DIVISIONAL COURT FILE NO.: 150/03
COURT FILE NO.: 01-CV-210071CM
DATE: 20030325
SUPERIOR COURT OF JUSTICE - ONTARIO
(Divisional Court)
RE: alltricor financial management inc., laurentian trust of canada inc., in trust for rrsp no. 8206103, t.d. trust company, trustee for: (1) the self directed retirement income fund no. 149134t and 138141T (2) the self directed retirement savings plan no. 657643S and no. 149255S; and romar group inc. (Plaintiffs) v. NU-PORT HOMES INC., JOHN PUGLIESE, 1461089 ONTARIO LTD., ROLAND PASKAR, 1455730 ONTARIO LTD., LAKSHMAN DOOBAY AND HERITAGE BAYPARK LTD. (Defendants)
BEFORE: O’Driscoll J.
COUNSEL: H.J.B.A. Dickie, Q.C., for the Applicants 1461089 Ontario Ltd., Roland Paskar, 1455730 Ontario Ltd., Lakshman Doobay and Heritage Baypark Ltd.
K.G. Crompton, for the Respondents
HEARD at Toronto: March 19, 2003
E N D O R S E M E N T
[1] The Applicants/Defendants 1461089 Ontario Ltd., Roland Paskar, 1455730 Ontario Ltd., Lakshman Doobay and Heritage Baypark Ltd., under the provisions of s. 19(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43, and Rule 62.02(1) and (4) of the Rules of Civil Procedure, apply for leave to appeal to the Divisional Court from the orders of Brennan J., dated January 6, 2003, which state, in part:
THIS COURT ORDERS that the defendants pay into court all rental revenues and proceeds of any sales of the property at 460 Rogers Road in the City of Toronto to the credit of the action herein.
THIS COURT ORDERS that the funds held in court shall be dispersed under the supervision of a Master, taking into account the claims of all interested claimants.
THIS COURT ORDERS that these defendants’ motion to vacate the certificate of pending litigation issued by Master Abrams on May 5th, 2001, be and is hereby dismissed.
THIS COURT ORDERS that the certificate of pending litigation issued on May 4th, 2001, pursuant to the order of Master Abrams, be and is hereby extended until further order or until the apparent defect in title is removed.
[2] The motions court judge heard argument on September 25 and 26, 2002, and reserved judgment. In his seven (7) paged endorsement, he reviewed the material and the authorities.
[3] The Plaintiffs/Respondents agreed to postpone their mortgages to allow Seagrove Investments Limited (Seagrove) to become first mortgagee in the amount of $1.3 M on 460 Rogers Road, Toronto. After advancing $680,000, Seagrove declined to make further advances. The Seagrove and the Plaintiffs’ mortgages went into default. On December 22, 2000, these plaintiffs commenced proceedings in default of payment of its mortgages.
[4] Brennan J. stated:
[6] On December 29, 2000 Seagrove gave notice to the plaintiffs (and others entitled to such notice) of its intention to exercise its power of sale under its mortgage. The Mortgages Act provides that such a sale cannot be made until the expiry of a period, within which the persons entitled to such notice may redeem the mortgage in which the power of sale arises. That period was to expire on February 5, 2001. No attempt to redeem was made.
[7] On February 2, 2000, before the expiry of the period provided for redemption, Seagrove assigned its mortgage to 1461089 Ontario Ltd. (Paskarco). No notice of that assignment was given to the plaintiffs. In purported exercise of the right of sale in the assigned mortgage Paskarco sold the property to 1455730 Ontario Ltd. (Doobayco), registering the transaction on February 13, 2001. On that day Doobayco also gave a mortgage to Heritage Baypark Ltd. in the amount of $1,300,000. No further notice was given to the plaintiffs, who learned of these transactions only upon searching the title in April 2001. The plaintiffs’ present action, within which these motions rise, seeks a declaration that the sale was a fraudulent conveyance, intended to defeat their interests as creditors and mortgagees, and seeks an order setting aside the transfer and mortgage. The stated consideration for the transfer of title was $795,000. Arrears of taxes amounting to $137,588.67 were also paid, for a total payment by Doobayco in the amount of $932,588.67. The plaintiffs assert that the true value of the property was substantially more, and that they are entitled to the protection of the Mortgages Act, and to share in the proceeds of sales or rentals of the developed units within the subject property.
[8] The defendants take the position, as set out in the affidavit of Lakshman Doobay, that “the plaintiffs have no mortgages against the subject property. Their various mortgages against the subject property were extinguished on February 13, 2001 when 730 (Doobayco) purchased the subject property for valuable consideration - $795,000 (and arrears of taxes) for a total consideration of $932,588.67.”
