FORECLOSURE ACTIONS Grant A. Richards Cuelenaere Kendall Katzman & Watson 500, 128 4th Avenue South Saskatoon, SK S7K 1M8

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1 FORECLOSURE ACTIONS Grant A. Richards Cuelenaere Kendall Katzman & Watson 500, 128 4th Avenue South Saskatoon, SK S7K 1M8 Revised August 2004

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3 Saskatchewan: Bar Admission Program i TABLE OF CONTENTS I. INTRODUCTION...1 II. INITIAL CONSIDERATIONS...2 A. JUDICIAL CENTRE...3 B. STATEMENT OF CLAIM OR LEAVE TO COMMENCE The Land Contracts (Actions) Act The Saskatchewan Farm Security Act....5 C. IS THE BORROWER A FARMER?...6 D. WHO TO SUE? (THE PERSONAL LIABILITY ISSUE)...7 III. NOTICE OF INTENTION...10 IV. LEAVE TO COMMENCE...11 V. STATEMENT OF CLAIM...16 VI. ORDER NISI FOR FORECLOSURE...18 VII. FINAL ORDER FOR FORECLOSURE...21 VIII. JUDICIAL SALE...22 IX. FORECLOSURES OF FARM LAND...26 A. PRELIMINARY CONSIDERATIONS...27 B. NOTICE TO FARM LAND SECURITY BOARD AND FARM DEBT REVIEW BOARD...28 C. APPLICATION FOR SECTION 11 ORDER...29 D. PROCEEDINGS SUBSEQUENT TO OBTAINING SECTION 11 ORDER...30 E. HOME QUARTER PROTECTION...30 F. OTHER ISSUES Guarantors Costs...31 X. MISCELLANEOUS...32 A. QUIT CLAIM...32 B. WRIT OF POSSESSION...33 C. COSTS...33 D. CONSENT FORECLOSURES...34 E. CANCELLATION OF AGREEMENTS FOR SALE...35

4 ii Saskatchewan: Bar Admission Program PRECEDENTS: SAMPLE CHECKLIST...P - 1 NOTICE OF INTENTION: Notice of Intention...P - 13 Affidavit of Service...P - 15 LEAVE TO COMMENCE: Memorandum to the Presiding Judge in Chambers...P - 17 Affidavit of Default...P - 19 Certificate of Solicitor...P - 23 Appointment for Application for Leave to Commence an Action...P - 25 STATEMENT OF CLAIM...P - 27 ORDER NISI FOR FORECLOSURE: Notice of Motion...P - 31 Memorandum to the Presiding Judge in Chambers...P - 33 Affidavit of Default...P - 35 Certificate of Solicitor...P - 39 Affidavit of Search...P - 41 Certificate of Search...P - 43 Order Nisi for Foreclosure...P - 45 FINAL ORDER FOR FORECLOSURE: Memorandum to the Presiding Judge in Chambers...P - 51 Notice of Motion...P - 53 Affidavit of Default...P - 55 Certificate of Solicitor...P - 57 Affidavit of Search...P - 59 Certificate of Search...P - 61 Final Order for Foreclosure...P - 63 Affidavit of Value and Postal Address...P - 65 JUDICIAL SALE: Notice of Motion...P - 67 Memorandum to the Presiding Judge in Chambers...P - 69 Affidavit of Default...P - 71 Certificate of Solicitor...P - 73 Affidavit of Search...P - 75 Certificate of Search...P - 77 Revised August 2004

5 Saskatchewan: Bar Admission Program iii PRECEDENTS: JUDICIAL SALE, continued Order Nisi for Sale...P - 79 Notice of Motion...P - 83 Memorandum to the Presiding Judge in Chambers...P - 85 Affidavit of Default...P - 87 Certificate of Solicitor...P - 89 Affidavit of Search...P - 91 Certificate of Search...P - 93 Order Confirming Sale...P - 95 FORECLOSURE OF FARM LAND: Notice of Intent to Realize on Security...P - 99 Notice of Intention...P Notice of Motion...P Order...P MISCELLANEOUS: Quite Claim Deed...P Writ of Possession...P Memorandum to the Presiding Judge...P Acknowledgment and Consent...P Affidavit of Execution...P Order...P Revised August 2004

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7 Saskatchewan: Bar Admission Program 1 I. INTRODUCTION Most foreclosure actions are relatively simple to conduct. However, as there are numerous hurdles to be cleared during the course of the proceedings, errors can be made by the lawyer conducting same. These errors often will cause a delay in the matter which can be prejudicial to the lender client. It is hoped that the precedents contained in the materials will provide a useful guide which will assist one in conducting foreclosure actions with minimal mistakes. Like any precedents, however, it is important for the practitioner to keep in mind that as the law changes, precedents must constantly be updated. Aside from filing the proper materials, it is useful to keep the following four rules of thumb in mind as one conducts the proceedings. Keep fresh material before the Court at all times. The Chambers Judge may overlook the fact that the information filed is several months old but if not, in all likelihood, he or she won t want to make a decision with respect to your application because there is uncertainty as to whether or not the information previously filed may have changed in some material aspect. It is good practice to make sure that relevant information such as the statement of arrears, the date of the last payment, a Land Titles Registry Search Result and Writ Registry Search are never more than one month old at the time of the return date of any application. Keep the proceedings moving. Generally, mortgage foreclosure clients are banks, trust companies or credit unions who wish to have the proceedings concluded as quickly as possible in order to get the arrears problem off of the books either by having the mortgage paid or by having the property foreclosed. It is especially important in cases where there is little or no equity to keep the matter moving in order to prevent or at least minimize a loss to your client. Keep your client informed. Financial institutions must make periodical reports to their head or regional offices with respect to the progress being made in foreclosure proceedings. Accordingly, it is important to keep them informed as the matter progresses. Use a checklist. Sample checklists are in the precedents section of the materials. Revised August 2004

