McVan General Contracting Ltd. v. Arthur et al. [Indexed as: McVan General Contracting Ltd. v. Arthur]

61 O.R. (3d) 240

[2002] O.J. No. 3336

Docket No. C36831

Court of Appeal for Ontario,

Sharpe, Cronk and Gillese JJ.A.

September 4, 2002

Limitations -- Mortgages -- Action for payment and possession and power of sale proceedings subject to a ten-year limitation period -- Limitations Act evidenced an intention to establish uniform ten-year limitation period for remedies under charges or mortgages -- Land Registration Reform Act, 1984, S.O. 1984, c. 34 -- Limitations Act, R.S.O. 1990, c. L.15.

Mortgages -- Limitations -- Action for payment and possession and power of sale proceedings subject to a ten-year limitation period -- Limitations Act evidenced an intention to establish uniform ten-year limitation period for remedies under charges or mortgages -- Land Registration Reform Act, 1984, S.O. 1984, c. 34 -- Limitations Act, R.S.O. 1990, c. L.15.

In 1989, McVan General Contracting Ltd. ("McVan") lent $10,000 to Arko and Gladys Arthur. The loan was secured by a charge on the Arthurs' condominium residence. The charge, which was registered on November 15, 1989, was prepared in accordance with Form 2 of the Land Registration Reform Act ("LRRA") and it contained the LRRA's standard charge terms and an acceleration provision. The Arthurs made the monthly interest payments until November 15, 1990, but no payments were made thereafter. On January 22, 1991, McVan, by letter, offered to renew the mortgage for a one-year term, but there was a dispute later between McVan and the Arthurs about whether the mortgage had been renewed. In any event, for the next ten years, McVan did not communicate with the Arthurs or enforce its security.

Then, in March 2001, McVan commenced power of sale proceedings and, in April, it issued a statement of claim against the Arthurs seeking possession and payment plus interest and legal costs. Pursuant to a motion under Rule 21 of the [page241] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Croll J. held that the power of sale was barred by ss. 4 and 15 of the Limitations Act, the action for possession was barred by s. 15 and the action for payment was barred by s. 45(1)(k). By order dated July 17, 2001, she enjoined McVan from continuing with the power of sale, discharged the charge and directed that it be deleted from the title to the condominium. McVan appealed.

Held, the appeal should be dismissed.

Concerning the action for possession, Croll J. was correct in holding that the Arthurs' first default in payment in 1990 afforded McVan a right to take possession and to bring action to recover the land. Since McVan failed to commence action within ten years as required by s. 4 of the Act, its right to possession was extinguished under s. 15 of the Act. Sections 4 and 15 of the Act applied to the claim for possession and, notwithstanding McVan's argument on the appeal, these sections were not displaced by s. 45(1)(b). The 20-year limitation period established by s. 45(1)(b) for a "specialty" does not apply to a claim for possession. A charge is a specialty because under s. 13(1) of the LRRA, a document transferring an interest in land has the same effect for all purposes as if executed under seal. However, a charge fell within the exception contained in s. 45(1)(b) for "a covenant contained in an indenture of mortgage made on or after the 1st day of July, 1894". McVan's argument that because the Limitations Act was not amended after the introduction of the LRRA, s. 45(1)(b) refers only to pre-1984 mortgages registered under the Registry Act and should be rejected. When viewed as a whole, the Limitations Act evidenced an intention to establish a uniform ten-year limitation period for remedies under charges or mortgages. After 1984 and for the purposes of rights and remedies, no distinction is to be drawn between actions on the covenant in mortgages under the Registry Act. Drawing the distinction would be contrary to s. 6(3) of the LRRA which provides that a chargee is entitled to all legal and equitable rights and remedies that would be available to them if the chargor had transferred to the chargee by way of mortgage, subject to a proviso of redemption.

Turning to the power of sale proceeding, Croll J. was correct in concluding that the power of sale was barred by ss. 4 and 15 of the Act. In the immediate case, the mortgage contained a term that required a period of default before there was an entitlement to commence power of sale proceedings. McVan's entitlement to exercise the power of sale had accrued by at least January 15, 1991, two months after the Arthurs' default. McVan's power of sale proceeding was an attempt to recover land that was prohibited under s. 4 of the Act after the expiry of ten years from the time when the right to make such an attempt accrued. The power of sale proceeding was therefore barred, and the court had the jurisdiction to order the charge discharged and removed from the title to the property. Accordingly, the appeal should be dismissed.

APPEAL of a judgment ordering a charge discharged.

