



COURT OF APPEAL FOR ONTARIO

CITATION: Toronto-Dominion Bank v. Hosein, 2016 ONCA 628

DATE: 20160816

DOCKET: C61401

MacPherson, Rouleau and Benotto JJ.A.

BETWEEN

The Toronto-Dominion Bank

Applicant (Appellant)

and

Jeunesse Hosein and Meera Boodhoo

Respondents (Respondents)

Amanda Jackson and James Riewald for the appellant

Jack Fleming for the respondent Meera Boodhoo

No one appearing for the respondent Jeunesse Hosein

Heard: June 24, 2016

On appeal from the order of Justice Gisele M. Miller of
    the Superior Court of Justice, dated October 29, 2015.

Benotto J.A.:

[1]

The appellant bank took a
    mortgage on a condominium owned by the respondent Jeunesse Hosein. Hosein has
    made no mortgage payments since November 2012. After her default, Hosein leased
    the property to the respondent Meera Boodhoo on terms very favourable to
    Boodhoo. The appellant applied to terminate the tenancy agreement pursuant to
    s. 52 of the

Mortgages
    Act
, R.S.O. 1990, c. M.40 (MA).
    The application was dismissed on the basis that s. 52 of the MA conflicts with
    the
Residential Tenancies Act, 2006
, S.O. 2006, c. 17 (RTA) and is therefore of no
    effect. For the reasons that follow, I would allow the appeal.

A.

Background Facts

[2]

The appellant registered a mortgage for
    $130,000 on a townhouse condominium owned by Hosein on July 19, 2011. On
    November 1, 2012, Hosein defaulted. Hosein has made no payments since then, nor
    has she paid the property taxes as required by the mortgage. The appellant
    commenced mortgage enforcement proceedings. A tenant then living at the
    property vacated at the end of June 2013. Before the appellant could take p
ossession
    of the property, and unbeknownst to the appellant, Hosein signed a five-year
    lease agreement with Boodhoo.

[3]

The appellant tried unsuccessfully to obtain a copy of the lease. In
    July, 2013, the appellant served a Notice of Attornment of Rents on Boodhoo.
    The Notice of Attornment of Rents included a Notice of Change of Landlord, a Demand
    for Particulars of Tenancy Agreement and a Notice to Inspect, Appraise and
    Show. Boodhoo sent the appellant a letter acknowledging receipt of the
    documents but indicating she would not provide information or make payments to the
    appellant as her contract was with Hosein.

[4]

Unable to obtain any information about the occupation of the
    condominium, the appellant applied to the Landlord and Tenant Board (the
    Board).  It sought production of the lease pursuant to s. 50(2)(b) of the MA
    and an order to terminate the alleged tenancy and evict Boodhoo on the grounds
    that Boodhoo had substantially interfered with the appellants right,
    privilege or interest by failing to provide the appellant with a copy of the
    tenancy agreement pursuant to s.51(1)(b) of the MA. In September 2013, the
    Board ordered Boodhoo to produce her lease, failing which the landlord could
    apply for an order terminating the tenancy and evicting Boodhoo.

[5]

Boodhoo produced the tenancy agreement. The lease is a five-year fixed
    term lease, beginning on July 1, 2013 and ending on July 31, 2018. It provides
    that rent be paid as follows:

·

From
    July 1, 2013 to May 1, 2014, the rent is $300 per month. This includes the
    $281.76 maintenance fee payable to the condominium corporation;

·

From
    July 1, 2014 to May 1, 2015, the rent is $300 per month plus the  maintenance
    fee payable to the condominium corporation;

·

From
    July 1, 2015 to May 1, 2016, the rent is $800 per month, which includes the
    maintenance fee payable to the condominium corporation.

·

For
    the remainder of the lease, the rent is to increase in accordance with the
    regulated increase for Dufferin County.

[6]

The terms of the lease do not cover the monthly expenses associated with
    the condominium: the mortgage payments are $627; the condominium fees were
    $281.76 in 2013. The municipal property taxes have not been paid since Hosein
    purchased the property in July 2011. Comparable rents in the same condominium
    complex were $900 to $1,000 in 2013.

