Court File and Parties

COURT FILE NO.: CV-23-00000977-0000 DATE: 2024-06-21 SUPERIOR COURT OF JUSTICE – ONTARIO 491 Steeles Avenue East, Milton ON L9T 1Y6

RE: Resco Mortgage Investment Corp., Plaintiff AND: Sandeep Kaur, Defendant

BEFORE: Justice Kurz

COUNSEL: Derek Ketelaars, counsel for the Plaintiff Tahir Majeed, counsel for the Defendant

HEARD: April 22, 2024, in person

Endorsement

1 The Plaintiff, Resco Mortgage Investment Corporation (“Resco”) moves for summary judgment against the Defendant, Sandeep Kaur (“Mr. Kaur”) on a defaulted mortgage (the “Mortgage”).

2 Resco argues that there is no genuine issue requiring a trial because this is a simple mortgage enforcement matter. Mr. Kaur is in default of payments under the Mortgage and the Mortgage has in any event, matured without payment.

3 Mr. Kaur offers a different narrative. He claims that this action was “commenced … with their malafide intentions to harass [him] and to cause monetary loss”. He asserts that Resco took advantage of him when he renewed his original mortgage. He claims that Resco’s “intentions” at the time of renewal “were to legally entrap [him] into the web of owing it huge monetary sums under the mortgage knowing that [he] was not capable to move out else where”. Mr. Kaur asks that the Mortgage be set aside and that his debt to Resco be determined in accordance with the far more favourable terms of the original mortgage between the parties. While he does not use the term “unconscionable” in his written materials or oral arguments, unconscionability is the essence of his argument.

4 Accordingly, Mr. Kaur argues that there are genuine issues requiring a trial in this action.

5 Resco replies that its conduct was far from predatory or improper. It had previously agreed with Mr. Kaur to a six-month mortgage on his home at a very favourable rate. But by the time of his mortgage renewal, house prices had dropped while interest rates had substantially risen. The amount owed on Mr. Kaur’s original mortgage at the time of renewal was essentially the value of his home. This made a renewed mortgage a very high risk one. Resco offered Mr. Kaur three mortgage finance proposals, including one with the 12-month term he had specifically requested. He ultimately accepted the twelve month proposal. Resco claims that the terms Mr. Kaur accepted even included a slight discount on its typical renewal fee.

6 For the reasons that follow, I find that there is no genuine issue requiring a trial of this action. The evidence provided in this motion demonstrates that the terms of the Mortgage are not unconscionable. Resco did not act in a predatory or improper way towards Mr. Kaur. It did not take advantage of any power imbalance between the parties. It was open and consulted with Mr. Kaur at every step of the way. It ultimately offered mortgage terms, negotiated with Mr. Kaur, which reflected market realities and the risks involved in a changing real estate environment. The terms of the renewed mortgage were not grossly unfair or improvident. Thus, I grant Resco’s motion.

Background

7 Mr. Kaur is the sole registered owner of his home, the property municipally described as 62 Rosedale Avenue West, Brampton (the “Property”). On March 28, 2022, Mr. Kaur granted a six-month mortgage to Resco for $1,000,000 (the “Original Mortgage”). The terms of the Original Mortgage included:

1. 5.99% annual interest rate;
2. Monthly payments of $4,991.67, interest only;
3. Maturity date of October 1, 2022.

8 On August 4, 2022, Mr. Kaur contacted Resco to request a renewal of the Original Mortgage. His request was made almost two months before the First Mortgage matured. Resco responded and negotiated with him in a timely manner.

9 Four days later, on August 8, 2022, Resco’s representative informed Mr. Kaur that it required an updated home appraisal of the current value of the Property because of falling house prices. Resco told him that it was unable to continue to offer the previous 5.9% mortgage rate, which it described as a “discount rate”. Instead, Resco stated that the mortgage it could offer would be in the range of 8.9% annually. But it could only do so if the loan-to-value ratio (“LTV”) on the Property (i.e. mortgage debt vs. property value) was within what it considered to be an appropriate level.

10 Resco was willing to allow Mr. Kaur to obtain his own home appraisal report. He delivered it to Resco on August 16, 2022. The report stated that the value of the Property was $1,025,000, only $25,000 more than the amount of the mortgage debt at the time. Resco accepted Mr. Kaur’s appraisal report.

11 The following day, on August 17, 2022, Resco advised Mr. Kaur that it considered any further mortgage to be “risky” because the LTV was 97.56%. Resco indicated though that it was still willing to work with Mr. Kaur on a mortgage renewal. It offered Mr. Kaur two options:

1. A six-month mortgage at a 9% annual interest rate. Mr. Kaur would be required to provide a $17,500 renewal fee (which represented a further 1.75% in interest, payable in advance). However, there was a caveat to this term: Mr. Kaur would be required to lower the LTV on the Property to 85% by first paying the mortgage debt down by $128,500, to $871,500.
2. A different six-month mortgage for the full $1 million, on an interest only basis. The new interest rate would be 10% with a $25,000 renewal fee (representing a further 2.5% in interest, payable in advance). Further, Mr. Kaur would have to prepay all six months of interest, or $52,000.

12 It is not disputed that in response, Mr. Kaur requested a further option: a one-year mortgage term. The parties had discussed Mr. Kaur’s finances and ability to honour the terms of a renewed mortgage. During these discussions, Mr. Kaur had disclosed that he had savings of $80,000.

13 Resco’s third option involved almost all of that money. Resco offered the following terms (the “Renewal Terms”), which Mr. Kaur accepted:

1. The new maturity date would be October 1, 2023;
2. The annual interest rate would be 10.5%;
3. The monthly payments would be increased from $4,991.67 to $8,750.
4. $2,900 per month (or $34,800) of that $8,750 per month would be paid in advance at closing, reducing the monthly payments to $5,850;
5. Mr. Kaur would pay a renewal fee of $45,000 (or a further 4.5% of the debt, making the effective annual interest rate 15%, paid in advance).

14 On August 25, 2022, six weeks before the Original Mortgage matured, Mr. Kaur accepted the Renewal Terms. He signed the Mortgage and made the requisite advance payments on September 15, 2022. As he points out, he did not obtain independent legal advice before doing so. Nor did he complain about the Renewal Terms or the manner in which Resco dealt with him in negotiating those terms until he filed his statement of defence in this action.

15 Mr. Kaur made the requisite monthly $5,850 payments to Resco until he went into default on February 1, 2023. He has made no payments on the Mortgage since then.

