SUPREME COURT OF NOVA SCOTIA Citation: Scotia Mortgage Corporation v. Misener, 2016 NSSC 66. v. Andrea Louise Misener aka Andrea Louise Knox

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1 SUPREME COURT OF NOVA SCOTIA Citation: Scotia Mortgage Corporation v. Misener, 2016 NSSC 66 Date: Docket: Hfx, No Registry: Halifax Between: Scotia Mortgage Corporation v. Andrea Louise Misener aka Andrea Louise Knox LIBRARY HEADING Applicant Respondent Judge: The Honourable Justice John D. Murphy Heard: May 12, 2015, in Halifax, Nova Scotia, Nova Scotia Final Written Submissions: October 5, 2015 Written Decision: February 29, 2016 Subject: Summary: Mortgage Foreclosure - Cashback When the defendant mortgaged her property to secure a loan, the mortgagee provided a cashback amount in addition to the principal amount of the loan. The loan documents stated that a portion of the cashback was repayable if the mortgage loan was not outstanding for its full term. The loan fell into default and in an undefended foreclosure proceeding the mortgagee claimed the outstanding mortgage amount and the cashback amount.

2 Issues: Does the cashback amount form part of the mortgage debt, secured by the property? Result: The cashback amount is not part of the mortgage debt in this case. Additional sums advanced to a mortgagor can be claimed in foreclosure proceedings as long as they are contemplated by and in accordance with the mortgage. In this case, the wording of the mortgage documents and the Civil Procedure Rules do not support the claim for cashback. Under Rule 72.13, to be considered part of the mortgage debt a cashback amount must be either part of the outstanding principal or a reasonable charge authorized by the mortgage instrument. The mortgage documents in this case described the cashback as an amount in addition to the principal, and the cashback is not a reasonable charge authorized by the mortgage instrument, as the Rule limits such charges to expenditures necessary to preserve or protect the mortgage property. The cashback repayment amount should be deducted from the mortgage debt secured by the property in this case. THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET.

3 SUPREME COURT OF NOVA SCOTIA Citation: Scotia Mortgage Corporation v. Misener, 2016 NSSC 66 Date: Docket: Hfx, No Registry: Halifax Between: Scotia Mortgage Corporation v. Andrea Louise Misener aka Andrea Louise Knox Applicant Respondent DECISION Judge: Heard: The Honourable Justice John D. Murphy May 12, 2015, in Halifax, Nova Scotia Final Written Submissions: October 5, 2015 Written Decision: February 29, 2016 Counsel: Douglas Schipilow, for the Applicant

4 Page 2 By the Court: BACKGROUND [1] Ms. Misener (Knox) mortgaged her property in Halifax, Nova Scotia (the Property ) with Scotia Mortgage Corporation ( Scotia ). The terms of the loan and mortgage are set out in the Personal Credit Agreement and Cost of Borrowing Disclosure Statement, both dated January 5, 2011, and in the Mortgage Contract dated January 10, At the same time, Scotia provided a cashback amount to Ms. Misener. The loan fell into default, and Scotia commenced an Action. The claim was not defended, and Scotia has brought an ex parte motion, seeking an order for foreclosure, sale and possession, and judgment for the outstanding mortgage amount and cashback amount. ISSUE [2] When the mortgagor received a cashback amount in addition to the principal amount of the loan stated in the mortgage, does the cashback amount form part of the mortgage debt, secured by the Property? In other words, in an application for foreclosure and sale, is a cashback amount to be included in or excluded from the mortgage debt amount? SHORT CONCLUSION [3] The cashback amount is not part of the mortgage debt in this case. Case law indicates that additional sums advanced to a mortgagor can be claimed in foreclosure proceedings as long as such sums are contemplated by and in accordance with the mortgage; however, the Nova Scotia Civil Procedure Rules together with the particular wording of the mortgage documentation do not support such a claim in this case. For a cashback amount to form part of the mortgage debt in this foreclosure proceeding, the mortgage documentation would need to have characterized that amount as part of the principal, which the relevant documents did not do. MORTGAGE DOCUMENTATION [4] Scotia has provided three documents (collectively, the Documents ) in support of its claim for the cashback amount: the Personal Credit Agreement dated January 5, 2011 ( PCA ); the Cost of Borrowing Disclosure Statement also dated

