CITATION: Ali v. Royal Bank of Canada, 2018 ONSC 5849

DIVISIONAL COURT FILE NO.: 672/17

DATE: 20181003

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

BIBI ALI

Plaintiff/Respondent

– and –

ROYAL BANK OF CANADA

Defendant/Appellant

Nadia Condotta, for the Plaintiff/ Respondent

James Riewald, for the Defendant/ Appellant

HEARD at Toronto: September 20, 2018

c. horkins J.

background

1The appellant Royal Bank of Canada (“RBC”) appeals the decision of Deputy Judge Prattas dated October 16, 2017.

2In 2009, the respondent Bibi Ali and her husband, Rohan Bhagwandin purchased a condominium (the “property”) located at 10 Markbrook Lane, Suite 1511, Toronto (the “property address”). At the time of purchase, Bibi Ali and Rohan Bhagwandin (the “mortgagors”) obtained a mortgage from RBC.

3The mortgage identified Rohan Bhagwandin and Bibi Ali as mortgagors. The mortgage was registered in the Land Registry Office for the Land Titles Division of the Toronto Land Registry Office (No. 66) as Instrument No. AT2163597.

4The mortgage stated that the address for service was the property address

5The mortgage provided that on default, the principal owing would at the option of RBC, become payable and RBC would be entitled to possession of the property.

6In October 2011, because of immigration issues, the respondent and her husband had to temporarily leave Canada and return to Guyana for an extended period of time. They expected to return in April 2013, but did not return until March 2014.

7Before leaving, the mortgagors rented their property and arranged for rent cheques to be deposited into their RBC account for the purpose of paying the mortgage in their absence.

8The tenant vacated the property at the end of April 2013 and no one resided in the property after this departure.

9Default under the mortgage occurred when a condominium lien was registered on title to the property on October 11, 2012 as Instrument No. AT3148800 (the “Lien”).

10On March 11, 2013, RBC received a Notice of Sale in respect of the Lien.

11Between March 11, 2013 and April 5, 2013, RBC made several attempts to contact the mortgagors by letter and telephone, but no response was received.

12On or about April 2, 2013, RBC received correspondence from Mario Deo, a lawyer for Metropolitan Toronto Condominium Corporation No. 953, confirming that the amount owing under the Lien was $5,982.04. RBC paid the amount owing under the Lien and obtained a discharge of the Lien.

13On April 17, 2013, RBC, through its lawyers, demanded payment from the mortgagors of the amounts required to obtain a discharge of the Lien. No funds were received. As a result, RBC issued a Statement of Claim on May 7, 2013 seeking payment from the mortgagors of the amounts due under the mortgage and possession of the property. Unsuccessful attempts were made to serve the mortgagors at the property address and contact them by telephone.

14On May 15, 2013, RBC issued a Notice of Sale. The Notice of Sale was sent by registered mail to the mortgagors at the property address. This was the address for service set out in the mortgage. On May 16, 2013, RBC took possession of the property when it was found to be vacant. By May 23, 2013, further attempts to locate the mortgagors had yielded no new address.

15On July 8, 2013, RBC entered into an Agreement of Purchase and Sale to sell the property under power of sale for $165,700 with a closing date of August 28, 2015.

16On July 16, 2013, RBC’s lawyer at Gowlings was contacted by Ms. Ali who advised that she was in Guyana.

17On July 18, 2013, Gowlings again spoke with Ms. Ali who advised that she had been making condominium payments. Ms. Ali was advised that the Lien was registered due to a special assessment and that RBC was willing to accept payment of arrears to bring the mortgage current.

18On July 18, 2013, Gowlings was also contacted by Ms. Ali’s friend, Kenny Bailey, He was advised that a Letter of Authority would be required if Gowlings was to discuss the file with him. A Letter of Authority was received on July 19, 2013 and thereafter information on the amount of arrears was provided to Mr. Bailey.

19On July 22, 2013, an arrears letter setting out the history of the matter and enclosing many of the relevant documents was faxed to Mr. Bailey and mailed to Ms. Ali at the address provided for her in Guyana. The documents provided included the Notice of Sale that had been issued on May 15, 2013. Although the property had already been sold, an extension of time was provided to pay the arrears by August 15, 2013.

20On August 1, 2013, Ms. Ali contacted Gowlings and requested more time to pay the arrears. A further request for more time was made on August 15, 2013. Ms. Ali was advised to put her request in writing. RBC did not receive a written request.

