Author: Alyssa

Many homeowners (“mortgagors”) focus on one goal: paying off their mortgage (also known as a  “charge”) so they can finally enjoy full and clear title to their property. Although paying off the loan is the toughest battle, it does not, on its own, remove the mortgage from title. There are several steps that must be taken to remove the charge, depending on the mortgage agreement and the lender (“mortgagee”).

Whether a homeowner has paid off the loan, is refinancing, or is preparing to sell, the charge must be properly discharged to ensure title is clean and marketable and to avoid delays, added costs, and closing complications. There are several mechanisms to discharge a mortgage, as outlined below.

1) By way of a Discharge of Charge:

The most common way to remove a mortgage from title is through a registered Discharge of Charge.

Defeasance Clauses:

Mortgage agreements often contain defeasance clauses, which state that upon payment in full, the mortgagee’s interest in the property is cancelled. Where such a clause exists, and the lender registers the discharge, the process is relatively seamless for the homeowner. This clause operates as a “legal trigger”, extinguishing the lender’s rights upon repayment and confirming the borrower’s entitlement to a discharge. However, even where a defeasance clause exists, a discharge must still be registered on title to formally remove the encumbrance.

The process for discharging a mortgage will differ based on the identity of the lender.

Institutional Lenders/Mortgagees:

If the mortgagee is a major financial institution, such as TD Bank, RBC, or Scotiabank, the process is streamlined. Typically, the lender will register the discharge of the mortgage on behalf of the homeowner once there is confirmation that the entirety of the mortgage has been paid off.

Private Lenders:

For private or smaller lenders, the process is not as straightforward for the mortgagor. The homeowner must complete the process themselves, requesting a “Discharge of Charge” document from the lender. This document confirms that the mortgage has been paid in full, which is necessary in order for the Land Titles Office to discharge the mortgage registered to the property.

This relatively simple process gets more complex in situations where the lender unreasonably withholds their consent to discharge; the lender has died or cannot be found; the lender corporation has dissolved; or where the mortgage is decades old, and documentation is incomplete. In these situations, if the Discharge of Charge document cannot be obtained, the homeowner requires court intervention to complete the process.

2) By way of Obtaining an Order to Discharge the Mortgage:

Where a Discharge of Charge document cannot be obtained, relief is available to mortgagors under Ontario’s Mortgages Act, depending on the specific complexity the homeowner is facing.

(A) If the Mortgage Has Been Paid In Full:

If the homeowner has already paid off the mortgage, section 12(8) of the Mortgages Act allows the court to order the discharge where it is proven that, first, the loan has been paid; and second, that a discharge cannot be otherwise obtained without undue delay or expense.

This remedy is available in situations where the lender is deceased, cannot be located, where a corporate lender has been dissolved or lacks accessible records, or where the lender refuses or fails to respond.

If a homeowner pursues this process, they must be prepared to file evidence demonstrating two key elements: first, why a discharge cannot be obtained directly from the lender; and second, that the mortgage has, in fact, been fully satisfied. Evidence addressing the first requirement may include a death certificate, corporate dissolution records, or documentation outlining the reasonable steps taken to locate the lender. Evidence of repayment may consist of bank statements, cancelled cheques, written confirmations, payout statements, or accounting records.

Once satisfied, the court will grant an order discharging the mortgage, which can then be registered on title to remove the encumbrance.

(B) If the Mortgage Has NOT Been Paid in Full:

In cases where the lender cannot be found, and there are outstanding amounts on the mortgage, section 12(3) of the Mortgages Act kicks in to prevent undue delay by allowing the borrower to pay the outstanding repayments into court.

If there is uncertainty surrounding the outstanding amount left to be paid on the mortgage, the court can require the borrower to pay a higher amount into court before granting the order. Any extra money paid in will remain with the court until a judge decides who is entitled to it.

