Sidmay Ltd. et al. v. Wehttam Investments Ltd.

entered into the agreement to save its interest in the oil well from being lost in mechanics' lien proceedings. To do this it had to agree, first, to the payment of the drilling M .

costs, and then to the release of any surplus after the OnM

Co. LTD.

payment of creditors' claims. The trust is only for the Judson J. payment of these creditors' claims and it is being enforced. The appeal and the cross-appeal should be dismissed with costs.

THE CHIEF JUSTICE:-This is an appeal from a unanimous judgment of the Court of Appeal' allowing an appeal from a judgment of Grant J. and directing a reference to the Master at Toronto to determine the amount owing by the appellants to respondent and that in all other respects the action be dismissed.

There is no dispute as to the relevant facts.

I I

O.R. D.L.R.

S.C.R.

[19681 SUPRtME

By an agreement dated May 5, 1964, Sidmay Limited, Gordon and Benjamin agreed to borrow from the respondent the sum of $308,250 on the security of lands in Burlington. This was short-term financing to enable the coistruction of maisonnettes pending the arrangement of long-term mortgage financing. The term of the proposed mortgage was six months from May 1, 1964, and interest was to be calculated monthly at the rate of 12 per cent per annum on the whole of the loan amount, to be payable at the time of each advance notwithstanding that the total loan amount had not been advanced. Pursuant to the said agreement the plaintiff Sidmay Limited executed and delivered to Wehttam the mortgage in question in this appeal. It is dated May 8, 1964, and contemplates the advance of $308,250. It provides for payment of interest at 12 per cent per annum monthly on the whole of the principal amount. The mortgage contains a covenant by the mortgagor to pay and also a guarantee by the plaintiffs Gordon and Benjamin to pay the amount loaned. Moneys were advanced under the mortgage by the mortgagee to the mortgagor or to third persons on the direction of the mortgagor. There is a disagreement between the parties as to whether the full amount of $308,250 was advanced but this question will be determined on the reference directed by the judgment of the Court of Appeal.

The appellants or some of them also executed and delivered to the respondent the following mortgages as collateral security for payment of the mortgage for $308,250 referred to above:

(a) Collateral mortgage Black Duke Investments to the respondent dated June 1964;

(b) Collateral mortgage from G.B.L. Holdings Limited to the respondent dated August 5, 1964;

Collateral mortgage from Dundas Terrace Apartments Limited to the respondent dated August 1964;

(d) Collateral mortgage from Aldershot Apartments Limited to the respondent dated August 11, 1964. The respondent was incorporated on July 10, 1956, by letters patent under The Corporations Act, 1953 (Ont.), c. 19. The objects and powers of the respondent as set out in its letters patent include owning and dealing in mortgages of realty. It was declared to be a private company with the number of shareholders limited to fifty. The respondent is a small corporation; except for a qualifying share held by a Mr. Gotfrid all its shareholders are members of the family of one Matthew Elman. At no time did it issue securities or debentures or accept money on deposit or borrow money on the security of its property; it did not advertise; its business was carried on from Mr. Elman's residence.

The respondent did not limit its investments to first mortgages nor was it concerned that any loan made by it should not exceed two-thirds of the value of the land mortgaged.

The respondent was not registered under The Loan and

Trust Corporations Act, R.S.O. 1960, c. 222, but was registered at all relevant times under The Mortgage Brokers

Registration Act, R.S.O. 1960, c. 244.

Although there was evidence that the defendant was engaged in the business of lending money on the security of real estate there was no evidence that it was doing anything else which could be regarded as carrying on the business of a loan or trust corporation within the meaning of

The Loan and Trust Corporations Act, or that it ever held itself out to be a loan or trust corporation within the meaning of that Act.

The statement of claim delivered by the appellants is a lengthy document but, in view of a reference having been directed to ascertain the amount owing on the mortgage and the claim that the mortgage transaction is unconscionable having been withdrawn, the claim requiring consideration is pleaded as follows in paras. 24 and 25 and clause (a) of the prayer for relief in the statement of claim:

to Grant J. held that the defendant was carrying on the business of a loan and trust corporation contrary to The C.J.

Loan and Trust Corporations Act and that the effect of that Act was to render the prime mortgage and the collateral mortgages null and void. He decided that no term as to repayment of the moneys advanced could be imposed on the plaintiffs and made the declaration for which they asked in clause (a) quoted above. He made no order as to costs.

The Court of Appeal held that the defendant was not carrying on the business of a loan or trust corporation within the meaning of The Loan and Trust Corporations Act and that in any event the effect of that Act was not to render the mortgages invalid. The Court of Appeal went on to express the opinion that if the mortgages were held to be illegal and void the declaration asked for by the plaintiffs should not in any event be made except on the condition of the payment back to the defendant by the plaintiffs of the moneys advanced by the defendant.

Kelly J.A. after a careful review of many decisions and of the history of the statutes which may be regarded as the predecessors of The Loan and Trust Corporations Act, hereinafter referred to as the Act, came to the following conclusions:

Wells J.A., as he then was, agreed with Kelly J.A. Laskin J.A. opened his reasons as follows:

I share the view, held unanimously by the Court of Appeal, that the Act does not invalidate the impugned mortgage and I find myself so fully in agreement with the reasons of Kelly J.A. for reaching this conclusion that I am content to adopt them and will not attempt to repeat or summarize them. This is sufficient to dispose of the appeal and consequently I refrain from dealing with grounds 2 and 3 above upon which also Kelly J.A. was prepared to base his judgment. I do not intend by this to cast any doubt upon the validity of his reasons; but while it was desirable for the Court of Appeal to consider these alternative matters in case on a further appeal there should be disagreement as to ground 1 there is now no necessity to consider them.

I would dismiss the appeal with costs.

Appeal dismissed with costs.