That pushback mattered. The fund’s claimed payout, as of October 31, 2024, tacked a default fee of $1,500, a three-month penalty of $2,547.45, a demand-letter charge of $1,500 and several smaller statement, discharge, processing and insurance-related fees onto the outstanding balance and interest owed. Justice Callaghan found many of those charges contrary to section 8 of the Interest Act, which bars mortgagees from levying fines, penalties or higher interest rates on arrears secured against real property, regardless of how the charge is labelled. When questioned on the charges, counsel for the fund agreed to withdraw them, a concession the court called proper – but not a first for this lender. The ruling notes the same fund made near identical concessions in a 2023 Ontario decision involving a different borrower, adding that this pattern is “a common occurrence seen too often by the court.”
With the improper charges stripped out, the court set the amount owing at $103,714.59, plus prejudgment interest of $17,429.20 to July 3, 2026, and continuing interest after that date at the contractual 9.99 per cent rate. The fund was also awarded a writ of possession over the property.
Justice Callaghan denied the fund’s request for costs, even though its mortgage terms provided a contractual right to them. Costs remain discretionary regardless of contract, the court noted, and advancing unjustified charges without any factual foundation is the kind of conduct courts should discourage. The judge added that the cost claim itself was not large relative to the debt owed, but that denying it might help curb the practice going forward.
For wealth advisors and fund managers who place client capital in private mortgage funds for yield, the ruling is a reminder that fee and collection practices sit inside the same compliance perimeter as investment performance – and that repeat missteps on basic lending law can surface in court records tied to the fund’s name.