Cases referred to 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 535 (ON CA), [1972] 2 O.R. 280, 25 D.L.R. (3d) 386 (C.A.); 872899 Ontario Inc. v. Iacovoni (1998), 1998 7129 (ON CA), 40 O.R. (3d) 715, 163 D.L.R. (4th) 263, 19 R.P.R. (3d) 8, 20 C.P.C. (4th) 1 (C.A.) [Leave to appeal to S.C.C. refused (1999), 236 N.R. 199n], affg (1997), 33 O.R. (3d) 561, 147 D.L.R. (4th) 333, 32 B.L.R. (2d) 28, 9 C.P.C. (4th) 336 (Gen. Div.); Andre v. Valade, 1944 77 (ON CA), [1944] O.R. 257, [1944] 2 D.L.R. 454 (C.A.); Ball v. Donais (1993), 1993 8613 (ON CA), 13 O.R. (3d) 322, 45 M.V.R. (2d) 319 (C.A.); Behmanesh v. Kaplan (2000), 31 R.P.R. (3d) 48 (Ont. S.C.J.); Cook v. Ip (1985), 1985 163 (ON CA), 52 O.R. (2d) 289, 22 D.L.R. (4th) 1, 5 C.P.C. (2d) 81 (C.A.) [Leave to appeal to the S.C.C. dismissed (1986), 55 O.R. (2d) 288n]; [page242] Friedmann Equity Developments Inc. v. Final Note Ltd., 2000 SCC 34, [2000] 1 S.C.R. 842, 48 O.R. (3d) 800n, 188 D.L.R. (4th) 269, 255 N.R. 80, 34 R.P.R. (3d) 159, 7 B.L.R. (3d) 153; Hallman v. Shantz, 1928 5 (SCC), [1928] S.C.R. 213, [1928] 2 D.L.R. 705 (sub nom Modern Realty Co. v. Shantz); King v. Flanigan, 1944 101 (ON CA), [1944] O.R. 537, [1944] 4 D.L.R. 674 (C.A.),affg 1944 328 (ON SC), [1944] O.R. 538, [1944] O.W.N. 105, [1944] 1 D.L.R. 685 (H.C.J.), additional reasons at 1944 330 (ON SC), [1944] O.W.N. 409, [1944] 3 D.L.R. 143 (H.C.J.); Martin v. Youngson (1924), 55 O.L.R. 658 (C.A.); North American Life Assurance Co. v. Johnson, 1940 69 (ON CA), [1940] O.R. 522, [1940] 4 D.L.R. 496 (C.A.); Scott and Pickell (Re) (1984), 1984 1971 (ON CA), 45 O.R. (2d) 158, 1 O.A.C. 327, 6 D.L.R. (4th) 172, 31 R.P.R. 1 (C.A.), revg (1983), 1983 1656 (ON SC), 41 O.R. (2d) 182, 145 D.L.R. (3d) 484, 27 R.P.R. 234 (H.C.J.) (sub nom. Scott v. Pickell and Pierce Investments, Ltd.) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 11 Land Registration Reform Act, 1984, S.O. 1984, c. 32 Land Registration Reform Act, R.S.O. 1990, c. L.4, ss. 1 "charge", 6, 13(1) Land Titles Act, R.S.O. 1980, c. 230 Land Titles Act, R.S.O. 1990, c. L.5 Limitations Act, R.S.O. 1914, c. 75, ss. 5, 24 Limitations Act, R.S.O. 1990, c. L.15, ss. 4, 15, 19, 23, 45(1) (b), (k) Registry Act, R.S.O. 1980, c. 445 Registry Act, R.S.O. 1990, c. R.20 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 21 Authorities referred to Rayner, W.B., and R.H. McLaren, Falconbridge on Mortgages, 4th ed. (Agincourt, Ont.: Canada Law Book, 1977) Dukelow, D., Guide to Ontario and Federal Limitation Periods (Toronto: Carswell, 1998)

Martin G. Banach, for appellant. Frank C. Carlone, for respondents.

The judgment of the court was delivered by

[1] CRONK J.A.: -- This appeal concerns the limitation periods applicable to a chargee's rights to sue for possession and to seek payment on the covenant under a charge on residential property, and to sell the charged land under power of sale, following default by the chargor in payment of principal and interest.

[2] In 1989, McVan General Contracting Ltd. lent $10,000 to Isaac Arko Arthur and Gladys Arthur, secured by a one-year term charge on the Arthurs' condominium residence. The charge provided for monthly interest payments only, which were made by the Arthurs for one year. No further payments of any kind were made thereafter. McVan claims that in 1991 the charge was [page243] renewed for an additional year. The Arthurs deny the alleged renewal. Approximately ten years later, McVan initiated a power of sale proceeding and sued for possession of the land and recovery of the debt due on the charge.

[3] On a motion to determine a question of law, Croll J. held that McVan's claims were barred by the Limitations Act, R.S.O. 1990, c. L.15 (the "Limitations Act" or "Act"). She discharged the charge and directed that it be deleted from title to the property. McVan appeals that decision. I agree that McVan's claims are statute-barred and that the charge should be discharged. Accordingly, for the reasons that follow, I would dismiss the appeal.