After the mortgage loan funds are paid into court in full, the court has the authority to enable the discharge of the mortgage notwithstanding the lender’s absence. The purpose of this process is to provide relief to a mortgagor who is entitled to repay the mortgage debt and obtain a discharge, but is prevented from doing so for reasons outside of their control.

(C) If Mortgage Payments Have Not Been Made in Over 10 Years:

Even if a mortgage is decades old, it does not automatically “expire” or disappear from title. However, in this situation, relief may be available to a mortgagor under Ontario’s Real Property Limitations Act. Section 43 provides that where more than 10 years have passed since the cause of action arose, typically marked by the date of the last payment, written acknowledgement of the debt, or the transfer of the borrower’s interest in the property, the lender cannot commence an action to recover the mortgage debt.

The purpose of this limitation is to prevent stale, forgotten, or abandoned mortgage claims from lingering indefinitely over a borrower’s head. Instead, the limitation promotes finality and certainty in property ownership. Importantly, the expiry of the limitation period does not automatically remove the mortgage from title. If the lender does not cooperate, the borrower must still obtain a court order to discharge the mortgage, as outlined above.

Final Takeaway

Although paying off a mortgage is a significant financial milestone, it is not the final legal step. Until a Discharge of Charge (or court order) is registered on title, the mortgage remains an encumbrance on the property. Depending on the circumstances, statutory remedies may be available; however, these remedies typically require a formal court application supported by proper evidence.

Property owners seeking to discharge a mortgage who require guidance through the legal process are encouraged to consult with our experienced counsel.

Graeme Oddy is a partner at Devry Smith Frank LLP, experienced in commercial litigation and mortgage enforcement matters. Graeme can be reached at graeme.oddy@dsf.theleadshub.biz and/or 416-446-5810.

This blog was co-authored by articling student Mariem Naem.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.”

Ontario courts have recently continued to maintain their approach to disputes arising from business acquisitions, earnout arrangements and shareholder buyouts. The courts focus on enforcing the agreement as written by the parties and limiting implied terms.

Interpretation: Text, Context and Commercial Sense

The Ontario Court of Appeal in Project Freeway Inc v ABC Technologies Inc.^[1] recently decided an appeal from an earnout dispute under a share purchase agreement (“SPA”). The SPA contained a clause accelerating the full earnout whenever the purchaser “sells a material portion of the assets of the Business”. Following the purchase, the purchaser entered into a large sale-leaseback transaction ^[2] and a factoring transaction^[3] with third parties. Both transactions were significant in size. The vendor, therefore, argued that the clause accelerating the full earnout was triggered due to the size/value of the transactions. On the other hand, the purchaser argued that the clause would only be triggered if the transactions impacted earnout payments, not merely because of their size. The trial judge found the term “material portion” to be ambiguous, read it in the context of the factual matrix and commercial purpose, and concluded that it referred to the portion that impacted earnout payments. Having found no palpable or overriding error in the trial judge’s decision, the Court of Appeal upheld the trial judge’s interpretation.^[4] The Court of Appeal also accepted the trial judge’s analysis on commercial absurdity. The trial judge found that it made no commercial sense to accelerate tens of millions in earnout payments in response to transactions (i.e. the sale-leaseback and factoring) that had no effect on the ability of the target companies to hit the contribution margin targets for earnouts.^[5]

The Ontario Superior Court of Justice has also adopted a similar interpretive approach in disputes involving closely held businesses. In 1440195 Ontario Inc v 1440194 Ontario Inc. ^[6], two former equal shareholders had a dispute over the proceeds of the sale of their business. At the inception of the business, they owned shares equally. Subsequently, they revised the profit split through a series of amendments to the shareholder agreement. Upon sale of the company, the plaintiff challenged certain provisions of the shareholder agreement while accepting other portions, contending that he had not read the amending agreements before signing and therefore never agreed to the key terms. The court rejected this attempt by the plaintiff to select only favourable contractual provisions, affirmed the binding nature of signed commercial contracts and emphasised that failure to read agreements does not permit a party to avoid them.^[7]