5 Page 3 January 5, 2011 ( COBD Statement ); and the Mortgage Contract dated January 10, [5] The Documents do not include a definition of cashback. The term is used by lenders to describe a lump sum cash payment, limited to a percentage of the mortgage loan amount, sometimes provided to borrowers when a home mortgage loan is closed or advanced. The cashback amount is in addition to the mortgage loan amount, and mortgages accompanied by a cashback payment usually have an increased interest rate. A portion of the cashback advanced is usually repayable on a pro rata basis if the term of the mortgage is shortened by sale of the property, pre-payment, or otherwise. [6] The relevant parts of the Documents are as follows. Personal Credit Agreement [7] The PCA Mortgage Loans Terms and Conditions show a loan amount of $212,462.28, a Cashback percentage of 5.095%, a Cashback amount of $10,825.00, and lists the Property as Security Pledged. The bottom of the first page states: ACKNOWLEDGEMENT By signing this document, you promise to pay or guarantee the loans specified above and in any addendum. You also agree to be bound by the terms and conditions on this document and in the companion booklet(s), which forms part of this agreement. You acknowledge receipt of the Cost of Borrowing Disclosure Statement for each mortgage loan, [etc.] You agree that through this agreement you have granted a security interest and/or hypothec in the property described above as security for the loan(s) set out in this agreement. The PCA appears to be signed by the Mortgagor and Anoia Meynert, Branch Officer for Scotiabank. [8] Personal Credit Agreements such as the PCA in this case are binding and enforceable, and are not mere agreements to agree: Kakoutsis v. Bank of Nova Scotia, 2015 ONSC 513; Pirie Estate v. Bank of Nova Scotia, 2015 NBQB 4, [2015] N.B.J. No. 15; and Bank of Nova Scotia v. Mawer, 2014 ABQB 462, [2014] A.J. No Cost of Borrowing Disclosure Statement

6 Page 4 [9] The COBD Statement attached to the PCA states: Real property located at 4 REXDALE AVE HALIFAX NS A. INFORMATION BOX Principal Amount $212, , Cashback amount. This amount is in addition to the principal amount above and could be repayable if your mortgage is partially repaid, paid in full, transferred, assumed, or renewed prior to the expiry of the term. (underlining added) Prepayment Charges Cashback repayment The cashback repayable amount if your mortgage is partially repaid, paid in full, transferred, assumed or renewed prior to the expiry date of the term is calculated on an even prorated basis using the following formula: [Cashback Repayment equals Remaining Term in Months (Rounded up) divided by Original term in Months multiplied by Cashback Amount Received] C. SECURITY

7 Page 5 Your mortgage is secured by the real property noted at the beginning of this statement. H. LATE PAYMENTS AND DEFAULT CHARGES Mortgage in Default Default Charges Calling the Loan...The mortgage document that will be executed by you and registered against the real property referred to at the beginning of this statement (the Mortgage Contract) states all the ways in which your mortgage may be in default. If your mortgage is in default for any reason, you will have to pay any or all of these amounts. - Any amount charged to you according to the Mortgage Contract If you are in default, we also call the loan and require you to pay immediately everything you owe according to the Mortgage Contract. Mortgage Contract I. PREPAYMENT TERMS AND CONDITIONS Cashback If you receive a cashback with your mortgage, the cashback amount will be repayable if your mortgage loan does not remain outstanding with us for the full term. If your mortgage is partially prepaid, paid off in full, transferred, assumed, or renewed prior to expiry of the term, the cashback amount will appear as payable in any discharge or early renewal statement and will be calculated on an even, prorated basis using the following formula: [Same formula as in PART A Information Box ]

