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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
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