



COURT OF APPEAL FOR ONTARIO

CITATION: Rokhsefat v. 8758603 Canada Corp., 2019 ONCA 273

DATE: 20190409

DOCKET: C65632

van Rensburg, Hourigan and Huscroft JJ.A.

BETWEEN

Seyed Razi Rokhsefat and
    Nasibe Kazemzadeh-Khorasgha

Applicants (Respondents)

and

8758603
    Canada Corp.

(formerly known as Ascend Mortgage
    Investment Corp.)

Respondent (Appellant)

Zoltan M. Kaslik, for the
    appellant

Benjamin Salsberg, for the
    respondents

Heard: March 28, 2019

On appeal from the judgment of Justice Joseph Di Luca of
    the Superior Court of Justice, dated July 19, 2018, with reasons reported at
    2018 ONSC 3615 and 2018 ONSC 4457.

REASONS FOR DECISION

[1]

The respondents granted a second mortgage on their home in Richmond
    Hill, to secure a loan of $120,000 from the appellant. The mortgage was for a
    term ending August 1, 2017, and until then interest only was payable monthly at
    the rate of 10.99% per annum.

[2]

On the day before the mortgage matured, July 31, 2017, the respondents
    received a discharge statement, dated July 25, 2017, by email. Included in the
    amount required to be paid ($128,604.30) were late payment fees and a fee for
    two demand letters. The statement provided that legal enforcement would commence
    after 15 calendar days, but it did not state when the 15 days would begin to
    run.

[3]

Two days later, the respondents received a registered letter from the
    appellants counsel, dated August 2, 2017, which indicated that the mortgage
    was in default by reason of the failure to pay the amount due on the redemption
    date of August 1, 2017. The letter enclosed a Notice of Sale under Mortgage.
    The letter and notice specified a discharge amount of $153,285.10, inclusive of
    additional late payment fees, charges for professional and lender
    administration fees, and various interest amounts. Although the Notice of Sale
    referred to a payment due date of September 8, 2017, the letter demanded
    payment by August 2, 2017, failing which enforcement proceedings would be commenced
    without further notice.

[4]

The respondents challenged the amounts claimed by the appellant and the
    premature Notice of Sale. Ultimately they brought an application in the
    Superior Court seeking, among other things, an order under s. 12 of the
Mortgages
    Act
, R.S.O. 1990, c. M.40, for a discharge of the mortgage upon payment
    into court of an amount to be determined by the court and a declaration that
    the Notice of Sale was of no force and effect.

[5]

The application judge considered the affidavit evidence and determined that
    the amount owing on the mortgage as of June 27, 2018 was $144,886.05 (including
    legal costs already awarded against the respondents), with a
per diem
interest amount of $42.85 for each day thereafter. He concluded that the
    default relied on by the appellant was the August default in payment of
    principal (and not other delays in payment of monthly interest that were
    alleged in the appellants materials). He allowed certain expenses claimed by
    the appellant (including fees for late payments and a discharge fee) and
    disallowed others (including an illegal interest penalty, three months
    interest, and professional and administrative fees that were not supported by
    any explanation). He ordered that if the amount due and owing was not paid
    within 30 days, an interlocutory injunction that had been imposed in September
    2017 prohibiting enforcement of the mortgage would be lifted, and the mortgagee
    would be free to enforce the mortgage as it deemed appropriate.

[6]

The mortgagee appeals. The mortgagee seeks an order setting aside the
    order of the application judge, so that a new proceeding can be commenced
    before an assessment officer under s. 43 of the
Mortgages Act
. The
    mortgagee also contends that the application judge ought to have directed the
    trial of an issue, as there were material facts in dispute. In the alternative,
    the mortgagee challenges the application judges disallowance of certain
    specific charges.

[7]

The appellants principal argument is that the application judge ought
    not to have determined the application. It argues that the proper procedure for
    determining the issues was to have the disputed amounts assessed by an
    assessment officer under s. 43 of the
Mortgages Act

after
    tender to the mortgagee or payment into court of the amount demanded, or at
    least of the principal amount owing. The appellant contends that the
    respondents had no
bona fide

intention to redeem, as they had
    no available funds, and that their application was intended simply to delay the
    mortgagees remedies.

[8]

The appellant relies on the procedure recognized in the case of
Royal
    Trust Corp. of Canada v. E.R. Kwinch Investments Ltd.
(1984), 44 O.R. (2d)
    593 (S.C., Master) for the assessment of the mortgagees costs and other
    expenses incidental to the exercise of a power of sale, where a mortgagor seeks
    to redeem and discharge a mortgage, and for the assessment of legal costs other
    than those incidental to the power of sale under the
Solicitors Act
, R.S.O. 1990, c. S.15
. See also
The
    Manufacturers Life Insurance Company v. 1008522 Ontario Limited
, [2006]
    O.J. No. 787, at para. 18 (S.C.). The appellant contends that the s. 43
    procedure before an assessment officer was the only recourse available to the
    respondents, and that therefore the application judge lacked jurisdiction to
    determine the issues in dispute. It holds, further, that proceeding under s.
    12(3) would have required the prior tender to the mortgagee or payment into
    court of the full amount owing and claimed together with an amount for future
    legal costs and interest, or at a minimum the principal amount.

