Toronto Dominion Bank v. Sawchuk, 2011 ABQB 757

Court of Queen ’ s Bench of Alberta Citation: Toronto Dominion Bank v. Sawchuk, 2011 ABQB 757 Date: 20111201 Docket: 1103 12697 Registry: Edmonton Between: The Toronto-Dominion Bank Plaintiff - and - Dwayne A. Sawchuk Defendants Corrected judgment: A corrigendum was issued on December 2, 2011; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of W. S.

Schlosser, Master in Chambers _______________________________________________________ [ 1 ] The question in this case is whether it is appropriate to order a first mortgagee to provide a mortgage payout statement - or at least the payout figure - to a foreclosing second mortgagee. In my view, not only is it appropriate that this information be provided, it is necessary for the proper administration of justice.

[ 2 ] In this case, the first mortgagee declined the request, apparently because they were concerned that disclosure would violate the mortgagee’s privacy rights. The concern seems to arise from an Ontario Court of Appeal decision: Citi Cards Canada Inc. v. Pleasance, 2011, ONCA 3 . [ 3 ] Until recently, this information was universally disclosed. Now some mortgagees decline to provide it.

The practice seems to vary from branch to branch rather than from institution to institution. (Ironically, the institution that seeks the information in this case is one of the institutions that refused it in the Citi Card case). [ 4 ] The facts in the Ontario case are quite different from the facts in the case at bar. The Ontario decision involved a writ holder attempting to exercise the power of sale of real property. The defendant had apparently left the jurisdiction.

The Defendant owner’s estranged wife lived in the house the Applicant was attempting to sell but was not a party to the action. [ 5 ] The Ontario Court of Appeal found that the mortgagees on title (Canada Trust and the TD Bank) were justified in declining to provide the information. The Court found that disclosure was required to be related to the needs of those organizations, which is contained within the stated purpose of the Personal Information Protection and Electronic Documents Act , S.C. 2000, c. 5,

section 3 (“ PIPEDA ”). It was not within the needs of these organizations to disclose mortgage balances to a writholder. [ 6 ] The Court also found that disclosure did not fall within the exemptions found in s. 7. It concluded that the creditor should obtain the information by way of examination in aid of execution.

Presumably, the creditor could locate the debtor, bring him back to the jurisdiction for questioning and have him undertake to obtain payout statements from the Respondent Banks. [ 7 ] Canada Trust and the TD Bank were Respondents to Citi Card’s application but they were not otherwise parties to the underlying action. It is notable, and somewhat striking, that the person whose rights were sought to be protected did not attend and took no position. [ 8 ] Even if this case were not distinguishable from the case at bar, I decline to follow it.

It is my view that a more pragmatic approach is mandated by our new Rules. The appropriateness of disclosure in these circumstances requires balancing a range of the debtor’s rights and not just an abstract consideration of privacy rights. [ 9 ] In the foreclosure context, the right to redeem is one of the mortgagors most important rights. For a conventional mortgage, this right is protected by

section 41 of the Law of Property Act . The length of time that a mortgagor has available to redeem depends, in part, upon whether there is equity in the property. ( Law of Property Act , RSA 2000, c. L-7, section 41(2)(b)). The Court cannot properly make this determination without knowing the value of prior encumbrances. [ 10 ] This case concerned an application for a Redemption Order by a second mortgagee. A shortened redemption period was sought by the Applicant. It was opposed by the third mortgagee who argued that there is (slight) equity in the property. These are residential premises.

The mortgagor has not appeared and takes no position. He was noted in default on October 21, 2011. He has not raised any objection to the Affidavit of Default or the appraised value. [ 11 ] The existence of equity is something that may entitle the mortgagor to the benefit and protection of a six month redemption period - or longer. The second mortgagee can tell us what the face value of the first mortgage is but the Court cannot proceed on that basis. Whether the actual amount is higher or lower would be speculation.

In this case the amount owing to the first mortgagee is central to determining the length of the mortgagor’s right to redeem. [ 12 ] Because the numbers were close I adjourned the matter for a week and directed the first mortgagee to provide a payout number.

[13] The value of prior encumbrances essential to setting the redemption period. If an Order for Sale is sought, Rule 9.33(2)(e)requires the court to consider (amongst other things) the amount owed for prior charges. The court cannot determine whether a publicsale should be attempted prior to granting an Order for Sale to the Plaintiff without knowing how much prior mortgagees are owed.