16 The Mortgage matured on October 1, 2023. It has not been paid.

Mr. Kaur’s Arguments

17 Although represented by counsel, Mr. Kaur failed to serve and file a factum for this motion, as required by Rule 20.03(1) and (3) of the Rules of Civil Procedure. Nonetheless, his affidavit raised what he described as the following five “issues” in defence of Resco’s claims:

1. Resco exhibited “ill intentions to extract maximum sum of money as able to from [Mr. Kaur] in the guise of renewal fees, interest costs and levies”;
2. Mr. Kaur signed the Mortgage without the benefit of independent legal advice;
3. Mr. Kaur suffered from “unequal bargaining power” and a power differential;
4. The Renewal terms were an improvident bargain;
5. The Plaintiff engaged in “excessive conduct” against him.

18 Resco responded to and denied each those arguments, as set out below.

Applicable Authorities

Summary Judgment

19 This motion is brought under Rule. 20.01 of the Rules of Civil Procedure. The terms of Rule 20.04(2) are mandatory: “[t]he court shall grant summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence…” [emphasis added]. See also: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 ("Hryniak"), at para. 68 and Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429, 141 O.R. (3d) 81 ("Mega International"), at para. 83.

20 There will be no genuine issue requiring a trial if the summary judgment process allows the court to reach a fair and just determination on the merits on a motion for summary judgment. That will be the case when the process (1) provides the court with the evidence required to fairly and justly adjudicate the dispute by making the necessary findings of fact, (2) allows the judge to apply the law to those facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result (see Hryniak, at paras. 49 and 66).

21 Each party to a motion for summary judgment has an obligation to "...'put its best foot forward' with respect to the existence or non-existence of material issues to be tried" (Ramdial v. Davis (Litigation Guardian of), 2015 ONCA 726, 341 O.A.C. 78, at para. 27, citing Papaschase Indian Band No. 136 v. Canada (A.G.), 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11).

22 The onus for proving that there is no genuine issue requiring a trial rests with the moving party. However in response to the evidence of the moving party, the responding party may not rest on mere allegations or denials in the party's pleadings. That party must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. A self-serving affidavit is not sufficient itself to create a genuine issue requiring a trial in the absence of detailed facts and supporting evidence (see Rule 20.02(2) and Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664, [1999] 3 S.C.R. 423, at para. 31).

23 In the oft-repeated maxim of Justice Coulter Osborne of the Ontario Court of Appeal, the responding party to a motion for summary judgment must "lead trump or risk losing": 106150 Ontario Ltd. v. Ontario Jockey Club, 1995 ONCA 1686, [1995] O.J. No. 132 (Ont. C.A.), at para. 35. The principle was reaffirmed in Ramdial, at para. 28.

24 The court is entitled to assume that the record before it is complete and that it contains all of the evidence that a party would present if there were a trial: Broadgrain Commodities Inc. v. Continental Casualty Company (CNA Canada), 2018 ONCA 438, 80 C.C.L.I. (5th) 23 (“Broadgrain Commodities Inc.”), at para. 7, citing Dawson v. Rexcraft Storage & Warehouse Inc., 1998 ONCA 4831, 111 O.A.C. 201 (C.A.), at para. 17; Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 27, 33-34, aff'd 2014 ONCA 878, leave to appeal to S.C.C. refused, [2015] S.C.C.A. No. 97; and Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, 137 O.R. (3d) 570, at para. 54.

25 Once the moving party discharges the burden of showing that there is no genuine issue for trial, the onus shifts to the responding party. That party must then provide evidence of specific facts showing that there is a genuine issue requiring a trial: Ramdial, at para. 30. An adverse inference may be drawn from a failure to support the allegations or denials in a party's pleadings: Pearson v. Poulin, 2016 ONSC 3707, at para. 40.

26 Under Rule 20.04(2.1) the court may exercise enhanced powers on the motion in order to determine the presence or absence of a genuine issue requiring a trial, unless it is in the interests of justice to do so at trial. Those enhanced powers allow the court to weigh the evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence. As Paciocco J.A. wrote for the Court of Appeal for Ontario at para. 83 of Mega International, those powers "...are presumptively available to a summary judgment motion judge to use to fairly and justly adjudicate a claim at a motion for summary judgment: Hryniak, at para. 45”.

27 Nonetheless, the court is not required to resort to those powers to make up for a party's evidentiary shortcomings (see Broadgrain Commodities Inc., at para. 7).

Section 8 of the Interest Act and Applicable Authorities Regarding Fines, Penalties or Interest on Arrears Under a Mortgage

28 Section 8 of the Interest Act, R.S.C.1985, c. I-15, is legislation that protects mortgagees from certain unfair lending practices. It reads as follows:

8(1) No fine, penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real Properties or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.

(2) Nothing in this section has the effect of prohibiting a contract for the payment of interest on arrears of interest or principal at any rate not greater than the rate payable on principal money not in arrears.

29 In Krayzel Corp. v. Equitable Trust Co., 2016 SCC 18, [2016] 1 S.C.R. 273 ("Krayzel"), at para. 21, Brown J., writing for the majority of the Supreme Court of Canada, explained that the purpose of s. 8(1) is to protect landowners from charges "that would make it impossible for [them] to redeem, or to protect their equity" (adopting Reliant Capital Ltd. v. Silverdale Development Corp., 2006 BCCA 226, 270 D.L.R. (4th) 717, at para. 53, leave to appeal refused).

30 I note that the court in Reliant Capital further explained at para. 53 that “[i]f an owner were already in default of payment under the interest rate charged on monies not in arrears, a still higher rate, or greater charge on the arrears would render foreclosure all but inevitable.”

[31] In Krayzel, Brown J. summarized the effect of s. 8(1) as follows at para. 24:

24 Section 8(1) identifies three classes of charges - a fine, a penalty or a rate of interest - that shall not be "stipulated for, taken, reserved or exacted" if "the effect " of doing so imposes a higher charge on arrears than that imposed on principal money not in arrears. Section 8(2) affirms that subs. (1) does not prohibit a contract from requiring payment of interest on arrears of interest or principal at a rate equivalent to or lower than that payable on principal money not in arrears.

[32] The leading Ontario case on the application of s. 8(1) is P.A.R.C.E.L. Inc. v. Acquaviva, 2015 ONCA 331, 126 O.R. (3d) 108 (“P.A.R.C.E.L.”). There, Cronk J.A., writing for the Court of Appeal for Ontario, explains at para. 51 that:

s. 8(1) creates an exception to the general rule that lenders and borrowers are free to negotiate and agree on any rate of interest on a loan. Section 8 prohibits lenders from levying "fine[s], penalt[ies] or rate[s] of interest" on "any arrears of principal or interest" that are "secured by mortgage on real property”.

