• 2023 ABKB 716

  • Court: Court of King’s Bench of Alberta, Application Judge W.S. Schlosser.
  • Background: Vision Credit Union provided a loan to Stayura Well Services Ltd (SWS), secured by mortgages on properties owned by SWS and Gerald and Judy Stayura. A dispute arose when Vision refused to discharge the mortgage despite SWS repaying the loan principal, arguing that legal fees from a separate ongoing lawsuit (the AOD Action) should be covered by the mortgage.
  • Decision: The court rejected Vision’s claim, ruling that the mortgage did not secure the legal fees for the defence of the AOD Action. Vision was ordered to discharge the mortgage on payment of the outstanding amount.
  • Costs Awarded: SWS and the Stayuras were awarded costs at 40% of indemnity costs to be assessed.

• Appeal Decision (2024 ABKB 576):

  • Court: Court of King’s Bench of Alberta, Justice John T. Henderson.
  • Outcome: Vision Credit Union's appeal was dismissed. The court upheld the original decision, confirming that the mortgage terms could not be interpreted to include legal fees from the AOD Action. The court emphasized that keeping the mortgage in place was unreasonable after the loan had been repaid.
  • Key Considerations: The court emphasized sound commercial principles and concluded that using the mortgage to secure defence costs would lead to an unjust outcome by preventing the borrower from refinancing or selling the property.

Final Outcome:

• Both decisions favored Stayura Well Services Ltd, leading to the mortgage's discharge, with Vision Credit Union ordered to cover partial legal costs at 40% of indemnity costs for both the initial application and appeal.