The common law system is based on the view that the truth emerges from a struggle between opposing parties and, of course, on an ex parte hearing only one side is before the court so that struggle does not take place.
As a way of trying to alleviate the problem of one party being unrepresented on an ex parte hearing the courts have been very strict in requiring full and fair disclosure of all facts, good or bad. The difficulty is that often it is hard to ensure all the facts are before the court -- sometimes, for example, the client does not tell the lawyer everything.
The impact of failing to make full disclosure on an ex parte matter is that the orders made will be set aside, with a significant cost award, and, often, a judicial tongue lashing.
The best approach, almost always (the exceptions being where notice would lead to destruction of evidence or hiding of assets), is to proceed on notice, even very short notice.
The very recent Court of Appeal decision in Frenchmen's Creek Estates Inc. v. Tuckernuck Mortgage Administration Inc. Is a good example of the risks involved in an ex parte order.
Mortgagors were in default of obligations and even signed a consent to judgment (to be obtained without notice). The mortgagees obtained foreclosure judgments ex parte but failed to make sufficient disclosure.
The result was that the judgments were set aside with serious cost consequences. In hindsight the mortgagees would have been far better not to rely on their right to obtain judgment ex parte and to have proceeded on notice.
The decision, which is short, follows:
[1] The appellants' appeal is from an order of Justice Lofchik refusing to give relief from the foreclosure judgments obtained ex-parte by the respondents.
[2] On the appeal, it became clear that Justice Lofchik did not have before him the record that was placed before Justice Echlin to obtain the ex-parte orders. That record is before us on the appeal and discloses that on the first attempt to obtain the ex-parte orders from Justice Rouleau (as he then was), Justice Rouleau required disclosure of the calculation and justification of the amount of the consent judgments, the form of which was signed in blank by the appellants as part of the Minutes of Settlement.
[3] The respondents then re-filed the ex-parte foreclosure motions with affidavits from Mr. Bernholtz which included an accounting that showed no monies had been paid on the Yolles first mortgages. Those affidavits failed to properly account for monies paid by the appellants which under paragraph 2 and 3 of the Minutes of Settlement had to be credited to the Yolles first mortgages. Because the material before Justice Echlin did not constitute full, fair and frank disclosure as required on an ex-parte motion, those orders should have been set aside by Justice Lofchik and we are satisfied they would have been had he been aware of this problem.
[4] We therefore allow the appeal from Justice Lofchik, set aside his order and set aside the ex-parte foreclosure orders of Justice Echlin. The record before us does disclose an ongoing financial default by the appellants. The respondents are entitled to seek appropriate remedies, as advised, on proper notice to the appellants.
[5] In the result, the appeal is allowed and the portion of the judgment of Justice Lofchik that refused to set aside the foreclosures is set aside. The portion of the judgment of Justice Lofchik that dismissed the application in respect of Matthews and Bent is not set aside by this court.
Costs
[6] Costs of the appeal to the appellants paid by the Tuckernuck respondents are in the amount of $20,000 inclusive of disbursements and G.S.T. on the partial indemnity scale. The Matthews respondents are entitled to their costs of the appeal from the appellants on the partial indemnity scale fixed at $12,000 inclusive of disbursements and G.S.T. The costs order of Justice Lofchik as between the appellants and Tuckernuck respondents is set aside. If the parties cannot agree on the amount to be paid to the appellants for such costs, they shall be fixed by the application judge.
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