Ontario Court of Appeal Holds Mortgage Guarantees Subject to Real Property Limitations Act 10-Year Limitation Period

On December 18, 2019, the Ontario Court of Appeal (the “OCA”) released its decision in Hilson v. 1336365 Alberta Ltd.¹ Among the issues considered was whether the trial judge had erred in finding that claims on five stand-alone personal guarantees of mortgage loans were subject to the ten-year limitation period under the Ontario Real Property Limitations Act² rather than the two-year basic limitation period under the Ontario Limitations Act, 2002.³

Subsection 43(1) of the Real Property Limitations Act states:

43. (1) No action upon a covenant contained in an indenture of mortgage or any other instrument made on or after July 1, 1894 to repay the whole or part of any money secured by a mortgage shall be commenced after the later of,

(a) the expiry of 10 years after the day on which the cause of action arose; and

(b) the expiry of 10 years after the day on which the interest of the person liable on the covenant in the mortgaged lands was conveyed or transferred.

The appellants argued that the language “any other instrument . . . to repay the whole or part of any money secured by a mortgage” should be interpreted narrowly to exclude stand-alone mortgage guarantees. The OCA rejected this interpretation because: (a) it was not supported by any legislative history; (b) it did not conform to the plain meaning of the language; (c) it would cause stand-alone guarantees to be subject to a different limitation period than are equivalent guarantees found within mortgage documents (as were also at issue on the appeal) or the mortgages themselves; (d) it was not supported by the principles of statutory interpretation, including as set out in the Ontario Interpretation Act;⁴ and (e) the narrower Ontario Registry Act definition of “instrument” did not apply.⁵

The Financial Services Group at Aird & Berlis regularly advises creditors in mortgage and guarantee enforcement actions. Details are available at our Financial Services webpage.