Abalon Holdings Ltd. v. Date:, 2012 MBCA 15

Citation: Abalon Holdings Ltd. v. Date: 20120216 74486 Manitoba Ltd., 2012 MBCA 15 Docket: AI 11-30-07496 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Barbara M. Hamilton Mr. Justice Martin H. Freedman BETWEEN : ABALON HOLDINGS LTD. ) K. J. Muys ) for the Appellant ) (Applicant) Respondent ) E. G.

Zazelenchuk ) for the Respondent - and - ) ) 74486 MANITOBA LTD. ) Appeal heard: ) June 10, 2011 ) (Respondent) Appellant ) Judgment delivered: ) February 16, 2012 HAMILTON J.A. 1 This appeal concerns the ten-year limitation period under The Limitation of Actions Act , C.C.S.M., c. L150, pertaining to mortgages and the effect a notice of exercising power of sale has on such limitation period. 2 The appellant mortgagee (74486) registered a mortgage in 1986 against property now owned by Abalon Holdings Ltd. (Abalon).

In 1993, 74486 Manitoba Ltd. (74486) registered a notice of exercising power of sale (the NEPS) against the property. 3 In 2010, Abalon applied, pursuant to s. 106 of The Real Property Act , C.C.S.M., c.

R30, for a declaration and order extinguishing the mortgage on the ground that it was statute barred because there had been no payment or acknowledgment of indebtedness for a period of more than ten years from the date of default under the mortgage. 4 The application judge granted the application. 5 74486 appeals, arguing, among other things, that the judge erred when she concluded that the legal effect of the NEPS on the limitation period was spent because the default under the mortgage for which the NEPS had been filed had been remedied.

The legal effect at issue is the tolling of the limitation period; that is, the suspension of the running of the limitation period. 6 74486 has not persuaded me that the judge committed any error of law or palpable and overriding error of fact. I would dismiss the appeal. Statutory Provisions 7 This appeal engages a number of statutory provisions. I set them out now to provide context for the commentary and analysis that follows. 8 As already noted, Abalon made application pursuant to s. 106 of The Real Property Act : Statute barred mortgage

106(1) Where a limitation imposed by The Limitation of Actions Act in regard to a mortgage or encumbrance made under this Act, comes into effect, a mortgagor under the mortgage or a person whose land is charged with the encumbrance may apply to the court for a declaration and order extinguishing the mortgage or encumbrance .

Court to grant order 106(2) Where, on an application made under subsection (1) the court is satisfied that the applicant is entitled to the declaration and order for which the application is made, the court shall declare that the mortgage or encumbrance is statute barred and thereby extinguished and shall, by order, direct the district registrar to note upon every certificate of title which was subject to the mortgage or encumbrance that the mortgage or encumbrance is statute barred and thereby extinguished and thereafter to treat the mortgage or encumbrance as if it had been wholly discharged by the person entitled by law to discharge it. [emphasis added] 9 Abalon relies on s. 21(1) of The Limitation of Actions Act , which sets out the ten-year limitation period for bringing proceedings to recover money secured by a mortgage unless there has been payment or an acknowledgment of indebtedness during that ten-year period: Recovery of money charged on land 21(1) No proceedings shall be taken to recover any rent charge or any sum of money secured by any mortgage or otherwise charged upon or payable out of any land or rent charge but within 10 years next after a present right to recover it accrued to some person capable of giving a discharge therefor or a release thereof, unless, prior to the expiry of that 10 years , some part of the rent charge or sum of money or some interest thereon has been paid by a person bound or entitled to make a payment thereof, or his agent in that behalf, to a person entitled to receive it, or his agent, or some acknowledgment in writing of the right to the rent charge or sum of money signed by any person so bound or entitled , or his agent in that behalf, has been given to a person entitled to receive it, or his agent, and in that case no action shall be brought but within 10 years after that payment or acknowledgment, or the last of such payments or acknowledgments, if more than one, was made or given. [emphasis added] 10 In her reasons, the judge noted that s. 41(1) of The Limitation of Actions Act also provides for a ten-year limitation period, but with respect to proceedings for foreclosure or sale under a mortgage: Foreclosure or sale 41 No mortgagee or person claiming through a mortgagee shall take any proceedings for foreclosure or sale under any mortgage of real or personal property or to recover the property mortgaged but within 10 years next after the right to take the proceedings first accrued to the mortgagee, or if the right did not accrue to the mortgagee, then within 10 years after the right first accrued to a person claiming through the mortgagee. 11 The judge explained the difference, rightly in my view, between s. 21(1) and s. 41(1), noting that there was no dispute between the parties that the limitation period was ten years (at para. 5):

Section 21 imposes a ten year limitation period with respect to the personal action against the mortgagor to recover the money secured by the mortgage (which proceedings would be pursued in the courts); s. 41 imposes a ten year limitation period with respect to sale or foreclosure proceedings (which proceedings are pursued in Manitoba in the Land Titles Office). While neither party referred to s. 41, it is not disputed that the limitation period in this case is ten years and that that period started to run when the mortgagor defaulted in making payments on the principal and/or interest payable under the mortgage. [emphasis added]

Section 1 of The Limitation of Actions Act defines “proceedings” as follows: …. “ proceedings” includes action, entry, taking of possession, distress, and sale proceedings under an order of a court or under a power of sale contained in a mortgage or conferred by statute; …. 13 Section 134(1) of The Real Property Act sets out the requirements for service and filing for a notice of exercising power of sale in mortgage sale proceedings: Notice of sale on default 134(1) Where default is made in the payment of the principal sum, interest, annuity, or rent charge, or any part thereof, secured by a mortgage or encumbrance registered under this Act, or in the observance of any covenant expressed or implied in the mortgage or encumbrance, if the default is continued for the space of one month, or for such longer period of time as is therein for the purpose expressly limited, the mortgagee or encumbrancer may forthwith give a written notice, a copy of which shall be filed in the land titles office, to the mortgagor or owner of land subject to an encumbrance, and to every other person appearing at the time of filing the notice to have any mortgage, encumbrance, or lien upon, or estate, right, or interest in, the lands subsequent to his mortgage or encumbrance requiring the mortgagor or owner of land subject to an encumbrance and the other persons to be served with the notice to pay, within a time to be specified therein, the money then due or owing on the mortgage or encumbrance or to observe the covenants therein expressed or implied, and stating that in case default is made in so doing, all remedies provided in this Act will be resorted to, to remedy the default. 14

Section 77 of The Real Property Act sets out the implied covenant of a transferee of real property to comply with the covenants under a mortgage registered against that property: Implied covenants in transfer 77 In every instrument transferring land for which a certificate of title has been issued subject to a mortgage or encumbrance, there shall be implied, unless otherwise expressed, the following covenant by the transferee both with the transferor and the mortgagee, that is to say: That the transferee will pay the principal money, interest, annuity, or rent charge secured by the mortgage or encumbrance, at the rate and at the time specified in the instrument creating it, will be bound by every other covenant, term and condition in the mortgage or encumbrance, and will indemnify and keep harmless the transferor from and against the principal sum or other moneys secured thereby, and from and against liability in respect of every other covenant, term and condition therein contained or, under this Act, implied on the part of the transferor. 15

Section 25 of The Mortgage Act , C.C.S.M., c. M200, places an obligation on a mortgagee to give the mortgagor, on request, an annual statement of account. Sections 25(1) to (3) read as follows: Request for statement 25(1) A mortgagor, as long as his right to redeem subsists, may, in writing, request the mortgagee to furnish to the mortgagor a statement of account of the mortgage debt.

Mortgagee to furnish statement of account 25(2) Where a mortgagee receives a written request under subsection (1) to furnish a statement of account for the mortgage debt, he shall, within 21 days of the date he receives the written request, at no cost to the mortgagor, furnish to the mortgagor or his authorized agent a statement in writing setting out (

a) the amount of payments credited, including apportionment as between principal, interest, and, if applicable, taxes; (

b) the amount of any payments made by the mortgagee and charged to the mortgagor’s account, indicating the nature of the payments;

(

c) the amount of the outstanding balance owing on the mortgage debt as of a date not more than 30 days prior to the date he receives the written request; (

d) the date of the last credited payment received within the period covered by the statement; and (

e) the status of the tax account, where tax instalments have been paid to the mortgagee and credited separately for tax purposes. Statement may be required once a year 25(3) Subject to subsection (4), a mortgagor is not entitled to receive a statement of account of the mortgage debt more than once in any single period of 12 months. . . . . .

Background 16 In 1986, 74486 registered the mortgage, which was in the principal amount of $80,000, against property (the property) located in Starbuck, Manitoba, owned by Abalon Construction Ltd. 17 In 1989, Abalon Construction Ltd. (known after its name change in 1996 as 0544699 Manitoba Ltd.) transferred the property to Joseph Leo Mulligan (Mulligan), the president of Abalon Construction Ltd.

The transfer was subject to the mortgage. 18 In 1993, 74486 filed in the Winnipeg Land Titles Office the NEPS alleging that default had occurred and that $37,100 was due under the mortgage. 19 Subsequent to such filing, payments were made under the mortgage. The last payment was made on September 7, 1999. The principal owing under the mortgage at that time was $29,925.49. 20 In 2001, Mulligan transferred the property to Abalon, which took title subject to the mortgage. 21 Mulligan died in November 2008. 22 In 2010, Abalon filed its application under s. 106 of The Real Property Act .

The Hearing 23 In support of its application, Abalon filed the affidavit of Gerald Bonham, the current shareholder, officer and director.

His evidence was that Mulligan had resided at the property during his lifetime, that Mulligan had kept most of his records there or at the Abalon corporate offices in Winnipeg and that he (Bonham), had conducted a thorough search of the records located at both locations and found no record of any payment under the mortgage or any acknowledgment in writing of 74486’s right to such money given by Mulligan, Abalon or 0544699 Manitoba Ltd. 24 In response, 74486 filed the affidavit of Carol Barker (Barker), its president.

Her evidence included that the mortgage is in default and that the amount owing under the mortgage was $63,820.68 on August 7, 2006, which included accrued interest at the rate of 11 per cent. In support of that claim, she attached a

schedule of mortgage payments prepared by her accountants with a “print date” of June 14, 2005. The

schedule shows default starting with the October 7, 1999 payment. 25 Barker stated in her affidavit that she has “on several occasions demanded payment on account of the Mortgage but there has been a failure or refusal to pay or remedy the default.” 26 The foregoing affidavits were not the subject of cross-examination. 27 Abalon’s position was that it was entitled to have the mortgage removed because no steps have been taken under the mortgage in the last ten years prior to its application.

It asserted that whether the mortgage had been remedied or not since the filing of the NEPS was a red herring and irrelevant to its application. 28 74486’s position was two-fold: First, it argued that the filing of the NEPS was the commencement of proceedings

taken within ten years for the purposes of s. 21(1) of The Limitation of Actions Act , and that the NEPS has the same effect on a limitation period as a statement of claim in a civil proceeding.

Alternatively, it argued that the effect of Abalon’s implied covenant to pay the mortgage pursuant to s. 77 of The Real Property Act is that the ten-year limitation started in 2001 when the property was transferred to Abalon. 29 During submissions, the judge had a number of questions about the legal effect of the filing of the NEPS, including whether its effect was spent in light of the payments that had been made subsequent to its filing.

Therefore, at her request, and with the consent of both counsel, Abalon subpoenaed Russell Davidson, the Senior Deputy District Registrar of the Winnipeg Land Titles Office to testify as to the practice in mortgage sale and foreclosure proceedings. 30 Mr.

Davidson testified that “the notice exercising power of sale in my opinion satisfies The Limitations of Actions Act as being the document to initiate proceedings.” He also testified that the assistant district registrar would not issue an order for sale without an “affidavit of continuing default.” At the end of his testimony there was the following exchange with the judge: [Judge:] Okay. So my next question is this then.

Now, I understand that you can’t look behind the affidavit material that’s filed in the Land Titles, whatever the mortgagee tells you you’ve got to accept unless it’s challenged, but assuming .... …. [The mortgagee:] files an NEPS, and then the mortgage is brought up to date, and then six months, a year, two years, ... later there’s a second default, does he have to file a new NEPS? [Witness:] Yes he does. . . . . . [Judge:] So he can’t rely on the, on the first NEPS? [Witness:] No.

The default that is noted in the first NEPS has been remedied, and one of the key things that Land Titles looks for when we get this affidavit of continuing default is that the default referenced in the NEPS continues to this point. [Judge:] So there has to be continuing default, if he wants to go for an order of sale his affidavit must swear that there is continuing default from ...? . . . . . [Witness:] ... [T]he default cited in the NEPS. [Judge:] Okay. So if the, if the default’s been remedied he’s got to start from scratch, and again file a new NEPS, and then go from there? [Witness:] That’s correct.

