Telford v. Holt, (1987) 78 N.R. 321 (SCC)

• Judge: Dickson, C.J.C., Estey, McIntyre, Wilson and Le Dain, JJ.
• Court: Supreme Court (Canada)
• Case Date: September 17, 1987
• Jurisdiction: Canada (Federal)
• Citations: (1987), 78 N.R. 321 (SCC);78 NR 321;54 Alta LR (2d) 193;[1987] SCJ No 53 (QL);41 DLR (4th) 385;[1987] CarswellAlta 188;81 AR 385;21 CPC (2d) 1;[1987] 6 WWR 385;1987 CanLII 18 (SCC);JE 87-1005;[1987] 2 SCR 193;[1987] ACS no 53;46 RPR 234;37 BLR 241

Telford v. Holt (1987), 78 N.R. 321 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Richard K. Telford and Margaret S. Telford v. Isaac B. Holt and Edith May Holt

Indexed As: Telford v. Holt

Supreme Court of Canada

Dickson, C.J.C., Estey, McIntyre, Wilson and Le Dain, JJ.

September 17, 1987.

Summary:

The Telfords and Canadian Stanley swapped equally valued parcels of land. Telford was to pay $115,000.00 plus a $150,000.00 mortgage; Canadian Stanley was to pay $165,000.00 plus a $100,000.00 mortgage. Each mortgage required the payment of $50,000.00 plus interest on July 31, 1981 and January 1, 1982. The Telford mortgage required the additional payment of $50,000.00 plus interest on January 31, 1981. On September 26, 1980, Canadian Stanley assigned the Telford mortgage to the Holts, without notice to the Telfords. The Telfords were unsuccessful in tendering the January 31, 1981 payment. In March 1981, the Holts commenced an action for the overdue payment plus the remaining two payments, invoking the acceleration clause in the Telford mortgage. The action was the Telfords' first notice of the assignment. The Telfords counterclaimed for a discharge of the mortgage upon payment of the January 31, 1981 payment, claiming the final two payments under each mortgage should be set off against each other.

The Alberta Court of Queen's Bench allowed the Holts' action and dismissed the Telford's counter-claim. The trial judge held that there was no agreed or statutory right to set- off, where s. 41(1) of the Law of Property Act precluded any enforceable debt against the Telfords. The Telfords appealed.

The Alberta Court of Appeal, Kerans, J.A., dissenting, in a judgment reported, [1985] 4 W.W.R. 573; 37 Alta. L.R. 399, dismissed the appeal. The court held that set-off was not available where the debt owed by the Telfords under the agreement for sale was unenforceable under s. 41(1) of the Law of Property Act. The Telfords appealed.

The Supreme Court of Canada allowed the appeal. The court agreed that there was no agreement to set-off and no set-off at law, because the assignment of the mortgage destroyed the required mutuality of the debts. However, the court held that the Telfords were entitled to set-off in equity, because the debts arose out of closely connected contracts. The court also stated that s. 41(1) of the Law of Property Act did not make the Telfords' debt unenforceable; s. 41(1) merely precluded one type of remedy (personal judgment on the covenant).

Mortgages - Topic 5405

Mortgage actions - Action on the covenant - Prohibition against - Law of Property Act, R.S.A. 1980, c. L-8, s. 41(1) - Section 41(1) precluded an action on the personal covenant against a personal mortgagor - The Supreme Court of Canada stated that "section 41 does not create an unenforceable debt. Section 41 does not extinguish or satisfy the debt. It merely precludes the remedy by way of a personal judgment against the mortgagor on the covenant. The mortgagee may still pursue the remedy of foreclosure" - See paragraph 40.

Practice - Topic 1845

Pleadings - Counter-claim and set-off - Set-off - Mutuality - Requirement of - The Telfords and Canadian swapped lands of equal value - The Telfords were paid $165,000. and were given back a $100,000. mortgage - Canadian was paid $115,000 and was given back a $150,000 mortgage - Both mortgages require payment of $50,000 plus interest on July 31, 1981 and January 31, 1982 - The additional $50,000 under the Telford mortgage was due on January 31, 1981 - Canadian assigned the Telford mortgage to the Holts without notice to the Telfords - When the Telfords did not make the January 31, 1981 payment, the Holts sued for the entire $150,000 owing under the mortgage pursuant to the acceleration clause - The Telfords counter-claimed for a discharge of the mortgage upon payment of the $50,000 plus interest, claiming that the remaining two payments under both mortgages, identical as to amount and time, should be set-off against each other - The Supreme Court of Canada affirmed that there could be no set-off at law, because the assignment of the mortgage debt destroyed the required mutuality of the two debts - See paragraphs 22 to 25.