8 2 Saskatchewan: Bar Admission Program II. INITIAL CONSIDERATIONS Often the initial instructions a lawyer receives in a foreclosure action is to send a demand letter to the borrower requesting payment of the arrears within a specified time (i.e., ten days), failing which legal proceedings are to be commenced. While it is not a necessary step in the proceedings (assuming that the mortgage is not payable on demand ) a demand letter on occasion results in the arrears being paid or an acceptable proposal for repayment being made. The demand letter is not necessary except where the mortgage is payable on demand. Either will lessen the legal costs of concluding the matter. Copy the demand letter to the client as a means of acknowledging the initial instructions. Assuming there is no reply to the demand letter, advise the client and request the following information if it is not already provided with the initial instructions: Statement of Arrears including: (i) arrears of principal and interest; (ii) arrears of tax installments (if any); (iii) accelerated principal; and (iv) any other expenses incurred by your client in maintaining its security including payment of property taxes and/or fire insurance premiums on behalf of the borrower. A copy of the mortgage and, where applicable, any extension or assumption agreements that apply to the mortgage. It is also a good idea at this time to advise the lender to ensure that fire insurance coverage has not lapsed, that vacancy insurance should be considered if the property is vacant, and that the utilities are being maintained. The latter is especially important in the winter months as substantial damage to the mortgaged premises can occur if the electricity and gas are cut off due to non-payment by the borrower. Most institutional lenders have blanket policies in place to cover these contingencies, however, non-institutional lenders likely will not.

9 Saskatchewan: Bar Admission Program 3 Upon receiving or confirming instructions to go ahead with the foreclosure proceeding, acknowledge same to the client and obtain a title search of the property to ascertain who the registered owners are and who else has an interest in the title. Also conduct a tax search to ascertain whether or not any property taxes are outstanding. Upon searching a lawyer should be in a position to commence the proceeding. At this time the following four considerations are important: In which judicial centre should the proceeding be commenced? Can a Statement of Claim be issued immediately or is leave of the Court pursuant to either of the following required: (i) the Land Contracts (Actions) Act; or (ii) the Saskatchewan Farm Security Act? Is the borrower a farmer as defined in the Farm Debt Review Act? Who are the parties you are going to sue in the proceeding? A. JUDICIAL CENTRE Section 133 of the Land Titles Act provides that proceedings to enforce payment of monies secured by the mortgage, (or for sale or foreclosure of the mortgaged land) may be had and taken in the Court of Queen s Bench. The Queen s Bench Act, s. 53(4) provides that unless otherwise ordered, all actions for foreclosure or sale under a mortgage must be entered, continued and tried at the judicial centre nearest to which the land or any part of it lies. Section 96 of the Queen s Bench Act provides the procedure to be used in determining the nearest judicial centre to the land in question. Where the action is not commenced in the correct judicial centre, no further proceedings can be taken (Eston Credit Union Ltd. v. Petterson, [1979] Sask. D ), although s. 23 of the Queen s Bench Act does not contain curative provisions where the action is commenced in the wrong judicial centre. Revised August 2004

10 4 Saskatchewan: Bar Admission Program Also note that the Land Contracts (Actions) Act, R.S.S. 1978, c.l-3, s. 3(6) provides that an application for an appointment for leave to commence an action shall be made at the judicial centre nearest to which the land or any part thereof is situated and every hearing shall take place at that judicial centre. If the mortgage covers two parcels of land, each of which is closer to a different judicial centre, the application can be commenced at either judicial centre. It is not necessary to make two separate applications. B. STATEMENT OF CLAIM OR LEAVE TO COMMENCE 1. The Land Contracts (Actions) Act The Land Contracts (Actions) Act, s. 3(1) provides that no action by a lender for foreclosure, sale or possession of the mortgaged premises or the recovery of any monies payable under the mortgage can be commenced except by leave of the Court granted upon application under the Act. There are, however, some exceptions to this which allow the lender to commence the proceedings simply by issuing the Statement of Claim rather than having to obtain leave of the Court to do so. These include the following: (a) Section 5 of the Land Contracts (Actions) Act provides that a corporation may agree in writing that the Act has no application to an action and where there is such an agreement made by a corporate body the Act does not apply to such an action. Accordingly, where the borrower is a corporation which waived the provisions of the Act and the corporation is still the registered owner of the property, the Act does not apply and the action can be commenced by a Statement of Claim without leave of the Court. Based on the reasoning of the Supreme Court of Canada in the case of National Trust v. Mead, [1990] 5 W.W.R. 459, leave would be required where an individual has formally assumed the mortgage even though the original corporate borrower waived the provisions of the Act. Leave would not likely be required where the individual has obtained title to the property but not assumed the mortgage with the consent of the lender. (b) (c) Section 6 of the Land Contracts (Actions) Act provides that the Act does not apply to a mortgage to secure a loan made under the Industrial Development Bank Act (Canada) by the Industrial Development Bank. Section 7 of the Land Contracts (Actions) Act provides that the Act does not apply to a mortgage given to secure a loan made under the Federal Business Development Bank Act (Canada) by the Federal Development Bank.

11 Saskatchewan: Bar Admission Program 5 (d) Section 39 of the Housing and Special-Care Homes Act, R.R.S. 1978, C. H-13 provides as follows: Where a loan in respect of a special care home or housing project contemplated by this Act is made under the National Housing Act (Canada) or any former National Housing Act (Canada) and secured by a mortgage on land in Saskatchewan, the Limitation of Civil Rights Act, the Land Contracts (Actions) Act and the Saskatchewan Farm Security Act shall have no application to the mortgage or to the rights and remedies of the mortgagee thereunder. As a result, if the loan is made under the National Housing Act (Canada) with respect to a special-care home or housing project, the Land Contracts (Actions) Act does not apply and leave of the Court to commence the action is not required. (e) A similar provision to s. 39 of the Housing and Special-Care Homes Act is found in s. 46 of the Saskatchewan Housing Corporation Act, R.S.S. 1978, c. S-24 which relates to low income, co-operative housing, urban renewal and student housing projects, as well as general housing assistance. 2. The Saskatchewan Farm Security Act Section 11(3) of this Act provides that any action to foreclose a mortgage on farm land is a nullity unless an order of the Court allowing the lender to commence or continue the action is obtained pursuant to that section. Farm land is defined in s. 2(1)(f) of the Act as property in Saskatchewan situated outside a city, town, village, hamlet or resort village that is used for the purpose of farming. Farming is broadly defined in s. 2(1)(g) of the Act to include almost every type of farming activity imaginable. The Act also applies to the parcel of land on which the buildings, etc., are situated even though same is not being farmed in the sense of putting in crop, etc. (Bank of Montreal v. Ducheminsky Farms Ltd., [1985] Sask. D (Q.B.)). Although the Act would appear to cover situations where the borrower was renting the land to a third party and not actively farming, the Court of Appeal in the case of Christie v. Texas Industries Ltd., [1986] 1 W.W.R. 532 has held that the borrower must have a realistic involvement in farming before the transaction is brought within the scope of the Act. It would, however, appear that a realistic involvement in farming

12 6 Saskatchewan: Bar Admission Program does not mean that the borrower must earn all or even a major portion of their income from farming (Ledinski v. Laursen, [1986] Sask. D ). These cases were decided when the old Farm Land Security Act was in effect but given the similar definitions of farming and farm land in that Act, these cases are likely to be followed by the Court in considering the Saskatchewan Farm Security Act. Accordingly, if the land being foreclosed is farm land within the meaning of the Act, no action can be commenced (or continued) until an order is obtained pursuant to s. 11 of the Act exempting the mortgage (or agreement for sale) from the provisions of the Act. The procedure for obtaining such an order is discussed in later materials. It should be kept in mind that if an order is obtained under the Act, the lender does not need to also apply for leave under the Land Contracts (Actions) Act (s. 9(1)(b) of the Saskatchewan Farm Security Act). C. IS THE BORROWER A FARMER? The federal Farm Debt Review Act which came into force in 1986 provides in s. 22 as follows: (1) Every secured creditor who intends to realize on any security of a farmer shall give the farmer written notice, in the prescribed form containing the prescribed information, of his intention to do so and in the notice shall advise the farmer of the right of an insolvent farmer to make an application under Section 20. (2) The notice referred to in subsection (1) shall be given to the farmer in the prescribed manner at least fifteen business days before the taking of any action by the secured creditor to realize on the security. A farmer is defined in the Act as any individual, partnership, corporation or co-operative association engaged in farming, which is also widely defined. Given the wording of s. 22, it appears that the Act does not just apply to a mortgage on land that is being farmed but to all mortgages a farmer may have given including, for example, a mortgage on a revenue property the farmer has purchased. The federal government has also advised lenders that the Act is meant to apply to part-time farmers as well as full-time farmers.

13 Saskatchewan: Bar Admission Program 7 Assuming that the borrower is a farmer, you can serve the notice required pursuant to s. 22 at the same time you serve the notice required under the Land Contracts (Actions) Act or the Saskatchewan Farm Security Act, as the case may be. If the borrower is a farmer within the meaning of the Act and neither the Land Contracts (Actions) Act or the Saskatchewan Farm Security Act apply to the mortgage, the notice required by s. 22 should be served prior to issuing the Statement of Claim. Once the notice is given under the Farm Debt Review Act, the farmer can apply for a stay of proceedings and during the stay no creditor shall commence or continue any actions or proceedings to realize on the security or recover the debt. This aspect of the Act is also discussed later in the materials. D. WHO TO SUE? (THE PERSONAL LIABILITY ISSUE) Generally speaking, a mortgage is an agreement consisting of the following terms: a promise by the borrower to pay a debt owing to the lender; a granting of a security interest in the borrower s equity of redemption to the lender; and miscellaneous terms relating to the security (i.e., covenants to insure, pay taxes, etc.). According to Mr. Justice Scheibel in Marine Water Wells Ltd. v. Dobson & Co. Refrigeration & Air Conditioning Ltd., [1982] Sask. D , the mortgage is a contract between the parties and covenants contained therein may be enforced by the parties except when modified by statute, unless they are contrary to public policy or constitute a restraint of the power of alienation. This is also true with respect to the covenant in the mortgage whereby the borrower undertakes to repay an indebtedness to the lender. In situations where the amount owing on the mortgage is more than the value of the property, it may be important for the lender to obtain a personal judgment against the borrower to be used to recover any deficiency in addition to realizing on the security. The covenant to pay can form the basis for such personal judgment and is generally

14 8 Saskatchewan: Bar Admission Program found in the Order Nisi for Foreclosure or Order Nisi for Sale. This is an ordinary judgment, except to the extent that it may be relieved against (by paying any arrears) pursuant to the provisions of s. 44(8) of the Queen s Bench Act. Where the borrower transfers the property to a third party, the original borrower may not be relieved of his or her obligation under the mortgage. A judgment can still be obtained on the covenant to pay unless the lender has released the borrower from such obligation (formally or by way of novation) or the borrower can rely on a legislative prohibition prohibiting judgment on his covenant. (Investors Mortgage Security Co. v. McDonald, [1927] 1 W.W.R. 671 and Central and Eastern Trust Co. v. Rosebowl Holdings Ltd. (1981), 34 N.B.R. (2d) 308.) In such cases, however, the transferor is entitled to be indemnified by the transferee by virtue of the provisions of s.74(2) of the Land Titles Act which implies an agreement by the transferee to indemnify the transferor in every transfer of land. The provisions of the Limitation of Civil Rights Act discussed later will, however, restrict this right of indemnification in some cases. In Saskatchewan, unlike many other jurisdictions, a transferee will not, however, be liable directly to the lender unless a covenant to pay is made directly with the lender. Such covenants often arise in both assumption and mortgage extension agreements and are enforceable in the same manner as the covenant in the original mortgage. As mentioned however, there are statutory limitations on the right to obtain a personal judgment based on the covenant to pay. The most notable is s. 2 of the Limitation of Civil Rights Act, which provides as follows: 2(1) Where land is hereafter sold under an agreement for sale in writing, or mortgaged whether by legal or equitable mortgage for the purpose of securing the purchase price or part of the purchase price of the land affected, or where a mortgage is hereafter given as collateral security for the vendor s or mortgagee s right to recover the unpaid balance due shall be restricted to the land sold or mortgaged and to cancellation of the agreement for sale or foreclosure of the mortgage or sale of the property, and no action shall lie on the covenant for payment contained in the agreement for sale or mortgage.

15 Saskatchewan: Bar Admission Program 9 (1.1) The benefit of subsection (1) extends to and includes a mortgage that secures, or is given as collateral security for, the purchase price or part of the purchase price of the land, whether or not the lender was the vendor of that land. (2) The benefit of subsection (1) extends to and includes: (a) the personal covenant of the purchase contained in any assignment by the vendor of such an agreement for sale; (b) the personal covenant of the assignee contained in any assignment by the purchaser of such an agreement for sale; (c) the personal covenant of the mortgagor contained in an agreement extending any such mortgage; (d) the personal covenant of a purchaser of lands subject to any such mortgage, to assume and pay the mortgage; It should be kept in mind that s. 2 of the Limitation of Civil Rights Act does not apply to all mortgages but only those where the mortgage monies were loaned for the purpose of allowing the borrower to purchase the mortgaged property. Situations where s. 2 of the Limitation of Civil Rights Act does not prevent the lender from pursuing an action on the covenant include those where the mortgage is given to secure debts unrelated to the purchase price of the mortgaged property (e.g., line of credit equity loans, second mortgage, debt consolidation loans). In addition, s. 40(2) of the Limitation of Civil Rights Act provides that a corporate borrower may waive the provisions of the Act and such waiver shall be binding on the corporation, its successors and assigns. In cases where an individual formally assumes the mortgage given by a corporation which waived the provisions of the Act, however, this waiver will not apply to the individual who will be entitled to the protection of the Act. (National Trust v. Mead, [1990] 5 W.W.R. 459 (S.C.C.).) In addition to suing individuals who covenant in the mortgage to repay the mortgage monies, a lender may be in a position to proceed against a guarantor to recover the monies owing on a mortgage, including a deficiency. Leave against a guarantor is not required under the provisions of the Land Contracts (Actions) Act and the guarantor is not entitled to the protection of Revised May 2001

16 10 Saskatchewan: Bar Admission Program s. 2 of the Limitation of Civil Rights Act. (See Gravelbourg Savings v. Bissonette, 43 S.R. 241; Sedco v. Western Bore 41 S.R. 136.) A guarantor may however, be protected from liability in cases where the debt is extinguished by virtue of s. 6 of the Limitation of Civil Rights Act (upon final order being obtained) or by operation of the common law if the borrower has disposed of the property in situations where the Act does not apply (i.e., corporate waiver). In such cases it is preferable to proceed by way of judicial sale rather than foreclosure. A guarantor can be sued prior to, concurrently with, or after the action on the lender. (Home Mortgage Ltd. v. Robertson (1985), 35 S.R. 84.) There appears, however, to be no compelling reason not to sue the guarantor in the foreclosure action rather than commencing two separate actions. In the event a defence is filed by a guarantor denying liability on the guarantee but not by the borrower (a common stall tactic used by guarantors hoping to effect settlement) the Court can allow the judicial sale to proceed prior to resolving the guarantee issue by trial. (See Discovery Trust v Saskatchewan Ltd., [1986] Sask. D ) III. NOTICE OF INTENTION Upon determining that the Land Contracts (Actions) Act applies and that leave of the Court to commence the action is required thereunder, the first step in the foreclosure proceeding is to prepare a Notice of Intention and serve it on the Provincial Mediation Board. Sections 3(2) and 3(3) of the Act require the following with respect to the Notice of Intention to commence the action: it must be served 30 clear days prior to the application for an appointment; it must be in writing; it must set forth the names of the parties to the proposed action; and it must set forth the nature of the proposed action.