I. FACTS

[4] The original charge in favour of McVan was granted on November 10, 1989. It was described as a "charge/mortgage of land" prepared in accordance with Form 2 of the Land Registration Reform Act, 1984, S.O. 1984, c. 32 (now R.S.O. 1990, c. L.4) (the "LRRA"), and incorporated a set of standard charge terms authorized by the LRRA. The charge was registered in the Land Titles Division of the Regional Municipality of Peel on November 15, 1989. It provided for interest payments payable on the 15th day of each month and for repayment of the principal on November 15, 1990. The Arthurs agreed under the charge to pay McVan the principal and interest secured thereunder, when due.

[5] The Arthurs made the required monthly interest payments until November 15, 1990. No payments on account of interest or principal were made thereafter.

[6] On January 22, 1991, McVan sent a letter to the Arthurs offering to renew the "mortgage" for a further term of one year, on the original terms, on condition that the Arthurs pay a renewal fee and two months past due interest, and provide McVan with post-dated cheques to November 15, 1991 and a signed copy of the letter. The Arthurs signed and returned the letter to McVan but did not comply with any of the other renewal conditions. McVan contends, and the Arthurs dispute, that the charge was thereby renewed for a further term of one year, until November 15, 1991.

[7] For the next ten years, McVan made no effort to communicate with the Arthurs, or to enforce its security.

[8] The charge contained an acceleration clause permitting McVan, at its option, to accelerate repayment of the principal amount secured by the charge upon default by the Arthurs in payment of interest. McVan did not exercise that option.

[9] The charge also provided that, upon default of payment for at least 15 days, the chargee could enter on and lease the land or [page244] sell the land upon at least 35 days' written notice to the chargor. If default in payment continued for two months, no notice was required by the chargee as a condition of exercising such powers.

[10] On March 12, 2001, McVan issued a "notice of sale under mortgage". The notice referred to default under a "mortgage" dated November 10, 1989.

[11] On April 26, 2001, McVan issued a statement of claim against the Arthurs, seeking possession of the charged property and payment of the moneys said to be owing under the charge, plus interest and legal costs.

[12] A subsequent motion by the Arthurs for summary judgment was adjourned and a motion under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 was argued to determine whether McVan's claims, including its power of sale proceeding, were statute-barred by operation of the Limitations Act. The motions judge held that the action for possession of the property was barred by s. 15, the action for payment on the covenant was barred by s. 45(1)(k), and the power of sale proceeding was barred by ss. 4 and 15 of the Act. By order dated July 17, 2001, the motions judge enjoined McVan from continuing with the power of sale proceeding, discharged the charge and directed that it be deleted from title.

II. ISSUES

[13] This appeal raises two issues: (i) whether McVan's claims for possession of the lands, for payment on the covenant of the moneys due under the charge and for power of sale are barred by the Act; and (ii) whether the motions judge erred in discharging the charge and directing that it be deleted from title to the Arthurs' property.

III. ANALYSIS

[14] Several provisions of the LRRA and the Limitations Act are relevant to this appeal:

A. The [LRRA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-l4/latest/rso-1990-c-l4.html)

1. In this Part"charge" means a charge on land given for the purposes of securing the payment of a debt or the performance of an obligation, and includes a charge under the Land Titles Act and a mortgage, but does not include a rent charge;

(1) A charge does not operate as a transfer of the legal estate in the land to the chargee. [page245]

(2) A charge ceases to operate when the money and interest secured by the charge are paid, or the obligations whose performance is secured by the charge are performed, in the manner provided by the charge.

(3) Despite subsection (1), a chargor and chargee are entitled to all the legal and equitable rights and remedies that would be available to them if the chargor had transferred the land to the chargee by way of mortgage, subject to a proviso for redemption.

13(1) Despite any statute or rule of law, a transfer or other document transferring an interest in land, a charge or discharge need not be executed under seal by any person, and such a document that is not executed under seal has the same effect for all purposes as if executed under seal.

B. The Limitations Act

4. No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

5. At the determination of the period limited by this Act to any person for making an entry or distress or bringing any action, the right and title of such person to the land or rent, for the recovery whereof such entry, distress or action, respectively, might have been made or brought within such period, is extinguished.

23(1) No action shall be brought to recover out of any land or rent any sum of money secured by any mortgage or lien, or otherwise charged upon or payable out of the land or rent, or to recover any legacy, whether it is or is not charged upon land, but within ten years next after a present right to receive it accrued to some person capable of giving a discharge for, or release of it, unless in the meantime some part of the principal money or some interest thereon has been paid, or some acknowledgement in writing of the right thereto signed by the person by whom it is payable, or the person's agent, has been given to the person entitled thereto or that person's agent, and in such case no action shall be brought but within ten years after the payment or acknowledgement, or the last of the payments or acknowledgements if more than one, was made or given.

