



COURT OF APPEAL FOR ONTARIO

CITATION: Sub-Prime Mortgage Corporation v. 1219076 Ontario
    Limited, 2019 ONCA 581

DATE: 20190709

DOCKET: C66391 and C66392

Feldman, Hourigan and Brown JJ.A.

DOCKET: C66391

BETWEEN

Sub-Prime Mortgage Corporation

Appellant

and

1219076 Ontario Limited

Respondent

AND BETWEEN

DOCKET: C66392

Sub-Prime Mortgage Corporation

Appellant

and

1219076 Ontario Limited

Respondent

Glenn E. Cohen and Balpreet S. Lailna, for the
    appellant

Vladimira M. Ivanov, for the respondent

Heard: July 2, 2019

On appeal from the
    orders of Justice Sandra Nishikawa of the Superior Court of Justice, dated
    December 4, 2018, and the costs endorsement dated January 8, 2019.

REASONS FOR DECISION

Introduction

[1]

These appeals arise from a dispute about the calculation of balances
    owing on two mortgages for discharge purposes. The respondent is the first
    mortgagee of the properties subject to the mortgages. The appellant, as second mortgagee,
    filed applications in the Superior Court of Justice seeking orders permitting
    it to obtain an immediate discharge of the respondents mortgage on each
    property by paying money into court, pending further court orders or the
    resolution of the parties dispute.

[2]

The application judge denied both applications and ordered costs payable
    by the appellant on a substantial indemnity basis. The appellant appeals the
    dismissal of its applications and seeks leave to appeal the costs order. For
    the reasons that follow, we dismiss the appeals on the substantive issues,
    direct the parties to amend their application materials and argue the disputed
    items in the mortgage discharge statements in the Superior Court, and refer the
    issue of the costs below to the judge hearing those amended applications.

Facts

[3]

In relation to the first property, 355 Oakwood Avenue, Toronto, the
    respondent provided the appellant with three different calculations of the
    balance owing under the mortgage. The appellant did not tender any of these
    amounts. In relation to the second property, 29 Yeomans Road, Toronto, the
    respondent initially issued a mortgage discharge statement dated June 6, 2018, indicating
    a balance of $675,937.73. The appellant takes the position that it lawfully
    tendered this amount in full. The respondent contends that its calculation was
    incorrect and that it therefore issued a revised discharge statement dated June
    18, 2018 with a balance of $683,133.76.

[4]

The appellant disputed an unspecified number of entries in the discharge
    statements for both properties. It filed two applications on an urgent basis
    with the Superior Court of Justice, relying on: ss. 12(3), 12(9), 17, and 22 of
    the

Mortgages Act
, R.S.O. 1990, c M.40
;
s. 8 of the
Interest
    Act
, R.S.C. 1985, c. I-15; and rr. 14.05(a), (d) and (e) of
Rules of
    Civil Procedure
,
R.R.O. 1990, Reg. 194
.

[5]

The applications did not specifically seek an order determining the
    balance owing for each mortgage. The affidavit supporting the application
    regarding the first property indicated that the appellant took issue with an
    open-ended list of items including charges for non-sufficient funds or missed
    payments, a three-month interest charge, and an automatic renewal fee. There
    was no detailed recitation of all of the disputed amounts. Instead, the notices
    of application contemplate those issues being dealt with subsequently. The
    appellant also took the position that the respondent was obliged to accept its
    tender for the discharge of the mortgage on the second property.

[6]

The application judge found that s. 12(3) of the
Mortgages Act
did not apply in the circumstances of this case. According to her, the language
    of s. 12(3) refers to situations where a mortgagee cannot be found, and the
    section is not engaged automatically any time there is a dispute with respect
    to the amount owing on a mortgage.

[7]

Even if s. 12(3) did apply, the application judge held that she would
    not exercise her discretion to grant the relief sought because there was no
    compelling reason based on the available record to do so. In addition, the application
    judge was not satisfied that there was sufficient evidence of tender with
    respect to the second property.

[8]

In her costs endorsement, the application judge found that the urgent
    applications were unnecessary. In her view, the appellant should have paid the
    mortgage balances under protest and subsequently brought a proceeding to
    dispute any charges it viewed as excessive. The application judge considered it
    appropriate to award costs on a substantial indemnity basis in the amount of
    $12,000.

Analysis

[9]

There is an issue regarding whether this court has jurisdiction
    to hear these
appeals, because pursuant to s. 12(10)
    of the
Mortgages Act
,
an a
ppeal
    lies to the Divisional Court from any order made under [s.12 of the act].

[10]

Even if the appeals of the dismissal of the s. 12
    relief should be in the Divisional Court, the applicants relied on other
    statutory grounds and r. 14 and therefore the appeals are otherwise properly
    before this court. Pursuant to s. 6(2) of the
Courts of Justice Act
,
R.S.O. 1990, c. C.43,
we elect to hear
    the appeals on all issues.

