THE TORONTO-DOMINION BANK PLAINTIFF - v. –, 2023 SKKB 114

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 114 Date: 2023 04 25 Docket: QBG-BF-00093-2022 Judicial Centre: Battleford BETWEEN: THE TORONTO-DOMINION BANK PLAINTIFF - and – WILFRED DEAN CLARK and SUSANNE MARIE GAUGHAN DEFENDANTS Counsel: Deron A. Kuski, K.C. for the plaintiff (applicant) ___________________________________________________________________________ FIAT HILDEBRANDT J.

April 25, 2023 ___________________________________________________________________________ [ 1 ] The plaintiff, The Toronto-Dominion Bank [TD Bank], has brought an application without notice seeking an order nisi for sale by real estate listing. The action pertains to a collateral mortgage which is in default. The affidavit of Nastasia Thorne, sworn April 12, 2023, indicates the arrears as $295,459.73, which, according to the deponent, includes property maintenance costs of over $8,000. No payments have been made on account of the mortgage since October 22, 2021.

Curiously, the judgment amount claimed by para. 4 of the draft order nisi does not match the amount of the arrears. [ 2 ] Based on the appraisal report attached as Exhibit “A” to the affidavit of Nastasia Thorne, the property has a value of $293,000. The court notes that the appraisal report, which appears to be a fax of a photocopy, is extremely difficult to read, with some portions being entirely blurred so as to be unreadable. [ 3 ] By para. 7.e. of the draft order nisi , the defendants have leave to make offers to purchase the property.

However, as was the case in Toronto-Dominion Bank v Forsyth , 2017 SKQB 235 , the draft order is silent as to the rights of the plaintiff

to purchase. [ 4 ] The draft order nisi proposes a 7-day redemption period, which Nastasia Thorne, at para. 7 of her affidavit, explains has been sought due to the property no longer being occupied by the defendants. Based on the previous applications for substitutional service, the defendants now live in Edmonton. Nonetheless, they may, for example, still have personal property on the site in question and a 7-day redemption period may be too brief. While the circumstances do not warrant the more usual 90-day period, a redemption period of 21 days might be more reasonable.

However, I will leave that matter for the discretion of the Chambers judge next reviewing this matter, as another issue requires consideration. [ 5 ] The draft order nisi also indicates that the selling officer is T. Joshua Morrison [Mr. Morrison]. There is, however, no indication in the application materials of with which firm Mr. Morrison practices. This court is aware that Mr. Morrison practices with MLT Aikins, the firm which represents the plaintiff in this action. As such, Mr.

Morrison is not an independent selling officer. [ 6 ] In Bank of Nova Scotia v Nieswandt, 2020 SKQB 53 at para 6 , the court noted: [6] . . . The order provided that the solicitor for BNS was also the selling officer. While the order nisi was granted on these terms and I cannot go behind it, and I have absolutely no reservations about counsel’s integrity, in my view the potential for conflict (real or perceived) is always present in such situations. There is a body of Saskatchewan case law to the effect that the mortgagee’s solicitor should not be the selling officer under an order nisi for sale.

See: Toronto-Dominion Bank v Forsyth , 2017 SKQB 235 , Toronto- Dominion Bank v Schell , 2014 SKQB 344 , 461 Sask R 257 . As well, Forms 10-47C and D specifically 2020 SKQB 53 state at para. 5 that the selling officer is to be an independent lawyer. In the future, mortgagors’ lawyers should not seek to be selling officers. [Emphasis in original] [ 7 ] In Royal Bank of Canada v Pearl Boutique Ltd., 2020 SKQB 106 , Robertson J. discussed this requirement of an independent selling officer, at paras. 56-58: [56] The courts require that the selling officer be an independent lawyer.

Rothery J. stated this requirement in Schell at para 4 : THE APPROPRIATE SELLING OFFICER [4] The draft order proposes that after the end of the redemption period, the mortgaged land be sold under the direction of the plaintiff’s lawyers, by way of listing the property for a period of ninety days with a licenced real estate agent.

While the assistance of a real estate agent is beneficial in obtaining the best price for a residential property such as this, it has long been decided by this court that another solicitor other than the plaintiff’s own solicitor must direct the sale. [57] Again, this requirement is reflected in Forms 10-47A, at para. 7, and 10-47B, at para. 5, which similarly require the applicant to “specify lawyer, sheriff, or as the case may be”.

Forms 10-47C, at para. 7, and 10-47D, at para. 5, similarly state: The Land shall be sold under the direction of ____________ (the “selling officer”) (specify name of independent lawyer or as the case may be) through a licensed real estate salesperson and sold pursuant to the terms of an offer: (

a) that the selling officer accepts; and (

b) that is confirmed by the Court, on application. [58] This requirement that the selling officer be an independent lawyer was recently re- stated by Danyliuk J. in Bank of Nova Scotia v Nieswandt , 2020 SKQB 53 at para 6 . [ 8 ] In Affinity Credit Union 2013 v Algner , 2020 SKQB 174 , Danyliuk J. again reviewed the case authorities noting, at paras. 11 and 12, that the principle of the selling officer being independent “has been repeatedly emphasized to counsel and mortgagees in both reported and unreported decisions” and such “should be sufficient to deter requests for plaintiff’s counsel to be the selling officer”. [ 9 ] More recently, the Saskatchewan Court of Appeal, in The Toronto-Dominion Bank v Sader, 2021 SKCA 154 [ Sader ], affirming 2021 SKQB 160 , [ SaderQB ], addressed a situation very similar to the case at hand.

The Court of Appeal, at paras. 9- 10, highlighted the concerns regarding the inherent conflict present when the selling officer is not independent: [9] It is apparent that the issue of conflict of interest is broader than just whether the right of the mortgagee to bid at the sale conflicts with the appointment of its representative as a selling officer. That much is clear from the following excerpt from Ronald C.C.

Cuming, Overview of Saskatchewan Real Property Security Law (Regina: Office of the Queen’s Printer, 2016) at 11–17 [ Cuming ]: … The power to order a judicial sale is based in equity and, consequently is in the discretion of the court. The role of judicial sale is to ensure, as much as is possible, a fair balance between the interests of mortgagors and mortgagees. … (Emphasis added) [10] This excerpt highlights the existence of an inherent conflict between the mortgagor and mortgagee in foreclosures and judicial sales as seen from the viewpoint of equity.

That conflict continues to exist and perhaps is highlighted where the selling officer is, in fact, the mortgagee’s solicitor. To ameliorate that conflict – real and perceived – courts have required independent selling officers or persons who are not retained by the mortgagee. In Ontario, for example, the law governing judicial sales provides for a referee that is a quasi-judicial officer: see Rules of Civil Procedure , RRO 1990, Reg 194 , s 55.06, 64.03, 64.04 and 64.06. [ 10 ] At paras. 14, 16 and 18 of Sader , the Court of Appeal provided commentary which is apropos to this case:

[14] The Chambers judge’s decision and the case law recognizes the conflict of interest, real or apparent, that the appointment of the mortgagee’s lawyer will create. This is so notwithstanding that the financial interests of the mortgagor and mortgagee in respect of the sale may be arguably aligned in some circumstances. Although the process of a judicial sale must be expedient and economical, it must also be just to the mortgagor and without the appearance of conflict.

In this way it strikes the equitable balance described in the excerpt from Cuming set out earlier. . . . [16] If the exercise of the Chambers judge’s discretion is to be properly informed with regard to the appointment of the mortgagee’s lawyer as the selling officer, more is required than a draft order nisi for sale with the mortgagee’s lawyer’s name inserted as selling officer and a brief of law containing unsupported factual assertions and speculation about how the interests and behaviour of the parties will play out. . . . [18] I end with this observation: mortgagees would be advised that, if, in a particular case, they wish to have their solicitor appointed as selling officer, they must demonstrate to the court that there are compelling reasons why, despite the real or perceived conflict noted above, such an appointment should be made .

Although this may be an uphill battle, the circumstances under which such an appointment may be possible is best explored in the Court of Queen’s Bench. [Emphasis added] [ 11 ] In the current circumstances, this court has only Mr. Morrison’s name inserted in the draft order nisi . While I do not assume that Mr. Kuski, counsel for the TD Bank, was seeking to obscure the lack of independence on the part of Mr. Morrison, lawyers can and do change firms and the location of each lawyer in the province is not readily known to each member of the court.

Accordingly, prudent practice would be to ensure that, along with the name of the proposed selling officer, that lawyer’s firm is also indicated in the materials filed.

In this way, it is readily evident whether the proposed selling officer is or is not independent of the mortgagee’s counsel. [ 12 ] Further, along with clearly identifying that the proposed selling officer is not independent, the issue of how the interests of the parties may be balanced in the particular circumstances ought to be addressed, if a request of the court to exercise its discretion in appointing a non-independent selling officer is pursued. [ 13 ] The jurisprudence supports and requires an independent selling officer, in the absence of “compelling reasons”, as noted in Sader .

No such compelling reasons—nor any reasons at all—have been provided in this case. [ 14 ] In reviewing SaderQB , para 10 alludes to circumstances where the mortgagor may not want the additional expense of an independent selling officer. In the current case, the draft order, by para. 11, still claims the selling officer’s costs despite the proposed selling officer not being independent. Thus, there would appear to be no cost benefit to the defendant-mortgagors. [ 15 ] The application is dismissed. However, such is without prejudice to the ability of the plaintiff to re-apply on further and better materials. J.

B.R. HILDEBRANDT