Superior Court of Justice – Ontario

Court File No.: CV-23-00001983-0000
Date: 2025-07-02

RE: Bank of Montreal, Applicant
AND: Mohammad Hossain, Tasnim Yahia Hossain, and 10655252 Canada Corporation, Respondents

Before: R.E. Charney
Counsel:

• Joseph Jamil, for the Applicant
• Obaidul Hoque, for the Respondent, 10655252 Canada Corporation
• No one appearing for the Respondents, Mohammad Hossain and Tasnim Yahia Hossain

Heard: 2025-06-13

Endorsement

Introduction

[1] The Applicant, Bank of Montreal (“BMO”) brings this application for an Order, inter alia, declaring that Respondent 10655252 Canada Corporation’s (“106 Corp.”) Charge registered against the residential property municipally known as 796 Bennett Crescent, Oshawa, Ontario (the “Bennett Property” and the “106 Corp. Mortgage”) is subordinate to BMO’s Charge registered against title (the “BMO Mortgage”) pursuant to the doctrine of equitable subrogation.

[2] The Respondents, Mohammad Hossain and Tasnim Yahia Hossain (collectively, the “Hossains”), are the registered owners of the Bennett Property. They have not responded or participated in these proceedings despite being properly served with BMO’s material.

[3] The Respondent 106 Corp. opposes the Application.

Facts

[4] The Hossains have been the registered owners of the Bennett Property since July 2, 2021. At that time, the Hossains registered the CIBC Mortgage on title against the Bennett Property in favour of CIBC. The CIBC Mortgage secured a loan in the principal amount of $644,800.

[5] On May 17, 2022, the Hossains applied to BMO for a mortgage. The purpose of the mortgage was to refinance and pay out the CIBC Mortgage registered on the Bennett Property. At the time the Hossains applied to BMO for a mortgage, the CIBC Mortgage was the only registered encumbrance on the Bennett Property.

[6] On May 18, 2022, BMO approved the Hossains for a first Charge on the Bennett Property. Pursuant to the terms of a Commitment to Lend and Disclosure Statement dated May 18, 2022 (the “Commitment”), BMO agreed to provide a mortgage loan to the Hossains in the principal amount of $760,000.00 (the “BMO Loan”), which was to be secured by the BMO Mortgage registered on title to the Bennett Property in first priority.

[7] The Hossains and BMO jointly retained Tofazzel Haque of Tofazzel Law for the Transaction.

[8] Pursuant to an Acknowledgment and Direction dated May 18, 2022, the Hossains directed Mr. Haque to, inter alia, complete the Transaction, including registering the BMO Mortgage as a first Charge on the Bennett Property.

[9] On May 18, 2022, BMO advanced the BMO Loan of $760,000 to Tofazzel Law, in trust, by way of certified cheque.

[10] Also on May 18, 2022, 106 Corp. advanced $315,000 to the Hossains for a short term (90 days) loan.

[11] Neither BMO nor 106 Corp. had any knowledge that the Hossains were borrowing from both lenders.

[12] Mr. Haque was supposed to use the BMO loan to discharge the CIBC Mortgage (the pay out at the time was $638,835) and register the BMO Mortgage on title to the Bennett Property.

[13] Mr. Haque failed to discharge the CIBC Mortgage or register the BMO Mortgage until July 19, 2022.

[14] On July 18, 2022 (the day before the BMO Mortgage was registered on title to the Bennett Property), 106 Corp. registered the 106 Corp. Mortgage on title to the Bennett Property unbeknownst to BMO. The 106 Corp. Mortgage secured the principal amount of $315,000.00 and was registered subordinate to the CIBC Mortgage that was still registered on the Bennett Property.

[15] Mr. Haque failed and/or neglected to make the necessary inquiries, including, inter alia, a title search to ensure title was free and clear of all encumbrances so that the BMO Mortgage was registered as a first Charge, after it paid out the CIBC Mortgage. The evidence suggests that Mr. Haque acted deliberately in this regard, since he was acting for the Hossains for both loans. Mr. Haque has since been suspended by the Law Society.

[16] On cross-examination, Mr. Haque acknowledged that the purpose of the BMO Mortgage was to replace the CIBC Mortgage and confirmed that the BMO Mortgage was always intended to be in first-ranking priority. Notably, Mr. Haque explained that he “forgot” to register the BMO Mortgage as instructed and failed to search the title when he delinquently registered the BMO Mortgage in July. Mr. Haque confirmed that the BMO Loan funds were used to pay out the prior CIBC first mortgage.

[17] Mr. Haque advanced $638,895.08 of the BMO Loan to pay out and discharge the CIBC Mortgage, and on August 31, 2023, CIBC discharged the CIBC Mortgage. There is no explanation as to why the payment to the CIBC was made so many months after the BMO’s advance.

[18] The Hossains breached the terms of the Commitment by, inter alia, registering or causing the 106 Corp. Mortgage to be registered on title to the Bennett Property in priority to the BMO Mortgage.

[19] The Hossains defaulted on the BMO Mortgage on September 1, 2022, and BMO has taken possession of the Bennett Property and commenced a mortgage enforcement action against the Hossains.

