Valerie A. Edwards

The appellant mortgagee sought to recover on a mortgage covenant from beneficial owners alleged to be undisclosed principals of a corporate titleholder that executed the mortgage under seal.

The Court held that the sealed contract rule remains part of Canadian common law and bars suit by or against undisclosed principals on contracts executed under seal.

It rejected the argument that the rule does not apply to corporate agents and held that Harmer v. Armstrong did not create a direct right of action against beneficiaries or principals.

Applying s. 13(1) of the Land Registration Reform Act, the Court held the mortgage was deemed under seal for all purposes, making the beneficial owners not liable on the covenant.

The request to abolish the sealed contract rule was refused because the proposed reform was not shown to be necessary and risked far-reaching commercial uncertainty.