Dominique Michaud

The appellants, majority shareholders of Golden Ocean Investment Corporation, appealed the dismissal of their challenge to the validity and enforceability of two mortgages on property owned by the corporation.

The mortgages were authorized by the minority shareholder and sole director, Mr. Huang.

The appellants alleged the mortgages were fraudulent conveyances and that they had been defrauded.

The Court of Appeal upheld the motion judge's decision, finding that the mortgagees were bona fide purchasers for value with no notice of fraud, that Mr. Huang had both ostensible and actual authority to enter into the mortgages, and that there was consideration for the third mortgage.

The appeal was dismissed, and costs were awarded to the second mortgagee respondents on a partial indemnity scale.

The court issued supplementary reasons regarding costs on a motion for default judgment.

The plaintiff failed to direct the court's attention to the possible effect of section 8 of the Interest Act on its claim and made a significant calculation error of $126,999.99 in its recalculation of the amount owing on the defendant's guarantee as of November 4, 2024.

As a result, the court exercised its discretion to deny the plaintiff's claimed costs on the motion.

Post-judgment interest was ordered to be calculated pursuant to the Courts of Justice Act.

The court issued supplementary reasons addressing discrepancies in the calculation of interest owing by Vector as of November 4, 2024.

The plaintiff's affiant calculated total interest at $537,329.14, but the court identified potential errors in the calculation, noting that interest payments of $42,333.33 made on three separate dates may not have been properly reflected.

The court requested further clarifying supplementary affidavits to resolve the apparent discrepancies before finalizing the judgment.

The plaintiff sought default judgment against the defendant as guarantor of a mortgage loan in the amount of $669,377.05 plus continuing contractual interest.

The defendant failed to file a statement of defence and was noted in default.

The court rejected the default judgment motion, finding that the plaintiff failed to adequately establish the quantum of damages claimed.

The court identified critical deficiencies in the evidence regarding the calculation of interest, the enforceability of contractual interest rate increases, and the validity of special servicing and default administration fees.

The court directed the plaintiff to recalculate the amount owing using the pre-step-up interest rate and to disallow unenforceable fees and charges.

This costs endorsement follows a decision upholding the validity and enforceability of second and third mortgages registered against a property owned by a company in which the applicants were shareholders.

The court awards substantial indemnity costs to the successful third mortgagee, finding the amount claimed reasonable and declining to include the legal costs of the second mortgagee and the sale solicitor as part of the costs of the application.

The applicants, shareholders in Golden Ocean Investment Corporation, brought a motion challenging the validity of second and third mortgages registered against a property owned by the corporation.

They alleged the sole director executed the mortgages without authority as part of a fraud, and that the mortgagees were willfully blind to badges of fraud.

The court dismissed the motion, finding the mortgagees were bona fide purchasers for value who conducted proper legal due diligence.

The court held that taking a financial or underwriting risk does not constitute willful blindness to fraud, and the mortgagees were entitled to rely on the director's actual and ostensible authority.

The applicants, a first mortgagee, sought a declaration that the priority of construction lien claims against unsold condominium units was limited to the statutory holdback amount, and authorization for the receiver to distribute net sale proceeds to the mortgagee.

Two lien claimants opposed, arguing for full priority based on alleged fraudulent conveyance and the nature of the mortgage advance.

The court found that the Construction Act's priority regime is a complete code, and since the lien claims were not preserved or perfected, nor was written notice provided to the mortgagee before the advance, the mortgage had priority over the liens beyond the statutory holdback.

The court also rejected arguments of fraudulent conveyance and the claim that the funds were not a proper "advance in respect of the mortgage." The motion was granted, allowing the receiver to distribute proceeds to the mortgagee while maintaining a holdback reserve for valid lien claims.

The appellant, 2557904 Ontario Inc. (the stalking horse bidder), appealed a motion judge's order that dismissed the receiver's motion for an approval and vesting order (AVO) and instead approved the debtor's (1000093910 Ontario Inc.) motion to redeem a first mortgage.

