Paradigm Quest Inc. v. Fox, 2012 ABQB 70

Court of Queen ’ s Bench of Alberta Citation: Paradigm Quest Inc. v. Fox, 2012 ABQB 70 Date: 20120125 Docket: 0903 20556 Registry: Edmonton Between: Paradigm Quest Inc. Plaintiff - and - Robert Michael Fox and Stanley Edward Fox Defendant _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is a case about dely in a foreclosure action. [ 2 ] In 2007 Robert Fox, and his father, Stanley Fox gave a high ratio mortgage to the Plaintiff. The father never lived on the property.

It was for the son and his now estranged wife. [ 3 ] After a time, the mortgage went into arrears. In December 2009, Paradigm Quest began foreclosure proceedings. At that time, $346,893.47 was owing.

[ 4 ] The Defendants filed a Demand of Notice, March 17, 2010. [ 5 ] In March 2010, the Defendants proposed a “quit claim”. The Plaintiff refused, saying that it needed an appraisal to determine if there was deficiency as the nature of the mortgage entitled it to a judgment for the deficiency. [ 6 ] March 23, 2010, Robert Fox’s wife filed a Matrimonial Property Act Certificate of Lis Pendens. Although it is not formally in evidence, my notes are that Ms. Fox continued to reside on the property after Robert Fox moved out. [ 7 ] In April 2010, the property was appraised at $335,000.00.

However, this Plaintiff’s appraisal was not disclosed to the Defendant until January 2011. [ 8 ] A payout statement was provided to the Defendants in August 2010. The Defendants took issue with some of the charges. [ 9 ] A second appraisal was obtained by the Plaintiff in September 2010. The market was declining. The appraised value was then $315,000.00. It was the same appraiser as before. [ 10 ] The Plaintiff intended to set the matter down again. There was a one month adjournment at the hands of the Defendants in September 2010. [ 11 ] The matter was heard in November of 2010, based on the September appraisal.

It was disclosed that there was the earlier (higher) appraisal. The matter was adjourned again on the basis that the April appraisal would be provided to Defence counsel. The April appraisal was provided in January of 2011. [ 12 ] The Plaintiff then took out a fresh Motion. Though it was returnable in regular chambers, the Defendant filed a brief. Leave was given to the Plaintiff to file a brief in response. For a time it looked like the matter would be settled. Value [ 13 ] The effect of delay in a foreclosure proceeding has been considered in a number of cases.

The law is succinctly reviewed by Master Laycock in Resmor Trust Company v. Rahman , 2011 ABQB 725 . In that case, Master Laycock observes: The Alberta Court of Appeal in Yorkshire Trust held that in the case of an Order for Sale to the lender, the value should be fixed on the date when the lender was first entitled to apply for such an order, or the day when the order is obtained, whichever is the higher (para. 13). (emphasis added). [ 14 ] In this case, the lender would have been entitled to apply for an Order for Sale to itself within a reasonable time after the April 2010 appraisal.

Accordingly, the value should be fixed at $335,000.00. Interest, Fees, and (etc.) [ 15 ] A lender has an obligation to proceed in a reasonably expeditious fashion.

The lender’s claim to ongoing interest, maintenance costs and solicitor and client fees may be limited where fairness to the debtor requires it. [ 16 ] This requires consideration of a range of competing factors. [ 17 ] The Plaintiff is deprived of the benefit of their security until judgment, especially if the mortgagors are not paying and have no intention of availing themselves of s. 38 of the Law of Property Act, to pay up the arrears and redeem. From the Defendant’s perspective, the effect of the delay is essentially to lengthen the redemption period.

During that time the mortgagor or their nominee may be benefiting from the property. The mortgagor could sell the property during that time, though given that an Order for Sale to the Plaintiff may be immanent, this may not be a practical option. In this case the Matrimonial Lis Pendens would likely have prevented a sale or settlement by consent. [ 18 ] While a lender may have an obligation to proceed in a reasonably expeditious fashion, a Defendant in a foreclosure action is not powerless to move the matter forward. If a Defendant is not willing to accept a Plaintiff’s appraisal, they can obtain their own.

Although it is not usually done, there is no reason that a Court cannot determine the value at the instance of the mortgagor. Although foreclosure is a specialized type of litigation in that that takes place, for the most part, in regular chambers, there appears to be no reason that a Defendant could not avail themselves of the Formal Compromise Rules. The complicating factor in this case is that the mortgagors were unaware of the April appraisal until the fall of 2010.

Until the lender obtains an appraisal there is nothing tangible for the mortgagor to respond to. [ 19 ] As Master Laycock observed in the Resmor case: To be clear it is not every delay which can be seized upon by a defendant to argue prejudice. Actions may be delayed for any number of valid reasons. There may be ongoing negotiations, which the court would encourage. A deponent may be absent and unable to complete an affidavit. People, who are essential to the character the action, may be ill or on holidays. Appraisers may be delayed in obtaining access to the property.

A four or five month gap in a foreclosure may well be justified. It is the lack of explanation in this case, in the face of the complaint by the defendant, that is a cause for concern. [ 20 ] It is not known why the April appraisal was not provided to the Defendant initially. The incorrect payout statement provided in August of 2010 caused some delay. It is not known why a second appraisal was ordered in September of 2010. The second appraisal obviously complicated things from the Plaintiff’s perspective.

Since the Defendants were willing to try to resolve this cooperatively the only issues appear to have been value and a proper accounting. [ 21 ] Master Laycock found that roughly two months was appropriate for the Plaintiff to apply for a Rice Order in the Resmor case. In this case there is no explanation for any of the delay, including why it took four months to obtain the first appraisal. [ 22 ] In my view there is no reason the lender could not have been in a position to obtain an Order for Sale to itself in June 2010.

Interest and other charges are capped as at the end of June 2010. [ 23 ] The lender is entitled to its solicitor-client costs to this point plus its costs for one Application. The amount shall be fixed by a Review Officer, with notice to Defendants’ counsel. Heard on the 27 th day of July, 2011. Dated at the City of Edmonton, Alberta this 25 th day of January, 2012.

W. S. Schlosser M.C.C.Q.B.A. Appearances: Raymond Steen Witten LLP for the Plaintiff Michael Hall Hall & Revering for the Defendant