In aforeclosure context the court cannot protect the mortgagor’s rights or determine the proper remedy without knowing the value of priorencumbrances. [14] If a mortgage is not redeemed, the result of a foreclosure action is that the foreclosing mortgagee, their nominee, or apurchaser will become the owner of the land and step into the shoes of the mortgagor, at least to the extent that title is taken subject toprior interests (section 48 L.P.A.) At that stage, the remaining mortgagees on title could hardly keep the payout numbers secret. [15] Our Foundational Rules require facilitating the quickest means of resolving claims at the least expense.

The Rules oblige theCourt to provide an effective, efficient and credible system of remedies. [16] Mortgages typically (as in this case) provide for solicitor and client costs payable to the mortgagee for the enforcement of themortgage. Mortgage interest is usually higher than Judgment Interest Act interest. These two factors sharpen the focus of theFoundation Rules in the foreclosure context.

Not only does each extra step detract from the expedient and efficient administration ofjustice, each additional step comes at a very high cost to the defendant. [17] The practice in Alberta is that prior encumbrancers or mortgagees are not made parties to a foreclosure action.

In fact, theyhave a vested interest in staying out. [18] If privacy laws were to present an insurmountable obstacle to the existing foreclosure practice, prior encumbrancers could bemade parties and they could be made subject to the usual disclosure requirements in the action. [19] It is in the interests of a prior mortgagee, not only to preserve the existing practice but also to not harm their mortgagor byexposing them to additional expenses and delay. Disclosure of the information is protected.

It would at least be subject to the impliedundertaking. [20] The existing practice is efficient and fair but it works because prior encumbrancers cooperate in the process without furtherformality. A Defendant who has not opposed or objected to the remedy sought by the Plaintiff is particularly entitled to expedient reliefat minimal cost. [21] Accordingly, it is difficult to see how a mortgagor would find disclosure of the necessary information inappropriate in aforeclosure context. It is certainly within the needs of the organizations to preserve the existing practice.

The information is necessaryfor a proper determination of the mortgagor’s rights. It cannot have been the intent of privacy legislation to sterilize a Defendant’s otherrights. On balance, it is difficult to see that disclosure could be objectively be viewed here as inappropriate. Notice [22] The Court can order production of a record from a non party pursuant to Rule 5.13. [23] Rule 5.13 typically requires notice of an application to compel production of a record to the outsider to the lawsuit. Althoughthere is a common law right of discovery (ATB v.

Leahy, 2000 ABQB 575 , 2000 270 AR 1), Rule 5.13 and its predecessor,Rule 209, is the usual method of obtaining records in these circumstances. [24] Rule 5.13 requires notice. Lack of notice is said to be a complete technical answer to such an application. (Berube v.Wringrowich, 2005 ABQB 367 , 2005 382 AR 189, per Viet, J. (and the cases cited there). However, if there is one thing thenew Rules tell us, it is to be cautious about the purely technical response. Instead we are to look to the substance of the matter.

[ 25 ] In this case, however, the first mortgagee is not a true outsider to the foreclosure proceedings and, as noted above, it is only a matter of practice (although well established practice) that prior encumbrancers are not joined as parties. I understand that the first mortgagee has no objection to production of this record other than seeking the protection of a Court Order to allay PIPEDA concerns. [ 26 ] All of the requirements for a “Norwich style” common law discovery are present and all of the usual requirements of Rule 5.13 or its predecessor Rule 209, except an application on notice, are satisfied.

A payment statement is an utterly routine request that I understand would not attract any cost or inconvenience on the part of the first mortgagee. [ 27 ] Rule 6.4 allows for application to be made ‘ex parte’ if the Court is satisfied that no notice is necessary. Requiring production of this record on an ex parte basis is consistent with foundational Rules 1.2(2)(

b) and (e). Conclusion [ 28 ] It is my view that in this narrow and distinct context it is appropriate that the record be produced and appropriate that the request be made on an ex parte basis. In the event that the first mortgagee takes any issue with the order, it is always open for them to return under Rule 9.15 to challenge the result. Heard on the 14 th day of November, 2011. Dated at the City of Edmonton, Alberta this 1 st day of December, 2011. W. S. Schlosser M.C.C.Q.B.A. Appearances: Kari Sejr Bishop & McKenzie for the Plaintiff Kyle Kawanami Emery Jamieson LLP for the 3 rd Mortgagee

_______________________________________________________ Corrigendum of the Reasons for Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ The Citation number should be 757 and not 575 as indicated on the Reasons for Decision. Please make the appropriate change.