Griffith v. Bank of Nova Scotia et al

2000 BCSC 1606 Citation: Griffith v. Bank of Nova Scotia et al Date: 20001102 2000 BCSC 1606 Docket: S000812 Registry: Vancouver

IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN:

SPENCER GRIFFITH AND JAMIE GRIFFITH

PLAINTIFFS AND: BANK OF NOVA SCOTIA, SCOTIA MORTGAGE CORPORATION, EUNICE LUK, MAUREEN BINKLEY AND

BONNIE HAGLAND

DEFENDANTS

REASONS FOR JUDGMENT

OF THE HONOURABLE MR. JUSTICE MELNICK The Plaintiffs, Spencer Griffith and Jamie Griffith: Appearing in Person Counsel for the Defendants: H. H. Low Dates and Place of Trial: July 6 & 7, October 30 & 31, 2000 Vancouver, BC [1] The plaintiffs Mr. and Ms. Griffiths ("the Griffiths") claim that Bank of Nova Scotia ("BNS") and Scotia Mortgage Corporation ("Scotia Mortgage") made certain misrepresentations to them in the course of their relationship as lender and borrower and overcharged them when they discharged their mortgage and paid off certain debts following the sale of their home. BNS counterclaims for the balance owing to it by the Griffiths on a consumer loan. By order of Mr. Justice Pitfield dated May 29, 2000, the Griffiths' action against the other defendants was dismissed. I. THE TRIAL: [2] This matter was set down as a speedy trial under Rule 66. The Griffiths appeared in person the two days originally set for the trial (July 6 and 7, 2000). The continuation of the trial was set for October 30 and 31, 2000. [3] On October 30 the Griffiths left telephone messages at the office of Ms. Low, counsel for the defendants, and with Trial Division of the Vancouver Supreme Court to say that they were sick, would not appear, and would reschedule a continuation at another date. According to Ms. Low, this had been a pattern of conduct when the defendants attempted to pursue

examinations for discovery resulting in their finally having to seek an order to compel the Griffiths to attend at examinations for discovery. [4] I directed Trial Division and requested Ms. Low to inform the plaintiffs that if they did not provide the Court with medical certificates confirming that they were ill, the trial would proceed on October 31, 2000 with or without them. On October 31 they did not appear nor did they provide medical certificates. Thus, the trial was completed in their absence. [5] At the conclusion of proceedings on July 7, the plaintiffs had apparently called all of their evidence with the exception of that to be given by Spencer Griffith and, possibly, one of the former defendants, Eunice Luk. At that point in time, the plaintiffs had apparently not been able to locate Ms. Luk, a former employee of BNS. I had asked Ms. Low to make efforts to locate Ms. Luk for the benefit of the plaintiffs and, on October 30, Ms. Luk was in attendance in the courtroom together with numerous witnesses to give evidence on behalf of the defendants. I did not require Ms. Luk to be present on October 31 but requested that she make herself available on October 31 if the plaintiffs attended and required her to give evidence. She agreed to that request. II. BACKGROUND: [6] The Griffiths were personal customers of BNS. They were also principals of a company, Golden Ears

Flooring Ltd. (the "Company"), which was a business customer of BNS. Scotia Mortgage held a first mortgage on the Griffiths' residence. [7] In April, 1992, BNS granted a term loan of $15,000 to the Company. Security for this loan to the Company included the unlimited personal guarantees of the Griffiths and a collateral second mortgage on their residence. This second mortgage was expressed to be as collateral for all debts and liabilities present and future. [8] Further loans were given by BNS to the Company on the strength of the security provided by the personal guarantee of the Griffiths and the collateral second mortgage. These were a second term loan of $2,500 in June, 1993; overdraft protection on their business account to the limit of $3,000 in October, 1993; an increase in the overdraft protection from $3,000 to $5,000 in July, 1994; and a further increase of the overdraft protection in March, 1995 to $10,000. At the time of the latter transaction, BNS again took unlimited personal guarantees from the plaintiffs. [9] On April 2, 1995, the Company, through the plaintiffs, requested a further loan from the bank in the amount of $13,200 for the purposes of purchasing a truck and to pay outstanding balances on existing loans. The proceeds were used in part to retire the balance of $7,020 owing on the April, 1992 loan, and $190 outstanding on the June, 1993 term loan. BNS

took a chattel mortgage over the truck as security. [10] It is at this point that the views of what security was in place diverges. In her evidence, Ms. Griffith said that she assumed the collateral second mortgage was not required by BNS by March of 1995 because a document effecting the increase in the overdraft protection from $5,000 to $10,000 did not expressly refer to a collateral second mortgage. In fact, the document indicated only that the collateral security that was in place was an unlimited guarantee of the Griffiths. It was the evidence of Mr. Bill Mathot, then manager of the Maple Ridge branch of BNS who had the initial dealings with the Griffiths and the Company, that it was always understood by BNS and the Griffiths that the unlimited guarantees and collateral second mortgage would stay in place and that that was the security BNS relied upon in, from time to time, increasing advances to the Company. [11] Ms. Griffith said that she was under the assumption that the collateral second mortgage was for a period of three years and that it would be effectively released by the bank after that time because the term of the $15,000 loan was three years. Thus, when the Griffiths took out the loan for $13,200, part of which was used to retire the outstanding balance of that original $15,000 loan, she assumed that the security given for that loan, including the unlimited