8 Page 6 [10] The Mortgage Contract included the following: Loan amount means the principal amount loaned to you that is outstanding from time to time. In return for our making a loan to you in the amount of ($212,462.28) Two Hundred & Twelve Thousand Four Hundred & Sixty-Two 28/100 (called the principal amount) which you acknowledge having received from us, you hereby give us this mortgage. 2. WHAT THIS MORTGAGE DOES. As owner of your property, you grant and mortgage your property to us and our successors and assigns as security for repayment of your loan. 4. HOW YOU WILL REPAY YOUR LOAN. A. Monthly Loan Payments - You will pay the balance of the principal amount together with all the interest due and payable, on the date last mentioned D. Prepayment Terms and Conditions - If a SMC Schedule A is attached to this mortgage, you may prepay your principal amount in accordance with the provisions set out in it. 13. REPAYMENT OF LOAN AMOUNT ACCELERATED. The loan amount together with all interest which is due and payable and to which we are entitled becomes immediately payable, at our option, if a) You default 15. ENFORCING OUR RIGHTS. A. If you default we may enforce any one or more of the following remedies in any order: (i) Sue you - We may take such action as is necessary to collect the unpaid balance of the loan amount, the interest that is due and payable and our expenses. ii) Sell your property through court - We may ask a court to order the sale of your property. If the court makes such an order, it will supervise the sale proceedings. The net proceeds of the sale will be used to pay off our expenses, the interest that is due and payable and the unpaid balance of the loan amount. Any balance remaining after all claims have been satisfied will be paid to you. If the amount we receive from the sale of your property is less than what you owe us plus our expenses, you must pay us the difference. iii) Other - We may take any other remedy available to us under Nova Scotia law. 19. RENEWING OR OTHERWISE AMENDING THE MORTGAGE

9 We may from time to time enter into one or more written agreements with you to amend this mortgage by extending the time for payment, renewing it or it's [sic] term for further periods of time, changing the interest rate payable under this mortgage or otherwise altering the provisions of this mortgage. it will not be necessary to register the agreement on title in order to retain priority for this mortgage, as amended, over any instrument registered after this mortgage. Any reference in this mortgage to this mortgage means this mortgage as amended by any such agreement or agreements. Page 7 The Mortgage Contract was signed and sealed by Ms. Misener and signed by a witness. Pursuant to clause 4.D., the Mortgage Contract incorporated Schedule A setting out prepayment terms and conditions. The relevant portions are as follows: Prepayment Charge When you prepay some, or the entire principal of your mortgage, you will incur prepayment charges The cost to pay off some, or the entire principal amount of your mortgage early, is the higher of (A) or (B): (A) 3 months' interest costs (B) The interest rate differential Cashback [This paragraph is identical to that set out above in The COBD Statement, PART I Prepayment Terms and Conditions ] Summary Regarding Mortgage Documents [11] The Documents provide that a portion of the cashback is repayable if the mortgage loan is not outstanding for its full term, but they do not state that the mortgage secures the repayable amount. The Mortgage Contract contains no indication that the Mortgagor received a cashback amount. It does not suggest that any amount in addition to the principal amount would be secured by the mortgage or the Property. The only references to the cashback amount are those quoted above. Account Statements [12] Exhibit B to the Affidavit sworn by Scotia s bank manager on January 22, 2015 (the Affidavit ), includes a Summary Statement of Account, Breakdown of Payments, and Annual Account Statements. These documents indicate a Principal Amount, Balance or Advances of $212, as of January 10, 2011, the date of the Mortgage. They do not mention the cashback amount.

