



COURT OF APPEAL FOR ONTARIO

CITATION: Hume v. 11534599 Canada Corp.,
    2021 ONCA 549

DATE: 20210727

DOCKET: M52657 (C69657)

Thorburn J.A. (Motions Judge)

BETWEEN

Ivylin Ricketts Hume and Weston
    Rodney Hume

Applicants

(Respondents/Responding Parties)

and

11534599
    Canada Corp.

Respondent

(Appellant/Moving Party)

Paul Robson, for the moving party

Elaine S. Peritz, for the responding
    parties

Heard: July 19, 2021 by videoconference

ENDORSEMENT

The order sought

[1]

The moving party-appellant, 11534599 Canada
    Corp., seeks an order granting a stay pending appeal of the order of Justice Kendra
    D. Coats (the Order), dated June 28, 2021.

[2]

The Order requires the appellant to forthwith

provide possession of 7047 Dalewood Drive, Mississauga (the property) to
    the respondents, Mr. and Ms. Hume. The Order requires the respondents to redeem
    the appellants mortgage and the appellant to assign the mortgage debt and
    convey the property to a third-party lender, pursuant to s. 2 of the
Mortgages
    Act
, R.S.O. 1990, c. M.40

Background

[3]

In September 2019, the appellant provided a
    second mortgage to the respondents in the amount of $215,000. The first
    mortgage is held by CIBC in the approximate amount of $480,000. The second
    mortgage was due on September 1, 2020 and automatically renewed on September
    2.

[4]

The appellant says that the respondents
    defaulted on the interest payments due on the loan on October 1. Total arrears
    amounted to $4,044.50.

[5]

The appellant sent out a demand letter on
    October 2 but did not receive a response.

[6]

On October 28, 2020, upon conducting a routine
    check of the property, the appellant found the property to be unoccupied and severely
    damaged by a fire earlier that month.

[7]

Without warning or notification to the respondents,
    the appellant retained a property manager to change the locks and post notices
    to secure control and possession of the property. Possession of the property was
    secured on October 28, 2020.

[8]

On November 4, 2020, Mr. and Ms. Humes counsel accused
    the appellant of breaking and entering and claimed that the possession was
    illegal as the property was not vacant. The respondents claimed entitlement to
    pay the arrears and demanded an assignment of the mortgage.

[9]

On December 30, 2020, a Notice of Sale was sent
    to the address set out in the mortgage (i.e. the property), although the
    respondents no longer resided there, as well as to the respondents lawyer.
    After receiving the Notice of Sale in January 2021, the respondents again
    requested a payout statement and were given a mortgage discharge statement.

[10]

The respondents lawyer and a new third-party
    lender then demanded that the mortgage be assigned to a third-party lender on
    the basis of s. 2(1) of the
Mortgages Act
. The appellant refused on
    the basis of the exception in s. 2(3), which provides that the obligation of a
    mortgagee to transfer is not applicable where the mortgagee is or has been

in possession of the mortgaged property.

The test to be met for a stay pending appeal

[11]

In deciding whether to stay an order being
    appealed, the test is the same as that for an interlocutory injunction. The
    overarching consideration is the interests of justice:
Zafar v. Saiyid
,
    2017 ONCA 919, at para. 18;
Circuit World Corp. v. Lesperance
(1997),
    33 O.R. (3d) 674 (C.A.), at para. 8.

[12]

The factors to be considered are whether:

i.

there is a serious issue to be tried, based on a preliminary
    assessment of the merits of the case;

ii.

the applicant would suffer irreparable harm if
    the application were refused; and,

iii.

the balance of convenience, that is, which parties would suffer
    greater harm from the granting or refusal of the remedy pending a decision on
    the merits: see
M & M Homes Inc. v. 2088556 Ontario Inc.
, 2020
    ONCA 134, 51 C.P.C. (8th) 253, at para. 29;

RJR-MacDonald
    Inc. v. Canada (Attorney General)
, [1994] 1
    S.C.R. 311, at p. 334.

[13]

The strength of one factor may compensate for the
    weakness of another:
Zafar
, at para. 18.

The application judges decision

[14]

In this case, the application judge ruled that
    the appellant was entitled to quiet or peaceable possession of the property.
    The issue was whether it took peaceable possession of the property.

[15]

The application judge noted the respondents were
    in default.

[16]

However, in her endorsement at paras. 48-50, the
    application judge found that the property was not vacant; the respondents had
    not abandoned the property and their possessions remained there; the appellant could
    expect resistance to the taking of possession; the property was locked; and the
    respondents lawyer challenged the taking of possession within days.

[17]

She therefore held that the appellant did not take
    quiet possession but, rather, took illegal possession of the property contrary
    to the
Mortgages Act
. Accordingly, the appellant could not rely on s.
    2(3) of the
Mortgages Act
to refuse assignment of the mortgage to the
    new third-party lender.

Whether there is a serious issue to be tried

[18]

The appellant claims there is a serious issue to
    be tried. The appellant claims that not granting a stay would trammel the
    appellants contractual and statutory entitlement to quiet possession upon the
    mortgagors default. The appellant further submits that there is no basis in
    law for the determination that the appellant took unlawful possession of the
    property as the respondents were in default, they were not occupying the
    premises as the property was damaged by fire, and the appellant did no more
    than any prudent mortgagee would do to effect control of the premises in these
    circumstances.

