The Toronto-Dominion Bank Appellant (Applicant) v. John Sader, Dallas Sader, Melodie, 2021 SKCA 154

Court of Appeal for Saskatchewan Docket: CACV3846 Citation: The Toronto-Dominion Bank v Sader, 2021 SKCA 154Date: 2021-11-29 Between:The Toronto-Dominion BankAppellant (Applicant)AndJohn Sader, Dallas Sader, Melodie Poitras, Capital One Bank (Canada Branch), KMP Law and Her Majesty the Queen in Right of CanadaRespondents (Defendants)Before: Ottenbreit, Caldwell and Leurer JJ.A.Disposition: Appeal dismissedWritten reasons by: The Honourable Mr. Justice OttenbreitIn concurrence: The Honourable Mr. Justice Caldwell The Honourable Mr.

Justice LeurerOn appeal from: 2021 SKQB 160, ReginaAppeal heard: November 18, 2021Counsel: Deron Kuski, Q.C., for the Appellant No one appearing for the Respondent Travis Sentes observing Ottenbreit J.A. I. INTRODUCTION [1] The Toronto-Dominion Bank [TD] appeals a Court of Queen’s Bench Chambers judge’s decision declining to grant an orderpermitting TD’s counsel to be appointed as the selling officer under an order nisi for sale by real estate listing: The Toronto-DominionBank v Sader, 2021 SKQB 160. II.

BACKGROUND [2] Before the Chambers judge, TD noted that there was a substantial body of case law from the Court of Queen’s Bench that aselling officer who is independent of the parties should be appointed to avoid a conflict of interest. However, it submitted that thenecessity for an independent selling officer should be reconsidered where the mortgagors have granted a non-purchase money mortgageand there is no equity in the property to be sold. [3] In that regard, TD made several arguments in favour of its position, including: (

a) that an order for an independent selling officer increased costs; (

b) that such an officer is not required where there is no realistic risk of conflict because both the mortgagor and the mortgageehave the goal of obtaining the highest possible price for the property to be sold; (

c) that a selling officer, whether independent of the mortgagee’s counsel or not, is still subject to the supervisory jurisdiction ofthe court, which includes strictly complying with the terms of a judicial sale order; and (

d) that there is no statutory provision or rule mandating an independent selling officer in all cases. [4] The Chambers judge addressed each one of TD’s arguments. He ultimately found that, while it may be open in somecircumstances to consider an order appointing the mortgagee’s counsel as selling officer, the principle of comity prevented him fromtaking that path in the circumstances of this case.

In short, he listed a long line of Court of Queen’s Bench decisions, starting in 2002 andcontinuing to the case of Affinity Credit Union 2013 v Algner, 2020 SKQB 174, and found that appointment of the mortgagee’s lawyer asselling officer created a conflict of interest and that the case law, therefore, weighed in favour of appointing an independent selling officer. III. ISSUES AND ANALYSIS [5] In this Court, TD renews the arguments made before the Chambers judge.

It argues that it is illogical that there would not besome circumstances where the discretion of the court would be exercised so that the mortgagee’s counsel would be appointed the sellingofficer. It submits that, in adhering to the case law mentioned, the Chambers judge committed an error of law by fettering his discretion. [6] The court’s jurisdiction to order a sale is found in s. 70 of The Queen’s Bench Act, 1998, SS 1998, c Q-1.01, Rules 10-46through 10-50 of The Queen’s Bench Rules, and s. 132(1) of The Land Titles Act, 2000, SS 2000, c L-5.1.

As explained in SaskatoonCredit Union Ltd. v Goertz and Atlas Industries Ltd. (1989), (SK CA), 73 Sask R 81 at paras 8–19 (CA), the genesis of

the power to order a sale is found in the Chancery Procedure Amendment Act (UK), 1852, 15 & 16 Vict, c 86, s 48. The power to order asale is discretionary. The power to order the appointment of a selling officer is discretionary as well. [7] The principle that an independent selling officer for a judicial sale is required and the reasons for this were concisely set out inFarm Credit Canada v Lundback, 2002 SKQB 376 at para 3, 225 Sask R 315 [Lundback].

