Alberta Treasury Branches v. Papineau, 2011 ABQB 37

Court of Queen ’ s Bench of Alberta Citation: Alberta Treasury Branches v. Papineau, 2011 ABQB 37 Date: 20110125 Docket: 1003 07841 Registry: Edmonton Between: Alberta Treasury Branches Plaintiff - and - Larry Daniel Papineau Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr.

Justice Donald Lee _______________________________________________________ Introduction [ 1 ] This is an appeal from the Master’s Order by the second mortgagee and subsequent encumbrancer, Sheri Couprie, of that portion of the Master’s Order granted on September 28, 2010 which sets out the amount of the mortgage indebtedness to the Plaintiff. One of the grounds of appeal is that the Master was not provided full and complete information by counsel for the Plaintiff Alberta Treasury Branches (“ATB”), and therefore made an erroneous finding of fact.

Specifically it is alleged that counsel for the ATB withheld material facts from the Court that were known to him that would have enabled the Court to make an informed decision, and that the lawyer for the ATB misled the Court, both actions being contrary to the Code of Professional Conduct , c. 10, s.s. 8 and 14.

[ 2 ] These allegations, and the Appeal itself are vigorously contested by counsel for the ATB.

Analysis [ 3 ] The Master’s Order Nisi/Order for Sale in this matter granted on September 28, 2010 declared that there was due and owing to the ATB as of September 27, 2010 the sum of $139,966.11 plus costs, and that that amount would be realized by a sale of the lands with a 6 month redemption period. [ 4 ] The ATB holds the first mortgage pursuant to a Loan Agreement and Memorandum of Mortgage originally made in February 2005 for $84,870, which amount was advanced in full by the Plaintiff. [ 5 ] A subsequent agreement in writing dated February 8, 2005 resulted in further funds being lent to the Defendant increasing his indebtedness under the terms of the mortgage to $127,500. [ 6 ] A Personal Line of Credit Agreement and Mortgage Amending Agreement (hereinafter referred to as “HELOC”) resulted in further funds being lent to the Defendant under security of this land mortgage, which increased the principal sum to $134,250 in January 2006. [ 7 ] These Agreements are described in the Affidavit of Default sworn by the Plaintiff’s representative on August 20, 2010.

The Plaintiff’s Affidavit of Default ends with the following paragraphs 15 to 19 which describe the contentious items which the Master’s Order added to the Defendant’s indebtedness under the mortgage:– 15. There is now justly and truly owing to the Plaintiff under and by virtue of the Pass Account Overdraft the sum set forth in Exhibit “F” annexed to this my Affidavit. 16. The Defendant is further indebted to the Plaintiff pursuant to a MasterCard Agreement (the “MC Agreement”). 17.

There is now due and owing to the Plaintiff under the said MC Agreement, the sum set forth in Exhibit “G” annexed to this my Affidavit. 18. Speaking positively for myself, and to the best of my knowledge, information and belief as to other person, I further say that the Plaintiff has not, nor hath nor have any person or persons by its order or for its use, received the said sum of any part thereof, nor any security whatsoever theretofore, save and except the said Mortgage. 19.

All agreements referred to herein are secured [sic] the Plaintiff’s mortgage. [ 8 ] Exhibit “F” referred to in that Affidavit of Default simply states the following:– Pass Account Overdraft as at August 20, 2010 $13,294.33

Total Balance as at August 20, 2010 $13,294.33 Current Interest Rate: 19.25% Current Per Diem: $6.52 [ 9 ] Exhibit “G” similarly is a very brief description of the MasterCard Agreement reads as follows:– MasterCard Agreement as at August 20, 2010 $5,105.02 Total Balance as at August 20, 2010 $5,105.02 Current Interest Rate: 18.9% Current Per Diem: $2.58 [ 10 ] The primary reference to what otherwise would be personal debts of the Defendant being secured under the Plaintiff’s mortgage is contained in paragraph 19 at the very end of the Affidavit of Default, and it purports to be a statement of fact without any further basis in support of that assertion that “All agreements referred to herein are secured by the Plaintiff’s mortgage”. [ 11 ] In fact it was those amounts related to the Pass Account and the MasterCard Account being secured by the ATB mortgage that was the subject of a number of emails between counsel for ATB and counsel for the second mortgagee both before, during and after the application before the Master of September 28, 2010:– Sent: September 17, 2010 11:28 AM To: Chris Horvath Subject: ATB v.

