Medoc Properties Limited v. Standard Trust Company, 2014 NLCA 13

Date: 20140304 Docket: 12/77 Citation: Medoc Properties Limited v.

Standard Trust Company , 2014 NLCA 13 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN : MEDOC PROPERTIES LIMITED FIRST APPELLANT AND : ACHARYA HOLDINGS LIMITED SECOND APPELLANT AND : STANDARD TRUST COMPANY FIRST RESPONDENT AND : ERNST & YOUNG INC., LIQUIDATOR OF STANDARD TRUST COMPANY SECOND RESPONDENT Coram: Welsh and Rowe JJ.A. and Handrigan J. ( ex officio ) Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division (G) 1991014505 Appeal Heard: December 6, 2013 Judgment Rendered: March 4, 2014 Reasons for Judgment by Rowe J.A. Concurred in by Welsh J.A.

Dissenting Reasons by Handrigan J. ( ex officio )

Counsel for the First and Second Appellants: Michael J. Crosbie Q.C. Counsel for the First and Second Respondents: Paul McDonald Q.C. Rowe J.A.: [ 1 ] This case deals with mortgage priorities. The owners of the subject property sought to develop it as commercial rental space. The project encountered financial difficulties, leading to a series of mortgages. Finally, one mortgage holder exercised the power of sale. The dispute relates to priority for part of the proceeds of sale. PROCEDURAL HISTORY [ 2 ] The trial decision was based principally on estoppel, but also dealt with priorities.

It is agreed by the parties and accepted by this Court that estoppel did not apply in this case. Regarding priorities, the matters at issue are questions of law, for which the standard of review is correctness. For these reasons, little will be said regarding the reasons of the trial judge. FACTS [ 3 ] In 1988, I.J.M. Holdings Ltd. (“I.J.M.”) undertook development of a commercial rental property (“Regatta Plaza”).

Initial financing was obtained in the amount of $500,000 from Acharya Holdings Limited (“Acharya”); a mortgage dated July 14, 1988 was registered on July 21, 1988. [ 4 ] I.J.M. contracted Ramco Construction Ltd. (“Ramco”) to build on the subject property. To secure payment of the contract price ($4,847,987), I.J.M. gave Ramco a mortgage dated October 31, 1988 and registered it on the same date. [ 5 ] I.J.M. obtained further financing from Standard Trust Company (“Standard”).

Under a mortgage dated November 2, 1988 and registered on November 3, 1988, Standard agreed to loan I.J.M. (up to) $7,875,000, on condition that its mortgage would become a first charge. This was achieved by means of two postponement agreements.

Under agreements signed on November 2, 1988 and registered on November 3, 1988, Acharya and Ramco agreed that the Standard mortgage would have priority over theirs. [ 6 ] Paragraph 1 of the two postponement agreements was similar; it reads: THAT the charges contained in the Standard Security have and may enjoy priority, for and in respect of any indebtedness secured thereby, whether now advanced or yet to be advanced, over the charges contained in the [Acharya/Ramco] Security notwithstanding the date of execution or registration of the same and notwithstanding that [Acharya/Ramco] may have occasion to enforce the [Acharya/Ramco] Security prior to Standard enforcing the Standard Security. [ 7 ] Paragraph 2 continues: THAT the security created by the [Acharya/Ramco] Security is hereby postponed and shall for all purposes be subject to and rank subordinate and junior to the security created by the Standard Security and the rights of Standard thereunder. [ 8 ] On October 31, 1988, Acharya agreed to loan I.J.M. $500,000.

