AG Dundas: the court declines a late redemption and approves the 1024 sale

On the morning of September 21, the day the receiver's motion to sell 1024 Dundas Street East in Mississauga was to be heard, the guarantor of the debtors' loan from Morrison Financial Mortgage Corporation uploaded two documents to the court's electronic filing system: an affidavit, and a notice of motion, posted minutes before the hearing began, alleging that the receiver's lawyers had a conflict of interest. He appeared without counsel, as guarantor, though he is also a representative of the debtors, and his position on the sale was that it should not be approved, or approved only on terms that gave him and the debtors time to redeem the mortgage on that property, per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, paras. 5–9.

Justice Dietrich declined, and signed the approval and vesting order the same day. The Court of Appeal's September 1 ruling that the debtors had no automatic stay of the sale process, reported here on September 2, had settled that the sale process could run; the question left for the approval hearing was whether an owner's right to redeem could still interrupt it.

Eight million dollars, and the conditions on it

The request, supported by the debtors and by Ahmed Asset Management Inc., the related-party former tenant of Unit 1, was specific. The court was asked to order that if an amount equal to $8 million, plus the receiver's charges allocable to 1024 Dundas, plus the purchaser's reasonable costs thrown away, were paid into court by November 13, 2026 or within 11 days after those amounts were fixed, Morrison's charge over 1024 Dundas would be discharged and the receivership over that property would end, per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, para. 9.

The figure came out of a long dispute over partial discharges. In a responding affidavit sworn June 12, the debtors' principal deposed that their counsel had asked Morrison on April 7 for separate discharge statements for each of the two properties, and that Morrison's counsel answered on April 9: "we maintain that your client is not entitled to partial discharges of the mortgage." He understood partial discharges to have been permitted from the outset of the loan, and listed the refinancing paths he said were open, among them a credit-approved TD Bank bridge facility and a June 2026 commitment letter from Drake Financial Ltd. for one of the properties, per the Responding Affidavit of the Debtors' Principal, June 12, 2026, paras. 68–70, 74. The receiver had told the debtors on April 15 that the right to a partial discharge was between the debtors and Morrison, and that it "will not insert itself in this dispute," according to the same Responding Affidavit of the Debtors' Principal, June 12, 2026, para. 71.

By September 21 the guarantor's evidence was that Morrison had agreed to accept $8 million for its charge against 1024 Dundas. The debtors' funding, taken at its best on that evidence, was a conditional commitment to pay $9 million, the balance above $8 million to cover the receiver's allocable costs and the purchaser's costs thrown away. The conditions, which the guarantor admitted, were a lender-ordered valuation showing the loan at no more than 65% of the property's value, a satisfactory feasibility study or satisfactory tenant leases, a satisfactory environmental report, and guarantees. "Those conditions are substantial," the judge wrote, per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, para. 14.

Rose-Isli, which nobody had cited

No one had put the governing authority before the court. Justice Dietrich raised Rose-Isli Corp. v. Smith, 2023 ONCA 548, herself, then stood the matter down so that counsel and the guarantor could read it and make submissions on it or on anything else relevant, per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, paras. 10–11. The passage she set out holds that a court asked to let an encumbrancer redeem a mortgage on property in receivership should weigh the effect on the integrity of the court-approved sale process, and that where the process was run consistently with Soundair, "a court should not permit a latter attempt to redeem to interfere with the completion of the sales process." The Court of Appeal adopted, from B&M Handelman Investments Limited v. Mass Properties Inc., the warning that "A mockery would be made of the practice and procedures relating to receivership sales if redemption were permitted at this stage of the proceedings," per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, para. 10.

The case offered in answer was Peakhill Capital Inc. v. 1000093910 Ontario Inc., 2024 ONCA 584, where the Court of Appeal upheld a motions judge who let a debtor redeem in extraordinary circumstances, including that every creditor was being paid in full. The judge found nothing unusual or exceptional here. The receivership had run since December 17, 2025; a sale process had been approved and carried out; the receiver had a signed agreement from it; and "the Debtors are not coming with a cheque in hand to pay out all creditors," per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, paras. 12–13.

Morrison was not the only creditor in the reasons. Relying on the receiver's Fourth Report, the judge listed property taxes of approximately $73,000 outstanding on 1000 Dundas and approximately $114,000 on 1024 Dundas, and the Canada Revenue Agency's advice that as of March 18, 2026 AG Inc. owed approximately $108,000 in GST/HST, including approximately $91,000 claimed as a deemed trust, and approximately $44,000 in corporate income tax, with GST/HST returns unfiled for fiscal 2024 onward. "All creditors are not being paid in full in cash in immediately available funds," she wrote, per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, paras. 15–16.

The guarantor attributed the shortfall in part to the partial discharge dispute. The judge noted that there had been no determination that Morrison acted improperly, and that it had voluntarily agreed to a partial discharge amount. The respondents also argued that Rose-Isli concerned a last-minute request, while they had been trying to redeem for months. "It may be that Debtors have expressed their desire to redeem for quite some time, but that is not in itself sufficient. The request must be backed up with available funds to pay all creditors," per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, para. 16. Giving the debtors another chance with the agreement signed and before the court for approval, she concluded, "would make a mockery of the practice and procedures relating to receivership sales," and she declined to grant more time, per the Endorsement of Justice J. Dietrich, Sept. 21, 2026, paras. 17–18.