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Full text of "Report on section 20 of the Mortgages act.--"

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ONTARIO 



REPORT 

on 

SECTION 20 OF THE MORTGAGES ACT 



ONTARIO LAW REFORM COMMISSION 



DEPARTMENT OF JUSTICE 1 970 



The Ontario Law Reform Commission was established by section 1 
of The Ontario Law Reform Commission Act, 1964, for the purpose of 
promoting the reform of the law and legal institutions. The Com- 
missioners are: 

H. Allan Leal, Q.C, LL.M., LL.D., Chairman 
Honourable James C. McRuer, S.M., LL.D. 
Honourable Richard A. B^ll, P.C., Q.C. 
W. Gibson Gray, Q.C. 
William R. Poole, Q.C. 

Edward F. Ryan, Esq., LL.B., LL.M., is Counsel to the Commission. 
The Secretary of the Commission is Miss A. F. Chute, and its offices 
are located on the Sixteenth Floor at 18 King Street East, Toronto, 
Ontario, Canada. 




ONTARIO LAW REFORM COMMISSION 



PARLIAMENT BUILDINGS 
TORONTO 2 



To The Honourable A. A. Wishart, Q.C., 

Minister of Justice and 
Attorney General for Ontario. 



Dear Mr. Attorney: 

A submission has been made to the Commission that the provisions 
of section 20 of The Mortgages Act, R.S.O. 1960, c. 245 are deficient in 
a number of respects but particularly cause difficulties for the mortgagor 
who wishes to pay up his arrears and is met with a refusal by the mort- 
gagee to state the amount of the arrears and to accept any such payment. 
The tender of arrears may be made either to forestall sale or the com- 
mencement of an action by the mortgagee, or as a condition precedent 
to an application to have an action dismissed or proceedings stayed 
once the action has begun. 

Pursuant to section 2 (1) (a) of The Ontario Law Reform Commission 
Act, 1964, the Commission has considered the problems raised and now 
submits its report. 

The provisions of section 20 read as follows: 

"20. — (1) Notwithstanding any agreement to the contrary, where 
default has occurred in making any payment of principal or 
interest due under a mortgage or in the observance of any 
covenant in a mortgage and under the terms of the mortgage, 
by reason of such default, the whole principal and interest 
secured thereby has become due and payable, 

(a) at any time before sale under the mortgage or before 
the commencement of an action for the enforcement of 
the rights of the mortgagee or of any person claiming 
through or under him, the mortgagor may perform such 
covenant or pay the amount of moneys due under the 



[3] 



mortgage, exclusive of the money not payable by reason 
merely of lapse of time, and pay any expenses necessarily 
incurred by the mortgagee, and thereupon he is relieved 
from the consequences of such default; or 

(b) in an action for enforcement of the rights of the mort- 
gagee or of any person claiming through or under him, 
upon performance of such covenant or upon payment of 
the moneys due under the mortgage, exclusive of the 
money not payable by reason merely of lapse of time, 
and upon payment of the costs of the action, the mort- 
gagor may apply to the court for relief, and 

(i) if judgment has not been recovered the court 
shall dismiss the action, or 

(ii) if judgment has been recovered but no sale or 
recovery of possession of the land or final fore- 
closure of the equity of redemption has taken 
place the court may stay proceedings in the 
action. 

(2) Notwithstanding subclause ii of clause b of subsection 1 
where judgment has been recovered and recovery of possession 
of the land has taken place, the court may stay proceedings in 
the action upon the application of a person having a subsequent 
lien, charge or encumbrance, made under subsection 1 within 
ten days after service of notice of the judgment has been made 
upon him. 

(3) Where proceedings have been stayed under subclause ii of 
clause b of subsection 1 or under subsection 2 and default 
again occurs under the mortgage, the court upon application 
may remove the stay. 

(4) This section applies to mortgages existing on or made after 
the 2nd day of April, 1953." 

In the factual situation envisaged by section 20 (1) (a) relief may 
be obtained by the mortgagor by paying the arrears and any expenses 
necessarily incurred by the mortgagee arising out of the mortgagor's 
default. There is nothing to compel the mortgagee to give a statement 
of the arrears and the mere fact that the mortgagor holds a copy of the 
mortgage instrument does not necessarily mean he is capable of cal- 
culating the exact amount of the arrears. 