21On August 28, 2013, Ms. Ali spoke with Gowlings and was advised that the sale of the property had closed. Ms. Ali advised that she did not send a written request because she did not know what to write.

22On August 28, 2013, Gowlings received an email from email address rohan33@gmail.com, confirmed by Ms. Ali to be her email address. The email stated that Ms. Ali and Mr. Bhagwandin left a person in charge of the property who had been opening letters for them in the past. As a result, they were never concerned that there may have been letters that they did not see.

The Smalls Claims court claim / trial

23On June 12, 2015, Ms. Ali issued a claim in Small Claims Court against RBC. Her husband, the other mortgagor was not named as a plaintiff.

24In the claim, Ms. Ali alleged that before she returned to Guyana she gave the condominium property manager her forwarding address. Ms. Ali did not allege that she gave RBC her forwarding address.

25She alleged that the common expense arrears that led to the Lien on the property were associated with the “fraudulent actions of the condominium Board of Directors”. Ms. Ali alleged that she was unaware of the arrears and the demand for payment.

26Ms. Ali claimed $25,000 in damages from RBC as “compensation for [RBC’s] improper process and misguided solution to their misdealing with [the condominium corporation]”.

27At trial, for the first time, Ms. Ali testified that she had given RBC her forwarding address in Guyana. No documents were produced to support her evidence.

28Jacqueline Rose at RBC was the main RBC employee that the mortgagors dealt with to obtain the mortgage and thereafter. Ms. Rose testified at the trial.

29The Deputy Judge reviewed Ms. Rose’s evidence and the relevant excerpts are as follows:

42Jacqueline Rose was called as a witness by the Bank and she testified on the second day of trial. She has been an RBC employee for about 12 years, is a financial adviser and does loans and mortgages.

[43) She recalled when Bibi and her husband came in for a mortgage application in 2009, and that they were approved. She had no post-mortgage transactions with either of them.

44Ms. Rose stated she had a few phone conversations with Bibi but did not recall specifics.

45She acknowledged that the plaintiff wanted to know if they left the country how they would service the mortgage.

46She remembered meeting with Rohan Bhagwandin (Bibi's husband) and he told her he was leaving the county in order to get his permanent status, and renting out the unit and rent cheques would be deposited into his account. No duration of how long he would be away was given and no forwarding address was given to her.

50She said that the plaintiff never advised her she was leaving the country and she had no conversation with the plaintiff regarding the plaintiff leaving the country. She stated that no change of address was ever provided and if it had, it would have been noted.

[51) Ms. Rose did acknowledge and confirm that she made the March 31, 2012 entry on the said Sales Platform document, which stated as follows: "we are accepting rent cheques From Khadra Abdi, on behalf of Bhagwandin Rohan .... as he is outside of the country .. 05 l 42;JR"

52She could not recall when she spoke with the plaintiff.

30The Deputy Judge found Ms. Ali to be a “credible and reliable witness” who testified in a “straightforward manner without inconsistencies”.

31The Deputy Judge found Ms. Rose to be a “somewhat unreliable witness”. The Deputy Judge stated that Ms. Rose “appeared to have a selective memory, and at times appeared somewhat defiant in her evidence, and at times was inconsistent.”

32As a result, where there was a conflict in the evidence between Ms. Ali and Ms. Rose, the Deputy Judge accepted the evidence of Ms. Ali, specifically Ms. Ali’s evidence that she had provided RBC with their forwarding address in Guyana.

33The Deputy Judge found that while Ms. Ali was out of the country the various events noted above, leading to the sale of the property, transpired without her knowledge.

34The Deputy Judge correctly stated that a mortgagee shall not exercise a power of sale unless notice has been given the mortgagor. The Deputy Judge referred to the relevant sections of the Mortgages Act, R.S.O. 1990, c. M.40 that I set out below. Section 31(1) confirms the obligation to give notice and s. 33 deals with the manner of giving notice:

31 (1) A mortgagee shall not exercise a power of sale unless a notice of exercising the power of sale in the Form to this Act has been given by the mortgagee to the following persons, other than the persons having an interest in the mortgaged property prior to that of the mortgagee and any other persons subject to whose rights the mortgagee proposes to sell the mortgaged property…