17 Saskatchewan: Bar Admission Program 11 Section 3(3) provides that the notice may be served by registered mail on the Provincial Mediation Board and shall be deemed to have been served on the date of the receipt of the postmaster for the envelope containing the notice. A precedent for the Notice of Intention and Affidavit of Service appears in the precedents section of the materials. You will note from this precedent that more information is provided than required by the Act. It is intended for the benefit of the Mediation Board in its dealings with the borrower. Note also that the precedent states that upon the expiration of 30 days, the proposed plaintiff intends to apply for an appointment to hear the application for leave to commence an action as defined in the Land Contracts (Actions) Act, R.S.S. 1978, Chapter L-3, against the Proposed Defendant(s) on the mortgage above noted for (a) foreclosure of the equity of redemption, (b) sale or possession of the mortgaged premises, and (c) the recovery of any monies payable under the mortgage. Utilizing the wording of the Act ensures that all relief for which leave is required is mentioned in the Notice. Once the Notice of Intention has been served on the Mediation Board and the Affidavit of Service is prepared, it is good practice to advise the client that 30 days must elapse before any further proceedings can be taken. IV. LEAVE TO COMMENCE Upon the expiration of 30 clear days from the service of the Notice of Intention on the Provincial Mediation Board the next step in the proceeding set out in s. 3(2) of the Land Contracts (Actions) Act is to apply to a Judge in Chambers for an appointment to hear the application for leave to commence the action. This application is made ex parte and the following documents, precedents for which appear in the precedents section of the materials, should be filed: Memorandum to the Presiding Judge; Notice of Intention with Proof of Service; Affidavit of Default;

18 12 Saskatchewan: Bar Admission Program Certificate of Solicitor; Draft Appointment; Recent Land Titles Registry Search Result; and Writ Registry Search as to the name(s) of the registered owner(s). (Not required but may be useful to convince the Judge that leave ought to be granted immediately on the return date if there are writs outstanding.) An important consideration at this stage is choosing the hearing date set out in the draft Appointment. This date must be set to allow sufficient time for the following to occur after the application material has been filed: the Judge must receive the file and grant the Appointment (2 to 3 days); you must issue it and forward it to your Process Server (1 to 4 days); your Process Server must serve it on the registered owners (7 to 14 days is generally sufficient); and persons who must be served with the Notice of Intention must be served at least 15 days prior to the hearing date (s. 3(7)). Additional time may be required if the proceedings are taking place in a different judicial centre or where you anticipate difficulty in serving the borrowers. It should be noted that the Appointment and Affidavit of Default must not only be served on the registered owner but on any person, other than a tenant, in personal occupation of the land (s. 3(4)). Presumably this would include the spouse of the borrower where the spouse is not shown on title as a registered owner but is living in the property, although the practice of the Courts has been to ignore this situation. There is no requirement that the Appointment be served on the original borrower where the property has been transferred regardless of whether or not a judgment is being sought against that person as well. Section 5 also provides that any person other than a tenant in personal occupation of the land includes a person farming the land notwithstanding that they don t reside on the land. Revised August 2004

19 Saskatchewan: Bar Admission Program 13 Section 3(8) of the Act provides that the Appointment can be served by Registered A/R Mail. However, if this method is used there is no way of ensuring that proper service will be effected or effected in time. Failure to effect proper service will require the issuing of a new Appointment and cause a delay in the proceeding. As a result, personal service is preferred. Once the application materials are filed, the Local Registrar should advise when the Appointment has been granted. After the materials have been filed for a few days, check with the Local Registrar in order to make certain that they have not neglected to advise of the Appointment being granted. Upon the Appointment being granted, it can then be completed, issued and forwarded together with sufficient copies and Affidavits of Default to the process server with instructions to effect service of both documents on the necessary parties. In giving instructions to the process server, advise as to the address of the parties and any other information which may help in locating the parties to be served. Note that the Affidavit of Default must be served with the Appointment. The Act also provides in s. 3(4) that in three circumstances leave to commence the action can be granted ex parte without a hearing being required. These circumstances include the following and must be before the Court in Affidavit form: if it appears to the Judge that there is no person upon whom notice can be served and no person upon whom service should be ordered. where the registered owner of the mortgaged land has consented to the application. where the registered owner has abandoned the land and does not reside in the province. The materials filed are essentially the same as those filed in the application for the appointment except: the Memorandum to the Presiding Judge should request leave as opposed to an appointment for a hearing date and it should set out the grounds on which the leave is being sought on an ex parte basis; the affidavit of the mortgage officer (or anyone else having the necessary knowledge) should also include information establishing the grounds for seeking leave on an ex parte basis; and no draft appointment need be filed.

