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Real Property - Mortgages (3). Cameron Stephens Mortgage Capital Ltd. v. Spotlight on Lawrence Inc. [equity of redemption]
In Cameron Stephens Mortgage Capital Ltd. v. Spotlight on Lawrence Inc. (Ont CA, 2025) the Ontario Court of Appeal dismissed a bankruptcy leave to appeal motion [under BIA 193(e)], here from a denial of an interlocutory order (for an adjournment).
Here the court considers a late redemption of a mortgage, here in the context of the leave to appeal motion:[11] In my view, it is important to bear in mind why the motion judge refused the adjournment request in this case. As his reasons make clear, he was skeptical about whether the moving parties would have been able to justify their being permitted to exercise their equity of redemption at such a late date, even if they had not needed an adjournment to give them more time to attempt to raise the necessary funds. As he explained:In order even to consider an extremely late-breaking proposal to exercise the equity of redemption in the face of a Transaction that has been fully negotiated and executed and is ready to close, the party seeking to redeem must turn up with “cash in hand”, i.e. must be ready to fully redeem the mortgage(s) on the property at issue. Even in those circumstances, the relevant case law provides that [a] late-breaking offer, unless it provides exceptional value in comparison to the proposed transaction, should not be allowed to interfere with the integrity of the receivership sale process. [12] The Receiver points out that in Rose-Isli Corp. v. Smith, 2023 ONCA 548, a decision released less than two years ago, a panel of this court addressed the factors that should be considered by judges when deciding whether to give priority to a debtor’s right to redeem, in cases where a receiver is proposing to sell the debtor’s assets. The court endorsed the following principles, at para. 9:. In considering a request by an encumbrancer to redeem a mortgage on property in receivership, a court should consider the impact that allowing the encumbrancer to exercise its right of redemption would have on the integrity of a court-approved sales process;
. Usually, if a court-approved sales process has been carried out in a manner consistent with the principles set out in Royal Bank of Canada v. Soundair Corp., (1991), 1991 CanLII 2727 (ON CA), 4 O.R. (3d) 1 (C.A.), a court should not permit a latter attempt to redeem to interfere with the completion of the sales process. In our view, the reason the Soundair principles apply to circumstances where an encumbrancer seeks to redeem a mortgage is that once the court’s process has been invoked to supervise the sale of assets under receivership, the process must take into consideration all affected economic interests in the properties in question, not just those of one creditor; and
. In dealing with the matter, a court should engage in a balancing analysis of the right to redeem against the impact on the integrity of the court-approved receivership process. [13] The court added, at para. 10:We adopt the rationale for those guiding principles articulated in B&M Handelman Investments Limited v. Mass Properties Inc. (2009), 2009 CanLII 37930 (ON SC), 55 C.B.R. (5th) 271 (Ont. S.C.), where the court stated, at para. 22:A mockery would be made of the practice and procedures relating to receivership sales if redemption were permitted at this stage of the proceedings. A receiver would spend time and money securing an agreement of purchase and sale that was, as is common place, subject to Court approval, and for the benefit of all stakeholders, only for there to be a redemption by a mortgagee at the last minute. This could act as a potential chill on securing the best offer and be to the overall detriment of stakeholders. [14] In my view, the fact that the moving parties in this case needed an adjournment to give them time try to raise the funds they would have needed to exercise their right of redemption does not significantly change the analysis. The factors the motion judge had to consider when deciding whether to grant an adjournment for this purpose largely overlapped with the factors he would have had to consider if they had been in a position to exercise that right, as outlined in Rose-Isli Corp. I am accordingly not persuaded that this proposed ground of appeal raises issues on which either the lower courts or the insolvency bar require additional guidance from this court, nor does it raise any broader matters of more general concern to the administration of justice. . McKenzie-Barnswell v. Xpert Credit Control Solutions Inc. [where fraud]
In McKenzie-Barnswell v. Xpert Credit Control Solutions Inc. (Ont CA, 2025) the Ontario Court of Appeal considered a contractual severance remedy where mortgage principle funds were added to as a result of a contractual addition that was tainted by fraudulent misrepresentation:(b) Failure to Sever the Mortgage
[55] The second error lies in the trial judge’s decision to set aside the entire March 2017 mortgage. It is true that the monies advanced for the performance of the construction contract were rolled into the March 2017 mortgage. That part of the March 2017 mortgage must fall with the invalidation of the construction contract. But it is far from clear that the entire debt should be set aside. The invalidation of the construction contract did not invalidate the entire mortgage. Nor does the finding of unconscionability compel that result.
[56] Mortgages are severable. Where some, but not all aspects of a mortgage are void for fraud, it is appropriate to determine whether other aspects of the mortgage are enforceable: Ontario Hardwood Flooring Co. v. Dowbenko, (1957) 7 D.L.R. (2d) 111 (Ont. C.A.), at p. 115. In this case, the monies advanced for the construction contact, invalidated by fraud, did not taint the entire March 2017 mortgage.