A promissory note for the loan was executed in June 1989. Security for that loan was provided in a mortgage from I.J.M. to Acharya dated June 22, 1989 and registered on June 23, 1989. The clause containing the charge in favour of Acharya states that it is subordinate to other security, being: (

a) a prior mortgage encumbrance granted by the Mortgagor in favour of Standard Trust Company dated the 2nd day of November, 1988 and registered in the Registry of Deeds for Newfoundland at Roll 578 Frame 2473 in the principal sum of Seven million eight hundred and seventy-five thousand dollars ($7,875,000.00) (the “First Mortgage”); and (

b) a prior mortgage encumbrance granted by the Mortgagor in favour of Acharya Holdings Limited dated the 14th day of July, 1988 and registered in the Registry of Deeds for Newfoundland at Roll 539 Frame 1721 as security for obligations not exceeding Five hundred thousand dollars (500,000.00) (the “Second Mortgage”); However, there was no postponement agreement with Standard, as there had been in the case of the earlier Acharya mortgage and Ramco mortgage. [ 9 ] In June 1989, Acharya obtained a loan of $400,000 from Medoc Property Holdings (“Medoc”). There was a promissory note for this amount dated June 22, 1989.

As well, by way of security, there was an assignment on June 22, 1989 (registered July 23, 1989) by Acharya to Medoc of the two mortgages held by Acharya (July 14, 1988 and June 22, 1989).

Other security was also given, but is not relevant to this case. [ 10 ] In addition, by way of a postponement agreement executed on June 22, 1989 and registered on June 23, 1989, Ramco subordinated its security interest (that it had taken October 31, 1988) to the two Acharya mortgages (July 14, 1988 and June 22, 1989). [ 11 ] On August 21, 1989, Acharya executed a release of mortgage to I.J.M. for the July 14, 1988 mortgage; this was registered on August 29, 1989.

However, this was one of the mortgages that Acharya had assigned to Medoc on June 22, 1989, and the release was not executed by Medoc. [ 12 ] Ramco released its security interest by way of an instrument executed August 21, 1989 and registered on August 29, 1989. [ 13 ] Standard made mortgage advances to I.J.M. totaling $6,031,207 between November 2, 1988 and September 29, 1989. [ 14 ] After September 29, 1989, Standard refused to make further advances. I.J.M. fell into default under the Standard mortgage. Standard exercised its power of sale. The return to Standard from the sale was $6,945,670.74.

Standard applied the funds to the amount owed to it by I.J.M. Standard paid the remaining amount ($113,184.35) into court by way of interpleader. Medoc is owed by I.J.M. a

sum far larger than $113,184.35 under the mortgages assigned to it by Acharya (July 14, 1988 and June 22, 1989). [15] Of money advanced by Standard to I.J.M., $685,326 was advanced after the June 22, 1989 Acharya mortgage was registered. Itis not in dispute that Standard has priority for advances made to I.J.M. up to the June 22, 1989 mortgage to Acharya (later assigned toMedoc). Rather, the dispute relates to whether for the $685,326 that Standard advanced to I.J.M. after July 22, 1989, it is Standard orMedoc that has priority. ANALYSIS The Rule in Hopkinson v.

Rolt [16] The solicitor for Standard also acted for Acharya. As such, he had knowledge of the June 22, 1989 mortgage from I.J.M. toAcharya. It is a settled general principle of law that the knowledge of the solicitor is imputed to his or her client: Rolland v. Hart (1871),L.R. 6 Ch. 678 (H.L.), at 681-82. (See also: Stoimenov v. Stoimenov (1985), (ON CA), 50 O.R. (2d) 1 (ONCA), atparagraph 11; Beechwood Cemetery Co. v.

Graham (1998), (ON CA), 117 O.A.C. 59 (CA), at paragraph 53.) In thiscase, it was not submitted that any information relevant to the mortgages was confidential as between the solicitor’s clients, Standard andAcharya. The result follows that Standard had imputed notice of the June 22, 1989 mortgage to Acharya. [17] This is relevant for the rule in Hopkinson v. Rolt (1861), 34 L.J. Ch. 468 (H.L.), which provides that, after a mortgagee hasnotice of a subsequent mortgage, the subsequent mortgage has priority over future advances made under the first mortgage. The rule isexplained in Newfoundland v.

