Wadden v. 470139 B.C. Ltd.

2013 BCSC 2520 Wadden v. 470139 B.C. Ltd.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Wadden v. 470139 B.C. Ltd., 2013 BCSC 2520 Date: 20131205 Docket: S100499 Registry: Kelowna Between: Joseph Leo Wadden and Melanie Hope Wadden Petitioners And 470139 B.C. Ltd. Respondent Before: The Honourable Madam Justice Beames Oral Reasons for Judgment In Chambers Counsel for the Petitioners: R.H.A. Sommerey Appearing as representative of the Respondent: J.D. James Place and Date of Trial/Hearing: Kelowna, B.C. December 5, 2013 Place and Date of Judgment: Kelowna, B.C. December 5, 2013 [1] THE COURT: This matter comes before the court on the petition of Joseph Wadden and Melanie Wadden. The respondent is 470139 B.C. Ltd. By way of very brief background, the petitioners purchased a property, which I need not specifically describe here, in Kelowna and obtained mortgage financing, both a first and a second mortgage. According to the facts that are before me, on June 25, 2012, the first mortgage in question was granted to a company called Fisgard, and the second mortgage was granted to the respondent in these proceedings, the numbered company to which I have just referred. [2] It is my understanding from the affidavit material before me that the first and second mortgages I have just referred to provided funds to the purchasers to actually refinance financing that was on their home in the first instance. [3] The petitioners

found themselves unable to make payments on their first or their second mortgage payments, and they went into default. On April 4, 2013, the first mortgagee commenced foreclosure proceedings to enforce the mortgage, and on May 29, 2013, an order nisi of foreclosure was granted to the first mortgagee with a six-month redemption period. [4] The petitioners made various efforts to refinance so that they could payout the first and the second mortgages, or the first and part of the second mortgage, without success, and the petitioners at the same time were making efforts to attempt to sell the property in an effort to obtain sufficient funds to payout the first and second mortgages in their entirety and hopefully have some equity left remaining to be paid to them. [5] They obtained an offer on the property, which they accepted, and on June 26, 2013, the contract of purchase and sale was finalized with a purchase price of $364,000, which sum was sufficient to pay out and discharge all selling expenses, outstanding property taxes, and the first and second mortgage in full. The closing date with respect to that sale was August 7, 2013. [6] The usual steps associated with the closing of a transaction for real property in British Columbia then took place, and in the course of those steps being taken, there was provided by the respondent numbered company a mortgage payout statement which

provided for the payout as of August 7, 2013. The payout demand included the principal amount outstanding on the second mortgage; past due payments from February until July of 2013; one NSF charge; something described as a three-month prepayment penalty in lieu of notice (Clause 12) (3 x $750) for a total of $2,250; a charge for drafting and filing a response to the petition filed by the first mortgagee; interest on a per diem calculation up to the date of closing of August 7, 2013; and a discharge fee, for a total payout required or demanded of $67,886.07. [7] An issue arose between the petitioners and the respondent numbered company with respect to the sum I have referred to ($2,250), and in order to secure closing, the full amount demanded of $67,886.07 was paid with the $2,250 being paid under protest. As I understand it, although the material is not completely clear about this, that sum was withheld from the respondent numbered company and is currently lodged, I believe, in the respondent's solicitor's trust account. [8] This petition was then brought by the petitioners, seeking a declaration with respect to the unenforceability of the clause in the mortgage that both parties seem to suggest required a payment of $2,250 and seeking an order for repayment of the $2,250. [9] The clause in question is contained in Part 10 of the mortgage, which is entitled "additional or

