Toronto-Dominion Bank v. Hosein

Toronto-Dominion Bank v. Hosein Collection Decisions of the Court of Appeal Date 2016-08-16 Neutral citation 2016 ONCA 628 Docket numbers C61401 Judges MacPherson, James C.; Rouleau, Paul S.; Benotto, Mary Lou Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Toronto-Dominion Bank v. Hosein, 2016 ONCA 628 DATE: 20160816 DOCKET: C61401 MacPherson, Rouleau and Benotto JJ.A. BETWEEN The Toronto-Dominion Bank Applicant (Appellant) and Jeunesse Hosein and Meera Boodhoo Respondents (Respondents) Amanda Jackson and James Riewald for the appellant Jack Fleming for the respondent Meera Boodhoo No one appearing for the respondent Jeunesse Hosein Heard: June 24, 2016 On appeal from the order of Justice Gisele M. Miller of the Superior Court of Justice, dated October 29, 2015. Benotto J.A.: [1] The appellant bank took a mortgage on a condominium owned by the respondent Jeunesse Hosein. Hosein has made no mortgage payments since November 2012. After her default, Hosein leased the property to the respondent Meera Boodhoo on terms very favourable to Boodhoo. The appellant applied to terminate the tenancy agreement pursuant to s. 52 of the Mortgages Act, R.S.O. 1990, c. M.40 (“MA”). The application was dismissed on the basis that s. 52 of the MA conflicts with the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (“RTA”) and is therefore of no effect. For the reasons that follow, I would allow the appeal. A. Background Facts [2] The appellant registered a mortgage for $130,000 on a townhouse condominium owned by Hosein on July 19, 2011. On November 1, 2012, Hosein defaulted. Hosein has made no payments since then, nor has she paid the property taxes as required by the mortgage. The appellant commenced mortgage enforcement proceedings. A tenant then living at the property vacated at the end of June 2013. Before the appellant could take possession of the property, and unbeknownst to the appellant, Hosein signed a five-year lease agreement with Boodhoo. [3] The appellant tried unsuccessfully to obtain a copy of the lease. In July, 2013, the appellant served a Notice of Attornment of Rents on Boodhoo. The Notice of Attornment of Rents included a Notice of Change of Landlord, a Demand for Particulars of Tenancy Agreement and a Notice to Inspect, Appraise and Show. Boodhoo sent the appellant a letter acknowledging receipt of the documents but indicating she would not provide information or make payments to the appellant as her contract was with Hosein. [4] Unable to obtain any information about the occupation of the condominium, the appellant applied to the Landlord and Tenant Board (“the Board”). It sought production of the lease pursuant to s. 50(2)(b) of the MA and an order to terminate the alleged tenancy and evict Boodhoo on the grounds that Boodhoo had “substantially interfered” with the appellant’s “right, privilege or interest” by failing to provide the appellant with a copy of the tenancy agreement pursuant to s.51(1)(b) of the MA. In September 2013, the Board ordered Boodhoo to produce her lease, failing which the landlord could apply for an order terminating the tenancy and evicting Boodhoo. [5] Boodhoo produced the tenancy agreement. The lease is a five-year fixed term lease, beginning on July 1, 2013 and ending on July 31, 2018. It provides that rent be paid as follows: · From July 1, 2013 to May 1, 2014, the rent is $300 per month. This includes the $281.76 maintenance fee payable to the condominium corporation; · From July 1, 2014 to May 1, 2015, the rent is $300 per month plus the maintenance fee payable to the condominium corporation; · From July 1, 2015 to May 1, 2016, the rent is $800 per month, which includes the maintenance fee payable to the condominium corporation. · For the remainder of the lease, the rent is to increase in accordance with the regulated increase for Dufferin County. [6] The terms of the lease do not cover the monthly expenses associated with the condominium: the mortgage payments are $627; the condominium fees were $281.76 in 2013. The municipal property taxes have not been paid since Hosein purchased the property in July 2011. Comparable rents in the same condominium complex were $900 to $1,000 in 2013. [7] Upon learning the terms of the lease, the appellant withdrew the Notice of Attornment of Rents and applied to the Superior Court to set aside Boodhoo’s tenancy pursuant to s. 52 of the MA. B. Decision of the Superior Court [8] The application judge held that the tenancy between Hosein and Boodhoo was created with the object of discouraging the appellant from taking possession of the property. She found it was a “sweetheart deal” created after the mortgage default and after the appellant served a Notice of Sale on Hosein. The tenancy therefore contravened the MA, which allows the court to set aside or vary a tenancy agreement when certain conditions are satisfied. [9] However, the application judge concluded that she could not grant the relief requested because s. 52 of the MA conflicts with the RTA and, pursuant to s. 3(4) of the RTA, in case of conflict the provisions of the RTA apply. The application judge held that: (i) the RTA ousted the jurisdiction of the Superior Court to make an order requiring Boodhoo to vacate the premises; (ii) the appellant was a “mortgagee in possession” and thus a landlord pursuant to s. 47 of the MA; (iii) the appellant could have ceased to be a mortgagee in possession by withdrawing its Notice of Change of