Newfoundland Railway, 1888 UKPC 7, at page 14: … the case exactly resembled the well-known case of Hopkinson v. Rolt, 9 H.L.C. 514, which settled the rules of priority as between afirst mortgage for securing future advances and a second mortgage. Lord Campbell there says, “The first mortgage is secure as to pastadvances, and he is not under any obligation to make further advances.

He has only to hold his hand when asked for a further loan.” … Accordingly, given that Standard made further advances after it had knowledge of the 1989 Acharya mortgage, the question of prioritiesin this appeal must be assessed in light of the rule in Hopkinson.

Priorities: Step by Step [18] To facilitate clarity in the analysis, I will describe the priorities as they existed following each transaction. [19] After the July 14, 1988 mortgage from I.J.M. to Acharya, the latter had a first charge on the subject property. [20] After the October 31, 1988 mortgage from I.J.M. to Ramco, based on the order of registration, the priorities were:

(1) Acharya (1988 mortgage)

(2) Ramco. [21] After the November 2, 1988 Standard mortgage, based on the order of registration and the postponement agreements withAcharya and Ramco, the priorities were:

(1) Standard

(2) Acharya (1988 mortgage)

(3) Ramco. [22] Based on the rule in Hopkinson, the Acharya (1989 mortgage) ranked ahead of Standard for advances made after Standard hadnotice of that mortgage. [23] After the June 22, 1989 assignments by Acharya to Medoc, the priorities were the same, save that Medoc stood in the place ofAcharya. [24] After Acharya’s August 21, 1989 release of the July 14, 1988 mortgage to I.J.M., the priorities did not change.

That is becausethis instrument was of no legal effect, as Acharya could not give a release of a mortgage that it had assigned to Medoc on June 22, 1989,and Medoc did not execute the release. [25] After Ramco released its security interest on August 21, 1989, it dropped out of the list of priorities. [26] We now reach the critical question: what effect, if any, does the November 2, 1988 postponement agreement giving Standardpriority over the 1988 Acharya mortgage (assigned to Medoc) have?

In particular, does that postponement agreement put Standard, forpurposes of priority, in the position of Acharya under the 1988 mortgage such that Standard has priority over Medoc’s claims under the1988 and 1989 Acharya mortgages as well as Medoc’s claims by virtue of the Hopkinson rule? The answer is yes, to the extent of theindebtedness outstanding under the 1988 Acharya mortgage. [27] This is so by virtue of the law set out by this Court in Royal Bank of Canada v. General Motors Acceptance Corp. of Canada,2006 NLCA 45, 259 Nfld. & P.E.I.R. 49. I quote paragraph 21 of that decision.

I reproduce the American text on which counsel for RBC relies only because I read it as being consistent with Canadian authorities setout above and because of its exceptional clarity. Grant Gilmore, Security Interests and Personal Property, Vol. II (Boston: Little, Brown and Company, 1965) at:

At p. 1020: §39.1 Types of circularities. What should be done when an inadequate fund is to be distributed among competing claimants and under applicable rules of law A is entitled to priority over B, who is entitled to priority over C, who is entitled to priority over A? At p. 1021: … The simplest of the three situations, which may be dismissed as not involving a “true circularity,” arises from a contractual subordination or waiver.

To start with, A, B and C have claims against debtor X or his property which are entitled to priority in alphabetical order: the classical example is that of first, second and third mortgages on Blackacre. A subordinates his claim to C’s. Blackacre is sold and the resulting fund is insufficient to satisfy all three claims. There is a comforting unanimity, among courts and commentators, on the proper distribution of the fund. 1. Set aside from the fund the amount of A’s claim. 2. Pay the amount so set aside to: (

a) C, to the amount of his claim; (

b) A, to the extent of any balance remaining after C’s claim is satisfied. 3. Pay to B the amount of the fund remaining after A’s claim has been set aside. 4. If any balance remains in the fund after A’s claim has been set aside and B’s claim has been satisfied, distribute the balance to (

a) C, (

b) A. Thus C, by virtue of the subordination agreement, is paid first, but only to the amount of A’s claim, to which B was in any event junior. B receives what he had expected to receive [from] the fund less A’s prior claim. If A’s claim is smaller than C’s, C will collect the balance of his claim, in his own right, only after B has been paid in full. A, the subordinator, receives nothing until B and C have been paid except to the extent that his claim, entitled to first priority, exceeds the amount of C’s claim, which, under his agreement, is to be first paid.

