Court File and Parties

2018 ONSC 4720 COURT FILE NO.: CV-18-1253-00 DATE: 2018 08 02

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Mercury Mortgage Investment Corporation, Plaintiff AND: Jermaine Chambers, Defendant

BEFORE: Trimble, J.

COUNSEL: David Crothers Counsel for the Plaintiff Jermaine Chambers, Self-represented

HEARD: July 31, 2018

Endorsement

[1] In this motion, the Defendant Mortgagor asks for a determination as to the propriety of certain charges levied by the Plaintiff Mortgagee on payout of the mortgage, which was in default.

FACTS:

[2] The Defendant gave a mortgage to the Plaintiff on December 12, 2016 for $468,000 at 8.25 % p.a., and a one year term. The charge was registered against his home a few days later.

[3] The mortgage contained a number of standard clauses including:

• Prepayment. A borrower who was not in default could prepay the whole of the principal sum by paying an amount equivalent to three months interest on the amount.
• Late or Dishonoured Payment. The borrower agreed to pay $225 for each late or missed payment, or any payment returned NSF.
• Service Fee. If the lender makes any payment to protect his or her security, for example, by paying real estate taxes or insurance premiums, the lender could charge a fee of $250.
• Discharge. On the balance due date, or on any renewal, the borrower agrees to pay a statement fee of $150 and the discharge preparation and execution fee of $350, having deemed to have requested the mortgage documents and agreed that these fees are the lender’s solicitors’ fees for preparing the documents.
• Renewals. At the lender’s sole option, the charge can be renewed automatically on the same terms with a renewal fee equivalent to one half of the lender admin fee charged at the time the loan was first advanced.
• Administration Fees. The borrower will pay administration fees of $100 for a mortgage statement for information purposes, $250 for a mortgage statement for legal enforcement purposes including but not limited to the notice of sale proceedings or issuing a Statement of Claim. The admin fees not paid are to be added to the principal.

[4] The Defendant defaulted on payments due on September 1 and October 1, 2017. On October 16, he notified the Plaintiff to not process the November 1, 2017 payment, but agreed to pay the outstanding balances for September and October. The lender agreed. The Plaintiff charged the missed payment fee, as it was entitled by the mortgage.

[5] Late on the afternoon of December 22, 2017, the Friday before the Christmas holiday, the Defendant emailed and asked for a deferral of the January 1, 2018 payment to January 25, 2018. He also asked that the late fee be waived. The email arrived after the close of business, however. No one saw it until January 2, 2018. Therefore, the late or missed payment fee was charged for the missed January 1 payment. The February 1, 2018 payment was also missed.

[6] February 1, 2018 was the loan’s maturity date. The loan was not paid out.

[7] On March 16, 2018, following an earlier phone call, the Plaintiff emailed the Defendant proposing that the loan be renewed on the same terms. A pre-condition was that all arrears and fees (totaling $5,757.28) had to be paid by March 19, 2018. The Defendant did not respond until March 27, eight days after the deadline to accept. At that time, the Plaintiff advised the Defendant that it had started enforcement proceedings. It would not renew the mortgage. It preferred to be paid out.

[8] On March 29, 2018 the Defendant wrote a letter to the Plaintiff advising that he was “caught by surprise” by the fact that the Plaintiff no longer wish to renew the mortgage. He said that, in his view, the Plaintiff had not given sufficient notice to exercise its power of sale proceedings.

[9] After litigation was commenced, the Defendant’s lawyer requested payout statement, which was sent to the Defendant’s lawyer on June 26, 2018.

[10] Eventually, the Defendant sold the property as ordered by the Court. $25,000 remains paid into Court to the credit of the action and subject to the outcome of this motion.

ISSUES TO BE DECIDED:

[11] The Defendant seeks a refund of $20,788.44 as overcharges by Mercury, a refund of legal fees that he paid, costs from Mercury of $7,716.32, and damages in the amount of $4,330. He provided no details of how he reaches these totals.

[12] According to the Plaintiff, I must decide whether the Plaintiff can recover from the Defendant administration\NSF fees of $1,628.42, late payment charges of $9,669.06 and legal fees and disbursements for enforcement of the mortgage of $4,241.14. In addition, the Plaintiff wishes additional interest since June 27, 2018.

THE PARTIES’ POSITIONS:

The Moving Defendant

[13] The Defendant says that pursuant to section 14 (2) and 14(4) of the Mortgage Brokers, Lenders and Administrators Act, 2006, the Plaintiff was required to provide 21 days’ notice of renewal or expiry, which he says was not given. Further, when he did agree to the renewal terms set out by the Plaintiff, the Plaintiff reneged on its agreement. Since the Plaintiff never gave the required notice, it cannot charge any of the fees it wishes to collect. Further, its legal fees and other fees are exorbitant.

[14] I note that the moving party provided no copies of statutes or case law to which he referred.

The Lender

[15] The Plaintiff says that all of its charges are provided for in the terms of the mortgage to which the Defendant agreed. They are also compliant with the Mortgage Act and Interest Act. It is not obliged to give the notice as the Plaintiff claims. As the mortgage was in default, it is entitled to collect. It is not obliged to renew the mortgage.

RESULT:

[16] For the reasons set out below, the Defendant’s motion is dismissed. The fees as claimed, are allowed.

ANALYSIS:

[17] I address, first, the Defendant’s submissions.