The Court of Appeal found the motion judge erred by not ensuring 255 received compensation for costs thrown away and by granting provisional enforcement of the order after an appeal notice was filed.

The appeal was allowed in part, varying the order to require the debtor to pay $300,000 in compensation to 255 and setting aside the provisional execution.

The court also ordered that if the refinancing transaction does not close, the AVO for 255 will be granted.

The Court of Appeal heard motions in an appeal concerning the receivership of a debtor's property.

The appellant, a successful bidder, appealed two lower court orders that terminated its Stalking Horse Agreement and approved the debtor's refinancing transaction.

The motion judge referred several issues to a panel, including the appellant's standing and right to appeal, and whether the lower court erred in terminating the agreement and granting provisional enforcement.

The Court of Appeal continued the stay of provisional execution of the lower court orders, emphasizing the importance of maintaining the integrity of court-approved sale processes, especially given the absence of reasons from the motion judge for his initial decision.

The respondent (1000093910 Ontario Inc.) brought an urgent motion for the court to sign a draft order including a provisional execution, which was opposed by the prospective purchaser (2557904 Ontario Inc.).

The purchaser had filed an appeal and sought a stay of a prior endorsement.

The court considered the urgency due to significant daily costs and an expiring financing offer.

The court affirmed its jurisdiction under section 195 of the Bankruptcy & Insolvency Act to grant provisional execution, rejecting the purchaser's arguments that such relief was not properly requested or that jurisdiction lay solely with the Court of Appeal.

Balancing the irreparable harm, the court found that the prejudice to the applicant (Peakhill Capital Inc.), respondent, second mortgagee, and guarantors if provisional execution was not granted outweighed the harm to the purchaser.

The motion for provisional execution was granted.

The Plaintiff, TPine Financial Services Inc., brought a motion for the continuation of an interim Mareva Order and leave to register a certificate of pending litigation (CPL) on the Caledon Property.

The Plaintiff alleged a fraudulent invoicing scheme by the Mareva Defendants, leading to the advancement of $7.5 million, part of which was used as a $3.65 million deposit for the Caledon Property, held by the Hanjra Defendants.

The Hanjra Defendants had failed to comply with previous orders to pay these deposit monies into court.

The court granted the Plaintiff's motion, ordering the Hanjra Defendants to pay the $3.65 million into court and granting leave to register the CPL, finding a triable issue regarding the Plaintiff's claim to the specific fund and an interest in the property.

Subsequently, the parties reached a settlement agreement where the Hanjra Defendants would pay the sum into court within 30 days, leading to the discharge of the CPLs and abandonment of their appeal.

Costs were fixed at $15,000 for the motion, payable by the Hanjra Defendants.

The Court-appointed Receiver sought approval of a lien claim settlement, administrative expenses, its fees, and directions regarding the mortgagee's claim for three months' bonus interest upon default.

The Court approved the settlement, expenses, and fees.

However, the Court directed the Receiver to reject the mortgagee's claim for bonus interest, finding that the mortgage provision violated section 8 of the Interest Act by imposing a higher charge on arrears.

The Court also held that section 17 of the Mortgages Act does not apply to distributions by a court-appointed receiver.

In a receivership and bankruptcy proceeding, a dispute arose regarding the distribution of proceeds from the sale of a property.

The 259 Group, a second mortgagee, had previously settled a motion regarding the distribution of holdback funds, resulting in a consent order.

The Trustee and a third mortgagee argued that this settlement finally determined the amount of indebtedness owed to the 259 Group, barring them from making a further secured claim in the bankruptcy.

The court applied the doctrine of issue estoppel and interpreted the consent order, concluding that the settlement only resolved the priority of the holdback funds, not the total indebtedness.

Therefore, the 259 Group was not barred from making a secured claim to the Trustee.

The plaintiffs brought a motion for default judgment against three defendants involved in a mortgage fraud scheme.

