A. Overview
There is a lack of clarity in the Supreme Court of Newfoundland and Labrador regarding the manner in which default notice must be provided to a mortgagor by a mortgagee when it is exercising power of sale pursuant to s. 6 of the Conveyancing Act, and, consequently, this is affecting applications for vacant possession.
The manner in which that default notice is provided is fraught with various judicial interpretations regarding the applicability of s. 40 to s. 6 of the Conveyancing Act. Some judges of the Supreme Court usually, but not always, require the default notice be served by posting it at the property or having the mortgagor sign for the registered mail pursuant to s. 40 of the Conveyancing Act.
However, a mortgagee is only required to give notice. This means sending the default notice by registered mail. Proof of acceptance is not required. Some judges accept this as service of the default notice.
This paper address why the latter and not the former statutory interpretation is correct.
As a result, an application for vacant possession does not ensure a just, speedy and inexpensive determination of it. Indeed, it often takes a mortgagee a further fourteen (14) to sixteen (16) months to obtain an order for vacant possession following the mortgage sale.
B. Historical Background – Foreclosure / Power of Sale
Foreclosure was formerly obtained by a suit in equity. It arises when repayment of the principal sum becomes due, either because the contractual redemption date has passed or because of a breach of the term of the mortgage.
The historical foreclosure process was cumbersome and quite often tedious. For example, if there were several subsequent encumbrancers there were successive redemption periods and various rules as regards redemption periods.
Further, the mortgagee was unable to sell the mortgaged property free from the equity of redemption without joining the mortgagor, who had the right to ask a court to order judicial sale instead of foreclosure.
To obviate the need for the concurrence of the mortgagor, a solution was found by inserting an express power in mortgage deeds that enabled the mortgagee to sell the property out of court, free from the equity of redemption.
Eventually, the contractual power of sale was codified by the Parliament of the United Kingdom. As stated in Keough v. Sandfire Capital Limited Partnership:
“… The inefficiency of that means of realizing the mortgage debt prompted conveyancers in the 19th century to develop a contractual power of sale whose aim was to provide “a simpler and more expeditious mode of getting rid of the mortgagor’s equity of redemption and of realizing the mortgage debt”: Walter M. Traub, Falconbridge on Mortgages, loose-leaf (consulted July 2016), (Toronto: Canada Law Book Limited, 2014), at p. 35-2, §35:10. In time, lenders and conveyancers were successful in persuading Parliament to give its imprimatur to the power of sale by deed (see Lord Cranworth’s Act, 1860 (U.K.), 23 & 24 Vict., c. 145 and the Conveyancing and Law of Property Act, 1881 (U.K.), 44 & 45 Vict., c. 41). The last-mentioned statute, like its predecessor, can hardly be described as borrower protection legislation. Quite the contrary: its terms were reflective of the power of sale by deed conveyancers had devised to facilitate the elimination of the equity of redemption and expeditiously realize the mortgage debt.”
Newfoundland and Labrador adopted a similar approach when it promulgated the Conveyancing Act, (1896) 60 Vic, c. 10.
Although the power of sale arises as soon as the mortgage debt becomes due, the Conveyancing Act stipulates that it cannot be exercised until at least one of the enumerated preconditions have occurred. The conditions enacted by the Newfoundland and Labrador legislature for the exercise of the power of sale remain a matter of legislative prerogative.
C. Conveyancing Act
Sections 6 and 40 of the Conveyancing Act state the following:
“6. A mortgagee shall not exercise the power of sale conferred by this Act unless written notice is first given to the mortgagor and another
registered encumbrancer or guarantor
(a) requiring payment of the mortgage money and there has been a default in payment for 30 days after the giving of the notice;
(b) requiring that interest under the mortgage that is in arrears and unpaid be paid and there has been a default in payment for 30 days after the giving of the notice; or
(c) requiring that a breach of a provision contained in the mortgage deed, or in this Act, and on the part of the mortgagor or of a person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest on the mortgage money be remedied and that breach remains unremedied for not less than 30 days after the giving of the notice.
40. (1) A notice required or authorized by this Act to be served shall be in writing.
(2) A notice required or authorized by this Act to be served on a lessee or mortgagor or other registered encumbrancer or guarantor shall be sufficient, although only addressed to the lessee or mortgagor or other registered encumbrancer or guarantor by that designation, without his or her name, or generally to the persons interested, without a name, and notwithstanding that a person to be affected by the notice is absent, under disability, unborn or unascertained.
