According to a recent case tried in the Court of Appeal for Ontario, Winters v Hunking, 2017 ONCA 909 as summarized by Scott McGrath of WeirFoulds LLP, Foreclosure is not automatic on default.
In an interesting article posted December 8, 2017 in Mondaq, Scott McGrath reminds us that the Court may have acknowledged the Lender was within their rights to commence foreclosure proceedings, but special circumstances “made such a foreclosure unjust in the circumstances”.
Special Circumstances an issue
The case involved a $350,000 mortgage granted to the Lender by Mr. Hunking. He made no payments on the mortgage, nor apparently did he pay his realty taxes. These facts were never in dispute, however a significant degree of sympathy was accorded the Mr. Hunking, the Appellant. It was established that he was illiterate and low income. According to his doctor he was also “severely mentally challenged”, with “significant cognitive impairment”. One might conclude that on the face of it, the Mortgagor was clearly in default, and the Lender was within their rights to exercise whatever remedies were available to them. The individual’s condition however, would possibly inform us as to why he did not respond to foreclosure proceedings.
Appeal Court Considerations
The lower court had refused to set aside the default judgement ordering foreclosure. The motion judge was not convinced that the facts were such as to persuade him to set aside the original order. The Court of Appeal took a different interpretation, raising a number of issues, including, importantly, that a Foreclosure action would prevent the mortgagor from accessing considerable equity in the property, thus providing the Lender with a windfall.
What is the take-away here? Quite simply that a foreclosure is not a guarantee. A sympathetic mortgagor may get the court’s sympathy, which could have significant implications for the lender.