The applicant mortgagee brought an interpleader application seeking directions regarding distribution of surplus proceeds from a power of sale after satisfaction of the mortgage and undisputed claims.
Competing claims were made by execution creditors, Legal Aid Ontario under a registered lien, and a party holding a lump sum child support order obtained five days after the closing date of the sale.
The court considered the priority scheme under the Mortgages Act and the Creditors’ Relief Act, as well as authorities addressing timing of encumbrances and support orders.
It held that priority under the Creditors’ Relief Act applies only where a support order exists at the relevant time and cannot retroactively displace encumbrancers whose interests existed at the date of sale.
Because the support order was made after closing, it ranked behind existing execution creditors and liens.
