Court File and Parties

CITATION: Vault Capital v. Sarwar, 2026 ONSC 2987

COURT FILE NO.: CV-26-0311-0000

DATE: 05 21 2026

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Vault Capital, Plaintiff

AND:

Qazi Salman Sarwar, Defendant

BEFORE: AJ Glick

COUNSEL: Christopher J. Staples for the Responding Party, Plaintiff

Saad Suleman for the Defendant

HEARD: May 20, 2026

Endorsement

Overview

[1] This is a motion by the Defendant Qazi Salman Sarwar for an Order setting aside the noting in default and the default judgment against him. The Plaintiff Vault Capital Inc. (“Vault Capital”) opposes the motion.

[2] For the reasons that follow, the motion is granted and the noting in default and default judgment are set aside. The Defendant is granted leave to defend this action by filing a Statement of Defence.

Background

[3] This action is a mortgage enforcement action. The Defendant is the owner of a condominium property in Burlington. The property is tenanted.

[4] On July 1, 2024, the Defendant obtained a mortgage on the property in the amount of $622,500.00 from TSX Trust Company. The mortgage was for a period of one year at the greater rate of 9.25% or RBC Prime plus 2.05% per annum. The mortgage was secured by way of a charge registered as an Instrument on the property.

[5] According to the Plaintiff, TSX acted as a title custodian and trustee of the mortgage for the Plaintiff. The Plaintiff says they were the ones who advanced the funds and that TSX holds no beneficial interest or right in the mortgage. The underwriting of the mortgage and day to day servicing is performed by the Plaintiff.

[6] In any event, the Parties agree that the mortgage matured on July 1, 2025. It was not renewed and so the full balance became due. The mortgage was not paid out.

[7] The Defendant states that the Parties agreed that, while the Charge had matured, he would continue to make interest payments to the Plaintiff while he, together with the Plaintiff and a mortgage broker, worked to refinance the property. He says the Plaintiff agreed not to take any action as against him during this period with respect to enforcement. He says that this arrangement continued until around December 2025 or January 2026, when he received a notice of non-payment. He says he immediately discussed the issue with the Plaintiff’s Director and the mortgage broker. He says they told him to ignore the notice and assured him the Plaintiff would take no enforcement action against him.

[8] Mr. Thomas, the Managing Director of Vault Capital, says that on November 26, 2025, the Plaintiff made demand on the Defendant for the mortgage balance. On December 11, 2025, a notice of sale was issued. Mr. Thomas disagrees however that there was an understanding as between the Parties that the Defendant could make monthly payments while working on refinancing. He says that while Vault Capital did not take immediate action on their understanding that the Defendant was working on financing, there was no open-ended forbearance. He says he never told the Defendant to ignore notices from the Plaintiff and that the Defendant was clearly advised that the Plaintiff would be proceeding with enforcement. He says that he was not working on coordinating refinancing with the Defendant or with a mortgage broker.

[9] Mr. Thomas does agree that the Defendant attended at the Vault Capital offices. Mr. Thomas met privately with the Defendant and his family member. He disagrees though with the Defendant as to what was discussed. He says he gave no forbearance, nor did he agree to cease legal action. He says he told the Defendant communication should be through counsel. He says that Vault Capital did not proceed at that time to commence the action because they understood refinancing was a real possibility, but that there was no agreement.

[10] While there was an effective postponement of enforcement, the Plaintiff ultimately commenced this action on February 5, 2026. The Statement of Claim was served by an alternative to personal service on February 10, 2026. That was achieved by leaving a copy of the Claim with Ms. Leak Toca at the Defendant’s residence and by sending the Claim by regular mail that same day to the attention of the Defendant at that same address. The process server, in his affidavit of service, states that Ms. Toca appeared to him to be an adult member of the same household at which the Defendant resides. He says he ascertained that Ms. Toca was an adult member of the same household by means of verbal admission.

[11] On March 10, 2026, the Plaintiff submitted a requisition for default judgment to the court. The court issued default judgment that same date.

[12] The Defendant says that he only became aware of the proceeding on March 17, 2026. He says he immediately retained counsel the following day. Defendant’s counsel wrote to Plaintiff’s counsel on March 18, 2026 advising that they had been retained. They asked for information as to when the Defendant had been served. They advised they were preparing a defence and asked that the Defendant not be noted in default without providing them with 20 days notice. Plaintiff’s counsel advised them the following day that they had already obtained default judgment.

[13] The Defendant advises that the person who received the Claim was his family’s nanny. She is not a member of his household. He says Ms. Toca never provided him with the Claim, but instead left it in the house underneath a number of other documents.

[14] The Defendant thereafter brought this motion. The Motion Record was prepared and served on the Plaintiff on March 31, 2026.