10 However, the final document attached to the Affidavit as Exhibit B1 and titled Mortgage Transaction History indicates a cashback advance was made on January 10, 2011, in the amount of $10, Page 8 [13] Exhibit B2 to the Affidavit is a statement issued by Scotia March 26, 2014, for foreclosure purposes. The information under Mortgage Details includes cashback received of $10, The Payout Details contain the following line items: Prepayment Charge - Interest Rate Differential $6, Cashback Repayment: (prorated based on the term remaining) $3, The Prepayment Charge has been crossed out in blue pen, and this amount has been subtracted from the Total Balance Due, for an adjusted amount of $207, The Cashback Repayment amount is included in this total, which Scotia claimed as the amount outstanding and due under the mortgage when the foreclosure proceeding was commenced. ANALYSIS What constitutes mortgage debt? [14] The Nova Scotia Real Property Practice Manual, looseleaf (Toronto: LexisNexis Canada Inc., 1988) states that mortgaged land is given as security only for payment of the mortgage debt provided for in the covenant to pay as set out in the mortgage (12-161). Legislation Land Registration Administration Regulations, N.S. Reg. 207/2009, as amended [15] The Land Registration Administration Regulations (the Regulations ), made under the Land Registration Act, S.N.S. 2001, c. 6 (the Act ), define mortgage to include any amendment to a mortgage or agreement that increases the amount of the obligation secured or the amount available for borrowing: (2) For the purposes of the Act, mortgage" in subsection 37(3) of the Act and clause 46(1)(c) of the Act includes any amendment to a mortgage or agreement with the lender that increases the amount of the obligation secured, increases the amount available for borrowing

11 Page 9 under a mortgage, adds an additional parcel or permits additional advances up to the original amount secured, but does not include any of the following: (i) amendments other than those included under this clause (ii) an assignment, (iii) a mortgage of a leasehold interest, (iv) (iv) an advance on an existing security interest that secures present and future advances up to the original principal amount secured; Land Registration Act, S.N.S. 2001, c. 6 [16] The references in the Regulations to ss. 37(3) and 46(1)(c) of the Act are not germane to the issue in this case. [17] The Act, s. 52, states as follows: 52 (1) The holder of a recorded mortgage or debenture incorporating a mortgage may enforce all rights and remedies permitted by law as if the parcel had been conveyed by mortgage subject to a proviso for redemption. (2) A mortgage has priority over subsequent recorded interests to the extent of the obligations secured and the sums actually advanced under the mortgage, not exceeding the amount for which the mortgage is expressed to be a security, even though part of the sums may have been advanced after the recording of a subsequent interest. (2A) Subsection (2) applies to a mortgage that secures a running, current or revolving account or line of credit even though some or all of the sums advanced under it from time to time have been repaid. Civil Procedure Rules [18] Although mortgage debt is not defined, the Civil Procedure Rules use the term to refer to the total mortgage amount claimable in a foreclosure proceeding. Rule 72 applies to actions and applications for foreclosure, sale and possession. Rule 72.05(1) lists the information that must be given on such an action or application. That list includes: (e) a statement of account and the evidence of the mortgagee, or agent of the mortgagee, that the statement is true;

12 (f) a summary of the statement of account that accurately states the total of the charges and credits on the statement and shows a total that reconciles with the amount claimed. Page 10 Rule 72.05(2) elaborates on the information that must be included in the statement of account: (2) The statement of account must establish, and show the calculation of, the amount of the mortgage debt, and it must include details of all payments made since the most recent of the following dates: (a) the date of the mortgage; (b) the date of the last renewal or assumption agreement; (c) the date of an agreement, or acknowledgement, signed by the mortgagor and any surety, settling, or acknowledging, the balance of the mortgage debt. [Emphasis mine] [19] Rule 72.07(1) indicates that on a motion for default judgment, or on an uncontested application, the statement of account may be used as evidence of the mortgage debt: Default judgment or uncontested application 72.07(1) A judge who hears a motion on default of defence or an application for an order for foreclosure, sale, and possession that is uncontested, or a motion for the order after issues in contest have been determined, may grant the order on such terms as are just. (2) The judge must settle the amount of the mortgage debt by taking the accounts or referring the taking of accounts to a referee. (3) The judge may require better proof of the mortgage debt, or refer the taking of accounts, to a person who is not a party. (4) The judge who refers the taking of accounts because of the applicant's failure to provide a reliable statement of account, or a reliable summary, may order the applicant to pay the cost of the reference and not charge it to the mortgage debt. (5) The order for foreclosure, sale, and possession must provide for each of the following: (a) the amount settled.

