COURT FILE NO.: 653/22 DATE: 2022/05/ 11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SHEILA A. ZAVITZ and CARL DALBERT NEEB, Applicants AND: VIVA FINANCIAL CORPORATION, Respondent

BEFORE: Justice I.F. Leach

COUNSEL: Sarah E. Wege, for the Applicants The named respondent not served and not participating

HEARD: In writing

Endorsement

[ 1 ] Before me is an application, brought in writing and without notice, seeking an order:

a. dispensing with service of the application and supporting application material herein on the named respondent; and

b. “discharging the notice of security interest” (sic) in favour of the named respondent, registered on January 5, 2016. [^1]

[ 2 ] I have not granted the requested order for the reasons outlined below.

Further background

[ 3 ] The underlying facts are set forth in detail in the material filed by the applicants, but for present purposes may be summarized as follows:

a. The applicants are the registered owners, (in joint tenancy), of a property known by its municipal address as 354 Winnipeg Boulevard, in the city of London, Ontario; a property hereinafter referred to as “the property” or “the residential property”, as the property appears to be a residential home occupied by the applicants.

b. In the very early days of January 2016, (i.e., on or before January 5, 2016), [^2] someone claiming to be a representative of the named respondent, Viva Financial Corporation (“VFC”), appeared at the door of the property and persuaded the applicants to enter into a contract for the supply and installation of a “carbon filter and water softener” system or unit at the property. In that regard:

i. The applicants are no longer able to locate a copy of the relevant contract, but their recollection and understanding was that it required VFC to maintain and service the system or unit it was to install.

ii. As noted above, VFC registered a notice of security interest in relation to the contract on January 5, 2016. The notice indicated that VFC had registered a security interest in relation to a carbon filter and water softener at the property; i.e., an interest secured to an indicated amount of $10,847.00. In my view, a reasonable if not inevitable inference from that evidence is that the contract admittedly executed by the applicants and the ostensible representative of VFC was not a contract of outright purchase and sale in relation to the relevant carbon filter and water softener system or unit. Instead, I think it reasonable to infer that, while the applicants fulfilled their obligations under the contract, (whatever those obligations may have been), VFC was to retain ownership of the relevant system or unit, (initially at least), or some other conditional entitlement to have that system or unit returned to its possession if the applicants defaulted on their contractual obligations. Hence the need for registration of a notice of security interest against the residential property of the applicants; i.e., effectively advising prospective purchasers or encumbrancers of the property that VJC had an interest in the relevant system or unit installed therein, which might otherwise be regarded as an unencumbered fixture of the property.

iii. There appears to be no dispute that the relevant carbon filter and water softener system or unit was installed at the property.

c. According to the evidence provided by the applicants, that relevant system or unit nevertheless failed to function properly shortly after its installation, and perhaps from the outset. However, when the applicants then repeatedly attempted to contact VFC to have the system or unit serviced and made properly operational, they were unable to do so. All of their calls to the indicated VFC service number went unanswered.

d. In response, it seems the applicants effectively exercised a form of “self help”; i.e., by declining to render any payments whatsoever to VFC pursuant to the contract. However, their doing so apparently prompted no response whatsoever from VFC. Without limiting the generality of the foregoing, VFC never made any demands for payment pursuant to the contract, or any demands for return of the relevant system or unit. In fact, according to the application material, the applicants never heard from VFC again. In the circumstances, it seems the applicants formed an impression that the matter was at an end. Having said that, there is nothing in the evidence before me to suggest that the installed but allegedly non-operational carbon filter and water softening system or unit, in respect of which the notice of security interest was registered, was ever removed from the property and returned to VFC.

e. In any event, approximately six years apparently then went by without the applicants receiving any further contact from VFC, and without the applicants turning their mind to the matter again. During that period, further security interests were registered against the property, including those associated with a refinancing of the property which the applicants carried out with and through the Canadian Imperial Bank of Commerce (“the CIBC”) in August of 2019, in the course of which VFC’s aforesaid security interest somehow was postponed in favour of the CIBC. All of those refinancing arrangements in August of 2019 apparently were carried out “internally” by the CIBC, without the involvement of any independent counsel retained by the applicants. [^3]

f. In January of 2022, the applicants retained their current counsel to assist with arrangements for a further refinancing of the property. The applicants thereafter were surprised to learn from their lawyer, on January 28, 2022, that a condition of the desired further refinancing would be the applicants’ securing of a discharge of the security interest in respect of which VFC had registered a notice, or a further postponement of that security interest in favour of the CIBC.

