Guidance from the Court – Procedure to Resolve Mortgage Discharge Issues under the Mortgages Act and the Rules of Civil Procedure

Gilbertson Davis LLPAppeals, Appellate Advocacy, Real Estate Litigation0 Comments

In Sub-Prime Mortgage Corporation v. 1219076 Ontario Limited, 2019 ONCA 581, the Ontario Court of Appeal was asked to determine, the proper procedure to discharge a mortgage or contest the discharge of a mortgage, under the Mortgages Act, and the Rules of Civil Procedure.

In the lower court decision, Sub-Prime Mortgage Corporation (“Sub Prime”), the second mortgagee, issued two urgent applications against 1219076 Ontario Limited (“121”), the first mortgagee, to obtain an immediate discharge of two mortgages on two properties placed by 121, by paying money into court, pending further court orders, or a resolution between the parties, at para 1.

In its application, Sub-Prime did not specifically seek an order determining the balance owing for each mortgage. To support its application, Sub-Prime cited and relied on section 12(3), 12(9) and 22 of the Mortgages Act, R.S.O. and Rule 14.05(a), (d), and (e) of the Rules of Civil Procedure, at para 4.

The application judge denied both applications and stated that section 12 is discretionary and it is intended to be invoked in situations where a mortgagee cannot be found. Sub-Prime subsequently appealed the decision to the Ontario Court of Appeal, at para 15.

The Ontario Court of Appeal stated that the application judge’s interpretation of section 12(3) was construed too narrowly; however, the Court confirmed that section 12(3) was a discretionary remedy, at para 15.

The Court further confirmed that if parties seek to discharge a mortgage or seek a judicial determination of the proper amount owing, to specifically do so under Rule 14.05(3)(e) of the Rules of Civil Procedure, and not through section 12 of the Mortgages Act. As the Ontario Court of Appeal further explained:

“If a mortgagor has legitimate concerns about the amount claimed to discharge a mortgage, an application should be brought under r.14.05(3)(e). The application judge will determine what is owing and may even make an interim order for the payment of monies into court: see Rokhsefat at para. 12. What is crucial in such an application is that the applicant seek a judicial determination of all of the disputed items and provide evidence in support of its position”, at para 16.

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