20 14 Saskatchewan: Bar Admission Program Rule 435 of the Queen s Bench Rules states that in order to obtain the appointment to hear an application for leave to commence the action, the applicant must show by Affidavit: the name of the proposed plaintiff and defendant and the nature of their interest; and the nature and extent of the relief sought by the proposed plaintiff. The Rule also states that such appointment may be in Form 51. Note that in the last page of the Affidavit of Default the relief is set out as follows: foreclosure of the equity of redemption of the defendants; sale or possession of the mortgaged premises; the recovery of any monies owing under the said mortgage; and costs. Some solicitors in the past had been in the practice of simply stating the relief as leave to commence an action for foreclosure. This is not sufficient if one also wishes to obtain a judgment on the covenant or sale of the mortgaged premises. In the event that leave is granted in such a case, the plaintiff will be restricted to foreclosure only. Authority for this is found in the unreported case of MacLeod Stedman Ltd. v. Pool, Judicial Centre of Moose Jaw, a decision of Mr. Justice F. W. Johnson, dated June 15, In that case, the plaintiff was granted leave to commence an action for foreclosure only. Leave was not granted to seek any other relief because the plaintiff did not seek same. The plaintiff did, however, issue a Statement of Claim seeking foreclosure of the mortgage, sale of the mortgaged premises and a personal judgment against both defendants for any deficiency after the sale thereof. Mr. Justice Johnson stated that because the plaintiff herein only obtained leave to commence an action for foreclosure and no other relief, it is my view that it is limited to foreclosure and my order so decrees. Accordingly, the relief requested in the Affidavit of Default must be set out fully.

21 Saskatchewan: Bar Admission Program 15 The relief should also be set out fully in the Appointment. Although Rule 435 states that the Appointment may be in Form 51, it would appear that where the relief in the appointment is simply stated as being leave to commence an action as defined in s. 2 of the Land Contracts (Actions) Act the appointment might not be granted unless the specific relief sought is outlined therein even though the affidavit fully sets out the relief sough. (See the Fiat of Mr. Justice Wimmer dated February 21, 1984, in Discovery Trust Company of Canada v. Pek et al, Q.B. No. 191/84, Judicial Centre of Prince Albert (unreported).) Just prior to the hearing date, the following documents should be filed: Proof of Service of the Appointment and Affidavit of Default; updated Affidavit of Default; and updated Land Titles Registry Search Result. Section 3(9) of the Land Contracts (Actions) Act provides that the Court can adjourn the application for leave to commence for periods totalling up to eight months. The Court will often do so when the borrowers appear and request time to bring the arrears up to date or sell the property and pay out the mortgage. Updated Affidavits of Default and Land Titles Registry Search Results should be prepared and filed prior to the date to which the application is adjourned in situations where the application has been adjourned for more than one month. It should be kept in mind that the hearing for leave to commence action is not the proper time for the defendants to raise the issue of a possible defence to the action. Such defences are matters for the Statement of Defence and the trial of the issue. (See The Household Realty Corporation of Canada v. Lee (unreported) C.A. 8330, April 9, 1984 where the amount owing was disputed and Rochdale Mall Corporation v. Damon Development Inc., [1986] 2 W.W.R. 719 (Sask. C.A) where a defence based on s. 2 of the Limitation of Civil Rights Act was raised.) It is important to keep in mind that if the application is adjourned for more than eight months any further proceedings are a nullity (Boehm v. Vanderlinde, (1965) 43 D.L.R. (2d) 179). Revised August 2004

22 16 Saskatchewan: Bar Admission Program Upon leave to commence being granted, you should report to your client and request an updated statement of arrears if you don t already have same to prepare the Statement of Claim. A search of the Writ Registry should also be conducted to find other encumbrances which attach but that don t appear on title. V. STATEMENT OF CLAIM Rule 436 of the Queen s Bench Rules provides that the Statement of Claim shall be in Form 52 and an example of a Statement of Claim completed pursuant thereto appears in the precedents section of the materials. All persons who appear to be interested in the equity of redemption by virtue of holding encumbrances which appear subsequent to the mortgage being foreclosed must be added as defendants to the action. Such parties can be ascertained from both the Title and Writ Registry. Encumbrancers may include second lenders, Writ of Execution holders, Builders Lien holders and Caveators. Encumbrancers whose interests appear prior to the mortgage being foreclosed need not be added as parties because the foreclosure action will not affect their priority or security (Lumber Manufacturers Yards v. Moose Jaw Flour Mills (1914), 7 W.W.R. 876). Municipal tax lien holders, though they appear on title subsequent to the mortgage being foreclosed, need not be added as parties either because a foreclosure action cannot discharge a municipal tax lien (s. 12 of the Tax Enforcement Act). Once the Statement of Claim is prepared it should be issued. However, just prior to issuing it, a search of the Title and the Writ Registry should be conducted to ensure that no further encumbrances have arisen. If they have, these encumbrancers must later be added as parties to Revised August 2004

