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Aug 15, 2022

THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LXXVIII of a Series – Is Ontario still a Self-Help Remedy Jurisdiction – part 4

My previous post LXXVII continued this latest series commenting on the May 18, 2022, court case known as Zapfe Holdings v 1923159 Ontario Inc. This case ignored the long standing common law rule that has always allowed a commercial mortgagee (after default under its mortgage) to use self-help remedies by taking possession of the commercial property without a court order for possession, so long as the mortgagee acts peacefully or peaceably when so doing. This case had now been appealed to the Court of Appeal for Ontario.

At the Court of Appeal, Zapfe Holdings, on behalf of all mortgagees, will respectfully argue that the Learned Judge who made the May 18/22 ruling mentioned above, made the following errors of law:

  • she ignored the long established self-help remedy allowing the mortgagee to change the locks in order to physically take possession of commercial mortgaged property in a peaceful manner
  • she incorrectly implied that the mortgagor/owner in default had the right to withhold consent to the mortgagee taking possession
  • she incorrectly stated that the mortgagees were required to sue for possession, seek and obtained leave to issue a writ of possession, and utilize the services of the Sheriff to enforce the writ of possession, before attempting to take possession of the Mortgaged Property
  • she ignored the express provisions of the mortgage contract itself which allow the mortgagee to take possession after default
  • she negated centuries of common law to the contrary, and ignored the unambiguous provisions of subsection 7(a)(iv) of the Mortgages Act which provides ... “that, on default, the mortgagee shall have quiet possession of the land, free from all encumbrances…”
  • she also ignored the unambiguous provisions of subsection 7(1)1.(v) and (vi) of the Land Registration Reform Act which similarly give the mortgagee the right to possession of the mortgaged property following default
  • she erred in concluding that if she allowed the mortgagee to utilize self-help remedies, that could lead to “chaotic and unsafe circumstances”
  • she erred in not coming to the conclusion that in order for the mortgagee to have taken possession peacefully or peaceably, all that the mortgagee had to do was not commit a breach of the peace while taking possession
  • additionally, she erred in saying that the taking of possession by the mortgagee “may constitute a criminal offence”.

The next post will look at the recent Court of Appeal decision in the Hume case. In Hume, the trial judge made the same ruling that our judge did in the Zapfe matter (not allowing self-help and not allowing a mortgagee to take possession of a mortgaged property when the mortgage was in default). The Court of Appeal clearly said that Hume was incorrectly decided. This means that it is a virtual certainty that the Court of Appeal will also overturn the judge’s ruling in the Zapfe matter. Perhaps self-help is alive and well after all!

And always, this blog is intended for information purposes only. It is not legal advice and cannot be relied on as such. Nor is it a substitute for hiring your own legal counsel, who will be an essential member of your power of sale and mortgage default team. And lastly, this blog is just my opinion. I reserve the right to change my mind. And I reserve the right to be wrong. If you are looking for a copy of this endorsements, feel free to call me .... 416.662.9550

Be well and stay healthy


P.S. previous posts dealing with self-help remedies in mortgage remedy and power of sale enforcement include Post XXI and Post XXX and Post LXXIII and Posts LXXV, LXXVI and LXXVII