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Power of sales
CIBC sues condo over a Power of Sale   (Part 1)
CIBC sues condo over a Power of Sale   (Part 2)
CIBC sues condo over a Power of Sale   (Costs)
CIBC sues condo over a Power of Sale   (Appeal)

CIBC Mortgages Inc vs YCC # 385
Ontario Superior Court of Justice—Toronto
20 Febuary 2015

There are two applications with CIBC suing YCC #385 and the condo corporation suing CIBC. The issue is over YCC #385 selling a unit under power of sale and wanting all their costs as allowed under Section 134. (5) of the  Condominium Act.

CIBC was the mortgagee. They claim that they were never informed that YCC #385 registered a lien certificate over a by-law infraction and had proceeded with the sale of the unit where they had first mortgage rights.

CIBC's application

YCC #385's lien rights expired prior to the registration of the lien certificate.

The condo corporation claiming priority over CIBC's mortgage for costs incurred in a by-law infraction with the unit owner was oppressive or unfairly prejudicial to the mortgagee.

The court should give CIBC the proceeds of the sale plus additional funds or an order saying that the mortgagee has full priority.

The facts

On 28 January 2010 CIBC gave Frank Blowes and his spouse a mortgage.

On 03 Feb 2009, YCC #385 commenced proceedings against Blowes. YCC #385 did not inform CIBC of its claim under Section 134 so CIBC could not defend its interests.

Madam Justice Pollack judgment of 14 Feb 2011 gave courts orders to restrain certain behaviours and ordered costs for $15,000 payable in 30 days at 3% per annum.

YCC #385's first law firm's legal costs from 31 July 2009 to 01 March 2011 was $44,272.63. It appears that Justice Pollack considered the sum of $15,000 out of the billed $44,272.63 to be reasonable.

The $44,272.63 related to costs of this by-law dispute and not ordinary common expenses.

These costs were actually incurred prior to March 2011, 9 months before the lien certificate was registered, therefore the lien rights expired by the time the lien certificate was registered.

Blowes (the owner) brought a motion to set aside the Pollack order and failed. Justice McEwan awarded partial costs of $10,371.00. He noted that the amount of costs awarded was reasonable.

Blowes brought a second motion to set aside the Pollack order and failed. Madam Justice Brown ordered costs to be paid. The amount was unknown to CIBC.

It is the unit owners obligation to meet all requirements of the Condominium Act, the declaration, by-laws and rules of the condominium corporation. Unit owners have an obligation to deliver to CIBC any notices, claims and every other communications relating to the property or common elements of the building. Failure by the unit owners to meet any of their obligations under the mortgages is an event of default under the mortgages.

YCC #385 declaration states that mortgagees will be informed who has notified his interest to the corporation.

On or about 14 Feb 2011, YCC #385 removed their law firm and hired a different law firm.

The second law firm charged $37,989.25 to defend against the Pollack order. (31 Oct 2011 to 20 May 2014.)

YCC #385 registered the lien on 12 Dec 2012 for $44,272.63.

Payment of costs fell due on 16 March 2011. Therefore the default day was 17 March 2011. The three months was over on 17 June 2011. YCC #385 did not register their lien until 12 Dec 2011.
(Section 85.(2) of the Act states: "The lien expires three months after the default that gave rise to the lien occurred unless the corporation within that time registers a certificate of lien in a form prescribed by the Minister."—editor).

The owners defaulted on the unit on 27 Dec 2013. CIBC commenced proceedings by statement of claim for payments of all amounts due under the mortgage and possession of the property.

On 12 May 2014 CIBC's agent said it was not able to secure the property because it had been sold by YCC #385 under Power of Sale proceedings.

Prior to CIBC taking possession, YCC #385 sold the unit under power of sale for $110,000.

YCC #385 sent a Notice to Encumbrancer (Notice of Lien) to CIBC for $59,857.37 not the $15,000 costs award granted by Her Honour.

The CIBC lawyer was informed by YCC #385's law firm on 13 May 2014 that the unit was closing on 30 May 2014.

Some of the money went to the YCC #385 law firm and the rest went to the condo corporation.

As of May 2014 YCC #385 claimed a total of $113,616.68 under the Lien Certificate.

YCC #385 told CIBC that its lien, over a by-law infraction, has priority.

