BARRIE COURT FILE NO.: CV-18-183
DATE: 20180613
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PARKER LEE
Plaintiff
– and –
FENG QING HE and JIE HE
Defendants
Derek Ketelaars, for the Plaintiff
Ford W. Wong, for the Defendants
HEARD: May 17, 2018
REASONS FOR DECISION
EDWARDS j.:
Introduction
[1] The Defendants borrowed funds from the Plaintiff on August 15, 2016 in the amount of $700,000, secured by a mortgage on the Defendants’ primary residence at 30 Pilgram Drive, Markham, Ontario, as well as another residence owned by the Defendants at 141 Kenborough Court, Markham, Ontario. The mortgage bore an interest rate of 12.99% annually, and was for a term of 12 months. The mortgage was registered on August 11, 2016.
[2] The Defendants seek an order for a discharge under s. 12 of the Mortgages Act, upon payment of an amount into court which is equal to or less than the amount the Plaintiff claimed is owing under the mortgage. The Plaintiff does not oppose the Defendants’ s. 12 motion in its entirety. What is opposed is: 1) the Defendants’ request to pay less than the amount claimed by the Plaintiff; and 2) the Defendants’ request to delay enforcement of the mortgage while they attempt to secure financing.
The Facts
[3] Most of the facts are not in dispute. The Defendants admit to owing $745,465 under the mortgage, an amount which is calculated as of February 15, 2018. There is no dispute that the mortgage has been in default for in excess of nine months.
[4] The mortgage matured on August 15, 2017. The Defendants have failed to repay the principle amount due under the mortgage as of August 15, 2017, and there is no dispute that the mortgage is in default.
[5] After the mortgage went into default, efforts were made by the Plaintiff to contact the Defendants. It was not until September 6, 2017 that the Defendants’ solicitor contacted a representative of the Plaintiff with a request from the Defendants to renew the mortgage. Negotiations between the parties took place between September 6, 2017 and October 20, 2017, in an effort to renew the mortgage. On October 22, 2017, a representative of the Defendants advised the Plaintiff’s solicitor that the Defendants had accepted the Plaintiff’s proposed terms for the renewal of the mortgage.
[6] After October 22, 2017, and for reasons that appear to relate to financial difficulties that the Defendants were having with another financial institution, the Plaintiff did not hear back from the Defendants until the Plaintiff was forced to issue and serve on the Defendants a statement of claim in February 2018.
[7] In the statement of claim issued by the Plaintiff, the Plaintiff seeks liquidated damages in the amount of approximately $881,000 representing the outstanding balance due under the mortgage, as well as judgment granting the Plaintiff immediate possession of the lands and premises which were secured by the mortgage.
[8] In addition to the remedies sought in the statement of claim, the Plaintiff on February 13, 2017 issued a Notice of Attornment of Rent addressed to the tenants of 141 Kenborough Court. The Notice of Attornment was issued pursuant to the Plaintiff’s assignment of rents registered against the properties pursuant to the terms of the mortgage.
[9] On February 13, 2017, the Plaintiff with his solicitor and a bailiff – together with a locksmith, attended at 141 Kenborough Court to deliver the Notice of Attornment and to change the locks at 141 Kenborough Court so that the Plaintiff could take possession of the property and to provide new keys to the tenant. As no one was home, the Plaintiff was unable to change the locks. The Plaintiff did, however, leave a copy of the Notice of Attornment at the property.
[10] As a result of the Notice of Attornment having been left at the property, the Plaintiff’s solicitor received communication from one of the tenants. Cooperation with respect to the changing of the locks was not forthcoming from the tenants at 141 Kenborough Court.
[11] Since the Plaintiff served its notice to attorn the rents at 141 Kenborough Court, the Defendants have not remitted any rent cheques.
[12] In addition to receiving none of the rents from 141 Kenborough Court, the Defendants have made no payments with respect to principle or interest on the mortgage.
Position of the Defendants
[13] The essence of the position advanced on behalf of the Defendants amounts to a request that would allow the Defendants to obtain refinancing that would allow them to either pay into court or pay directly to the Plaintiff the amount that is not in dispute under the mortgage, i.e. $745,465, an amount which is agreed to as of March 6, 2018. As for the balance of what is claimed by the Plaintiff, an amount totalling in excess of $210,000, the Defendants dispute that this amount is due under the mortgage and should be dealt with by the court at trial.
[14] When the matter was argued before me on May 17, 2018, I engaged counsel in discussions with respect to how much time realistically the Defendants needed to secure refinancing. Counsel for the Defendants urged upon me that this court should structure an order along the lines found in a decision of Perell J. in Mishev v. Shaw, 2011 ONSC 1462. In Mishev, Perell J. dealt with a similar situation and dealt at some length with respect to s. 12 of the Mortgages Act. At para. 58 of his decision, Perell J. stated:
I appreciate that s. 12 of the Mortgages Act does not speak of postponements, but a postponement with payment is more favourable to the mortgagee than a forced discharge of the mortgage with the mortgagee’s disputed moneys in court awaiting a trial.