45(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned,

(b) an action upon a bond, or other specialty, except upon a covenant contained in an indenture of mortgage made on or after the 1st day of July, 1894; [page246]

within twenty years after the cause of action arose.

(k) an action upon a covenant contained in an indenture of mortgage or any other instrument made on or after the 1st day of July, 1894, to repay the whole or part of any money secured by a mortgage, within ten years after the cause of action arose or within ten years after the date upon which the person liable on the covenant conveyed or transferred the person's interest in the mortgaged lands, whichever is later in point in time.

(1) Whether McVan's Claims Are Statute-Barred

(a) Action for possession

[15] McVan makes three arguments in support of its action for possession. First, although McVan acknowledges that s. 4 of the Act provides a ten-year limitation period from the time the cause of action arose to bring an action to recover land, it asserts that its cause of action under s. 4 arose ten years after the principal became due under the charge because it did not exercise its acceleration option. McVan contends that the principal became due on November 15, 1991 because the Arthurs renewed the charge for a further term of one year. Therefore, McVan argues that its action for possession was commenced within the applicable ten-year limitation period.

[16] Second, McVan asserts that the charge is a specialty contract within the meaning of s. 45(1)(b) of the Act, such that a 20-year limitation period applies from the time the cause of action arose. If that argument is accepted, McVan's claim for possession was advanced within the applicable limitation period.

[17] Finally, McVan submits that the ten-year limitation period established by s. 23 of the Act has no application to its claim for possession, because it relates only to actions brought to recover money.

[18] On the record before this court, it is unclear whether McVan argued on the Rule 21 motion that s. 45(1)(b) of the Act applies to its claim for possession, as distinct from its claims for payment on the covenant and for power of sale. The motions judge's decision that McVan's action for possession was statute-barred was based on ss. 4 and 15 of the Act. She concluded that the Arthurs' first default in payment of interest in 1990 afforded McVan a right to take possession and to bring an action to recover the land. As McVan failed to commence its action for possession within ten years of that date, as required by s. 4 of the Act, its right to possession of the land was extinguished under s. 15 of the Act. I agree. [page247]

[19] This court determined in King v. Flanigan, 1944 101 (ON CA), [1944] O.R. 537, [1944] 4 D.L.R. 674(C.A.) and Andre v. Valade, 1944 77 (ON CA), [1944] O.R. 257, [1944] 2 D.L.R. 454 (C.A.), that a mortgagee's right to claim possession of mortgaged land accrues upon the first default in payment of interest and that the ten-year limitation period established by s. 4 of the Act runs from that time. In this case, that event of default occurred, at the latest, by December 15, 1990. McVan's claim for possession was not advanced until April 2001. Accordingly, McVan's action for possession is statute-barred by s. 4 of the Act and its right to seek possession of the land is extinguished by operation of s. 15 of the Act. Sections 4 and 15 of the Act apply in this case unless displaced by s. 45(1)(b), as urged by McVan.

[20] McVan relies on the decision of this court in North American Life Assurance Co. v. Johnson, 1940 69 (ON CA), [1940] O.R. 522, [1940] 4 D.L.R. 496 (C.A.) in support of its contention that a cause of action for possession of the land arises when the principal first became due under the charge. In my view, that case does not assist McVan. As Gillanders J.A. observed in Andre v. Valade, at p. 262 O.R., the issue in North American Life Assurance was whether the original mortgagor, the assignor of the equity of redemption in mortgaged lands, had lost the right to compel the assignee of the equity of redemption to pay the mortgage debt. It did not involve, or determine, the right of the original mortgagees to enforce their remedies under the mortgage.

[21] While I agree with McVan that s. 23 of the Act has no application to a claim for possession, as distinct from a claim for recovery of money, that is not determinative of whether McVan is entitled to now seek possession of the Arthurs' land. That question turns on consideration of McVan's remaining argument, that the 20-year limitation period established by s. 45(1)(b) of the Act applies to its claim for possession. For the reasons that follow, in my consideration of whether McVan's action on the covenant is statute-barred, I would reject that argument. Accordingly, as held by the motions judge, McVan's claim for possession is barred by ss. 4 and 15 of the Act.

(b) Action on the covenant

[22] Section 45(1)(b) of the Limitations Act provides that an action on a "speciality" may be commenced within 20 years after the cause of action arose, except in connection with "a covenant contained in an indenture of mortgage made on or after the 1st day of July, 1894". Accordingly, if the charge here is a "speciality", a 20-year limitation period applies unless the charge fits within the exception established by s. 45(1)(b). If the exception [page248] applies, the applicable limitation period is ten years, as provided by s. 45(1)(k). In that event, as the first interest payment default occurred here, at the latest, by December 1990, the ten-year limitation period under s. 45(1)(k) expired in December 2000, regardless of any renewal of the charge.

