Berger, Rowbotham and O'Ferrall JJA

3.77: Subsequent encumbrancers not parties in foreclosure action
6.5: Notice of application in foreclosure action
9.32: Offer for sale of secured property
9.33: Sale to plaintiff
9.4: Signing judgments and orders

Case Summary

This was a decision concerning two of eight Appeals arising out of a foreclosure Action concerning a rural property near Lethbridge. The central issue under appeal was whether the Case Management Judge had properly ordered a sale of the property.

In the first Appeal, the mortgagees of the property were chiefly concerned with the process of the foreclosure Action. They alleged the Justice, in making the sale Order, committed a number of breaches of procedural fairness, had assumed case management of the proceedings, despite not having been appointed, and had deprived the Appellant mortgagees of their interests. The Court of Appeal noted that allegations of bias were woven throughout the grounds of appeal.

The Court noted that Rules 3.77, 6.5 and 9.32 govern the proceedings in foreclosure actions. Rule 9.32 grants the Court discretion to determine the manner of sale. Rules 3.77 and 6.5 provide that, once the foreclosing mortgagee commences the foreclosure Action, the process is governed by the Court, not the foreclosing mortgagee. As a result, it is not necessary for every subsequent encumbrancer to file a separate Action. The Court also noted that the right of the foreclosing mortgagee to select amongst the remedies offered by Rule 6.5 is subject to the Court’s equitable jurisdiction to protect subsequent encumbrancers.

The Court observed that, here there was no redemption period required, and an Application was made and granted for an Order for sale. The Appellant mortgagees did not want a sale, they wanted foreclosure and possession of the property. The Court of Appeal found that the mortgagees were kept apprised of every step in this process, and were permitted to, and did, bid on the property pursuant to Rule 9.33. Accordingly, the Court found there had been no breach of procedural fairness.

The Appellants in the second Appeal had an Action claiming specific performance of an agreement and a one-third interest in the Property. They asserted in their Appeal that the Justice had prejudiced their Action by giving the buyers clear title. The Appellants’ grounds of Appeal were similar to those in the first Appeal, with the addition that it was unfair that the Justice had invoked Rule 9.4(2)(c), waiving the need for all parties to sign the Order. The Court of Appeal noted that Rule 9.4(2)(c) is discretionary and was appropriate in this case given the need to move the proceedings forward at the least cost to the parties. The Court noted that, in the result, there was no prejudice to the Appellants.

The Appeals were dismissed and the sale Order was confirmed.

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