Case information

Civil procedure — Res judicata — Estoppel — Abuse of process by re-litigation — Whether majority of Court of Appeal erred in law in finding res judicata may be raised for first time on appeal — If so, whether requirements of res judicata satisfied — Whether doctrine of abuse of process by re-litigation applied beyond permissible limits — Whether abuse of process for purchaser to rely on collateral mortgage — Amount due and payable under a mortgage at the time of power of sale proceedings.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

11368 NL Inc. was the owner of commercial real estate known as Kenmount Terrace. Patrick Street Holdings Limited is part of a group of related companies that, through loans secured by mortgages, financed development projects undertaken by a group of related companies including 11368 NL Inc. In early 2016, two mortgages known as Mortgage 608132 and Mortgage 708519 went into default and notices of power of sale were issued under the Conveyancing Act, RSNL 1990, c. C-34. These power of sale proceedings halted when 11368 NL Inc., as the mortgagee, gave a third mortgage known as Mortgage 759678. Mortgage 759678 is a collateral mortgage registered against Kenmount Terrace to a limit of $4,000,000 in support of 11368 NL Inc.’s guarantee of Mortgage 608132. Patrick Street Holdings Ltd. reactivated power of sale proceedings under Mortgage 708519 and obtained Kenmount Terrace at public auction. Patrick Street Holdings Ltd. provided an accounting of the proceeds of the power of sale to all encumbrancers of Kenmount Terrace stating that specific charges including Mortgage 759678 took priority and exhausted the power of sale proceeds such that not all encumbrancers could be paid. Two unpaid encumbrancers commenced an application challenging the accounting. 11368 NL Inc. filed an interlocutory application claiming entitlement to any surplus funds from the power of sale plus interest, but also advancing a claim of priority for another encumbrancer, Ms. Cheeke. On October 3, 2017, Handrigan J. determined the two encumbrancers’ application but not 11368’s interlocutory application. Handrigan J. held there was a surplus on the power of sale of approximately $4.2 million. He accepted most of Patrick Street Holdings Ltd.’s accounting but did not include its claim to $4,000,000 under Mortgage 759678 in his accounting. Patrick Street Holdings Ltd. appealed, The Court of Appeal dismissed the appeal. Patrick Street Holdings Ltd. paid the two applicant encumbrancers’ claims and withheld the balance of the surplus of the power of sale proceeds. On July 16, 2022, Handrigan J. determined the interlocutory application filed by 11368 NL Inc. Handrigan J. held Ms. Cheeke’s encumbrance took priority and was due from the remaining surplus. He held that his conclusion on October 3, 2017, that Patrick Street Holdings Ltd. had not established what was owing under Mortgage 759678 had been accepted on appeal and nothing had been shown to cause him to change his mind on this issue. Patrick Street Holdings Ltd. was ordered to pay the surplus remaining after payment to Ms. Cheeke to 11368 NL Inc. Patrick Street Holdings Ltd. appealed. A majority of the Court of Appeal dismissed the appeal.