In a recent decision of the BC Supreme Court, Justice A. Saunders clarified a key aspect of foreclosure proceedings. InstaFund Mortgage Management Corp. v Li, 2024 BCSC 1512 confirms that a chargeholder with an unproven claim to a property can obtain an order for conduct of sale following Order Nisi.
Prior to the decision, there was some uncertainty in the law as to whether a ‘mere chargeholder’ with unproven claim could be granted conduct of sale, or if this right was restricted to parties with an interest in the land.
Background:
Crowe MacKay & Company Ltd. (“CMC”) is the Trustee in bankruptcy of Xiao Bo Li. Ms. Li’s son, Clinton Li, and Ms. Li’s associate Danny Ting Chug Ma are the registered owners of the disputed property, 2092 West 57th Avenue, Vancouver, BC. Prior to the foreclosure proceedings, CMC brought a fraudulent preference claim against Mr. Li and Mr. Ma, alleging funds owed to them in their capacity as Trustee were used to purchase the West 57th property. CMC registered a certificate of pending litigation (CPL) on title.
Mr. Li and Mr. Ma applied to have the CPL removed on the basis of hardship and inconvenience. Their application was granted on the condition of posting $857,831.72 in security. The security was never posted and the CPL was CMC’s only security for its claim.
InstaFund Mortgage Management Corp. commenced foreclosure proceedings and Order Nisi was granted in May 2, 2024, with a six-month redemption period. In the meantime, the mortgage on the West 57th was accruing considerable interest—$23,000 per month—diminishing the equity in the property and in turn, CMC’s security.
Prior Proceeding:
On June 7, 2024, CMC applied for both sale of the property and for conduct of sale. The order was granted by Associate Judge Muir, effective August 2, 2024, which was the 3-month mark of the 6-month redemption period.
Justice Muir cited Rule 21-7(7) of the Supreme Court Civil Rules and s. 15 of the Law and Equity Act (LEA). Rule 21-7(7) provides a “party of record” may apply for an order for sale of the mortgaged property at any time, while s. 15 of the LEA provides the court may grant such an order to “a person who has an interest in the property or land.” Justice Muir, in granting the Trustee conduct of sale, held the Trustee was, “clearly a party of record, and it clearly has an interest in the land.”
The appellant cited British Columbia (Minister of Competition, Science and Enterprise) v. Delta Fraser Properties Partnership, 2003 BCSC 905 [Delta Fraser], which stated that while a chargeholder was “theoretically entitled to such relief…until the lien has been established by a judgement of the court…it ought not to have conduct of sale of the lands.”
Similarly, Ahone v Holloway, 1988 CanLII 3141 (C.A.) remarked a lienholder would be entitled to sale of the lands once their lien had been established by a court judgement.
Justice Muir distinguished this line of authority, noting Delta Fraser had limited application to situations where there are competing claims between registered chargeholders. For instance, where there is both a CPL-holder and a mortgagee, the latter would have preference in obtaining an order for conduct of sale.
Clarification of Law:
In the present case, the appellant argued Justice Muir erred in finding that CMC, the CPL holder, had an interest in the land. Further, they argued s. 15 of the LEA limits orders for conduct of sale to holders of interests in land only.
Justice Saunders observed that while there is a distinction between chargeholders and parties with an interest in land, such a strict application of s. 15 of the LEA was inconsistent with a long line of legal authority and practice in B.C. Contrary to the appellant’s position, parties with proven and unproven claims have been extended the right to seek orders for sale in foreclosure proceedings.
For example, in Thompson Valley Savings Credit Union v Jubbal, 1980 CanLII 566 (S.C.), the Court remarked “any respondent with an interest in, or a claim to, the mortgage property…” would have the right to redeem or seek an order for sale.
The legislative history of s. 15 of the LEA can be traced back to the English Chancery Procedure Amendment Act of 1852 which provided for orders for sales to be granted to mortgagees and “incumbrancers” alike. Its B.C. successor, the Laws Declaratory Act, R.S.B.C. 1960, c. 213 similarly provided at s. 2(12)(c) that both mortgagors and encumbrancers may be granted conduct of sale by the Court.
Justice Saunders remarked the Supreme Court Rules and other statutes were streamlined in the late 1960s-70s. As a result, s. 15 of the LEA and the rule pertaining to orders for sale referred only to “a party of record” or “a person who has an interest in the property or land” and no longer referred to a mortgagor or an encumbrancer. Justice Saunders held that despite the shift in wording, interpreting the phrase “a person who has an interest in the property of land” as inclusive of unproven lien claimants was in line with the legislative purpose of the provisions.
Result:
Justice Saunders dismissed the appellant’s appeal, holding that there was no error in finding CMC had an interest in land and was entitled to conduct of sale of the West 57th property.
For more information or assistance with a foreclosure, please reach out to any member of our Financial Services Group.
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Reilly Pollard Partner |Financial Services Vancouver |
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Ahlia Moussa Articling Student |Financial Services Vancouver |
This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.