Executive Summary: Key Legal and Evidentiary Issues

• Defendant claimed an oral agreement for indefinite interest-only payments, but it was unenforceable under the Statute of Frauds.

• Defendant’s ex parte CPL motion omitted critical facts, justifying the court’s decision to set aside the order and discharge the CPL.

• Plaintiff properly exercised the contractual right to peaceably take possession of the non-residential property after default.

• Defendant failed to respond to multiple written demands and was in default of the matured mortgage since 2019.

• The CPL obstructed the Plaintiff’s property sale and created disproportionate harm compared to the Defendant’s asserted interest.

• Court awarded possession to Plaintiff and dismissed Defendant’s motion with costs payable by Defendant.

Factual Background

This case involves a mortgage enforcement dispute between 2642948 Ontario Inc. (the Plaintiff), a holding company controlled by 83-year-old G-Lien Kwik, and Jonny’s Antiques Ltd. (the Defendant), represented by David Johnson.

In 2018, the Defendant agreed to purchase shares in the Plaintiff’s corporation. To finance the purchase, the Defendant entered into a vendor take-back mortgage secured against a commercial property at 10 Shakespeare Street, Ontario, where it operated an antiques business.

Key terms of the mortgage included:

• Principal: $385,000

• Maturity Date: July 10, 2019

• Interest: 2.5% semi-annually

• Monthly Payments: $802.08

• Standard Charge Terms Incorporated (Form 200033)

Following maturity, the Defendant ceased making full payments. After a single payment in September 2019, the Defendant only made interest-only payments, approximately every three months. The Plaintiff took no enforcement action during the COVID-19 pandemic, with Ms. Kwik testifying she gave the Defendant a “break” due to business hardship.

Despite a demand letter in July 2023 requiring full repayment by October 10, 2023, no principal payment was made. The Plaintiff then issued a Notice of Sale Under Mortgage and a Notice of Intention to Enforce Security under the Bankruptcy and Insolvency Act (BIA). The notices were sent to the Defendant’s registered address but returned unclaimed. However, evidence showed Mr. Johnson had received and reviewed the notices via his former lawyer.

After the 35-day notice period expired, the Plaintiff issued a Statement of Claim and made multiple attempts to serve it. On April 12, 2024, believing the property vacant, the Plaintiff lawfully entered the premises using a bailiff and changed the locks. Later that month, Mr. Johnson broke back into the property and was removed and arrested following a police intervention.

The Defendant then obtained an ex parte Certificate of Pending Litigation (CPL) on May 14, 2024, and claimed possession. The Plaintiff responded with a motion to set aside the CPL and for a declaration that it remained in possession of the property.

Court’s Decision

Justice E. ten Cate heard the motions and ruled in favour of the Plaintiff. Key findings included:

1. Ex Parte Order Set Aside Due to Material Non-Disclosure

The Defendant failed to disclose critical material facts during the ex parte motion before Justice Cook, including:

• The mortgage had matured in 2019.

• The Plaintiff had issued multiple written demands and served enforcement notices.

• The Defendant’s lawyer had forwarded these notices to Mr. Johnson, who therefore had actual notice.

• The claimed oral agreement with Ms. Kwik occurred after the date Mr. Johnson told the court it was made.

These omissions misled the court and justified setting aside the CPL and the ex parte order under Rule 39.01(6) of the Rules of Civil Procedure.

2. No Enforceable Oral Agreement

The Defendant’s assertion that an oral agreement allowed indefinite interest-only payments was rejected as unenforceable under the Statute of Frauds. Paragraph 19 of the standard charge terms requires any renewal to be in writing, which was never done.

3. Valid and Peaceable Possession by Plaintiff

The court found the Plaintiff lawfully took peaceable possession of the property, consistent with the mortgage’s standard charge terms and section 7(a)(iv) of the Mortgages Act.

The court emphasized that:

• The property was non-residential, despite having a residential portion.

• No one was present during the lock change.

• There was no violence or resistance.

• Mr. Johnson admitted that he resided elsewhere and operated by “appointment only.”

Thus, the Plaintiff exercised its contractual “self-help” right of possession without court order, as permitted by the mortgage terms.

4. Balancing of Harm and CPL Discharge

The court compared the harm to both parties:

• The Plaintiff faced imminent loss of a property sale due to the CPL, which would prevent recovery of the mortgage debt.

• The Defendant, who had delayed payment for five years, had no reasonable expectation of retaining the property.

The court concluded that the Plaintiff’s harm outweighed the Defendant’s and vacated the CPL accordingly.

Final Orders

Justice ten Cate ordered:

1. The ex parte Order of May 14, 2024, was set aside.

2. The Certificate of Pending Litigation was vacated and discharged from title.

3. 2642948 Ontario Inc. was declared in possession of the property.

4. The Defendant’s motion was dismissed.

5. The Defendant was ordered to pay costs, subject to further submissions if needed.

Conclusion

This case affirms key legal principles in mortgage enforcement:

• Oral agreements regarding land interests are unenforceable unless in writing.

• Ex parte motions require full and frank disclosure of all material facts.

• A mortgagee may take peaceable possession without a court order where the property is non-residential and vacant.

• Courts will discharge CPLs where they are obtained through misrepresentation and obstruct legitimate mortgage enforcement.

• While costs were awarded to the Plaintiff, the total monetary value was not determined at the time of the decision and would be set following submissions. No damages were awarded beyond costs and possession of the property.