Papineau Chris, I have your fax of September 16. Given the amount of equity in the subject property, an application to shorten the redemption period would be futile. That being the case, we will be seeking a 6-month redemption period. Hopefully within that period of time you will have the place sold and my client’s mortgage paid. From: Chris Horvath Sent: September 24, 20W 12:02 PM Subject: RE: ATB v. Papineau Thanks for the attached information.

My client also seeks some assurance that the amounts you are seeking relative to the Pass account ($13,294.33) and the Master Card account ($5,105.02) do not take priority over her mortgage. As these accounts are not secured on title, they may not be paid in preference to my client’s mortgage. Please confirm.

Also, are you able to advise as to the amount required to bring the mortgage to your client into good standing? My client may be interested in bringing the account into good standing however, there is concern that funds may be readvanced on the line of credit portion of the mortgage. Are you able to advise that upon bringing the mortgage into good standing there will not be a readvance to Mr. Papineau? Thanks you in advance for your input. Chris Horvath Pefans Horvath Sent: September 28, 2010 8:43 AM To: Chris Horvath Subject: ATB v.

Papineau Chris, further to your email from Friday, ATB’s position is that the mortgage secures indebtedness of the mortgagor up to $134,250 of principal. The mortgage refers to all present and future liabilities and indebtedness of the mortgagor. That being the case, we feel the entire amount owing by Mr. Papineau is secured in first position on the title. We will organize a statement for you setting out the arrears for the mortgage. To ensure no further funds are advanced under the line of credit, it will have to be fully paid and closed. We will provide you figures in the next week.

From: Chris Horvath Sent; September 28, 2010 5:51 PM Subject: RE: ATB v. Papineau I am concerned with your reply below as I disagree that the entire amount owed by Mr. Papineau is secured by the mortgage. Did you proceed today in light of my objection? If so, may I have a copy of the Order? I agree that the balances under the mortgage and line of credit are in priority to my client’s mortgage. The balances of these accounts are contained in Exhibit “0” of the Affidavit of Default.

However, it seems that the Pass Account overdraft and the Master Card account are two separate and independent agreements between your client and Mr. Papineau and these accounts are not secured under the mortgage. Indeed, no reference is made to the mortgage in the Pass Account overdraft agreement and you have not included the Mastercard agreement as evidence that it is secured under the mortgage. As such, I don’t see how these accounts take priority over my client’s mortgage. I understand your reference to the mortgage serving to secure all present and future debts between your client and Mr.

Papineau however, this is not what the mortgage says in context, It says that the mortgage secures all present and future financial indebtedness “which the Mortgagor and Mortgagee agree in writing will be secured by this mortgage (all such present and future indebtedness is hereinafter called the “Indebtedness”). The Affidavit of Default does not disclose such agreement and I want to ensure that if you obtained an Order today, such Order does not include the overdraft and Mastercard as amounts owed under the mortgage. Christopher W. Horvath Pefanis Horvath

From: Chris Horvath Sent: September 30, 2010 4:30 PM Subject: FW: ATB v. Papineau I haven’t heard from you relative to my email below. Can you advise what occurred on Tuesday and provide a copy of any Order granted? If the pass account overdraft and Mastercard amounts were added to the mortgage, please advise if there is any authority for this. If not, I will be looking to appeal any such Order. Christopher W. Horvath Pefanis Horvath Sent: October 4, 2010 3:58 PM To: Chris Horvath Subject: ATB v.

Papineau Chris, further to our telephone conversation this afternoon, I confirm that we are attempting to speak with Mr. Papineau to determine his position in regards to the Overdraft account and MasterCard being incorporated into the balance secured by the mortgage. As I advised, the Order Nisi granted by the Court last week has these products in the total balance. Your point is well taken that in order for the mortgagee to have the two noted accounts included in the mortgage balance, we need to demonstrate the authorization of Mr. Papineau. Once we hear from him, we will know how to deal with this situation.

If Mr. Papineau confirms that he wants the two accounts included under the mortgage balance, I will provide you with that information and we would then intend on relying upon the Order granted last week. In order to ensure you are not forced to appeal that Order at this time, I confirm that I will not take the position that your appeal is out of time should this issue not be addressed for the next few weeks. On the other hand, if Mr.

