Executive Summary: Key Legal and Evidentiary Issues

• CIBC obtained a single default judgment combining both a secured mortgage debt and an unsecured credit card debt against the defendants.
• CMHC's assignment policy requires a judgment covering only insured obligations before it will pay out a mortgage insurance shortfall claim.
• The combined judgment made CIBC ineligible to assign it to CMHC, blocking recovery of the deficiency on the secured debt.
• At issue was whether the court had authority under Rules 59.06(1) and 59.06(2) to set aside and bifurcate a valid default judgment into two separate judgments.
• No prior case law directly addressed the conversion of one valid judgment into two, requiring the court to apply the Rules by analogy under Rule 1.04.
• The defendants faced no substantive prejudice, as the two replacement judgments together mirrored the total amounts in the original judgment.

Facts of the case

Canadian Imperial Bank of Commerce ("CIBC") commenced proceedings against Girish Pillai and Sharon Pillai after both of the defendants' debts fell into default. The first and larger debt was secured by a mortgage on a residential property in Mississauga; the second was an unsecured credit card debt. The defendants failed to serve and file a statement of defence and were noted in default. On May 7, 2025, the Ontario Superior Court of Justice granted a default judgment requiring the defendants to pay CIBC $847,043.74 plus interest at CIBC's prime rate, costs of $1,346.04, and interest on costs at 5% per annum on the secured debt, as well as $16,600.84 plus interest at CIBC's prime rate on the unsecured credit card debt. Following judgment, CIBC commenced power of sale proceedings and sold the mortgaged property on November 10, 2025 for a net amount of $572,769, leaving a deficiency of $304,981.92 plus interest, legal fees, and expenses.

Policy terms at issue

The subject mortgage had been insured by CMHC. CMHC's policy requires the assignment of a judgment to it before paying out any insured mortgage shortfall. When CIBC sought reimbursement from CMHC for the deficiency, CMHC informed CIBC that it could not accept an assignment of the existing judgment because it captured both the insured secured mortgage debt and the uninsured credit card debt. As deposed by Jayson March, CMHC Senior Officer in Home Owner Operations, accepting such an assignment would place CMHC in the position of holding and enforcing rights over obligations it did not insure and for which it had not paid a claim — a result inconsistent with CMHC's statutory mandate and the terms of its mortgage loan insurance. CMHC's position was that it required a judgment dealing exclusively with the secured mortgage debt before it would release payment of any supplemental claim.

Court's reasoning and analysis

Justice Kurz acknowledged that no prior case directly addressed converting one valid judgment into two, and that the relief sought was not expressly contemplated by the Rules of Civil Procedure. The court nonetheless found two bases for granting relief. Under Rule 59.06(1), the court found that the original judgment contained an accidental omission, in that CIBC should have sought separate judgments for the secured and unsecured portions of its debt from the outset. Under Rule 59.06(2), the court found that CIBC had discovered after the judgment was issued that the judgment was in an improper form relative to CMHC's assignment requirements. The court applied Rule 1.04 to construe the Rules liberally and by analogy, concluding that bifurcating the judgment into two — which together encompassed only the relief originally granted — was fair, just, and proportional in the unusual circumstances. The court also noted that the defendants, having been noted in default and deemed to admit all allegations of fact in the statement of claim, faced no substantive prejudice, since one or two judgments totalling the same amount made no material difference to them. CIBC's counsel further undertook not to seek any additional costs in the enforcement of the unsecured judgment if the order was granted.

Ruling and overall outcome

The court granted CIBC the relief sought. The original default judgment dated May 7, 2025 was set aside, and the court ordered the Local Registrar to issue two replacement default judgments — a Secured Judgment and an Unsecured Judgment — each dated May 7, 2025, together replicating the full terms of the original judgment. The existing Writ of Seizure and Sale (execution number 25-0002483) was ordered to be updated accordingly and to continue in force under the Secured Judgment from its original issuance date of May 12, 2025. No costs of the motion were awarded. CIBC was the successful party; the order did not alter the total monetary amounts previously awarded but restructured them into two separate judgments to facilitate CIBC's CMHC insurance claim for the deficiency of $304,981.92 plus interest, legal fees, and expenses.