Mortgage Broker

legalease CmB magazine cmba-achc.ca spring 2017 | 25 Background To what extent are you bound by the activities of a person who is helping you administer a mortgage? What can you do to limit the scope of activities that bind you? Who is responsible if this person acts dishonestly and causes harm while they are engaging in activities for you? ese questions concern agency. e recent Alberta Court of Appeal decision in Toronto-Dominion Bank (TD Canada Trust) v Currie, 2017 ABCA 45 provides key principles. It should make you stop, think and be far more careful before letting others act in business as if they have your authority to do things on your behalf. e case involves fraud by a mortgage broker. e Court was le with the difficult decision as to which of the innocent parties should bear the loss. What Happened? A lender lent $220,000 to borrowers, on the security of an inter alia mortgage registered against two properties. e financing and the mortgage were negotiated by a licensed mortgage broker. e registered mortgage called for payments to be made to the lender; the address provided for the lender was "c\o" the broker's office address. e mortgage was foreclosed off one of the two properties by a prior lender; the borrowers obtained refinancing from a trust company, using the other property as security for the loan. In the process of registering the trust company's mortgage, the trust company's lawyer wrote to the broker requesting a payout statement for the lender's mortgage. e broker prepared a payout statement showing a balance of $249,992.55, and sent it to the lender for signature. Neither the borrowers nor the trust company's lawyer knew about this document. e broker subsequently sent a discharge statement to the trust company's lawyer showing an outstanding balance of only $75,000, and instructing that the payout funds should be made payable to the brokerage. e lender was not aware of this. e trust company's lawyer completed registration and funding of the replacement mortgage. He sent $75,000 to the broker, made payable to the brokerage, in trust for a discharge of the mortgage. e broker absconded with the funds, and never provided the discharge, despite repeated requests from the trust company's lawyer. With both the lender's mortgage and the trust company's mortgage on title, the issue arose as to which one had registration priority. e question became whether the broker was an agent for the lender and, if so, which of the broker's activities bound the lender? Actual and Ostensible Authority A person who gives another person actual authority to act as his or her agent, is bound by the acts of the agent – including fraudulent acts. When the agent has actual authority, but that authority is subject to limitations, the onus is on the principal to prove that the limitations were conveyed to the third party who relied on the agent. A person who does not give another person actual authority to act as his or her agent might nevertheless have made the person their agent by giving the person ostensible authority. It is for the person who claims to have relied on the agent to prove that the person had ostensible authority. Whether a person has been given ostensible authority is determined by looking at whether the alleged principal has, by words and deeds, held out the agent as having the authority to do the challenged act. Representations as to the authority of the agent come from the principal, not from the agent. Was There an Agency in this Case? e broker clearly was an agent with considerable actual authority with respect to the mortgage: By Ray Basi, LL.B., staff, Education and PoLicy REviEw Don't let your agent leave you holding the bag Bind Ties ThaT

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