Guest Column – Bob Aaron – 12/7/2007

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`Arrogant’ bank chastised by judge

Dec 01, 2007
Bob Aaron

Whoever said you can’t fight city hall – or the big banks – never met Brampton lawyer Ken Hood or his clients Mark and Laura McDonald.

When the McDonalds bought their cottage near Kapuskasing some years ago, they took out a personal loan secured by a mortgage with the Canadian Imperial Bank of Commerce.
From 2000 to 2006, the McDonalds diligently made payments on the mortgage – in some months making double payments. In September 2006, they inadvertently missed one payment of $385.

Shortly afterward, the bank sued the couple for payment of $41,961.92 on the wrong mortgage – the first mortgage on their Brampton home.

Upon being advised that the mortgage had been paid in full prior to the lawsuit, CIBC discontinued its action and had to pay the McDonalds $1,161 in costs.

After receiving the October 2006 payment of $385 on the cottage mortgage, the bank refused to accept any more payments and referred the couple to its lawyers. The McDonalds repeatedly requested a calculation of their loan balance for the period from 2000 to 2006, but were unable to obtain it. Nor were annual statements ever provided to them.

Eventually the bank started a second lawsuit, this time on the cottage mortgage.
In September 2007, Brampton lawyer Edwin Upenieks, counsel for the McDonalds, finally received a statement from Cassels Brock, solicitors for the bank, showing total arrears were $4,647.60 plus legal costs of $10,217.75.

Upenieks then arranged with an employee of Cassels Brock that the mortgage could be brought into good standing upon payment of the mortgage arrears, and the costs issue would be sorted out later.

He immediately couriered $4,700 (which included accumulated interest) to the bank’s lawyers, only to have it returned four days later along with a letter stating that the bank would not accept partial payment. A subsequent letter denied that there was an agreement with Upenieks about the court costs. (The figure of $4,700 was a round number as a precaution to cover extra days’ interest).
The case came before Justice Douglas K. Gray in Brampton in October. The parties had agreed that the mortgage could be brought into good standing upon payment of $4,879.26, and the McDonalds were prepared to pay the money immediately after the judge’s decision.

The only issue in dispute was the matter of legal costs. The bank was seeking a ruling without a trial, based on documentary evidence only. Known as a “summary judgment” request, the bank wanted the borrowers to pay an additional $10,615.50 in costs.

Justice Gray was not impressed with the bank’s case. “In my view,” he wrote, “the conduct of the bank 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 …

“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,” Justice Gray added, “I have no doubt that this litigation would have been entirely avoided … In my view, not only should the Bank be deprived of its costs, it should pay costs to the defendants.”

In the end, the judge ordered the bank to pay the borrowers their court costs of $10,000. Brampton lawyer Ken Hood represented the McDonalds at the hearing. He told me last week that the decision has not been appealed by CIBC.

My advice to clients who have trouble with their banks is to contact the customer care centre, the regional vice-president or the bank’s ombudsman.

It’s often amazing how quickly problems are resolved when someone up the ladder intervenes.

Bob Aaron is a Toronto real estate lawyer whose Title Page column appears Saturdays. He can be reached at bob@aaron.ca. Website: aaron.ca.

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