Nova Scotia Savings & Loan Co. v. Canada (Minister of Finance) and Canada Deposit Insurance Corp., (1990) 32 F.T.R. 83 (TD)

• Judge: Collier, J.
• Court: Federal Court (Canada)
• Case Date: January 24, 1990
• Jurisdiction: Canada (Federal)
• Citations: (1990), 32 F.T.R. 83 (TD)

N.S. Savings & Loan Co. v. Can. (1990), 32 F.T.R. 83 (TD)

MLB headnote and full text

Nova Scotia Savings & Loan Company (plaintiff) v. The Honourable Michael Wilson, in his capacity as Minister of Finance of Canada and Canada Deposit Insurance Corporation (defendants)

(T-602-86)

Indexed As: Nova Scotia Savings & Loan Co. v. Canada (Minister of Finance) and Canada Deposit Insurance Corp.

Federal Court of Canada

Trial Division

Collier, J.

January 24, 1990.

Summary:

The Canadian Commercial Bank Mortgage Investment Corporation (the Investment Corp.) agreed to lend $15,000,000.00 to certain borrowers to construct an office building in downtown Calgary. A mortgage was granted by the Investment Corp. The Canadian Commercial Bank acted as financial and investment advisor to the Investment Corp. Participation interests in the $15,000,000.00 loan were syndicated to various institutional lenders, including the plaintiff, Nova Scotia Savings & Loan Co. (Nova Scotia), pursuant to a mortgage loan participation agreement. The terms of the agreement provided that Nova Scotia would advance $3,000,000.00 to the Investment Corp. by way of interim payments. The money would then be advanced to the borrowers. Nova Scotia and the other participants entered into a mortgage loan administration agreement with the Canadian Commercial Bank. Construction of the building commenced and Nova Scotia made advances of $2,214,677.54. The borrowers experienced financial and legal problems and Nova Scotia refused to make further advances. To salvage the project the Canadian Commercial Bank agreed to purchase the interest of Nova Scotia and the other participants in the mortgage loan participation agreement. Nova Scotia assigned and transferred its interest in the mortgage loan participation agreement and the mortgage, including its right to be repaid the funds previously advanced, to the Canadian Commercial Bank. The Bank agreed to pay the $2,214,677.54 by July 8, 1986, and gave Nova Scotia a promissory note. The Canadian Commercial Bank, however, went into liquidation before the note was honoured. Nova Scotia applied for relief under the Canada Deposit Insurance Corporation Act and the Financial Institutions Depositors Compensation Act. The Minister of Finance and the Canada Deposit Insurance Corporation (the defendants) rejected the application on the basis that Nova Scotia was not a "depositor" as required by the legislation. Nova Scotia commenced an action for a declaration that it was a "depositor" as defined in the legislation and for mandamus directing the defendants to grant relief.

The Federal Court of Canada, Trial Division, dismissed the application.

Banks and Banking - Topic 3102

Bank deposits - Deposit - What constitutes - Deposit insurance - Pursuant to a mortgage participation agreement N.S. advanced over $2,000,000.00 to a mortgage investment corporation, which then made advances to borrowers for a building - The Canadian Commercial Bank administered the mortgage - Problems arose - N.S. stopped advances - The bank, to salvage the project, took an assignment of N.S.'s interest, agreed to repay the $2,000,000.00 and issued a promissory note - The bank went into liquidation without honouring the note - The Federal Court of Canada, Trial Division, refused N.S.'s claim under the Canada Deposit Insurance Corporation Act and the Financial Institutions Depositors Compensation Act, because N.S. was not a "depositor" in the bank.

Words and Phrases

Deposit - The Federal Court of Canada, Trial Division, discussed the meaning of this word as it was used in the Canada Deposit Insurance Corporation Act, R.S.C. 1970, c. C-3 and the Financial Institutions Depositors Compensation Act, S.C. 1985, c. 51 - See paragraphs 25 to 37.

Cases Noticed:

R. v. Davenport, [1954] 1 W.L.R. 569 (C.A.), refd to. [para. 25].

Statutes Noticed:

Canada Deposit Insurance Corporation Act, R.S.C. 1970, c. C-3, Schedule, sect. 2(1) [para. 14].

Financial Institutions Depositors Compensation Act, S.C. 1985, c. 51, sect. 2 [para. 13].

Counsel:

D.G. Hatch and S.I. Sofer, for the plaintiff;

E.A. Bowie, Q.C., and B.A. McIsaac, for the defendants.

Solicitors of Record:

Smith, Lyons, Torrance, Stevenson & Mayer, Toronto, Ontario, for the plaintiff;

John C. Tait, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the defendants.

This case was heard on September 9 and 10, 1987, in Toronto, Ontario, before Collier, J., of the Federal Court of Canada, Trial Division, who delivered the following decision on January 24, 1990: