CANADA MORTGAGE v. HOUSING CORPORATION, 2023 NBKB 203

2023 NBKB 203 BC-150-2021 IN THE COURT OF KING’S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF BATHURST BETWEEN: CANADA MORTGAGE AND HOUSING CORPORATION Plaintiff – and – CHANTAL PLOURDE Defendant BEFORE: Justice Ivan Robichaud AT: Bathurst, New Brunswick DATE OF HEARING: October 27, 2023 DATE OF DECISION: November 23, 2023 APPEARANCE: Corben Parker, on behalf of the Applicant

[TRANSLATION] Robichaud, J.: A. introduction [ 1 ] On August 25, 2021, the plaintiff filed a Notice of Action with Statement of Claim Attached against the defendant, claiming the deficiency following failure to pay the amounts owed on a mortgage after the plaintiff acquired the mortgaged property at a mortgage sale held under the Property Act . [ 2 ] The defendant was served but did not file a Statement of Defence.

The plaintiff therefore had the defendant noted in default on January 17, 2023. [ 3 ] In accordance with Rule 21.05 of the Rules of Court , the plaintiff proceeded to trial in respect of the claim for unliquidated damages and presented its evidence by way of affidavits. [ 4 ] The defendant was served with a Notice of the Hearing in accordance with an order for substituted service. The defendant did not appear at the hearing. [ 5 ] In its Statement of Claim, the plaintiff stated that it wanted to proceed in the English language.

The Notice of Trial was drafted in French, as was the Certificate of Readiness, which states that the plaintiff intends to proceed in the French language. The plaintiff’s pre-hearing brief was drafted in French, the plaintiff presented its arguments at the hearing in English but submitted a draft order in French. This decision is therefore rendered in French and will be translated. B. faCts DEEMED ADMITTED AND PROVEN FACTS [ 6 ] Under Rule 21.02 of the Rules of Court , a defendant who has been noted in default is deemed to admit the truth of all allegations of fact made in the Statement of Claim.

This, of course, does not apply to the quantum of unliquidated damages, which must be determined by the Court during the trial. [ 7 ] The following facts are deemed to have been admitted and have also been proven by affidavit: a. On July 20, 2012, La Caisse Populaire de Shippagan Limitée (“the Caisse”) granted a loan of $63,705 to the plaintiff, secured by a duly registered mortgage against a property owned by the defendant and bearing interest at an annual rate of 3.6%. b. The mortgage was insured by the plaintiff, the Canada Mortgage and Housing Corporation. c.

On or about January 2, 2020, the defendant failed to fulfill her payment obligations under the mortgage. d. After demand was made, the Caisse proceeded with the mortgage sale of the property in question. e. On August 17, 2020, the Caisse obtained a property appraisal from an independent appraiser. According to the appraisal report, at that time, the fair market value of the property was $48,000, but its value at a forced sale was $27,000. f. The Caisse complied with the obligations set out in the Property Act for the mortgage sale.

g. The public sale took place on November 3, 2020. The Caisse purchased the property for $48,000. h. On March 24, 2021, the Caisse transferred ownership of the property to the plaintiff. i. The plaintiff then sold the property to a third party for $30,000. [ 8 ] The facts show that the Caisse did not [TRANSLATION] “improperly exercise” its power of sale. [ 9 ] As for the unliquidated damages, the evidence shows the following: a. At the date of the default, the amount owed by the defendant was $49,957.12. (Exhibit C of Chantal Orieux’s affidavit.) b.

The interest accrued from the date of default to the date of the mortgage sale amounts to $1,507.75 (49,957.12 x (3.6%/365) x 306 days). c. The unpaid property taxes accrued up to the mortgage sale amount to $4,450.55. d. The management fees accrued prior to the date of the mortgage sale amount to $1,115.50. e. The legal fees, disbursements and HST incurred by the Caisse up to the mortgage sale amount to $5,562.50. f. After deduction of the price obtained at the mortgage sale, the balance is therefore $14,628.42.

It is in fact the price obtained at the mortgage sale that is relevant and not the price of a subsequent resale. [1] g.

The interest, still at the rate of 3.6%, from the date of the mortgage sale until the trial, amounts to $1,568.70. [ 10 ] Those amounts figure in the following table: Balance at the time of default $49, 957.12 Plus interest from the date of default to the sale $1,507.75 Plus property taxes $4,450.55 Plus management fees $1,150.50 Plus legal fees $5,562.50 Total additions $12,671.30 Total due at the mortgage sale $62,628.42 Less the sale price obtained at the mortgage sale $48,000.00 Balance due after the mortgage sale $14,628.42 Plus interest accrued between the sale and the trial $1,568.70 Total $16,197.12 C.