[57] Similarly, while some aspects of the blanket March 2017 mortgage were unconscionable, other aspects of the debt are enforceable.[1] The respondent received advances and used the funds for various purposes. For example, the respondent borrowed $90,000 in order to make her parents’ home more “senior-friendly”. The respondent also asked that the debt be increased by $17,000 so that she could pay her father’s funeral expenses. . Margel v. Dawson
In Margel v. Dawson (Ont CA, 2024) the Ontario Court of Appeal considers a court's discretion to vary (reduce) mortgage interest in response to a mortgagee's failure to deliver a mortgage statement:[3] The motion judge was entitled to consider the decision in Cheung v. Moskowitz Capital Mortgage, 2018 ONSC 1322, 87 R.P.R. (5th) 89 to be distinguishable. As explained by this court in 2257573 Ontario Inc. v. Furney, 2022 ONCA 505, at paras. 17-18, the discretion exercised in Cheung to reduce interest as a consequence of a mortgagee’s failure to deliver a mortgage statement is a fact driven exercise. In Cheung, it was predicated on the mortgagee having sought to obtain an advantage by not delivering a statement to the prejudice of the mortgagor.
[4] Here, as in Furney, no advantage was sought or prejudice suffered to justify the exercise of any discretion to vary the interest payable under the mortgage. The motion judge noted that, although there was no mortgage statement delivered before the mortgage matured in April 2020, a Notice of Sale was delivered in May 2020 which set out the amounts owing. Subsequently, in August 2020 a discharge statement was provided. The motion judge also found that the absence of a mortgage statement did not hamper refinancing. Yet no payments at all were, or have been, made under the mortgage since it matured four years ago. . New Haven Mortgage Corporation v. Codina
In New Haven Mortgage Corporation v. Codina (Ont CA, 2023) the Court of Appeal considers an appeal relating to a claim against a mortgage company for taking of possession of a house, here allegedly contrary to s. 42(1) of the Mortgages Act:[3] First, he did not err in concluding that the respondents’ peaceable taking of possession of the property was not contrary to s. 42(1) of the Mortgages Act. Contrary to the appellant’s submission, this conclusion is consistent with Lee v. Guettler (1976), 1975 CanLII 639 (ON CA), 10 O.R. (2d) 257. The respondents did not commence an action or take proceedings in order to take possession of the property.
[4] Second, the motion judge did not err in his factual findings that the property was vacant when the respondent took possession, and that the respondent took peaceable possession. His decision was in accordance with the definition of “peaceable possession” articulated in the recent decision of this court, Hume v. 11534599 Canada Corp., 2022 ONCA 575. . Rose-Isli Corp. v. Smith
In Rose-Isli Corp. v. Smith (Ont CA, 2023) the Court of Appeal upheld a motion judge's order that denied the appellant's statutory right to redeem property [Mortgages Act, s.2] once it had gone into receivership and an APS had been entered into:[5] The appellants submit the motions judge erred in dismissing their cross‑motion because the second mortgagee, 273 Ontario, pursuant to s. 2 of the Mortgages Act, R.S.O. 1990, c. M.40, had an absolute right to redeem the first mortgage at any time, even where a court-approved sales process had been undertaken and the receiver was seeking court approval of a bid.
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[7] 273 Ontario, as one of the applicants for the appointment of a receiver, consented to the Appointment Order. Section 9 of the Appointment Order qualified any encumbrancer’s right to redeem a mortgage on the properties under receivership. The section states that “all rights and remedies against the Company, the Receiver, or affecting the Property, are hereby stayed and suspended except with the written consent of the Receiver or leave of this Court.” See also: BCIMC Construction Fund Corporation et al. v. The Clover on Yonge Inc., 2020 ONSC 3659, at paras. 33 and 41.
[8] The motions judge recognized that the issue for determination was not whether 273 Ontario had a right to redeem but the more pragmatic issue of whether it should be permitted to exercise that right once the court-approved sales process had run its course and the Receiver had entered into an agreement with the successful bidder: Reasons, at paras. 73‑74. This properly framed the issue: the appellants had sought the appointment of the Receiver; the Receiver had undertaken the sales process approved by the court; and the Receiver had not been discharged. Accordingly, the ability of 273 Ontario to exercise a right of redemption had to take into account the reality that the property remained subject to an active receivership, which engaged interests beyond those of the second mortgagee.
[9] We see no error in the motions judge applying the following principles to guide her consideration of whether, in the specific circumstances, 273 Ontario should be granted leave to redeem:. In considering a request by an encumbrancer to redeem a mortgage on property in receivership, a court should consider the impact that allowing the encumbrancer to exercise its right of redemption would have on the integrity of a court-approved sales process;
. Usually, if a court-approved sales process has been carried out in a manner consistent with the principles set out in Royal Bank of Canada v. Soundair Corp., (1991), 1991 CanLII 2727 (ON CA), 4 O.R. (3d) 1 (C.A.), a court should not permit a latter attempt to redeem to interfere with the completion of the sales process. In our view, the reason the Soundair principles apply to circumstances where an encumbrancer seeks to redeem a mortgage is that once the court’s process has been invoked to supervise the sale of assets under receivership, the process must take into consideration all affected economic interests in the properties in question, not just those of one creditor; and
. In dealing with the matter, a court should engage in a balancing analysis of the right to redeem against the impact on the integrity of the court-approved receivership process. [10] We adopt the rationale for those guiding principles articulated in B&M Handelman Investments Limited v. Mass Properties Inc. (2009), 2009 CanLII 37930 (ON SC), 55 C.B.R. (5th) 271 (Ont. S.C.), where the court stated, at para. 22:A mockery would be made of the practice and procedures relating to receivership sales if redemption were permitted at this stage of the proceedings. A receiver would spend time and money securing an agreement of purchase and sale that was, as is common place, subject to Court approval, and for the benefit of all stakeholders, only for there to be a redemption by a mortgagee at the last minute. This could act as a potential chill on securing the best offer and be to the overall detriment of stakeholders.
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