The Judge’s Decision 31 The judge concluded (at para. 44):

The applicant has established that there were no payments on the mortgage within the ten years preceding the filing of this application. The respondent has not established that the limitation period was stopped or renewed within that period.

Therefore, the applicant isentitled to an order under s. 106 of the Real Property Act extinguishing the mortgage. 32 In reaching that conclusion, the judge addressed a number of legal and factual issues, the first of which was whether anotice of exercising power of sale tolls the limitation period for a claim under a mortgage. 33 In her analysis, the judge explained that: “The service and filing of the NEPS is the first step that a mortgagee musttake before obtaining an order for sale or foreclosure …” (at para. 10).

After noting that “there appears to be no authority on the effect ofservice of the NEPS on the limitation period” (at para. 16), she referred to the evidence of Mr. Davidson about the practice followed bythe Land Titles Office, which she said “is supported by the legislation” (at para. 18).

She concluded that a notice of exercising power ofsale tolls the limitation period, but that “its effect would be spent if the default for which the NEPS was served is remedied” (ibid.). 34 She stated that “[t]he difficult issue in this case is determining whether the default was remedied” (ibid.). 35 The judge commented on the lack of evidence concerning the mortgage payments after the filing of the NEPS (at para.12): .… There is evidence before the court that, as of September 1999, only $29,925 remained owing on the loan. Therefore, it is clear thatsome payments were made after the NEPS was served.

However, I have no evidence before me as to the amount of the payments, whenthey were made or whether the payments were such that they remedied the default.

While the amount owing on the loan was obviouslyreduced after the NEPS was served, I do not know if the payments were made in such a way that the mortgage was put into goodstanding, that is to say, that the payments were made current at any point. 36 She addressed the issue of onus at some length (at paras. 26-38), and concluded that the evidentiary onus ultimately fellon 74486 to establish that the default was not remedied after the NEPS was filed. 37 She explained that there was a shifting onus (at paras. 26, 30-31) The question then is whether this evidence establishes, or whether I should infer from this evidence, that the default was remedied.

Theapplicant says that it does; the respondent says it does not. Because the evidence is equivocal, how I resolve this issue depends on wherethe onus lies. .… The parties filed no authority on the question of onus, and, not surprisingly, I have been unable to find any directly onpoint. …. … [A] shifting onus has practical appeal and is supported by at least one Manitoba case. In Petryk v. Petryk, (MBKB), [1966] M.J. No. 48; 56 D.L.R. (2d) 621 (Man.

Q.B.), the court held that, where in an action on a debt the defendant pleads theexpiry of the limitation period, the onus is on the plaintiff to show payments were made which stopped the limitation from running. By analogy, in an application under s. 106 of the Real Property Act, the initial onus would be on the applicant to show that the limitationperiod had expired. The applicant here has satisfied that onus by leading evidence, which was not disputed, that there have been nopayments on the mortgage in the ten years preceding the application.

The onus then would shift to the respondent to show that thelimitation period had been stopped or suspended. I think that the respondent has initially met that onus by showing that the applicant wasserved with an NEPS. 38 In her analysis with respect to onus, the judge considered the underlying rationale for statutes of limitation articulatedby La Forest J. in M.(K.) v. M.(H.), (SCC), [1992] 3 S.C.R. 6, quoting pp. 29-30, and noted that the ten-year limitationperiod for the enforcement of mortgages is unusually long relative to other limitation periods prescribed by The Limitation of ActionsAct.

She then wrote (at paras. 35-38): In my view, considering the unusual length of the current limitation period and the rationale underlying limitation periods, referred to bythe Supreme Court in K.M. v. H.M., it is reasonable to place the ultimate onus on the mortgagee to satisfy the court that it should beallowed to enforce the mortgage more than ten years after default. From a practical perspective, it makes sense that the onus should fall on the party who is most likely to have the evidence to determinethe issue. ....

So, in proceedings to enforce a mortgage, which party is best able to provide evidence as to the status of the mortgage? Of course, itwould be prudent for both the mortgagor and mortgagee to keep records of payments made. In this case, the original mortgagor, whowas the person in possession of the property, is now dead. The evidence of Mr. Bonham is that no records regarding payments could befound. On the other hand, it is clear from the statement attached to Ms.