Papineau does not want these two accounts included in his mortgage balance, I intend on seeing a Master to have the initial Order Nisi set aside, and replaced by one with the same effective date, but with a reduced balance declared due and owing under the mortgage. That Order will include a judgment against Papineau for the overdraft and the MasterCard balances. I trust this will satisfy your concerns about the impending appeal deadline. We certainly do not wish that you have to hurry in an appeal where one is not necessary. From: Chris Horvath Sent: Tuesday, October 05, 2010 3:55 PM Subject: RE: ATB v.

Papineau Thank you for your email. Please note that I have attached a copy of my Notice of Appeal. I have sent same for filing and I will provide a filed copy to you when available. Notwithstanding our conversation yesterday, I proceeded in this manner as I am concerned that we may not have the same understanding as to the future course of this matter. Out of an abundance of caution I have sent the Notice of Appeal for filing - please note that the return date is January 19, 2011.

My primary concern arises out of your stated plans to seek Mr. Papineau’s consent to include the overdraft and Mastercard accounts in his mortgage balance. If you succeed in obtaining such consent, the result is a ‘fraudulent preference” at the expense of my client. As such, I hereby request that you not proceed with your efforts to have Mr. Papineau consent to the inclusion of the overdraft and Mastercard accounts in his mortgage indebtedness.

Perhaps a better solution, at this point, is for you to take steps to vary the Order so as to exclude the overdraft and the Mastercard account balances from being included in the mortgage balance. Based on our conversation of yesterday, you are prepared to pursue this option but, only if Mr. Papineau refuses to consent to the inclusion of the two account balances. I am of the opinion that at this stage and in these circumstances, Mr. Papnieau’s consent is irrelevant and therefore, I ask you to reconsider the contingency you have placed on seeking a variation of the Order.

Finally, I have made several prior requests for a copy of the Order but, I have not yet received a copy, kindly advise if there is some issue which prevents the delivery of this document to me. Otherwise, please provide a copy of the Order to me immediately. Christopher W. Horvath Pefanis Horvath Sent: October 6, 2010 11:39 AM To: Chris Horvath Subject: RE: ATB v. Papineau There is nothing fraudulent about Mr. Papineau agreeing to a consent judgment when in fact he owes the money and it is an unsecured liability.

Such judgment would be registered as a writ of enforcement on title to the property, subject to whatever encumbrances are then registered against title. That is my focus at this point. There is nothing in the mortgage that says when he has to agree that a liability to ATB is secured so I can’t agree with you that it would be a fraudulent preference for him to do that at this point. The subsequent encumbrancer funded their mortgage in the face of an agreement that referred to all present and future liabilities.

I doubt that mortgagor sought a statement from ATB or its customer as to the extent of liability at the time of funding the second mortgage. If that is the case, I believe the argument that it would be improper for Papineau to do so now is weakened. Once we have had our discussions with Papineau, I will be back in touch with you. From: Chris Horvath Sent: October 6, 2010 11:00AM Subject: Notice of Appeal Attachments: SCAN2768_000.pdf Has your client had an opportunity to consider my request from yesterday?

Notwithstanding that the redemption period on my action expires next month, I hope to have the issue of the amount owed to your client resolved as soon as possible. Also, I await delivery of the Order that was granted. Finally, please find attached the filed Notice of Appeal. Christopher W. Horvath Pefanis Horvath [ 12 ] Appeals from the Master are now based “on the Record”, and the Transcript of the Proceedings of September 28, 2010 before the Master was extremely short. It is clear that ATB’s counsel did not refer to the previous emails and discussions with counsel for the second mortgagee.

The Transcript reads as follows:–

MASTER WALLER: Alberta Treasury Branch and Larry Papineau COUNSEL: This is a foreclosure on a conventional first mortgage with some associated products. Submissions by Counsel (Application) COUNSEL: We’re seeking an order nisi order for sale. The defendant was noted in default on the 9th of July and we have good service of today’s application. We posted it to the door of the subject premises and the mortgagor and I had a nice conversation yesterday morning. He understands what’s going on. The market value of this property is $270,000.

The amount that is owing to the Treasury Branches is $140,000 and so we are seeking an order nisi with a six month redemption period followed by 90 day listing period at the market value or such higher amount as the listing realtor deems appropriate. Ruling MASTER WALLER: That is fine. COUNSEL: Thank you Master. [ 13 ] One of the issues now before me is that counsel for ATB made no reference to the emails and discussions in dispute in his representations before the Master.