Law and Analysis

[15] The test on a motion to set aside a noting in default or default judgment was recently set out by Associate Justice Nitchke in Royal Bank of Canada v. Skelly, 2025 ONSC 6622. Citing the Court of Appeal’s decisions in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 at para. 47, Intact Insurance Co. v. Kisel, 2015 ONCA 205 at para. 14 and Storoszko & Associates v. 1489767 Ontario Limited, 2024 ONCA 147 at para 3., Associate Justice Nitchke stated that the Court is to consider the following factors, which are not exhaustive:

a. Whether the defendant moved promptly;

b. Whether there is a plausible excuse or explanation for the default;

c. Whether the defendant has an arguable defence on the merits;

d. The potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff should the motion be allowed; and

e. The effect of any order the court might make on the overall integrity of the administration of justice.

[16] AJ Nitchke noted that “the above factors are not rigid rules but are pertinent considerations that are assessed in the circumstances of each case to determine whether it is just to relieve the Defendant from the consequence of their default.”

[17] Justice Doi in the recent case of Ampere Metal Finishing Inc. v. KenzoKai Metal Finishing Inc., 2025 ONSC 3888 noted that “if default judgment is irregularly obtained, a defendant is entitled to have it set aside as of right without having to establish a defence to the plaintiff’s claim”. Justice Doi also noted that “irregularities that may result in a default judgment being set aside include failing to serve the statement of claim in the proper manner.”

Default Judgment Was Irregularly Obtained

[18] The Defendant argued that the Plaintiff moved too quickly for default judgment. He says that service on February 10, 2026 was only effective five business days later. He says that this means the clock started to run on the day after, which is February 19, 2026. On this calculation, the Plaintiff could only have obtained default judgment twenty days later, which would have been March 11, 2026. As above, the Plaintiff obtained default judgment on March 10, 2026.

[19] In order to determine whether the Defendant is correct in his assertion, one must consider Rule 3.01 in conjunction with Rule 16.03(5). Rule 16.03(5) states that the service as done by the Plaintiff in this matter is “effective on the fifth day after the document is mailed.”

[20] Rule 3.01 is as follows:

Computation

3.01 (1) In the computation of time under these rules or an order, except where a contrary intention appears,

(a) where there is a reference to a number of days between two events, they shall be counted by excluding the day on which the first event happens and including the day on which the second event happens, even if they are described as clear days or the words “at least” are used;

(b) where a period of seven days or less is prescribed, holidays shall not be counted;

(c) where the time for doing an act expires on a holiday, the act may be done on the next day that is not a holiday; and

(d) service of a document, other than an originating process, made after 4 p.m. or at any time on a holiday shall be deemed to have been made on the next day that is not a holiday. R.R.O. 1990, Reg. 194, r. 3.01 (1); O. Reg. 394/09, s. 3; O. Reg. 438/08, s. 4.

(2) Where a time of day is mentioned in these rules or in any document in a proceeding, the time referred to shall be taken as the time observed locally. R.R.O. 1990, Reg. 194, r. 3.01 (2).

[21] I find that, if service was not defective, that it would be effective on February 18, 2026 and not February 19, 2026 as argued by the Defendant. This is because, as per Rule 3.01(1)(a), where there is a reference to a number of days between two events, they shall be counted by excluding the day on which the first event happens and including the day on which the second event happens, even if they are described as clear days or the words “at least” are used. The first day here is the date the Claim was mailed. The second event is the fifth day after, meaning that the first day is excluded and the date the second event happens is included.

[22] If February 18, 2026 was the date of effective service, the defence was due by the end of the day on March 10, 2026. March 10, 2026 is the twentieth day after service, excluding the first event and including the second – the deadline. The Defendant, if properly served, had until the end of that day to file their defence.

[23] The Plaintiff noted the Defendant in default on March 10, 2026. This was one day early. The Plaintiff ought to have waited until March 11, 2026, after the twenty-day period had expired. They ought not to have obtained default judgment on the twentieth day. The default judgment was obtained prematurely and is therefore irregular and ought to be set aside on this basis.

[24] There is also a second issue with the service of the Statement of Claim by way of alternative to personal service, which is that there was no independent attempt at personal service before recourse to the alternative means of service. Mr. Haigh, the process server, states in his affidavit of service that he only attempted personal service immediately before leaving the Claim with Ms. Toca. It was Ms. Toca who told Mr. Haigh that Mr. Sarwar was not home. There is no evidence of any prior attempts at personal service before the attendance described in Mr. Haigh’s affidavit. Even if Ms. Toca was a member of the household, this invalidates the service and means that the Plaintiff irregularly obtained default judgment, which must be set aside.