Barker’s affidavit, that the mortgagee has at least some records.Moreover, the Mortgage Act places an obligation on the mortgagee to keep records as to the status of the mortgage to satisfy therequirement of s. 25. .... . . . . . I infer from this provision that the respondent should have had records which would have shown the status of the mortgage after theNEPS was served. As between the applicant and respondent, the respondent is in the better position to provide evidence as to whetherthe default on the mortgage was remedied after the NEPS was served.

By not filing those records in evidence, it has failed to rebut theinference from the evidence that the mortgage was put into good standing. On the basis of the evidence before me, I conclude that theNEPS was spent and the limitation period has expired. [emphasis added] 39 Finally, the judge did not accept 74486’s alternative argument that the transfer of the property by Mulligan to Abalonrevived the limitation period in 2001 in light of the implied covenant of Abalon with respect to the mortgage.

She noted that 74486 “didnot argue that there was an ‘acknowledgement’ of the mortgage debt by [Abalon] when it took over the property in 2001 so as to renewthe limitation period” (at para. 43). With respect to Trusts & Guarantee Co. Ltd. v. Buxton, (SCC), [1929] S.C.R. 529,relied on by 74486, she wrote (at para. 42): .… In my view, the case does not support the respondent’s contention that the limitation begins to run when the transferee acquires theproperty. Rather, the court holds that the transferee’s liability ceases with that of the original mortgagor. ….

Positions of the Parties on Appeal 40 74486 asserts that the judge erred by not concluding that the NEPS constituted proceedings taken within ten years, ascontemplated by The Limitation of Actions Act, thereby precluding Abalon’s right to an order pursuant to s. 106 of The Real PropertyAct. It says that the judge was wrong to broaden the issues before her by asking whether the NEPS was spent if the default under themortgage was remedied. It says that she erred further by concluding that the NEPS was spent, based on evidence that she said wasunclear and by misplacing the onus.

Finally, it says that the judge erred when she concluded that the limitation period did not start to runagain in 2001 when the property was transferred to Abalon, given the implied covenant under s. 77 of The Real Property Act. 41 It says that these alleged errors raise questions of law for which the standard of review is correctness. 42 Abalon’s position is that there are no facts in dispute and that the only real issue on appeal is whether the mortgage isstatute barred. This, it says, raises a question of law for which the standard of review is correctness.

Abalon says that the judge wascorrect to conclude that the mortgage should be extinguished, notwithstanding she did not accept, in full, its arguments. Analysis and Decision 43 I think it important to be clear about what the judge decided. She concluded that the NEPS tolled the limitation periodwhen it was filed and served in 1986. However, she held that on the facts before her, the default for which the NEPS was filed had beenremedied and, therefore, the NEPS was spent.

She also held that upon further default by Abalon starting on October 7, 1999, thelimitation period started running again and at the time it filed its application, the ten-year limitation period had expired. As a result, shedeclared that the mortgage was “statute barred and thereby extinguished” (The Real Property Act s. 106). 44 While 74486 raises a number of issues in this appeal, in my view, the only significant one is whether the judge erredwhen she concluded that the NEPS was spent.

The other issues can be addressed briefly. 45 74486 argues that the judge wrongly stated that it filed no authority for its position that the NEPS tolled the limitationperiod, stating that it referred the judge to the definition of “proceedings” in The Limitation of Actions Act, and to s. 134 of The RealProperty Act. This, it says, is clear statutory authority that a notice of exercising power of sale should have the same legal effect on a

limitation period as does the filing of a statement of claim. 46 Throughout her reasons, the judge noted, as did counsel in their submissions, that there is little authority for the issuesraised by Abalon’s application. When the judge stated that she had not been provided with “authority,” the judge was referring to thefact that 74486 had not provided case law or academic commentary in support of its position that the NEPS tolled the limitation period. 47 In her reasons, the judge did consider the definition of “proceedings” and s. 134 of The Real Property Act.

Sheconcluded that pursuant to s. 134, “[t]he service and filing of the NEPS is the first step that a mortgagee must take before obtaining anorder for sale or foreclosure” (at para. 10). If any authority is needed for that principle in light of s. 134, see Re Rafnson et al. v. CanadaPermanent Trust Co., (1978), (MB CA), 87 D.L.R. (3d) 59 (Man.