modified terms", and specifically Clause 12 of Part 10 reads as follows: 12. UPON MATURITY, should the Mortgagor default in paying the full sum due and owing for principal, interest, and any and all other charges which may be due hereunder, then the Mortgagor shall provide the Mortgagee with three [months'] notice of his intention to pay the balance due under the mortgage after maturity. [10] The respondent's interpretation of Clause 12 is that in lieu of notice, that is to say, if the mortgagee does not provide three months' notice as required by Clause 12, it is entitled to receive three months' interest in lieu of the notice. [11] Counsel for the petitioners seems to agree with that interpretation of the clause but says it is not payable; that is to say, three months' interest in lieu of notice is not payable because it amounts to a penalty or an increase in interest and is in breach of s. 8 of the Interest Act, R.S.C. 1985, c. I‑15. [12] I had the opportunity, as I indicated to counsel and to Mr. James on behalf of the respondent numbered company, before submissions commenced today to receive all of the material that has been filed in these proceedings, including the affidavits and the written arguments; I received and read the authorities provided as well. Having read the mortgage, and particularly Clause 12 of Part 10, and having read and referred to all of the material

that has been provided, I do not find that there is an express obligation contained in this mortgage to pay three months' interest in lieu of notice if notice is not given. The remedy, in my view, when the mortgage is silent with respect to what occurs if notice is not given, would be, theoretically, for the mortgagee to make a demand based on a breach of contract. On that basis, it is my view that the sum of $2,250 was not claimable by the respondent mortgagee and was not payable by the petitioners/mortgagors. Even if the clause could be interpreted as apparently both the petitioners' counsel and the respondent interpret it, that is to say that in lieu of notice, three months' interest became payable, it is my view that the effect of that interpretation would amount to a breach of s. 8 of the Interest Act. [13] I am unable to distinguish the wording of the clause in this case as including the implied term from the cases provided to me in the British Columbia context, and those include Adams Properties Ltd. v. Sherwood Estates Ltd., 1976 CanLII 255 (B.C.C.A.); Citizens Trust Co. v. Vyas, 1996 CanLII 822 (B.C.S.C.); Vohra Enterprises Ltd. v. Creative Industrial Corp., 1988 CarswellBC 49 (S.C.); and Vohra Enterprises Ltd. v. Creative Industrial Corp., 1988 CarswellBC 73 (S.C.). Given what I find to have been a breach, as my alternative finding, of s. 8 of the Interest Act, I am

also driven to conclude that the sum of $2,250 was not payable by the petitioners nor collectible or enforceable by the respondent. [14] As a further alternative, I will say that if I am wrong with respect to the interpretation of Clause 12, or the breach of s. 8 of the Interest Act, then s. 24 of the Law and Equity Act allows for relief from forfeiture, and in my view, on all of the circumstances of this case, it would be appropriate to grant relief from forfeiture. [15] It follows from all that I have said that I am going to grant the relief sought in the petition, specifically paragraphs 1, 2 and 3 if the monies are actually sitting in the respondents' solicitor's trust account. [16] The petitioners also seek costs of these proceedings on a solicitor-and-own-client basis or, in the alternative, on Scale C. As I indicated during the course of submissions, this is not, in my view, a case that would attract an award of solicitor‑client costs. There has been, in my view, no improper conduct on the part of the mortgagee, and any suggestion in the material or in the submissions to the contrary is not accepted by me. [17] There is, however, a case for party-and-party costs to be awarded on the usual rule of this court, which is that a successful party is entitled to his or her costs. Appendix B, s. 2(2), expressly provides that the court must have regard to the level of difficulty

in terms of determining the scale of costs to be awarded. In my view, this is not a case of more than ordinary difficulty such that Scale C could possibly be justified, and I make an order that the respondent pay costs to the petitioners on a Scale B basis, the amount to be assessed or agreed upon between the parties. [18] That concludes my decision. Is there anything arising? [19] MR. SOMMEREY: My Lady, could there be an order dispensing with the respondent's approval to the form of order? [DISCUSSION RE ABOVE] [20] THE COURT: I prefer not to remove the entitlement to review the order and approve its contents from litigants just because they are self-represented, but under the circumstances of your upcoming travel, Mr. James, I will change that order and simply say that the signature on behalf of the respondent is dispensed with and that the order must come to me for approval. "A.J. Beames, J."