[19]

The appellant suggests the application judge
    made the following errors which raise serious issues to be determined:

i.

Although she noted that neither notice nor vacant possession is
    required before taking possession of the property, the appellants right to
    possess was seriously challenged after it received the letter from the respondents
    counsel, such that there was no peaceable possession;

ii.

The application judge further determined that the appellant did not
    have the statutory right, pursuant to s. 2(3) of the
Mortgages Act
, to
    refuse to assign the mortgage but cited no legal authority for why s. 2(3) was
    not applicable where the mortgagee is in
de facto
possession;

iii.

The application judge placed too high a
    threshold for the determination of whether the appellant established that it
    had acquired peaceable possession

by invoking the definition in s. 41
    of the
Criminal Code
; and,

iv.

Notwithstanding the requirement to pay
    litigation fees and property management fees, the respondents were not
    obligated to pay them on the grounds that the appellants possession of the
    property was not legal.

[20]

In
Royal Trust Corp. of Canada v. Gupta
,
    1997 CarswellOnt 571, 24 O.T.C. 27 (Gen. Div.), at paras. 35-37, the court observed:

If peaceably is interpreted literally, i.e.,
    no conflict arose, then Royal Trust took possession peaceably. However, if peaceably
    is interpreted to mean with knowledge and consent of the mortgagors, or voluntarily
    as described by the Court of Appeal [in
Lee v. Guettler
(1975), 10 O.R. (2d) 257 (C.A.)], then Royal Trust did not take
    possession peaceably.



Although the mortgagee has the right to
    immediate possession upon default, the mortgagee usually does not exercise that
    right unless the mortgagor consents to giving up possession, or if the premises
    are abandoned.

[21]

The appellant relies on
Royal Trust
    Corp. of Canada v. 880185 Ontario Ltd.
(2005),

198 O.A.C. 235
    (C.A.). The appellant says that this case stands for the proposition that the
    mortgagee is entitled to unilaterally take possession immediately upon the
    mortgagors default, so long as possession is exercised peaceably.

[22]

The appellant also relies on the decision in
Lusk
    v. Perrin
, [1920] O.J. No. 201 (Ont. H.C.) where the court held that the
    lands being vacant [as Lusk had been away from the property for a month],
    Perrin was able to enter peaceably. The appellant submits that this case
    stands for the proposition that, on default, the mortgagee is entitled to
    remain in possession even if possession was not taken peaceably.

[23]

The respondents submit that the application
    judge was correct to find that the appellant did not take quiet possession of
    the property and that appellants unilateral changing of the locks was
    unlawful. The respondents argue that the law and the findings of fact relied
    upon by the application judge are consistent with the principles set out in the
    cases relied upon by the appellant below and on appeal.

[24]

I agree that this case appears to be distinguishable
    from the cases cited by the appellant as in this case:

i.

The property was not vacant because the
    respondents chose to leave. The respondents were forced to leave after the fire;

ii.

They left the property locked to prevent others from entering and
    their possessions remained there.

iii.

There was no abandonment of the property; and,

iv.

The appellant could reasonably expect that the respondents would not
    consent to taking possession without notice, which resistance took place within
    days of the appellant taking possession.

[25]

I find that, while the respondents have raised a
    serious argument that the appellant did not effect peaceable possession, the
    interpretation of peaceable possession remains a serious issue on the appeal.

Irreparable harm and where the balance of
    convenience lies

[26]

The appellant claims that if the stay is not
    granted it will suffer irreparable harm to its ability to enforce this and
    other like mortgages given the finding that it took unlawful possession. The
    appellant may forfeit its entitlement to quiet possession; and lose the
    security of its litigation costs, property management expenses and other
    charges the respondents are contractually obligated to pay. Moreover, the
    appellant claims that there would be nothing prohibiting the respondents, or
    the new third-party lender, from selling the property and prohibiting the
    appellant from collecting the full amount owed.

[27]

The respondents claim the appellant will suffer
    no irreparable harm as the respondents undertake not to sell the property, the
    appellant will be entitled to seek damages, there is equity in the property and,
    to the extent that not all funds may be recovered, this was a risk assumed by
    the appellant in giving a second mortgage.

[28]

The respondents point out that in
Dhatt v.
    Beer
, 2020 ONCA 545, the Dhatts provided an undertaking not to deal with
    the property pending disposition of the appeal. Zarnett J.A., as motion judge,
    denied the Beers requested stay of an order transferring ownership of a
    property, holding that the right to effective relief as a result of a
    successful appeal will not be lost given this undertaking.

[29]

I find that, while the appellant may not recover
    all funds owing, the appellant will not suffer irreparable harm if there is no
    stay pending this expedited appeal. There is equity in the property, the
    appellant may pursue a claim for relief, and the respondents have undertaken
    not to sell the property in the interim. I note that Mr. and Ms. Hume, on
    the other hand, would suffer significant hardship if they lost their principal
    residence which they only vacated as a result of the fire.

Conclusion

[30]

For the above reasons, I find that, while there
    is a serious issue to be resolved on appeal, the appellant will not suffer
    irreparable harm in the absence of the proposed stay. If a stay were granted,
    however, the respondents would suffer significant hardship as they would lose
    their home. As such, the balance of convenience favours the respondents.

[31]

The motion to stay the order of the application
    judge pending appeal is therefore dismissed.

[32]

The issue of costs is reserved for the panel
    hearing the appeal.

J.A.
    Thorburn J.A.