COSTS [ 11 ] However, costs still need to be determined. In its Statement of Claim, the plaintiff is simply asking for their fees and costs. It is also the case in the plaintiff’s pre-hearing brief.

[ 12 ] However, at the hearing, the plaintiff requested an award of costs on a solicitor and client basis.

The defendant was not informed of this claim. [ 13 ] The claim is not based on improper conduct, but rather on a clause in the mortgage agreement. [ 14 ] Clause 110.1 of the Optional Conditions and Covenants forming part of the mortgage reads as follows: 110.1 The mortgagor covenants with the mortgagee that the mortgagor shall pay all fees, costs as between solicitor and client, charges and expenses which are incurred in making and maintaining this mortgage as a charge on the lands and premises, or in negotiating or effecting a renewal of this mortgage, or in obtaining or retaining or realizing or attempting to realize upon any security to which this mortgage is collateral, or in advancing any money under this mortgage or in inspecting or revaluing the lands and premises, or in taking, recovering and keeping or attempting to procure possession of the lands and premises, or in any proceeding judicial or otherwise to protect or to realize this security, and any amounts so paid by the mortgagee shall be payable forthwith by the mortgagor to the mortgagee. [ 15 ] The plaintiff did not cite any case law in support of its request but argues that the contractual agreement between the parties must be respected. [ 16 ] Rule 59.01 of the Rules of Court reads as follows: 59.01 Authority of the Court

(1) Subject to any Act and these rules, the costs of a proceeding or a step in a proceeding are in the discretion of the court and the court may determine by whom and to what extent costs shall be paid.

(2) Nothing in this rule shall be construed so as to interfere with the authority of the court (

a) to fix the costs of a proceeding, or a step in a proceeding, with or without reference to a tariff, instead of requiring assessment of the costs, (

b) to allow or refuse costs in respect of a particular issue or part of a proceeding, (

c) to order costs to be assessed on a solicitor and client basis, or (

d) where parties are entitled to costs from each other, to order set-off of the costs. [ 17 ] Normally, solicitor and client costs are only awarded where a party has displayed reprehensible, scandalous, or outrageous conduct. [2] [ 18 ] Although there does not seem to be a decision by this Court or our Court of Appeal on the issue of costs provided for in advance in a contract, several courts in other provinces have considered this issue. The following principles emerge.

[19] Firstly, if it is alleged that a contract providing for compensation on a solicitor and client basis exists, the right to suchcompensation must be expressed clearly and unequivocally.[3] [20] Secondly, the defending party is entitled to notification that costs other than ordinary costs between parties, under Rule 59, arebeing sought.[4] [21] Thirdly, a prior agreement between the parties as to costs shall not take away from the Court its discretionary power in awardingcosts. [22] In Bossé v.

Mastercraft Group Inc.,[5] the Court of Appeal of Ontario states the following: [TRADUCTION] Les dépens de l’instance ou d’une mesure prise dans le cadre de celle-ci, et qui sont accessoires à l’instance ou à la mesure, relèvent dupouvoir discrétionnaire de la cour, qui peut déterminer à qui il incombe de les payer et la part qui incombe à chacun :

Loi sur lestribunaux judiciaires, L.R.O. 1990 ch. C.43, par. 131(1); règle 57.01 des Règles de procédure civile. En règle générale, lorsqu’il existeun droit contractuel aux dépens, la cour exercera son pouvoir discrétionnaire de manière à tenir compte de ce droit. Toutefois, l’ententedes parties ne peut pas exclure le pouvoir discrétionnaire de la cour; il est loisible à la cour d’exercer son pouvoir discrétionnaire defaçon contraire à l’entente.

La cour peut refuser d’appliquer le droit contractuel si elle a de bonnes raisons de le faire – par exemple,lorsque le créancier hypothécaire qui a obtenu gain de cause s’est comporté de façon inéquitable ou lorsque l’affaire présente descirconstances particulières qui rendent la condamnation aux dépens établis sur la base des frais entre avocat et client inéquitable ou indûment onéreuse dans les circonstances particulières. Voir, de façon générale, l’ouvrage Orkin on the Law of Costs, 2e éd., 1993, p. 2- 111; Collins c.

Forest Hill Investment Corporation, (ON SC), [1967] 2 O.R. 351 (c. de cté Ont.); Ontario PotatoDistributing Inc. c. Confederation Life Insurance Co. (1991), 25 A.C.W.S. (3d) 809 (C. Ont. (Div. gén.)); Cabot Trust c. D’Agostino(1992), (ON SC), 11 O.R. (3d) 144 (Div. gén.); C.D.I.C. c. Canadian Commercial Bank (1989), 1989 ABCA 150, 68 Alta. L.R. (2d) 194 (C.A.), aux p. 203 à 204. [23] The Court of Appeal of Saskatchewan came to a similar decision in Rozdilsky v. Kokanee Mortgage M.I.C.

Ltd.[6] The Courtstated the following at paragraphs 9 and 10: [TRADUCTION] [9] Un ensemble de facteurs différents entrent en jeu lorsqu’une entente contractuelle prescrit qu’une

partie à une instance paie lesdépens d’une autre

partie établis sur la base des frais entre avocat et client. En règle générale, lorsqu’il existe un droit contractuel auxdépens, la cour exerce son pouvoir discrétionnaire de manière à tenir compte de ce droit. Dans le cadre d’une procédure de forclusion, lecréancier hypothécaire a normalement droit aux dépens établis sur la base des frais entre avocat et client, si l’obligation de payer cesdépens fait

partie des conditions de l’hypothèque : Central Mortgage and Housing Corporation c. Johnson, (SK CA),[1971] 5 W.W.R. 163 (C.A. Sask.); First Nations Bank of Canada c. Ledoux, 2005 SKQB 262, 266 Sask. R. 73 [Ledoux]; Royal Bank ofCanada c. Lafond, 2009 SKQB 346, 341 Sask. R. 195, au par. 7; Royal Bank of Canada c. Partridge, 2018 SKQB 216, au par. 7;Bossé c. Mastercraft Group Inc., (ON CA), (1995), 123 D.L.R. (4th) 161 (C.A. Ont.) [Bossé]. [10] Cette règle générale n’est toutefois pas une règle absolue; la cour conserve le pouvoir discrétionnaire de priver une

partie desdépens établis sur la base des frais entre avocat et client, malgré l’existence d’une obligation contractuelle expresse, lorsque ces dépensne sont pas appropriés dans les circonstances : Fidelity Trust Company c. Hawrish, Ward and Ward, (SK CA),(1986), 55 Sask. R. 10 (C.A.); 1269917 Alberta Ltd. c. FMI Developments Ltd., 2011 SKCA 94, 375 Sask. R. 175; Karkoulas c. FarmCredit Canada, 2005 SKQB 535, 274 Sask. R. 152. Une entente entre les parties n’a pas préséance sur le pouvoir discrétionnaire de lacour en matière de dépens.

La cour peut refuser d’appliquer une disposition contractuelle concernant le recouvrement des dépens établissur la base des frais entre avocat et client si elle a de bonnes raisons de le faire.

Ces raisons peuvent inclure un comportement vexatoire,oppressif, frauduleux ou autrement inéquitable de la part du créancier hypothécaire, ou d’autres circonstances particulières à l’affaire quirendent la condamnation à de tels dépens injuste, excessive ou indûment onéreuse : Bossé, au par. 65; Ledoux, au par. 19. [24] Finally, the Court’s discretion to award costs other than solicitor and client costs is not limited to situations where the mortgageehas acted improperly. [25] Here is what the Court of Appeal of Ontario had to say on the issue in Peace River:[7]

[TRADUCTION] [137] Les décisions citées ci-dessus par notre Cour appuient l’application des clauses contractuelles régissant l’adjudication de dépens, qui prévoient généralement une indemnisation complète. Toutefois, ces décisions n’analysent pas la question de savoir si la cour dispose d’un pouvoir discrétionnaire pour s’écarter de l’indemnité contractuelle ni les circonstances qui pourraient justifier de le faire. [138] Les cours d’appel d’autres ressorts ont reconnu un tel pouvoir discrétionnaire lorsque les circonstances le justifient. Par exemple, dans Schafer c.

Schafer , 2023 ABCA 117 , la Cour a confirmé la décision du juge de première instance refusant d’accorder des dépens établis sur la base des frais entre avocat et client, malgré une clause de la convention d’arbitrage des parties dans un litige de droit de la famille qui prévoyait de tels dépens. [139] Après avoir précisé que l’octroi de dépens est hautement discrétionnaire et ne peut faire l’objet d’un contrôle en appel que si le juge a commis une erreur de principe ou si l’octroi des dépens est absolument déraisonnable (au par. 72), la Cour a indiqué ce qui suit : [73] Tout droit contractuel aux dépens est toujours subordonné à la discrétion de la cour : Mark M.

Orkin et Robert G. Schipper, dans l’ouvrage Orkin on the Law of Costs , 2 e éd. (Toronto: Thomson Reuters Canada, 2019) (feuilles mobiles, version 2020), au par. 219.1.1. Les circonstances dans lesquelles un tribunal peut exercer son pouvoir discrétionnaire pour adjuger des dépens d’une manière différente de celle convenue par les parties ont été récemment abordées dans Driving Force Inc. c.

