Legal Blog

Arrogant

Arrogant is not a word that a financial institution wishes to read in a judgment commenting upon its behaviour. Neither does it wish to be described as high-handed. Unfortunately, that is exactly what we read in Canadian Imperial Bank of Commerce v. McDonald, a 2007 Ontario Superior Court of Justice decision.

Facts

As in every lawsuit, which really should be called a factsuit, the facts are crucial.

The mortgage was advanced in 2000. The mortgagors had not only made their normal monthly payments, they often paid more than the minimum amount in order to reduce the principal. The normal monthly payment was the grand sum of $385.

The bank stopped accepting payments from the mortgagors in November 2006, notwithstanding the mortgagors’ attempts in November and December 2006 to pay them. Why? The bank stated that the matter was in its lawyers’ hands. However, the mortgagors received nothing from the lawyer until February 5, 2007, at which time the lawyers demanded $41,707.

The mortgagors sent a letter to the bank on February 19, 2007 claiming that the amount demanded was incorrect. The mortgagors requested a re-calculation of the loan amount and stated that the bank had never complied with their previous requests for a statement. Indeed, even though the mortgagors had previously requested statements, the bank never provided any – for 6 years. Why? We do not know.

Instead of replying to the letter and immediately providing a statement, the bank, through its lawyers, issued a notice of sale and a statement of claim for possession.

The bank delivered two affidavits. The first was the usual boilerplate affidavit setting out the details of the mortgage and noting that the loan was in default. The second was in reply to the mortgagors’ affidavit that set out the facts that we have noted above. The bank’s second affidavit did not deny any of those facts. It gave no reason why the bank refused to accept payments or why the bank did not respond to the mortgagors’ letter. It did state that the mortgagors failed to make payments in September and November 2006. It also stated that the bank attempted to call the mortgagors on a number of occasions and wrote to them on November 16 and 30, 2006. The affidavit did not include those letters as exhibits.

So far, the bank does not look good. However, it gets worse.

Representation 

The mortgagors retained their own lawyer. The mortgagors’ lawyer spoke to the bank’s lawyer and, on August 1, 2007, finally obtained a payment history. That history indicated no payment in September 2006, but it showed a payment in October and, for many months, more than one payment made.

The mortgagors’ lawyer delivered an affidavit in which he stated:

1.   He spoke to the bank’s lawyer and they agreed that the bank would provide a statement as of the end of August 2007; the mortgagors would pay the arrears; and the parties would then attempt to agree on costs.

2.   On September 14, 2007, he received a letter confirming that total arrears were $14,865, including $10,217 for costs (i.e. the arrears were slightly less than $4,700).

3.   He spoke to the bank’s lawyer and told her that he would send a cheque for $4,700 and the two agreed that, upon payment, the mortgage would be in good standing subject to a claim for costs.

4.   The next day, he sent a cheque for $4,700 and five days later, the bank’s lawyer returned it to him saying that she could not accept partial payment. Later, she wrote and denied that she had ever agreed to accept $4,700.

The bank did not submit an affidavit from its lawyer to deny what the mortgagors’ lawyer asserted in his affidavit. The judge therefore drew the inference that the evidence of the mortgagors’ lawyer was accurate.

Hearing

By the time of the hearing, the parties agreed that the arrears were $4,879 and that the only issue for decision was the bank’s claim for $10,615 in costs. As soon as the judge made his decision, the mortgagors would pay whatever they owed.

The judge noted that the mortgage probably contained the usual provision that the mortgagors had to pay for all of the costs of the bank. Of course, the question that comes to our mind is why the bank’s lawyers did not provide the mortgage as part of the motion materials. However, it did not matter in this case. The judge also noted that he had the discretion to award costs on any basis that he felt was just (and he is correct in that statement).

This is what he said:

“In my view, the conduct of the Bank in this case has been high-handed. To describe it as arrogant is not an overstatement. The uncontradicted evidence is that the cause of the alleged default was the refusal of the Bank to accept the McDonalds’ payments. Requests for information were ignored, and were met by Notices of Sale and the commencement of these proceedings. This came hard on the heels of the discontinuance of an earlier mortgage action, and ultimately the late payment of costs for that proceeding. To make matters worse, the Bank reneged on an agreement that it would accept the arrears and try to sort out the matter of costs later. If the Bank had acted in a more responsible manner, I have no doubt that this litigation would have been entirely avoided. As indicated earlier, the Bank’s conduct throughout has been high-handed and arrogant.”

In the result, the judge not only refused to award the bank any of its costs claimed, he awarded the mortgagors $10,000 in costs against the bank. This is what happens when a financial institution is unreasonable and when its lawyers follow suit.