Executive Summary: Key Legal and Evidentiary Issues

• Competing motions centered on setting aside a default judgment versus granting summary judgment in a mortgage debt enforcement action.
• Enforceability of mortgage renewals where the borrowers claimed they did not read or understand the increased interest rates, framed as a non est factum defence.
• Adequacy of service, delay, and explanation for the defendants’ failure to defend, including their prolonged non-payment while remaining in possession and collecting rent.
• Application of the tests under Rule 19.08 (setting aside default judgment) and Rule 20.04 (summary judgment), alongside leading authorities such as Mountain View Farms and Leaf Homes.
• Evidentiary weight of executed and initialled loan and renewal documents showing clear disclosure of the interest rates compared with the defendants’ bare assertions.
• Prejudice to the lender and impact on the administration of justice and mortgage lending integrity if defaulting borrowers could avoid enforcement by alleging they did not properly review signed documents.

Factual background and the mortgage relationship
The case arises from a mortgage enforcement dispute between Equitable Bank, as plaintiff lender, and borrowers Jatinder Kaur Bal and Manpreet (Mike) Bal concerning a residential property at 44 Elmers Lane in King City, Ontario. The defendants granted a mortgage in favour of Equitable Bank to secure a substantial loan facility of approximately $2.9 million. The relationship began with an original mortgage loan agreement executed on July 27, 2022, for a 12-month term at an annual interest rate of 4.49%. This mortgage was subsequently renewed twice. The first renewal, dated August 21, 2023, extended the term to January 1, 2024, at an increased interest rate of 8.49% per annum. A second renewal, signed on December 28, 2023, further extended the term to June 1, 2024, at 9.44% per annum. Each of these agreements and renewals, including their schedules, was signed and initialled on every page by both defendants, expressly acknowledging that they had accepted and agreed to the stated terms and conditions.

Default under the mortgage and continued occupation
The defendants went into default on March 1, 2024, when they failed to make payments required under the mortgage. From that date forward, they made no payments at all on the loan. Despite this complete payment default, the defendants remained in possession of the property and collected rental income from a leased portion of it. The judge described this as an “outrageous” situation in which a $2.9 million mortgage remained in default for over 20 months, with the borrowers making no payments, yet still benefiting from possession and rent while the lender was unable to realize on its security.

Procedural history and default judgment
Equitable Bank issued its statement of claim on August 15, 2024. Service was properly effected in accordance with the Ontario Rules of Civil Procedure, becoming effective on September 4, 2024. The defendants did not deliver a statement of defence within the prescribed 20-day period. They were consequently noted in default, and on November 13, 2024, the bank obtained default judgment. That default judgment granted Equitable Bank possession of the property and a monetary judgment for $2,974,680.47 (described as the principal amount), together with contractual post-judgment interest at 9.44% per annum. Following the default judgment, the defendants sought and obtained a stay of enforcement from another judge (Woodley J.) on July 24, 2025. McCarthy J. later extended that stay on August 26, 2025, subject to certain conditions. When the matter returned to him on October 9, 2025, he found imperfect compliance with his earlier order but allowed a further adjournment to permit the defendants additional time to comply. Ultimately, the case came before McCarthy J. again on November 14, 2025, by videoconference, on the combined motions: the defendants’ motion to set aside the default judgment and Equitable Bank’s motion for summary judgment.

Policy terms and mortgage renewal provisions
While this is not an insurance case, the court closely examined the contractual terms of the mortgage and its renewals. The original agreement and both renewals expressly set out the applicable interest rates and terms. Importantly, each page of the loan agreements and renewals was initialled by both defendants, which the court treated as strong evidence that the borrowers knew and accepted those terms. The defendants argued that they had not read or understood the increased interest rates on renewal and that they did not agree to them, effectively attempting to repudiate the rate changes while still benefiting from the renewed loan structure. The judge rejected this position, citing long-standing Supreme Court of Canada authority that a person who signs a document without taking the trouble to read it is nonetheless bound by its contents and cannot rely on a plea of mistake about its terms. This principle directly undermined their attempt to distance themselves from the contractual renewal provisions, including the higher interest rates of 8.49% and 9.44% per annum.