At p. 1032: §39.3 Circularity litigation since 1940. . . . The most popular solution has been to apply the rule used in cases of apparent circularity resulting from a subordination agreement. In the subordination case A, B and C have liens which rank in that order; A then subordinates his claim to C’s. The solution is to set aside from the fund the amount of A’s claim; pay that to C and the balance, if any, going to A and B in that order.

In a true subordination case, it is assumed that there is no difficulty in establishing the normal order of priority which would have settled the distribution (A first, then B, then

C) except for A’s subordination to C. [ 28 ] It is critical that the 1988 Acharya mortgage was not, in law, released. The mortgage having been assigned to Medoc, only Medoc could release it. Had there been no other mortgage, the question of priorities would have been straightforward. Applying the rule in Hopkinson v. Rolt , Standard would have had priority for amounts advanced before registration of the 1989 Acharya mortgage, and Medoc would have had priority over Standard for amounts advanced by Standard after June 22, 1989.

But, the 1988 Acharya mortgage not having been released, it continued to have priority (being earlier) over the 1989 Acharya mortgage. And, by virtue of circularity as discussed above, given the November 22, 1988 postponement agreement, Standard had priority with respect to the funds set aside from the proceeds of sale to satisfy the indebtedness owing under the 1988 Acharya mortgage. Since only Standard made advances after notice of the 1989 Acharya mortgage, the rule in Hopkinson had no effect on the amount to be set aside from the proceeds of sale to satisfy the 1988 Acharya mortgage.

Those are funds to which Standard had priority. [ 29 ] Thus, the proceeds of the sale from the Regatta Plaza property are to be distributed as follows:

(1) Standard: to the extent of the balance outstanding relating to advances made by Standard before June 22, 1989;

(2) Standard: to the extent of the balance outstanding under the 1988 Acharya mortgage by virtue of the November 2, 1988 postponement agreement;

(3) Medoc: to the extent of the balance outstanding under the 1989 Acharya mortgage;

(4) Standard: to the extent of the balance outstanding relating to advances made by it after June 22, 1989; and

(5) Medoc: to the extent of the balance outstanding under the 1988 Acharya mortgage. COSTS [ 30 ] Counsel for both parties requested an order for costs in accordance with column 5 of the Scale of Costs appended to rule 55.04 of the Rules of the Supreme Court, 1986 . Subsection (4) of that rule provides factors to be considered in a costs award: In exercising its discretion under this Rule, the Court may consider

(

a) the amounts claimed and the amounts recovered; (

b) the importance of the issues; (

c) the complexity, difficulty or novelty of the issues; (

d) the manner in which the proceeding was conducted, including any conduct that tended to shorten or unnecessarily lengthen the duration of the proceeding; (

e) the failure by a party to admit anything that should have been admitted; (

f) the proportion of the services rendered prior to the date the amendment to this paragraph introducing a Scale of Costs where costs are taxed according to a column or combination of columns came into force; (

g) seniority at the bar of counsel; and (

h) any other relevant matter. [ 31 ] In granting costs in accordance with column 5 in the Trial Division, the judge accepted the submission of counsel and ordered costs under column 5 on the following basis: … having considered the substantial amount of money involved ($657,086.98 plus interest); the real importance of the issues to the Parties; the complexity of the matters; and the thorough manner in which the proceeding was conducted. … [ 32 ] In this appeal, the request for costs under column 5 was made by both parties on the same basis as in the Trial Division.