Counsel for the second mortgagee/subsequent encumbrancer now submits this violates the Code of Professional Conduct in that the Master was not aware of all material facts known to the lawyer that would enable the Court to make an informed decision [s. 8,

Chapter 10]; and that the lawyer misled the Court in not advising the Court of those material facts [s. 14,

Chapter 10]. [ 14 ]

Section 8,

Chapter 10 of the Code of Professional Conduct of the Rules of the Law Society of Alberta reads as follows:– 8. In an ex parte proceeding, a lawyer must (subject to confidentiality - see Rule #7 of

Chapter 7, Confidentiality ) inform the court of all material facts known to the lawyer that will enable the court to make an informed decision, whether or not the facts are adverse. [ 15 ] I agree with counsel for ATB that strictly speaking this Rule does not apply in his application before the Master because he was not making an ex parte application, but rather one in which all parties were served. Nevertheless Rule 14 of

Chapter 10 does apply to all applications, and it reads as follows:– 14. A lawyer must not mislead the court nor assist a client or witness to do so. [ 16 ] In this regard, counsel for ATB argues that the Court was not misled, and in any event he has no duty to advise the Court of the subsequent encumbrancer’s position, or the discussions and emails he had with counsel for the subsequent encumbrancer. If opposing counsel wanted to make that argument, he should have appeared himself and done so.

[ 17 ] Although not cited by counsel for either party, I conclude that part of the Commentaries for Rule 14 which the subsequent encumbrancer alleges counsel for ATB breached are helpful in this matter and they read as follows:– R.14 A lawyer must not mislead the court nor assist a client or witness to do so. C.14.1 Misrepresentation by lawyer: It is an obvious contravention of Rule #14 for an advocate to lie to the court. The rule applies as well, however, to an indirect misrepresentation.

For example, a lawyer may not respond to a question from the court in a technically correct manner that creates a deliberately misleading impression (see Rule #16(b)). On the other hand, subject to Rule #8, a lawyer is not required to inform the court of facts that should have been brought forth by opposing counsel. If it becomes apparent that the court is uninformed or misinformed on a factual matter through no fault of the lawyer or the lawyer's client or witness, a lawyer is justified in remaining silent. An example is failure of the Crown to raise the prior record of a criminal defendant.

There is no duty on defence counsel to bring such a record to the court's attention.

In response to direct questioning by the court on this issue, counsel is not required to reply. (see Rule #16(a)) [ 18 ] Based on this Commentary, a lawyer cannot respond to a question from the Court in a technically correct manner that creates a deliberately misleading impression, but the Court in this case had no questions for counsel because the Master was likely functioning under certain assumptions, one of which arguably was that the Court would be informed of anything material particularly as it related to the Affidavit of Default. [ 19 ] However as the Commentary also points out, subject to Rule 8 which deals with ex parte applications which this technically is not, a lawyer is not required to inform the Court of facts that should have been brought forward by opposing counsel, and the lawyer is justified in remaining silent if it becomes apparent that the Court is uninformed or misinformed on a “factual matter” through no fault of the lawyer or the lawyer’s client or witness. [ 20 ] One of the issues however that this Commentary raises is whether the Court is uninformed or misinformed in the present appeal on a “factual matter”, or whether it is some other matter that the Court is uninformed or misinformed about, specifically the application of the law as it relates to the within dispute about the amount secured under the ATB mortgage. [ 21 ] I note as stated in Legal Ethics and Professional Responsibility , Second Edition, Irwin Law Inc. by Allan C.

Hutchinson at pages 93 to 96 a lawyers duty may extend even to non-clients or parties adverse in interest as the following passage indicate:– . . . As regards professional duties, lawyers cannot be said to hold no particular ethical obligations to non-clients. Although the rules leave no doubt that lawyers’ function is to be “openly and necessarily partisan” (IX, Commentary, s. 17), there is the general requirement that “the lawyer’s conduct toward all persons with whom the lawyer comes into contact in practice should be characterized by courtesy and good faith” (XVI).

While the requirement of ‘good faith’ cannot be said to impose a fiduciary duty to ‘all persons with whom the lawyer comes into contact’, it does demand that lawyers do not treat non-clients “as if they were barbarians and enemies.” 7 This is no longer, if it ever was, an acceptable or ethical way to proceed. A preferable approach is to note that, although a legal professional should exhibit special care towards clients, a lawyer must still show a general care to and for others.