[25] Justice Doi, at paragraphs 22 and 23 of Ampere Metal Finishing Inc. states the law in this regard as follows:

[22] … Where the only attempt to serve a defendant personally with originating service is made at the same time and place that service is attempted with an adult member of the same household under rule 16.03(5), service will be defective and inadequate: Ridings Financial Service Inc. v. Singh, [1998] OJ No 3797 (Master) at para 17; Machards at para 17; Drindak v. Bachiski Estate, [2006] OJ No 4117 (SCJ) at paras 5-6 and 9; Graf at paras 10-14. As no attempt to effect personal service was made before recourse to an alternative method of service under rule 16.03(5), I find that service was defective from the outset…

[23] Based on the foregoing, I am satisfied that Ampere has not met its onus to prove service of the statement of claim on KenzoKai and Mr. Bran: Rajasekaram at para 13; Ali at para 35. As a result, I find that Ampere irregularly obtained default judgment that should be set aside as of right: Redabe Holdings at para 7; Dunn at paras 19-21; Darlind Construction, Inc. v. Rooflifters, LLC at paras 40-41; Amexon at paras 21-23; Graf at para 4. On this basis, I find that the noting in default, the default judgment, and any writs of execution issued pursuant to the default judgment should be set aside.

[26] Both on the basis that service was defective, and that even if it was proper, the default judgment was obtained a day too early, the noting in default and default judgment cannot stand and must be set aside.

Setting Aside the Default is Justified on the Mountain View Criteria

[27] While the service issue ought to dispose of this motion, I find in the alternative that this is a case where the Court’s discretion ought to be exercised to set aside the default judgment under the Mountain View criteria.

[28] There is no real dispute that the Defendant moved promptly to set aside the default judgment. The Defendant retained counsel on March 18, 2026 upon learning of the Claim. The Defendant learned of the default judgment on March 19, 2026. The motion record was served on March 31, 2026.

[29] There is also no real dispute about the second factor. The Defendant explains that service was on his family’s nanny. The nanny placed the Claim in a pile of papers. The Plaintiff agreed at the motion that they had no basis upon which to dispute this account.

[30] I find that the Defendant also has an arguable defence on the merits. As set out in Mountain View, the Defendant does not need to show their claim will succeed, but rather that there is an air of reality to the defence. As set out by Master Sugunasiri, as she was then, at paragraph 11 in Merchant Advance Capital Ltd. v. 2200816 Ontario Inc. et al, 2019 ONSC 2477:

To meet the “air of reality” test, the defence must be tenable in law and the defendant must lead some evidence to demonstrate that it is not devoid of factual and/or legal foundation. The policy reason underlying this approach aligns with the goals reflected in Rule 1.04 of the Rules to ensure the most expeditious and efficient resolution of a case on its merits. There is no economy in allowing unmeritorious defences to proceed even if the defaulting defendant had a plausible explanation for her default and took immediate steps. On the other hand, it is inimical to the administration of justice that cases are decided on a technical application of the rules rather than on their merits, however novel or creative a defence may be. A creative defence may be questionable but still arguable for the purposes of allowing a defendant to deliver a defence and move beyond the pleadings stage.

[31] In this case, the Defendant has met their burden. The draft Statement of Defence and Crossclaim advances defences which are legally tenable and supported by an evidentiary foundation in the Defendant’s affidavit. The Defendant asserts the Plaintiff agreed to forbear from enforcing the mortgage and challenges some of the fees claimed. Similarly, the Defendant may potentially obtain relief on the Crossclaim if able to make out their allegations.

[32] Finally, I find that there would be significant prejudice to the Defendant if the default judgment is not set aside given his arguable defences. I see no real prejudice to the Plaintiff if the default judgment was set aside to allow the Defendant an opportunity to defend the claim. In addition, I find that making the order will not harm the integrity of the administration of justice. Refusing the Defendant the requested relief will however cause harm to the integrity of the administration of justice and risk elevating procedure over the fair adjudication of the Parties’ rights. In this regard, as stated by Justice Doi at paragraph 17 of Ampere Metal Finishing Inc., the “court will always strive to see that issues between litigants are resolved on their merits whenever that can be done with fairness to the parties.”

[33] Having regard to all of the factors addressed above, it is in the interest of justice to set aside the defaults and to allow the Defendants to defend the action and for the action to be determined on its merits.

Costs

[34] The Parties agreed that the successful party should be entitled to costs in the amount of $4500 inclusive. The Defendant was the successful party. I therefore order costs to be paid by the Plaintiff to the Defendant in the amount of $4500.

Summary of Outcomes

[35] On the basis of the forgoing, I make the following Orders:

a. The default judgment dated March 10, 2026 is set aside.

b. The noting in default of the Defendant is set aside.

c. Any enforcement proceedings that may have been initiated by the Plaintiff are halted.

d. The Defendant is granted leave to serve and file his Statement of Defence and Crossclaim within thirty days of the date of this Order.

e. Costs are payable by the Plaintiff to the Defendant in the amount of $4500 inclusive.

Associate Justice Glick

Date: May 21, 2026

CITATION: Vault Capital v. Sarwar, 2026 ONSC 2987

COURT FILE NO.: CV-26-0311-0000

DATE: 05 21 2026

ONTARIO

SUPERIOR COURT OF JUSTICE

Vault Capital, Plaintiff

– and –

Qazi Salman Sarwar, Defendant

ENDORSEMENT

AJ Glick

Released: May 21, 2026