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MORTGAGES - Mortgagee’s remedies - Power of sale - Right to portion of sale proceeds

Friday, June 08, 2018 @ 8:10 AM  

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Motion by the appellant, Hails, for an order appointing a McKenzie friend and directing the payment of a surplus from a sale of a mortgaged property after Hails defaulted on the mortgage. Hails had entered into a mortgage agreement with a bank. The mortgage was registered and the terms provided the bank with remedies on default of payment, including entry upon and sale of the land. Hails defaulted on the payments on January 1, 2017 and continued in default until the mortgage matured on November 1, 2017. In May 2017, the bank issued a notice of sale under mortgage and issued a statement of claim. A motion judge granted summary judgment in the bank’s favour due to Hails’ agreement not to oppose the motion and the imminence of the mortgage’s maturity. The bank was ordered not to take possession until November 1, 2017. Hails appealed. He also sought stays of execution on the portion of the order requiring him to deliver vacant possession. In January 2018, the sale of the property closed and in March 2018, the bank contacted the second mortgagee seeking a discharge statement. On the current motion, Hails sought an order appointing a McKenzie friend and directing the payment of the surplus available and an accounting.

HELD: Motion dismissed. This was not a case in which a McKenzie friend should be appointed. The record was barren of any credible evidence that Hails was in need of a McKenzie friend. For the most part, appointment of a McKenzie friend occurred in family law proceedings, not in enforcement proceedings for default under a mortgage. In addition, the obligation to pay the second mortgagee from the sale proceeds settled upon the bank under s. 27 of the Mortgages Act. It followed that the direction sought by Hails – that he receive the current surplus to pay the second mortgagee – would have had the effect of circumventing the obligations imposed on the bank by s. 27 of the Mortgages Act. The court was not prepared to make that order.

B2B Bank v. Hails, [2018] O.J. No. 2420, Ontario Court of Appeal, D. Watt J.A., April 12, 2018. Digest No. TLD-June42018011