[7]

Upon learning the terms of the lease, the appellant withdrew the Notice
    of Attornment of Rents and applied to the Superior Court to set aside Boodhoos
    tenancy pursuant to s. 52 of the MA.

B.

Decision of the Superior Court

[8]

The application judge held that the tenancy between Hosein and Boodhoo was
    created with the object of discouraging the appellant from taking possession of
    the property. She found it was a sweetheart deal created after the mortgage default
    and after the appellant served a Notice of Sale on Hosein. The tenancy therefore
    contravened the MA, which allows the court to set aside or vary a tenancy
    agreement when certain conditions are satisfied.

[9]

However
, the application
judge concluded
    that she could not grant the relief requested because s. 52 of the MA conflicts
    with the RTA and, pursuant to s. 3(4) of the RTA, in case of conflict the
    provisions of the RTA apply. The application judge held that:
(i) the RTA
    ousted the jurisdiction of the Superior Court to make an order requiring
    Boodhoo to vacate the premises; (ii) the appellant was a mortgagee in
    possession and thus a landlord pursuant to s. 47 of the MA; (iii) the
    appellant could have ceased to be a mortgagee in possession by withdrawing its Notice
    of Change of Landlord, but did not do so; and (iv) even if the appellant had
    ceased to be a mortgagee in possession, the previous order of the Board
    compelling the production of the lease included a determination that the
    appellant was a landlord, and this determination is
res judicata
.

C.

Issue

[10]

As conceded by the parties in oral submissions, the primary issue in the
    appeal is this: Is there a conflict between the RTA and s. 52 of the MA? This
    is dispositive of the appeal and it will not be necessary to address the issue
    of whether the appellant was a landlord at the time of the application.

D.

Analysis

[11]

The question to be determined is whether s. 52 of the MA conflicts with
    the provisions of the RTA so that the Superior Court is unable to set aside a
    tenancy under s. 52.

[12]

Section 52 of the MA provides for an application to set aside a
    tenancy:

52. (1) The Superior Court of Justice may
    on application by the mortgagee vary or set aside a tenancy agreement, or any
    of its provisions, entered into by the mortgagor in contemplation of or after
    default under the mortgage with the object of,

(a) discouraging the mortgagee from taking
    possession of the residential complex on default; or

(b) adversely affecting the value of the
    mortgagees interest in the residential complex.

(2) In considering the application, the judge
    shall have regard to the interests of the tenant and the mortgagee.

[13]

The RTA states that a tenancy may be terminated only in accordance with
    this Act: s. 37(1). Section 39 also restricts a landlord on how it may recover
    possession of a rental unit subject to a tenancy:

39. A landlord shall not recover possession of a
    rental unit subject to a tenancy unless,

(a) the tenant has vacated or abandoned the unit;
    or

(b) an order of the Board evicting the tenant has
    authorized the possession.

[14]

The appellant submits that these two provisions are not in conflict. The
    MA allows a mortgagee to apply to set aside a tenancy; the RTA allows a
    landlord to apply to terminate a tenancy. The appellant did not seek to
    terminate the tenancy, it sought to set aside the agreement such that the rental
    unit will no longer be subject to a tenancy and s. 39 of the RTA will no
    longer apply to the mortgagee trying to recover possession.

[15]

The respondent Boodhoo argues that regardless of the semantic difference
    between setting aside a tenancy agreement under s. 52 of the MA and terminating
    a tenancy agreement under the RTA, the effect is the same: the tenant can be
    evicted. Section 52 is therefore in direct conflict with the provisions of the
    RTA that only allow for the tenancy agreement to be terminated according to
    that Act.