YCC #385 claimed $113,616.68 as of 20 May 2014. $82,261.88 was legal costs incurred in a proceeding for compliance under Section 134 of the Act.

CIBC was not given proper notice.

Invocation of Section 134.(5) was prejudicial and oppressive to CIBC.

The fees claimed under the lien by YCC #385 are excessive, unreasonable and eclipse the amounts actually fixed by the court in the Blowes application.

The two law firms billed considerably more than costs granted by the courts.

The payout statement includes $14,472.85 for additional interest calculated on $82,261.88 with interest rate of 18%. CIBC claims that the interest rate should be 3% per annum as ordered by Justice Pollack.

YCC #385 vs CIBC Mortgages Inc.

YCC #385 claims that Section 134 means that CIBC is not entitled to any portion of the sale.

YCC #385 pleads and relies on Subsection 134.(5). YCC # 385 is and was entitled to the $15,000 together with any additional costs to YCC #385 in obtaining the order. YCC #385's actual costs were $44,272.63.

Blowes 2nd motion to set aside the Pollack order on 28 May 2013 was dismissed by Justice Brown and he was ordered to pay costs of the said motion in the amount of $1,935.51.

YCC #385 obtained a default judgment for possession of the unit on 11 April 2013.

YCC #385 states that the lien secured the total sum of $114,656.18 in common expenses. The unit sold for $110,000.

In the condo corporation's application there was an affidavit by Frank Blowes that stated that the original Pollack application was because he was requisitioning an owners meeting to remove the directors and the manager which he was successful in doing. —editor

These two applications are important to condo owners for several reasons:

1. It highlights the high costs that a unit owner may face if their condo corporation is successful in getting a court order against them for something as minor as a by-law or rule infraction. In this situation, as in others, the unit owners lost their home.

2. It informs us that if you get a notice of a special assessment, a raise in fees, notice of city work orders and any other notices that may affect the value of your unit, you are obliged to inform your mortgagee. An owner can have his mortgage cancelled if the bank feels that their money is at risk.

3. It shows how high legal bills can climb in a condo dispute where the condo corporation counts on getting all of its costs recovered using Section 134.(5) of the Act. The costs of enforcing a by-law infraction can cost more than the value of the unit.

4. Many condo corporations have provisions in their management contracts stating that the property management company will issue the status certificates and lien applications. These contracts have provisions that state that the management company will be responsible for all costs for any errors they make.

Condo boards should insure that their management contracts have these provisions in place.


CIBC Mortgages Inc vs YCC # 385   (Part 2)
Ontario Superior Court of Justice—Toronto
File No:    CV-14-517576
Before:     S.F. Dunphy, J.
Council:   Benjamin Frydenberg,  for the Applicant
                 Chetan Phull,  for the Respondent
Date:        16 November 2016

This case raises the narrow question of when an amount that is added to
common expenses following an enforcement proceeding pursuant to s.134(5) of the Condominium Act can be said to be in default for the purpose of giving rise to lien rights in favour of the corporation pursuant to s.85(1) of the Condominium Act. The precise timing of the “default” will determine the time limit for registering notice of the lien under s.85(2) of the Condominium Act in order to claim priority over the first mortgagee.
This application will decide who should receive the proceeds of sale of
a condominium unit. The unit was sold under power of sale and the net proceeds of sale were insufficient to pay the claims of either the mortgage holder or the common expense claim of the condominium corporation in full.

If the default occurred earlier than three months prior to the December 12, 2011 registration of notice of lien, the lien will have expired, the mortgagee will receive all of the net the proceeds and the corporation will be required to account for certain deductions made from those proceeds for which it did not have priority; if the default occurred within three months of December 12, 2011, the corporation perfected its lien in a timely way, its lien has priority over the first mortgage and thus the corporation is entitled to retain all of the proceeds.
For the more detailed reasons that follow, I have found in favour of the
mortgagee. While the provisions of s.134 and s.85 of the Condominium Act
do not mesh perfectly with each other, a contextual reading of both reveals
their clear intent with sufficient clarity.

The exceptional right to assert priority lien rights under s.85 of the Condominium Act strikes a delicate balance between the rights of a variety of affected stakeholders, including unit owners and mortgage holders.  The common-sense meaning of default when used in relation to an obligation to pay is that default occurs when the payment is due but not made.  Payment of the court-ordered costs by the unit holder was first due but not paid on March 17, 2011.