Landlord, but did not do so; and (iv) even if the appellant had ceased to be a mortgagee in possession, the previous order of the Board compelling the production of the lease included a determination that the appellant was a landlord, and this determination is res judicata. C. Issue [10] As conceded by the parties in oral submissions, the primary issue in the appeal is this: Is there a conflict between the RTA and s. 52 of the MA? This is dispositive of the appeal and it will not be necessary to address the issue of whether the appellant was a landlord at the time of the application. D. Analysis [11] The question to be determined is whether s. 52 of the MA conflicts with the provisions of the RTA so that the Superior Court is unable to set aside a tenancy under s. 52. [12] Section 52 of the MA provides for an application to “set aside” a tenancy: 52. (1) The Superior Court of Justice may on application by the mortgagee vary or set aside a tenancy agreement, or any of its provisions, entered into by the mortgagor in contemplation of or after default under the mortgage with the object of, (a) discouraging the mortgagee from taking possession of the residential complex on default; or (b) adversely affecting the value of the mortgagee’s interest in the residential complex. (2) In considering the application, the judge shall have regard to the interests of the tenant and the mortgagee. [13] The RTA states that a tenancy may be “terminated only in accordance with this Act”: s. 37(1). Section 39 also restricts a landlord on how it may recover possession of a rental unit subject to a tenancy: 39. A landlord shall not recover possession of a rental unit subject to a tenancy unless, (a) the tenant has vacated or abandoned the unit; or (b) an order of the Board evicting the tenant has authorized the possession. [14] The appellant submits that these two provisions are not in conflict. The MA allows a mortgagee to apply to set aside a tenancy; the RTA allows a landlord to apply to terminate a tenancy. The appellant did not seek to terminate the tenancy, it sought to set aside the agreement such that the rental unit will no longer be “subject to a tenancy” and s. 39 of the RTA will no longer apply to the mortgagee trying to recover possession. [15] The respondent Boodhoo argues that regardless of the semantic difference between setting aside a tenancy agreement under s. 52 of the MA and terminating a tenancy agreement under the RTA, the effect is the same: the tenant can be evicted. Section 52 is therefore in direct conflict with the provisions of the RTA that only allow for the tenancy agreement to be terminated according to that Act. [16] Certain principles of statutory interpretation are relevant to this appeal. The guiding approach is set out by Elmer Driedger in Construction of Statutes and adopted by the Supreme Court in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21: Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. [17] Statutes dealing with similar subjects are presumed to be coherent and consistent. Interpretations favouring harmony should prevail over discordant ones: Pointe-Claire (City) v. Quebec (Labour Court), [1997] 1 S.C.R. 1015, at para. 61; Ruth Sullivan, Sullivan on the Construction of Statutes (Markham: LexisNexis, 2014), pp. 416-417. Finally, the legislature does not intend to produce absurd consequences, such as rendering a provision meaningless: Rizzo, at para. 27. [18] Here, the RTA is concerned with the termination of existing tenancies. By contrast, s. 52 of the MA provides a mechanism to have a tenancy agreement set aside. There is no provision in the RTA to set aside a tenancy agreement. [19] The different words used – to set aside and to terminate – must be presumed to have different meanings. Black’s Law Dictionary defines “set aside” as “to annul or vacate (a judgment, order, etc.).” The Dictionary of Canadian Law (4th) defines “set aside” as “to nullify”. According to both law dictionaries, “terminate” means “to bring to an end”. That these terms are not meant to be synonyms is also demonstrated by the heading of the section of the MA immediately following s. 52. The heading provides for the “termination of tenancy”, and then refers to the process under the RTA. [20] Counsel for the appellant compared the situation to an annulment of a marriage versus a divorce. This is an accurate analogy. In the former case, the marriage is treated as never having existed whereas in the latter case, the marriage is ended. Likewise here, to “set aside” the tenancy agreement indicates that the tenancy never existed; to terminate it indicates that it is being brought to an end. This interpretation is consistent with the word “annuler” in the French version of the Mortgages Act. The French version of s. 52 provides for a “[r]equête en annulation de la location”, and states that: 52. (1) La Cour supérieure de justice peut, sur requête du créancier hypothécaire, modifier ou annuler une convention de location… [21] Section 52 is in Part V of the Mortgages Act. The context of this Part is relevant. It was introduced by the Mortgages Amendment Act, 1991, S.O. 1991, c. 6, and deals with mortgagees in possession of rental residential units. Section 47 deems a person who becomes a mortgagee in possession to be a landlord under the tenancy agreement. This provides security to tenants in case of a default by the landlord on its mortgage. Sharpe J.A. explained the purpose of the 1991 amendments in Pieckenhagen v. 1030553 Ontario Ltd. (2000), 51 O.R. (3d) 763 (C.A.), at paras. 