SUPERIOR COURT OF JUSTICE – ONTARIO
RE: XING ZHAO, Plaintiff
AND:
OLENA LEANNA LEKSIKOVA and SUTTON GROUP – ADMIRAL REALTY INC., Defendants
BEFORE: S.F. Dunphy J.
COUNSEL: Ruzbeh Hosseini (rhosseini@cambridgellp.com), and Leon Li (lli@cambridgellp.com), for the Plaintiff
James Quigley (jsquigley@izwlaw.com), for the Interested Parties, Luxury Castle Homes Inc. and Saeid Sarrafian
HEARD at Toronto (Video): October 26, 2021
REASONS FOR DECISION
[1]
Introduction and Background
This matter came before me as an appeal from a decision of Assoc. Justice Ilchenko dated October 1, 2021 refusing to grant a Certificate of Pending Litigation. In the interests of time, I shall issue these reasons in abbreviated form only
2The reasons of the Learned Judge were detailed and thorough. There is no issue taken with his analysis of the applicable law in relation to CPL’s. The narrow issue underlying this appeal stems from two factual findings made by him which the appellant states amounted to a deprivation of natural justice because he was denied an opportunity to present evidence or to make submissions o the point. In the one case, the fact was an inference drawn from a Google Search of the appellant’s name and that of a company he is associated with that was conducted after the hearing. In the other, observations were made regarding the assignability of certain building and other permits about which no submissions or arguments were made (although the permits themselves were in evidence).
3The contest in this case is between a purchaser of a residential property under an agreement of purchase and sale from an owner who was herself a defaulting mortgagor and her mortgagee. The vendor was in default under a second and third mortgage. The mortgagee had commenced power of sale proceedings to enforce its security one year before the sale was entered into and obtained default judgment against her one month before it was entered into. The purchaser sought to place a CPL on title and it was this application that the Learned Associate Justice denied in the face of the strenuous opposition of the respondent mortgagee. The vendor in this case did not contest the CPL and in fact the “main” object of the CPL was to interfere in the efforts of the mortgagee to sell the property independently.
4There is no dispute that decisions that are not anchored in pleadings, evidence or submissions of the parties amount to a reversible error of law: Union Building Corporation of Canada v. Markham Woodmills Development Inc., 2018 ONCA 401. In the case of the Google search at least, it appears that negative inferences were drawn based on the results of that search which the appellant was not given an opportunity to explain or call evidence about. The issue with regards to the building permits is less clear because the argument in that case was that while the restriction on transfer was evident on the face of the documents, there was no argument or evidence by either side as to the degree to which that restriction could be satisfied in this case.
[5]
Analysis
Whatever the merits of the stated grounds of appeal brought by the purchaser in this case, Mr. Quigley’s arguments on behalf of the mortgagee are both persuasive and decisive.
6The short answer is that even if granted as against the vendor, the CPL would always and everywhere have to be discharged at the instance of the mortgagee. The grounds of appeal raised before me, even if meritorious, were not material to the decision and the CPL should not have been issued on these facts regardless.
7It is not disputed that the mortgagee had pending power of sale proceedings and a default evidenced by judgment prior to the subject agreement of purchase and sale being entered into. The mortgage remains in default to this day. The mortgagor has the undoubted right to tender the mortgage debt and obtain a discharge of the mortgage at any time up until when the mortgagee enters into a binding agreement to sell the property to a third party. If, as the purchaser loudly proclaims, the purchase price agreed is more than sufficient to retire the mortgage, then the purchaser could presumably agree to close the transaction tomorrow and take title subject to the existing mortgages or he could tender the money which could be used by the mortgagee to discharge the mortgage. There is a difference between debt that HAS BEEN repaid and debt that CAN BE repaid.
8The important point is that the purchaser’s claimed title is always and everywhere derivative of the mortgagor’s title and is subject to all of the vicissitudes of that title. A CPL could not purport to stay the enforcement hand of the mortgagee, particularly one sought by a party with no privity with the mortgagee.
9In effect, as the Learned Assoc. Justice pointed out, the transparent object of the CPL is to do just that: stay the mortgagee. That, as he noted, is “saying the quiet part out loud”. A CPL is not a back-door injunction to stay the enforcement hands of prior-ranking secured creditors. The primary remedy of the defaulting debtor is to repay the debt.
10The appellants raised all kinds of questions about the “real” motives of the mortgagee. The short answer is that the Mortgages Act has a bundle of remedies designed to balance the interests of mortgagors and mortgagees. If the mortgagee over-reaches at some point, that can be dealt with if as and when it occurs. I cannot place a CPL on the property on the off-chance that the this may in future occur.
11At the end of the day, I am satisfied that the errors pleaded in the Notice of Appeal were not material to the decision which ultimately turned on the superior, prior right of the mortgagee.
[12]
Disposition
The appeal is dismissed and the CPL is accordingly denied. It is likely that costs will be dealt with in the coming weeks through the realization process at all events. I shall issue no order for costs at this time but will entertain a request for costs in writing received on or before December 15, 2021. If no such request is made by that date, there shall be no order as to costs and I shall assume that the matter has been attended to contractually through the mortgages.
___________________________
S.F. Dunphy J.
Date: October 26, 2021