A priority dispute arose between two mortgagees over lands on Queen Street East following a $400,000 advance intended to fund a principal payment under a vendor take-back mortgage.
Funds advanced by a second mortgagee were delivered by certified cheque to the first mortgagee but were subsequently returned to the borrower after arrangements between the borrower and the first mortgagee to defer the principal installment.
The second mortgagee argued that deposit of the cheque constituted acceptance of payment under the first mortgage and a re‑advance to the borrower, thereby affecting priority.
The court reviewed extensive email communications and evidence surrounding the transaction and raised credibility concerns about the first mortgagee’s knowledge of the source and purpose of the funds.
The court directed brief viva voce evidence and potential cross‑examination to resolve the factual dispute before determining priority.