C.A.), in which O’Sullivan J.A., after referring toThe Law Society of Manitoba’s Bar Admission Course material with respect to “Mortgage Sale and Foreclosure Proceedings,” andVictor DiCastri, Thom’s Canadian Torrens System, 2d ed. (Calgary: Burroughs & Company Limited, 1962) at 515, wrote (at p. 62): Admittedly, these quotations are not necessarily decisive of the point.

Yet they point to a common understanding among conveyancersand Judges that the filing of a notice of exercising power of sale is a first step in the proceedings and not merely a notice that they maybe commenced. [emphasis added] 48 The filing of a notice of exercising power of sale is the first step in mortgage sale proceedings. That is clear. In myview, it is also clear that it has the effect of tolling the applicable limitation period. As explained by the judge, this is evident from thestatutory regime and supported by the foundational principles pertaining to limitation periods, as well as the evidence of Mr.

Davidson. Therefore, the judge correctly concluded that the NEPS tolled the limitation period with respect to the mortgage when it was filed in1986. 49 This conclusion did not end the matter, as 74486 argued that it should. Given the evidence before her, the judge wasobliged to consider whether the NEPS was spent. I do not agree with 74486 that the judge inappropriately broadened the issues beforeher by engaging in this enquiry. 50 74486 argues that the judge erred in law when she concluded that a notice of exercising power of sale can becomespent.

By this argument, it is saying that the tolling of the limitation period as a result of the NEPS is in effect today and that it isirrelevant what occurred subsequent to its filing. The judge disagreed and so do I. 51 Mr. Davidson’s evidence, which the judge appropriately noted was supported by the statutory regime (including s. 14of The Mortgage Act and s. 115 of The Real Property Act, which give a mortgagor protection from acceleration), emphasized theimportance of “continuing default” in the mortgage sale proceedings.

Simply put, if the default for which the NEPS was filed isremedied there is no longer any continuing default and any right to proceed under the NEPS. See Ratner v. Lavallee, [1975] M.J. No.323 (Q.B.) (QL) in which Hunt J. wrote that an “affidavit of continuing default … was necessary to give a right to continue the mortgagesale proceedings” (at para. 6). 52 Sackville v. Canada Permanent Mortgage Co. (1916), (SK CA), 27 D.L.R. 790 (Sask. S.C.) alsoprovides support for the principle that a notice of exercising power of sale can become spent.

In Sackville, the plaintiff (mortgagor) wasin default and the respondent (mortgagee) filed a notice of exercising power of sale. In dispute was what was agreed to by the parties at asubsequent meeting as to the new monthly payments. The plaintiff then obtained an injunction from the master restraining the sale ofthe land. That was later overturned by a judge in chambers and there was then a further appeal, by the plaintiff, to the court en banc. Elwood J., writing for five judges, wrote (at p. 790): …. I do not think on this application we are called upon to definitely decide what that arrangement was.

The plaintiff swears definitelythat the agreement was that he was to pay two payments of $10 each every month, and that no further steps were to be taken by thedefendant under the notice of exercising power of sale. If that was the arrangement, then it would seem to me that the proceedings, sofar as the notice of exercising power of sale is concerned, would be at an end, and that the defendant company could only proceed againby serving a further notice of exercising power of sale.

What the exact arrangement was is a matter that will be determined at the trial. [emphasis added] 53 The judge did not err in law when she concluded that a notice of exercising power of sale becomes spent if the defaultunder the mortgage is remedied. 54 I turn now to the key issue of whether the judge was wrong to conclude that the NEPS was spent in this case becausethe default under the mortgage had been remedied. Whether the default had been remedied is a question of fact and the standard ofreview is palpable and overriding error.

The issue also raises a question of law with respect to the judge’s placement of the onus on74486. The standard of review for this discrete question is correctness.

55 As did the judge, I think it important to be reminded of the foundational principles that apply to limitation periods. Asnoted (and quoted in part) by the judge, La Forest J. articulated these principles at some length in M.(K.). In Novak v.