The plaintiffs had provided a private mortgage loan to an individual impersonating the true property owner, and the funds were dissipated by the borrower's lawyer in breach of his undertaking.

The defendants failed to file statements of defence and were noted in default.

The court granted default judgment, finding the lawyer liable for negligence and breach of undertaking, and the other defendants liable for fraud, while awarding partial indemnity costs to the plaintiffs.

The applicants purchased a property and subsequently received a municipal order to remediate unpermitted structures.

They made a claim under their title insurance policy.

The insurer invoked the policy's appraisal process, instructing the appraiser to calculate the 'Actual Loss' by valuing the land as if the unpermitted structures did not exist.

The applicants challenged this interpretation and the policy's appraisal process.

The court held that 'Actual Loss' must be calculated based on the value of the property subject to the government order, not as vacant land.

Furthermore, the court ruled that the appraisal process mandated by section 128 of the Insurance Act overrides the inconsistent process set out in the insurance policy.

Hazleton Development Corporation, an insolvent company constructing a condominium complex, applied for an initial order under the Companies’ Creditors Arrangement Act (CCAA).

The application sought a stay of proceedings, approval of Grant Thornton Limited as Monitor, permission for pre-filing payments to critical trades, approval of a Debtor-in-Possession (DIP) financing facility, an administration charge, and a directors’ charge.

The court granted the initial order, finding the company met the CCAA's statutory requirements, the stay was appropriate for a 10-day period, the Monitor was qualified, pre-filing payments were beneficial to stakeholders, the DIP facility was essential and reasonably necessary, and both the administration and directors’ charges were warranted.

The order was granted without prejudice to the secured creditors' rights for a subsequent hearing.

The defendant 2603553 Ontario Inc. ('260') brought a motion for summary judgment to dismiss a fraudulent conveyance claim by the plaintiff, Vestacon Limited.

Vestacon cross-moved for a certificate of pending litigation.

The court granted 260's motion, finding no genuine issue requiring a trial regarding 260's knowledge of any fraudulent intent on the part of Huszti Investments.

The court concluded that the sale of the units by Huszti Investments to 260 was commercially reasonable and the proceeds were used to pay secured creditors.

Consequently, Vestacon's action against 260 was dismissed, and its cross-motion for a certificate of pending litigation was also dismissed.

The court awarded substantial indemnity costs of $85,000 to 260.

The applicant second mortgagee sought assignment of a first ranked mortgage and challenged the priority effect of undisclosed and unregistered mortgage amending agreements entered into after the first mortgage was assigned to the respondent.

The court held that the mortgagor was in default when the applicant demanded an assignment under s. 2 of the Mortgages Act, and that the respondent was obliged to assign the first ranked mortgage upon payment of $788,152.20.

Following prior authority on notice and subsequent encumbrancers, the court held that the undisclosed amending agreements did not obtain priority over the second mortgage.

The court also applied equitable estoppel because the respondent repeatedly represented that the first mortgage was in good standing while capitalizing unpaid interest and increasing the secured amount.

Distribution of proceeds and payment of costs were held in abeyance pending a related trial involving the intervenor.

Centurion Mortgage Capital Corporation brought a motion for determination of a mortgage priority dispute with The Guarantee Company of North America (GCNA) regarding a condominium development project.

The court found that counsel for both parties had agreed in May 2016 that Centurion's mortgage would have priority over GCNA's mortgage, except with respect to purchasers' deposits.

The court also held that GCNA was precluded by proprietary estoppel from relying on a registered postponement acknowledgment to assert priority over Centurion's mortgage.

The court declared Centurion's mortgage subordinate only with respect to deposits and ordered the deletion of the postponement acknowledgment from title.

The moving parties brought motions for leave to appeal the orders of the motion judge dated June 29, 2020, and August 17, 2020.

The Divisional Court dismissed the motions for leave to appeal.

Costs were awarded to the responding parties in the total amount of $10,000, payable jointly and severally by the moving parties.