Canadian Imperial Bank of Commerce v. Partners Management Development Inc. et al., 2016 NSSC 2

• Judge: Duncan, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: November 16, 2015
• Jurisdiction: Nova Scotia
• Citations: 2016 NSSC 2;(2016), 369 N.S.R.(2d) 165 (SC)

CIBC v. Partners Mgt. Dev. (2016), 369 N.S.R.(2d) 165 (SC);

    1162 A.P.R. 165

MLB headnote and full text

Temp. Cite: [2016] N.S.R.(2d) TBEd. JA.016

Canadian Imperial Bank of Commerce, a body corporate (plaintiff) v. Partners Management Development Inc., a body corporate and John T. Early (defendants)

(Ken. No. 414040; 2016 NSSC 2)

Indexed As: Canadian Imperial Bank of Commerce v. Partners Management Development Inc. et al.

Nova Scotia Supreme Court

Duncan, J.

January 5, 2016.

Summary:

CIBC granted the defendant Early a $320,000 personal line of credit, conditioned on him arranging a collateral mortgage. Early, as the sole director and president of the corporate defendant "PMD", executed a resolution permitting PMD to pledge its property as security, and executed a collateral mortgage. He also signed the mortgage in his personal capacity, as the guarantor. No payment was made on the loan since November 2012. CIBC declared the loan to be in default and demanded payment in full. CIBC sued, claiming payment of the principal amount together with other charges and expenses, and in default of payment an order for foreclosure, sale and possession. Early challenged the interpretation of the lending agreement as to what constituted a default. PMD challenged its liability for the debt and, in the alternative, the quantum of its liability. Both defendants counterclaimed against CIBC, alleging tortious abuse of process, defamation and slander of title, and intentional infliction of mental harm.

The Nova Scotia Supreme Court granted judgment to the plaintiff, and dismissed the counterclaim.

Banks and Banking - Topic 5301

Loans - Secured loans - Default - General - [See first Banks and Banking - Topic 5538 ].

Banks and Banking - Topic 5538

Loans - Line of credit - Collection of or payment on loan - The plaintiff CIBC claimed that the defendant Early's personal line of credit (secured by a collateral mortgage) was in default - The claim was founded on the allegation that the loan was payable on demand, and that demand for payment was made but no payment was received - Early acknowledged that he had not made payments on the debt since November 2012 - He challenged the interpretation of the lending agreement as to what constituted a default and when a default occurred - The Nova Scotia Supreme Court concluded that Early was in default as of October 2, 2012, when he failed to pay the "Minimum Payment Due" on October 1, 2012, which the Court found to be the "Payment Due Date" - Notwithstanding his payment of November 1, the account continued to be in default from October 2, 2012, onward, as Early did not make sufficient payments to bring the account current in any month after September 2012 - As such he was in breach of his contractual obligations to CIBC - In the result, CIBC was entitled to the principal amount of $320,000 plus interest as claimed - See paragraphs 28 to 42.

Banks and Banking - Topic 5538

Loans - Line of credit - Collection of or payment on loan - The plaintiff CIBC granted the defendant Early a $320,000 personal line of credit, conditioned on him arranging a collateral mortgage - Early, as the sole director and president of the corporate defendant ("PMD"), executed a collateral mortgage - The borrowing resolution authorized by PMD provided that PMD would borrow from CIBC "up to $320,000 and give a mortgage on property of the Company ... as security therefore" - Early defaulted - CIBC sued - The defendants submitted that the borrowing resolution set a limit of liability in the event of default, not exceeding $320,000 - The Nova Scotia Supreme Court disagreed - The resolution spoke only to the maximum amount of principal that could be borrowed; it did not limit the overall indebtedness - "To suggest, as the defendants do, that PMD can limit its liability to the principal amount loaned is not tenable - such a conclusion is inconsistent with the intention of the parties as evidenced by the totality of the contents of the lending agreement documents and the collateral mortgage." - The amount of PMD's liability was to be determined by looking to the collateral mortgage as it set out the terms that PMD resolved to "comply with" - See paragraphs 75 and 76.

