COURT FILE AND PARTIES

COURT FILE NO.: 4057/11
DATE: 2012-01-04
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NATOYA HYLTON, Applicant

AND:
ALLIANZE POWER CORP., Respondent

BEFORE: MURRAY J.

COUNSEL:
Natoya Hylton, Self-Represented
Mark Adilman, Counsel for the Respondent

HEARD: October 5, 2011

ENDORSEMENT

[ 1 ] The hearing in this matter was on October 5, 2011, and further written submissions were received from the parties on October 17 and October 18.

[ 2 ] In essence, this application is a request by the applicant for an order requiring the removal from title of a Notice of Security Interest which has been registered by the respondent against the title of the residential property owned by her. The Notice of Security Interest relates to a hot water system owned by the respondent and located on the property of the applicant.

[ 3 ] In her factum, the applicant also asked for an order that the respondent be compelled to agree to sell or to rent the hot water system. If, pursuant to such an order, the respondent agrees to rent the system, the applicant says that she agrees to pay rental until the date of removal of the unit from her home.

Background Facts

[ 4 ] The applicant, Natoya Hilton, purchased a new home with the municipal address of 1267 Rolf Terrace in Milton, Ontario, being Lot 38, Plan 20-1051, Town of Milton, in the Regional Municipality of Halton.

[ 5 ] The agreement of purchase and sale, dated February 11, 2008, was originally between the vendor, Milton Country Properties Limited (Country Homes) and Philippa Clarke, purchaser. Philippa Clarke is the mother of the applicant. The purchase agreement was amended in June of 2008 by adding the applicant as a purchaser. On closing, August 18, 2009, to the property was taken in the name of the applicant only pursuant to a direction given by the purchasers to the vendor. Both the purchaser and her mother live in the home.

[ 6 ] A schedule to the agreement of purchase and sale, and to the amended agreement of purchase and sale, provided that the hot water system was not included in the purchase price for the property and required that the purchasers enter into a rental contract for the hot water system. The hot water system is comprised of a heater and storage tank that provide hot water for domestic use and for heating the home.

[ 7 ] The vendor, Country Homes, ordered the installation of the hot water system. The execution of the rental agreement with Allianze Power Corporation occurred prior to the closing of the transaction at the offices of the purchasers’ solicitors. The rental agreement was signed by Philippa Clarke and apparently by the applicant. The rent for the hot water system required by the contract is $39.95 per month, plus applicable taxes.

[ 8 ] The rental agreement signed by the purchaser provides that Allianze is authorized to register a Notice of Security Interest against the property. It did so on May 12, 2010 in the Halton Registry Office as instrument number HR 840368.

[ 9 ] The purchasers sought to refinance the mortgage on their property and ran into difficulty with the potential mortgagee because of the prior registration of the Notice of Security Interest.

[ 10 ] Without getting into the details of the interactions between the lessor of the hot water tank and the applicant, suffice to say that Allianze refused to postpone its registered security interest in favour of a proposed mortgagee because of rental arrears. The applicant then brought this application in which she sought a court ordered postponement or removal of the notice of security interest from title.

Analysis

[ 11 ] Section 23 of the Personal Property Security Act, R.S.O. 1990, c. P.10 provides that registration perfects a security interest in any type of collateral.

[ 12 ] Section 54 which directs the registration with respect to land states:

... that a notice of security interest , in the prescribed form, may be registered in the proper Land Registry Office where the collateral includes fixtures.

[ 13 ] Section 54 (1) (b) of the Personal Property Security Act, R.S.O. 1990, c. P.10 states that a notice of security interest, in the required form, may be registered in the proper land registry office, where, the security interest is a security interest in a right to payment under a lease, mortgage or charge of real property to which this Act applies.

[ 14 ] Section 54 (4) provides that:

A notice registered under subsection (1) may be discharged or partially discharged by a certificate in the required form and the certificate may be registered in the proper land registry office.

[ 15 ] Section 56 (1) (a) of the Personal Property Security Act provides that where a financing statement or notice of security interest is registered under this Act , and all the obligations under a security agreement to which it relates have been performed, then any person having an interest in the collateral covered by the security agreement may deliver a written notice to the secured party demanding registration of … a certificate of discharge or partial discharge referred to in subsection 54 (4), or both, and the secured party shall register the financing change statement or the certificate of discharge or partial discharge, or both, as the case may be.

[ 16 ] Section 57 (1) of the Personal Property Security Act provides that within 30 days after all the obligations under a security agreement that creates a security interest in consumer goods have been performed or forgiven, the secured party shall register, (a) a financing change statement discharging the registration if the security interest has been perfected by registration; and (b) a certificate of discharge, if a notice of security interest has been registered under section 54.

[ 17 ] I have set out the above provisions of the Personal Property Security Act in order to assist the applicant in understanding her rights and the rights of the respondent, Allianze, under that legislation.

[ 18 ] As noted above, the applicant seeks to obtain a court order removing the respondent’s Notice of Security Interest which has been registered against the title of the residential property owned by her. It is plain that the respondent had the right under the Personal Property Security Act to register notice of its secured interest and has done so. As I will explain, it is also plain that there is no reason for the court to order the removal of such notice.

[ 19 ] The application includes allegations that she is neither a signatory to nor bound by the contract with Allianze. This assertion appears to be one of the principal reasons why she feels she is entitled to have the respondent’s Notice of Security Interest removed from title.

[ 20 ] The evidence filed by the respondent establishes that in the amended agreement of purchase and sale, the applicant agreed to sign a lease agreement for the hot water system. In addition, the evidence of the respondent is that both the applicant and her mother were signatories to the lease agreement for the hot water system. The applicant continues to own and live in the house and has had the advantage of the system without paying the rental amounts as they fell due.