g. The applicants and their lawyer thereafter made efforts to locate and contact VFC to discuss the matter in a meaningful way. However, attempts to contact VFC using the telephone number for VFC supplied to the applicants, (and indicated on the notice of security interest registered against the property by VFC), required the applicants and their counsel to follow a trail of successively indicated “onward referral” telephone numbers, (apparently no less than six times), which did not lead to anyone capable of discussing the matter on behalf of VFC. A fulsome and detailed description of those efforts is set forth in the application material. For present purposes:

i. Calls placed to the number indicated on the registered notice were redirected to someone who professed to be working in VFC’s “billing department”, who nevertheless indicated that the inquiry should be made instead to a different number.

ii. The person or persons who answered that second (or third) telephone number nevertheless disclaimed any ability to discuss the matter, (as the relevant company for which the person or persons worked denied being the holder of the relevant contract), and indicated that the inquiry should be made instead to another/different telephone number.

iii. The gentleman who answered that third (or fourth) telephone number also disclaimed any ability to discuss the matter, (as his company also denied being the holder of the relevant contract or security interest), and provided another telephone number to which the inquiry should be directed.

iv. The above process was repeated until the applicants’ lawyer eventually was put in contact with a representative of a company called “Simply Smart Home” (“SSH”), who indicated that VFC was “no longer operational”. The SSH representative also denied that SSH had assumed any obligations under the initial contract between the applicants and VFC or any right to speak on VFC’s behalf in that regard, but nevertheless professed to have the ability to discharge the relevant security interest in exchange for a service fee of $1,500.00.

v. When counsel for the applicants asked the SSH representative to confirm that there were no amounts owed by the applicants in relation to the original contract with VFC, the SSH representative failed to give any response.

vi. When counsel for the applicants thereafter sent SSH an email requesting confirmation that there were no amounts owed by the applicants in relation to their original contract with VFC, the email went unanswered.

vii. When counsel for the applicants called SSH again, in an effort to locate someone with authority to deal with discharging of the relevant security interest, no one from SSH returned the call.

h. Further efforts to locate and speak with a VFC representative about the original contract and relevant security interest were similarly unsuccessful. In particular:

i. a corporate search revealed that VFC formally is still an active corporation, although it currently has no registered director or officers; and

ii. internet searches confirmed that the relevant office address indicated as the corporate address for VFC in its corporate filings, (and in the notice registered by VFC in relation to the relevant security interest), is no longer occupied by VFC but by a real estate agency with an entirely different name.

[ 4 ] In the above circumstances, the applicants have proceeded by way of this current application against VFC, (the only named respondent), seeking the relief outlined above.

[ 5 ] The request for an order dispensing with formal service of the application and its supporting material on the named respondent (VFC) is based on the applicants’ assertion that the named corporate respondent “cannot be found”.

[ 6 ] The request for an order discharging VFC’s security interest, (again, described in the application material as an order discharging the notice referring to that security interest), was said to be justified by sections 1 and 12(3) of the Mortgages Act, R.S.O. 1990, c.M.40, and by subsection 102(1) of the Land Titles Act, R.S.O. 1990, c.L.5. The former provisions were said to justify a court order discharging a security interest in circumstances where the owner of that interest (the relevant “mortgagee”) cannot be found, and the latter provision was said to authorize the Land Registrar to note on the register that the relevant security interest had ceased to exist.

Analysis

[ 7 ] As noted above, I have not granted the relief requested by the application, and I accordingly have not signed the submitted draft order.

[ 8 ] I have refrained from doing so for a number of reasons.

[ 9 ] First, I think it self-evident, even on the face of the material filed by the applicants, that it would be inappropriate to have this matter proceed entirely ex parte; i.e., by way of an application that has been served on no one. In that regard:

a. I can appreciate why the searches and investigations made to date by the applicants and their lawyer strongly suggest that efforts to effect personal service of the application on the named corporate respondent via Rule 16.02(1)(c) of the Rules of Civil Procedure will not be successful. In particular: there apparently are no current officers or directors of VFC; the searches and investigation carried out to date suggest no known agent of VFC, (to the extent no one in the telephone chain of inquiry, including SSH, has acknowledged any ability to speak for VFC); and there apparently is no longer any actual “place of business of the corporation” at the only indicated address for VFC, or anyone at that address, (now occupied by a real estate agency), who will appear to “be in control or management” of such a “place of business” of VFC. However, that address remains the registered corporate head office address for VFC, and there is nothing in the material before me to suggest that material sent by mail to that address would not be forwarded or redirected appropriately to some agent of VFC; e.g., an agent dealing with any residual affairs of that formally active corporation. Moreover, and in any event, Rule 16.02(1) and (6) of the Rules of Civil Procedure dictate what is to be done in circumstances such as those described in the application material. In that regard:

i. Rule 16.03(1) provides that “ Where these rules … permit service by an alternative to personal service, service shall be made in accordance with this rule”. [Emphasis added.]