There can be no sensible reason to imply an artificial and identical “second” obligation arising only when the condominium corporation gets around to
fulfilling its statutory duty by actually adding the court-ordered amount to
its own records of common expenses or issuing a demand letter asking for their
payment. There is but one default arising from non-payment of the costs ordered and that default occurred when those costs were not paid on the last day specified for their payment. 

While section 134(5) authorizes but does not require the condominium corporation to extend the time for payment of amounts that are required to be added to common expenses, no such extension of time was granted by the condominium corporation before the default occurred or indeed at any time before the three month period for registering a lien expired. 

Having failed to register a lien within three months of the time that the default first occurred, there was no lien right to revive (or perfect) on December 12, 2011 when notice of the lien was registered.

CIBC commenced enforcement proceedings with a Statement of Claim issued
on May 2, 2014, ultimately obtaining default judgment on October 22, 2014
against Mr. Blowes in the amount of $135,411.79 plus costs.
In the course of attempting to secure possession of the unit and exercise its mortgage remedies, CIBC first learned of the power of sale proceedings initiated by YCC #385 and the fact that a sale was in fact due to close within days. The prior notices sent by YCC #385 had been misplaced or misdirected in some fashion. The parties exchanged information. At that point, YCC #385 claimed that its lien amounted to $113,616.68. The parties agreed to permit the sale process commenced by YCC #385 to be completed with the net proceeds held in trust pending determination of priority.
YCC #385’s counsel has delivered a statement of adjustments indicating that it holds $94,006.01 in net proceeds of the sale. CIBC takes that position that, if it is successful, the amount held in trust by Fine & Deo should be augmented by $4,530.98 in respect of YCC 385 legal expenses paid out of closing proceeds that did not relate directly to the sale but to claimed expenses under s.134(5) of the Condominium Act.

The need for a balancing of interests is readily apparent. The safety of the investment of condominium owners in their home depends in part on the
availability of a ready market for mortgage financing of condominiums, whether to refinance their own investment or to assist potential buyers in purchasing from them. A failure to achieve a reasonable equilibrium between the need for lenders to have certainty and the fairness to other unit owners in having to pay for the consequences of a breach by one single owner would have dire consequences for all.

In my view it is not reasonable to assume that the legislature intended
to restrict the knowable, predictable s.84 common expenses to three months of
priority arrears while granting an unfettered discretion to the corporation to
manage the timing of giving the mortgagee notice of claims for liens in respect of potentially much larger damages or costs that might be awarded in compliance proceedings under s.134 of the Condominium Act. That is precisely the right YCC #385 claims in this case by asserting that it alone has the right to determine the timing of the “default” that gives rise to a lien and starts the clock ticking for perfection under s.85(2) of the Condominium Act. Such an interpretation would also frustrate the rights granted to a mortgagee to protect itself from being primed further under s.88 of the Condominium Act
since it is the registration of a notice of lien that notifies the mortgagee of the existence of a default in payment of common expenses and permits the mortgagee to decide whether and to what extent it wishes to step in to protect its rights

CIBC has been successful on its application and is entitled to its costs. The Application of YCC #385 (CV-14-512825) has been endorsed as dismissed with costs.


CIBC Mortgages Inc vs YCC # 385   (Costs)
Ontario Superior Court of Justice—Toronto
File No:    CV-14-517576
Before:     S.F. Dunphy, J.
Council:   Benjamin Frydenberg,  for the Applicant
                 Chetan Phull,  for the Respondent
Date:        21 December 2016

Costs endorsement
The judge's written endorsement states:

YCC #385’s main request is that no order of costs be made–I have all the jurisdiction I need to consider that request in connection with fixing scale and quantum of costs, both of which matters were reserved to me.  I see no reason to reconsider my ruling that costs follow the event but will take all the
submissions of the parties into account in considering scale and amount, up to and including considering the advisability of making a nil or nominal award as requested by YCC #385.