33 (1) A notice of exercising a power of sale shall be given by personal service or by registered mail addressed to the person to whom it is to be given at the person’s usual or last known place of address, or, where the last known place of address is that shown on the registered instrument under which the person acquired an interest, to such address, or by leaving it at one of such places of address, or, where the mortgage provides for personal service only, by personal service, or, where the mortgage provides a specific address, to such address.[Emphasis added]

35RBC sent the Notice of Sale to the address for service shown on the mortgage. The mortgage clearly stated “Address for Service 10 Markbrook Lane, Unit 1511, Etobicoke, Ontario M9V 5E3”. The Bank argued that s. 33 allowed service at this address, because the mortgage provided this as the address for service.

36The Deputy Judge rejected RBC’s position. She found that RBC failed to provide notice as required by the Mortgages Act. In her reasons, the Deputy Judge stated as follows:

117The Mortgages Act creates alternatives, with no one service method being mandatory or preferred over the other. The overriding consideration though, in my view, is that notice be actually given to a mortgagor.

118The Bank submits that it complied with the notice provisions because it sent the Notice of Sale to the address for service shown on the registered mortgage.

119However, there is no provision per se in the Mortgages Act for serving at the "address for service" on the registered mortgage.

120Further, in my view, in the circumstances of this case and given the knowledge that the Bank had at the relevant time, it is insufficient merely to do what under other circumstances might have been technically permissible under the Mortgages Act all the while knowing that this Notice of Sale would in all likelihood not come to the attention of the mortgagors. It defeats the purpose of service which is to give notice of to the mortgagors and to ensure that the matter comes to their attention so that they have an opportunity to redeem within the requisite time.

121There was no attempt to serve the Notice of Sale by personal service. This is not surprising because the Bank was unsuccessful in personally serving the Statement of Claim and knew that the mortgagors were not living at the condo.

122The Bank chose to "serve" the Notice to an empty condominium despite knowing that the mortgagors were not there. I find that the Bank knew or ought to have known that the Notice would not come to the mortgagors' attention.

123Knowingly serving or sending documents to an empty property when you know the person you are trying to serve is not there, in my view, defeats the purpose. The plaintiff was never given a real opportunity to pay, because on each occasion, both by the MTCC 953/Simerra Property and by the Bank, notices were sent to at a place when each party knew she would not be there. Thus it cannot be said that she was (properly) "served" if at all.

37The Deputy Judge relied on a series of cases to support her decision that I will address below.

38The Deputy Judge awarded Ms. Ali $25,000 in damages, the maximum amount permitted in the Small Claims Court.

standard of review

39The standard of review on an appeal from the order of a Deputy Judge is correctness for an error of law, palpable and overriding error for an error of fact, and correctness or palpable and overriding error for a question of mixed fact and law, depending on whether there is an extricable legal principle: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.

ANalysis

40RBC raises several grounds of appeal. Most are alleged palpable and overriding errors of fact concerning the Deputy Judge’s finding that Ms. Ali gave RBC her address in Guyana, the lack of evidence to support the damages and the rate of interest allowed. With the exception of the interest rate, it is not necessary to deal with these grounds because the appeal is allowed on RBC’s main ground of appeal.

41RBC’s main ground of appeal is that the Deputy Judge erred in law and mixed fact and law in finding that there is no provision in the Mortgages Act for serving at the address for service listed on the registered mortgage and in finding that notice of the power of sale was not given in accordance with the Mortgages Act.

42The Deputy Judge found in para. 119 that “there is no provision per se in the Mortgages Act for serving at the "address for service" on the registered mortgage.”

43This is not correct. Section 33 of the Mortgage Act is clear. It sets out a variety of ways in which service can be effected. The last option in s. 33 is “where the mortgage provides a specific address, to such address”. There is no dispute that the mortgage did provide a “specific address” for service and that is where RBC sent the notice of sale.

44In Confederation Trust Co. v. Mac-Don Builders Inc., [1990] O.J. No. 1859, the Court considered an argument that the word “provides” in s. 32(1) (now section 33(1)) implies that the address must not be simply shown on the mortgage document, but must be a provision to which the parties have agreed. The argument was made that because the Standard Charge Terms did not contain a provision regarding notice, the mortgage did not provide for service at the address listed for service within the meaning of the Mortgages Act. The Court specifically rejected the argument noting that the mortgage document affords a space for “address for service” and that this is a provision of the mortgage.