ii. There is nothing in the nature of the application before me which requires personal service and only personal service of the application.

iii. Rule 16.03(6) provides that “ Where the head office, registered office or principal place of business of a corporation … cannot be found at the last address recorded with the Ministry of Government and Consumer Services, service may be made on the corporation by mailing a copy of the document to the corporation … at that address”.

iv. In my view, the applicants accordingly should comply with Rule 16.03(6), and serve their application material by mailing a copy to the last known address of VFC. If the erstwhile directors, officers and/or agents of that corporation put any arrangements in place for the appropriate forwarding or redirecting of such correspondence to ensure that residual affairs of the still active corporation are addressed, (and there is nothing in the material before me to indicate that they failed to do so), the application will come to the attention of those responsible for the residual affairs of VFC. If no such arrangements have been put in place, or there are such arrangements but the recipient of the forwarded or redirected application material does not respond on behalf of VFC, the consequences of such failures will properly fall on VFC; i.e., it then should and will be formally bound by the outcome of an application in respect of which the applicants effected service as required by the Rules, but VFC failed to enter an appearance.

b. Even on the face of the application material before me, it seems reasonably clear that SSH is a non-party to the application which nevertheless would be affected by the relief sought by the application, and accordingly also should have been formally served with the application material. In particular:

i. The representative of SSH indicated that SSH had the ability to discharge the relevant security interest, and would be interested in doing so in exchange for a service fee of $1,500.00.

ii. In my view, that professed ability of SSH to discharge the relevant security interest strongly suggests that the benefit of that security interest somehow has been assigned to SSH. At the very least, SSH has asserted, (rightly or wrongly), that the existence of the relevant security interest provides it with some form of leverage or other ability to secure payment of a $1,500.00 fee before it will exercise its professed ability to see that the relevant underlying security interest is formally discharged.

iii. The relief requested by the applicants effectively would put an end to any such benefit and/or leverage SSH apparently derives from the ongoing existence of the relevant security interest. SSH therefore may not be a named respondent to the application, but it nevertheless is a party affected by the relief being sought via the application, and should be served accordingly.

c. Pursuant to Rule 38.06(2) of the Rules of Civil Procedure, where it appears to a judge hearing an application that the notice of application ought to have been served on a person who has not been served, the judge may:

i. dismiss the application or dismiss it only against the person who was not served;

ii. adjourn the application and direct that the notice of application be served on the person; or

iii. direct that any judgment made on the application be served on the person.

d. In my view, the particular circumstances of this case suggest that the second of those options is the most appropriate and practical approach. Without limiting the generality of the foregoing, in my view:

i. the first option would entail costs thrown away, (if the application is dismissed entirely), and/or fail to move the matter forward to a final outcome, (if SSH has an interest in the underlying security interest and accordingly needs to be involved in this litigation before that interest can be terminated effectively and with finality);

ii. the third option would entail granting of the requested relief without service on an affected party and affected non-party in circumstances where such service is possible and/or mandated by the rules, and advisable to ensure finality; and

iii. the second option preserves the applicants’ cost investment to date while also allowing for the applicants’ filing of further amended and/or supplemental material, (e.g., to address the additional concerns outlined below), before service is effected on VFC and SSH.

e. I therefore formally will order that the application herein be adjourned sine die, pending directed service of the applicants’ material on VFC (in the manner noted above) and SSH (as per the rules), and the applicants’ service and filing of an appropriate notice of return of application.

[ 10 ] Second, while the above service concerns were sufficient to prevent me from granting the relief requested, I would not have granted that relief on the stated grounds in any event, even if the application as framed had been formally served on VFC and SSH. In that regard:

a. As noted above, the jurisdiction expressly identified and relied upon by the applicants, in pursuit of their requested order, is said to lie in ss. 1 and 12(3) of the Mortgages Act, supra, and s.102(1) of the Land Titles Act, supra.

b. On closer examination, however, those provisions do not apply to the circumstances presented in the application material filed with the court. In that regard:

i. I accept that section 1 of the Mortgages Act, supra, defines a “mortgage”, (for purposes of that Act), in a manner that is wide enough to encompass the relevant security interest the applicants seek to have discharged by order of the court. In particular, the relevant definition expressly “includes any charge on any property for securing money or money’s worth ”. [Emphasis added.] It accordingly includes the security interest, (notice of which was registered against the residential property of the applicants), to secure the applicants’ monetary obligations under the contract and/or the value or “money’s worth” of the carbon filter and water softener system or unit VFC installed in the property of the applicants.