[23] Traditionally, a speciality contract was regarded as a contract under seal, or a deed. It was said to be a "formal" contract, in the sense that it derived its validity from the form in which it was expressed, it bore the seal of the signatory and it required no consideration: Black's Law Dictionary, 7th ed. (St. Paul, Minn.: West Group, 1999). The modern view suggests that both the nature of the claim and the formalities of execution of the contract giving rise to the claim will determine whether an action is a proceeding on a "speciality": 872899 Ontario Inc. v. Iacovoni (1998), 1998 7129 (ON CA), 40 O.R. (3d) 715, 163 D.L.R. (4th) 263 (C.A.).

[24] Under s. 13(1) of the LRRA, a document transferring an interest in land or a charge, when not executed under seal, has the same effect for all purposes as if executed under seal. The effect of s. 13(1) is to deem executed conveyances of land, transfers and charges to be speciality contracts: Friedmann Equity Developments Inc. v. Final Note Ltd., 2000 SCC 34, [2000] 1 S.C.R. 842, 188 D.L.R. (4th) 269. I conclude that the charge in this case is a "speciality". It is a contract under seal, whereby the Arthurs undertook an obligation to repay the debt secured by the charge. McVan's action on the covenant is an action on that obligation. It follows that s. 45(1)(b) of the Act applies, unless the charge falls within the exception to the 20-year rule established under that section.

[25] Section 1 of the LRRA defines the word "charge" as including a mortgage and a charge under the Land Titles Act, R.S.O. 1980, c. 230 (now R.S.O 1990, c. L.5). In this case, the terms of the charge provide that the word "charge" has the same meaning as established by s. 1 of the LRRA. Notwithstanding the broad definition of "charge" under the LRRA, s. 6(1) of the LRRA provides that a "charge" does not operate to transfer the legal estate in the land to the chargee. Under the Land Titles Act, a charge does not convey the legal estate in land, whereas a mortgage under the Registry Act, R.S.O. 1980, c. 445 (now R.S.O. 1990, c. R.20) operates to transfer the legal estate in the land to the mortgagee. Section 6(3) of the LRRA, however, contains an important qualification on the rule established by s. 6(1):

6(3) Despite subsection (1), a chargor and chargee are entitled to all the legal and equitable rights and remedies that would be available to them if the chargor had transferred the land to the chargee by way of mortgage, subject to a proviso for redemption. [page249]

[26] McVan argues that the Act distinguishes between mortgages registered under the Registry Act prior to the introduction of the LRRA in 1984, and other mortgages or charges. As the Limitations Act was not amended upon introduction of the LRRA to delete references to an "indenture of mortgage", McVan submits that that phrase, as it appears in the exception under s. 45(1)(b), refers only to pre-1984 mortgages under the Registry Act. Similarly, McVan contends that the rights and remedies referenced in s. 6(3) of the LRRA are confined to those rights and remedies applicable to a pre- 1984 mortgage under the Registry Act. Those submissions, if accepted, would exclude the charge here from the application of the exception in s. 45(1)(b) and from the limitation period under s. 45(1)(k) of the Act. I would reject McVan's submissions, for several reasons.

[27] McVan relies on the following passage from W.B. Rayner and R.H. McLaren, Falconbridge on Mortgages, 4th ed. (Agincourt, Ont.: Canada Law Book, 1977) at pp. 570-71 to assert that s. 45(1)(b) of the Act applies to actions on a covenant:

In Ontario, however, the view taken by the courts, and confirmed by the Legislature, is that the personal remedy on the covenant for payment comes within the provision relating to bonds or other specialities, and that the provision relating to an action to recover money secured by the mortgage applies only so far as it is sought to recover the money out of the land. On this view it is clear that the six- year limitation as to the recovery of arrears of interest relates only to an action to recover money out of the land. Thus, it has been held in Ontario, in the case of mortgages made before the 1st day of July, 1894, that the action on the covenant for payment is not barred until after twenty years though the right to resort to the land may have been already barred, and similarly that in an action on the covenant arrears of interest up to twenty years may be recovered, although only six years' arrears may be recovered out of the land. It follows that in the case of mortgages made on or after the 1st day of July, 1894, a personal judgment on the covenant may be recovered for ten years' arrears of interest, although only six years' arrears may be recovered out of the land.

[28] In my view, the quoted statement from Falconbridge is not directed at the distinction between ss. 45(1)(b) and 45(1) (k) of the Act. Rather, it addresses the distinction between a personal action on the covenant, which is governed by s. 45 of the Act, and an action to recover money out of land, which is governed by s. 23 of the Act. That interpretation is supported by footnote 27 at p. 570 of Falconbridge, which first refers to an amendment to s. 23 made in 1887 and then states: "[s]o when the period of limitation for an action on a covenant in a mortgage was reduced from 20 to 10 years, the change was effected by the amendment of s. 45 . . .".