14-15: In my view, it is apparent that the "mischief" addressed by the Mortgages Amendment Act was the vulnerability of tenants in residential complexes to being disrupted in their tenancy by changes in possession and title resulting from mortgage default by the landlord or owner of the property. Before the Mortgages Amendment Act, tenants lacked security of tenure as against mortgagees in possession, those who obtained title by foreclosure, and subsequent purchasers who acquired title in power of sale proceedings… Accordingly a party who obtained possession or title by virtue of mortgage default could obtain vacant possession despite the existence of a landlord and tenant relationship between the mortgagor and its tenants. The purpose and intent of the Mortgages Amendment Act was to overcome this state of affairs and to provide tenants with security of tenure in the event of mortgage default by the landlord. The Mortgages Act, s. 47 specifically puts those persons described in the position of the landlord under the tenancy agreement. [22] It was in the context of protecting valid tenancy agreements that the legislature set out a provision whereby the Superior Court could set aside an allegedly invalid tenancy. If, for specific reasons, the lease is not valid, the mortgagee was given an avenue to seek to annul it: s. 52. Section 52 of the MA, therefore, is a narrow exception. It protects mortgagees when the tenancy agreement was entered into in contemplation of or after default, and with the object of discouraging the mortgagee from taking possession or adversely affecting the value of the mortgagee’s interest in the residential complex. In Compcorp Life Insurance Co. v. Divitcos (1997), 12 R.P.R. (3d) 122 (Ont. Ct. J. (Gen. Div.)), at para. 41, Sutherland J. wrote of s. 52: It represents an awareness on the part of the Legislature of the vulnerability of a mortgagee of property that can be leased out by a mortgagor under a "sweetheart" deal between the mortgagor, who is in default under the mortgage, and a tenant who will in the ordinary course, under relatively recent amendments, be "inherited" by the mortgagee in possession, whether or not the mortgage was in place before the "sweetheart" tenancy agreement was entered into. [23] Section 52 also incorporates the objective of protecting the tenant by directing the court to have “regard to the interests of the tenant and the mortgagee.” In this way, the interests of the purported tenants are recognized and balanced against the interests of the mortgagee seeking to nullify an alleged agreement. [24] In light of the words used by the legislature and the context of the provisions, it is clear that s. 52 of the MA and the provisions of the RTA can be read together harmoniously. The RTA is concerned with the regulation and termination of valid tenancies; s. 52 of the MA provides a remedy to have an alleged tenancy set aside with the result that a valid tenancy never existed in the first place. Further, s. 52 would have no meaning or possible application if the respondent’s argument is accepted and the mortgagee can only apply to terminate the tenancy under the RTA rather than set it aside under the MA. [25] The respondent relies on this court’s decision in Fraser v. Beach (2005), 75 O.R. (3d) 383, to support the application judge’s determination that the jurisdiction of the Superior Court is ousted by the provisions of the RTA. At issue in Fraser was an order of the Superior Court in a nuisance action. The Superior Court ordered the tenants to vacate the premises as a method of enforcing an earlier order restraining the landlord from operating an illegal rooming house. This court held that the tenancies could only be terminated by the Board pursuant to the predecessor statute to the RTA. [26] Fraser is not applicable here. In Fraser and in Parker v. Yundt, 2012 ONSC 244, the applicants sought to terminate existing tenancies. The tenancy agreements were presumed to be valid. [27] In this case, the appellant’s Notice of Application before the Superior Court was “for an order setting aside an alleged tenancy agreement” made between Boodhoo and Hosein. The application did not seek to terminate the tenancy. Fraser holds that the inherent jurisdiction of the courts to make an order evicting a residential tenant is ousted by the RTA. Here, jurisdiction is specifically given to the Superior Court by s. 52 of the MA not to terminate but to set aside a tenancy agreement when it was entered into by a mortgagor under certain conditions. The jurisdiction of the Superior Court to apply s. 52 of the MA has also been recognized by the Board: File Number: TET-66943-16, 2016 CanLII 38767, at paras. 14 and 18; File No. CEL-02248, 2007 LNONLTB 27, at para. 47. [28] In short, there is no conflict between the RTA and s. 52 of the MA. E. Disposition [29] I would allow the appeal, and set aside the tenancy agreement pursuant to s. 52 of the MA. I would make the following determination as to costs: · In accordance with the agreement between the appellant and the respondent Boodhoo, there will be no costs against Boodhoo. · The respondent Hosein will pay costs to the appellant in the amount of $15,000 inclusive of disbursements and HST. This amount may be added to the mortgage arrears and enforced as such. Released: August 16, 2016 “M.L. Benotto J.A.” “I agree J.C. MacPherson J.A.” “I agree Paul Rouleau J.A.”