personal guarantees granted at that time and the collateral second mortgage against their home, would no longer be in effect. It was her understanding that the truck that they purchased in April, 1995, became the security for BNS. [12] Later, in April, 1996, the overdraft protection was converted to an operating line of credit apparently because the Company was no longer able to fulfill the conditions required to maintain an overdraft with BNS. That is, the Company was unable to pay off all of the overdraft at least every 30 days. Again, the bank regarded its security as the unlimited personal guarantees of the plaintiffs supported by the collateral second mortgage over their home. [13] In July, 1997, the Company sold the truck and repaid the balance then outstanding on the third term loan. However, the operating line of credit of $10,000 remained in place. Furthermore, from that time on, the Company was apparently not able to reduce the balance owing on the operating line of credit below the $10,000 authorized limit. It paid interest only on this loan. [14] In June, 1994, the plaintiffs had taken out a mortgage from Scotia Mortgage in the amount of $150,000. The mortgage matured on May 1, 1996. The mortgage was renewed in March, 1996, with a maturity date of April 1, 1999. At that time, Scotia Mortgage renewed the mortgage for a further six month open term to October 5,

1999. [15] In the meantime, relations between BNS and the Griffiths deteriorated. In September, 1997, BNS had advised Mr. Griffith that he had exceeded the limits on two Visa cards that he held through BNS. It requested that he make payments forthwith to bring the cards within limits. Less than two weeks later, BNS gave Mr. Griffith notice that it was cancelling both Visa cards and demanded the balance owing under both of them. Those demands came from the Maple Ridge branch of BNS. [16] Mr. Griffith attended the Coquitlam Centre branch of BNS and obtained a loan, in July 1998, to pay off the outstanding balances of the Visa cards. This loan was secured by a promissory note dated July 22, 1998 in the amount of $12,894.11 together with interest at 11.25% per year. Ms. Maureen Binkley, the then manager of the Coquitlam Centre branch of BNS, said that she was not made aware by Mr. Griffith of the history of his and the Company's dealings with the Maple Ridge branch until she requested his file from that branch and the manager of the Maple Ridge branch took the opportunity to forward to her the Company's loan file as well. I do note, however, that on the application for credit made on July 8, 1998, to the Coquitlam Centre branch of BNS, the Griffiths listed, as a liability, "Golden Ears - prev business" $10,000 with a monthly payment of $100. [17] The Griffiths continued to make

payments of $334.83 a month on that loan until early 2000 when they commenced this action. In her evidence, Ms. Griffith did not dispute that she and her husband owe a balance of approximately $9,500 to BNS for that consumer loan. In fact, evidence from BNS at trial was that the balance owing as at October 31, 2000, was $9,698.92 plus per diem interest thereafter at 11.25% or $2.79. [18] Ms. Griffith stated that the Griffiths stopped paying this loan because BNS had improperly taken from them the balance owing to BNS by the Company of the $10,000 operating line of credit when they sold their home and, further, because BNS took a greater amount from the proceeds of the sale to pay on the first mortgage than it had advised the Griffiths was owing. [19] The Griffiths' first position results from their belief that their agreement with BNS was that, after they provided the truck for security in April, 1995, BNS no longer held, or should have held, the second collateral mortgage over their home. By that time, said Ms. Griffiths, the Company was doing well enough to stand on its own and they made it clear to BNS that they did not wish to be personally guaranteeing the indebtedness of the Company. This is denied by BNS. Thus, according to the Griffiths, they are not responsible for the Company's operating line of credit in the amount of $10,927.94. [20] Due to the deteriorating

relationship between the Griffiths and BNS, BNS or Scotia Mortgage advised the Griffiths that they were not prepared to further renew the Griffiths' mortgage after October 5, 1999. The Griffiths were advised to make alternate mortgage arrangements. When they were not successful in doing so, they listed their home for sale and sold it. [21] Two letters were generated by Scotia Mortgage on October 8, 1999 and December 4, 1999, both advising the Griffiths that their mortgage had matured and providing them with the principal balance and interest owing. Both letters contained obvious errors. The letter of October 8, 1999 advised that the mortgage matured on October 5, 1999. That was correct. The Griffiths were advised that the balance of the mortgage was $128,611.40. That, too, was correct. They were further advised that "interest is being charged at a per diem rate of $0.00." That was not correct. The Griffiths, however, assumed that it was correct. [22] Their belief was reinforced by the letter of December 4, 1999. That letter advised that the mortgage had matured on October 15, 1999. That date was an error. The balance owing under the mortgage was again given in the correct sum and the letter reiterated that the per diem interest rate was $0.00, again an error. [23] The mortgage document executed by both of the Griffiths clearly provides for the payment of interest until the

