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Real Property - Mortgages (4). MCAN Home Mortgage Corporation v. Broad
In MCAN Home Mortgage Corporation v. Broad (Ont CA, 2026) the Ontario Court of Appeal allowed an appeal, here brought against an order that "the court had no jurisdiction to order a discharge of a CPL" in the circumstances of the case:[1] Where in litigation “an interest in land is in question”, s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) permits the court to issue a certificate of pending litigation (a “CPL”) that may be registered against title. The court may discharge the CPL on a variety of specific grounds and, under s. 103(6)(c), “on any other ground that is considered just”. This appeal concerns the scope of the discretion under this provision.
[2] The appellant, a mortgagee[1] whose loan was in default, wished to sell the mortgaged property under its private power of sale. After giving notice, it entered into an agreement of purchase and sale promising to deliver clear title to the purchaser. There was a CPL registered on title, giving notice of an action brought by the respondent against the mortgagor, her former common law spouse, claiming an interest in the mortgaged property. The appellant was not a party to that action and no claim for priority over its mortgage was made in it.
[3] The appellant sought an order discharging the CPL to allow its sale to close. The application judge held that the court had no jurisdiction to order a discharge of a CPL in such circumstances. In her view, the appellant’s remedy lay solely in s. 35 of the Mortgages Act, R.S.O. 1990, c. M.40, which sets out what evidence proves a mortgagee’s compliance with the prerequisites to exercise a power of sale, sufficient to give the purchaser “good title”.
[4] In my respectful view, the application judge erred. The Mortgages Act, in combination with the Land Titles Act, R.S.O. 1990, c. L.5 (“LTA”) to which it is subject, confirm the ability of a mortgagee who has complied with the statutory requirements for exercising a private power of sale to convey title clear of subordinately ranking interests. This is a matter of substantive law. However, a practical gap remains because the Mortgages Act does not mandate the actual deletion of a CPL from the parcel registry, and although provisions of the LTA authorize the deletion of instruments from the register to accord with the purchaser’s “good title”, it is not the practice of the Land Titles office to do so for a CPL without consent of the person who obtained the CPL or a court order.
[5] The scope of the discretionary jurisdiction under s. 103(6)(d) of the CJA is broad enough to fill this practical gap. It permits the court to direct the discharge of a CPL at the request of a mortgagee who is not a party to the lawsuit in which it was obtained, where the mortgagee has priority over the interests claimed in the lawsuit and the discharge is necessary to allow the mortgagee’s otherwise proper sale to close. Such a discretion is complementary to, rather than inconsistent with, the provisions of the Mortgages Act and the LTA.
[6] Although the appellant asks us to set aside the application judge’s order and confirm the existence of a discretion to discharge the CPL, it does not ask us to replace the decision below with an order discharging the CPL. The parties acknowledge that circumstances have changed since the matter was before the application judge. The appellant’s prospective sale has aborted. The respondent won her lawsuit against the mortgagor, resulting in her now being the beneficial owner of the mortgaged property. There is a pending application in the Superior Court concerning the respondent’s ability to redeem the mortgage. The appellant recognizes that whether the discretion to discharge the CPL should be exercised must be considered afresh, in the Superior Court.
[7] I would therefore set aside the order of the application judge and refer the matter back to the Superior Court for further proceedings consistent with these reasons.
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Discussion
[28] In my view, the application judge erred in holding that “[t]here is no power in the court to discharge a validly registered CPL at the instance of a mortgagee in the process of completing a mortgage power of sale proceeding”. I reach that conclusion for a number of reasons.
[29] A CPL may only be issued and registered with permission of the court where an interest in land is in question in an action. The court maintains jurisdiction to ensure that the CPL’s continued presence on title does not work an injustice. Section 103(6) of the CJA describes a range of specific grounds on which a CPL may be discharged by the court, including where the party who obtained it does not have a reasonable claim to the interest in the land claimed, or where their interests could be protected by another form of security. Section 106(6)(c) permits discharge of a CPL on “any other ground that is considered just”. The court has the power to impose terms when ordering the discharge of a CPL.
