Executive Summary: Key Legal and Evidentiary Issues

• Legitimacy of 2670082 Ontario Corp. as a bona fide purchaser for value without notice was central to the dispute.

• The authority of an appellate court to set aside a lower court’s declaratory judgment based solely on the parties’ consent was questioned.

• Negative credibility findings against witnesses for the corporate parties influenced the trial outcome.

• The fairness and propriety of settlements that require vacating judicial findings as a condition for payment were scrutinized.

• The court’s responsibility to uphold the integrity of the administration of justice was emphasized over private agreements.

• No costs were awarded due to the consent nature of the motion, and the appeal process was ordered to be expedited if pursued.

Facts of the case

Kelly Martin was the owner of a residential property in Oakville, Ontario, which was subject to a second mortgage held by 2148468 Ontario Ltd. In June 2019, Martin defaulted on her mortgage payments due to fraudulent activity on her bank account. The mortgage was subsequently assigned to 11037315 Canada Inc., which then initiated foreclosure proceedings and obtained a default judgment against Martin. The property was sold to 2670082 Ontario Corp. (267), the moving party in this appeal. Martin, still residing at the property, discovered the default judgment and sale after the fact and successfully moved in the Superior Court to set aside the default judgment and direct a sale of the property.

Procedural history and trial findings

The Ontario Court of Appeal previously directed a trial to determine whether 267 was a bona fide purchaser for value without notice, a status that would afford protection under the Land Titles Act. At trial, Justice Chozik found that 267 was not a bona fide purchaser without actual notice, citing significant negative credibility findings against witnesses for 110 and 267. The trial judge noted that the property had already been sold by 267’s creditors, so she could not order a sale under Martin’s notice of sale. She also acknowledged that $140,000 was being held in trust and, if the sale between 110 and 267 was set aside, no further relief was necessary. The trial court declared 267 was not a bona fide purchaser and reserved the issue of costs for further submissions.

Appeal and motion for consent order

267 filed a notice of appeal and subsequently brought a motion to the Court of Appeal, on consent, to set aside the trial judgment regarding its status as a bona fide purchaser. The only evidence supporting the motion was an affidavit from a law clerk attaching the trial reasons, the notice of appeal, and Martin’s consent to the proposed order. The parties explained that their settlement involved Martin receiving some of the funds held in trust, but also required her to consent to vacating the adverse finding against 267. The panel questioned the legal basis for granting such relief on consent and required written submissions.

Court of Appeal’s analysis and outcome

The Court of Appeal held that it could not set aside the trial judgment or allow the appeal solely on the basis of the parties’ agreement. The court emphasized that its powers must be exercised in accordance with law and the facts, not merely to facilitate private settlements, especially where doing so would undermine findings of fact and law made after a full trial. The panel found that vacating the judgment would bring the administration of justice into disrepute, particularly given the underlying findings of misconduct. The court noted that Martin was placed in an unfair position by being required to consent to vacating the judgment as a condition of settlement. The motion was dismissed, but the court ordered that if 267 wished to proceed with its appeal, the process would be expedited. No costs were awarded due to the consent nature of the motion. The successful party at this stage was Kelly Martin, but the precise amount awarded or to be paid remains undetermined, as it was contingent on further proceedings and the terms of any settlement.