[Citation omitted]

[33] At para. 50 of P.A.R.C.E.L., Cronk J.A. cited with approval the comment of the British Columbia Court of Appeal at para. 56 of Reliant Capital, cited above, which was also adopted by the majority in Krayzel, above, that:

s. 8 is intended to “protect property owners against abusive lending practises, while recognizing that generally speaking parties are entitled to freedom of contract”.

[34] At paras. 52-56 of P.A.R.C.E.L., Cronk J.A. lays out four prerequisites for the court's application of s. 8(1) to prohibit a mortgagee from charging certain fees or other amounts to a mortgagor:

1. The covenant in question must impose a "fine", "penalty" or "rate of interest". If it does not, then s. 8(1) is not engaged.
2. The "fine", "penalty" or "rate of interest" must relate to "any arrears of principal or interest secured by mortgage on real property", whether before or after maturity of the relevant debt instrument.
3. "[T]he covenant must also have the prohibited effect of 'increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears'."
4. "[T]he arrears of principal or interest must be 'secured by mortgage on real property'."

[Citations omitted]

[35] The court in P.A.R.C.E.L. placed the onus on the mortgagee claiming the amounts following default to prove that they "reflect real costs legitimately incurred by the mortgagee for the recovery of the debt, in the form of actual administrative costs or otherwise": para. 96.

[36] In the absence of that proof, the court concluded that:

the only reason for the charges was to impose an additional penalty or fine, apart from the interest otherwise payable under the Mortgage, thereby increasing the burden on the appellants beyond the rate of interest agreed upon in the Mortgage. The courts have not hesitated to disallow similar charges on the basis that they offend s. 8 of the Interest Act ...

[37] Thus, while the parties are entitled to agree on the terms of their mortgage, they cannot contract out of the provisions of s. 8(1): Greenpath Capital Partners Inc. v. 1903130 Ontario Ltd., 2022 ONSC 7316, at paras. 81-84.

[38] In BMMB Investments Ltd. v. Naimian, 2020 ONSC 7999, Myers J. differentiated the right of mortgagees to provide an advance estimate of their enforcement costs of a defaulted mortgage and illegal disguised penalties as follows:

36 Case law has consistently held that lenders may lawfully recoup from mortgagors who are in default of their payment obligations the administrative costs incurred by the lenders caused by the defaults. The common law recognizes that for good business reasons such costs can be estimated in advance and fixed in a contract. But fees and charges levied on a mortgage default that are not genuine pre-estimates of costs actually incurred by a lender are penalties that can be void at common law and may violate the statute.

[39] Myers J. added at para. 40 that “[t]he test at common law is whether a fee is a genuine pre-estimate of damages incurred by the lender. The test under s. 8 of the Interest Act is as set out above in P.A.R.C.E.L. Both apply and satisfying either will invalidate a fee.”

Mortgage Unconscionability

[40] As set out in greater detail below, Mr. Kaur essentially argues that the Renewal Terms and the Mortgage are unconscionable and should be set aside. In Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118, at para. 54, the majority of the Supreme Court of Canada described unconscionability as “an equitable doctrine that is used to set aside ‘unfair agreements [that] resulted from an inequality of bargaining power’”. It operates when the traditional freedom of contract assumptions “lose their justificatory authority” and thus “provides relief from improvident contracts”: at para. 59. It is a process by which “courts can avoid the inequitable effects of enforcement without endangering the core values on which freedom of contract is based”: at para. 54. The doctrine of unconscionability is “meant to protect those who are vulnerable in the contracting process from loss or improvidence to that party in the bargain that was made”: at para. 60 [emphasis in original].

[41] In Uber Technologies, the Supreme Court rejected a rigid formula for the determination of whether a transaction is unconscionable. Rather, the court will look to two elements: whether there is an inequality of bargaining power and whether there is a resulting improvident bargain: at paras. 54 and 65.

[42] At para. 58, the Supreme Court of Canada offered examples of circumstances where contracts are not enforced on the basis of unconscionability. In those cases, the flaws in the contracting process challenge the traditional view that parties can protect their own interests. They include:

The elderly person with cognitive impairment who sells assets for a fraction of their value; the ship captain stranded at sea who pays an extortionate price for rescue; the vulnerable couple who signs an improvident mortgage with no understanding of its terms or financial implications — these and similar scenarios bear little resemblance to the operative assumptions on which the classic contract model is constructed.

[Citations omitted]

[43] In Sanders (Litigation Guardian of) v. Jain, 2023 ONSC 195 (“Sanders”), Centa J. granted an injunction against the enforcement of a mortgage against a 78-year-old woman with Alzheimer’s Disease, when there was a strong prima facie case of both unconscionability and fraudulent misrepresentation.

[44] Sanders was cited in the case which Mr. Kaur relies upon; the recent decision of this court in 2439656 Ontario v. Sadana, 2023 ONSC 6881 (“Sadana”). In that case, the court found that a mortgagor was only liable for the principal and original interest rate of a mortgage, prior to its renewal on costlier terms, because the renewal terms were unconscionable. As a result, the court relieved the mortgagor of the obligation to pay a renewal fee, any other fees on default or an increased interest rate.

[45] In finding that the mortgage renewal represented an unconscionable transaction, the court made virtually all of the findings that Mr. Kaur seeks in this this case. In particular, the court found:

1. A significant power differential and an unequal bargaining position between the mortgagee, a private lending corporation and the mortgagor, a private individual of modest means. As the mortgagee was aware, the mortgagor was in “particularly desperate” circumstances at the time of the mortgage renewal. She was already ten days in default of the mortgage and facing legal proceedings. She would have agreed to “almost anything” to save her home after her default.
2. The renewal was an improvident bargain for a variety of reasons. The true cost of the loan was hidden. Taken together with all hidden added fees, the effective annual interest rate on the mortgage was 19.62%, including fees that are forbidden under s. 8 of the Interest Act. The court further found that the renewal fee did not reflect the real costs to the Mortgagee as required under s. 8 of the Interest Act and the applicable caselaw. I will have more to pay about that finding below.
3. Further, and perhaps most egregiously, it was not made clear to the mortgagor that she would be liable for the payment of all twelve months of mortgage payments within one month of renewal, a term that she manifestly could not meet. That put her into an almost immediate default, which, if the mortgagee were successful, would have stripped the mortgagor of her assets.
4. Following the default, the mortgagee failed to comply with certain statutory and regulatory obligations, including issuing its statement of claim prior to its notice of sale, in violation of section 42 of the Mortgages Act, R.S.O. 1990, c. M40.
5. As a result of all of the above, the mortgage renewal agreement was unconscionable and thus unenforceable. Rather, the court enforced the terms of the previous mortgage, with no added fees or penalties.

