Sherry v. CIBC Mortgages Inc., 2016 BCCA 240

• Judge: Newbury, Harris and Stromberg-Stein, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: April 25, 2016
• Jurisdiction: British Columbia
• Citations: 2016 BCCA 240;(2016), 389 B.C.A.C. 24 (CA)

Sherry v. CIBC Mortgages (2016), 389 B.C.A.C. 24 (CA);

    671 W.A.C. 24

MLB headnote and full text

Temp. Cite: [2016] B.C.A.C. TBEd. JN.019

Erin Sherry (respondent/plaintiff) v. CIBC Mortgages Inc. and in French, Hypothéques CIBC Inc. (appellant/defendant)

(CA42033; CA42749; 2016 BCCA 240)

Indexed As: Sherry v. CIBC Mortgages Inc.

British Columbia Court of Appeal

Newbury, Harris and Stromberg-Stein, JJ.A.

June 7, 2016.

Summary:

A mortgagee charged prepayment penalties to persons who paid out, or paid down more than the penalty-free portion of the principal of their mortgages prior to the end of the terms of their mortgages. The prepayment penalty charged to Sherry was $47,868. Sherry filed a Notice of Civil Claim, alleging that (1) the prepayment penalty clauses in the mortgagee's mortgage contracts were void and unenforceable because of the inclusion of the "Discretion as to Calculation" or "Discretion as to Comparison Rate" clauses or either of them; (2) alternatively, if the prepayment penalty clauses were not entirely void and unenforceable, then under some of the mortgages in question (those containing "Discretion as to Comparison Rate" clauses), the maximum prepayment penalty that could be charged was three months' interest; and (3) alternatively, if any prepayment penalty could be charged under the mortgages based on an interest rate differential (IRD), as opposed to being based on three months' interest, the formula used by the mortgagee to quantify penalties miscalculated and overcharged those penalties. Sherry applied to have the action certified as a class action.

The British Columbia Supreme Court, in a decision reported at [2014] B.C.T.C. Uned. 1199, certified the action conditional on Sherry establishing an identifiable class which was not overbroad as were the proposed terms. The parties made written submissions respecting the class definition. Sherry proposed the following formulation of a common issue: "1. Do the acts and omissions of the defendant warrant an award of punitive damages? 2. If the answer to issue 1 is yes, should an award of punitive damages be made against the defendant and, if so, in what amount?"

The British Columbia Supreme Court, in a decision reported at [2015] B.C.T.C. Uned. 490, ordered that the class was to be defined as follows: "Persons resident in British Columbia who were or are mortgagors under mortgages issued by the Defendant as mortgagee, who prepaid part or all of the principal amounts secured by those mortgages from 2005 onward, and who: (a) had a mortgage containing either a Discretion as to Calculation Clause or a Discretion as to Comparison Rate Clause, or both, and paid any Prepayment Penalty; or (b) had any mortgage issued by the Defendant and paid a Prepayment Penalty based on an IRD." The court also found that the Notice of Civil Claim disclosed a "reasonable and arguable" claim for punitive damages and that the certification of the common issue as proposed satisfied the requirements for certification and was the preferable means for hearing and determining it. The court agreed that both issues should be certified, but that the second should be determined "following the resolution of the other common issues and the quantification of compensatory damages", at which time it could also be determined whether such an award would "serve a rational purpose" in light of the objectives of punitive damages generally. The mortgagee appealed, asserting that the court erred by finding that Sherry's claims respecting mortgage clauses being void due uncertainty and the miscalculation of the IRD disclosed reasonable causes of action; by finding that the claim of unconscionability could be determined on a common basis; and by certifying a class that included those who paid a prepayment charge of three months' interest, rather than the IRD.

The British Columbia Court of Appeal allowed the appeal to the extent of deleting all references in the orders below to (1) the allegation that the mortgagee's mortgage contracts were void or non-enforceable; (2) the allegation of miscalculation of prepayment charges (including quantification of the IRD) by the mortgagee; and (3) the allegation of breach of fiduciary duty. The court dismissed the appeal respecting allegations of unsconscionability and punitive damages. The court declined to interfere with the chambers judge's definition of the class except to delete subparagraphs (a) and (b) thereof.

Contracts - Topic 5643

Unenforceable contracts - Uncertainty and vagueness - Uncertainty - See paragraphs 56 to 66.

Mortgages - Topic 2986

Payment of mortgage - Prepayment - Penalty - See paragraphs 71 to 78.

Mortgages - Topic 3310

Discharge of mortgage - General - Discharge fees - See paragraphs 71 to 78.

Practice - Topic 209.1

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Members of class - General - See paragraphs 90 to 92.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - See paragraphs 56 to 89.

Practice - Topic 209.9

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Appeals (incl. leave to appeal) - See paragraphs 54 and 55.

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not previously raised (incl. new theory of the case) - See paragraphs 67 to 70.

Counsel:

P. Steep, C. Zayid and M.L. Lam, for the appellant;

K.A.G. Bridge, for the respondent.

This appeal was heard at Vancouver, British Columbia, on April 25, 2016, by Newbury, Harris and Stromberg-Stein, JJ.A., of the British Columbia Court of Appeal. Newbury, J.A., delivered the following reasons for judgment for the court on June 7, 2016.