ii. However, in my view the full text of s.12(3) of the Mortgages Act, supra, makes it clear that the subsection does not give the court authority to discharge a mortgage simply because the mortgagee, (i.e., the holder of a registered security interest), cannot be found. To the contrary, the entire text of s.12(3) reads as follows:

12.(3) W hen a mortgagor or any person entitled to pay off a mortgage desires to do so and the mortgagee, or one of several mortgagees, cannot be found or when a sole mortgagee or the last surviving mortgagee is dead and no probate of his or her will has been granted or letters of administration issued, or where from any other cause a proper discharge cannot be obtained, or cannot be obtained without undue delay, the court may permit payment into court of the amount due upon the mortgage and may make an order discharging the mortgage.

iii. The full text of s.12(3) therefore indicates that its application to situations where a mortgagee “cannot be found” also requires a desire on the part of the relevant mortgagor, (i.e., against whose property notice of the relevant security interest is registered), to pay off that mortgage or charge. There is nothing in the filed application material to indicate any desire on the part of the applicants to pay off the obligation secured by the relevant registration, which according to the relevant notice had a value, (at the time of its registration at least), of $10,847.00. To the contrary, the material indicates that the applicants believe that they owe nothing in relation to the relevant transaction, (even though they apparently retain the installed carbon filter and water softener system or unit in respect of which the security interest was registered), because VFC failed to perform its alleged obligations under the contract to service and maintain the installed system or unit.

iv. In my view, having regard to their natural, ordinary and grammatical plain meaning, (and in the absence of any provided authority to indicate a contrary interpretation), the opening words of s.13(2) of the Mortgages Act, supra, (i.e., “When a mortgagor or any person entitled to pay off a mortgage desires to do so”), effectively establish a mortgagor’s desire to pay off the “mortgage” as a precondition to any application of the subsection; i.e., a precondition that operates in relation to all the further alternative circumstances described in the subsection. In other words, the word “and”, immediately following that opening wording of the subsection, then introduces three further alternative conditions or circumstances that also must be present before the subsection applies, such that the subsection effectively reads and operates as follows:

12.(3) When a mortgagor or any person entitled to pay off a mortgage desires to do so and:

a. the mortgagee, or one of several mortgagees, cannot be found; or

b. when a sole mortgagee or the last surviving mortgagee is dead and no probate of his or her will has been granted or letters of administration issued; or

c. where from any other cause a proper discharge cannot be obtained, or cannot be obtained without undue delay;

the court may permit payment into court of the amount due upon the mortgage and may make an order discharging the mortgage. [Additional punctuation and emphasis added.]

v. As the applicants in this case have no desire to pay off the relevant “mortgage”, s.12(3) has no possible application here; e.g., even if the applicants, instead of relying on evidence suggesting that VFC “cannot be found”, were to suggest instead that the case presents a situation “where from any other cause a proper discharge cannot be obtained, or cannot be obtained without undue delay”.

vi. I think the above interpretation is reinforced by the indicated relief the court may grant in circumstances where s.12(3) does apply; i.e., whereby the court “may permit payment into court of the amount due upon the mortgage and make an order discharging the mortgage”. [Emphasis added.] In my view, the natural, ordinary and grammatical plain meaning of those words, brought about by the Legislature’s use of the conjunction “and” rather than the conjunction “or”, makes it clear that the court cannot grant one branch of the indicated relief without also granting the other. In particular:

1. The court cannot order payment into court of the amount due upon the “mortgage” without also granting the “mortgagor” an order discharging the registered security. This makes sense. Once the “mortgagor” essentially has provided alternative security for the relevant charge, (by paying the amount of the mortgage or charge into court, and therefore fully protecting the “mortgagee”), it would be unnecessary and unjust, from the perspective of the mortgagor, to preserve the original security arrangement as well.