[16]

Certain principles of statutory interpretation are relevant to this
    appeal. The guiding approach is set out by Elmer Driedger in
Construction
    of Statutes

and adopted by the Supreme Court in
Rizzo & Rizzo Shoes Ltd.
(Re)
,
    [1998] 1 S.C.R. 27, at para. 21:

Today there is only one principle or
    approach, namely, the words of an Act are to be read in their entire context
    and in their grammatical and ordinary sense harmoniously with the scheme of the
    Act, the object of the Act, and the intention of Parliament.

[17]

Statutes dealing with similar subjects are presumed to be coherent and
    consistent. Interpretations favouring harmony should prevail over discordant
    ones:
Pointe-Claire (City) v. Quebec (Labour Court)
,
    [1997] 1 S.C.R. 1015, at para. 61;
Ruth Sullivan,
Sullivan on the
    Construction of Statutes
(Markham: LexisNexis, 2014)
, pp.
    416-417. Finally, the legislature does not intend to produce absurd
    consequences, such as rendering a provision meaningless:
Rizzo
, at para. 27.


[18]

Here, the RTA is concerned with the termination of existing tenancies.
    By contrast, s. 52 of the MA provides a mechanism to have a tenancy agreement
    set aside. There is no provision in the RTA to set aside a tenancy agreement.

[19]

The different words used  to set aside and to terminate  must be
    presumed to have different meanings. Blacks Law Dictionary defines set aside
    as to annul or vacate (a judgment, order, etc.). The Dictionary of Canadian
    Law (4th) defines set aside as to nullify. According to both law
    dictionaries, terminate means to bring to an end. That these terms are not
    meant to be synonyms is also demonstrated by the heading of the section of the MA
    immediately following s. 52. The heading provides for the termination of
    tenancy, and then refers to the process under the RTA.

[20]

Counsel for the appellant compared the situation to an annulment of a
    marriage versus a divorce. This is an accurate analogy. In the former case, the
    marriage is treated as never having existed whereas in the latter case, the
    marriage is ended. Likewise here, to set aside the tenancy agreement
    indicates that the tenancy never existed; to terminate it indicates that it is
    being brought to an end. This interpretation is consistent with the word
    annuler in the French version of the
Mortgages Act
. The French
    version of s. 52 provides for a [r]equête en annulation de la location, and
    states that:

52. (1) La Cour supérieure de
    justice peut, sur requête du créancier hypothécaire, modifier ou
annuler
une convention de location

[21]

Section 52 is in Part V of the
Mortgages Act
. The context of
    this Part is relevant. It was introduced by the
Mortgages Amendment Act
,
    1991, S.O. 1991, c. 6, and deals with mortgagees in possession of rental
    residential units. Section 47 deems a person who becomes a mortgagee in
    possession to be a landlord under the tenancy agreement. This provides security
    to tenants in case of a default by the landlord on its mortgage. Sharpe J.A.
    explained the purpose of the 1991 amendments in
Pieckenhagen v. 1030553
    Ontario Ltd.
(2000), 51 O.R. (3d) 763 (C.A.), at paras. 14-15:

In my view, it is apparent that the "mischief"
    addressed by the Mortgages Amendment Act was the vulnerability of tenants in
    residential complexes to being disrupted in their tenancy by changes in
    possession and title resulting from mortgage default by the landlord or owner
    of the property. Before the Mortgages Amendment Act, tenants lacked security of
    tenure as against mortgagees in possession, those who obtained title by
    foreclosure, and subsequent purchasers who acquired title in power of sale
    proceedings Accordingly a party who obtained possession or title by virtue of
    mortgage default could obtain vacant possession despite the existence of a
    landlord and tenant relationship between the mortgagor and its tenants.

The purpose and intent of the Mortgages Amendment Act was to
    overcome this state of affairs and to provide tenants with security of tenure
    in the event of mortgage default by the landlord. The Mortgages Act, s. 47
    specifically puts those persons described in the position of the landlord under
    the tenancy agreement.

