NEWMARKET

COURT FILE NO.: CV-12-110133-00

DATE: 20130603

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

JASCO HOLDINGS LIMITED

Plaintiff/Responding Party

– and –

BLOOMINGTON LAND COMPANY 2004 LTD., ALCORN & ASSOCIATES LIMITED, and C.C. TATHAM & ASSOCIATES LTD.

Defendants/Moving Party

T.A. Pochmurski, for the Plaintiff/Responding Party

R.A. Gosbee, for the Moving Party Bloomington land Company 2004 Ltd.

HEARD: May 30, 2013

HOWDEN J.

[1] The defendant Bloomington Land Company 2004 Ltd. moves for an injunction restraining the plaintiff corporation from proceeding with sale of the subject property under Power of Sale notice sent to the defendant on March 7, 2013. The sale is otherwise set to close on Friday, May 31. The only day that the motion could be heard due to the yearly spring trial sittings that take up most of the judicial resources of this court in the Central East Region, was Thursday May 30, 2013, one day before the closing of the deal. I heard both counsel after reading all the material filed. That evening at 5 p.m., I was able to provide my decision granting the injunction and some limited reasons. Today I am providing the complete reasons for my decision.

[2] Counsel for both sides have reviewed with me in considerable detail the equities on both sides of this case. For as the leading cases make clear, the court is dealing with a balancing to some extent of the equities for and against allowing the sale by the mortgagor to proceed. Unlike many cases where there is an obvious advantage to the mortgagor because the mortgaged premises is his family’s home required to continue to house the family, this case involves land whose only use is for filling and part of which has now been overfilled and can take no more according to the local municipal limits. It was the ability to take fill that in part provided the defendant with a means to repay the mortgage.

[3] The defendant Bloomington purchased this land from the plaintiff in 2004. The defendant also purchased a fill permit from the plaintiff. The purchase price was $3 million. $100,000 was paid on closing and $2.9 million was the amount of the collateral mortgage taken back by the vendor.

[4] After the purchase in 2004, the plaintiff continued to operate the fill and supervised the dumping of fill. The defendant says that it expected there to be a two-part process for the use of the fill permit. The first was a license for 350,000 cu. meters of fill which would generate $1,400,000 in revenue. Part two was to provide another 400,000 cu. meters of fill generating a further $1,500,000. The defendant blames the plaintiff for overfilling the property, thus making it impossible to obtain a further license and ending any possibility of phase 2.

[5] In November 2010, the prior mortgage was discharged and a new mortgage registered against this property. Its amount was $1,552,500. The new mortgage provided for payment of interest. The defendant acknowledges that he has paid no interest on this property. The first payment was due January 1, 2011. Default occurred then and no payments have been made since except for $25,000 in April 2011 which was applied to the principal owing.

[6] This action for foreclosure was commenced in July 2012. The defendant says that it was not aware of that action until default judgment was signed. On the request of the defendant, the plaintiff agreed to set aside the default judgment. The order setting aside the default judgment issued on February 26, 2013. It provided that the defendant “shall have 20 days ... to file a statement of defence, a request to redeem, or a request for sale.”

[7] The Plaintiff argued briefly that it had only consented to the setting aside of the default judgment for the defendant to be limited to one of two things, either defend the action or request an opportunity to redeem. Then, despite the wording in the order, the plaintiff also says that it only consented to reopening the action provided it was converted to a sale proceeding. The order does not say that at all. It provides the defendant with a right to defend, to request sale, or to request a right to redeem. Yet the plaintiff says its intent was that at least two of those options were to happen, not just one. The defendant was to agree to the action continuing as a sale action and to defend or to redeem. And the operative rules, whether the action continued in foreclosure or was converted to a sale action, provide that in either event, the defendant had the right to defend and to request an opportunity to redeem. The right to redeem is defined in rule 64.03(8) as providing the defendant with 60 days after the taking of the mortgage accounts in which to attempt to redeem the property. Rule 64.04(05) allows this choice even where the action is converted to a sale action which occurred in this case. The plaintiff’s submission regarding the limiting intention of the consent and the order falls victim to poor drafting and to nonsensical and ambiguous conclusions.