Banks and Banking - Topic 5538

Loans - Line of credit - Collection of or payment on loan - The plaintiff CIBC granted the defendant Early a $320,000 personal line of credit (PLC), conditioned on him arranging a collateral mortgage - Early, as the sole director and president of the corporate defendant ("PMD"), executed a collateral mortgage - Early also executed the mortgage in his personal capacity, as the guarantor - Early defaulted - CIBC sued - PMD challenged its liability for "other costs" than the principal and interest arising from the PLC indebtedness - The amount secured by the mortgage was described as "the debt, the aggregate balance of which (exclusive interest and any other charges payable under this mortgage at any given time) shall not exceed $320,000 in relation to this mortgage." - The Nova Scotia Supreme Court held that both PMD and Early, as guarantor, were liable to pay all amounts incurred by CIBC and authorized by the mortgage - "The flaws ... in the drafting of the mortgage do not provide a legal basis upon which the defendants can avoid their contractual obligations to pay the plaintiff that which it has claimed: principal, property taxes, interest, and associated costs incurred by the plaintiff in seeking to enforce its rights under the lending agreement and the collateral mortgage." - The Court granted judgment to CIBC for a sum to be calculated, and in default of payment an order for foreclosure, sale and possession - See paragraphs 77 to 90.

Estoppel - Topic 379

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Cause of action - The defendants' counterclaim against the plaintiff CIBC was founded on the "sharp practice" of CIBC's counsel in obtaining default judgments - The default judgments were set aside following motions brought by the defendants pursuant to Civil Procedure Rule 8 - The defendants now sought damages arising from alleged tortious abuse of process; defamation and slander of title; and intentional infliction of emotional distress - CIBC argued that the counterclaim was estopped by res judicata, i.e., that the cause of action had been previously decided - The Nova Scotia Supreme Court rejected the argument - The motions under rule 8, while addressing the same factual matrix, presented discrete legal issues from those presented in the counterclaim - The counsel's conduct was not before the motions judge, except as it might influence the order for costs - The motions could not have been utilized to obtain all of the remedies sought in the counterclaim - Nor could the claim have been pleaded on the motions (issue estoppel) - The motions were considered in an existing action - The counterclaim represented a different cause of action and was the appropriate mechanism to resolve any legal consequences in tort of the counsel's conduct - See paragraphs 113 to 121.

Estoppel - Topic 386

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Issues decided in prior proceedings - [See Estoppel - Topic 379 ].

Mortgages - Topic 1427

The mortgage - Amount secured - Collateral mortgage - [See third Banks and Banking - Topic 5538 ].

Mortgages - Topic 1441

The mortgage - Validity of - General - The plaintiff CIBC granted the defendant Early a personal line of credit (PLC), conditioned on him arranging a collateral mortgage on real property as security for the debt - Early pledged property owned by the corporate defendant (PMD) as security, and executed a collateral mortgage on behalf of himself (as "guarantor") and for PMD (as "mortgagor") - Schedule B was drafted as if the mortgagor/ PMD was also the "borrower" under the PLC - Early defaulted on the PLC - CIBC sued - The defendants argued that the mortgage was not valid as against PMD, on the basis of the definition of "you" and "your" as borrower - The Nova Scotia Supreme Court rejected the argument - "(i) The Mortgage when read as a whole makes it clear that PMD is, in fact, included in the 'you' that the mortgage intends to bind; (ii) The objective intention of the parties ... is consistent with the interpretation that PMD is the 'you' that the mortgage refers to; (iii) The contents of the Corporate Resolution, the Acknowledgement, and the signature page of the mortgage, as well as the evidence that PLC funds were applied to the benefit of PMD support the conclusion that PMD was in fact a 'borrower' ...; (iv) The commercial purpose of the contract would be defeated" - See paragraph 64.

Mortgages - Topic 1441

The mortgage - Validity of - General - The plaintiff CIBC granted the defendant Early a personal line of credit (PLC) in the amount of $320,000, conditioned on him arranging a collateral mortgage on real property as security - Early, as sole director and president, pledged the property owned by the corporate defendant (PMD) as security, and executed a collateral mortgage on behalf of himself (as "guarantor") and for PMD (as "mortgagor") - Early defaulted on the PLC - CIBC sued - The defendants argued that no consideration had passed to PMD for its promise - The Nova Scotia Supreme Court disagreed - PMD's two earlier mortgages on its property were paid out by funds borrowed in the PLC - CIBC also paid arrears of property taxes owed by PMD - Finally, PMD incurred legal obligations in providing security to CIBC in return for CIBC granting Early credit - In the result, the collateral mortgage formed a binding contract as between CIBC and PMD - See paragraphs 65 to 72.