There, the court found it was not appropriatefor it to appoint the solicitor for the creditor as selling officer because that would create a conflict of interest; who does the selling officerserve: the court (from which his or her authority originates) or the client? Over time, that dicta became established as the governing law. [8] The genesis of the concern that a conflict of interest may arise where the mortgagee’s lawyer is appointed as the sellingofficer was not explored by TD before the Chambers judge.

However, it appears that the recognition of a potential conflict where theselling officer is not independent has been long established. For example, a mortgagee’s unrestricted right to bid on the property where it isa trustee or has conduct of the sale: London & British North America Company, Limited v Haigh and Investment Trustees Company, (SK KB), [1922] 1 WWR 172 (Sask SC). Notably, the order nisi for sale granted TD the right to bid.

Based on this older caselaw alone, an independent selling officer was warranted in the case before us. [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 saleconflicts 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 toensure, 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 judicialsales 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 personswho 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. [11] The Chambers judge grappled with TD’s arguments as to why its solicitor should be appointed selling officer. Heacknowledged that it may be open in some circumstances to consider an order appointing the mortgagees’ counsel as selling officer. I donot take his comments about the principle of comity as constituting a fettering of his discretion.

I understand them as an explanation thathe was, in the circumstances of this case, satisfied that he must exercise his discretion in accordance with the line of cases that hold that itis inappropriate to appoint the mortgagee’s lawyer as selling officer because of a real or perceived conflict of interest. That said, thedecision to appoint a selling officer is discretionary and a reliance solely on comity may constitute a fettering of that discretion where thereis insufficient analysis of the relevant factors.

However, I do not find that the Chambers judge committed such an error. [12] TD argues that the Chambers judge failed to understand its various arguments. I disagree. He understood them well butdetermined that they were not able to overcome the conflict issue identified in Lundback in the circumstances of this case. [13] The Chambers judge appropriately relied on a body of law developed by the Court of Queen’s Bench as to how a judge shallexercise their discretion to order a judicial sale, how it will be conducted and who can be appointed as a selling officer.

Although it maybe as argued by TD that it is more expedient and less expensive in some circumstances to appoint the mortgagee’s lawyer as the sellingofficer, that consideration is not determinative. Apart from the obvious legal conflict and perception of a conflict between the mortgagorand mortgagee, there may be, as well, other points of conflict that intrude into the sale process that are avoided by appointing anindependent selling officer.

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

In this way it strikes the equitable balance described in the excerpt fromCuming set out earlier. [15] TD argues in this Court as it did before the Chambers judge that, in reality, there is no conflict of interest. I am not satisfied thisis so in this case. In support of this submission, TD, in its factum, makes the same sweeping factual assertions about the behaviour ofmortgagees and the interests of mortgagors as did in its brief before the Chambers judge. All of this is, as it was in the court below,without a shred of evidence to underpin those assertions.

For example, the order nisi for sale in this matter provides that both the plaintiffand defendants have leave to bid at the sale.

In respect of this, TD makes the bald statement without any evidentiary foundation thatmortgagees never bid on the property for sale, notwithstanding that they have a right to do so. [16] If the exercise of the Chambers judge’s discretion is to be properly informed with regard to the appointment of the mortgagee’slawyer as the selling officer, more is required than a draft order nisi for sale with the mortgagee’s lawyer’s name inserted as selling officerand a brief of law containing unsupported factual assertions and speculation about how the interests and behaviour of the parties will playout. IV.

CONCLUSION [17] I conclude, based on all the foregoing, that the Chambers judge did not fetter his discretion by solely applying the body of caselaw mentioned above in the circumstances of this case without the appropriate engagement with and consideration of TD’s arguments.The Chambers judge left open the possibility that a mortgagee’s lawyer could be appointed as selling officer in the proper circumstances.His decision must be understood as a determination that the evidence and arguments provided by TD did not overcome the real orperceived conflict mentioned above.

[ 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. [ 19 ] The appeal is dismissed. There will be no order as to costs. “Ottenbreit J.A.” Ottenbreit J.A. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Leurer J.A.” Leurer J.A.