2. The court cannot make an order discharging the “mortgage” without having required the “mortgagor” to pay the amount of the “mortgage” into court as a condition of the order granting the discharge of the mortgage. This too makes sense. To discharge the mortgage without the mortgagor having provided alternative security, (by paying the amount of the mortgage or charge into court), unjustly compromises the mortgagee by leaving him, her or it without any agreed security for the relevant obligation, while simultaneously conferring a windfall benefit on the mortgagee, (i.e., releasing that mortgagee from an agreed obligation to provide security), that may not be deserved or appropriate.

vii. In this case, the applicants apparently want the court to discharge the relevant security interest, (i.e., the relevant “mortgage” in respect of which a notice was registered against their residential property), without paying the stated amount of the secured obligation, (apparently $10,847.00), into court. (The application materials make no mention whatsoever of the applicants making any payment into court.) In my view, the court lacks jurisdiction under s.12(3) of the Mortgages Act, supra, to grant such relief in isolation; i.e., without requiring a simultaneous payment into court.

viii. Similarly, a reading of the complete text of s.102(1) of the Land Titles Act, supra, relied upon by the applicants, makes it clear that the provisions apply, (in the absence of participation by a consenting holder of a security interest or that holder’s representative), only where the underlying charge has been satisfied. In particular, the subsection reads in its entirety as follows:

102 (1) The land registrar shall, on the requisition of the registered owner of land and on due proof of the satisfaction of a charge thereon, or may, on the requisition of the registered owner of a registered charge or of the personal representative of the registered owner of the registered charge or on the certificate of such registered owner or the personal representative of the registered owner of the satisfaction thereof, note on the register in the required manner the cessation of the charge, and thereupon the charge ceases.

[Emphasis added.]

ix. In this case, there is nothing in the filed application material to suggest that the applicants contemplate any satisfaction of the $10,847.00 charge registered against their property. They instead simply want the registered charge lifted or discharged, without that charge being satisfied or paid by the applicants in any way. The provisions of s.102(1) therefore also do not confer authority permitting the outcome desired by the applicants.

c. In my view, it seems the applicants’ desire for an order discharging the relevant security interest registered against their property is really based on their implicit if not explicit view that they actually owe no obligations whatsoever pursuant to their acknowledged contract with VFC, such that the maintenance of any supposed security in that regard is unnecessary or unjust, and the security should be declared void or discharged accordingly. That view may or may not be accurate. At present, however, the fundamental proposition underlying that view, (i.e., that the applicants owe nothing in respect of which the relevant security interest is required or justified), has yet to be argued or formally decided/established; e.g., by the applicants formally seeking an appropriate declaration in that regard, along with ensuing relief that arguably could include a discharge of the relevant security interest on that basis. The application material filed to date is not framed in that manner, and does not formally seek or attempt to justify, in any meaningful way, the granting of such relief on that basis.

[ 11 ] As noted above, I nevertheless think it appropriate in the circumstance to adjourn rather than dismiss the application placed before me.

[ 12 ] Again, that solution will provide the applicants with an opportunity to reframe their application, (e.g., through amendments and/or the filing of supplementary application material), before effecting service of all the finalized application material in the manner outlined above; i.e., rather than obliging the applicants to start an entirely new proceeding, inevitably entailing costs thrown away completely. I see no prejudice to VFC or SSH in that regard, as it seems neither company has been served with any application material to date, and there is nothing before me to suggest that either corporation is aware of this proceeding.

[ 13 ] For now, an order shall go, for the above reasons, adjourning the application herein sine die pending:

a. service of the applicants’ final application material on VFC via Rule 16.03(6) of the Rules of Civil Procedure, and on SSH via the Rules of Civil Procedure; and

b. service and filing of an appropriate notice of return of application.

[ 14 ] The same order also shall include an additional provision requiring the applicants to serve a copy of this endorsement with their final application material.

[ 15 ] For the sake of clarity, I note that, if and when the applicants serve and file an appropriate notice of return of application, after taking any desired steps to reframe their application, I am not seized of this matter. The application may be heard and dealt with by any judge of the court.

“Justice I.F. Leach” Justice I.F. Leach Date: May 11, 2022

[^1]: Although the wording of the application literally refers to discharging of the indicated registered notice relating to the underlying secured interest noted therein, I think it reasonably clear that what the applicants actually seek is a formal discharge in relation to that underlying secured interest, which in turn would facilitate a further registration indicating that the relevant secured interest has ceased to exist. [^2]: The affidavit evidence provided by the applicants merely indicates that the relevant attendance took place “in 2016” but, as indicated below, notice of a security interest relating to the contract was registered against the property on January 5, 2016. A reasonable if not inevitable inference is that the attendance of VFC’s ostensible representative at the property must have occurred on or before January 5, 2016. In particular, the underlying contract giving rise to the associated security interest self-evidently would not have come into existence before the first and only meeting between the applicants and VFC’s ostensible representative. [^3]: The meaning of “internally” was not clarified in the application material. At a minimum, however, it seems the applicants take the position that the 2019 refinancing and associated postponement of the VFC’s security interest were carried out without the applicants learning of the existence or continued existence of the registered notice concerning VFC’s security interest.