Neither provided any rationale to oppose such an award to the successful party in this Court. [ 33 ] Accordingly, Standard shall have its costs of the appeal to be taxed in accordance with column 5 of the Scale of Costs. CONCLUSION [ 34 ] I have come to the same result as did the trial judge, albeit for different reasons. Accordingly, the appeal is dismissed. Standard shall have its costs of the appeal under column 5 of the Scale of Costs. __________________________________ M. H. Rowe J.A. I Concur: ____________________________________ B. G. Welsh J.A.

Dissenting Reasons by Handrigan J. ( ex officio ): [ 35 ] I have read Rowe J.A.’s judgment in this matter. I agree with much that Rowe J.A. says; but I do not agree with his conclusion, or several premises that he adopts to achieve that result. Let me first state what I agree with and then what I disagree with and why I disagree. [ 36 ] I agree that: 1. Estoppel does not apply in this case. 2. The issues are questions of law for which the standard of review is correctness. 3. Rowe J.A. correctly states the relevant facts in paragraphs 3 to 15 of his reasons. 4. Rowe J.A. correctly states the rule in Hopkinson v.

Rolt in paragraphs 16 and 17 of his reasons. 5. Rowe J.A. correctly states the “step by step” priorities in paragraphs 18 to 25 of his reasons. [ 37 ] I do not agree that: 1. This case deals with distribution of the funds Standard realized when it exercised power of sale over the mortgaged property. 2. The November 2, 1988 postponement agreement that gave Standard priority over the 1988 Acharya mortgage (which Acharya assigned to Medoc) affects the 1989 Acharya mortgage’s (also assigned to Medoc) priority to cash advances Standard made after it had notice of the 1989 Acharya mortgage.

3. Acharya’s failure to release its 1988 mortgage affects the priority its 1989 mortgage has to cash advances Standard made to I.J.M. Holdings after it had notice of the 1989 mortgage. 4. Rowe J.A. correctly states the order of priority in paragraph 29 of his reasons. [ 38 ] The reasons I agree with the first five points I state above are (or should be from these comments) self-evident so I will not elaborate on them. The reasons I disagree with the four points I state may be less apparent and require explanation, which I offer now.

Characterization of Case [ 39 ] Rowe J.A. says this case “relates to priority for part of the proceeds of sale”. I disagree. Standard exercised power of sale and realized proceeds of $6,945,670.74 from the sale. The proceeds were more than I.J.M. owed Standard although they could not satisfy I.J.M.’s debt to Medoc, as secured by the two mortgages that Acharya took from I.J.M. and assigned to Medoc.

But the focus of this case should not be on how Standard distributed the funds it received from the power of sale; focusing that way engages the circularity that Rowe J.A. introduces in the quotation that he uses from Royal Bank of Canada v. General Motors Acceptance Corp. of Canada . [ 40 ] The focus both as to time and event should be on June 22, 1989, when Acharya obtained its 1989 mortgage.

At that point Standard knew that I.J.M. had given four mortgages on the property that Standard took as security for the money it loaned to I.J.M.: a first to Acharya (the 1988 mortgage); a second to Ramco; a third to Standard; and a fourth to Acharya (the 1989 mortgage). [ 41 ] Acharya postponed its 1988 first mortgage and Ramco postponed its second mortgage to Standard; but Acharya did not postpone its 1989 mortgage to Standard. These then are the priorities from June 22, 1989 for future advances that Standard made under its mortgage: 1.

Standard (first because of the postponement agreement) 2. 1989 Acharya mortgage (by registration & because Standard knew about it) 3. 1988 Acharya mortgage (because of the postponement agreement) 4. Ramco mortgage (because of the postponement agreement) [ 42 ] With its knowledge of the competing priorities and without any change in them, Standard advanced three lots of money to I.J.M. totaling $685,326. Applying the rule in Hopkinson v.

