For transactional real estate lawyers, understanding the litigation landscape can provide valuable insights into drafting stronger agreements and advising clients on potential risks. A recent Ontario Court of Appeal decision, Hermina Developments Inc. v. Epireon Capital Limited, 2025 ONCA 559, offers important lessons about mortgage enforcement, power of sale proceedings, and the challenges facing both borrowers and lenders in distressed real estate situations.
The Facts: A 16-Year Enforcement Saga
The case involves a development property in Woodstock, Ontario—a 26.7-acre parcel purchased by Hermina Developments in 1999. In 2008, Hermina secured financing through two mortgages, including a second mortgage to the respondents for $4.25 million at a hefty 14.875% annual interest rate.
When Hermina defaulted in January 2009, what should have been a straightforward power of sale became a prolonged battle. The respondents’ initial sale efforts were derailed when Hermina’s director allegedly damaged “For Sale” signs and threatened to burn them—an extreme response that highlights how contentious these proceedings can become.
By July 2009, the respondents obtained a consent judgment for approximately $4.77 million, plus ongoing interest. However, despite multiple attempts between 2009 and 2021, they couldn’t successfully sell the property. Meanwhile, Hermina remained in possession, using the land for farming and operating a sandblasting business.
The Legal Battle: Stay Applications and Irreparable Harm
When the respondents finally secured a buyer in 2025 (with closing scheduled for August 1, 2025), Hermina sought to block the sale. After the motion judge dismissed their application, Hermina appealed and requested a stay pending appeal—arguing they met the three-part test from Circuit World Corp. v. Lesperance:
- Serious question to be tried on appeal
- Irreparable harm if the stay is refused
- Balance of convenience favoring a stay
The Court’s Analysis: Why Monetary Damages Suffice
Justice Monahan acknowledged a serious question for appeal but rejected the stay application on the other two prongs. His analysis provides valuable guidance for practitioners:
Defining Irreparable Harm in Real Estate Context
The court clarified that irreparable harm means harm that “either cannot be quantified in monetary terms or which cannot be cured.” Importantly, the test isn’t whether a party can recover specific property if successful on appeal, but whether losses from a sale can be quantified and compensated through damages.
Hermina argued the property was unique due to its size, Highway 401 frontage, and proximity to Woodstock. However, the court found these characteristics insufficient to establish uniqueness. Comparing the property to three recent area sales didn’t prove the land was irreplaceable—proximity to highways and urban centers, while valuable, aren’t unique characteristics.
This contrasts with M & M Homes Inc. v. 2088556 Ontario Inc., where a stay was granted because the property was adjacent to the defendant’s planned residential development—a truly unique locational advantage.
Balance of Convenience: Following the Money
The court’s balance of convenience analysis was particularly instructive. By 2025, the mortgage debt had ballooned to $14.365 million—exceeding the sale price under the agreement of purchase and sale. Key factors included:
- Hermina was impecunious with the property as its only asset
- The respondents had been trying to sell since 2009 without success
- Continued delays would increase the respondents’ losses with no realistic prospect of recovery from Hermina
- If the sale was later found improper, monetary damages could compensate Hermina
Practical Implications for Transactional Lawyers
This decision offers several lessons for real estate practitioners:
- Power of Sale Provisions
The 16-year delay between default and sale shows how borrower resistance can frustrate enforcement. Strong power of sale clauses with clear procedures and timelines can help, though they must still comply with statutory requirements and court oversight.
- Property Uniqueness Claims
When advising clients on potential irreparable harm arguments, focus on truly unique characteristics that couldn’t be replicated elsewhere. General advantages like highway access or urban proximity typically won’t suffice.
- Stay Applications Strategy
For borrowers seeking stays, emphasize genuine uniqueness, the inability to quantify losses, and the inability of the opposing party to compensate for losses. For lenders, highlight mounting losses and borrower impecuniosity to support the balance of convenience.
Conclusion
Hermina v. Epireon Capital demonstrates the challenges inherent in distressed real estate situations. While borrowers have legitimate rights to challenge power of sale proceedings, courts will carefully scrutinize stay applications to prevent abuse of process that merely delays inevitable enforcement.
For transactional lawyers, the case underscores the importance of clear documentation, realistic assessment of enforcement challenges, and understanding how litigation principles apply to real estate disputes. In an environment where commercial real estate faces increasing pressures, these lessons become even more critical for protecting clients’ interests.
The decision reinforces that while the law provides various protections for borrowers, it won’t indefinitely shield them from the consequences of default—particularly where lenders have demonstrated patience and borrowers lack realistic prospects for resolution.