Issues and Analysis

[46] Based on the authorities set out above, the issues in this case are:

1. Is this case an appropriate one for summary judgment?
2. Are the Renewal Terms and the Mortgage unconscionable?
3. What amount does Mr. Kaur owe to Resco?

Issue No. 1: Is this case an appropriate one for summary judgment?

[47] I find that there is no genuine issue as to whether Mr. Kaur defaulted on the Renewed Mortgage and whether it has matured without payment in full. Both the default and the maturity are conceded. Resco having proven that the basic elements of its claim, the onus shifts to Mr. Kaur to demonstrate a genuine issue requiring a trial regarding the key issue he has raised regarding the validity of the Mortgage. Implicit in that question is Mr. Kaur’s assertion that the Mortgage is unconscionable. The court must determine whether that issue regarding the validity of the Mortgage can be fairly, justly and proportionately determined within the context of this motion.

[48] As set out below, I find that Mr. Kaur has failed to provide evidence of specific facts showing that there is a genuine issue requiring a trial regarding unconscionability or any other reason to find that the Mortgage is invalid. I also find that the issues raised in this proceeding can be fairly, justly and proportionately determined within the context of this motion.

Issue No. 2: Are the terms of the Mortgage unconscionable?

[49] As set out above, the test of unconscionability is a two-part one: whether there was an inequality of bargaining power between the parties and whether the bargain in question was an improvident one. I will deal with each of those sub-issues in order.

Was there an inequality of bargaining power between the parties?

[50] At para. 73 of Sanders, Centa J. summarized the Supreme Court’s definition of the term, inequality of bargaining power, in Uber Technologies, as follows:

73 An inequality of bargaining power exists when one party cannot adequately protect their interests in the contracting process. This may result from a claimant's purely cognitive, deliberative, or informational capabilities that preclude a worthwhile judgment as to what is in the claimant's best interest. These disadvantages need not be so serious as to negate the capacity to enter a technically valid contract. A common example of inequality of bargaining power is where only one party could understand and appreciate the full impact of the contractual terms, creating a type of cognitive asymmetry. This may occur because of personal vulnerability or because of disadvantages specific to the contracting process. Unequal bargaining power can be established even if the legal requirements of contract formation are otherwise met. In such circumstances, weaker parties may be vulnerable to exploitation in the contracting process and courts can provide relief from an improvident bargain: Uber, paras. 66 to 72.

[51] Regarding an inequality of bargaining power, Mr. Kaur’s allegations can be summarized as follows:

1. Resco exhibited “ill intentions to extract maximum sum of money as able to from [Mr. Kaur] in the guise of renewal fees, interest costs and levies”;
2. Mr. Kaur signed the Mortgage without the benefit of independent legal advice;
3. Mr. Kaur suffered from “unequal bargaining power” and a power differential.

[52] I review each of these allegations below.

Resco’s Alleged “Ill Intentions” to Extract the Maximum Amount of Money from Mr. Kaur

Mr. Kaur’s Allegations

[53] In support of his allegations of Resco’s “ill intentions”, Mr. Kaur asserts the following in his affidavit:

1. Mr. Kaur was “in essence forced to accept any terms because the consequences of failing to agree were so dire”;
2. While the Renewal Terms were presented to him as fair ones, Resco’s “intentions were to legally entrap [him] into the web of owing it huge monetary sums under the mortgage knowing that [he] was not capable to move out else where”;
3. The Renewal Agreement was offered after “prodding” and deceiving him to reveal his finances;
4. He was not told how the renewal fees were calculated;
5. Mr. Kaur lacked expertise in English language;
6. Due to the “urgency”, the October 1, 2022 maturity date for the Original Mortgage, he was told that it was best he signed the Renewal Agreement in order to avoid default.

Chronology of the Manner in Which the Renewal Terms were Negotiated

[54] A review of the manner in which the Renewal Terms were negotiated is instructive in determining whether Mr. Kaur has raised a genuine issue regarding their negotiations.

[55] While Mr. Kaur claims that the true costs of borrowing were hidden from him and that he was not told how the Renewal Fee or increased interest rate were calculated, he offers no supporting evidence to back those claims. He says nothing about his verbal conversations with Resco and omits any evidence of his written communications with it. On the other hand, Resco offers the actual email chain which set out Mr. Kaur’s exchanges with Resco. Those emails, described immediately below, strongly support Resco’s contentions.

[56] On August 4, 2022, Mr. Kaur wrote to Resco requesting mortgage renewal forms. Kristy Wu, a Client Relationship Officer of Resco, responded the next day that she was working on renewals and would get back to him the following week.

[57] On August 8, 2022, Ms. Wu sent an email to Mr. Kaur to candidly explain the changed mortgage landscape that would have to apply to any renewed mortgage on the Property. She let him know that the LTV may be too high to support a mortgage and that it would be a “risky” one. The risk she raised was to Resco, regarding nonpayment.

[58] Ms. Wu also let Mr. Kaur know that he could expect an increased mortgage rate, even if the LTV was within Resco’s “range”. She wrote:

We have looked at your mortgage. Since the house value dropped these few months, we will need a full appraisal report up front to confirm the house value.

You may order it yourself from our approved appraiser list or we can help you to order it, but you will need to pay the appraisal fee.

If the value comes back lower and LTV is too high, we will request you to pay down the mortgage to lower the loan amount. The rate and fee will be issued after we have the house value.

Your current rate is 5.99%, which is a discount rate in March and we cannot offer it any more. You may notice there were a few times of rate increases in the past months, so in your case, the rate will start from 8.99% plus the renewal fee if the LTV is within our range.

Kindly please let me know if you need my help to order the appraisal.

Or if you want, you can contact your broker and ask for help as well.

Let me know if you have any questions.

[59] On August 17, 2022, the day after receiving his Property appraisal report, Ms. Wu wrote to Mr. Kaur. Again, she was candid in explaining the increased risks that a renewed mortgage would pose for Resco and the reasons that a renewed mortgage would carry a significantly higher cost to Mr. Kaur. She wrote:

Sorry for the late reply. We have just discussed your file,

Your appraisal value comes at $1,025,000, and the current loan amount is $1,000,000.

To be honest, it is a really risky file for us now. But we would like to help you and work with you. Hope the property value will go up next year.

We have 2 options for you and you may decide which option you would like to proceed:

1. If you can pay down the loan amount to $871,250 (85%LTV based on the appraisal value), we can offer you a 6 month open term at 9% interest rate ($6534.38 per month) with $17,500 of the renewal fee (based on the paydown loan amount).