Indeed, the professional rules state that a lawyer must, among other things, be “accurate, candid, and comprehensive” with an unrepresented adversary (IX, Commentary, s. 17); not take advantage of “slips, irregularities or mistakes ... not going to the real merits” (XVI, Commentary, s. 4); bring all legal authority “directly in point” to the court’s attention (IX, Commentary, s. 2(h)); and not impose on other lawyers “impossible, impractical or manifestly unfair conditions of trust, including those with respect to time restraints and the payment of penalty interest” (XVI, Commentary, s. 4).

All in all, it is incumbent on lawyers to deal with everyone with a genuine, if variable, sense of ethical integrity and professional regard. __________________

7 C.P. Curtis, “ The Ethics of Advocacy ” (1951) 4 Stan. L. Rev. 3 [ 22 ] In this particular appeal counsel for the subsequent encumbrancer second mortgagee submits that she could not have been specifically aware from the state of the title that any home equity line of credit, Pass Account, overdraft and MasterCard debts were secured under the ATB mortgage.

As such it is submitted that the present addition of those amounts by ATB would constitute a preference under the Fraudulent Preferences Act , R.S.A. 2000, c.F-24, specifically s. 3 which reads as follows:– Preferential effect 3 Subject to sections 6 to 9, every gift, conveyance, assignment, transfer, delivery over or payment of goods, chattels or effects or of bills, bonds, notes or securities or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made (

a) by a person at a time when the person is in insolvent circumstances or is unable to pay the person’s debts in full or knows that the person is on the eve of insolvency, and (

b) to or for a creditor and having the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, is, in and with respect to any action that within one year after the transaction is brought to impeach or set aside the transaction, void as against the creditor or creditors injured, delayed, prejudiced or postponed. [ 23 ]

Section 53 and 54 of the Alberta Land Titles Act , R.S.A. 2000, c.L-4 makes clear the necessity of registration and the effect of such registration, or lack thereof, on subsequent encumbrancers as follows:– Necessity of registration 53 After a certificate of title has been granted for any land, no instrument is effectual to pass any estate or interest in that land (except a leasehold interest for 3 years or for a less period) or to render that land liable as security for the payment of money, unless the instrument is executed in accordance with this Act and is registered under this Act, but on the registration of any such instrument in the manner hereinbefore prescribed the estate or interest specified in the instrument passes or, as the case may be, the land becomes liable as security in manner and subject to the covenants, conditions and contingencies set out and specified in the instrument or by this Act declared to be implied in instruments of a like nature.

Effect of registration 54 So soon as registered every instrument becomes operative according to its tenor and intent, and on registration creates, transfers, surrenders, charges or discharges, as the case may be, the land or the estate or interest in the land or estate mentioned in the instrument. [ 24 ] Appellant’s counsel argues that none of the Agreements registered against title contain any specific notice to any subsequent encumbrancers of any confirmation from the Defendant in these proceedings that these otherwise personal debts owing to the ATB are secured under the ATB mortgage.

The only specific reference or acknowledgement from the debtor is contained in an unsigned January 18, 2011 email to counsel for ATB a day before this appeal is scheduled to be heard in which the debtor acknowledges that all “present and future indebtedness owing to Alberta Treasury Branches including my home equity line of credit, Pass Account, overdraft and MasterCard are secured under the ATB mortgage”.

[ 25 ] It is also noteworthy that this document only now appears as a result of an Affidavit the legal assistant of ATB’s lawyer swore on the day of this Appeal Hearing.That Affidavit sworn before ATB’s present counsel also desposed that the Defendant (Debtor) had previously provided her [the legal assistant] with verbal confirmation. [ 26 ] This Affidavit was only admitted by me after application from counsel for ATB in this appeal since appeals from the Master are based on the “Record” unless otherwise ordered, as stated in Rule 6.14(3) of the Rules of Court :– 6.14(3) An appeal from a master’s judgment or order is an appeal on the record of proceedings before the master and, if the judge permits, may also be based on new evidence that is significant enough that it could have affected the master’s decision .

Underlining Added [ 27 ] I allowed ATB’s counsel to introduce his new evidence because I believe as he did that the new evidence was “significant enough that it could have affected the master’s decision”. ATB’s counsel in making this application may have essentially established what Appellant’s counsel now argues was the problem in his not advising the Master about the emails namely that this information and issue was significant enough that it could have affected the Master’s decision in regards to declaring the amounts due and owing under the Plaintiff’s mortgage.

Without this information counsel for ATB also would have had little, if anything, to say in this appeal.

