The Timing Trap: Statement of Claim Before Notice of Sale in Power of Sale Proceedings
Ontario mortgage lenders face a common but dangerous temptation: issuing a Statement of Claim before serving the Notice of Sale. Recent Superior Court decisions—Resco Mortgage Investment Corp. v. Kaur, RiverRock Mortgage Investment Corp. v. Blazys, and 1000005996 Ontario Ltd. v. Virk —expose this backwards sequencing as a technical violation of the Mortgages Act that courts will usually cure, but at a cost.
The Statutory Framework
Section 42(1) of the Mortgages Act is unequivocal: a mortgagee "may not take further action or proceed to enforce a mortgage until after the expiry of the time period during which payment must be made pursuant to the Notice of Sale." This creates a statutory "breathing space" for mortgagors to redeem without the immediate pressure of litigation (McKenna Estate v. Marshall, 2005 CanLII 37001 (ON SC)).
The proper sequence for a contractual power of sale is clear:
15-day minimum default (s. 32)
Serve Notice of Sale (35-day redemption for contractual power)
Statement of Claim only after notice period expires
The Cases: Show a Judicial Disapproval of Backwards Sequencing
Resco Mortgage Investment Corp. v. Kaur (2024 ONSC 3615) exemplifies the problem. Resco served its Statement of Claim on April 3, 2023, then issued Notice of Sale two days later (April 5). Justice Kurz called this "better to ask for forgiveness than permission," noting it "should not be standard procedure" despite being common practice. The court granted nunc pro tunc relief absent prejudice but reduced costs to signal disapproval.
RiverRock Mortgage Investment Corp. v. Blazys (2024 ONSC 6357) followed the same backwards pattern: the Statement of Claim was issued on January 8, 2024 and the Notice of Sale on January 16, 2024. Justice Wilkinson declared it "contrary to the Mortgages Act and should not be encouraged," but cured it nunc pro tunc with a costs penalty.
1000005996 Ontario Ltd. v. Virk (2025 ONSC 5013) confirmed the pattern: The Notice of Sale and Statement of Claim were served on the same day, January 26, 2024. Justice Charney applied Resco and RiverRock, granting nunc pro tunc relief where "no prejudice" was shown after the full 35-day redemption expired.
The Legal Risk Analysis
The courts consistently have held that s. 42 doesn't render the Statement of Claim a nullity—it's a technical breach curable by nunc pro tunc order. However, three principles emerge:
The courts focus on the mortgagor’s rights — whether the full statutory redemption window has passed and on any actual prejudice
The costs consequences could be significant—courts use discretion to deter repetition
The courts want the practice to change—Justice Kurz explicitly flagged judicial fatigue with this "unexceptional" but improper sequencing
Practice Pointers for Lenders
Wait the full 35 days from Notice of Sale service before issuing claims
Document redemption attempts during the notice period to defeat prejudice claims
Budget for reduced costs even on winning summary judgment motions
Consider parallel tracks— possibly send demand letters while waiting for the redemption period to pass
For Borrowers' Counsel
Timing attacks rarely kill claims outright. Focus on:
Proving actual prejudice
Fee challenges under s. 8 Interest Act
Aggressive costs submissions when lenders cut corners
Conclusion
As the 2026 mortgage cliff approaches, lenders must internalize that while courts will generally fix backwards claims, every violation can cost money. Clean statutory compliance avoids the nunc pro tunc dance entirely. For the lender’s counsel, your file's success depends on timing discipline from day one.