Bond, (SCC), [1999] 1 S.C.R. 808, McLachlin J. (as she then was), wrote of the four characteristics of limitation statutes one ofwhich is to “prevent the bringing of claims where the evidence may have been lost to the passage of time” (at para. 67): The result of this legislative and interpretive evolution is that most limitations statutes may now be said to possess four characteristics.

They are intended to: (1) define a time at which potential defendants may be free of ancient obligations, (2) prevent the bringing ofclaims where the evidence may have been lost to the passage of time, (3) provide an incentive for plaintiffs to bring suits in a timelyfashion, and (4) account for the plaintiff’s own circumstances, as assessed through a subjective/objective lens, when assessing whether aclaim should be barred by the passage of time. To the extent they are reflected in the particular words and structure of the statute inquestion, the best

interpretation of a limitations statute seeks to give effect to each of these characteristics. 56 Walter M. Traub, Falconbridge on Mortgages, looseleaf, 5th ed. (Toronto: Canada Law Book, 2011) addresses theevidentiary challenge created by the passage of time (at pp. 30-2, 30-3): …. The statutory law imposing limitation periods on the right to seek legal redress has been enacted in the public interest to ensure thatthere will be an end to the prospect of litigation, once a claim has become stale.

The concern is the increasing difficulty to produceevidence and witnesses with the passage of time and the need for persons to be free of unexpected claims arising after an unreasonableperiod of time. Upon expiry of the limitation period, all rights of enforcement are lost. In the case of a mortgage claim, the party against whom thelimitation period has run can no longer bring an action for realization against or recovery of the land. The effect is that both the right tobring an action and the right to assert the rights to title of the real property are extinguished by the expiry of the limitation period.

See also Graeme Mew, The Law of Limitations, 2d ed. (Toronto: Butterworths, 2004) at para. 3.2. 57 I think it significant that the

schedule of mortgage payments, adduced into evidence by 74486, shows that the lastpayment on the mortgage was in 1999. It is also significant that the evidence does not disclose 74486 doing anything since that time tocontinue the process initiated by the NEPS filed in 1993.

In those circumstances, the judge appropriately turned her mind to the factualquestion of whether there had been continuing default under the mortgage. 58 Given the limited evidence before her, the question of onus became crucial. 59 The judge wrote that “it makes sense that the onus should fall on the party who is most likely to have the evidence todetermine the issue” (at para. 36), and explained why 74486 had the ultimate onus in this case. I am of the view that the statutoryobligation of a mortgagee to keep records under s. 25 of The Mortgage Act tellingly supports this conclusion.

Further support is found inPetryk v. Petryk (1966), (MB KB), 56 D.L.R. (2d) 621 (Man. Q.B.), as noted by the judge. In the course of explainingthat the onus is on a plaintiff (creditor) to show payments were made which stopped a limitation period from running, Dickson J., as hethen was, wrote (at p. 4): …. … [Section] 3(1) (

f) of the Limitation of Actions Act bars recovery in respect of those items unless there was part payment of theindebtedness by defendant. The burden of establishing part payment is upon the plaintiff: Ball v. Parker (1877), 1 O.A.R. 593. 60 I see no reason to distinguish between the onus on a plaintiff/creditor and a mortgagee, such as 74486, to establish thatthere has been part payment or acknowledgment of indebtedness within the limitation period.

The judge did not err in law in placing theonus on 74486. 61 From the evidence, and the lack of evidence, the judge inferred that the mortgage had been remedied after the filing ofthe NEPS and that the last payment under the mortgage was made on September 7, 1999. The judge was entitled to make the finding offacts, and inferences from those facts, that she did.

She made no palpable and overriding error in concluding that the mortgage had beenremedied prior to the default in October 1999. 62 Given that the NEPS was spent and that: “It is common ground that no payments were made on the mortgage withinthe ten years preceding the filing of the application” (at para. 3), the judge rightly granted the order sought by Abalon. 63 Finally, for the reasons given by the judge, I do not accept 74486’s alternative argument that the limitation periodstarted again in 2001 when the property was transferred to Abalon. Conclusion

64 The judge thoroughly addressed the correct legal and factual issues. She made no error in law or any palpable and overriding error with respect to the facts in reaching her decision declaring the mortgage statute barred and thereby extinguished pursuant to s. 106 of The Real Property Act . 65 I would dismiss the appeal, with costs. J.A. I agree: J.A. I agree: J.A.