[30] Nothing in the wording of s. 103(6)(c) of the CJA, read in light of its context and purpose, precludes it being invoked by a mortgagee who is not a party to the lawsuit in which the CPL was obtained, but is nonetheless affected by it. A mortgagee whose mortgage ranks prior to the interest in land that is in question in the action, and against whom no claim for priority is made, is affected by a CPL if it prevents the mortgagee from completing a sale it would otherwise be entitled to make. Where no reasonable claim about the mortgagee’s interest in land is being made, this effect of a CPL goes beyond its purpose. In such circumstances, the mortgagee has the right to request that the court exercise its discretion to discharge the CPL on the basis that it would be just to do so.
[31] The existence of a power under s. 103(6)(c) of the CJA to discharge a CPL at the request of a mortgagee, where it is just to do so, is consistent with the relevant provisions of the Mortgages Act and the LTA.
[32] Section 35 of the Mortgages Act specifies the documentation that evidences compliance by a mortgagee with the relevant parts of the Act concerning the exercise of a power of sale and that is thus “sufficient to give a good title to the purchaser”. Nothing in that section conflicts with the court’s jurisdiction under s. 103(6)(c) to discharge the CPL at the request of a mortgagee where it is necessary to give practical effect to the purchaser’s “good title”.
[33] As the LTA makes clear, there can be a difference between what, in law, constitutes the transfer of good title, and what must be done to ensure that the parcel register reflects that good title, unaffected by the presence on the register of any other instruments that may suggest the existence of an adverse claim.
[34] Sections 99(1) and (1.1) of the LTA allow the Director of Titles to specify the evidence necessary to show compliance with the Mortgages Act, contemplate the registration of such evidence, and stipulate that such evidence and the registration of a transfer by the mortgagee to the purchaser is “sufficient to give good title to the purchaser”. But s. 99(2) goes on to provide that upon the transfer being registered and satisfactory evidence being produced the land registrar may “delete from the register the entry of an instrument or writ appearing to rank subsequent to the charge under which the land is sold, and thereupon the interest of every person claiming under such subsequent instrument or writ ceases to affect the land.”
[35] In other words, notwithstanding that in law the purchaser receives “good title”, the state of the register is still critical. The parcel register in the Land Titles system is a “perfect mirror of the state of title”: Lawrence v. Wright, 2007 ONCA 74, 84 O.R. (3d) 94, at para. 30. This “mirror principle” is central to the land titles system, which guarantees the indefeasibility of title. The land registrar’s power to delete subsequent instruments under s. 99(2) of the LTA, regardless of the fact that compliance with Part II of the Mortgages Act grants good title, is a reflection of the importance of the register. Where an instrument ranks subsequent to the mortgage under which the property is being sold, it may be discharged so that the interest of any person claiming under such instrument ceases to affect the land.
[36] Section 99(2) applies to a CPL where the litigation in question relates to an interest in land that ranks subsequent to the mortgage under which a sale is being made. However, as the case was put to us, the land registrar will not exercise the power to delete such a CPL from the register without consent of the person who obtained it, or a court order: Electronic Registration Procedures Guide, p. 72.
[37] Granting a discharge of a CPL that ranks subsequent to the interest of a mortgagee selling under power of sale under s. 103(6)(c) of the CJA is appropriate where it would give effect to the purchaser’s good title as otherwise established under s. 99(1) and (1.2) of the LTA. To do so would facilitate the removal from the register of an instrument that does not affect that purchaser’s title and negate any concern that a person claiming under the CPL continues to have an interest that affects the land.
Conclusion
[38] A discretion exists under s. 103(6)(c) of the CJA to discharge a CPL on the application of a mortgagee exercising its power of sale under a mortgage, where the mortgage ranks in priority to the interest in the land in issue in the action in which the CPL was obtained. This discretion may be exercised where the mortgagee provides evidence of compliance with the Mortgages Act, as stipulated in s. 99 of the LTA, that is, where, in law, good title is being conveyed to the purchaser, and it is necessary for the court to grant a discharge so that the register reflects that title.
[39] The court may always consider appropriate terms, such as making it clear that the discharge takes effect only on registration of the transfer to the purchaser referred to in s. 99(1.1) of the LTA, and requiring payment into court of any surplus realized on the sale. Whether the discretion should be exercised, and any terms that may be appropriate to impose, will depend on the facts of each case.
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