[29] The intended meaning and effect of s. 45(1)(b) is to be ascertained by examination of the Act in its entirety, in combination with the subsequently enacted LRRA. I agree with the [page250] Arthurs' submission that, when viewed as a whole, the Act evidences an intention to establish a uniform ten-year limitation period for remedies under charges or mortgages. Thus, a ten-year limitation period is provided for actions for entry, distress, recovery of land and recovery of money out of land (ss. 4, 15, 23(1) and 45(1)(k) of the Act). The construction of the s. 45(1)(b) exception urged by McVan would establish a different, and much lengthier, limitation period for actions for possession and on a covenant contained in a speciality mortgage or charge, save only for a covenant in a mortgage registered under the Registry Act prior to 1984. That interpretative outcome would result in inconsistent and confusing limitation periods for remedies under speciality mortgages and charges. Absent clear statutory language to the contrary, such an anomalous result is to be avoided.

[30] Support for the conclusion that the exception in s. 45(1)(b) is not to be construed as narrowly as McVan urges is provided by Martin v. Youngson (1924), 55 O.L.R. 658 (C.A.). In that case, this court held that s. 49(1)(k) of the limitations statute then in force (now s. 45(1)(k) of the Act), rather than s. 49(1)(b) (now s. 45(1)(b) of the Act) governed an action on a covenant contained in a mortgage, such that a ten-year limitation period applied to the action. See also, D. Dukelow, Guide to Ontario and Federal Limitation Periods (Toronto: Carswell, 1998), at pp. Ont. 149-50.

[31] In my view, confining the exception in s. 45(1)(b) to only those mortgages registered under the Registry Act prior to 1984 -- when the LRRA was introduced -- is inconsistent with an important purpose of the land registration system envisaged under the LRRA, which is to eliminate the differences between charges under the Land Titles Act and mortgages under the Registry Act except in respect of the transfer of the legal estate in land. To facilitate achievement of that legislative purpose, a "charge" under the LRRA is defined to include a mortgage and the rights and remedies of the parties to a charge are to be determined as if the legal effect of the charge is to transfer the land by way of mortgage.

[32] Thus, after 1984, and for the purpose of rights and remedies, no distinction is to be drawn between actions on a covenant in charges under the Land Titles Act and actions on a covenant in mortgages under the Registry Act. Stated differently"an indenture of mortgage" under ss. 45(1)(b) and 45(1)(k) of the Act is a form of "charge" under the LRRA for the purpose of s. 6(3) of the latter statute. That supports the conclusion that McVan's action on the covenant is an action on a covenant contained in a mortgage [page251] made after July 1, 1894, thus falling within the exception set out in s. 45(1)(b).

[33] In my view, had the legislature intended that, following introduction of the LRRA, the exception in s. 45(1)(b) of the Limitations Act apply only to mortgages registered under the Registry Act prior to introduction of the LRRA, it is reasonable to assume that such an intention would have been expressed clearly and unequivocally in the LRRA or in an amendment to the Limitations Act. The absence of such qualifying language militates against a construction of the exception in s. 45(1)(b) which would effect a significant reduction in the rights and remedies of chargors, contrary to s. 6(3) of the LRRA.

[34] The language of s. 6(3) of the LRRA itself is also instructive. Limitation periods are not exempted from the rights and remedies referenced under that section. To the contrary, the language of s. 6(3) is expansive. The clear intent of that section is to eliminate, rather than to preserve, the distinction between charges under the Land Titles Act and mortgages under the Registry Act for the purpose of determining rights and remedies. In addition, the ability to raise the expiry of a limitation period as a defence to an action or a claim is a significant right which, if demonstrated, can be determinative of the proceeding in which the defence is raised. (See Ball v. Donais (1993), 1993 8613 (ON CA), 13 O.R. (3d) 322, 45 M.V.R. (2d) 319 (C.A.).) Its exemption from the rights and remedies referenced under s. 6(3) of the LRRA cannot be inferred.

[35] The construction of the s. 45(1)(b) exception advanced by McVan is flawed for an additional reason. It is inconsistent with the language of s. 45(1)(k), which provides that an action upon a covenant contained in an indenture of mortgage or "any other instrument" made on or after July 1, 1894 for repayment of the money secured by a mortgage is subject to a ten-year limitation period. As I mentioned, s. 1 of the LRRA defines the word "charge" as including a mortgage. The word "indenture" is defined in Black's Law Dictionary as "a formal written instrument made by two or more parties with different interests". The same dictionary defines the word "mortgage" as:

2. A lien against property that is granted to secure an obligation (such as a debt) and that is extinguished upon payment or performance according to stipulated terms.

