𝐓𝐡𝐢𝐬 𝐢𝐬 𝐭𝐡𝐞 𝐤𝐢𝐧𝐝 𝐨𝐟 𝐡𝐨𝐫𝐫𝐨𝐫 𝐬𝐭𝐨𝐫𝐲 𝐭𝐡𝐚𝐭 𝐤𝐞𝐞𝐩𝐬 𝐥𝐞𝐧𝐝𝐞𝐫𝐬 𝐚𝐰𝐚𝐤𝐞 𝐚𝐭 𝐧𝐢𝐠𝐡𝐭.

A borrower stopped making all payments on a $263,000 second mortgage.

Not one payment. Not principal, not interest, nothing.

The lender commenced enforcement proceedings and after two years, the Ontario Superior Court issued its decision:

🙅‍♂️ It rejected every defence the borrower raised.

💪 The lender won.

Sounds like a great result, right?

𝐍𝐨𝐭 𝐞𝐱𝐚𝐜𝐭𝐥𝐲.

Upon obtaining a judgment, a lender asked that the borrower pay the roughly $237,000 legal bill the lender had incurred in the enforcement proceeding.

The lender was entitled to do so based on a solicitor-client costs clause in its mortgage.

However, after describing the legal fees as "not reasonable" and "grossly disproportionate", the Court limited the amount the borrower was required to pay to $100,000.

In other words, approximately $137,000 of the lender's legal bill remained the lender's responsibility.

𝐓𝐡𝐚𝐭'𝐬 $137,000 𝐬𝐩𝐞𝐧𝐭 𝐭𝐨 𝐫𝐞𝐜𝐨𝐯𝐞𝐫 𝐚 $263,000 𝐦𝐨𝐫𝐭𝐠𝐚𝐠𝐞.

The Court acknowledged that mortgage documents could entitle lenders to recover their legal fees but also reminded everyone of an important point:

𝐂𝐨𝐮𝐫𝐭𝐬 𝐬𝐭𝐢𝐥𝐥 𝐫𝐞𝐭𝐚𝐢𝐧 𝐝𝐢𝐬𝐜𝐫𝐞𝐭𝐢𝐨𝐧 𝐭𝐨 𝐝𝐞𝐭𝐞𝐫𝐦𝐢𝐧𝐞 𝐰𝐡𝐞𝐭𝐡𝐞𝐫 𝐭𝐡𝐨𝐬𝐞 𝐟𝐞𝐞𝐬 𝐚𝐫𝐞 𝐫𝐞𝐚𝐬𝐨𝐧𝐚𝐛𝐥𝐞.

For lenders, this case highlights three important lessons.

1️⃣ 𝐄𝐧𝐟𝐨𝐫𝐜𝐞𝐦𝐞𝐧𝐭 𝐭𝐚𝐤𝐞𝐬 𝐭𝐢𝐦𝐞.

The borrower stopped making payments in 2024 yet the summary judgment decision wasn't released until 2026.

For more than two years, the lender continued carrying the risk while recovering nothing.

2️⃣ 𝐃𝐨𝐧'𝐭 𝐚𝐬𝐬𝐮𝐦𝐞 𝐞𝐯𝐞𝐫𝐲 𝐝𝐨𝐥𝐥𝐚𝐫 𝐲𝐨𝐮 𝐬𝐩𝐞𝐧𝐝 𝐨𝐧 𝐥𝐞𝐠𝐚𝐥 𝐟𝐞𝐞𝐬 𝐰𝐢𝐥𝐥 𝐮𝐥𝐭𝐢𝐦𝐚𝐭𝐞𝐥𝐲 𝐛𝐞 𝐩𝐚𝐢𝐝 𝐛𝐲 𝐭𝐡𝐞 𝐛𝐨𝐫𝐫𝐨𝐰𝐞𝐫.

Even if your mortgage says so.

Even if you succeed on every issue.

3️⃣ 𝐀 𝐬𝐮𝐜𝐜𝐞𝐬𝐬𝐟𝐮𝐥 𝐞𝐧𝐟𝐨𝐫𝐜𝐞𝐦𝐞𝐧𝐭 𝐟𝐢𝐥𝐞 𝐢𝐬 𝐦𝐞𝐚𝐬𝐮𝐫𝐞𝐝 𝐛𝐲 𝐦𝐨𝐫𝐞 𝐭𝐡𝐚𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐢𝐧𝐠 𝐚 𝐣𝐮𝐝𝐠𝐦𝐞𝐧𝐭.

Every lender wants to win.

The problem is that some victories are far more expensive than anyone expected.

As King Pyrrhus of Epirus learned nearly 2,300 years ago:

𝐖𝐢𝐧𝐧𝐢𝐧𝐠 𝐢𝐬 𝐧𝐢𝐜𝐞, 𝐛𝐮𝐭 𝐭𝐡𝐞 𝐫𝐞𝐚𝐥 𝐪𝐮𝐞𝐬𝐭𝐢𝐨𝐧 𝐢𝐬 𝐰𝐡𝐚𝐭 𝐢𝐭 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐜𝐨𝐬𝐭𝐬 𝐭𝐨 𝐰𝐢𝐧.