Chatham Street Realco (2102) Inc v. Lalor et al.

COURT FILE NO.: CV-20-644957 DATE: 20200923 ONTARIO SUPERIOR COURT OF JUSTICE -

BETWEEN: Chatham Street Realco (2102) Inc, Plaintiff – and – Diana Lalor et al., Defendants

BEFORE: F.L. Myers J. COUNSEL: Carmine Scalzi, for the Plaintiff Jide Oladejo, for the Defendants READ: September 22, 2020

Endorsement

[1] The plaintiff is the assignee of three mortgages over property owned by Ms. Lalor. The three mortgage debts all came due in 2017. The plaintiff’s evidence is that Ms. Lalor has paid nothing on the mortgages since 2017. In the interim, she allowed over $90,000 in property tax arrears to mount against the property. The mortgagee paid $50,000 toward the arrears to prevent the city from taking enforcement steps. In addition, the mortgagee accuses Ms. Lalor and her tenant of ignoring the mortgagee’s attornment of rents and failing to pay over rents paid by the tenant since January, 2020.

[2] The plaintiff’s evidence is that it had taken possession of the retail unit on the main floor of the mortgaged premises and was working to sell the property. Ms. Lalor re-entered unlawfully and has prevented viewings by potential purchasers including one with an executed agreement of purchase and sale. The mortgagee knows that its mortgages are subject to the residential lease of the apartment unit. But it has attorned the rents and wishes to take possession as a landlord so that it can fulfill its duties especially with cooler weather coming.

[3] Last week, counsel attended Civil Practice Court to schedule the plaintiff’s motion for possession of the mortgaged premises. I directed counsel to attend a case conference to discuss scheduling as it appeared to be too involved for a brief CPC appearance.

[4] On September 17, 2020, counsel for the mortgagee advised counsel for the defendants that at the case conference he would be seeking an interim order for possession of the premises pending the return of the motion. Counsel for the defendants responded by contesting the court’s jurisdiction to make interim orders at a case conference for scheduling.

[5] I heard the case conference on September 22, 2020. Counsel for the mortgagee sought the following interim terms of a scheduling order:

a. That Ms. Lalor give it possession of the mortgaged premises pending the return of the motion;

b. That Ms. Lalor pay the carrying costs of approximately $4,300 per month pending the return of the motion; and

c. That Ms. Lalor pay to the mortgagee all rents that she has received from her tenant since the notice of attornment (about $9,000);

[6] The mortgagee undertakes to pay the amounts received from Ms. Lalor under (b) and (c) above to the city on account of realty tax arrears.

[7] The defendants have pleaded that the plaintiff or its predecessors have been paid in full. Ms. Lalor denies receiving independent legal advice when she granted the three mortgages. She also alleges that the principal of the plaintiff has a conflict of interest in view of his role in a community business association.

[8] The mortgagee served it motion record seeking possession on August 31, 2020. It did not set a return date in its notice of motion as one had not yet been obtained in Civil Practice Court. However, the defendants have had three weeks to start preparation of their responses.

[9] Mr. Oladejo proposes a schedule under which his clients’ material will be delivered in late October and the motion heard in late November. The mortgagee asks for the motion to be heard sooner since the defendants have already had the motion record for three weeks. In addition, the mortgagee fears the continued erosion of its position as each day passes in which the defendants do not pay accruing taxes, interest, and expenses. It asks for interim terms to keep it whole pending the hearing of the motion.

[10] Counsel for the defendants argues against the imposition of terms sought by the plaintiff. Moreover, he argues that the court has no authority to grant terms during a case conference and that it should not schedule a motion or another case conference to consider interim terms as it is a costly detour from the principal hearing.

[11] There is no doubt that in appropriate circumstances a judge can make an order on terms at a case conference. Rule 50.13 (6) of the Rules of Civil Procedure, RRO 1990, Reg 194 provides:

(6) At the case conference, the judge or case management master may, if notice has been given and it is appropriate to do so or on consent of the parties,

(a) make a procedural order;

(b) convene a pre-trial conference;

(c) give directions; and

(d) in the case of a judge,

(i) make an order for interlocutory relief, or

(ii) convene a hearing. [Emphasis added.]

[12] Once the court is authorized to make any type of order, then Rule 1.05 enables it to “impose such terms and give such directions as are just.” Therefore, if the court is authorized to make an order under Rule 50.13 (6) at a case conference, it can attach interim terms to the order.