Similarly, in Morrison v Gadomski ^[8], the court interpreted a share purchase agreement between a deceased shareholder’s estate and the surviving shareholder of an equipment business. Two former co‑owners of a small retail business disputed whether a buyout agreement transferred a half‑interest in a business premises or only shares. The parties had operated a small fishing retail business and jointly owned the business property as tenants in common. Upon the death of one of the co-owners, his estate negotiated and received a lump‑sum buyout payment under a share purchase agreement for the deceased’s interest in the business, while the surviving co‑owner solely assumed to pay the mortgage and carrying costs of the property. The estate later contended that the SPA dealt only with shares and that an unfulfilled clause about a potential separate agreement of purchase and sale for the property meant that the estate still owned 50% of the property. The court held that this interpretation of the clause would create a commercial absurdity as it would deprive the parties of their intended result as set out in the SPA following the death of the co-owner. Applying a textual, contextual and commercial sense approach, the court found it was the parties’ intention for the SPA to cover both shares and the property. The Court therefore declared the survivor sole owner of the property.

In these cases, the courts clearly applied the modern interpretive principles from Sattva ^[9] and Weyerhaeuser ^[10] to read the agreements as a whole, having regard to the surrounding circumstances and the commercial context.

Implied Terms and “Industry Practice”: a Narrow Gate

These recent decisions also show that the courts are reluctant to imply terms into business sale structures, particularly around valuation, adjustments and conditions. In Zaldin v Goldstein ^[11], a father and daughter were running an insurance and mutual fund business together (a parent company and its subsidiary) as majority and minority shareholders, respectively. The minority owned 10% of the parent company, while the majority owned 90%. After a breakdown in their relationship, the minority brought an action against the majority for oppression and to assert a right of first refusal with respect to the sale of the business. While the motion was pending, the majority pulled the trigger on a shotgun clause in their shareholders’ agreement, offering either to sell the 90% shareholding to the minority or buy her 10% under the reverse shotgun. A share purchase agreement was reached for the minority to purchase the majority’s shares. The SPA included a term that the majority would resign from all his positions in the parent company. However, the transaction never closed because the majority failed to obtain the necessary regulatory approval for the resulting change of control of the subsidiary, thereby undermining the minority’s ability to secure financing. The majority sought to treat the failure as a rejection of the shotgun offer and therefore exercise his right to purchase the minority shares under a reverse shotgun. The minority urged the Court to imply several terms, including purchase price adjustments, extension of closing date, a termination right if regulatory approvals were not obtained, and the majority’s resignation from the subsidiary upon closing. The court held that the majority breached his contractual duty under the shareholder agreement to do all that was required to complete the transfer, and treated her failure to close as an indirect consequence of his breach rather than a distinct default.

The court ultimately granted specific performance of the SPA in favour of the minority and dismissed the majority’s attempt to treat the transaction as a failed purchase that entitled him to exercise the reverse shotgun. With respect to the minority’s request for implied terms, the court refused to (1) imply “industry standard” price‑adjustment mechanisms into the SPA which the parties intended as a fixed‑price shotgun; (2) extend the closing date; (3) imply a termination right dependent on regulatory approval, and (4) extend the express obligation to resign from positions with the parent company to include an obligation to resign from the subsidiary as well.

Takeaways

Considering these recent decisions, various practical themes emerge for business acquisition and buyout transactions.

• Draft earnout and exit clauses with precision, anticipating how courts will read them in the round, including how triggers relate to the earnout’s purpose and how asset sales interact with performance metrics.
• Do not assume courts will import market practice or industry standards. If price adjustments, regulatory approval conditions, specific termination rights or allocation mechanisms matter, they must be clearly spelled out in the agreement.
• Good faith and honest performance are about how a party performs the bargain, not an invitation to rewrite it. The courts use the doctrine of good faith to scrutinize obstructive conduct such as failure to seek regulatory approvals or insistence on new adjustment terms, but the ultimate remedy is to enforce the agreement of the parties, not to craft a new one.