13 Page 11 [20] Rule states that a judgment for deficiency may be claimed where the mortgage debt exceeds the amount realized from the sale. [21] Rule 72.13(1), when read together with Rule 72.11, provides guidance concerning what can be included as part of a mortgage debt. Rule 72.13(1) gives instructions for performing the calculation of deficiency judgment, available under Rule when the mortgage debt exceeds the amount realized from the sale (emphasis mine): ) A judge may calculate the deficiency by subtracting one of the following amounts from the outstanding principal, mortgage interest, judgment interest, reasonable charges authorized by the mortgage instrument, and costs: (a) the balance of the sale price paid to the mortgagee, if the property is sold by public auction or approved agreement to a person other than the mortgagee; (b) the amount reasonably realized on resale, if the property is sold by public auction to the mortgagee or its agent, it is resold by the mortgagee, and the resale price received by the mortgagee is both reasonable and greater than the bid; (c) the amount bid by, or on behalf of, the mortgagee, if the property is sold by public auction to the mortgagee and the resale price or the value of the property is less than the bid; (d) the value of the property, in all other circumstances. [22] Rule 72.13(1) sets out the options for calculating one component of the deficiency, i.e. the amount that was realized, or ought to have been realized, from the sale. However, the Rule also provides insight into how to determine the other component, i.e. the mortgage debt. Rule says the sale amount should be subtracted not from the mortgage debt (the term used in Rule 72.11), but from the outstanding principal, mortgage interest, judgment interest, reasonable charges authorized by the mortgage instrument, and costs. In so doing, the Rule indirectly describes what constitutes mortgage debt. [23] Before 2009, deficiency judgment was addressed in Rule of the Nova Scotia Civil Procedure Rules (1972). Rule provided that the plaintiff could be entitled to an order for payment of the deficiency where the amount realized on sale is insufficient to pay the amount found to be due to a plaintiff for principal, interest, and disbursements, as authorized by the mortgage instruments Thus, while the 2009 Rules introduced the term mortgage debt,

14 Page 12 the meaning has remained largely the same. The biggest changes are the addition of costs, and the use of reasonable charges rather than disbursements. [24] Rule 72.13(2) sets out requirements for proving reasonable charges authorized by the mortgage instrument. It says: ) A mortgagee who claims that an expenditure is a reasonable charge authorized by the mortgage instrument must demonstrate the claim by evidence specifically set out in an affidavit of the mortgagee, or its agent, showing all of the following: (a) the term in the instrument authorizing the expenditure to be made and charged to the mortgage debt; (b) the necessity of the expenditure for preserving or otherwise protecting the mortgaged property; (c) the reasonableness of the amount of the expenditure both in its fairness for the work done or materials supplied, and its value for protecting the property. Case Law [25] Nova Scotia case law has not addressed what can be included as mortgage debt, and in particular has not considered whether a cashback is a component of secured debt in a foreclosure proceeding. [26] Although mortgage law varies across Canada, some extra-provincial decisions provide guidance on what may or may not be included in the mortgage debt calculation. [27] In CIBC Mortgages Inc. v. Eldstrom, 2014 SKQB 337, [2014] S.J. No. 627, CIBC sought leave to commence an action respecting a mortgage registered against the mortgagors' property. The affidavit of default filed in support of the application included a prepayment charge, occupancy check costs, and cashback as components of the default amount. [28] The Court ruled that in Saskatchewan prepayment penalties are not part of the mortgage debt, and found as follows in disallowing the cashback amount: 6. As well, the affidavit of default includes a cash back amount of $15, Again, when asked to explain the legitimacy of this claim, counsel referred the court to clause 4.15 of the mortgage. This clause states:

15 Page Repaying the cash back options If you have a mortgage that offered a cash back option, you may be required to repay us all or a portion of the cash amount received. Depending on the terms of the cash back agreement that you signed, you may be required to do this if, for any reason, any of the following occur before the maturity date of the mortgage: 7. When the court inquired whether the "cash back agreement" referred to clause 4.15 had been submitted to the court, the rather surprising reply was that the mortgagee (at least not in this instance) did not have a cash back agreement as referenced in the clause How then, one wonders, did the mortgagee arrive at a significant amount of $15, owing under the mortgage as a "Cash back" payment? No justification is offered for its calculation in the affidavit of default. The court did not indicate whether it would have allowed the cashback amount had CIBC been able to produce a cash back agreement to support it. [29] With respect to pre-payment penalties, the law in Nova Scotia is the same as in Saskatchewan. In Ferguson v. Amiro, 2011 NSSC 416, [2011] N.S.J. No. 639 [Ferguson], Muise J. did not include a penalty as part of the mortgage debt, in part because the mortgagor had initiated a foreclosure action: 76 Further, Ferguson has now initiated a foreclosure action. The Court in Ashley et al v. Royal Bank, 1984 CarswellNS 91 (S.C.T.D.), at paragraph 7, ruled that, once the mortgagee initiates a foreclosure action, it cannot claim a prepayment interest penalty. As such, Ferguson is not entitled to such a penalty. [30] However, the payback of a cash payment was distinguished from a prepayment penalty in Ter Borg v. Morris, 2012 BCSC 554, [2012] B.C.J. No. 743 at para. 31. [31] Recent British Columbia decisions show that the scope of a foreclosure proceeding depends upon the wording in the mortgage document, and is not necessarily limited to recovery of a dollar amount specified in that document. [32] In Richmond Savings Credit Union v. Nijjer, 2000 BCSC 1150, [2000] B.C.J. No. 1543, the Court concluded that a mortgage could secure more than one obligation. The mortgagee had obtained a multi-purpose mortgage, which allowed the mortgagor to apply for subsequent loans up to a specified maximum amount without the necessity to amend the mortgage. Similarly, in Community Futures Development Corp. v. Dore River Forest Products, 2014 BCSC 68, [2014] B.C.J.

16 Page 14 No. 38, mortgage wording stating it secures payment, observance, performance and satisfaction of all of the borrower s present and future debts, liabilities and obligations to the lender was held to support including debts referenced in promissory notes in the foreclosure proceeding. However, in Dickinson v. Vancouver Savings Credit Union, 2013 BCSC 290, [2013] B.C.J. No. 325, the British Columbia Supreme Court ruled that a mortgage did not secure loans not contemplated by and in accordance with its terms. Summary: Legislation and Case Law [33] The Nova Scotia Civil Procedure Rules refer to the claimable mortgage amount as the mortgage debt. The Land Registration Administration Regulations define a mortgage to include any amendment that increases the amount of the obligation secured or the amount available for borrowing under the mortgage, and the Land Registration Act similarly provides that a registered mortgage, including additional sums advanced under the mortgage, whether under a current or revolving account or a line of credit, has priority over subsequent recorded interests. The one caveat is that the mortgage has priority only up to the amount for which the mortgage is expressed to be a security. [34] Rule suggests that the following items are properly considered to be part of the mortgage debt : the outstanding principal, mortgage interest, judgment interest, reasonable charges authorized by the mortgage instrument, and costs. Of these items, only outstanding principal and reasonable charges authorized by the mortgage instrument could be interpreted as encompassing a cashback amount. The question is whether either interpretation is reasonable, in context of the mortgage documentation and the authorities. The Mortgage Debt In This Case Outstanding Principal [35] The Mortgage Contract says the principal amount is $212, This excludes the cashback amount. The Mortgage Contract defines the loan amount to mean the principal amount that is outstanding from time to time. Thus, it seems loan amount and outstanding principal are effectively the same thing. Since the loan amount does not include the cashback amount, the outstanding principal also cannot include the cashback amount.