And you can pay your interest payment by monthly

2. If you really cannot paydown the mortgage, we will keep the same loan amount $1,000,000. However, we will do the 6 month open term with rate at 10.5% and renewal fee $25,000. you will need to prepaid [sic] the 6 month interest payment $52,500 ($8750 per month) and renewal fee

$25,000 before the maturity date. I will provide the deadline of the payment shortly.

Please find out which option you would like to choose and let me know ASAP.

Any questions, please feel free to contact me.

[Emphasis in original]

[60] Here, there is no evidence of undue pressure or an attempt to take advantage of Mr. Kaur. This email was sent to Mr. Kaur about six weeks before the Original Mortgage was due to mature. He still had plenty of time to research and negotiate alternative sources of financing. Further, Resco offered two different options to Mr. Kaur.

[61] A few moments later, Ms. Wu wrote again to Mr. Kaur, explaining the partial payout scenario that was part of its first option. She wrote:

Hi Sandeep,

For the pay down details:

You will need to pay down your loan amount to $871,250 ($1,025,000*85%)

The current loan amount is $1,000,000.

So you will need to provide the paydown amount $128,750 and the paydown admin fee $250 to us in order to get the better interest rate and renewal fee.

[Emphasis in original]

[62] The following day, August 18, 2022, Ms. Wu wrote to Mr. Kaur, asking whether he had decided on his options. She stated that “[s]ince your mortgage is maturing on Oct 01, you will need to let me know your decision by next week. We still need time to prepare the offer and complete the renewal by Sep 15th. Any questions, please let me know.” While Ms. Wu requested a response by the following week, there is no evidence before me which discloses that this request placed undue pressure on Mr. Kaur. At this point, the renewal did not have to be completed for almost a month.

[63] On August 24, 2022, after what clearly were conversations between the parties, Ms. Wu wrote the following email to Mr. Kaur:

Good afternoon,

So after I discussed with my manager, here is the 12 month term offer we can do:

• 12 month term @10.5% with $45,000 renewal fee for the $1M loan amount --- monthly interest payment is $8750

Since you have told us the savings you have currently is $80k, we will need you to prepaid $45,000 renewal fee and $34,800 interest payment.

The prepaid interest payment of $34,800 will spread into 12 months to lower the monthly interest payment. So each month prepaid interest will be $2900.

Therefore, the monthly payment is going to be $5850. ($8750-$2900).

In this way, it lowers your monthly payment and will help you with the cash flow.

And compare to the 6 month term ($25,000 renewal fee), we have lower[ed] our renewal fee for 12 month term by $5000 ( should be $50,000 renewal fee)

Please let me know if you have any questions

[64] Here, Ms. Wu was willing to offer a third option to Mr. Kaur. It was based on the twelve month term that Resco asserts, without contradiction, he requested. Ms. Wu’s email was open about the exact monthly and advance payments required under the third option. She also suggested that the $45,000 renewal fee represented a discount over the $50,000 fee it would have normally charged (i.e. $25,000 for six months times two). Ms. Wu imposed no deadline for Mr. Kaur’s response.

[65] Mr. Kaur responded the following day, August 25, 2022, stating: “I accept your offer. Please prepare any required documents.” This agreement was reached about five weeks before the Original Mortgage was scheduled to mature, meaning that there was still time for Mr. Kaur to consider other options than the three offered by Resco and to seek independent legal advice.

[66] On September 6, 2022, after accepting Resco’s Renewal Terms but before entering into the Mortgage, Mr. Kaur received the following email from Ms. Wu, which again set out the amounts that were required under their agreement:

Hi Sandeep Kaur,

Thanks a lot for the signed offer.

Now we are just waiting for the deposit for renewal fee and prepaid interest by Sep 15th.

Please separate 2 deposits into different accounts.

• bank receipt for deposit of renewal fee $45,000 by Sep 15 • bank receipt for deposit of prepaid interest $34,800 by Sep 15

Please deposit the renewal fee to our Radiance account, void cheque attached. And deposit the Prepaid interest to 5C capital account, void cheque attached.

[67] On September 15, 2022, Ms. Wu wrote to Mr. Kaur, stating that following their discussion, Resco would agree to a slight variation on the interest prepayment terms, such that $20,000 of the $34,800 originally payable by September 15, 2022 could be paid eight days later, by September 23, 2022.

Analysis of Mr. Kaur’s Allegations Regarding Resco’s Ill Intentions in Negotiating the Terms of the Renewal Agreement

[68] Mr. Kaur makes a number of allegations regarding the impropriety of the manner in which Resco negotiated the Renewal Terms. He spoke of being pressured, duped, and kept in the dark by Resco. Yet he fails to say what was said or done to achieve that end, let alone offer proof of that contention.

[69] The correspondence set out above shows that the terms which Mr. Kaur complains of were clearly placed in writing by Ms. Wu, well in advance of the First Mortgage’s maturity. There is no evidence that Mr. Kaur failed to understand them. Nor is there evidence of Resco’s undue pressure upon him.

[70] Mr. Kaur had almost two months to consider his options and search for others. While he was asked to provide an answer to Resco’s first two options, that request was made about six weeks prior to the maturity of the Original Mortgage. When Resco offered the third option the following week, it did not impose a new deadline for response.

[71] It is noteworthy that Mr. Kaur offers no evidence regarding any attempts he made to seek out alternate financing or why he relied on a private lender such as Resco.

[72] The fact that Mr. Kaur provided evidence of his finances to Resco while applying to renew the Original Mortgage is far from proof of mala fides by Resco. It is a normal part of the process of any similar transaction. It was Resco performing its due diligence.

[73] To the extent that Mr. Kaur claims that Resco violated “professional standards” he fails to identify them or the manner in which they were violated.

[74] Mr. Kaur’s allegations of Resco’s improprieties in inducing him to enter into the Mortgage are not credible. While he is required to put his “best foot forward” and not rely on mere allegations and denials, he has failed to do that. Mr. Kaur’s allegations of Resco’s improprieties consist only of broad, unparticularized and uncorroborated allegations. On the other hand, Resco offers the communications described above. They confirm its claims that it was open with Mr. Kaur about its interest rates and fees, as well as the reasons that it charged them. It did not utilize undue pressure on him to agree to the Renewal Terms. It did not violate any professional standards that Mr. Kaur was able to identify. I see no merit to those claims.

Mr. Kaur’s Lack of Independent Legal Advice

[75] Mr. Kaur states that he not only lacked independent legal advice before entering into the Mortgage, he was not “afforded the opportunity to obtain independent legal advice”. As a consequence, he claims not to have understood all of the mortgage’s terms. He claims he lacked expertise in English.