Rolt which says “after a mortgagee [Standard] has notice of a subsequent mortgage [the 1989 Acharya mortgage], the subsequent mortgage [the 1989 Acharya mortgage] has priority over future advances made under the first mortgage [the Standard mortgage]”. Nothing happened after this (except that Acharya assigned its 1988 and 1989 mortgages to Medoc) to alter the priority that the 1989 Acharya mortgage had to Standard’s mortgage over the three subsequent advances. [ 43 ] I return now to why I disagree with how Rowe J.A. characterizes this case: Quite simply, this case is about the applying the rule in Hopkinson v.

Rolt to subsequent advances on a mortgage, and it is not about distributing the proceeds from a power of sale among competing priorities. Distributing the proceeds from the power of sale may be of practical concern as those proceeds may be a source of the funds to satisfy the competing claims to the subsequent advances, but the discussion should not focus on that distribution.

The risk that inheres in focusing on distributing the proceeds of sale is that the real issue will be overlooked, which is whether Standard or Medoc (by its assignment of the 1989 Acharya mortgage from Acharya) has priority over the advances that Standard made after June 22, 1989. Effect of the Postponement Agreement [ 44 ] Rowe J.A. claims that the November 2, 1988 postponement agreement giving Standard priority over the 1988 Acharya mortgage (with a similar effect for the Ramco postponement agreement) also gives Standard priority over the 1989 Acharya mortgage.

Rowe J.A.’s premise is that the attempt to release the 1988 Acharya mortgage failed because Medoc, to whom Acharya assigned the mortgage, did not sign the release of mortgage. Thus, Rowe J.A. argues, Standard has priority over the 1989 Acharya mortgage to the extent of the debt that I.J.M. owed to Acharya under the 1988 Acharya mortgage because of the postponement agreement between Acharya and Standard. [ 45 ] I disagree with Rowe J.A.’s view for two reasons. First, the outcome that Rowe J.A. achieves is too arbitrary.

It hinges on a failed release of the 1988 Acharya mortgage, for which the obvious corollary is that if Medoc had released the 1988 Acharya mortgage Standard would have lost its priority and Medoc would have a first call on the subsequent advances.

The law will not support such arbitrariness. [ 46 ] Second, and more importantly, claiming that Standard gains a priority over the 1989 Acharya mortgage through the postponement agreement that it signed with Standard for the 1988 Acharya mortgage, is treating the postponement agreement (but only for the 1988 Acharya, if at all) like an assignment of the mortgage, which it is not. Acharya assigned the 1988 mortgage only to Medoc; it also assigned the 1989 mortgage, through which it gains its priority over Standard for the subsequent advances, to Medoc.

It assigned neither of these mortgages to Standard. [ 47 ] The postponement agreement between Acharya and Standard for the 1988 Acharya mortgage simply allowed Standard to collect the debt that I.J.M. owed Standard before Acharya collected its debt from I.J.M.; the postponement agreement conferred no other rights on Standard. In particular, the postponement agreement did not subordinate the 1989 Acharya mortgage to Standard for the advances Standard made to I.J.M. on its mortgage after I.J.M. granted Acharya the 1989 mortgage.

Failed Release of the 1988 Acharya Mortgage [ 48 ] This is the logic that Rowe J.A. adopts when he finds that Standard has priority to the 1989 Acharya mortgage for the advances

Standard made subsequent to the 1989 Acharya mortgage: ● The 1988 Acharya mortgage was registered before Standard’s mortgage. ● Acharya postponed its claim for the debt I.J.M. secured with the 1988 Acharya mortgage to the debt that Standard secured by its mortgage. ● The 1989 Acharya mortgage was registered after Standard’s mortgage and also after the 1988 Acharya mortgage. ● Medoc took the place of Acharya for both Acharya mortgages when Acharya assigned them to Medoc. ● Only Medoc could release the 1988 and 1989 Acharya mortgages. ● Acharya purported to release the 1988 Acharya mortgage but failed because only Medoc could release the 1988 mortgage. ● Standard retained its priority over the 1988 Acharya mortgage because Medoc (the assignee) did not release it. ● Standard ranks prior to Medoc for the 1989 Acharya mortgage (because Standard ranks prior to the 1988 Acharya mortgage through the postponement agreement) but only for the amount of the debt owing to Medoc under the 1988 mortgage. [ 49 ] I do not accept Rowe J.A.’s logic.