I Spy-Eagle Eyes Safety Inc , 2022 ABCA 25 , au par. 72 : Même s’il existe un engagement obligatoire de payer des dépens établis sur la base des frais entre avocat et client, le juge de première instance a le pouvoir discrétionnaire de s’écarter de cet engagement, en tenant compte de la manière dont le litige a été mené, de la proportionnalité des dépenses par rapport aux montants en jeu, du degré de succès obtenu et d’autres facteurs pertinents : [références omises]. [74] Par conséquent, nous n’acceptons pas qu’un tribunal ne doive exercer son pouvoir discrétionnaire de ne pas adjuger des dépens établis sur la base des frais entre avocat et client convenus par contrat que lorsqu’il y a eu des litiges abusifs ou d’autres formes d’inconduite, bien que cela puisse manifestement constituer un facteur pertinent.

La proportionnalité des dépenses et le degré de succès peuvent également être pris en compte. [140] La Cour a conclu que le juge, en refusant d’accorder les dépens prévus par contrat, avait pris en compte à bon droit le principe de proportionnalité, compte tenu du montant relativement faible en jeu, ainsi que le désir d’éviter une audience spéciale qui aurait été nécessaire pour calculer les dépens selon le tarif des frais entre avocat et client : aux par. 75 à 76. [141] Comme il est indiqué au paragraphe 74 de l’arrêt Schafer , la Cour a rejeté l’idée que le tribunal, pour refuser d’appliquer une disposition contractuelle qui prévoit une indemnisation complète des frais, doit établir l’existence d’une inconduite.

C’est la méthode qui a été adoptée dans des affaires antérieures, par exemple dans HSBC Bank Canada c. Lourenco , 2012 ABQB 648 , au par. 31 , une décision citée par le juge en l’espèce. C.1 Application of the principles to the present matter [ 26 ] In my opinion, clause 110.1 of the mortgage agreement does not clearly and unequivocally provide for the plaintiff’s right to solicitor and client costs in the present matter. [ 27 ] We must first determine what clause 110.1 provides by reviewing each of its elements.

This clause provides that “the mortgagor shall pay all fees, costs as between solicitor and client, charges and expenses which are incurred in” (

a) making and maintaining this mortgage as a charge on the lands and premises;

(

b) negotiating or effecting a renewal of this mortgage; (

c) realizing or attempting to realize upon any security to which this mortgage is collateral; (

d) advancing any money under this mortgage; (

e) inspecting or revaluing the lands and premises; (

f) taking, recovering and keeping or attempting to procure possession of the lands and premises; (

g) any proceeding judicial or otherwise to protect or to realize this security. [ 28 ] Clauses (a), (b), (d), (

e) and (

f) cannot apply to these proceedings. [ 29 ] With respect to clause (a), we do not have in this case a security to which a mortgage is collateral. The security is the land. The mortgage is not collateral to a security but is rather the instrument that constitutes the security. At the very least, the clause cannot be described as clear and unequivocal. [ 30 ] As for clause (g), once again, it is not a clear and unequivocal clause. It seems to refer to the mortgage sale procedure. The costs for these are already included in the claim. Again, the collateral provided by the mortgage is the land.

This part of clause 110.1 therefore refers only to the costs of [TRADUCTION] “realizing” the security, that is to say, of proceeding to the sale of the property given as collateral. [ 31 ] Clause 110.1 may be open to other

interpretations, but it cannot be clear and unequivocal wording that provides for the award of solicitor and client costs in a proceeding subsequent to the mortgage sale to recover a deficiency. [ 32 ] This is sufficient to assess costs according to the ordinary criteria of Rule 59.

Even if the clause had clearly provided for an agreement to solicitor and client costs in the case of a deficiency proceeding, I am of the opinion that the facts warrant exercising the Court’s discretion to award party and party costs in accordance with Scale 1 of Tariff “A” of Rule 59. [ 33 ] The defendant did not file a Statement of Defence and was noted in default. She did not appear at trial. Therefore, she did not contest the claim in any way. [ 34 ] The defendant was not notified that the plaintiff was seeking costs other than normal party and party costs. [ 35 ] The proceedings were quite simple and quick.

The trial took place without the need for viva voce evidence. [ 36 ] Based on an amount involved of $16,200, costs are therefore set at $1,400. D. dispositION [ 37 ] The plaintiff is therefore entitled to judgment against the defendant in the amount of $16,197.12, plus costs of $1,400, plus HST and allowable disbursements.

DATED at the City of Bathurst, New Brunswick, this 23 rd day of November 2023. Ivan Robichaud Judge of the Court of King’s Bench of New Brunswick