Case information

Mortgages — Interpretation — Contracts — Breach — Remedies — Does the decision of the Court of Appeal create commercial uncertainty, and upset the common law across Canada, by making it impossible for commercial lenders in Ontario to rely on the closed mortgages for which they had bargained, as a corporate mortgagor can now avoid future interest to term simply by defaulting on its closed mortgage — Does the decision of the Court of Appeal frustrate the will of Parliament, expressed in s. 10(2) of the Interest Act R.S.C. 1985, c. I-15 and the will of the Legislature of Ontario expressed in s. 18(2) of the Ontario Mortgages Act, R.S.O. 1990, c. M.40, by extending mortgage consumer protection legislation to closed mortgages granted by corporations.

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The applicant (FN), as first mortgagee, sought a declaration that it was entitled to the payment of future, accelerated interest out of the distribution of proceeds from a court-ordered sale of two mortgaged properties under a receivership. Its application was opposed by a second mortgagee on one of the properties and the two corporate mortgagors. The Ontario Superior Court of Justice held that although there was not an express mortgage term triggering the payment of future, accelerated interest upon default, it was payable to FN under an implied term and common law rule that applied in these circumstances. The Ontario Court of Appeal allowed the appeal on the basis that the contractual terms precluded the payment of future accelerated interest on the facts of this case.