of increasingly complex mortgage products and financing structures, these principles remain as relevant as ever.