Conclusion [ 28 ] The original mortgage in this matter clearly contains the Defendant mortgagor’s Agreement that his mortgage with ATB would secure all present and future financial indebtedness and liabilities of the mortgagor to the mortgagee “which the mortgagor and mortgagee agree in writing will be secured by this mortgage”. [ 29 ] With respect to the additional amounts that the Master’s Order encompasses as being secured by the mortgage, only the Personal Line of Credit Agreement was registered against title.

This Personal Line of Credit Agreement specified a credit limit of $10,000 but does not specify that it was secured by a mortgage. In fact under the Security Portion (paragraph 4) of the Personal Line of Credit Agreement the Following Additional Security

section was left completely blank. [ 30 ] No where is the mortgage referred to as such, although the second mortgagee when advancing her mortgage amount of $100,000 in October 2009 would have been aware of the two Amending Agreements that were filed on title in February of 2005 and 2006 that raised the amount owing under the ATB mortgage to a maximum of $134,250. Neither Amending Agreement however specifically refers to either the Personal Line of Credit Agreement nor the MasterCard Agreement.

In fact before the Master, the MasterCard Agreement was not even it reproduced it appears. [ 31 ] Although counsel for ATB correctly points out that the second mortgagee would have been put on notice by the Amending Agreements that there could have been as much as $134,250 owing by the debtor in this matter, it is my respectful opinion that any subsequent encumbrancer would not have been put on sufficient notice about the Personal Line of Credit and MasterCard amounts being specifically secured by this ATB mortgage. [ 32 ] Even if one reviews the Affidavit of Default, which was the basis upon which the Master gave his Order, the references as quoted above in paragraphs 15 through 19 of that Affidavit of Default are very sparse as it relates to the Personal Line of Credit and the MasterCard.

Those paragraphs only essentially contain the general statement that “all Agreements referred to herein are secured [by] the Plaintiff’s mortgage”. This is as counsel for the Appellant stated misleading, and incomplete, particularly in light of the ongoing emails and discussions between counsel that were taking place. [ 33 ] I agree with counsel for ATB that it was not his obligation to put before the Master the Respondent’s argument in favour of the second mortgagee’s position.

I also agree that the Respondent’s counsel should have appeared to make his own argument, or at least made it clear in his prior emails/discussions that he expected ATB’s counsel to at least advise the Master of this problem, or to ask for an adjournment.

[ 34 ] However I also believe that ATB’s counsel in these circumstances had an obligation to at least raise the fact that the second mortgagee’s counsel was objecting to the additional amounts being secured under the mortgage.

Counsel for ATB has evidenced this spirit of disclosure and candour with the Court in the present appeal by now conceding that at least $1,886.71 of the declared amount by the Master exceeds the limit to which ATB is entitled to under its mortgage, and that the Master’s Order must be reduced by at least that amount. [ 35 ] The fact however that ATB’s counsel was not aware at the time of the Master’s Order that the amount declared due and owing exceeded that which was payable however establishes that this was not a simple issue, although it was likely an academic issue at the time for ATB.

However given the amount of equity that remains in the lands it creates a potential shortfall problem for the second mortgagee and any other subsequent encumbrancer to realize against. [ 36 ] The last minute email now provided to the Court from the Defendant Debtor also is not sufficient in my respectful opinion to sustain the Master’s Order.

Beside the fact as pointed out that this email was never signed, it likely does not constitute an “agreement in writing” between the mortgagor and the mortgagee to secure those amounts as present indebtedness under the mortgage, as required under the mortgage. [ 37 ] The Debtor’s email is also issued long after the Master’s Order, and while it is not applicable in this particular case, I do agree with counsel for the Appellant that the Court should not rely on such subsequent after the fact agreements between creditor and debtor because theoretically the Debtor in his present financial state could agree to almost anything to the prejudice of subsequent encumbrancers.

As is the case in Bankruptcy proceedings, the “timing” of these admissions/acknowledgments is important to avoid either a fraudulent preference or the appearance of a fraudulent preference. [ 38 ] As such, I allow the appeal of the second mortgagee, and I awards costs in the second mortgagee’s favour. The indebtedness to ATB will be reduced by the amount of the MasterCard and Pass Accounts. Heard on the 19 th day of January, 2011. Dated at the City of Edmonton, Alberta this 25th day of January, 2011. Donald Lee J.C.Q.B.A. Appearances: R.W. (Bud) Steen

Witten LLP for the Plaintiff Nadia Koziak for Christopher Horvath Counsel for Sheri Couprie, Second Mortgagee