Practice - Topic 1846

Pleadings - Counter-claim and setoff - Set-off - Legal set-off v. equitable set-off - The Supreme Court of Canada stated that statutory set-off, or set-off at law, required that both obligations be debts and that there be mutuality of debts - Equitable set-off was available where there was a claim for a liquidated or unliquidated sum, where there has been an assignment and where there was no mutuality of debts - See paragraphs 22 to 26.

Practice - Topic 1850

Pleadings - Counter-claim and setoff - Set-off - Equitable set-off - Against assignee of debt - The Telfords and Canadian swapped lands of equal value - The Telfords were paid $165,000 and were given back a $100,000 mortgage - Canadian was paid $115,000 and was given back a $150,000 mortgage - Both mortgages required payment of $50,000 plus interest on July 31, 1981 and January 31, 1982 - The additional $50,000 under the Telford mortgage was due on January 31, 1981 - Canadian assigned the Telford mortgage to the Holts without notice to the Telfords - When the Telfords did not make the January 31, 1981 payment, the Holts sued for the entire $150,000 owing under the mortgage pursuant to the acceleration clause - The Telfords counter-claimed for a discharge of the mortgage upon payment of the $50,000 plus interest, claiming that the remaining two payments under both mortgages, identical as to amount and time, should be set-off against each other - The Supreme Court of Canada held that equitable set-off was available - The court stated that a debt arising out of the same contract or closely inter-related contracts may be set-off against the assignee even if the debt accrues due after the notice of the assignment - The court held that the two mortgage debts were closely connected and met the requirements for an equitable set-off - See paragraphs 26 to 37.

Cases Noticed:

Renner v. Racz, [1972] 1 W.W.R. 109, refd to. [para. 16].

Edmonton Airport Hotel Co. v. Credit Foncier Franco-Canadian, [1965] S.C.R. 441, dist. [para. 17].

Freeman v. Lomas (1851), 9 Hare 109, refd to. [para. 19].

Atlantic Acceptance Corp. v. Burns & Dutton Construction (1962) Ltd.. [1971] 1 W.W.R. 84 (Alta. C.A.), refd to. [para. 23].

C.I.B.C. v. Tuckerr Indust Inc., [1983] 5 W.W.R. 602 (B.C.C.A.), refd to. [para. 24].

Royal Trust v. Holden (1915), 22 D.L.R. 660 (B.C.C.A.), refd to. [para. 25].

Coba Industries Ltd. v. Millie's Holdings (Canada) Ltd. and Tsang, [1985] 6 W.W.R. 14 (B.C.C.A.), refd to. [para. 25].

Aboussafy v. Abacus Cities Ltd., [1981] 4 W.W.R. 660; 29 A.R. 607 (C.A.), refd. to [para. 26].

Watson v. Mid Wales Railway Co. (1867), L.R. 2 C.P. 593, consd. [para. 27].

Smith v. Parkes (1852), 16 Beav. 115, refd to. [para. 27].

Newfoundland (Government of) v. Newfoundland Railway Co. (1888), 13 App. Cas. 199 (P.C.), appld. [para. 28].

In re Pintp Leite and Nephews, [1929] 1 Ch. 221, consd. [para. 29].

Business Computers Ltd. v. Anglo-African Leasing Ltd., [1977] 1 W.L.R. 578 (Ch. D.), consd. [para. 30].

Canadian Admiral Corp. v. L.F. Dommerich & Co., [1964] S.C.R. 238, consd. [para. 31].

Hanak v. Green, [1958] 2 Q.B. 9; [1958] 2 W.L.R. 755; [1958] 2 All E.R. 141, refd to. [para. 35].

Statutes Noticed:

Land Titles Act, R.S.A. 1980, c. L-5, sect. 150(1), sect. 150(2) [para. 37].

Law of Property Act, R.S.A. 1980, c. L-8, sect. 41(1), sect. 43(1) [para. 38].

Insolvent Debtors Relief Act (Imp.), 2 Geo. 2, c. 22 [para. 22].

Set-off Act (Imp.), 8 Geo. 2, c. 24 [para. 22].

Rules of Court (Alta.), rule 93 [para. 23].

Supreme Court of Judicature Act, Rules promulgated under (U.K. 1873), 36 and 37 Vict., c. 66, sect. 199.3 [para. 22].

Authors and Works Noticed:

Halsbury's Laws of England (4th Ed.), vol. 42, para. 421 [para. 24].

Counsel:

D.E. Jermyn, for the appellants;

James P. Low, for the respondents.

This appeal was heard on February 27 and March 2, 1987, before Dickson, C.J.C., Estey, McIntyre, Wilson and Le Dain, JJ., of the Supreme Court of Canada.

On September 17, 1987, Wilson, J., delivered the following judgment for the Supreme Court of Canada.