If you have any disputes arising from business acquisitions, please contact Unwana Udo, a lawyer in our commercial litigation department, to discuss and assess your options.

[1] 2025 ONCA 855

[2] Sale of a large percentage of company’s assets but leased and operated sold assets.

[3] Sale of company’s account receivables to a third party at a discount for cash in hand.

[4] Project Freeway, paras. 1–8, 10–15

[5] Project Freeway, paras. 9-11, 16–20

[6] 2025 ONSC 4420

[7] paras. 69–79

[8] 2025 ONSC 3365

[9] Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53

[10] Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007

[11] 2025 ONSC 453

In television dramas, lawsuits often appear to move at an unrealistic pace, with a claim filed one day and the parties appearing in court the next. In reality, litigation is a highly structured and often lengthy process, involving multiple procedural steps before a matter ever reaches trial.

One of the most significant steps that occurs prior to trial is the discovery process. Discovery allows counsel to uncover relevant information and narrow the issues in dispute. In order to promote a fair and equitable litigation process, discovery is governed by the Rules of Civil Procedure (the “Rules”). One of the key protections outlined in the Rules is the deemed undertaking rule.

What is The Deemed Undertaking Rule?

The deemed undertaking rule is codified in Rule 30.1.01 of the Rules. It provides that parties and their lawyers agree that the information and evidence (including documentary discovery, examination for discovery, inspection of property, medical examination, examination for discovery by written questions) obtained through the discovery process will only be used for the purpose it was collected and nothing further.

Rule 30.1.01(3) specifically states:

All parties and their lawyers are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained.

In Juman v Doucette, the Supreme Court of Canada interpreted the deemed undertaking rule and explained that it exists to protect privacy interests, including innocuous personal information that is neither confidential nor discloses any wrongdoing, while it also protects against self-incrimination and the efficient and fair conduct of civil litigation.

Statutory Exceptions Under Rule 30.1.01

While the Rule is strict, it is not absolute. Rule 30.1.01(6) sets out express exceptions.

Subrule (3) does not prohibit:

• a use to which the person who disclosed the evidence consents;
• the use for any purpose of,

(a)  evidence that is filed with the court;

(b)  evidence that is given or referred to during a hearing;

(c)  information obtained from evidence referred to in clause (a) or (b);

• the use of evidence obtained in one proceeding, or information obtained from such evidence, to impeach the testimony of a witness in another proceeding;
• the use of evidence or information in accordance with subrule 31.11 (8) (subsequent action); and
• if satisfied that the interest of justice outweighs any prejudice that would result to a party who disclosed evidence, the court may order that subrule (3) does not apply to the evidence or to information obtained from it, and may impose such terms and give such directions as are just.

Can Discovery Evidence Revealing a Crime Be Disclosed to Police?

Given the deemed undertaking rule, many people wonder whether information collected during the discovery process that reveals a crime was committed can be disclosed to police. Interestingly, the short answer is, no, not without a court order, except in truly exceptional circumstances. The Supreme Court of Canada in Juman affirmed that parties require a court order to disclose discovery evidence suggesting criminal conduct to police or other parties. Simply because a person being examined implicates self-incrimination, it does not amount to unnecessary disclosure.

Importantly, though, in situations of immediate and serious danger, the applicant may be justified in going directly to the police without a court order.  The onus will be on the person applying for the exemption to demonstrate on a balance of probabilities that the existence of public interest and protection outweighs the values that the deemed undertaking is designed to protect.

Does the Deemed Undertaking Apply to Rule 30.10 (Non-Party) Documents?

The production of documents from non-parties with leave is codified as Rule 30.10 in the Rules  and states:

30.10 (1)

The court may, on motion by a party, order production for inspection of a document that is in the possession, control or power of a person not a party and is not privileged, where the court is satisfied that,

(a) the document is relevant to a material issue in the action; and

(b) it would be unfair to require the moving party to proceed to trial without having discovery of the document.