[9]

We do not accept this argument. The respondents brought their
    application in order to challenge the conduct of the appellant, and to
    determine the proper discharge amount. Because the Notice of Sale followed only
    two days after the discharge statement and yet demanded payment of an
    additional sum of nearly $25,000, there was a real question about the legality
    of a number of the charges. Indeed, the application judge, at paras. 13 and 32
    of his June 12 reasons, characterized the August 2, 2017 letter and notice as
    remarkable and the approach of the appellant to the anticipated default of
    the mortgage principal as aggressive, perhaps abusive. He noted that the
    mortgagees counsel obviously had inflated the mortgage account and gave the
    impression that unless the inflated amount was paid in one day legal remedies
    would be exercised. Counsel also gave the impression that sale proceedings had
    already begun.

[10]

A
    mortgagee must be able to ascertain, assert, and finally defend its right to
    the legal fees in connection with the mortgage debt. The standard charge terms
    of mortgage agreements are not a carte blanche for a mortgagee to incur and
    charge fees:
Chong & Dadd v. Kaur
, 2013 ONSC 6252, at paras. 40 and
    43. In the particular circumstances of this case, the respondents court
    application was a justifiable response to the appellants unreasonable conduct,
    in refusing to explain the additional charges and its issuance of a premature
    Notice of Sale.

[11]

We need not determine in this appeal whether any or all of the
    various issues that were raised in this application could have been addressed
    in an assessment under s. 43. It is sufficient to say that the application
    judge had jurisdiction in this case to address all of the issues that were
    before him: see e.g.
C.M.T. Financial Corporation v. David McGee
, 2015
    ONSC 3595, 57 R.P.R. (5th) 259, at paras. 67-68.

[12]

The application judge might well have concluded that the
    appropriate procedure was to require the respondents to pay money into court,
    and then to direct an assessment of the additional amounts at issue.
Indeed, at the time the application was first before the court, an
    order could have been made requiring at least the principal that was admitted
    to be owing, or some other amount, to be paid into court as a term of the
    adjournment and interlocutory injunction. The parties are not in agreement as
    to their respective positions, and what exactly happened at this time, when the
    mortgagor was represented by other counsel, who was later removed because of a
    conflict of interest.

[13]

What
    ultimately occurred in this case was that by the time the matter came on for a
    hearing before the application judge, the parties had provided affidavit
    evidence, and the application judge was in a position to decide all of the
    issues before him. Even if some of what he determined in relation to the
    dispute about the amount that was owing for a discharge of the mortgage could
    have been addressed before an assessment officer, the matter has been
    determined. The matter was before a justice of the Superior Court who had
    jurisdiction to deal with it.

[14]

We
    also see no merit in the appellants argument that the application judge ought
    to have directed a trial of the issue because there were disputed facts. The
    application judge noted, at para. 6 of his June 12 reasons, that the material
    filed on the application was not subject to cross-examination and that the
    evidence of each side was diametrically opposed on key issues, but that [n]onetheless,
    the parties maintain that this application can and should be decided on the
    record that is before me. In the circumstances, it was appropriate for the
    application judge to proceed and to make findings on the evidence that was
    available.

[15]

Finally,
    we reject the appellants argument that the application judge erred in his
    treatment of the various contested amounts that were claimed by the appellant.
    Specifically, in disallowing the mortgagees claim for a three-month interest
    penalty, the application judge indicated that he was not satisfied that there was
    any prepayment penalty payable under this mortgage, either on default or the
    failure to pay on the maturity date. Contrary to the appellants submission, s.
    17 of the
Mortgages Act
does not provide to the mortgagee any
    unconditional right to claim such a payment based on maturity alone. See
58
    Cardill Inc. v. Rathcliffe Holdings Ltd.
, 2018 ONCA 672, 62 C.B.R. (6th)
    173, at para. 9;
Ialongo v. Serm Investments Ltd.
(2007)
, 54 R.P.R. (4th) 310 (Ont. S.C.),
    at paras. 30-1; and
2468390 Ontario Inc. v. 5F Investment Group Inc.
, 2017
    ONSC 4641, 140 O.R. (3d) 233, at para. 24. With respect to the other items in
    dispute, the application judge allowed for certain amounts claimed by the
    appellant, including late payment charges, where there was substantiation for
    such claims and where they did not offend the
Mortgages Act
or the
Interest
    Act
, R.S.C. 1985, c. I-15.

[16]

Accordingly,
    the appeal is dismissed. Costs of the appeal are payable by the appellant to
    the respondents in the amount agreed between the parties, $17,500 inclusive of
    disbursements and HST.

K.
    van Rensburg J.A.

C.W.
    Hourigan J.A.

Grant
    Huscroft J.A.