[22]

It was in the context of protecting valid tenancy agreements that the
    legislature set out a provision whereby the Superior Court could set aside an
    allegedly invalid tenancy. If, for specific reasons, the lease is not valid,
    the mortgagee was given an avenue to seek to annul it: s. 52. Section 52 of the
    MA, therefore, is a narrow exception. It protects mortgagees when the tenancy
    agreement was entered into in contemplation of or after default, and with the
    object of discouraging the mortgagee from taking possession or adversely
    affecting the value of the mortgagees interest in the residential complex. In
Compcorp
    Life Insurance Co. v. Divitcos
(1997), 12 R.P.R. (3d) 122 (Ont. Ct. J.
    (Gen. Div.)), at para. 41, Sutherland J. wrote of s. 52:

It represents an awareness on the part of the Legislature of
    the vulnerability of a mortgagee of property that can be leased out by a
    mortgagor under a "sweetheart" deal between the mortgagor, who is in
    default under the mortgage, and a tenant who will in the ordinary course, under
    relatively recent amendments, be "inherited" by the mortgagee in
    possession, whether or not the mortgage was in place before the
    "sweetheart" tenancy agreement was entered into.

[23]

Section 52 also incorporates the objective of protecting the tenant by
    directing the court to have regard to the interests of the tenant and the
    mortgagee. In this way, the interests of the purported tenants are recognized
    and balanced against the interests of the mortgagee seeking to nullify an
    alleged agreement.

[24]

In light of the words used by the legislature and the context of the
    provisions, it is clear that s. 52 of the MA and the provisions of the RTA can
    be read together harmoniously. The RTA is concerned with the regulation and
    termination of valid tenancies; s. 52 of the MA provides a remedy to have an
    alleged tenancy set aside with the result that a valid tenancy never existed in
    the first place. Further, s. 52 would have no meaning or possible application
    if the respondents argument is accepted and the mortgagee can only apply to
    terminate the tenancy under the RTA rather than set it aside under the MA.

[25]

The respondent relies on this courts decision in
Fraser v. Beach
(2005), 75 O.R. (3d) 383, to support the application judges determination that
    the jurisdiction of the Superior Court is ousted by the provisions of the RTA. At
    issue in
Fraser
was an order of the Superior Court in a nuisance
    action. The Superior Court ordered the tenants to vacate the premises as a
    method of enforcing an earlier order restraining the landlord from operating an
    illegal rooming house. This court held that the tenancies could only be
    terminated by the Board pursuant to the predecessor statute to the RTA.

[26]

Fraser
is not applicable here. In
Fraser
and in
Parker
    v. Yundt
, 2012 ONSC 244, the applicants sought to terminate existing
    tenancies. The tenancy agreements were presumed to be valid.

[27]

In this case, the appellants Notice of Application before the Superior
    Court was for an order setting aside an alleged tenancy agreement made
    between Boodhoo and Hosein. The application did not seek to terminate the
    tenancy.
Fraser
holds that the inherent jurisdiction of the courts to
    make an order evicting a residential tenant is ousted by the RTA. Here, jurisdiction
    is specifically given to the Superior Court by s. 52 of the MA not to terminate
    but to set aside a tenancy agreement when it was entered into by a mortgagor
    under certain conditions. The jurisdiction of the Superior Court to apply s. 52
    of the MA has also been recognized by the Board:
File Number: TET-66943-16
,
    2016 CanLII 38767, at paras. 14 and 18;
File No. CEL-02248
,
    2007 LNONLTB 27, at para. 47.

[28]

In short, there is no conflict between the RTA and s. 52 of the MA.

E.

Disposition

[29]

I would allow the appeal, and set aside the tenancy agreement pursuant
    to s. 52 of the MA. I would make the following determination as to costs:

·

In
    accordance with the agreement between the appellant and the respondent Boodhoo,
    there will be no costs against Boodhoo.

·

The
    respondent Hosein will pay costs to the appellant in the amount of $15,000
    inclusive of disbursements and HST. This amount may be added to the mortgage
    arrears and enforced as such.

Released: August 16, 2016

M.L. Benotto J.A.

I agree J.C.
    MacPherson J.A.

I agree Paul Rouleau
    J.A.