CIBC did make two offers to settle neither of which was formally compliant with Rule 49 of the Rules of Civil Procedure. CIBC nevertheless submits that I should have regard to them in exercising my discretion. Rule 49.13 of the
Rules of Civil Procedure gives me full discretion to consider the amount, timing and terms of any offer to settle in exercising my discretion as to costs.
Both offers (August 21, 2014 and July 8, 2016) would have seen the sales proceeds held in trust divided broadly in half (the latter offering somewhat less to YCC #385 than the first). The precise amounts are not material so much as the fact that CBC offered a very real and substantial compromise and its offer
was rejected. Both offers were very substantially advantageous to YCC #385 who was entirely unsuccessful in its claim to full priority over CIBC’s mortgage.

Costs might have been avoided had YCC #385 show sufficient flexibility to compromise rather than insist as it did on an all-or-nothing hearing that it ultimately lost.

Paragraph 24 is a direct warning to condo unit owners:
Finally, the consumer protection plea on behalf of innocent unit holders
wears thin here. The unit holders elect their managers and the conduct of
litigation by management is ultimately their responsibility.

CIBC claimed a total of $52,989 in fees plus $6,888.57 in HST plus $9,444.61 in disbursements plus $1,188.67 in HST for a total of $70,510.85. This compares to an amount at issue that was just under $100,000.

award CIBC total costs

Accordingly, I have determined to award CIBC total costs for fees and disbursements of $62,510.85 including HST. This figure is still unacceptably high in relation to the amount at issue. However, it was an expense that CIBC offered YCC #385 reasonable and early prospects of avoiding and it was one that was inflated due to lack of pragmatism and cooperation for which I find fault cannot be laid solely or even predominantly at CIBC’s feet.  It is, alas, the fairest result I can fashion from the clay that I have been given.


CIBC Mortgages Inc vs YCC # 385   (Appeal)
Court of Appeal for Ontario
File No:    C63135
Before:     Strathy C.J.O., Cronk and Pepall JJ.A.
Council:   Jonathan Fine and Maria Dimakas, for the appellant
                 Benjamin Frydenberg, for the respondent
Date:        08 May 2017

YCC # 385 appealed two issues.  The central issue is whether YCC preserved the priority assigned to its statutory lien by s. 86(1) of the Act, by registering its lien certificate within three months of the unit owner’s “default that gave rise to the lien”. YCC # 385 also seeked to appeal the applications judge’s costs award in favour of CIBC.


[56] There is no evidence that, at any time prior to the registration of its lien certificate, YCC entered into discussions or other communications with either of the owners of Unit 302 regarding the timing for payment of the Claimed Common Expenses under s. 134(5), which, as I have stressed, originated with the Costs Order. To the point, there is no evidence that YCC’s delay in registering its lien certificate was intended to assist the unit owners by deferring collection efforts regarding the Claimed Common Expenses.
[57] Yet the quantum of the Claimed Common Expenses continued to mount significantly. The costs awarded under the Costs Order are in the sum of $15,000. As I have said, by May 2014, YCC’s lien claim totalled $113,616.68.
[58] On the record before this court, it appears that YCC’s delay in registering its lien certificate and the ballooning costs forming part of the Claimed Common Expenses arose because of internal YCC matters, including the involvement of two different law firms to assist it in obtaining the compliance order and in responding to unsuccessful efforts by the defaulting unit owner to challenge the validity of the order.
[59] In brief, it is undisputed that YCC was placed under the administration of a court-appointed administrator in November 2010, the administrator fired YCC’s property manager and YCC’s lawyers who had carriage of the compliance proceeding, the administrator retained new solicitors for YCC in March 2011 and a new property manager, and the outgoing property manager failed to inform its successor of the compliance proceeding and the Costs Order. As a result, YCC’s new property manager appears to have first learned of these matters on an unspecified date in June or July, 2011.
[60] Further, the record indicates that, although YCC’s new solicitors obtained a copy of the issued and entered Costs Order by June 23, 2011, a demand for payment of the Claimed Common Expenses was not forthcoming until August 15, 2011, almost two months later.
[61] The main component of YCC’s $113,616.68 lien claim as at May 2014 consisted of $82,261.88 for legal costs, of which $44,272.63 represented costs billed by YCC’s first solicitors. The balance represented costs charged by YCC’s second solicitors, in the sum of $37,989.25, plus interest and additional miscellaneous costs. In the result, by the time Unit 302 was sold, the amount owed by the unit owners as s. 134(5) Claimed Common Expenses was more than seven and a half times the amount originally awarded under the Costs Order.

The condo corporation lost both appeals and CIBC Mortgages will recieve yet more costs.