Executive Summary: Key Legal and Evidentiary Issues

• Entitlement depended on mortgagee status: Corbo and Daniels were the mortgagees under the first mortgage, and CMI High-Yield Opportunity Fund Corp. was the mortgagee under the second mortgage, but Canadian Mortgages Inc. was only the administrator of the mortgages and was not entitled to seek vacant possession under the mortgage deeds. 
• Default was established on both mortgages: the Court accepted evidence of missed payments under the first mortgage and found default under the second mortgage because it matured in March 2022 and was not redeemed or renewed.
• Notice compliance was disputed but upheld: although the original demand letter was deficient, the Court found that the notice ultimately given satisfied section 6 of the Conveyancing Act. 
• Contractual possession clauses were central: clause 8(a) gave the mortgagees a broad right to take possession after default and was not limited by clause 3. 
• The power of sale did not produce a valid sale: the Court found that the sale to Robert Regular was not perfected and that the purported sale to Canadian Mortgages Inc. was not in accordance with the auction terms or the Conveyancing Act. 
• Relief was granted without costs: Corbo, Daniels, and CMI High-Yield Opportunity Fund Corp. obtained vacant possession, but the Court made no order as to costs because of the mistakes in the Application process and the circumstances surrounding the power of sale process. 

Facts of the case

Sebastien Corbo, Douglas Daniels, Canadian Mortgages Inc., and CMI High-Yield Opportunity Fund Corp. applied for vacant possession of 16 Madison Place, Paradise, Newfoundland and Labrador. William Snook and Kimberley Ann Snook occupied the property as their matrimonial home. The Snooks admitted that the Applicants had provided financing to them and that the loans were secured by two mortgages on the property. A mortgage deed dated February 9, 2021 identified the Snooks as mortgagors and Corbo and Daniels as mortgagees. A second mortgage deed dated November 1, 2021 identified the Snooks as mortgagors and CMI High-Yield Opportunity Fund Corp. as mortgagee. The role of Canadian Mortgages Inc. and its right to seek vacant possession was one of the issues in the Application.

Evidentiary record and issues raised

The Application was supported by affidavits from Sonia Kumar, a default officer of Canadian Mortgages Inc., affidavits from Douglas Schipilow, counsel for the Applicants, and an affidavit from Sarah Fitzgerald, the lawyer retained to conduct a public auction of the property. The Response was supported by affidavits from Kimberley Snook and Robert Regular, counsel for the Snooks. The Snooks were permitted to cross-examine Kumar on her affidavits. The Court noted that the matter was not routine because it involved evidentiary issues concerning proof of default and notice, issues as to the identity of the mortgagees, interpretation of the Conveyancing Act, and a contested power of sale process arising from the Snooks’ solicitor bidding at the auction and the Applicants’ solicitor first accepting and later rejecting that bid. The Court also noted that the Application and supporting affidavits contained mistakes, including twice attaching the wrong mortgage documents and citing a section of a mortgage that was not contained in either mortgage deed.

Policy terms and mortgage clauses at issue

The Court reviewed clauses 3, 7, and 8 of both mortgages. Clause 3, entitled “Possession,” provided that until an event of default occurred in accordance with clause 7, the mortgagor might have possession of the lands and, upon direction by the mortgagor after such an occurrence, the mortgagees might enter and have quiet enjoyment of the lands. Clause 7, entitled “Default,” defined default to include failure to comply with any obligation to the mortgagees, including specifically default in any term of the commitment letter. Clause 8, entitled “Remedies,” provided that if the mortgagors defaulted or failed to rectify a default upon demand or requisition being made, the mortgagees could immediately exercise any remedy available at law or in equity, including taking possession of the lands. The Court held that clause 8(a) provided a broad remedy for the mortgagees to take possession and was not limited by the wording of clause 3.

Identity of the proper applicants

The Court found that the mortgagees of the first mortgage were Corbo and Daniels, and that the mortgagee of the second mortgage was CMI High-Yield Opportunity Fund Corp. The Court further found that Canadian Mortgages Inc. was not named as mortgagee under either mortgage deed and that the evidence did not support that it was a mortgagee. Kumar testified that Canadian Mortgages Inc. administered the first mortgage on behalf of Corbo and Daniels and the second mortgage on behalf of a pool of investors represented by a mortgage investment corporation. The Court therefore found that Canadian Mortgages Inc. was the administrator of the mortgages and was not entitled to demand vacant possession under the mortgages.