[13] A judge is authorized to make any order for interlocutory relief at a case conference that she considers appropriate in the exercise of the court’s discretion provided that notice has been given. Notice for the purposes of Rule 50.13 (6) is necessarily somewhat less formal than a notice of motion. Any party can seek relief at a motion by delivering a notice of motion. As set out in Rule 50.01, case conferences contemplate a summary and less formal process:

…to provide an opportunity for any or all of the issues in a proceeding to be settled without a hearing and, with respect to any issues that are not settled, to obtain from the court orders or directions to assist in the just, most expeditious and least expensive disposition of the proceeding, including orders or directions to ensure that any hearing proceeds in an orderly and efficient manner. [Emphasis added.]

[14] If a formal notice of motion was required each time a judge proposed to make an order at a case conference, then conferences would just become motions. That would defeat their cost-saving and time-saving purpose.

[15] In this case, Ms. Lalor had notice that the mortgagee was going to seek interim terms at the case conference at least for possession of the premises. However, as Mr. Oladejo did not accept that possibility, it seems to me to be appropriate to provide a short period to allow Mr. Scalzi to give notice of all the terms that the plaintiff seeks. Moreover, my consideration of the ultimate schedule may be affected by interim terms. For example, if the defendants were to keep the plaintiff whole pending the return of the motion, then their request for a longer period of time to respond to the motion becomes more equitable.

[16] Mr. Oladejo asks that the court not schedule a hearing for interim terms or that if it does so, the return should be on October 1, 2020 to give him time to prepare. He did not volunteer however that his clients would pay over October rent that comes due that day.

[17] In my view, the issue of interim terms needs to be decided sooner. On the prima facie evidence before the court, the plaintiff’s financial position appears to be eroding. A determination should be made one way or the other before further disputed payments are made or significant costs, interest, or taxes accrue. Mr. Oladejo advises that Ms. Lalor has an appraisal that shows that there is substantial equity in the property so that there is no erosion. If that is the case, one might wonder why three years have passed without a refinancing. I make no determination of how much equity is available in the property. I just note that it is always open to a mortgagor to avoid mortgage enforcement by paying the mortgage debt. It is the rare lender who refuses “par plus accrued” (i.e. principal plus interest and costs).

[18] Both counsel are available on September 25, 2020 at 1:00 p.m. for a brief conference hearing on whether any interim terms should be granted as part of a scheduling order. I recognize that the defendants have little time to prepare. This is analogous to the first return of an injunction. There is no real doubt that there will be an adjournment; the issue is whether interim terms are appropriate under the applicable legal tests.

[19] The defendants have not been heard on the merits. They have evidence to present. Counsel for the defendants submits that Ms. Lalor has been victimized and is entitled to be heard. They have already had time to consider and commence preparation and now they will have a few more days to deal solely with issues relevant to interim terms. The merits have a minimal role at this stage. The question for the conference or hearing will be what schedule to agree upon (or impose) and whether the plaintiff meets the tests to establish that it needs interim protection while the schedule runs. The defendants will maintain all of their rights to present their evidence and be heard in full on the merits of all of their defences to the enforcement of the mortgages at the return of the main motion. Moreover, if they think that they need to put in evidence for this scheduling hearing, they have a few days to do so.

[20] Parties are encouraged to serve their motion records prior to attending Civil Practice Court. This makes the scheduling process more concrete. If interim terms will be sought, counsel should ensure that the responding party has some notice of the proposed terms before the CPC attendance or for a subsequent case conference. Responding counsel always has a decision to make as to how much evidence to prepare for a first return of a motion. Some believe it is more advantageous to keep their powder dry and argue against terms from the moving party’s material. Others will try to move heaven and earth to get at least some evidence before the court to provide an essential point or two relevant at least to the tests applicable for interim terms. Counsel or parties who take no steps to prepare after being served with a motion record pending imposition of a schedule at which interim terms may be sought do so at their own risk.

[21] The case conference is adjourned to a further hearing before me on September 25, 2020 at 1:00 p.m. by Zoom. The plaintiff will provide notice to the defendants’ counsel on September 23, 2020 of the interim relief that it will be seeking. Any additional material for use by the court at the return of the hearing shall be uploaded to the Sync.com folder that is already being used by the parties.

F.L. Myers J.

Date: September 23, 2020