Executive Summary: Key Legal and Evidentiary Issues

• Mortgage lender sought recovery of shortfall following power of sale of rental property.

• Defendants disputed the reported sale price and challenged accounting of proceeds.

• Plaintiff provided credible documentation proving $1.1 million sale and VTB mortgage terms.

• Court rejected defendants' claims of overcharging and improper fee calculations.

• Three-month interest penalty was deemed unenforceable as a prohibited charge under the Interest Act.

• Summary judgment granted to plaintiff for adjusted deficiency amount, plus interest.

Background and parties involved
Bemco Financial Services Ltd. loaned $1,000,000 to 12425467 Canada Inc. The loan was secured by a mortgage on a rental property at 47 Bloor Street in Sudbury, Ontario, and was personally guaranteed by Sasitharan Somasekarampillaai and Laavanya Sasitharan. After the loan matured and remained unpaid, Bemco exercised its right to sell the property under power of sale. The sale did not cover the full amount owing, and Bemco brought a summary judgment motion to recover the shortfall.

The dispute over sale proceeds and accounting
The defendants disputed Bemco’s claim that the property sold for $1.1 million, arguing it had actually sold for more and that Bemco failed to properly account for proceeds, including interest on the vendor take-back (VTB) mortgage. Bemco provided affidavits, a purchase agreement, statement of adjustments, real estate documents, and management records to substantiate its version of events. The defendants relied on conflicting registration documents and unauthenticated MLS listings, which the court found unreliable and inconsistent with the registered sale and credible evidence.

Assessment of legal fees, rent, and taxes
The court reviewed all related charges and upheld Bemco’s accounting of rent collected, management fees, and property taxes. The court found no merit in the claim that Bemco had improperly charged or withheld surplus funds. The evidence, including affidavits and property management statements, was sufficient to resolve all factual issues without a trial.

Ruling on interest penalty
The only point where the court disagreed with Bemco was on its claim for a three-month interest penalty. Justice Stothart ruled that such a charge constituted a penalty under the federal Interest Act and was not recoverable once the mortgage had matured and enforcement proceedings commenced. As a result, the claimed amount was reduced by $20,990.39.

Summary judgment granted
The court concluded there were no genuine issues requiring a trial. Summary judgment was granted in favour of Bemco in the amount of $58,067.48, plus pre- and post-judgment interest at 7.99% as specified in the mortgage contract. The defendants’ evidentiary submissions were deemed insufficient to counter the plaintiff’s prima facie entitlement. The parties were invited to make brief submissions on legal costs if they could not agree.