Executive Summary: Key Legal and Evidentiary Issues

• Whether there was a genuine triable issue concerning the alleged improvident sale of the Coboconk Property

• The enforceability of personal guarantees and collateral mortgages following a court-approved receiver’s sale

• The extent to which the defendants could rely on prior appraisals to challenge the sale price

• Interpretation of contractual terms regarding internal collection costs

• The sufficiency of evidence to support a claim for administrative collection charges

• Whether the plaintiffs complied with procedural requirements in submitting late evidence for internal costs

Background of the loan and collateral

The plaintiffs, a group of lenders, provided a loan of $5,950,000 to 2538983 Ontario Inc. to finance the purchase of a commercial gas station and restaurant property in Coboconk, Ontario. The loan was secured by a first mortgage on the Coboconk Property and additional collateral mortgages on three residential properties in Pickering. The defendants, either officers, shareholders, or family members associated with the borrowing corporation, personally guaranteed the loan and granted the collateral mortgages.

Default and receiver’s sale

The mortgages went into default in July 2023. A court-appointed receiver was later appointed to sell the Coboconk Property, which was listed for $6.4 million. The property sold for $5.6 million in December 2024. After the sale, a balance of approximately $1.5 million remained owing under the loan, secured by the guarantees and the collateral mortgages on the residential properties.

The defendants’ arguments

The defendants opposed the plaintiffs’ motion for summary judgment on two grounds. First, they claimed the Coboconk Property was sold improvidently, relying on appraisals from 2021 and 2023 valuing the property higher. Second, they disputed the plaintiffs’ claim for $72,135 in internal collection costs, arguing the contract did not permit such charges in this situation, and that the plaintiffs had failed to properly document their claim.

Court’s findings

The court held that the defendants had not raised a genuine issue requiring trial on the improvident sale defence. The receiver’s sale had followed an appropriate process, meeting the Soundair factors for court-approved sales. The court noted that appraisals attached to affidavits without expert opinion evidence were insufficient to support an argument that the sale was improvident.

On the internal collection costs, the court agreed with the defendants that the contract clause relied on did not entitle the plaintiffs to collect $300 per hour in the circumstances of this case. Moreover, the plaintiffs had failed to provide proper evidence of the hours claimed within the court-ordered timelines. As a result, the claim for internal collection costs was dismissed.

Conclusion

The court granted summary judgment to the plaintiffs in all respects except for the claim for internal collection charges, which was dismissed. The plaintiffs’ motion to amend the statement of claim was allowed. The plaintiffs were entitled to full indemnity costs, subject to a reduction for the unsuccessful claim on internal costs, with the parties encouraged to agree on the amount.