[11]

The appellant argues that the application judge failed to
    exercise her discretion judicially and erred in law in declining to grant a
    discharge under s. 12(3) of the
Mortgages Act
. It submits that
    the procedure it chose was not improper, but expeditious and efficient. The
    appellant also argues that, even if s. 12(3) was not applicable, the
    application judge should have dealt with the substantive issues in dispute
    rather than dismissing the application, as it was properly brought under r. 14.

[12]

We
    agree that the motion judge erred in law in finding that the process under s.
    12(3) was unavailable to the appellant because it is a second mortgagee and not
    a mortgagor. In s. 1 of the
Mortgages Act
,
a mortgagor is
    defined to include any person deriving title under the original mortgagor or
    entitled to redeem a mortgage Thus, the appellant was a mortgagor under the
    act. However,

that error
    was immaterial to her decision
.

[13]

In
    considering the appellants submission regarding s. 12(3) of the
Mortgages
    Act
, it is important to look at the wording of that section, which
    provides:

When a mortgagor or any person entitled to pay off a mortgage
    desires to do so and the mortgagee, or one of several mortgagees, cannot be
    found or when a sole mortgagee or the last surviving mortgagee is dead and no
    probate of his or her will has been granted or letters of administration
    issued, or where from any other cause a proper discharge cannot be obtained, or
    cannot be obtained without undue delay, the court may permit payment into court
    of the amount due upon the mortgage and may make an order discharging the
    mortgage.

[14]

There
    is case law that suggests that s. 12(3) applies more broadly than situations
    where a mortgagee is unavailable or a proper discharge cannot be obtained:
Fernicola
    (In Trust) v. Creview Development Inc.
, 75 R.P.R. (4th) 226 (Ont. S.C.),
    leave to appeal refused 80 R.P.R. (4th) 178 (On. Div. Ct.); and
Metroview
    Investment Corp. v. Araujo
,
[2000] O.J. No. 2403 (S.C.). However,
    even that line of authority recognizes that s. 12 (3) applies in limited
    circumstances and not in every case where there is a dispute over what is owing
    on a mortgage. In addition, there is an acknowledgment in that case law that
    the use of s. 12(3) is a matter of discretion to be applied to the individual
    facts of each case.

[15]

We
    need not determine whether this jurisprudence represents an accurate
    interpretation of s. 12(3) because in the present case the application judge
    went on to decide that even if s. 12(3) could be interpreted in this way, she
    would not make the order requested. That was a discretionary decision and we
    are not satisfied her discretion was wrongly exercised. The procedural route
    for resolving disputed costs and charges in a discharge statement is not
    entirely clear. It is important that mortgagors have a clear understanding
    about how to contest items in a discharge statement because, as this court
    stated in
Rokhsefat v. 8758603 Canada Corp.
, 2019 ONCA 273, at para. 10: the standard charge terms of mortgage agreements
    are not a carte blanche for a mortgagee to incur and charge fees.


[16]

If
    a mortgagor has legitimate concerns about the amount claimed to discharge a
    mortgage, an application should be brought under r.14.05(3)(e). The application
    judge will determine what is owing and may even make an interim order for the
    payment of monies into court: see
Rokhsefat

at para. 12.
What is
    crucial in such an application is that the applicant seek a judicial
    determination of all of the disputed items and provide evidence in support of
    its position.

[17]

That
    is not what happened in the case at bar. The relief sought before the
    application judge was not an assessment of disputed costs and charges, which
    the appellant never fully particularized. Rather, the appellant requested that
    such costs and charges be assessed at a later date, but that the mortgages be
    discharged immediately without any payment to the respondent. The application
    judge cannot be faulted for not making a finding on the validity of the amounts
    claimed by the respondent, as that relief was never requested and was largely unsupported
    by evidence.

[18]

We
    are of the view that the appropriate course is that this matter should be
    remitted back to the Superior Court. The parties shall file amended application
    materials so that the court can determine, pursuant to r. 14.05(3)(e), whether
    the disputed costs and charges should be allowed. To be clear, it is open to
    the court to make such interim order as it sees fit.

[19]

In
    addition, we are of the view that the respondent was not bound by the errors in
    its discharge statement with respect to the second property. The appellant was
    not prejudiced by the correction, and could have paid the updated amount to
    discharge the mortgage. However, the appellant is at liberty to argue in the
    Superior Court, as it appears it wants to do, that the failure to accept tender
    reduces the interest that can be charged or otherwise impacts the amount owing.

[20]

The
    appellant also seeks leave to appeal the costs award, arguing that its conduct
    did not warrant the imposition of substantial indemnity costs. In light of our
    direction that the applications be remitted to the Superior Court, we order
    that the application judges costs order is quashed and a new costs assessment
    is to be conducted by the judge hearing the amended applications.

Disposition

[21]

We
    dismiss the appeals on the substantive issues, direct the parties to amend
    their application materials and argue the disputed items in the Superior Court,
    and refer the issue of the costs below to the judge hearing those amended
    applications.

[22]

The
    respondent was the more successful party on the appeals and is entitled to its
    costs of the appeals payable by the appellant, which we fix in the
    all-inclusive sum of $10,000.

K.
    Feldman J.A.

C.W.
    Hourigan J.A.

David
    Brown J.A.