balance payable is discharged. [24] Scotia Mortgage further compounded problems by ultimately providing incorrect payout figures to the Griffiths. Scotia Mortgage should not take any pride in the sloppy business practices displayed in this transaction. However, ultimately, the proper balance of principal and interest owing on both the first mortgage and the collateral second mortgage (reflecting both interest on the first mortgage to the date of payout and the balance owing by the Company on the operating line of credit) was provided to the notary attending to the conveyance of the Griffiths' home. Ultimately, the Griffiths paid Scotia Mortgage $130,989.73 for principal, interest and a discharge fee of $100 less a credit for the balance in their tax account of $214.04. The collateral second mortgage was discharged upon payment from the sales proceeds of the home of $10,927.94. [25] Finally, I note that toward the end of the relationship between the Griffiths and BNS, Mr. Griffith came to Ms. Binkley at the Coquitlam Centre branch of BNS and informed her that, effectively, the Company was out of business, it had a significant receivable and that BNS could collect it if it wished to get its money. Ms. Binkley says that she informed Mr. Griffith that BNS was not in the business of collecting customer's accounts to pay their debts. Further, Ms. Binkley denied that she, at any time,

told Ms. Griffith that BNS no longer had security against the Griffiths' home for the Company debt. III. DISCUSSION: [26] Both Mr. and Ms. Griffith were in business. Ms. Griffith was a former employee of the Maple Ridge branch of BNS. I do not accept that they did not appreciate the nature of the transactions that they entered with BNS on their own behalf and that of the Company. On the evidence before me (even without considering any of the evidence that I heard on October 31, 2000) I am not convinced that the Griffiths established that BNS or Scotia Mortgage misrepresented to them either the nature of the security held by BNS or the loan balances properly owing to BNS or Scotia Mortgage. [27] Undoubtedly, Mr. and Ms. Griffiths misunderstood what security was held by BNS for the outstanding balance owing by the Company on the operating line of credit loan. However, it is my view that no reasonable person should have misunderstood, and any inquiry by the Griffiths had clearly shown what security had been granted to BNS. [28] However, even if the Griffiths were correct in their conclusion that the original personal guarantee and collateral second mortgage had been released, they still face the fact that when they negotiated the operating line of credit in the amount of $10,000, they again provided BNS with unlimited personal guarantees. Thus, they were no less liable personally

for that debt of the Company than they would have been under the disputed documentation, although BNS would have had to take a different route to realize on its security. Having said that, however, I repeat that I am satisfied that the collateral second mortgage and original unlimited personal guarantee continued to be valid security in the hands of BNS upon which it was entitled to act when the Griffiths sold their home in late 1999. Thus the plaintiffs are not entitled to a judgment against BNS for $10,927.94. [29] I turn then to the error made by Scotia Mortgage in describing the amount of interest owing as "$0.00". I have already remarked that this was the result of sloppy work by employees of Scotia Mortgage. However, this error is not a fundamental error in the security document calling for rectification. The mortgage made it perfectly clear to the Griffiths what their obligation was with respect to paying principal and interest. I find it difficult to accept that a person such as Ms. Griffith, a former employee of BNS, would truly believe that interest was no longer chargeable on a mortgage balance once a mortgage matured. Although Scotia Mortgage caused unfortunate confusion by providing incorrect information in the two letters in question, they rectified the situation by ultimately (after further error) providing the correct information to the notary. I am satisfied

that Scotia Mortgage did not overcharge the Griffiths in the amount of $2,378.33. The Griffiths were responsible, under the terms of their mortgage, for the payment of that amount of interest in addition to the principal due on October 5, 1999. [30] On the other had, I am satisfied that BNS has established that as of October 31, 2000, there is owing to BNS the sum of $9,698.92. From the evidence of Ms. Griffith, I take it that there is no real dispute that that sum is owing to BNS. I am also satisfied from the evidence of Ms. Binkley that this sum is properly due and owing by the Griffiths and that demand for payment has been properly made by BNS upon the Griffiths. Accordingly, BNS is entitled to judgment against the Griffiths in that amount. IV. CONCLUSION: [31] The claim of the Griffiths against BNS and Scotia Mortgage is dismissed. [32] BNS is entitled to judgment in the amount of $9,698.92 against each of Mr. and Ms. Griffith. [33] BNS and Scotia Mortgage are entitled to their costs of this action on scale 3 including their costs thrown away by the Griffiths failing to appear for the continuation of the trial on October 30, 2000. "T.J. Melnick, J." The Honourable Mr. Justice T.J. Melnick November 15, 2000 -- Memorandum to the Legal Publishers issued as directed by Mr. Justice Melnick that on page 3, paragraph 4, the first sentence should read: "I directed Trial Division and requested Ms. Low to inform the plaintiffs that if they did not provide the Court with medical certificates confirming that they were ill, the trial would proceed on October 31, 2000 with or without them. ..."