Court Confirms Validity of Second Mortgages in Ashcroft Enforcement Dispute

On March 24, 2026, the Ontario Superior Court of Justice confirmed the validity of second mortgages held by CMLS Financial Ltd. (“CMLS”) over certain Ottawa properties owned by Ashcroft Development Inc. (“ADI”) in CMLS Financial Ltd. v. Ashcroft Development Inc. et al., 2026 ONSC 1824. The decision arose in connection with an application brought by CMLS against ADI and its first-secured creditor seeking to force the sale of certain real properties held as collateral for a $10-million guarantee in favour of CMLS.

The court rejected arguments that the security was invalid due to the absence of consent from the first mortgagee, finding that ADI had provided clear authorization for the registration and that the requirement for consent was not a true condition precedent. Despite the respondents heavily contesting the validity of CMLS’s collateral mortgage, Regional Senior Justice C. MacLeod confirmed its validity and CMLS’s right to payment of up to $10 million from the sale proceeds after satisfaction of the first mortgage.

The court declined, however, to appoint a receiver over the lands at this stage. While the loan secured by the properties is in default and the applicable charge terms permitted CMLS to seek that remedy, the court determined that a receivership was not necessary given that the assets consist of vacant land with no ongoing business operations. Instead, ADI was authorized to continue marketing the properties for sale for a 90-day period, with an obligation to keep CMLS informed of listing arrangements and any offers received. The decision preserves CMLS’s enforcement rights while allowing an opportunity for a private sale process.

Aird & Berlis represented CMLS Financial Ltd. with a team including Robb English, Josh Suttner and Calvin Horsten (Financial Services).