Accordingly the Commission recommends that section 20 be 
amended to enable the mortgagor to procure a statement of arrears 
from the mortgagee. It is suggested that section 20 of The Mortgages 
Act might be recast to read as follows: 



"20. — (1) Notwithstanding any agreement to the contrary, where 
default has occurred in making any payment of principal or 
interest due under a mortgage or in the observance of any 
covenant in a mortgage and under the terms of the mortgage, 
by reason of such default, the whole principal and interest 
secured thereby has become due and payable, 

(a) at any time before sale under the mortgage; or 

(b) before the commencement of an action for the enforce- 
ment of the rights of the mortgagee or of any person 
claiming through or under him, 

the mortgagor may perform such covenant or pay the amount 
due under the mortgage, exclusive of the money not payable 
by reason merely of lapse of time, and pay any expenses 
necessarily incurred by the mortgagee, and thereupon he is 
relieved from the consequences of such default. 

(2) The mortgagor may, by a notice in writing, require the mort- 
gagee to furnish him with a statement in writing, 

(a) of the amount of the principal or interest with respect 
to which the mortgagor is in default; or 

(b) any expenses necessarily incurred by the mortgagee; or 

(<:) of the nature of the default in the non-observance of the 
covenant. 

(3) The mortgagee shall answer a notice given under subsection 2 
within fifteen days after he receives it, and, if without reason- 
able excuse he fails so to do or his answer is incomplete or 
incorrect any rights which he may have to enforce the mortgage 
shall be suspended until he shall have complied with the pro- 
visions of subsection 2." 

Section 20 (1) (b) of The Mortgages Act involves the case where 
relief may be granted to a mortgagor where an action has already been 
commenced to enforce the rights of the mortgagee. Since these cases 
are dealt with in the Master's Office, the matter was referred for comment 
to A. Foster Rodger, Esq., Q.C., the Senior Master. The Commission 
was informed subsequently that the matter had been considered by the 
Standing Subcommittee of the Rules Committee, and the Rules Com- 
mittee itself, and that the question of the unavailability of a statement 
of arrears was only one of the problems created by the langugage of 
section 20 (1) (b).' 

The Rules Committee concluded that instead of the section requiring 
the mortgagor to pay or tender the arrears and costs prior to making 
an application to the court to have the action dismissed or stayed, as 
the case may be, it would be preferable to have the section amended to 
allow the mortgagor to apply to the court for relief conditional upon 
payment of the arrears and costs. 



Once an action has been commenced there are distinct advantages 
in having these matters dealt with in an application to the court in the 
presence of the parties. The record will contain an endorsement of the 
settlement and this will ensure that the court is informed of the fact 
and details of the settlement and will preclude the mortgagee from 
proceeding subsequently under the same writ but based on a different 
default. 



The existing provisions of section 20 (1) (b) require the mortgagor 
to pay the arrears and costs as a condition precedent to applying for 
relief under the section. Since the Rules Committee has recommended 
that the granting of relief be made conditional upon payment of the 
arrears and costs, they also recommend that the application of the 
mortgagor must be accompanied by payment into court of the sum of 
$100 to the credit of the action as security for costs. 

The Rules Committee has recommended that section 20 (1) (b) be 
amended to read as follows: 

"in an action for enforcement of the rights of the mortgagee 
or of any person claiming through or under him, the mortgagor, 
upon payment into court of the sum of $100 to the credit of 
the action as security for costs, may apply to the court and, 
conditional upon performance of such covenant or upon pay- 
ment of the money due under the mortgage, exclusive of the 
money not payable by reason merely of lapse of time, and upon 
payment of the costs of the action, the court 

AJOT 

(a) shall dismiss the action if judgment has/been recovered, 
or 

(b) may stay proceedings in the action, if judgment has been 
recovered, but no sale or recovery of possession of the 
land or final foreclosure of the equity of redemption 
has taken place." 



The Commission concurs in these recommendations except that the 
Honourable J. C. McRuer would delete the requirement that the mort- 
gagor must pay into court the sum of $100 as security for costs before 
he may avail himself of the right to apply to the court for relief under 
the proposed section. He emphasizes that before effective relief can 
be granted by the court the covenant must be performed or the money 
due under the mortgage must be paid together with the costs of the 
action. His view is that the requirement that $100 be paid into court 
as a security for costs is in the nature of a penalty to deter mortgagors 
from availing themselves of the benefits provided by the section. He 
also observes that in most cases mortgagees will have ample security 
for costs in the equity of redemption. His view is that the ordinary 
rules as to when security for costs should be required should apply to 
applications under the proposed section. 



In view of the amendments which the Commission has recommended 
to section 20 (1) (a), it also recommends that section 20 (1) (b) be 
renumbered section 20A (1) and that the remaining subsections (2) and 
(3) of section 20 appear as part of the new section 20A. 

The Standing Subcommittee of the Rules Committee has taken the 
position that if section 20 is amended as proposed in this report, then a 
new rule should be added as Rule 491a reading as follows: 

"491a. Upon an application under section 20 of The Mortgages Act, 
the court may require the mortgagee to prove the moneys due 
under the mortgage, exclusive of the money not payable by 
reason merely of lapse of time and may tax the costs of the 
action." 

