As the litigation dockets continue to grow now that courts are resuing services after being closed to anything but urgent matters during COVID-19, it will become imperative to avoid any unnecessary delays. A case decided by the Ontario Court of Appeal earlier this year should provide comfort to litigants that the ONCA is determined to keep matters moving despite the inevitable litigation strategy of delay many will employ as the economic impact of the pandemic lands.

Court Relies on Written Materials When Appellants Fail to Appear

The Appellants in the case at hand had requested an adjournment of their appeal three days before it was scheduled. The ONCA denied the adjournment, instead indicated it would proceed based only on the written materials provided if necessary. When the day came, the appellants were not present and in court for their appeal, nor did they send a representative on their behalf.

Lender of Second Morgage Enters into Power of Sale Proceedings

The appellant, an Ontario limited corporation we will call 183, owned real property, over which there was a first mortgage held by an institutional lender. 183 negotiated for a second mortgage on the property, guaranteed by K, the principle of 183. The second mortgage was held by Respondent RCM. 183 did this while the first mortgage was overdue and unpaid. K explained that he was unaware that the first mortgage had matured and that he had continued to make his monthly payments on that first mortgage. There was no evidence supporting this claim, and in fact, it contradicted his earlier statements that he thought 183 had renewed the first mortgage.

The second mortgage contained a provision that any default under a prior charge, as occurred here, meant that the second mortgage was also in default. As a result, RCM paid out the first mortgage and began power of sale proceedings with respect to the property.

RCM was successful at trial. The judge ordered 183 and K to pay out the mortgage balances, the interest charges and all enforcement fees. They were also to deliver vacant possession of the property to RCM. 183, and K appealed.

It’s hard to imagine more creative grounds of appeal than these:That RCM’s mortgage was void ab initio because:

1. RCM acted in a predatory manner knowing that the first mortgage was in default when it granted the second mortgage, and took advantage of the situation; and
2. RCM failed to conduct a proper due diligence check to ensure the first mortgage was in good standing;
3. As the first mortgage had matured before the second was granted.

The appeal was predictably denied, as these steps were precautions 183 should have taken prior to taking out a second mortgage, and were not the sole responsibility of the respondent.

Keeping the Process Fair in the Appellants’ Absence

The appellants were not present for the hearing of the appeal. They had previously been denied an adjournment request by the President of the panel. They were warned that if they did not appear on the date of the appeal that the panel would proceed on the written materials filed. They did not appear but did write the court asking again for an adjournment which was denied. 

The appeal then proceeded without them. As a further precaution against appearing to give any advantage to the respondent, RCM was not permitted to make any oral submissions. Although RCM was agreeable to this, it does show a determination by the ONCA to move matters along even where parties are unrepresented.

Although the merits of this appeal to the Ontario Court of Appeal (ONCA) were suspect, as were the requests for an adjournment, the procedure adopted by the court is informative and encouraging. With the wait for litigation continuing to grow, courts will need to adopt similar strategies going forward to avoid unnecessary delays whenever possible. Parties should be aware that they may face more resistance when seeking a delay, and prepare accordingly.

At Milosevic & Associates, our team of Toronto corporate commercial lawyers regularly represent clients in complex commercial litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including dealing with claims of loss from real estate transactions. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online to schedule a consultation.