23 Saskatchewan: Bar Admission Program 17 the action and this can cause a delay in the proceedings. Once the action is commenced, however, subsequent encumbrancers need not be added as defendants although the Court will generally direct that notice of the proceedings be served upon them (Bonneau v. Heagy, [1920] 1 W.W.R. 605). Once the Statement of Claim is issued, it should be served on all of the defendants. The registered owners at the time the Statement of Claim was issued and any other persons against whom personal judgment is sought must be personally served, however, Rule 436(4) of the Queen s Bench Rules provides that other defendants can be served by Registered A/R Mail. The Affidavit of Service by mail is provided in Form 53 of the Queen s Bench Rules. In general, the rules with respect to substitutional service, service on a corporation, etc., all apply with respect to service of the Statement of Claim in a foreclosure action. Upon service being effected, Proof of Service of the Statement of Claim should be filed at the Court House and the defendants noted for default after 20 clear days from the date of service. As soon as all of the parties have been noted for default, the materials for an application for an Order Nisi for Foreclosure or Order Nisi for Sale can be prepared. You should also report to your client at this time and request updated default figures. In the event a Statement of Defence is filed, you will of course have to proceed to trial assuming that the issue cannot otherwise be resolved or dealt with. In the event the defence is limited to disputing the amount owed, it can be struck and dealt with by way of an accounting before the Local Registrar pursuant to Part 23 of the Queen s Bench Rules. It should also be kept in mind that summary judgment is not available in a foreclosure or cancellation action (Bank of Montreal v. Neptune s Palace (1985), S.R. 287 (Q.B.)).

24 18 Saskatchewan: Bar Admission Program VI. ORDER NISI FOR FORECLOSURE Once it is determined that the next step in the proceedings is to bring an application for an Order Nisi for Foreclosure (as opposed to a judicial sale of the property) the following documents, precedents for which appear in the precedents section of the materials, must be filed: Notice of Motion or Memorandum to the Presiding Judge; Proof of Service of Statement of Claim; Affidavit of Default; Certificate of Solicitor; Affidavit of Search or Certificate of Local Registrar; Land Titles Registry Search Result; Writ Registry Search Result; and Draft Order Nisi (Form 55, Rule 438(1) of the Queen s Bench Rules). Where no parties have served and filed Demands for Notice, this application can be made ex parte, however, if this is not the case, the application must be made by Notice of Motion which must be served on all parties demanding notice at least three clear days prior to the return date. Supporting materials should also be served on such parties and Proof of Service must be filed prior to the return date. When proceeding by Notice of Motion, the redemption period in the draft order can be left blank as it will be determined by the Judge in Chambers. When proceeding ex parte, complete this blank with a proposed redemption period. The normal redemption period is three months, however, it may be shortened where the lender can show special circumstances such as lack of equity or that the property is abandoned. The redemption period may also be extended beyond three months where the borrower can show special circumstances for so doing such as the possibility of a sale of the property or paying up the arrears if the redemption period is extended. All such special circumstances should be before the Court in affidavit form. Revised August 2004

25 Saskatchewan: Bar Admission Program 19 A lender may also wish to request immediate possession of the premises pursuant to Rule 439 of the Queen s Bench Rules. The facts which entitle the lender to such possession should be before the Court in affidavit form. A paragraph ordering immediate possession can be inserted in the Order Nisi if same is granted. The granting of possession to the plaintiff is discretionary and will rarely be granted prior to or even at the time of the application of the Order Nisi unless there appears to be some compelling reason to do so (Great West Life Assurance Co. v. Sebe Holdings Ltd. et al, [1982] Sask. D and Royal Bank v. McLean (1986) 42 S.R. 152). Upon the return date of the application for an Order Nisi for Foreclosure, one or more of the defendants may request a judicial sale of the property. Generally, the Court will grant the request provided there is sufficient equity in the property such that if the judicial sale eventually proves abortive (no bids), the plaintiff s position will not be jeopardized. In such instances, the solicitor for the lender, should ensure that the reserve bid set in the Order Nisi for Sale will be sufficient to allow for the payment of Sheriff s costs, legal costs and the amount owing under the mortgage. This is further discussed in the Judicial Sale section of the materials. Assuming that no judicial sale is requested and the Order Nisi for Foreclosure is granted, the Order should be issued and then must be served on all defendants regardless of whether or not a Demand for Notice was filed. The Order Nisi is usually ordered to be served on the registered owner by personal service regardless of whether or not they have filed a Demand for Notice, on other appearing parties by service on their solicitors, and on all other defendants by ordinary registered mail. Rule 437 of the Queen s Bench Rules provides that the Court, upon the application for an Order Nisi, shall direct all persons as appear from the material to have acquired any interest in the property since the issuance of the Statement of Claim to be served with a copy of the Order Nisi by way of registered mail. Accordingly, the Order Nisi should provide for service on these new encumbrancers if they exist.

26 20 Saskatchewan: Bar Admission Program The Order Nisi should be served as soon as possible after it has been issued because if it is served near the expiration of the redemption period the Chambers Judge may subsequently exercise a discretion to extend the redemption period or adjourn the final order application simply because the person in question did not have the benefit of knowing what the redemption period was until a very late date. This again can delay the proceedings to the prejudice of the client. When the Order Nisi is granted and served be sure to report to your client and advise of the redemption period with instructions for them to advise you immediately of any payments which are received prior to the expiration of the redemption period. In the event any monies are received after the issuance of the Order Nisi and prior to the redemption period expiring, a Notice of Credit pursuant to Rule 438(4) of the Queen s Bench Rules should be served by ordinary registered mail on the party by whom the money is payable. The Rule does not provide a form for a Notice of Credit but simply provides that notice by registered mail on the party liable to pay the money setting out the specified sum to be credited and the new amount claimed owing is sufficient. A precedent for a Notice of Credit appears in the materials. If the Notice of Credit is proper, the Final Order can be granted without fixing a new period of redemption although the party to whom the notice is given can apply under Rule 438(4) to have the Court fix the amount to be paid instead of the amount claimed in the Notice. Further, Rule 438(6) provides that the Court can make the Final Order without fixing a new period of redemption where payments are received after the redemption period has expired but before the application for a Final Order (Canadian Life Assurance Company v. Stewart, [1943] 2 W.W.R. 251).

