DATE: 20050324

DOCKET: C41429

COURT OF APPEAL FOR ONTARIO

RE:

1427814 ONTARIO LIMITED (Applicant/Respondent in Appeal) – and – 3697584 CANADA INC. and AIRD & BERLIS LLP

BEFORE:

DOHERTY, SHARPE and ARMSTRONG JJ.A.

COUNSEL:

William A. Chalmers

for the appellant

Maurice J. Neirinck

for the respondent 1427814 Ontario Ltd.

HEARD & RELEASED ORALLY:

March 22, 2005

On appeal from the judgment of Justice Andromache Karakatsanis of the Superior Court of Justice dated February 16, 2004.

E N D O R S E M E N T

[1] In our view, s. 27 of the Mortgages Act is dispositive of the appellant’s claim and of this appeal. That provision mandates the payment of the proceeds from a sale in a specific manner. We agree with the application judge that the appellant’s claim does not fall within s. 27.

[2] We do not accept the submission that the as yet to be incurred costs of litigation arising from the respondent’s claim against the appellant regarding improvident sale or slander of title are “expenses incident to the sale” within the meaning of s. 27: see Strawrene Ltd. v. Kay et al. (1986), 55 O.R. (2d) 429 (H.C.J.)

[3] Assuming that the appellant could, at some point, add the litigation costs at issue to the principal of the mortgage, those costs have not yet been incurred. Section 27 provides, that the proceeds of the sale shall be applied, inter alia, “in discharge of all of the principal money then due in respect of the mortgage” (emphasis added). The appellant’s claim relates to the costs of future litigation that will be incurred after the sale. They are not “then due” and, therefore, do not fall within s. 27.

[4] While s. 30 of the Mortgages Act permits parties to a mortgage to contract out of that part of the Act, by the terms of s. 30, the mortgage must contain a declaration to that effect. There is no such declaration in this mortgage. To hold that nothing more than a potential inconsistency between the terms of the mortgage and the terms of the Act is capable of ousting the Act would denude the statutory requirement for a declaration of any meaning.

[5] Accordingly, the appeal is dismissed with costs to the respondent fixed at $7,500 inclusive of disbursements and GST.

“D.H. Doherty J.A.”

“Robert J. Sharpe J.A.”

“R.P. Armstrong J.A.”