[76] Resco replies that:

1. Mr. Kaur understood the terms being proposed well enough to negotiate them rather than accept either of the two alternatives that Resco initially offered him;
2. His correspondence with Ms. Wu demonstrates no want of understanding of English.
3. The terms offered to Mr. Kaur were clear – they were set out in relatively simple language in his correspondence with Ms. Wu.
4. Mr. Kaur has offered no evidence of how the terms may have been different with independent legal advice.

Analysis

[77] Independent legal advice is not a pre-requisite to the validity of an agreement. Rather, it is one factor that a court can consider in determining whether to enforce a contract: Dougherty v. Dougherty, 2008 ONCA 302, 89 O.R. (3d) 760. It is relevant only to the extent that it ameliorates the inequality of bargaining power experienced by the weaker party: Uber Technologies, at para. 83. Further, where a party could have obtained independent legal advice but chose not to do so, courts will be loathe to set aside the agreement on that ground alone: Dyck v. Boshold, 2009 ONSC 4999, at para. 27, citing Settle-Beyrouty v. Beyrouty, 1996 ONSC 19739, 24 R.F.L. (4th) 318 (Ont. Gen. Div.).

[78] The evidence before me discloses no lack of understanding by Mr. Kaur of the contractual terms between the parties. While any mortgage is a sophisticated legal document, the essential terms were plainly explained to Mr. Kaur before he entered into the Mortgage that is the subject of this action. His evidence does not clarify what terms he would have better understood or would have better negotiated with the benefit of independent legal advice.

[79] Perhaps equally important, while Mr. Kaur claims that Resco did not afford him the opportunity to obtain independent legal advice, he fails to say how it did so. He had the time between receiving Resco’s third proposal and his entering into the Mortgage to obtain legal advice. He fails to explain why he failed to do so.

[80] I add that I cannot ignore the fact that Mr. Kaur’s affidavit for this motion is in English, without reference to having been translated for Mr. Kaur. The affidavit utilizes sophisticated language, such as the terms “clever and dubious intentions”, “legally entrap”, “independent legal advice”, “unequal bargaining power and power differential”, “improvident bargain” and “excessive conduct”.

[81] In sum, the evidence regarding Mr. Kaur’s lack of independent legal advice is not sufficient grounds to raise a genuine issue requiring a trial.

Unequal Bargaining Power Between Mr. Kaur and Resco

[82] Mr. Kaur argues that there was a vast difference in wealth, knowledge and experience between him and Resco. He adds that he was “vulnerable” to its representations at the time of negotiation. He states that those representations were that:

1. “had [he] not agreed, serious consequence would have flown”;
2. He was under “extreme pressure” as he did not wish to lose his home;
3. Resco knew of his “dire straights” and desperation not to lose his home;
4. The renewal was in his best interests and “routine paperwork”.

[83] Resco responds that:

1. While it is more sophisticated regarding mortgages than Mr. Kaur, he was under no specific pressure to accept its renewal proposal;
2. Mr. Kaur fails to say why he was unable to accept the other two renewal proposals, including the one with a six-month term, no paydown of the mortgage debt and a far lower renewal fee;
3. Kaur was able to “extract significant concessions” from Resco during their negotiations. They included a twelve-month term on a “risky”, highly leveraged mortgage when Resco preferred a six-month term and that he pay down some of the principal debt.
4. Mr. Kaur fails to explain why he did not obtain alternate financing or what other financing alternatives were available to him.

Analysis

[84] An inequality of bargaining power is central to a consideration of unconscionability of an agreement. There is no question here that the positions of the parties were unequal. But the same can be said for the majority of mortgages obtained in this country. The financing entity is almost always wealthier than the mortgagor and usually more sophisticated. Lending companies are in the business of lending money while most borrowers are not. Obviously more is required. The stronger power must take advantage of that inequality.

[85] Here, I do not find that Resco took advantage of an inequality of the bargaining power between the parties. I say this for the following reasons:

1. Mr. Kaur approached Resco to renew the mortgage, not vice versa.
2. Not only was he under no compulsion to deal again with Resco, there is no evidence that Resco ever resorted to any attempt at compulsion in its dealings with him.
3. When he began his negotiations with Resco to renew the Original Mortgage, Mr. Kaur had almost two months to arrange his financing, either with Resco or an alternative lending source. He offers no evidence that he attempted to investigate any alternative by Resco or that Resco somehow prevented him from doing so.
4. Far from being taken advantage of because of an inequality of bargaining power, Mr. Kaur was offered three different mortgage options. When he did not agree to the first two, Resco offered the third, whose twelve-month term he desired. He also negotiated a slight change in the advance payment terms. In short, Mr. Kaur was in a position to negotiate with Resco regarding the Renewal Terms.
5. Further, in agreeing to the Renewal Terms, Resco did not require Mr. Kaur to pay down the principal on the Original Mortgage as it had originally suggested in one of its two original renewal proposals. In not holding Mr. Kaur to that requirement, Resco assumed an increased risk of nonpayment of the Mortgage.
6. Recall that included such a term in one of its two original proposals to him.
7. Mr. Kaur has offered no evidence that points to Resco taking advantage of its superior bargaining position or that he was in a position where he was unable to do anything but accept its offer. That differentiates him from, for example, the defendant in Sadana.

[86] Thus, I do not find on the evidence before me that Resco took advantage of an inequality in the parties’ bargaining power when the parties entered into the Mortgage.

Was the Bargain Between the Parties Improvident?

[87] At para. 74 of Sanders, Centa J. summarizes the definition of an improvident bargain found in Uber Technologies, as follows:

74 An improvident bargain is one that unduly advantages the stronger party or unduly disadvantages the more vulnerable party at the time the contract is formed. The terms of the agreement are to be assessed in light of the surrounding circumstances at the time of contract formation including the market price and the position of the parties. The court should consider, for example, if the price of goods or services in the contract departs significantly from the usual market prices: Uber, at paras. 73 to 79.

[88] In support of his claim that the Renewal terms represented an improvident bargain, Mr. Kaur offers the following assertions:

1. The interest rate was raised from 5.99% in the Original Mortgage to 10.5% in the Mortgage;
2. The Renewal Fee was illegal;
3. He believes that “the renewal was a hoax so that [Resco] could artificially inflate its claim…”
4. Resco experienced no added risk in entering into the Mortgage.

[89] Resco denies any improvidence in the terms of the Mortgage. It states that Mr. Kaur has failed to offer any proof of the alleged improvidence of the bargain. It adds that the Renewal Fee represents the consideration for entering into the Mortgage.

