Executive Summary: Key Legal and Evidentiary Issues

• Huan Thanh Nguyen, as fourth and fifth mortgagee, sought assignment of CIBC's first mortgage and elevation of his charges to first priority on the foreclosed property.

• Opposition from CIBC and the second and third mortgagees argued the application violated the established "redeem-up rule" in British Columbia foreclosure law.

• Section 14(1) of the Law and Equity Act, R.S.B.C. 1996, c. 253, was invoked by the applicant, which permits a mortgagor to require a mortgagee to assign the mortgage debt to a directed third party.

• Precedent from Scotia Mortgage Corporation v. Chin, 2022 BCSC 1763, and Teevan v. Smith confirmed that a puisne mortgagee cannot redeem an anterior mortgage without also redeeming all intervening mortgages.

• Granting the order would constitute "mischief" by allowing the applicant to leapfrog over senior encumbrancers and potentially foreclose them off title.

• Costs were awarded to the second and third mortgagees per their mortgage terms and to CIBC at Scale B, while special costs sought by Olympia Trust were not granted absent supporting mortgage provisions.

Background of the foreclosure and the competing mortgage interests

This case arose from a foreclosure proceeding initiated by the Canadian Imperial Bank of Commerce ("CIBC") in the Supreme Court of British Columbia against Tan Thuc Nguyen and several other respondents. CIBC held the first mortgage on the property in foreclosure. Among the other respondents, Olympia Trust Company and Minh Kien Le were the second and third mortgagees, and Huan Thanh Nguyen held the fourth and fifth mortgages. The remaining named respondents were Do Van Huynh, The Crown in Right of British Columbia, and Jade Chong also known as Thi Ngoc Thuy Chong, none of whom appeared at the hearing. An order nisi of foreclosure had already been granted, setting out the terms under which any respondent could redeem the property by paying the required amount into court or to CIBC's counsel.

The applicant's bid for mortgage assignment and priority elevation

Huan Thanh Nguyen, the holder of the fourth and fifth mortgages, brought an application before Associate Judge Muir seeking an order that CIBC's first mortgage be assigned to him, and that his own fourth and fifth mortgages be elevated to first priority charges on the property. In essence, Mr. Nguyen sought to step into the shoes of the first mortgagee and place himself in priority ahead of the second and third mortgagees. He relied on s. 14(1) of the Law and Equity Act, which generally permits a mortgagor entitled to redeem to require the mortgagee to assign the mortgage debt and convey the mortgaged property to a third party of the mortgagor's choosing. He also pointed to paragraphs 4 and 5 of the order nisi, paragraph 4 being the important one, which on its face contemplated that any respondent who paid the required redemption amount would receive a reconveyance free and clear of all encumbrances in favour of the petitioner.

Opposition grounded in the redeem-up rule

Both CIBC and the second and third mortgagees opposed the application. Their primary argument was that granting the order would offend the well-established "redeem-up rule." They further submitted that this was a discretionary order and should not be granted if it would lead to significant abuse or mischief. The obvious concern, as identified by the court, was that the applicant sought to place himself in priority of the second and third mortgagees, and that having done so, the potential was that he would seek an order absolute and foreclose them off title.

The statutory and common law framework considered by the court

Associate Judge Muir noted that the cases referred to by the applicant in support of his application were decisions rendered in other jurisdictions with different statutory frameworks, and the court was not satisfied that it was appropriate to rely on them in those circumstances. The court focused on the decision of Master Robertson (now Associate Judge Robertson) in Scotia Mortgage Corporation v. Chin, 2022 BCSC 1763, which dealt quite extensively with the redeem-up rule. That decision drew on the ruling in Teevan v. Smith, (1882) 20 Ch. D. 724 (C.A.), which established that while every mortgagor is entitled to redeem, where there are several successor mortgagees, if a mortgagor wishes to redeem any anterior mortgage he must also redeem all who are between that mortgagee and himself. The court also considered Gulf Estates Ltd. v. Rix, 1985 CanLII 392 (BCSC), where Chief Justice McEachern confirmed that a mortgagee is bound to reconvey to the person best entitled to the estate and is not obliged to convey to any other person who by virtue of the conveyance would acquire the position of mortgagee in priority to persons better entitled to the legal estate.

The mischief doctrine as an independent basis for refusal

Even assuming the redeem-up rule did not bar the application, the court also considered the issue of mischief dealt with by Master Robertson at paragraphs 36 and 37 of her reasons in Scotia Mortgage. That decision cited Giroday Sawmills Ltd. v. Grun, 2002 BCSC 1694, where the petitioner had already assigned the mortgage, with the assignor seeking to substitute herself as a petitioner and seek order absolute of the subject property, where there were five subsequent mortgagees that would be vested off title. The court in Giroday found that the assigner was a straw man for the mortgagor such that the orders, if granted, would result in mischief.

Ruling and outcome

Associate Judge Muir dismissed Mr. Nguyen's application, concluding from the law with respect to "redeeming up" that the applicant was not entitled to the order sought, despite the wording of the order nisi. The court held that the order nisi could not undermine the clear law in this province that the applicant is not entitled to a redemption that would give priority to him in advance of others with a better interest in title. The mischief that would result, the court noted, was that if the order were granted it would give priority to the fourth and fifth mortgagee over the second and third mortgagees. On costs, the second and third mortgagees were awarded costs as set out in their mortgage terms, which should be added to their mortgages, as they were required to protect the mortgages outside of their own proceeding. CIBC was awarded its costs at Scale B. The court considered the matter somewhat novel and stated it would not ordinarily agree that special costs, as submitted by Olympia Trust, would be warranted absent whatever provisions there are in the mortgage. No exact monetary amount was specified in the judgment.