(3) A notice required or authorized by this Act to be served shall be sufficiently served if it is left at the last known place of residence or business in this province of the person to be served, or, in case of a notice required or authorized to be served on a mortgagor, is attached or left for him or her on the land or a house or building comprised in the mortgage.
(4) A notice required or authorized by this Act to be served shall also be sufficiently served if it is sent by mail in a registered letter addressed to the person to be served, by name, at the last known place of residence or business, and if that letter is not returned through the post office undelivered.
(5) Service shall be considered to be made at the time at which the registered letter would in the ordinary course be delivered.”
Section 6 requires a mortgagee to give written notice to the mortgagor, registered encumbrancer or guarantor requiring any one of them to pay the principal and interest and there has been default in payment for 30 days after giving written notice. At the expiry of the 30 days, the mortgagee can proceed with power of sale.
Section 40 addresses the service of written notice. Section 6 no longer requires the service of written notice, which was a purposeful change by the legislature to the Conveyancing Act in 1988.
The clause to ‘give written notice’ must be a lesser requirement than to ‘serve written notice’. Despite this legislative change, the Supreme Court in P. McNicholas M.D. Inc. v. Field, held that written notice required under s. 6 of the Conveyancing Act must be served pursuant to s. 40 of
the Conveyancing Act when Thompson, J., held, in part, the following:
“… In the result, the Fields, not being otherwise bound to a specified manner of service, the service in these three instances effectively
complies with s. 40(3) of the Conveyancing Act as all three mortgagees are out of the Province and service was effected at a known place for service in the Province. Effectively, s. 40 contemplates that actual service on the parties may in fact not occur provided the attempts are made as prescribed. The provision serves to cure otherwise incomplete service. In this case, service has been reasonably completed well within the parameters contemplated by s. 40(3).”
And the Supreme Court in Dawson v. Cribbin also came to the same conclusion as in P. McNicholas, supra, when Russell, J., held, in part, the following:
“Section 40 of the Act deals with the service of notices. Section 40(3) states that a notice required or authorized by the Act to be served shall be sufficiently served in the case of a notice required or authorized to be served on a mortgagor, if attached or left for him or her on the land or house comprised in the mortgage. In this case the sending of the notice by registered mail to the postal address of the property, and addressed to the Defendant meets the requirements of that section, especially when the registered mail is not returned through the post office and in fact is received by the occupants and the Defendant advised of the same. This is especially so bearing in mind that the only address the Plaintiff had for the Defendant was not sufficient for the purposes of sending the notice. Accordingly, I find that written notice was given to the Defendant in accordance with s. 6 of the Act.7”
Home Trust Company (“Home Trust”) was seeking to address these rulings in Home Trust v. Ballam since neither seemed to address the purposeful change to the legislation.8 Prior to discussing the reasons, a brief background.
D. Home Trust v. Ballam – Supreme Court
On March 24, 2022, Home Trust sent by regular and registered mail a demand for payment and a Notice of Intent to Ballam pursuant to s. 6 of the Conveyancing Act. Mr. Ballam did not sign for the registered mail.
On October 18, 2022, and October 22, 2022, Home Trust caused the Mortgage Sale to be advertised pursuant to s. 7 of the Conveyancing Act.
The Mortgage Sale occurred on November 15, 2022, and, since no sufficient bids were received, the property was withdrawn and was listed on the open market for sale by private contract.
On November 17, 2022, Home Trust sent a Notice to Vacate by regular and registered mail to Ballam advising him to vacate the Property within 30 days. Mr. Ballam did not sign for the registered mail, and did not vacate the property. This is not a legislative requirement.
Home Trust filed an application for, inter alia, an order for vacant possession against Terrance Ballam on or about March 7, 2023. In that application, Home Trust addressed the applicability of s. 40 to s. 6 of the Conveyancing Act.
At the short cause hearing on April 18, 2023, the judge scheduled the application hearing for December 11, 2023, and directed that Home Trust forward a letter to the Associate Chief Justice of the Supreme Court advising that Home Trust intended to address the applicability of s. 40 to s. 6 of the Conveyancing Act. Home Trust sent that letter.