3. An instrument (such as a deed or contract) specifying the terms of such a transaction. . . .

The charge here is clearly an "instrument" which meets those definitions. [page252]

[36] Finally, although the parties' views of the nature of the charge are not determinative of its legal character, I note that McVan itself appears to have regarded the charge as a mortgage. Both its January 22, 1991 offer to renew the charge and its notice of sale refer to the charge as a "mortgage". Similarly, McVan's statement of claim seeks remedies concerning an alleged "mortgage".

[37] Accordingly, I conclude that although the charge is a speciality contract within the meaning of s. 45(1)(b) of the Act, it is also an instrument falling within the exception created by that section. Consequently, the 20-year limitation period provided under s. 45(1)(b) does not apply to McVan's action for possession or for payment on the covenant. Its action for possession is barred by ss. 4 and 15 of the Act and its action for payment on the covenant is barred by the ten- year limitation period created under s. 45(1)(k) of the Act.

(c) The power of sale proceeding

[38] McVan argues that the 20-year limitation period established by s. 45(1)(b) of the Act applies to its power of sale proceeding. In contrast, the Arthurs contend that the ten- year limitation period under s. 23(1) of the Act operates to bar the power of sale proceeding.

[39] Given that the charge in this case comes within the exception to the 20-year rule set out in s. 45(1)(b), it follows that that section does not operate to defeat a limitation period defence to McVan's power of sale proceeding. It remains, then, to consider whether s. 23(1), or other provisions of the Act, apply to the sale proceeding.

[40] The ten-year limitation period under s. 23(1) applies to an action brought "to recover out of any land . . . any sum of money secured by any mortgage or lien, or otherwise charged upon or payable out of the land . . .". The Arthurs assert that McVan's power of sale proceeding is an action to "recover out of land a sum of money secured by a mortgage or lien", thus attracting the ten-year limitation period under s. 23(1). I do not agree that s. 23(1) governs in this case.

[41] In Re Scott and Pickell (1984), 1984 1971 (ON CA), 45 O.R. (2d) 158, 6 D.L.R. (4th) 172 (C.A.), this court considered the scope of s. 23(1) of the Limitations Act in connection with power of sale proceedings. Weatherston J.A. stated (at p. 163 O.R.): "[Section] 23 of the Limitations Act has nothing to do with a sale by a mortgagee under his power of sale."

[42] The facts in Re Scott and Pickell were unusual. The mortgagees in that case conveyed the mortgaged property under their [page253] power of sale contained in the mortgage after they had been in possession of the property for approximately 47 years. Thereafter, the heirs of the original mortgagor sought to attack the sale, relying on s. 23 of the Act. In this case, McVan has never been in possession of the charged property.

[43] In recognition of the unusual circumstances in Re Scott and Pickell, it was held in Behmanesh v. Kaplan (2000), 31 R.P.R. (3d) 48 (Ont. S.C.J.) that Re Scott and Pickell is concerned with, and confined to, situations in which a mortgagee has been in possession for more than ten years, in which event the rights of the mortgagor are extinguished by operation of ss. 19 and 15 of the Act. In Behmanesh, the mortgagor had arranged a second residential mortgage loan. The mortgagor claimed that the mortgage loan had been repaid shortly after the granting of the mortgage, but no discharge of mortgage was ever registered. More than a decade after the mortgage fell due, the mortgagee demanded repayment of the mortgage principal, plus interest. On those facts, Stinson J. concluded that the mortgagee's rights were statute-barred by operation of ss. 4 and 15 of the Act, ten years having passed from the date when the mortgagee was entitled to take possession of the property and to bring action to recover the land.

[44] In Behmanesh, however, unlike this case, the mortgagee had not attempted to exercise its power of sale, nor had it commenced any judicial action on the mortgage. Rather, the mortgagee had only made a demand for repayment of the mortgage debt and accumulated interest. Thus, Behmanesh did not involve consideration of whether the exercise of a contractual power of sale is subject to s. 23(1) of the Act.

[45] The motions judge in this case held that McVan's right to proceed with a power of sale was barred under ss. 4 and 15 of the Act. I agree.

[46] In Re Scott and Pickell, in concluding that s. 23 of the Act is unrelated to a mortgagee's sale under power of sale, Weatherston J.A. expressly recognized that other provisions of the Act apply to such proceedings (at p. 163 O.R.):

An action for foreclosure or sale is an action for the recovery of land, and not for the recovery of money out of land. Other sections of the Limitations Act apply to such an action, but not s. 23. . . .