Mortgages - Topic 5516.1

Mortgage actions - Action for foreclosure and sale - Collateral mortgages - [See third Banks and Banking - Topic 5538 ].

Practice - Topic 2228

Pleadings - Striking out pleadings - Grounds - Res judicata - [See Estoppel - Topic 379 ].

Torts - Topic 6254

Abuse of legal procedure - Abuse of process - What constitutes - CIBC sought payment from the defendants of the principal amount borrowed under a line of credit, together with other charges and expenses - The defendants' counterclaim against CIBC was founded on the "sharp practices" of CIBC's counsel in obtaining default judgments - The default judgments were set aside following motions brought by the defendants pursuant to Civil Procedure Rule 8.10 - The defendants now sought damages arising from alleged tortious abuse of process - The Nova Scotia Supreme Court dismissed the claim - "[T]he plaintiff committed what I would characterize as 'unforced errors' in their prosecution of the collection of the debt. ... Despite the errors and omissions attributable to the plaintiff in its pursuit of the default judgement I do not find that the legal process was engaged by the plaintiff for a collateral and illicit purpose. ... There is no abuse 'when a litigant employs regular legal process to its proper conclusion, even with bad intentions'. Errors in letters and documents, mistakes in submissions to a court, being uncommunicative to an opposing self-represented party are not evidence that, in the circumstances of this case, speaks to a collateral or illicit purpose in pursuing the legal process to obtain judgement against the defendants." - See paragraphs 123 to 140.

Cases Noticed:

Creston Moly Corp. v. Sattva Capital Corp. (2014), 461 N.R. 335; 2014 SCC 53, refd to. [para. 25].

Canada (Attorney General) et al. v. Rostrust Investments Inc. et al., [2010] O.T.C. Uned. 3986; 2010 ONSC 3986, refd to. [para. 26].

Toronto-Dominion Bank v. Leigh Instruments Ltd. (Bankrupt) et al. (1998), 63 O.T.C. 1 (Gen. Div.), affd. (1999), 124 O.A.C. 87; 45 O.R.(3d) 417; 1999 CanLII 3778 (C.A.), refd to. [para. 27].

Bank of Nova Scotia v. Allen (2010), 291 N.S.R.(2d) 284; 922 A.P.R. 284; 2010 NSCA 47, refd to. [para. 85].

Hoque v. Montreal Trust Co. of Canada et al. (1997), 162 N.S.R.(2d) 321; 485 A.P.R. 321; 1997 NSCA 153, refd to. [para. 113].

Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc. (2013), 331 N.S.R.(2d) 341; 1051 A.P.R. 341; 2013 NSCA 76, refd to. [para. 114].

Bank of Montreal v. Ross (2013), 331 N.S.R.(2d) 307; 1051 A.P.R. 307; 2013 NSCA 70, refd to. [para. 114].

Williams v. Kameka et al. (2009), 282 N.S.R.(2d) 376; 895 A.P.R. 376; 2009 NSCA 107, refd to. [para. 114].

Saulnier v. Bain (2009), 277 N.S.R.(2d) 30; 882 A.P.R. 30; 2009 NSCA 51, refd to. [para. 114].

Danyluk v. Ainsworth Technologies Inc. et al., [2001] 2 S.C.R. 460; 272 N.R. 1; 149 O.A.C. 1; 2001 SCC 44, refd to. [para. 114].

Body Shop Canada Ltd. v. Carson (Dawn) Enterprises Ltd. et al. (2010), 289 N.S.R.(2d) 104; 916 A.P.R. 104; 2010 NSSC 25, refd to. [para. 122].

Statutes Noticed:

Civil Procedure Rules (N.S.), rule 8.10 [para. 96].

Rules of Civil Procedure (N.S.) - see Civil Procedure Rules (N.S.).

Rules of Court (N.S.) - see Civil Procedure Rules (N.S.)

Counsel:

Lisa M. Wight, for the plaintiff (defendant by Counterclaim);

John T. Early III, for the defendant (plaintiff by Counterclaim) Partners Management Development Inc.;

John T. Early III, self-represented defendant (plaintiff by Counterclaim).

This action was heard on November 2-4, 2015, in Kentville, Nova Scotia, and on November 16, 2015, in Halifax, Nova Scotia, before Duncan, J., of the Nova Scotia Supreme Court, who delivered the following decision on January 5, 2016.