On December 11, 2023, Home Trust agreed to a consent order with Ballam in Court. The terms of which were as follows: (1) Ballam would provide vacant possession on or before February 28, 2024, and Home Trust would waive its entitlement to costs. Subsequently, Home Trust addressed the applicability of s. 40 to s. 6 of the Conveyancing Act.
On April 16, 2024, the Court issued written reasons.
In the reasons, the judge specifically indicated that lenders were seeking direction regarding their vacant possession applications and, as a result, that the Supreme Court would resolve the issues for the benefit of people who borrow money secured by mortgages on their properties (“mortgagors”), lenders who lend money secured by mortgages and the legal community.
The judge went on to hold that the notice which must be provided pursuant to s. 6 of the Conveyancing Act must be delivered to the mortgagor pursuant to s. 40 of the Conveyancing Act when he stated:
“[11] Under ss. 40(3) and (4) of the Act, a lender can serve the mortgagor and any encumbrancer or guarantor with the default notice in one of two ways:
(a) First, it can serve the mortgagor by leaving a copy at, or attaching it to, the mortgaged property. It shall serve any encumbrancer or guarantor, not by leaving a copy at the mortgaged property, but by leaving it at their last known residence or place of business; or
(b) Second, it can serve a mortgagor and encumbrancer or guarantor by sending it by registered mail to their last known address, so long as Canada Post does not return the letter to the lender marked undelivered.
[12] A lender does not need to personally serve a mortgagor and any encumbrancer or guarantor with the default notice unless it cannot serve it as I described in paragraph [11]. I will call this non-personal service.”
The judge did not consider in his reasons the purposeful change of the words ‘serve notice’ to ‘give notice’ found at s. 6 of the Conveyancing Act. The judge merely adopted, without addressing at all, the holdings in P. McNicholas M.D. Inc. v. Field and Dawson v. Cribbin.
Accordingly, Home Trust appealed the written reasons and order of the judge regarding the issue of giving notice, among other things.
E. Home Trust v. Ballam – Court of Appeal
On March 18, 2025, the Newfoundland and Labrador Court of Appeal issued written reasons dismissing the appeal in Home Trust Company v. Ballam. The Court of Appeal dismissed the appeal on procedural grounds and did not address the issue regarding notice.
Let me explain.
The Court of Appeal held that absent an adversarial dispute, the judge ought not have acceded to the request of Home Trust. In proceeding as he did, the judge rendered a decision that provides only commentary and is a non-binding opinion. Indeed, the Court of Appeal found that the judge’s reasons were nothing more than obiter dicta and not subject to appeal.
F. Conclusion
The Supreme Court was aware of the issue that Home Trust raised in the first instance and assigned a judge to determine the issue. Despite that, the Court of Appeal declined to address the merits of the judge’s decision which is now left for another day.
A mortgagor rarely appears at an application for vacant possession and, when he/she does, almost never has counsel. Thus, it is the mortgagee addressing applicability of s. 40 to s. 6 of the Conveyancing Act with the Supreme Court; meaning the adversarial dispute is with the Supreme Court and not a party.
Time will tell if another opportunity presents itself to address the issue of ‘give notice’ and ‘service notice’ raised herein and, for the time being, the mortgagor, mortgagee and the legal community are left with a non-binding opinion and various interpretations of the method of service of the default notice by different judges of the Supreme Court.
Sources:
Dawson v. Cribbin, 2001 CarswellNfld 142; (2001), 203 Nfld & P.E.I.R. 168 (NLSC) at paras. 19 – 20
Home Trust Company v. Ballam, 2024 NLSC 67
Keough v. Sandfire Capital Limited Partnership, 2016 NBCA 50, (2016) 403 D.L.R. (4th) 308, at para. 45
P. McNicholas M.D. Inc. v. Field, 2011 NLTD 35, (2011), 306 Nfld & P.E.I.R 259
Walter M. Traub, ed., Falconbridge on Mortgages, 5th ed. (Toronto: Thomson Reuters 2017) at 22-2
W.S. Holdsworth, KC, DCL, A History of English Law, vol VII (Boston: Little Brown & Company, 1926) p. 160; R.E. McGarry, QC & H.W.R. Wade, The law of Real Property, (London: Stevens & Sons Limited, 1957) at pp. 802- 803