It is important to note that Rule 30.1.01 (1) specifically identifies Rule 30 as one of the provisions that triggers the deemed undertaking rule. As a result, information obtained through a Rule 30.10 motion is likely captured by Rule 30.1.01 (1).

Rule 30.10 authorizes the court to order document production from a non-party where relevance and fairness are established. Importantly, this form of production is court-ordered and therefore compulsory, not voluntary. Accordingly, documents produced to a Rule 30.10 order should be treated subject to the deemed undertaking rule and the associated exemptions.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.”

This blog was co-authored by articling student Adriana Piccolo.

Ontario’s Superior Court of Justice has released an important decision in the bankruptcy of Hamilton resident Douglas Grozelle, who ran a large Ponzi scheme disguised as a high‑yield real estate lending business.^[1] The ruling matters for anyone in Ontario who makes private investments or high‑interest loans, especially where returns seem unusually good.

Background

Grozelle raised money from 236 investors by promising short‑term “bridge loans” on real estate with fast repayment and very high returns. There were no real bridge loans or business profits as Grozelle simply used new investors’ money to pay “interest” and “profits” to earlier investors. Over $103 million flowed through his accounts between 2021 and 2023, and the scheme collapsed when he could no longer bring in enough new funds to satisfy existing investors. When the scheme stopped, 116 investors were left out‑of‑pocket by about $24.6 million, while 120 “net winners” had recovered all of their capital plus roughly $21.6 million in profit. Those profits ranged from modest returns to eye‑watering gains of up to 6,700% on principal. Grozelle went into receivership and then bankruptcy, and he and others now face criminal charges.

The central issue in the bankruptcy was whether net winners could keep their profits while others recovered only a fraction of their original investments. The court‑appointed bankruptcy trustee, Grant Thornton, asked the court to order winners to repay only their profits, i.e., the amounts they received over and above what they invested, so those funds could be shared among the net losers. The trustee did not seek to claw back capital; winners would still be ahead of those who lost principal.

Decision of the Court

The court agreed and held that Grozelle operated a fraudulent Ponzi scheme that was legally insolvent from day one. In that context, every profit payment to winners was a “fraudulent conveyance” under Ontario’s Fraudulent Conveyances Act, because it was made with intent to “defeat, hinder, delay or defraud” other creditors. The judge emphasized that in a Ponzi scheme, there is no need to prove fraudulent intent separately for each payment; the structure of the scheme itself allows the court to infer that all such profit payments were made with that intent.

Many investors relied on promissory notes that appeared to promise high but fixed returns for short terms. The court found those notes were largely useless as legal protection, as most were incomplete, unsigned, internally inconsistent, or promised criminally high (usurious) rates once annualized (up to 18,250% in some cases). Payments to investors bore little relationship to the notes’ terms and instead depended on what cash Grozelle had available when investors demanded money. The court treated the notes as marketing props rather than genuine evidence of a legitimate business and held that they did not justify keeping profits.

Practical Takeaways for Investors

The decision confirms that in a Ponzi scheme, there is no “good consideration” or “good faith” defence to keeping profits. While many investors were innocent and unaware of the fraud, the court found that no one provides real value in exchange for profits that are simply paid out of other victims’ capital. Innocent investors can keep their principal, but they cannot reasonably expect to keep gains that depend on others’ losses.

For Ontario retail investors, the lessons are clear. Extremely high, “too good to be true” returns combined with vague or inconsistent explanations should trigger serious caution. Fancy‑looking promissory notes are not a guarantee of safety, especially if the underlying business model is opaque or implausible. And if an investment later turns out to be a Ponzi scheme, even innocent investors who came out ahead may face demands to return their profits so losses can be shared more fairly among all victims.

If you wish to pursue an investment-related civil claim arising from breach of contract, unjust enrichment or fraudulent misrepresentation, please contact Unwana Udo to discuss and assess your options.

[1] In the Matter of the Bankruptcy of Douglas Grozelle, 2026 ONSC 758 (CanLII)