Legal Blog

Fraudulent Mortgage

Mohammed v. Makhlouta 2020 Ont SCJ

A vendor gave and had registered a mortgage in favour of his brother after the purchaser’s requisition letter had been received and before closing. That mortgage was registered to secure prior loans from the brother. Although not stated in the reasons, it was apparent that the lawyer for the purchaser did not update the search of title before the transaction closed; no one knew about the mortgage until after the brother died and five years after closing when the purchaser was refinancing his existing mortgage. Brother’s estate took the position that the mortgage was valid. The judge held that the mortgage was fraudulent – because it was not for new consideration, but rather to gain an advantage against other creditors – and set it aside under the Fraudulent Conveyances Act.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.