45Having rejected RBC’s position that it was entitled to serve the mortgagors at the "address for service" on the registered mortgage, the Deputy Judge went on to find that this service was not valid because RBC had actual notice that the mortgagors were in Guyana. As a result, she found that they had to “act on the current information” and this “displaces the provision in the Mortgages Act”.

46The Deputy Judge’s decision is contrary to binding appellate authority that confirms RBC satisfied its service obligation under s. 31(1) of the Mortgages Act when it sent the notice of power of sale to the address for service specified in the mortgage as permitted in s. 33(1).

47In CIBC Mortgage Corp. v. Chopra (1997), 35 O.R. (3d) 362 (C.A.), the mortgage company sent the notice of power of sale to the address specified in the mortgage document. The Court of Appeal, in interpreting s. 33(1), held that notice sent to the address listed in the mortgage was valid, even though the mortgagee knew the debtor was living at another address. The court referred to its previous decision in Wood v. Bank of Nova Scotia (1980), 29 O.R. (2d) 35 (C.A.), where it held that notice given in compliance with s. 33 is sufficient, whether or not it is ever received.

48The facts in Chopra are important. The mortgagor challenged the service at the address listed for service in the mortgage. In this case, the mortgagee knew that the mortgagor was not living at the subject property and knew his other address. In finding that service of the notice by registered mail to the property address was valid, the Court noted that the mortgagor contracted with the mortgagee in the Standard Charge Terms that the mortgagee could sell the property in case of default, provided it gave the mortgagor 35 days’ notice as required by Part III of the Mortgage Act. Section 33 is part of Part III and allows for service at the address provided in the mortgage.

49The Deputy Judge concluded that Chopra did not apply because, in her view, the Court of Appeal in Chopra “specifically left open the door to invalidate a notice where notice was sent to a place where [the] mortgagee knew [it] would not come to the attention of the mortgagor”. The Deputy Judge relied on the following passage in para 19 of Chopra that is emphasized:

19 Similarly, in this case, in my view, s. 33 was complied with when the requisite notice was sent by registered mail to the respondent addressed to the specific address provided for service in the mortgage, even though that notice was not received by the respondent. In saying this, I should not be taken as commenting on the correctness or otherwise of statements in some of the decisions to which we were referred that the mortgagor has not been given proper service where the mortgagee knows that the proposed method of service will not bring the notice to the attention. That is simply not this case, and it is unnecessary to decide that issue. At least where the mortgagee has no information that service by registered mail to the address for service will not bring the notice to the attention of the mortgagor, it is entitled to rely upon that method. [Emphasis added.]

50It is not clear what “decisions” the court is referring to in para. 19 of Chopra. I do not interpret Chopra to leave the door open as the Deputy Judge suggests. Regardless of this passage in para. 19, the facts in this case cannot be distinguished from Chopra. Furthermore, Chopra continues to be followed by this court and remains binding law.

51In Wells Fargo Financial Corp. Canada v. Brazeau, [2009] O.J. No. 3337 the court rejected the mortgagor’s reliance on the above obiter statement in Chopra. In Brazeau, the Court considered a motion for summary judgment brought by a mortgagee. The mortgagor alleged that service of the Notice of Sale was invalid even though it was sent by registered mail to the address for service listed on the mortgage. The mortgagor alleged that he attended at the mortgagee’s office prior to the power of sale and advised a representative of his current address (different than the address for service), that he was not living at the property and that he was not allowed to enter the property. The Court relied on Chopra and Wood and found that service of the Notice of Sale to the address listed in the mortgage satisfied the mortgagee’s obligation, even though the mortgagee knew the mortgagor was living at another address.

52In Brazeau, the Court found that even in circumstances where the mortgagor advised the mortgagee that he was living at another property, was not permitted to enter the property and the bank’s file showed a contact phone number for the mortgagor’s mother, it did not automatically follow that mail sent to the property would not come to the mortgagor’s attention. The Court noted there was no evidence that mail sent to the mortgagor at the property was ever returned or that he filed a change of address with Canada Post.