[15] Having reached that conclusion, Perell J. then ordered that the mortgage in question should be postponed to a new first mortgage. He further ordered that a writ of possession would be issued to the mortgagee for the mortgage premises, and that the mortgagee could not execute on the writ of possession or proceed with their power of sale proceedings unless the mortgagor failed to pay the amount ordered within 30 days. The final part of Perell J.’s order in Mishev provided that the payment by the Plaintiffs of the amount ordered was without prejudice to the Plaintiff’s position that the payment was an overpayment of the mortgage debt, or the position of the mortgagee that the payment ordered was insufficient to satisfy the mortgage debt.
[16] The Defendants have had since May 17, 2018 to obtain refinancing. When the matter was argued before me, I specifically advised counsel that my Reasons in this matter would be delayed for at least a few weeks given my involvement in other trials that I knew I would have to address prior to my release of any reasons in this matter. It was clear to counsel for the Defendants that this period of time was a period during which the court would be expecting the Defendants to obtain refinancing. Counsel for the Plaintiff advised that while this matter was under reserve, the Plaintiff would not take any steps to enforce the mortgage through power of sale proceedings.
[17] I directed my assistant to contact counsel to enquire as to whether or not the Defendants had been successful in obtaining refinancing, and whether my Reasons for Decision were required. On June 4, 2018 my assistant received an email from Mr. Ketelaars, a portion of which I reproduce as follows:
I thank Justice Edwards for following up. The parties have been trying to arrange refinancing on terms acceptable to both sides, but have not been able to reach an agreement and no refinancing has taken place. As such, I ask that Justice Edwards please provide us with his Reasons for the motion as soon as they are available.
[18] In my view, the Defendants have had ample time to obtain terms that would allow them to refinance the mortgage with the Plaintiff. I have no confidence given the history of this matter that the Defendants will, in fact, be successful in working out terms of refinancing that would allow me to craft an order along the lines set forth in the decision of Perell J. in Mishev. In an effort, however, to provide the Defendants with one last opportunity to obtain satisfactory terms of refinancing and recognizing that they have already had in excess of three weeks since this matter was argued be me, I am ordering the following:
a) upon payment within 15 days to the Plaintiff of the sum of $745,465 plus interest at the rate of 12.99% from March 6, 2018 to the date of repayment, the Plaintiff’s mortgage on 30 Pilgram Drive, Markham, Ontario, and 141 Kenborough Court, Markham, Ontario, shall be postponed to a new second mortgage on those properties in the principle amount of no more than the sum of $745,465 plus the accrued interest;
b) subject to paragraph c) a writ of possession shall be issued to the Plaintiff for the properties municipally described as 30 Pilgram Drive, Markham, Ontario, and 141 Kenborough Court, Markham, Ontario;
c) the Plaintiff may not execute on the writ of possession or proceed with their power of sale proceedings unless i) the Defendants fail to pay the Plaintiff the sum of $745, 465 plus accrued interest within 15 days, or ii) the Defendants default in payment of the new mortgage;
d) the payment by the Defendants of the sum of $745,465 plus accrued interest shall be without prejudice to the Defendants’ position that the payment is an overpayment of the mortgage debt, or to the Plaintiff’s position that the payment of $745,465 plus accrued interest is insufficient to satisfy the mortgage debt.
e) if the Defendants do not obtain refinancing within 15 days of today’s date, the Plaintiff shall be entitled to partial summary judgment in the amount claimed in the statement of claim. Specifically, the Plaintiff shall receive judgment in the amount of $745,465 plus interest at the rate of 12.99% from March 6, 2018 to June 13, 2018.
[19] As it relates to the additional amounts claimed by the Plaintiff under the mortgage which total in excess of $200,000, those amounts are in dispute. In my view, the most cost efficient and timely way in which those issues should be determined is by way of a mini trial. In order to crystalize the position that each party asserts with respect to those amounts that are in dispute, the Plaintiff shall provide to the Defendants an affidavit of the Plaintiff’s witness who will attest to the amounts due and owing, to which affidavit shall be appended all of the relevant back-up documentation. The affidavit shall suffice for the purposes of the Plaintiff’s evidence in-chief. The Defendants will have no more than 90 minutes to cross-examine on that affidavit.
[20] The Defendants shall submit to the Plaintiff their affidavits, which shall provide a detailed response to the claims of the Plaintiff, together with any documents to be relied upon at the mini trial. The affidavits shall be the substitute for the Defendants’ evidence in-chief, and the Plaintiff will have 45 minutes to cross-examine on each affidavit.
[21] In addition to the affidavit evidence that I have ordered, the parties are to exchange factums addressing the legal issues raised in the evidence filed by each party. The mini trial, which is inclusive of evidence and argument, shall be allotted no more than one day. The mini trial is to take place no later than August 30, 2018. The affidavit evidence from the Plaintiff shall be served no later than July 15, 2018. The Defendants’ affidavits shall be served no later than July 30, 2018. The Plaintiff’s factum shall be served and filed with the court no later than August 7, 2018, with the Defendants’ responding factum to be served and filed no later than August 15, 2018. If the court cannot accommodate a one day mini trial prior to the end of August 2018, the date is to be coordinated at the earliest opportunity through the trial coordinator. I am not seized of this matter.
Justice M.L. Edwards
Released: June 13, 2018
BETWEEN:
PARKER LEE
Plaintiff
– and –
FENG QING HE and JIE HE
Defendants
REASONS FOR DECISION
Justice M.L. Edwards
Released: June 13, 2018