20 | summer 2016 cmba-achc.ca CMB MAGAZINE
Background
e British Columbia Court of Appeal
(BCCA) has overruled much of the British
Columbia Supreme Court's (BCSC) decision
that had allowed a class action lawsuit
concerning CIBC's mortgage prepayment
clauses to go ahead. (See the Summer 2014
edition of Mortgage Broker for more details.)
e BCCA decision is very important as to
the payments a lender may require from a
borrower who pays out a closed mortgage
prior to the mortgage due date.
A class action lawsuit allows a person to
bring a lawsuit on behalf of himself or herself
as well as a class of people who face the same
issue. Among other benefits of and reasons
for a class action lawsuit, it allows issues to be
raised for people who, individually, would not
find it economical to go to court and for court
resources to be used more efficiently. To better
balance the competing interests of parties to
the lawsuit (including as between the claimants,
some of whom are not known at the time the
lawsuit is ongoing), a class action lawsuit can
proceed only with permission from the court.
In the CIBC case, the borrower seeks to
bring the case forward as a class action lawsuit.
She seeks to be the litigation representative
for persons in B.C. who borrowed money
from CIBC and prepaid part or all of the
principal amounts secured by those mortgages
from 2005 onward. e amounts charged to
individuals in the class range from less than
$1,000 to tens of thousands of dollars. e
borrower wanted the court to order that CIBC
pay back to borrowers improperly collected
prepayment penalties. e borrower claimed
the collection was improper because:
n
the prepayment clause was void due to it
giving discretion to CIBC in the method
with which it calculated the prepayment
penalty,
n
CIBC had systemically miscalculated
prepayment penalties, or
n
CIBC had acted unconscionably in collecting
the prepayment penalties.
As well, the borrower wanted the court to
order that CIBC pay punitive damages.
Lenders can have
considerable discretion to
determine prepayment
penalties
BY RAY BASI, LL.B
STAFF, EDUCATION AND
POLICY REVIEW
PIPER
PAYING
THE