17 Page 15 [36] Although clause 19 of the Mortgage Contract does indicate that the mortgage may be amended, and any reference in this mortgage to this mortgage means this mortgage as amended, the cashback amount cannot be considered an amendment to the Mortgage Contract. It was disbursed on January 10, 2011, the same day the Mortgage Contract was executed. [37] On the PCA, the primary mortgage amount of $212, is labelled loan amount. The cashback amount is listed separately from the loan amount ; it is labelled cashback amount. [38] While the COBD Statement lists both amounts under the heading principal amount, the two amounts are separated by a line and the $10, figure is proceeded by the following: Cashback amount. This amount is in addition to the principal amount above and could be repayable if your mortgage is partially repaid, paid in full, transferred, assumed, or renewed prior to the expiry of the term. [Emphasis added] [39] Based on the Documents, I do not interpret outstanding principal to include the cashback amount. The authorities indicate that where the mortgage documentation permits, additional debt amounts can be claimed in foreclosure proceedings; however, in this case the Documents do not evidence intent to include cashback to do so they should have been more clearly worded. The Mortgage Contract and the COBD Agreement do not include the cashback amount as part of the principal. The PCA does include the cashback amount under the heading of principal amount, but then says the cashback amount is in addition to the principal amount above. The Documents do not support interpreting outstanding principal as including the cashback amount. Reasonable Charge Authorized by the Mortgage Instrument [40] Is the cashback amount a reasonable charge authorized by the mortgage instrument? It is not conclusive that cashback is authorized by the Documents, (including reference to cashback repayment in Schedule A to the Mortgage Contract); so are prepayment charges, but they are not secured as reasonable charges in foreclosure proceedings (Ferguson, supra). [41] A cashback amount can be distinguished from a prepayment penalty in that it is a debt, i.e. money owing from the mortgagor to the mortgagee, that may have

18 Page 16 to be repaid at one time or another, and not a penalty per se. The Schedule to the Mortgage Contract and the COBD Statement specify that the cashback amount will be repayable if your mortgage loan does not remain outstanding for the full term, and the Documents provide the formula that will be used to calculate the amount to be repaid. [42] However, Rule (previously quoted in in paragraph 21) restricts a reasonable charge authorized by the mortgage instrument to an expenditure made and charged to the mortgage debt, which is necessary for preserving or otherwise protecting the mortgaged property. The cashback amount is none of these things. Therefore, it cannot be considered a reasonable charge authorized by the mortgage instrument. CONCLUSION [43] Scotia Mortgage Corp. has improperly included the cashback amount in the mortgage debt in this claim for foreclosure, sale and possession. [44] Rules and 72.13(1) indicate that the following items are properly included in the mortgage debt calculation: the outstanding principal, mortgage interest, judgment interest, reasonable charges authorized by the mortgage instrument, and costs. Of these items, only outstanding principal or reasonable charges authorized by the mortgage instrument could reasonably encompass a cashback amount. [45] In this case, outstanding principal does not include the cashback amount, because references to the principal amount or the loan amount in the Documents exclude the cashback amount. The requirements for reasonable charges are set out in Rule 72.13(2), and the cashback amount does not meet those requirements. [46] The order for foreclosure, sale and possession will issue in the usual form, as provided in draft by Scotia, after deducting the cashback repayment amount of $3, claimed as part of the mortgage debt. Murphy, J.