Executive Summary: Key Legal and Evidentiary Issues

• TD Bank sought court approval to pay surplus mortgage sale proceeds of $133,386.94 into court under the Trustee Act and Rule 43.02.
   
• Multiple judgment creditors, including RBC, Capital One, and PRA Group, had registered writs against the defendant and claimed interests in the surplus funds.
   
• Canada Revenue Agency had registered two tax liens against the property, though the parcel register suggested these may have since been deleted from title.
   
• Evidentiary gaps regarding service, sale particulars, and priority required an earlier adjournment of the motion.
   
• Capital One's responding materials failed to address updated debt quantification, service efforts, and priority issues among competing creditors.
   
• Justice Perron ultimately granted TD's motion while adjourning the competing creditor claims pending further coordination among the parties.
   

Facts of the case

The Toronto-Dominion Bank brought a motion under the Trustee Act and Rule 43.02 of the Rules of Civil Procedure to pay surplus proceeds of $133,386.94 into court following the bank's sale of a mortgaged property owned by the defendant, Sakthivel Muthusamy. The bank gave notice of the motion to the defendant based on an updated skip trace of his last known address, and to three judgment creditors who had registered writs against him following an execution search conducted on January 14, 2025. RBC held a writ tied to an October 22, 2019 judgment of $19,124.63 plus costs and interest of 11.99% on the judgment and 3% on costs; the execution search indicated this writ expired June 17, 2026, and it was unclear whether RBC had renewed it. Capital One held a February 9, 2021 judgment of $9,620.53 plus costs and interest of 19,8%, with its writ set to expire in February 2027. PRA Group held a March 19, 2020 judgment of $14,119.40 plus costs and interest of 19.99%, also expiring in February 2027. The Canada Revenue Agency was also notified because a parcel register obtained on January 14, 2025 showed two tax liens registered against the property on June 3, 2019, in the amounts of $35,232.96 and $111,084.85 plus interest, though the same parcel register suggested the liens may have since been deleted from title. The motion had originally come before Justice Perron on November 13, 2025, at which point it was adjourned so TD Bank could provide further evidence on the sale and marketing process, its efforts to locate and serve the defendant, and the particulars of distributions made from the sale proceeds. RBC's initial request for payment of its judgment ahead of payment into court was also adjourned at that time due to insufficient evidence on priority among the creditors and concerns about RBC's service by mail given labour disruptions affecting Canada Post.

Policy and legislative provisions at issue

The motion engaged the Trustee Act and Rule 43.02 of the Rules of Civil Procedure, which govern a mortgagee's ability to pay surplus sale proceeds into court and be released from further liability. CRA's claimed priority over the liens invoked subsections 227(4) and (4.1) of the Income Tax Act and section 222 of the Excise Tax Act, with one lien asserting priority over the lesser amount and the other asserting priority over all encumbrances registered after the lien.

Reasoning and analysis

On the return of the motion, TD Bank filed revised materials addressing the evidentiary gaps the court had previously identified, including updated information on the sale and marketing process and further attempts to locate and serve the defendant. Justice Perron found this revised record sufficient to grant the bank's request, including extinguishing its liability regarding the property and proceeds. By contrast, RBC did not file updated materials and indicated it would bring a separate motion for payment out of court at a later date. Capital One filed a responding record confirming its judgment but, like RBC previously, failed to provide an updated quantification of its debt, evidence of efforts to locate and serve the defendant, or submissions addressing priority among the multiple competing creditors. The court observed that if CRA's liens have indeed been deleted from title, there may be sufficient surplus funds to satisfy the three execution creditors, but the evidentiary record was inadequate to make that determination at this stage. Justice Perron noted that these evidentiary shortcomings are common on interpleader motions and cause delay, and set out a series of practical recommendations for parties in future proceedings, including clearly specifying the relief and quantum sought, serving all potential claimants, providing evidence of valid and unexpired writs and updated debt totals, addressing priority issues with evidence or case law, and, where multiple claimants exist, meeting to attempt an agreed distribution before returning to court.

Ruling and overall outcome

Justice Perron granted TD Bank's motion for payment of the surplus proceeds into court, extinguishing the bank's liability with respect to the property and proceeds, and approved payment of the bank's costs of the motion, set at $4,000, from the surplus funds before the balance is paid into court. The bank's draft order was signed accordingly. RBC's and Capital One's requests for payment from the surplus proceeds were adjourned, with the court directing those claimants to coordinate the return of their motions for payment out of court after conferring with the other interested parties.