Notice

[18] The Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29, section 14 (2) does not apply. On the face of the Act, it applies to mortgage brokers and other intermediaries. It does not apply to the lenders who are not also intermediaries. In any event, section 14 (2) does not provide for notices from lenders to borrowers. That section deals with licensing under the Act. There is no section 14(4).

Was the Defendant aware of the maturity date?

[19] The Defendant says that he was not aware of the maturity date. Therefore, he relied on the notice requirements under the Mortgage Brokerages Act.

[20] This is not true. In his letter to the Plaintiff dated January 25, 2018 the Defendant said “I am aware that the mortgage expires January, 2018”.

Was there an agreement to renew?

[21] The Defendant says that there was an oral agreement to renew the mortgage, reached in February, 2018. The Plaintiff’s evidence is that there was no such agreement. What is clear, however, is that on March 16, 2018 the Plaintiff emailed the Defendant and said that it would renew the mortgage on the same terms, provided, as a pre-condition, the Defendant had to pay all arrears of $5,757.28, by March 19. The Defendant did not reply until 8 days after the arrears payment deadline had passed.

[22] I now turn to the specific fees charged.

Late Payment Fees of $9,669.06

Under section 17 (1) of the Mortgages Act, R.S.O. 1990, c. M40, after any failure to repay principal, a mortgagee is not required to accept payment of principal in arrears unless the mortgagor gives three months written notice of intention to pay, or pays a bonus equivalent to three months’ interest to abridge the time for payment. The $9,669.06 the Plaintiff charged for payment of principal is appropriately charged and owing under s. 17(1).

Legal fees of $4,241.14

[23] The Plaintiff is charging legal fees of $4,241.14. This is the solicitor and client account provided by the Plaintiff’s lawyer for enforcement.

[24] The Defendant says that on April 23, 2018 he paid $2,339.76 on account of legal fees. This should be deducted. The Defendant says that the Plaintiff did not account for it.

[25] The mortgage provides that all payments made by the borrower would be applied in the following order: disbursements, arrears, interest on arrears, administrative\NSF fees, legal costs for enforcement, and finally principal. The Defendant was provided with a statement indicating how his payment was attributed to the outstanding amount.

[26] The mortgage does not allow the Defendant to direct how a payment should be applied to the overall indebtedness.

[27] The legal fees of $4,241.14 are payable under the terms of the mortgage.

Administrative/NSF Fees of $1,620.42

[28] The Defendant says in his submissions that he told the Plaintiff on five occasions not to process his post-dated cheques at the time they were due because he warned there would be insufficient funds in his bank account.

[29] The Defendant is in error. The evidence before me is that his payments were to be made by automatic debit from his account. Further, whether a payment is processed has no bearing upon the Plaintiff’s right under the mortgage to charge the $225 for each occasion the Defendant failed to make a payment on the required date. It is the failure to make the payment that triggers the late payment charge.

[30] The Defendant says the $225 fee charged for each late or missed payment is exorbitant. Other financial institutions charge $48 for an NSF cheque.

[31] The Defendant’s position that this fee is for “NSF” payments is misguided. The fee is not intended to reimburse for NSF fees charged to the Plaintiff by its bank when a borrower’s cheque is declined for insufficient funds. The $225 is the fee that the Plaintiff is charged by Mercury Mortgages Inc., an arm’s length company who records and processes missed payments or payments that are returned NSF on the Plaintiff’s books. The $225 is supported by invoices from Mercury Mortgages Inc. for each of the six payments which the Defendant either did not make or for which there was insufficient funds in the account.

[32] This amount is properly charged.

Interest charges of $226.11 and $2,688.58

[33] The July 24, 2018 payout statement lists two interest charges: $226.11 for interest on arrears and $2,688.58 for interest on the principal from June 1, 2018 to July 27, 2018.

[34] The Defendant says that this represents a double charge of interest and therefore is not allowed under section 8 of the Interest Act, R.S.C. 1985, c. I-15.

[35] The Defendant is incorrect. The interest charges are distinct. There is no double counting.

[36] The first interest charge is the accumulated interest on the interest on the arrears of principal portion of the payment not paid when due during the life of the loan. Interest on arrears is compound interest. The second interest charge is the interest only on the principal. That the Plaintiff did not disclose these charges in its initial proposal is irrelevant. It could not do so as they arise on failure to make payments during the course of the loan, or the failure to pay the loan on maturity.

Updated Interest

[37] The Plaintiff seeks a further $4,462.50 for interest from June 27, 2018 (the effective date of the calculations of the June 24, 2018 payout statement at a per diem rate of $106.25 on principal as set out in that payout statement) to August 6, 2018.

[38] The added interest is allowed.

Total to be Paid

[39] The total owed by the Defendant to the Plaintiff is as follows:

Item	Amount
Late Payment Fees	$9,669.06
Legal fees	$4,241.14
Administrative/NSF Fees	$1,620.42
Interest on arrears	$ 226.11
Interest on Principal (to June, 27, 2018)	$2,688.58
Interest Update (June 27 to August 6)	$ 4,462.50
Total	$22,908.11

[40] I order that $22,908.11 shall be paid from the funds in court to the credit of this action, to the Plaintiff. The balance of the $25,000 paid into court shall remain there pending my decision on costs.

COSTS:

[41] I will decide who will pay costs to whom, and in what amount based on written submissions. Submissions are limited to three double-spaced pages, excluding offers to settle and bills of costs. The Plaintiff’s costs submissions are to be served and filed by 4:00 p.m., August 20, 2018, the Defendant’s submissions are to be served and filed by 4:00 p.m., August 31, 2018.

Trimble, J. Date: August 2, 2018