(Citations omitted)

[47] The Supreme Court of Canada in Modern Realty Co. v. Shantz, 1928 5 (SCC), [1928] S.C.R. 213, [1928] 2 D.L.R. 705 held that where a mortgagee failed to give notice of entry or to take proceedings to exercise its remedies under a mortgage within a ten-year [page254] period, the mortgagors, who did not make any payments within the ten-year period, were in constructive possession of the land and the mortgagee's right of entry and right to recover the mortgage money out of the land were barred by ss. 5 and 24 of the Limitations Act, R.S.O. 1914, c. 75 (now ss. 4 and 23 of the Act).

[48] The mortgage in Shantz included a covenant by the mortgagor giving the mortgagee a right to quiet possession in the event of default. As well, the mortgage provided for a power of sale framed in the following terms: "[T]he said mortgagee, on default of payment for one month, may, on one month's notice, enter on and lease or sell the said lands" [p. 218 S.C.R.]. The majority of the court held [at p. 215 S.C.R.] that "the right of entry of the mortgagee and its right to recover the mortgage money out of the land was effectively barred by sections 5 and 24 of the Limitations Act . . .".

[49] The court in Shantz did not specify whether the right of power of sale contained in the relevant mortgage was barred by s. 5 (now s. 4 of the Act) or s. 24 (now s. 23 of the Act). This court confirmed in Re Scott and Pickell that s. 23 of the Act does not apply to such proceedings. The combined effect of Shantz and Re Scott and Pickell, therefore, supports the view that s. 4 of the Act governs a mortgagee's exercise of a power of sale.

[50] It is also well-established that s. 4 of the Act applies to foreclosure actions, which are actions to recover land and not actions to recover money charged on land: Andre v. Valade, and see Falconbridge at p. 599.

[51] In this case, McVan's statement of claim contains no assertion of a right to recover a sum of money "out . . . of land", or a claim for power of sale. Rather, its notice of sale was issued in the exercise of its contractual power of sale under the charge, without commencement of court proceedings. Under the terms of the charge, McVan was entitled to exercise its contractual power of sale, without notice to the Arthurs, two months after default in principal or interest payments. In addition, with at least 35 days' notice, McVan was entitled to exercise its power of sale after 15 days on default of payment. Its entitlement to exercise its power of sale, therefore, accrued by at least January 15, 1991, two months after default by the Arthurs on payment of interest.

[52] In my view, McVan's power of sale proceeding is an attempt to recover land, which is prohibited under s. 4 of the Act after the expiry of ten years from the time when the right to make such an attempt first accrued. Accordingly, I agree with the [page255] motions judge that McVan's power of sale proceeding is barred by operation of ss. 4 and 15 of the Act.

(2) The Discharge of the Charge and its Deletion from Title

[53] McVan argues that even if its claims concerning the Arthurs' property are barred by the Act, the motions judge had no jurisdiction to discharge the charge, and to direct that it be deleted from title to the Arthurs' property. I conclude that this argument also fails.

[54] In resisting the discharge of the charge, McVan relies on s. 6(2) of the LRRA, which provides that a charge ceases to operate when the money and interest secured by the charge are paid, or the secured obligations are performed. McVan argues that the charge in this case continues to operate because the money and interest secured by the charge were not paid and the obligations secured by the charge were not performed. However, s. 6(2) does not displace the jurisdiction of the court to order a discharge when a limitation period has intervened to extinguish the rights and remedies provided in the charge.

[55] Under s. 15 of the Act, the expiry of a limitation period applicable to "making an entry or distress or bringing any action . . . for the recovery of land or rent" has the legal effect of extinguishing the "right and title" of the person otherwise entitled to make such entry or distress or to bring such an action. Here, by operation of s. 15 of the Act, McVan's entitlement under the charge to enter upon the Arthurs' land, to bring action for the recovery of such land, or to sue on the covenant has been extinguished due to the expiry of applicable limitation periods under the Act.

[56] In those circumstances, in my view, in order to do justice between the parties the motions judge had jurisdiction under the wide authority of the Superior Court of Justice confirmed by s. 11 of the Courts of Justice Act, R.S.O. 1990, c. C.43 to discharge the charge and to direct its deletion from title concerning the Arthurs' land: 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 535 (ON CA), [1972] 2 O.R. 280, 25 D.L.R. (3d) 386 (C.A.) and Cook v. Ip (1985), 1985 163 (ON CA), 52 O.R. (2d) 289, 22 D.L.R. (4th) 1 (C.A.); leave to appeal to the Supreme Court of Canada dismissed (1986), 55 O.R. (2d) 288n.

IV. DISPOSITION

[57] Accordingly, for the reasons given, I would dismiss the appeal. The respondents are entitled to their costs of the [page256] appeal. Counsel for the respondents properly informed this court that his fees to the respondents are set by the terms of a legal services plan. Having regard to the fees provisions of that plan, the respondents' costs of the appeal are fixed in the amount of $3,285, plus disbursements and Goods and Services Tax.

Appeal dismissed with costs.