Executive Summary: Key Legal and Evidentiary Issues

• Dispute over whether a mortgage renewal fee of $81,000 was paid or contractually reduced to $54,000 in cash

• Plaintiff alleged mortgage default after failure to pay principal and interest post-renewal

• Defendant argued oral agreement for reduced fee and additional renewal without documentation

• Court found no credible evidence supporting alleged cash payment or modified renewal terms

• Issue raised regarding premature issuance of a Statement of Claim before Notice of Sale expired

• Court rejected applicability of the Farm Debt Mediation Act due to lack of evidence that defendant was a farmer.

Background and mortgage default

In April 2022, Vajinder Virk granted a mortgage to 1000005996 Ontario Ltd. (“BraichCo.”), secured by a property in Clearview, Ontario. The mortgage was for $1,350,000 at 9% annual interest, structured for six months with monthly interest-only payments of $10,125. It included an automatic renewal clause with a 6% renewal fee upon maturity, unless otherwise agreed.

The mortgage matured on November 1, 2022 and was automatically renewed to May 1, 2023. Virk issued six post-dated cheques to cover the renewed term’s interest payments. A dispute arose over the renewal fee: BraichCo claimed Virk never paid the required $81,000, while Virk alleged that a reduced $54,000 fee was paid in cash based on an oral agreement. No supporting documentation or receipt was provided, and the Plaintiff denied the arrangement.

By May 2023, no further payments had been made. The Plaintiff waited until December 2023 before taking enforcement steps. On January 25, 2024, a demand letter and Notice of Sale were issued. The following day, a Statement of Claim was filed for recovery of the mortgage debt and possession of the property.

Defendant's procedural and substantive defences

Virk raised procedural objections, arguing the Statement of Claim was invalid because it was issued before the expiry of the 35-day notice period required under the Mortgages Act. She also claimed the property qualified for protection under the Farm Debt Mediation Act and that she did not receive proper notice as required under that legislation.

She further asserted that she had paid the alleged reduced renewal fee in cash and that an oral agreement extended the mortgage for another year, supported by the delivery of post-dated cheques for the June 2023 to May 2024 period. However, aside from the June cheque, no others were cashed. Her position relied heavily on an affidavit from a real estate agent who claimed to have delivered $54,000 in cash to the Plaintiff.

Court’s analysis and findings

The Court rejected the Defendant’s evidentiary claims due to the complete lack of documentation or corroboration. The judge found it implausible that such a large cash payment would be made without any written confirmation, receipt, or follow-up correspondence. No affidavit was provided by Virk herself, and the evidence of the intermediary lacked credibility.

On the procedural issue of the early filing of the Statement of Claim, the Court held that although the claim was issued before the notice period expired, this was a technical defect. There was no prejudice to the Defendant, as no enforcement occurred during the protected period, and the Court granted a nunc pro tunc order validating the filing.

The Farm Debt Mediation Act was found inapplicable. The Defendant failed to prove she was a “farmer” under the Act, and the property—though potentially agricultural—was not shown to be used for commercial farming by Virk.

Outcome

The Court granted summary judgment in favour of the Plaintiff. Virk was ordered to pay $1,731,188.44 under the mortgage, plus $29,944 in full indemnity legal costs, for a total award of $1,761,132.44. The Plaintiff was also granted possession of the property and leave to issue a writ of possession. Post-judgment interest is to accrue at 9% per annum until the full amount is paid.