561861 Ontario Ltd. v. 1085043 Ontario Inc. et al., (1998) 66 O.T.C. 305 (GD)

• Judge: Chadwick, J.
• Court: Ontario Court of Justice General Division (Canada)
• Case Date: July 10, 1998
• Jurisdiction: Ontario
• Citations: (1998), 66 O.T.C. 305 (GD)

561861 Ont. Ltd. v. 1085043 Ont. Inc. (1998), 66 O.T.C. 305 (GD)

MLB headnote and full text

Temp. Cite: [1998] O.T.C. TBEd. JL.084

In The Matter Of the Proposal of 1085043 Ontario Inc., c.o.b. as The Boundary Golf Club.

(File No. 091528)

In The Matter Of the Construction Lien Act, R.S.O. 1990, c. C-30.

561861 Ontario Ltd., o/a Robert Excavating (plaintiff) v. 1085043 Ontario Inc., Surenda Gera, In Trust, 1168696 Ontario Inc., Dorothy Mae O'Byrne, Leo Gauthier and Madeleine Gauthier (defendants)

(File No. 97-CV-138)

Indexed As: 561861 Ontario Ltd. v. 1085043 Ontario Inc. et al.

Ontario Court of Justice

General Division

In Bankruptcy

Chadwick, J.

July 10, 1998.

Summary:

Angus O'Byrne sold land to a corporate purchaser to build a golf course. Angus received a small down payment and no other security other than some of the purchaser's shares being held in trust for him. Angus never registered his vendor's lien. The purchaser mortgaged the property to finance golf course construction. A number of liens were registered for unpaid construction costs. The lien claimants brought an action and the land was sold. Angus sought a vendor's lien and claimed priority over the lien claimants.

The Ontario Court (General Division), in a judgment reported (1997), 33 O.T.C. 311, held that Angus, as an unpaid vendor, had an equitable lien for the balance of the purchase price. However, where the vendor's lien was unregistered and the lien claimants had no notice, the combination of the Registry Act (ss. 71, 72), the Construction Lien Act (ss. 78(1), 78(3)), the Land Registration Reform Act (s. 5(1)) and the Conveyancing and Law of Property Act (s. 7), clearly gave the lien claimants priority over the unregistered vendor's lien. Subsequently, Dorothy O'Byrne (who had loaned $100,000 to Angus to purchase his wife's interest in the property sold) brought a motion to determine her status as mortgagee and her priority in relation to the lien claimants and other claimants in the purchaser's proposal under the Bankruptcy and Insolvency Act. Angus had given Dorothy a first mortgage in 1991, which was discharged on the sale and replaced by a second mortgage. That mortgage was discharged. Dorothy now argued that the mortgage was mistakenly discharged and that equity would not permit the lien claimants and others to benefit by her mistake.

The Ontario Court (General Division), in Bankruptcy, dismissed the motion. Dorothy did not advance funds as required by s. 78(3) of the Construction Lien Act and as such would not be entitled to priority over the lien claimants. The mortgage did not benefit the land. All monies were advanced on the prior 1991 mortgage, which had been discharged. There was no mistake in discharging the subsequent mortgage.

Mortgages - Topic 3306

Discharge of mortgage - General - By mistake - Effect of - See paragraphs 1 to 26.

Restitution - Topic 62

Unjust enrichment - General - What constitutes - See paragraphs 1 to 26.

Cases Noticed:

Central Guaranty Trust Co. v. Dixdale Mortgage Investment Corp. et al. (1994), 77 O.A.C. 253; 43 R.P.R.(2d) 137 (C.A.), dist. [para. 19].

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384; 117 D.L.R.(3d) 257; 19 R.F.L.(2d) 165; 8 E.T.R. 143, refd to. [para. 21].

Sorochan v. Sorochan, [1986] 2 S.C.R. 38; 69 N.R. 81; 74 A.R. 67; [1986] 5 W.W.R. 289; 2 R.F.L.(3d) 225, refd to. [para. 21].

Statutes Noticed:

Construction Lien Act, R.S.O. 1990, c. C-30, sect. 78(1) [para. 17].

Counsel:

Craig M. Bater, for 1085043 Ontario Inc.;

P. Roderick Brooks, for BDO Dunwoody;

Christopher A. Moore, for Dorothy O'Byrne;

Ronald Price and John J. Callan, for the lien claimants.

This motion was heard before Chadwick, J., of the Ontario Court (General Division), in Bankruptcy, who delivered the following judgment on July 10, 1998.