Default findings

The Applicants alleged that the Snooks defaulted because they failed to make the required mortgage payments. The Court found that the Applicants established default under the mortgages. With respect to the first mortgage, Kumar provided a list of seventeen missed payments between October 2021 and January 2023. The Court accepted Kumar’s evidence on default of the first mortgage. With respect to the second mortgage, Kumar acknowledged on cross-examination that because the second mortgage was entered into in November 2021 and prepaid for four months, the Snooks did not default in mortgage payments during the term of that mortgage. However, Kumar also attested that the Snooks made no payment on the second mortgage after March 2022, that the mortgage matured, and that it was not renewed. The Court accepted that evidence and found that the Snooks defaulted on the second mortgage because they did not redeem it when it became due and owing and it was not renewed.

Notice under the Conveyancing Act

The Snooks argued that the Applicants had not complied with section 6 of the Conveyancing Act because the notice did not specify the basis upon which a power of sale was sought, did not state the amount required to bring the mortgages into good standing, wrongly advised that they had 10 days to remedy the default rather than 30 days, and failed to properly identify which mortgage was required to be redeemed. The Court held that section 6 required notice sufficient to identify the property and the mortgages in question and also the amount owed together with interest. The Court found that the Applicants’ solicitor sent a demand letter on February 3, 2023 that was clearly deficient because it suggested only one mortgage was in arrears, identified Canadian Mortgages Inc. as the lender, did not advise how much money was owed, and provided 10 days rather than 30 days. However, the Court found that the accompanying Notice of Intent clarified that both mortgages were in default and identified both mortgages by date and registration number, and that subsequent communications between counsel provided payout letters, payment histories, and the amounts owed as of February 14, 2023. The Court held that, despite the errors in the original demand letter, the notice ultimately given was sufficient to satisfy section 6 of the Act.

Power of sale process

The Court then considered whether the power of sale process changed who was entitled to vacant possession because the property had been sold to a separate party. The terms of auction provided that the highest bidder would not necessarily be the purchaser, that the successful bid had to be accompanied by a 5% deposit, and that the mortgagee reserved the right to bid at the auction, reject any and all bids or tenders, reserve a decision on the highest bid received, and cancel the auction or tendering process. At the public auction on March 23, 2023, only Robert Regular and Kimberley Snook attended. Fitzgerald attested that she opened the auction and bid $273,750 on behalf of Canadian Mortgages Inc. Regular attested that Fitzgerald advised that $273,750 was the minimum bid and that he made that bid. Both Fitzgerald and Regular said that Fitzgerald accepted Regular’s bid. Afterward, Fitzgerald said she realized she had made a mistake because $273,750 was the minimum bid and not the mortgagee’s maximum bid. Fitzgerald then contacted Regular and said she could not accept his bid and was willing to continue the bidding process with him by telephone. The next morning, Regular placed a further bid of $275,000, which Fitzgerald rejected.

Findings on the attempted sale

The Court found that what happened in the power of sale process was troubling, but it could not find that the property was sold to Regular. Although the Court found that the initial offer made by Regular was accepted, it also found that when he was advised of Fitzgerald’s mistake, he chose to withdraw that bid and participate in the informal process initiated afterward by telephone. The Court noted that he did not try to enforce the $273,750 bid made at the auction and did not forward the required deposit. The Court was therefore satisfied that the sale of the property to Regular was not perfected. The Court then considered whether there had been a proper sale of the property to Canadian Mortgages Inc. or CMI High-Yield Opportunity Fund Corp. as stated in the sale notice. The Court found that the sale notice was internally inconsistent, that the evidence as to who purchased the property was conflicting, and that there was no evidence that the property was sold to the second mortgagee. It further found that any purported sale to Canadian Mortgages Inc. outside the public auction process would be a private sale and would have to comply with section 9(2) of the Act. Because there had been an offer at the public auction and that offer was not rejected for being unreasonably low, the Court found that the purported sale to Canadian Mortgages Inc. was not in accordance with the terms of the auction or the Act. The Court therefore held that no proper sale of the property occurred.

Outcome

The Court concluded that Corbo, Daniels, and CMI High-Yield Opportunity Fund Corp. established their right to vacant possession of the property. It also held that the power of sale process did not result in a proper sale of the property to any purchaser so as to divest their right to vacant possession. The Court stated that if there were any dispute among the successful Applicants as to priority or right to vacant possession, Corbo and Daniels, as the mortgagees of the first mortgage, would have vacant possession in priority to the second mortgagee.

Final result

The successful parties were Sebastien Corbo, Douglas Daniels, and CMI High-Yield Opportunity Fund Corp. The Court ordered that the Snooks provide vacant possession of the property within 45 days of the filing of the order. The Court made no order as to costs. No total monetary amount ordered in favour of the successful parties is stated in the decision.