Sundaralingam v. Mohanathasan 2026 ONSC 5002
A recent Ontario Superior Court decision provides an important lesson about mortgages and assumed debt.
In Sundaralingam v. Mohanathasan, the defendant acquired a property from her former husband and agreed to assume his existing indebtedness. As part of the arrangement, a new $300,000 second mortgage was registered in favour of the plaintiff.
The defendant later argued that the mortgage was a sham because she had never received $300,000.
The Court rejected that argument.
The mortgage was not intended to secure a new advance of $300,000. It secured the remaining amount of an existing debt that had been assumed by the defendant. A mortgage can be enforceable even where it secures a pre-existing debt.
The Court also placed considerable importance on the fact that the defendant:
- signed the mortgage documents;
- received independent legal advice;
- acknowledged the existing indebtedness; and
- made all 12 monthly interest payments before defaulting.
The defendant also attempted to raise several arguments, including undue influence and misrepresentation, that had not been properly pleaded or supported by specific evidence.
The Court granted summary judgment, ordered payment of $342,115.01 plus interest, and granted the plaintiff possession of the property. Costs of $9,000 were also awarded.
Considerations
A mortgage does not necessarily mean that new money was advanced to the person signing it:
- A mortgage is security for a debt, and that debt may be an existing obligation that has been assumed by the new owner.
For real estate professionals, the case is another reminder of the importance of carefully documenting assumptions of debt, ensuring that parties understand what they are signing, and obtaining independent legal advice where substantial obligations are being assumed.
COMMENT
Appreciation to a good friend and colleague, Thaya PK Kandiah, who acted for the Plaintiff in this case.
Brian Madigan LL.B., Broker