53To find that the mortgagee cannot rely on the address for service stated in the mortgage, imposes an unfair burden on the mortgagee, as the court explained in Brazeau at para. 19:

19 Even more importantly, Brazeau's assertion ignores his clear contractual obligation to notify Wells Fargo in writing of any change of address. The mortgage agreement he signed states precisely how service is to be effected, and what he must do if he wishes to alter that arrangement. He simply ignored that, and now expects that because he may have mentioned his new living arrangements to an unspecified bank representative on an unspecified time and date he should be relieved of his contractual duties. That approach not only ignores the clear wording of the mortgage agreement, but also imposes an unfair burden on the bank to track and record errant debtors who cannot be bothered to deliver notice in writing. [Emphasis in original.]

54In this case, there was no evidence that RBC knew that mail sent to the property address would not reach Ms. Ali or her husband. As in the cases cited above, there was no evidence that mail was returned to RBC, that Ms. Ali had filed documents to amend the mortgage to provide a new address for service or that Ms. Ali filed a change of address with Canada Post. To the contrary, Ms. Ali’s August 28, 2013 email states that they left a person in charge of the property who was opening mail on their behalf.

55The only evidence given by Ms. Ali directly on point is that she provided RBC with a forwarding address. As in the cases cited above, a mortgagee’s knowledge of another address is not sufficient to displace the clear wording of s. 33(1) that allows service of the Notice of Sale by registered mail to the address provided for service in the mortgage.

56The Deputy Judge relied on Re Hal Wright Motor Sales Ltd. and Industrial Development Bank (1975), 8 O.R. (2d) 76, as an example of a case where service of a Notice of Sale by registered mail to the mortgaged property was invalid, where the mortgagee had another address from which it had corresponded with the mortgagor. This case is clearly distinguishable because the mortgage in question did not specify an address for service. As a result the issue was whether the mortgagor had been given notice of the power of sale by one of the other methods set out in s. 32(1), now s. 33(1). Re Hal Wright Motor Sales Ltd. was similarly distinguished by the court in Confederation Trust Co. v. Mac-Don Builders Inc., on this basis.

57Finally, the respondent argues that the recent decision in Stanbarr Services Ltd. v. Metropolis Properties Inc., 2018 ONCA 244, validates the Deputy Judge’s decision. The Stanbarr decision is distinguishable. The issue in Stanbarr was whether the purchaser of a property had “actual knowledge of non-compliance with s. 33 of the Mortgages Act, which mandates the manner of notice of the exercise of a power of sale” and if not, whether the purchaser could rely on the registration of its transfer and the protections afforded under the Land Titles Act. On appeal, the court found that the purchaser did not have “actual notice” of the defect in the power of sale and was therefore a bona fide purchaser for value without notice of the defect in the power of sale proceedings.

58The focus of the decision in Stanbarr was not whether a mortgagee gave a mortgagor notice of power of sale proceedings as required by the Mortgages Act. However, referring to the required notice under the Mortgages Act, the court stated in Stanbarr at para 32 “[i]t is not a defect in a power of sale process that a notice is not received by the intended recipient; it is only a defect if the notice was not sent in the prescribed manner; Wood v. Bank of Nova Scotia (1980), 29 O.R. (2d) 35 (C.A.) at plaintiffs 36-37”.

59In summary, when the law as stated in Chopra is applied to the facts of this case, it is clear that the Deputy Judge’s decision is wrong in law and Bibi Ali’s claim against RBC should have been dismissed. As a result, the appeal is allowed and the decision of the Deputy Judge is set aside.

60While this error of law is sufficient to set aside the judgment, I will address one additional error because both parties agree that an error was made when the Deputy Judge dealt with interest. The Deputy Judge’s decision on interest includes a mistake of fact and the parties request that it be corrected.

61The Deputy Judge awarded Ms. Ali $25,000 in damages with pre-judgment and post-judgment interest at the rate of 7.2% per annum. This rate exceeded the amounts provided for in ss. 128 and 129 of the Courts of Justice Act.

62The Deputy Judge started with the rate fixed in the mortgage which she described as “prime + 4% calculated monthly”. This was an error of fact because the registered mortgage set out a rate of interest of “prime + 0.4%”. This error flowed through the Deputy Judge’s approach to interest.

Conclusion

63I make the following orders:

(1) The appeal is allowed.

(2) The judgment of Deputy Judge E.C. Prattas dated October 16, 2017 is set aside.

(3) On consent, the costs of this appeal are fixed at $4,000. The respondent shall pay the appellant costs in the amount of $4,000 all inclusive.

___________________________ C. Horkins J.