Analysis

[90] As set out above, I have found that there is no genuine issue requiring a trial regarding Mr. Kaur’s breach of the Mortgage and its subsequent maturity without payment. That being the case, the onus of proving a genuine issue regarding whether the alleged improvidence of the renewal terms of the Mortgage rests on Mr. Kaur. He has failed to meet that onus. I say that for the following reasons:

1. Resco explained to Mr. Kaur as early as August 8, 2022 that interest rates had risen since the time he entered into the Original Mortgage. Mr. Kaur offers no evidence to the contrary. Nor does he offer any evidence of market interest rates at the time that he entered into the Mortgage. That evidence is necessary to determine that the Mortgage was an improvident bargain.
2. There is no factual dispute that the value of the Property at the time the Original Mortgage was to be renewed was only $25,000 more than the amount of the mortgage debt. Nor is there a dispute that the LTV was at a very high 97.56%.
3. Thus, while Mr. Kaur broadly claims that there was no added risk to Resco in renewing the Original Mortgage, he offers no evidence to corroborate that assertion. On the other hand, the evidence offered by Resco belies that claim. As Ms. Wu pointed out to him on August 17, 2022, after reviewing his appraisal of the Property “[t]o be honest, it is a really risky file for us now.” That assertion is just common sense. Mr. Kaur offers no evidence to the contrary.
4. The fact that that increased risk, together with an increase in mortgage rates meant that the rate of interest of the Mortgage itself would substantially increase again aligns with the proven facts.
5. It was open to Mr. Kaur to find a better interest rate and mortgage terms. He had six weeks to do so. He failed to offer any proof of seeking out those rates or even what those rates would have been at the time. He offers no evidence of comparable interest rates that would have been available at the time of renewal.
6. The renewal fee of $45,000 was undoubtedly a high one. It represented 4.5% of the mortgage debt, paid in advance. But that fact alone does not make it improvident: see for example Richmond v. James, 2008 ONSC 267, 79 R.P.R. (4th) 267 (Ont. S.C.), where Lack J. found that a 5% renewal fee on a mortgage was not unconscionable, albeit under a stricter pre-Uber Technologies test, and Ekstein v. Jones, 2005 ONSC 280, 34 R.P.R. (4th) 280 (Ont. S.C.), where Ferguson J. found that a 5% renewal fee was not unconscionable, using a test similar to that found in Uber Technologies.
7. I recognize that in Sadana, above, the court found that an $11,004 renewal fee was illegal under s. 8(1) of the Interest Act. The court made that finding since the mortgagee failed to prove that the amount of the renewal fee represented the actual costs of renewal. With respect, I must disagree for two reasons. First, s. 8(1) applies only to a “fine, penalty or rate of interest”. Second, that “fine, penalty or rate of interest” must be applied to “arrears” of a mortgage. As Cronk J. pointed out in P.A.R.C.E.L.:

   The "fine", "penalty" or "rate of interest" must relate to "any arrears of principal or interest secured by mortgage on real property", whether before or after maturity of the relevant debt instrument. The Renewal Fee was not a fine, penalty or rate of interest and it was not applied in default of the Mortgage. That being the case, it is not necessary under s. 8(1) to prove that the Renewal Fee represented an actual cost which Resco incurred in renewing the Original Mortgage. High as it was, the renewal fee was a contractual term negotiated between the parties.

[91] Thus, I do not find that the Mortgage is an improvident bargain. The evidence offered by Resco is that the terms of the Renewal Agreement reflected market forces in regard to a rise in interest rates and a fall in the value of the Property since the time of the Original Mortgage. Together, those two factors increased the risk to Resco in continuing to act as Mr. Kaur’s mortgagee. There is no evidence to the contrary.

[92] The uncontested evidence shows that Resco would have preferred to have loaned money under less risky circumstances: a shorter term and a lower LTV. If Mr. Kaur would have agreed to those terms, the costs of borrowing would have been a fair bit lower. Nonetheless, he freely chose the Renewal Terms and entered into the Mortgage.

[93] Mr. Kaur offers nothing but vague, uncorroborated statements to the contrary.

Conclusion Regarding Genuine Issue for Trial Regarding Unconscionability

[94] There is no dispute that Mr. Kaur entered into the Mortgage and fell into arrears of its terms before the Mortgage had matured. The Mortgage remains unpaid. Thus Resco has met its burden in this motion and onus shifts to Mr. Kaur to prove that his defences to this claim raise a genuine issue requiring a trial.

[95] Assuming that he has “led trump” and provided to the court all of the evidence that would be available at trial, Mr. Kaur fails to prove that there is a genuine issue requiring a trial regarding any issue he raises in his defence. He only offers the court the bald and unparticularized claims found in his one affidavit, which is devoid of any exhibits. He offers no other evidence to substantiate his claims. In response to those claims, Resco has offered far more detailed and particularized evidence, which is corroborated by the correspondence between the parties.

[96] I do not find that the facts of this case are sufficiently similar to those of the Sadana case to follow its precedent in finding the Mortgage unconscionable. Among the differences were the timing of the entry into the Mortgage, the increased risk that Resco accepted in agreeing to the Renewal Terms and the increase in interest rates between the time of the Original Mortgage and the Mortgage. Further, I do not agree with Sadana’s finding regarding the applicability of s. 8 of the Interest Act to a mortgage renewal fee.

[97] Thus, I find that the Mortgage is enforceable at this summary judgment stage, without the requirement of a trial. That finding does not mean that Resco is entitled to all of the fees and penalties it seeks in this action, as I consider them below.

Issue No. 3: What amount does Mr. Kaur owe to Resco?

[98] At the stage of determining damages, the requisite analysis under s. 8 of the Interest Act comes into play. The onus rests on Resco to prove its damages.

[99] Resco claims the following “charges” under the Mortgage:

1. A non-sufficient funds fee of $250.00 for each and every cheque which is not honoured;
2. A late payment fee of $250.00 for each and every late payment;
3. A “Demand Letter Fee” of $2,500.00 for responding to a default, and preparing and sending a demand letter after a default; and
4. A “Default Proceedings Fee” of $2,500.00 for preparing the file for external counsel, instructing external counsel and such other agents as it the Plaintiff may retain, and for the purposes of enforcing its enforcing the mortgagee’s rights.

[100] Resco offers no proof that it incurred any of the expenses that it claims above. Rather, it claims that they are genuine pre-estimates of costs it actually incurred per BMMB Investments Ltd. v. Naimian, above. However it offers no evidence that it incurred any of the expenses set out above. While it claims that the Mortgage went into default on February 1, 2022, it offers no proof of any NSF cheques. I can only accept that it is entitled to a late payment fee for February 1 and March 1, 2022, for a total of $500, before it issued its statement of claim on March 30, 2022.