[5] After reviewing the relevant authorities, Brennan J. said:
[14] I am satisfied that the plaintiffs here have made out a good prima facie case for relief under the Fraudulent Conveyances Act and that there is a sufficient likelihood of success on the ground that the transactions in issue contravene Part III of the Mortgages Act.
Fraudulent Conveyances Act, R.S.O. 1990, c. F.29:
- Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others or their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures, are void as against such persons and their assigns.
Mortgages Act, R.S.O. 1990, c. M.40:
31(1) A mortgagee shall not exercise a power of sale unless a notice of exercising the power of sale in the Form to this Act has been given by the mortgagee to the following persons….
[6] It is uncontested that the notice of sale served by Seagrove pursuant to Form 1 under the Mortgages Act, R.S.O. 1990, c. M.40 does not, as required, make any reference to an assignment to 1461089.
[7] Brennan J. also stated:
[15] Although the assignment of Seagrove’s mortgage (Charge CA655997) to Paskarco is dated February 2, 2001, Seagrove’s solicitor Martin Lloyd Rubinoff made a statutory declaration dated February 5, 2001, referring to Seagrove as the registered owner of the Charge, and setting out that notice of sale had been given to the persons entitled to the notice. Rubinoff’s declaration includes his opinion that the sale complied with the provisions of Part III of the Mortgages Act. If that were so, the apparent purpose of Part III of the Mortgages Act would be frustrated by the mere expedient of assignment without notice to subsequent encumbrancers.
[16] That cannot be so. In Emedi v. McMaster (1982), 25 R.P.R. 41 (Ont. H.C.J.) Trainor J. decided “an assignee of a mortgage cannot rely on power of sale proceedings commenced by the mortgagee prior to assignment where no notice of such assignment has been given, and where it fails to comply with Form 1 in that it fails to provide notice of the assignment. An interim injunction is to be issued restraining the assignee of the mortgage from proceeding under the power of sale…”.
[8] The motions court judge also referred to:
(a) 490352 Ontario Incorporated v. Asaape Financial Corporation Ltd. (1985), 1 C.P.C. (2d) 36, 40 per Callaghan J. and
(b) Lee v. Korea Exchange Bank of Canada (1999), 1999 14800 (ON SC), 44 O.R. (3d) 366 per Cullity J.
[9] It is a condition precedent to the exercise of a power of sale that notice be given in compliance with the Act. When the notice fails to comply with what the statute prescribes, the notice is a nullity.
[10] Brennan J. also concluded that the plaintiffs/respondents had made out a good prima facie case for relief under the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2.
[11] Because the applicants/defendants failed to give notice of the assignment of the Seagrove mortgage, the notice of sale and all transactions purportedly made under the defective notice are a nullity: see: Emedi (supra), Lee (supra), p. 370; Re Comri Lumber Co. et al. (1977), 1977 1348 (ON SC), 15 O.R. (2d) 613, 615 (H.C.J.)
[12] Nor is the defect capable of being cured by s. 36 of the Mortgages Act, supra.
[13] Counsel for the Applicants/Defendants devoted most of his submissions to an attempt to persuade me that the endorsement and the orders of Mr. Justice Brennan were in conflict with the following decisions:
(1) Maletta v. Thiessen (1996), 1996 11765 (ON CA), 28 O.R. (3d) 251 (Div. Ct.)
(2) Lawrence Avenue Group Limited et al. v. Innocan Realty Inc. et al. (1999), 1999 14793 (ON SC), 44 O.R. (3d) 155 per Lax J.
[14] In my view, there is no conflict between Maletta and/or Lawrence Avenue Group and the orders/reasons of Brennan J. Nor do I have any reason to doubt the correctness of the impugned orders. Between and amongst the parties, the matter involves issues of importance. However, to meet the requirements of Rule 62.02(4)(b) the issue or question must be a matter of general or public importance. That does not pertain in this case.
[15] In Rankin v. McLeod, Young, Weir Ltd. et al. (1986), 1986 2749 (ON SC), 57 O.R. (2d) 569, Catzman J. said:
. . . the “importance” comprehended by the rule transcends the interests of the immediate parties to the litigation and contemplates issues of broad significance or general application that are felt to warrant resolution by a higher level of judicial authority. I have earlier indicated my assessment that the issued raised in respect of the orders in question are not of broad importance extending beyond the interests of the parties. It follows that, even on the assumption that there appears good reason to doubt the correctness of the orders in question, the proposed appeal does not involve matters of such importance, within the contemplation of the rule, that leave to appeal should be granted.
[16] The application for leave to appeal is dismissed. If counsel are unable to agree on costs, each counsel may file brief written submissions within ten (10) days of the date of release of these reasons.
O’Driscoll J.
DATE: March 2003