[ 21 ] Given that material facts are in dispute, it is apparent that this proceeding ought not to have been commenced by notice of application but by action in order that issues of fact and credibility can be determined.

[ 22 ] The application fails for this reason.

[ 23 ] The Personal Property Security Act sets out the jurisdiction of the Court to order the registration of a discharge after the obligations under a security agreement that creates a security interest in consumer goods have been performed or forgiven. This Court has limited jurisdiction to make such an order. Section 56 (5) of the Personal Property Security Act provides that:

Upon application to the Superior Court of Justice, the court may,

(a) allow security for or payment into court of the amount claimed by the secured party and such costs as the court may fix, and thereupon order the secured party to discharge or partially discharge, as the case may be, the registration of the financing statement or notice of security interest; or

(b) order upon any ground that the court considers proper that,

(i) the registrar amend the information recorded in the central file of the registration system to indicate that the registration of the financing statement has been discharged or partially discharged, as the case may be,

or

(ii) the land registrar delete any entry in the books of the land registry office related to the notice of security interest or that the land registrar amend the books of the land registry office to indicate that the security interest has been discharged or partially discharged, as the case may be. R.S.O. 1990, c. P.10, s. 56 (5) ; 2000, c. 26 , Sched. B, s. 16 (1).

[ 24 ] If the applicant were to pay into court, pursuant to Section 56 (5) (a), the amount claimed by Allianze, and such costs as the Court may fix, the Court would have jurisdiction to order Allianze to discharge the Notice of Security Interest. Such payment into court would stand in the place of the secured equipment pending trial and resolution of disputed facts. The applicant has not proposed any payment into court pursuant to Section 56 (5) (a). Therefore, the Court has no jurisdiction to order Allianze to discharge the Notice of Security Interest under section 56 (5) (a) .

[ 25 ] The applicant has also failed to establish grounds upon which this Court would consider it proper to order a discharge or partial discharge of the security interest of the respondent. Therefore, the Court has no jurisdiction to order Allianze to discharge the Notice of Security Interest under section 56 (5) (b).

[ 26 ] The Personal Property Security Act provides that if the applicant makes all payments due under the lease agreement then she is entitled to require the respondent to register a notice in the land registry office indicating that the security interest has been discharged. This suggests that when all such payments have not been made - as in the case at bar - a court should not vacate the registration of notice of the secured interest of the respondent. Indeed, in the absence of a payment into court, the order requested would operate to defeat the purpose of registration in a case such as this.

[ 27 ] The application fails for these reasons as well.

[ 28 ] I also note that if the applicant pays all arrears due pursuant to the lease of the hot water system, the respondent’s counsel has advised the Court that Allianze would agree to postpone its registered security interest to that of a first mortgagee. If this offer is still open, it would appear to be a practical solution to the applicant’s concerns related to refinancing the property.

Other Issues Raised by the Applicant

[ 29 ] As noted at the outset, the applicant also asked for an order that the respondent be compelled to agree to sell or to rent the hot water system. If such an order were made and the respondent were to decide to rent the system to a third party, the applicant appears to agree to pay rent for the system until a date fixed for the removal of the system from her home.

[ 30 ] It is not the function of this Court to re-write contracts. The applicant’s rights to purchase the system are spelled out in the contract as are the respondent’s rights to remove the system from the premises. I am not prepared to release the applicant from the contract. The contract governs the rights of the parties unless determined otherwise by a Court after a trial.

[ 31 ] In her prayer for relief, the applicant asked for a number of other remedial orders which were not pursued when she appeared in court on the application.

[ 32 ] The applicant sought an order for the release of funds held by her real estate lawyer, Mr Jerry Korman. Mr. Korman is not a party to this application and the Court is not in any position to make such an order.

[ 33 ] The applicant also asked for an order to have the hot water system removed from her property by the respondent because it is not working properly and has not worked properly since the purchase of the house. This factual assertion is vigorously contested by the respondent. Whether the applicant has a claim for damages against the respondent or any valid claim for removal\replacement of the hot water system is also properly the subject matter of an action where issues of fact and credibility can be determined. These claims too should have been initiated by Statement of Claim under Rule 14.02 and not by application under Rule 14.05.

Conclusion

[ 34 ] The applicant is not entitled to any of the relief sought in her application.

[ 35 ] The application fails.

Should there be an order pursuant to Rule 38.10 that the application or any issue(s) proceed to trial?

[ 36 ] I will entertain a request for an order that the application or any issue(s) proceed to trial.

[ 37 ] I am not prepared to exercise my discretion to make such an order without hearing submissions from the parties.

[ 38 ] If either party wishes an order that the application or any issue(s) proceed to trial, written notification should be given to the other party and to the Court within 15 days of the release of this decision. If such a request is made, the parties can - in consultation with the trial coordinator in Milton - arrange a convenient time to attend before me to make submissions.

[ 39 ] If there is no request to convert the application or any issue(s) to an action within 15 days of the release of this decision, the application will be dismissed in its entirety.

Costs

[ 40 ] The respondent seeks costs for this application.

[ 41 ] This application was not properly brought and there is no reason to deprive the respondent of its costs or to depart from the normal rule that costs follow the event. The issue of costs need not be postponed pending a trial that may result from an order pursuant to Rule 38.10.

[ 42 ] Counsel for the respondent, within 15 days of the release of this decision, shall make brief written submissions as to scale and quantum of costs sought by the respondent. Ms. Hylton shall make brief written reply within 15 days of the receipt of Mr. Adilman’s costs submissions.

MURRAY J.
Date: January 4, 2012