[8] In view of the provisions in the Rules of Court which allow both defence and right to redeem, and given the failure of the consent and the order in this case to clearly remove one or more of those rights or to clearly convey what each party was actually agreeing to, in my view the defendant acted within its rights to file a statement of defence and to provide notice of its desire for an opportunity to redeem as the Rules of Court allow. The defendant did agree to convert the action from foreclosure to sale.

[9] Now that it is a sale action, the operative rule on the right to redeem is Rule 64.04(5). it states:

A defendant in a sale action who wishes to redeem the mortgaged property shall serve on the plaintiff, and file with proof of service, a request to redeem (Form 64A) within the time prescribed by rule 18.01 for delivery of a statement of defence, or at any time before being noted in default, whether the defendant delivers a statement of defence or not. R.R.O. 1990, Reg. 194, r. 64.04 (5); O. Reg. 534/95, s. 9.

[10] During argument, counsel and I have played through the possibilities and the equities from both sides. In this case there are certainly factors which weigh on the plaintiff’s side:

• the mortgage fell into default with the first payment over two years ago

• only one payment has been made since

• there is evidence from the plaintiff that the defendant is shopping the property around trying to find a buyer

• the only evidence of value is the agreement of purchase and sale entered by the plaintiff and to close on May 31

• the defendant may be trying to delay the inevitable but in the meantime interest continues to run.

[11] On the other hand, the largest part of the debts to be paid from a sale by far is the $1.7 million owed to the plaintiff on the mortgage, a replacement vendor-take-back mortgage on the sale to the defendant where the plaintiff received a significant amount in cash and retained control of the fill capability. There is an allegation in this action that the plaintiff’s principal has hampered the ability of the defendant to repay the mortgage by allowing overfill on part of the property and disqualifying it from future fill potential as the defendant had planned. If proven, the award of damage on this account would be a strong factor in the defendant’s favour and would provide a basis for set-off against the mortgage debt. And there is nothing in the defendant’s conduct which could be characterized as disentitling it from exercising its right to redeem.

[12] Furthermore there is no evidence that the plaintiff would lose its sale. There is no evidence that the prospective purchaser would not entertain an extension to the closing date. And if this sale were to proceed, there is no right to possession that the plaintiff company has that it can transfer to the purchaser. The defendant can still move to set aside the sale, register a certificate of pending litigation (CPL) on the title to make it unsaleable and could maintain possession as the rightful owner whose rights have not been terminated by any judgment in this action. All parties would thus be prejudiced even more; all the sale would do would be to add one more victim to be jeopardized by the growing costs bill facing all parties.

[13] On the facts before me, there is one principle that is clear. Paraphrasing the Chief Justice in Petranik v Dale, [1977] S.C.R.959 at p. 969:

…the equitable right to redeem is more than a mere equity to be (balanced with others. It is) an interest that (this defendant) has in the mortgaged land which is not lightly to be put aside.

[14] Having begun this action in this court for foreclosure or sale, the plaintiff cannot render the right to redeem nugatory simply by using a self-help remedy via the power of sale provisions in the mortgage. There is a prima facie case made out by the defendant. The irreparable damage to the defendant of not granting the injunction is the loss to the defendant of its interest in the mortgaged land expressed by the loss of its equitable right to redeem. And the balance of convenience when all is said and done favours granting the injunction as the above analysis has shown.

[15] I am bound by the Supreme Court of Canada decision in Petranik v Dale, supra, that clearly holds that the right to redeem when a defendant has filed the proper notice under the rules, which it has done here, is an interest that this defendant has in the mortgaged land and its loss would amount to irreparable harm. The remaining tests for an interim injunction have been made out.

[16] The relief asked by the defendant is granted, amended to add that specifically the sale of the subject land by the plaintiff set to close on May 31, 2013, or any other sale of this land, shall not proceed to closing until the defendant’s right to redeem under the Rules of Court has expired and the plaintiff has had the mortgage accounts taken and judgment has been rendered for sale and possession. The relief asked by the plaintiff under s. 39 of the Mortgages Act to bless its use of the power of sale procedure in the mortgage after the event, and after bringing this action for foreclosure and sale because it is advantageous now to do so, is improper and is rejected.

HOWDEN J.

Released: June 3, 2013