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Aug 27, 2022

THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LXXIX of a Series – Is Ontario still a Self-Help Remedy Jurisdiction – part 5

My previous post LXXVIII enumerated the errors that the Learned Judge made in the Zapfe Holdings v 1923159 Ontario Inc. decision. Unfortunately, Her Honour did not follow the common law rule that has always allowed a commercial mortgagee to take possession of commercial property after a default by the mortgagor - without a court order for possession.

Rather, the Learned Judge followed a recent Superior Court decision called Hume 2022 ONCA 360 which used the Criminal Code definition of “peaceable possession” to interpret whether the mortgagee had taken possession peacefully or peaceably, resulting in the Court misinterpreting the meaning of "taking possession peacefully" in the mortgage context. Bottom line was that the lower court judges in Hume and Zapfe both decided that the mortgagee did not take possession peaceably because of the mortgagor’s serious challenge of the mortgagee’s possession. In other words, the judges looked to the mortgagor’s feelings and intentions about losing possession of the mortgaged property as the bell weather for the propriety of the mortgagee’s actions when taking possession.

Of course, if the mortgagor’s feelings or intentions were relevant, then virtually no mortgagee would ever be permitted to take possession of any property. And that is just not the law in the mortgage remedy context.

Fortunately, the Ontario Court of Appeal agreed with the position that I took when arguing (and losing) the Zapfe case at first instance. The Court of Appeal released a new decision just a few weeks ago, in early August, 2002, in the Hume case at 2022 ONCA 575 in which the Court of Appeal made it clear, once and for all, that:

  • the judge in Hume (and Zapfe, one has to assume) should not have relied on the Criminal Code definition of peaceable possession
  • taking peaceable possession means taking possession of a property without violence or the threat of violence
  • a mortgagee cannot take possession peaceably if it engages in behaviour that is contrary to the Criminal Code, as such conduct would be self-evidently NOT PEACEABLE
  • there is no need for a mortgagee to have a writ of possession in order to take possession of most mortgaged properties

The Court will decide in future decisions (if appropriate) whether there is a difference in the meaning of peaceable possession in the residential and commercial contexts. And in the residential context, peaceable possession may also depend on whether the property is being lived in, occupied, vacant or abandoned, again, to be decided in the future.

Note that the appeal of the Zapfe decision is coming, but a date for oral argument has not been set. In Zapfe, the property is commercial, and so some of the residential issues noted by the Court of Appeal will not be resolved in the Zapfe decision. But I fully expect the Zapfe decision to closely follow the Hume Court of Appeal decision and confirm that self-help mortgage remedies are alive and well in Ontario! And that a writ of possession is not required for a mortgagee to take possession of mortgaged property when the mortgage is in default.

Next blog will try to explain the rationale for the Court of Appeal's decision in finding that the civil meaning of taking possession peaceably cannot be inferred by the Criminal Code's concept of peaceable possession. And as 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 LXXVLXXVI and LXXVII and LXXVIII