27 Saskatchewan: Bar Admission Program 21 It should be noted that the defendants can apply to enlarge or extend the redemption period, even after its expiration, provided circumstances justifying same are shown. The extension of the redemption period is discretionary and the following cases may be useful in determining whether or not the discretion will be exercised: Farm Credit Corporation v. Trebick, [1981] Sask. D ; Woodbine Developments Ltd. v. Tekarra Properties Ltd., [1981] Sask. D (Q.B.); Co-operative Trust Co. of Canada v. J.B. Rasmussen Holdings Ltd., [1980] Sask. D (Q.B.); Canadian Imperial Bank of Commerce v. Clasky (1967) 60 W.W.R. 62 (Sask. C.A.); and Everson v. Hodgson, [1921] 1 W.W.R Once served, Proof of Service of the Order Nisi and the Notices of Credit with Proof of Service should be filed at the Court House. VII. FINAL ORDER FOR FORECLOSURE Once the redemption period contained in the Order Nisi for Foreclosure has expired, an application for the Final Order for Foreclosure can be made. The following documents, precedents for which appear in the precedent section of the materials, must be filed: Notice of Motion or Memorandum to the Presiding Judge; Proof of Service of the Order Nisi (if not already filed); Affidavit of Default; Certificate of Solicitor; Affidavit of Search or Certificate of Local Registrar; Land Titles Registry Search Result; Writ Registry Search; and Draft Final Order (Form 56, Rule 438 of the Queen s Bench Rules). Revised August 2004

28 22 Saskatchewan: Bar Admission Program Upon the Final Order being granted it must be issued and an affidavit as to the value of the property and the lender s postal address completed. A precedent for this affidavit appears in the materials. Once the affidavit has been executed it should be forwarded with the original Final Order to the Land Titles Registry for registration. The Final Order should also be served at this time and is usually served on all appearing parties by service on their solicitors and all other parties by ordinary registered mail. Once served, Proof of Service should be filed at the Court House and upon title registering, a final report can be given to the client. Whenever any Final Order for Foreclosure is obtained, the defendant can apply to the Court to have same set aside. The setting aside of a Final Order for Foreclosure is discretionary, however, the Court will generally grant an application with respect to same where the borrower can pay the balance owing under the mortgage together with any other disbursements incurred by the lender and the lender is in a position to reconvey the property. (See Canadian Imperial Bank of Commerce v. Young, 1978, Sask. D.) VIII. JUDICIAL SALE In cases where the amount owing on the mortgage is greater than the value of the property and judgment on the covenant is not prohibited, the Plaintiff lender may wish to apply for an Order Nisi for Sale as opposed to an Order Nisi for Foreclosure in order to maintain a judgment for the deficiency against the borrower. Aside from the question of the amount of equity, the lender should also consider whether or not the borrower has any assets that would allow for the collection of the deficiency judgment. Because proceeding by way of judicial sale is more costly and takes longer than proceeding to foreclosure, the lender may be better off simply foreclosing as opposed to being left with a deficiency judgment which will never be paid. Another consideration to take into account is whether or not the mortgage is insured by Canada Mortgage and Housing Corporation ( CMHC ). Generally, the mortgage insurance contract requires the lender to obtain a clear title to the property through foreclosure before it can rely on the insurance Revised August 2004

29 Saskatchewan: Bar Admission Program 23 policy for coverage, unless a judicial sale is forced by another party to the action. In these cases, the lender is better off simply proceeding to foreclose the property and then recovering any deficiency on the insurance, unless the insurer instructs the lender to proceed by way of judicial sale. Instructions should be sought from the insurer in all cases where a deficiency judgment can be recovered. Generally, where the Plaintiff applies for a judicial sale, the information the Court will require is the same as that in the materials filed in an application for an Order Nisi for Foreclosure. The following documents ought to be filed: Notice of Motion or Memorandum to the Presiding Judge; Affidavit of Default; Certificate of Solicitor; Certificate of Local Registrar or Affidavit of Search; Land Titles Registry Search Result; Writ Registry Search; and Draft Order Nisi for Sale (Form 57, Rule 440 of the Queen s Bench Rules). Precedents for these documents appear in the precedent section of the materials. While the Plaintiff may be applying for an Order Nisi for Foreclosure, a defendant may often request a judicial sale of the property upon the return date of the Order Nisi application. Where there is sufficient equity in the property to warrant same, the Court will usually grant such a request, with the requesting party being obliged to pay a sum of money to the Sheriff as security for the costs which the Sheriff incurs in advertising for the sale. In such cases, the parties will often prepare a consent Order Nisi for Sale to submit to the Chambers Judge at a later date although this need not be done as the Chambers Judge can simply make the order on the return date. Revised August 2004