In addition it is recommended by the Standing Subcommittee that an 
additional clause be added to " Warning to Defendant" in Form 8 as 
follows : 

"Note — In a mortgage action add: and take notice that 

the defendant may be entitled to apply to the court for relief 

under section 20 of The Mortgages Act." 

The Commission concurs in both these recommendations and wishes to 
take this opportunity of thanking the Rules Committee and the Senior 
Master for their helpful co-operation. 



Summary of Recommendations 

The Commission recommends: 

1. That section 20 of The Mortgages Act, R.S.O. 1960, c. 245 be amended 
to read as follows: 

"20. — (1) Notwithstanding any agreement to the contrary, 
where default has occurred in making any payment of 
principal or interest due under a mortgage or in the 
observance of any covenant in a mortgage and under the 
terms of the mortgage, by reason of such default, the 
whole principal and interest secured thereby has become 
due and payable, 

(a) at any time before sale under the mortgage, or 

(b) before the commencement of an action for the en- 
forcement of the rights of the mortgagee or of any 
person claiming through or under him, 

the mortgagor may perform such covenant or pay the 
amount due under the mortgage, exclusive of the money 
not payable by reason merely of lapse of time, and pay 
any expenses necessarily incurred by the mortgagee, and 
thereupon he is relieved from the consequences of such 
default. 



8 

(2) The mortgagor may, by a notice in writing, require the 
mortgagee to furnish him with a statement in writing, 

(a) of the amount of the principal or interest with 
respect to which the mortgagor is in default; or 

(b) any expenses necessarily incurred by the mortgagee; 
or 

(c) of the nature of the default in the non-observance of 
the covenant. 

(3) The mortgagee shall answer a notice given under 
subsection 2 within fifteen days after he receives it, and, 
if without reasonable excuse he fails so to do or his answer 
is incomplete or incorrect any rights which he may have 
to enforce the mortgage shall be suspended until he shall 
have complied with the provisions of subsection 2." 

2, That a new section 20A be added to The Mortgages Act, R.S.O. 
1960, c. 245 reading as follows: 

"20A. — (1) Notwithstanding any agreement to the contrary, 
where default has occurred in making any payment of 
principal or interest due under a mortgage or in the 
observance of any covenant in a mortgage and under the 
terms of the mortgage, by reason of such default, the whole 
principal and interest secured thereby has become due 
and payable, in an action for enforcement of the rights of 
the mortgagee or of any person claiming through or under 
him, the mortgagor, upon payment into court of the sum 
of $100 to the credit of the action as security for costs, 
may apply to the court and, conditional upon performance 
of such covenant or upon payment of the money due under 
the mortgage, exclusive of the money not payable by 
reason merely of lapse of time, and upon payment of the 
costs of the action, the court i,*-r- 

(a) shall dismiss the action if judgment has/been 
recovered, or 

(b) may stay proceedings in the action, if judgment has 
been recovered, but no sale or recovery of possession 
of the land or final foreclosure of the equity of 
redemption has taken place. 

(2) Notwithstanding clause b of subsection 1 where judgment 
has been recovered and recovery of possession of the land 
lias taken place, the court may stay proceedings in the 
action upon the application of a person having a sub- 
sequent lien, charge or encumbrance, made under subsec- 
tion 1 within ten days after service of notice of the judgment 
has been made upon him. 



(3) Where proceedings have been stayed under clause b of 
subsection 1 or under subsection 2 and default again 
occurs under the mortgage, the court upon application 
may remove the stay." 



3. That a new rule be added to the Rules of Practice of the Supreme 
Court of Ontario reading as follows: 

"491a. Upon an application under section 20A of The Mortgages 
Act, the court may require the mortgagee to prove the 
moneys due under the mortgage, exclusive of the money 
not payable by reason merely of lapse of time and may 
tax the costs of the action." 



4. That an additional clause be added to "Warning to Defendant" 
in Form 8 reading as follows: 

"Note-- In a mortgage action add: and take notice 
that the defendant may be entitled to apply to the court 
under section 20A of The Mortgages Act to be relieved of 
the consequences of his prior default." 



All of which is respectfully submitted, 



H. ALLAN LEAL, 

Chairman. 



JAMES C. McRUER, 

Commissioner. 



RICHARD A. BELL, 

Commissioner. 



W. GIBSON GRAY, 

Commissioner. 



WILLIAM R. POOLE, 

Commissioner. 



March 12, 1970. 





Date Due 




































































































































(Hf 


CAT. NO. 23 2 


33 PRINT 


EH IN U.S.A. 



YORKUNIV fY LAVS/