Canadian Imperial Bank of Commerce v. Brown, [1999] O.T.C. 63 (SupCt)

• Judge: Gillese, J.
• Court: Superior Court of Justice of Ontario (Canada)
• Case Date: November 24, 1999
• Jurisdiction: Ontario
• Citations: [1999] O.T.C. 63 (SupCt)

CIBC v. Brown, [1999] O.T.C. 63 (SupCt)

MLB headnote and full text

Temp. Cite: [1999] O.T.C. TBEd. DE.169

Canadian Imperial Bank of Commerce (plaintiff) v. William F. Brown and Elizabeth Brown (defendants)

(Court File No. 24918/93)

Indexed As: Canadian Imperial Bank of Commerce v. Brown

Court of Ontario

Superior Court of Justice

Gillese, J.

November 24, 1999.

Summary:

At the urging of a mortgage broker, Mr. and Mrs. Brown borrowed $30,000 from the plaintiff bank to purchase a unit in a limited partnership from Stonebridge. They signed a promissory note payable to the bank. Prior arrangements had been made between the broker and the bank that persons wishing to buy such limited partnership units would be sent to the bank. Stonebridge was heavily indebted to the bank, and the bank had "called" the Stonebridge loans less than a week before the Browns signed the promissory note. Stonebridge went out of business, and the bank claimed against the promissory note. The Browns argued the debt was unenforceable because the bank was in a conflict of interest when it negotiated the loan, and it had breached its obligation to deal with them in good faith. The bank argued it would have been improper for it to have disclosed confidential information on the financial state of Stonebridge. The Browns counterclaimed for the return of the money paid pursuant to the loan, plus interest.

The Ontario Superior Court held that the loan was unenforceable, and allowed the counterclaim. The bank was in a conflict of interest situation as purchases of units in the limited partnership reduced the debt owing by Stonebridge to the bank. At a minimum, the bank was obliged to recommend to the Browns that they obtain independent legal advice before purchasing the unit.

Banks and Banking - Topic 703

Duties of banks - Duty of good faith - See paragraphs 13 to 19.

Banks and Banking - Topic 705

Duties of banks - Duty of confidentiality - See paragraphs 13 to 19.

Banks and Banking - Topic 708

Duties of banks - Duty respecting independent legal advice - See paragraphs 13 to 19.

Banks and Banking - Topic 1445

Liability of banks to customers - Duties of bank - Duty of confidentiality - See paragraphs 13 to 19.

Banks and Banking - Topic 1446

Liability of banks to customers - Duties of bank - Duty to inform - See paragraphs 13 to 19.

Banks and Banking - Topic 1447

Liability of banks to customers - Duties of bank - Where clients doing business together - See paragraphs 13 to 19.

Banks and Banking - Topic 1507

Liability of banks to customers - Negligence - Investment advice - See paragraphs 9 to 19.

Banks and Banking - Topic 5141

Loans - Duties of bank - General - See paragraphs 13 to 19.

Contracts - Topic 9350

Unconscionable transactions relief - Conditions for relief - What constitutes harsh and unconscionable - See paragraphs 13 to 19.

Equity - Topic 1121

Equitable relief - Contracts - Unconscionable bargain - General - See paragraphs 13 to 19.

Equity - Topic 3608

Fiduciary or confidential relationships - Standard of conduct - See paragraphs 13 to 19.

Equity - Topic 3714

Fiduciary or confidential relationships - Commercial relationships - Duty of disclosure - See paragraphs 13 to 19.

Cases Noticed:

Bertolo v. Bank of Montreal (1986), 18 O.A.C. 262; 57 O.R.(2d) 577 (C.A.), refd to. [para. 14].

MacKay v. Bank of Nova Scotia et al. (1994), 20 O.R.(3d) 698 (Gen. Div.), refd to. [para. 14].

Abdool et al. v. Somerset Place Developments of Georgetown Ltd. et al. (1992), 58 O.A.C. 176; 27 R.P.R. 157 (C.A.), refd to. [para. 15].

Buchanan v. Canadian Imperial Bank of Commerce (1980), 125 D.L.R.(3d) 394 (B.C.C.A.), folld. [para. 16].

Hong Kong Bank of Canada v. Phillips (1997), 119 Man.R.(2d) 243; 1997 CarswellMan 152 (Q.B.), refd to. [para. 17].

Counsel:

D.B. Williams, for the plaintiff;

S. Turton, for the defendants.

This case was heard on June 7, 8 and 9, 1999, by Gillese, J., of the Ontario Superior Court, who released the following decision on November 24, 1999.

Please note: The following judgment has not been edited.