I repeat my earlier comments about the arbitrariness that Rowe J.A. relies on and the critical misconstruction of the postponement agreement. I note as well that Rowe J.A.’s conclusion flows naturally, though problematically, from the flawed characterization of the issues in this case that I also addressed earlier: The issue here is about who holds the prior claim on advances made on a mortgage after the mortgagee knew about a subsequent charge.

It is not about who holds the prior claim on the proceeds realized when the mortgagee sold the property under its power of sale. [ 50 ] Standard made three advances to I.J.M. holdings under its mortgage after Acharya Holdings obtained the 1989 mortgage: $202,296 on July 14, 1989; $330,316 on September 7, 1989; and $152,714 on September 29, 2012, for the $685,236 that I mentioned earlier in these reasons. Standard instructed its solicitor, John Baker, to advise if it could safely release those advances to Acharya (or Medoc, as might be appropriate). [ 51 ] Mr.

Baker knew about the 1989 Acharya mortgage because he had drawn and registered it between Acharya Holdings and I.J.M. Holdings. He also knew about it from a sub search he did at the Registry of Deeds. Mr. Baker requisitioned a sub search to avoid the jeopardy that resulted, that a subsequent encumbrancer (Acharya Holdings in this case, or Medoc as appropriate) would have priority over further advances that Standard made on its mortgage. Mr.

Baker ignored the 1989 Acharya mortgage, at his and Standard’s peril. [ 52 ] In the result, Standard knew when it made three advances for $685,236 that the 1989 Acharya mortgage was in place; it knew that Acharya Holdings had not postponed its right to collect the debt secured by the 1989 Acharya mortgage to Standard’s right to collect the debt secured by its mortgage; and it also knew that Acharya Holdings would have a prior claim on those advances. [ 53 ] Acharya Holdings did not subordinate its 1989 mortgage to Standard’s mortgage, as it did with its 1988 mortgage; and the rule in Hopkinson v.

Rolt captured the subsequent advances that Standard made and gave the priority to them to Acharya, and Medoc by assignment. Any attempt that Acharya made to release its 1988 mortgage on August 29, 1989 or its missteps in doing so do not affect the priority over the subsequent advances. Order of Priority [ 54 ] In paragraph 29 of his reasons, Rowe J.A. stated the order of priority for distributing the proceeds of the sale from the Regatta Plaza property: 1. Standard: for advances made before June 22, 1989. 2.

Standard: for the balance owing under the 1988 Acharya mortgage (because of the 1988 postponement agreement and the failed release). 3. Medoc: for the balance outstanding under the 1989 Acharya mortgage. 4. Standard: for advances made after June 22, 1989. 5. Medoc: for the balance outstanding under the 1988 Acharya mortgage. [ 55 ] I disagree with this order of priority: This case is not about distributing the proceeds of the sale from the Regatta Plaza property, as I have said several times now.

It is about priority over the three advances that Standard made on its mortgage after June 22, 1989; and as to them the priorities are, very simply: 1. Medoc: for the balance owing under the 1989 Acharya mortgage, up to $685,236. 2. Standard: for the balance, if any, of the $685,236. COSTS [ 56 ] I agree with Rowe J.A.’s comments about costs and would order that they be taxed and paid under Column 5 of the Scale of Costs; to Medoc Properties of course. CONCLUSION

[ 57 ] I would set aside the trial judge’s decision, allow the appeal and declare that Medoc has a prior claim to Standard Trust for the $685,236 that Standard advanced on its mortgage after Acharya took its 1989 mortgage from I.J.M. _________________________________ G. A. Handrigan J. ( ex officio )