[101] That being said, I have no evidence that Resco engaged in any of the other services for which it claims payment. The late payment and NSF cheque fees appear to be the mirror image of each other and cover the same cost to Resco. I have been offered no evidence of why they should be granted simultaneously. There is no evidence that a demand letter was ever sent to Mr. Kaur. In fact, the statement of claim was issued before the notice of sale. Regarding the default proceedings fee, in the absence of any evidence, I have to see that as something covered by the costs payable in this motion and action.

Note about the Fact that the Statement of Claim was Issued Prior to the Notice of Sale

[102] The fact that the statement of claim was issued prior to the notice of sale was raised for the first time during the course of oral argument before me. It was not pleaded in Mr. Kaur’s statement of defence or motion materials.

[103] Under the Mortgages Act, R.S.O 1990, c. M-4, a notice of sale is required to be served before a power of sale is exercised. Section 31(1) states:

31 (1) A mortgagee shall not exercise a power of sale unless a notice of exercising the power of sale in the form prescribed by the regulations made under this Act has been given by the mortgagee to the following persons, other than the persons having an interest in the mortgaged property prior to that of the mortgagee and any other persons subject to whose rights the mortgagee proposes to sell the mortgaged property:

1. Where the mortgaged property is registered under the Land Titles Act, to every person appearing by the parcel register and by the index of executions to have an interest in the mortgaged property.

[104] Section 42 of the Mortgages Act states:

42 (1) Where, pursuant to any condition or proviso contained in a mortgage, there has been made or given a demand or notice either requiring payment of the money secured by the mortgage, or any part thereof, or declaring an intention to proceed under and exercise the power of sale therein contained, no further proceeding and no action either to enforce the mortgage, or with respect to any clause, covenant or provision therein contained, or to the mortgaged property or any part thereof, shall, until after the lapse of the time at or after which, according to such demand or notice, payment of the money is to be made or the power of sale is to be exercised or proceeded under, be commenced or taken until an order permitting the same has been obtained from a judge of the Superior Court of Justice.

[105] In Sadana, the court quoted McKenna Estate v Marshall, 2005 ONSC 37001. There, Sproat J. found at para. 11 that the purpose of s. 42 of the Mortgages Act is to provide the "mortgagor in default with breathing space and an opportunity to correct the default without having the additional concern or requirement to retain counsel and prepare a Statement of Defence".

[106] As I understand it, the combined effect of those two provisions does not say that a statement of claim cannot be issued before the notice period has expired. But it does prohibit the enforcement of a judgment for possession of a property until after the “breathing space” required by s. 42 of the Mortgages Act has expired.

[107] The concern about the relative timing of the notice of sale and the statement of claim was discussed by Reid J. in New Haven Mortgage Corp. v. Codina, 2022 ONSC 7036. There, a statement of claim was issued during the notice of sale notice period. Reid J. wrote at para. 36:

36 Finally, as to compliance with the Act, the defendants submit that the statement of claim herein was issued prior to the service of the notice of sale contrary to the provisions of ss. 31 and 42 of the Act. Accepting for the moment that issuing (rather than serving) a statement of claim was a further proceeding or action to enforce the charge and that the scheme of ss. 31 and 42 the Act are designed to give the chargor an opportunity to redeem without having to deal with simultaneous legal proceedings, the defendants do not appear to have been prejudiced in any way. Only when the statement of claim was served did it come to the attention of the defendants. At most, the issuing of the statement of claim prior to the expiry of the notice period under the notice of sale was a technical problem, which the Act allows to be addressed in s. 42 by a court order. I am prepared under these circumstances to make an order nunc pro tunc permitting the statement of claim to be issued in advance of expiry of the notice period under the notice of sale.

[108] A similar result occurred in Sadana, although in that case, the mortgagee requested the order, nunc pro tunc. But the circumstances in Sadana were also far more egregious than those here. In Sadana, the statement of claim was issued in a manner that was intended to place maximum pressure on the mortgagee. There is no evidence that that is the case here. Further, the issue was not pleaded as a defence here.

[109] If, as Sproat J. wrote, above, the combined effect of the two provisions is that the mortgagor is offered breathing space to correct the mortgage default without the necessity of defending an action by the mortgagee, the service of a statement of claim before service of a notice of default defeats the statute’s intention.

[110] Unless an extension is granted, the mortgagor/defendant has only 20 days after service of a statement of claim to defend an action. Here, the statement of claim was issued on March 30, 2023 and personally served on April 3, 2023. That timing allowed Mr. Kaur until April 23, 2023 to serve and file his statement of defence. However, the notice of sale in this matter was issued on April 5, 2023, two days after the service of the statement of defence. It gave Mr. Kaur 37 days, to May 12, 2023, to correct his default. Thus, Mr. Kaur was required to defend this action before he was required to correct his default. While technically not forbidden, the timing of service of the statement of claim relative to service of the notice of sale offered the mortgagee, Mr. Kaur, far from the breathing space to which Sproat J. alluded.

[111] I am informed that the process of serving a statement of claim before a notice of sale is an unexceptional one. This practice was referred to as “common” at para. 32 of Sadana. It appears to be a case of “better to ask for forgiveness than permission”. That should not be standard procedure in mortgage enforcement. As Sproat J, stated, there is a very good reason for the breathing space that the statute affords the mortgagor. It should not be common practice to grant forgiveness when the statute is not followed.

[112] But here, Mr. Kaur has already moved out of the Property many months ago. He is not asking to be returned there. He has not offered any proof that he may have been able to place the mortgage in good standing during the statutory “breathing” period. Had there been such evidence, the result may have been different. Thus, I cannot point to any evidence of damages caused by the breach of the statute. Nonetheless, I believe that my costs award should reflect the court’s disapprobation of this practice as exercised in this case.

Conclusion

[113] In conclusion:

1. Resco is granted leave nunc pro tunc to serve the Notice of Sale prior to the Statement of Claim.
2. Resco is granted an order for Possession of the Property.
3. Mr. Kaur will pay to Resco: i. Principal on the mortgage of $1,000,000; ii. Prejudgment interest of 10.5% per annum from February 1, 2022 to the date of judgment; iii. Postjudgment interest of 10.5% per annum.

[114] Regarding costs, the parties agreed that the winner of this motion is entitled to $15,000. Had they not agreed to that figure, I would have significantly reduced the costs award.

Kurz J.

Released: June 21, 2024