The test to set aside default judgment
The motion to set aside default judgment was governed by Rule 19.08 of the Rules of Civil Procedure. The court applied the long-standing three-part test: (1) whether the motion was brought without delay after learning of the default judgment; (2) whether the circumstances that led to the default were adequately explained; and (3) whether the defendants had an arguable defence on the merits. The judge also incorporated more recent authorities, particularly Mountain View Farms Ltd. v. McQueen and Leaf Homes Limited v. Khan, which add two further considerations: (a) the potential prejudice to each side if the motion is granted or refused, and (b) the impact of the decision on the broader administration of justice. Ultimately, the judge emphasized that the overarching question is whether the interests of justice favour setting aside the judgment, which requires at least an arguable case on the merits.

The test for summary judgment
Equitable Bank sought summary judgment under Rule 20.04, which permits judgment where there is no genuine issue requiring a trial. The court’s task is to determine whether the material presented shows any real dispute of fact or law that necessitates a trial, or whether the record is sufficient to decide the issues fairly and justly at the motion stage. In this case, the plaintiff argued that the documentary record, the undisputed default, and the defendants’ conduct showed there was no genuine defence to the mortgage enforcement claim.

The defendants’ evidence and the non est factum defence
The key evidentiary support for the defendants’ position was a single affidavit sworn by Manpreet Bal in January 2025. The defendants also delivered a statement of defence, which essentially pleaded non est factum—that they could not be bound by the renewals because they had failed to read and understand the documents, particularly the higher interest rates. They asserted that they did not understand or agree to the increased rates in the 2023 renewals. The court characterized this defence as untenable, relying on the Supreme Court of Canada’s decision in Marvco Colour Research Ltd. v. Harris, which stands for the principle that a person who signs a document without reading it cannot later avoid its legal effect by claiming ignorance of its contents. Given that the defendants had signed and initialled every page of the relevant loan documentation, including the pages that clearly set out the interest rates, the court found their assertion that they did not understand or agree to the terms to be wholly implausible.

Findings on delay, explanation, and merits
On the issue of timing, the judge accepted that the defendants had moved to set aside the default judgment in a reasonably prompt fashion. However, he emphasized that the motion had not been pursued with vigor and that the defendants’ conduct throughout showed a pattern of delay. On the explanation for the default, the court found there was effectively no credible or reasonable explanation for the failure to defend the action or for the prolonged non-payment under the mortgage. The defendants had remained in possession for nearly 20 months without paying anything on the loan, while collecting rent and using the court process to keep enforcement at bay. On the merits, the judge found that the defendants had advanced no real defence. Their non est factum plea was inconsistent with clear documentary evidence. Even if there had been some issue regarding the specific interest rate (which the judge expressly found there was not), that would not change the fundamental fact that they had made no payments at all during a significant period of default.

Prejudice and the integrity of the justice system
The judge weighed prejudice and broader policy considerations heavily. He held that the defendants could “hardly claim prejudice,” given their prolonged default, continued use of the property, and efforts to delay enforcement through procedural means while paying nothing on the mortgage. In contrast, Equitable Bank was prejudiced on multiple fronts: its default judgment and writ of possession had been effectively frozen; it received no payments despite a long-overdue loan; it obtained no share of rental income from the property; and it incurred ongoing legal costs. The judge also stressed that permitting borrowers to avoid or delay mortgage enforcement by asserting that they did not read, understand, or “properly review” renewal documents that they had signed and initialled would undermine the integrity and efficiency of the mortgage lending system. It would bring the administration of justice into disrepute, given the central role of mortgages in enabling home ownership and the necessity of reliable contractual enforcement.

Outcome on the motions and final result
In applying the legal tests, the court concluded that the defendants had not satisfied the criteria to set aside the default judgment. There was no adequate explanation for the default, no credible defence on the merits, and the balance of prejudice and justice strongly favoured the lender. At the same time, the court determined that there was no genuine issue requiring a trial on Equitable Bank’s claim. The written agreements were clear, the default was undisputed, and the defence was “nothing short of ludicrous” in light of the evidence. Accordingly, the defendants’ motion to set aside the default judgment was dismissed, and the July 24, 2025 stay of enforcement was lifted. Equitable Bank was authorized to enforce its previously obtained judgment from November 13, 2024, including its writ of possession over the King City property. The court granted the bank leave to prepare and file a draft order without seeking the defendants’ approval as to form and content. On costs, the court did not fix an amount in this decision. Instead, it set a timetable for written submissions from both parties, after which a costs determination may be made. In practical and financial terms, the successful party is Equitable Bank, which is entitled to enforce its money judgment for $2,974,680.47 plus post-judgment interest at 9.44% per annum, together with any costs that may later be awarded. The precise quantum of costs and any additional monetary sums beyond this principal and interest were not determined in this ruling and will depend on the subsequent costs process.