It is provided in Ontario by rule 410 that under an order of reference the master may, inter alia, take account of any rents and profits received or which, but for wilful neglect or default, might have been received (y).

A mortgagee who enters into possession or receipt of the rents and profits of the mortgaged property must account not only for what he actually receives, but for what he might have received but for his wilful default (z), that is for what he might have received but for his negligence or mismanagement (a).

Where mortgagees in possession, who were brewers, let the premises with a restriction that the tenant should take his supply of beer entirely from them, it was held that the mortgagees must account for such additional rent as they would have received if the premises had been let without restrictions, but not for the profit which they made by the sale of beer to the tenant (b).

A mortgagee is so accountable not only to the mortgagor but also to subsequent mortgagees and to creditors and others claiming under the mortgagor. A mortgagee in possession is liable to a subsequent encumbrancer if after notice from him he pays the surplus rents and profits to the mortgagor (c).

If a mortgagee in possession execute an assignment of his mortgage he will continue to be liable for the rents and profits if the assignee fails to account for them (d).

(y) See chapter 27, Sec. 293.

(z) Parkinson v. Hanbury, 1867, L.R. 2 H.L. 1, at p. 15, 18 R.C. 411, at p. 425.

(a) Mayer v. Murray, 1878, 8 Ch.D. 424; Merriam v. Cronk, 1874, 21 Gr. 60; Coldwell v. Hall, 1862, 9 Gr. 110, at p. 112.

(b) White v. City of London Brewery Co., 1889, 42 Ch.D. 237.

(c) Berney v. Sewell, 1820, 1 J. & W. 647.

(d) See Sec. 304, supra.

The assignee of a mortgagee in possession is likewise accountable to the mortgagor and those claiming under him not only for the rents and profits received by himself but also for those received by the mortgagee and intermediate assignees (e). Where one of several devisees claimed to be solely entitled and mortgaged the property, and the mortgagees entered into receipt of the rents, it was held that they must account to the other devisees for their shares of the rent (f).

A mortgagee, his power of sale on default having arisen, sold the mortgaged premises ostensibly to a third person but in reality to himself. Subsequently he sold a portion of the premises to a third person for an amount in excess of the mortgage debt; and he continued in possession of the remaining part, and received rent. It was held that the sale by the mortgagee to himself was abortive, and that he was a mortgagee in possession, and should account to the mortgagor for the surplus from the second sale, together with the rent and interest on both sums and costs (g).

A derivative mortgagee is bound to account to his assignor for all profits made by him. Thus where a derivative mortgagee by representing himself to be the absolute mortgagee obtained an assignment of the equity of redemption which he subsequently re-sold at a profit, he was held bound to account for the profits so made (h).

In a redemption suit by the second mortgagee against the first in which it appeared that the equity of redemption had become vested in the first mortgagee, and that he had entered into possession and had cut and removed timber to a greater value than the amount due on his mortgage, it was held that he was bound to account for the value of only such timber and occupation rent as was taken or received by him as mortgagee, and not for what he took or received as owner of the equity of redemption, but that the second mortgagee might ask for a receiver (i).

(e) Chambers v. Goldwin, 1804, 9 Ves. 254.

(f) Mcintosh v. Ontario Bank, 1872, 19 Gr. 155.

(g) Mitchell v. Kinnear, 1897, 1 N.B. Eq. 427.

(h) Wilkins v. McLean, 1885, 10 O.R. 58; 13 O.A.R. 467; 14 Can. S.C.R. 22, sub now. McLean v. Wilkins.

The rule is that when a mortgagee enters into possession he does so for the purpose of recovering both his principal and interest. Equity regards the estate only as a security for the money due on the mortgage, and the court requires the mortgagee to be diligent in realizing the amount due, in order that he may restore the estate to the mortgagor who is in equity the person entitled to it. Nevertheless the mortgagee will not be held responsible for any greater rent than he has actually received, unless it is clearly established in evidence that he knew a greater rent might and could have been obtained, and that he refused or neglected to obtain the same (j).

A mortgagee taking possession and evicting a tenant of the mortgagor who is willing to remain and pay rent will be held accountable for the rents from that time (k). Where after default was made in payment of a mortgage, a tenant put in possession by the mortgagor promised to pay the mortgagee rent, but failed to do so, it was held that the mortgagee was not chargeable with such rent (l).

Where a mortgagee has taken possession of part only of the mortgaged lands he will not be held to be in constructive possession of the whole so as to render him liable to account to subsequent encumbrancers for the rents and profits of the lands which still remain in the possession of the mortgagor (m).

(i) Steinhoff v. Brown, 1865, 11 Gr. 114.

(j) Merriam v. Cronk, 1874, 21 Gr. 60; Waddell v. McColl, 1868, 14 Gr. 211; Penn v. Lockwood, 1850, 1 Gr. 547; Earle v. Harrison, 1909, 4 N.B. Eq. 196.

(k) Penn v. Lockwood, 1850, 1 Gr. 547.

(l) Waddell v. McColl, 1868, 14 Gr. 211.

Where one of two co-owners of a patent mortgaged his share to the other, and the mortgagee worked the patent for his own benefit, it was held that as he had a perfect right to do so in his character as co-owner, he was not liable to account as mortgagee in possession of the mortgaged share in respect to the profits received by him (n).