[20] The Hossains defaulted on the 106 Corp. Mortgage on September 18, 2022.

[21] 106 Corp. has refused to postpone the 106 Corp. Mortgage to the BMO Mortgage.

[22] On cross-examination, Mr. Kar, on behalf of 106 Corp., acknowledged that the Hossains applied for a second mortgage from 106 Corp. and that 106 Corp. was aware that at the time when the 106 Corp. Mortgage was given that the CIBC Mortgage was already registered in first position. Knowing that there was a first mortgage registered, 106 Corp. agreed to give the 106 Corp. Mortgage, which was to be a second mortgage.

Analysis – The Doctrine of Equitable Subrogation

[23] It is undisputed that the BMO Loan ($760,000.00) was used to pay out the CIBC Mortgage registered on title to the Bennett Property. The BMO Loan proceeds were used to pay out and discharge a prior encumbrance so that the BMO Mortgage could be registered in first ranking position.

[24] The evidence is clear that the BMO Mortgage was intended to be in first ranking priority, while the 106 Corp Mortgage was intended to be in second-ranking priority. 106 Corp., the Hossains and Mr. Haque all knew that the 106 Corp. Mortgage was to be subordinate to another registered mortgage, and the Hossains and Mr. Haque knew that the first in priority CIBC Mortgage was to be paid out and replaced with a first in priority BMO Mortgage. This intention was frustrated by Mr Haque’s negligence or deliberate fraud.

[25] The issue in this Application is whether the doctrine of equitable subrogation applies to declare the BMO Mortgage a first Charge on the Bennett Property in priority to the 106 Corp. Mortgage.

[26] “The doctrine of equitable subrogation, generally, is a discretionary equitable remedy invoked when a person discharges the obligation of another, but having done so, has no right of action against the debtor to enforce the debt the person has paid. It is a principle of fairness, invoked where it is prejudicial not to do so, and in doing so there is no prejudice to others”: TD Bank v. Yousefie, 2016 ONSC 5991, at para. 20.

[27] The doctrine arose from the case of Crosbie-Hill v. Sayer, [1908] 1 Ch. 866, where the equitable subrogation of a mortgage was found (at 877) to arise in the following context:

… where a third party, at the request of a mortgagor pays off a first mortgage with a view to becoming himself a first mortgagee of the property, he becomes, in default of evidence of intention to the contrary, entitled in equity to stand, as against the property, in the shoes of the first mortgagee.

[28] See also Midland Mortgage Corp. v. 784401 Ontario Ltd., paras 14-16; and Mutual Trust Co. v. Creditview Estate Homes Ltd. (1997), 34 OR (3d) 583 (CA), at paras. 31-32.

[29] Crosbie-Hill stands for the principle that equitable subrogation requires that the claimant satisfy four criteria to “stand, as against the property, in the shoes of the first mortgagee”:

a. At the request of the first mortgagor,
b. The claimant pays off the first mortgage,
c. With a view to becoming himself a first mortgagee of the property,
d. Absent any contrary intention.

T.D. Bank, at para. 25, citing Crosbie-Hill.

[30] Equitable subrogation is a discretionary remedy. “A party seeking it must have clean hands. Therefore, where a lender caused the loss through its own negligence, equitable subrogation will not be granted. Where the loss arose because of the conduct or negligence of the lender’s solicitors, the lender’s hands are not unclean”: TD Bank, at para. 27; Attanayake v. Mikhail, 2019 ONSC 5692, at para. 43.

[31] In exercising my discretion in this case, an important factor is that 106 Corp. always understood that it was providing a second mortgage to the Hossains. Granting the equitable subrogation will not prejudice 106 Corp. 106 Corp. is in precisely the same position whether the first mortgage is held by CIBC or BMO. BMO’s equitable subrogation is only to the extent of the outstanding debt of the CIBC Mortgage ($638,835), not the full extent of its BMO loan ($760,000). BMO is not unjustly enriched; it receives nothing more than what it loaned the mortgagor to pay off the first mortgage.

[32] Each of the four criteria for equitable subrogation applies in this case. At the mortgagor’s request, BMO advanced funds to pay off the first mortgage with a view to becoming the first mortgagee. There is no evidence of any contrary intention. BMO stands in the shoes of the first mortgagee.

[33] Accordingly, I find that the Crosbie-Hill criteria have been satisfied and that it is just to exercise the court’s discretion to apply equitable subrogation to give BMO’s Mortgage first priority.

Conclusion

[34] This Court declares that the Charge of 10655252 Canada Corporation (“106 Corp.”) registered as Instrument No. DR2154435 (the “106 Corp. Mortgage”) is subordinate to the Charge of BMO registered as Instrument No. DR2154768 (the “BMO Mortgage”) pursuant to the doctrine of equitable subrogation.

[35] This Court directs the Land Registrar to rectify the title (the register) of the Bennett Property (PIN 16274-0039 (LT)) in a manner consistent with the Declaration in para. 34.

[36] If the parties cannot agree on costs, the Applicant may deliver costs submissions of no more than 3 pages plus costs outline and any offers to settle within 20 days of the release of this Decision, and the Respondent may deliver costs submissions on the same terms within a further 15 days.

R.E. Charney
Date: July 2, 2025