2014 QCCQ 11497, 2014 QCCQ 11497

Landmark Financial Group Inc. c. Vashi 2014 QCCQ 11497 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-129980-118 DATE: November 11, 2014 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ LANDMARK FINANCIAL GROUP INC. 755 Saint-Jean Boulevard Suite 600 Pointe-Claire, Qc H9R 5M9 Plaintiff v.

SOHIL VASHI […] Kirkland, Qc […] And MIRA VASHI […] Kirkland, Qc […] Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Landmark Financial Group Inc. (Landmark), sues its former clients, the Defendants, Sohil Vashi and Mira Vashi, under an exclusive mandate (P-6) whereby Landmark was to obtain hypothecary financing for them.

The suit is based on a penal clause in the mandate that provides for liquated damages in the amount of 0.75% of the total amount of an approved loan obtained by Landmark in the event that the clients fail to act upon. [ 2 ] It is not in issue that the Defendants, who wished to refinance their home to obtain liquidity, consulted Sean Chouman, whom they knew from previous dealings when he represented exclusively the National Bank.

As a result of his representation, they had borrowed a substantial amount secured by a first-ranking hypothec on the family home. [ 3 ] When they approached him, they initially believed that he still worked for the National Bank, though he conducted business from the offices of Landmark. [ 4 ] In fact, Mr Chouman had left the employ of the National Bank recently and now operated as a mortgage broker representing any number of potential lenders including the National Bank. [ 5 ] At an initial meeting, the Defendants signed an application for credit which subsequently gave rise to an offer of financing by TD Canada Trust. [ 6 ] Pradipkumar Vashi, the father of Sohil Vashi and husband of Mira Vashi testified that he received a call from Mr Chouman informing him that an application had been approved and that he was required to sign certain documents that would be sent by fax.

[ 7 ] Mrs Mira Vashi testifies that she saw this document (P-6), and signed it for the first time when a faxed copy was shown to her by her husband who asked her to sign it immediately. [ 8 ] The Plaintiff alleges, however, that this mandate was signed by Mrs Mira Vashi in the presence of Mr Chouman but it is admitted that the document was faxed to her husband so that Sohil Vashi, who was not present at the meeting, could sign it as well. [ 9 ] When Mr.

Pradipkumar Vashi learned of the terms of financing, he disagreed and the family withdrew from the proposal, obtaining a different type of financing directly from the National Bank. [ 10 ] The Defendants propose several elements of defence including the assertion that the conditions of the TD Canada Trust financing were not appropriate. Also, they were not comfortable with certain changes that Mr Chouman had suggested. [ 11 ] In particular, Mr Pradipkumar Vashi states that he was not comfortable with an increased amortisation and with a penalty for the cancelation of the first mortgage.

There is another significant difference in the financing in that the very low rate proposed by TD Canada Trust was a fluctuating short-term rate based on the prime lending rate while the blended financing that occurred when the refinancing was done with the National Bank was for a longer term. [ 12 ] There is also the legal defence based on the Plaintiff’s failure to comply with regulatory requirements. [ 13 ] The Defendants complain that the document that they received by fax was not sufficiently legible and that they were therefore not aware that there was a penalty clause in this document. [ 14 ] The relevant portions of the regulation in force at the time read as follows [1] : 3.

Where a licence holder completes a contract, a transaction proposal or a form using a computer system or a printing system, he or she must use at least 10-point type. Moreover, in the case of a form, the licence holder must use type that is different from the type used for mandatory particulars or stipulations, so as to enable the parties to easily distinguish the particulars or stipulations from any addition or amendment. […] 6.

A licence holder must, before having a contract, a transaction proposal or a form that he or she has completed signed, allow the parties to take cognizance of its terms and conditions and, before the signing, provide all the explanations and answers to questions that the parties may ask. [ 15 ] The contract form used by the Plaintiff and the way in which it was used offends this regulation in three respects : • It is in a much smaller type than 10 point and, in the fax copy, it was extremely difficult to read; • There is no differentiation in the font used between clauses that are mandatory and those that were added, such as the clause containing the penalty; • The Defendants testify, as well, that nothing was said to them to draw their attention to this rather complicated and onerous penal clause. [ 16 ] As a matter of fact, the fax copy that the Court received in evidence is extremely difficult to read both by the fact that it is in very small print, much smaller than 10 point, and because of the distortion in the fax copy.

The Court was provided with a clearer copy to work from. The particular passage that contains the penal clause reads as follows: The Brokerage Fees stay due by the Mandator to the Mandatory in the event where the Mandator accepts, before the Termination Date, any funding outside the frame of the present Mandate, even if said funding was obtained after the Termination Date but initiated before said date.

It is understood and agreed that in the event where the Loan requested by the Mandator in according with the present Mandate is obtained and is subsequently refused, ignored or revoked by the Mandator, the latter shall pay to the Mandatory, as liquidated damages, the Brokerage Fees in addition to an amount equivalent to 0.75% of the total amount of the approved Loan if it is the case. [ 17 ] In the space where the amount or percentage of Brokerage Fees would have been added, it is in fact left blank. [ 18 ] This obscure text is part of a long rambling paragraph printed under the heading “DESCRIPTION OF THE MANDATE”. [ 19 ] The regulations are a form of consumer-protection legislation.

Such regulations should be taken seriously by members of the industry. Something as onerous as a penal clause should be clearly indicated with the proper headings in a script that is easy to read, and in language that is simple and clear. The broker should, when having a client sign the document, bring the matter to his attention to ensure that he, in fact, understands that this is not a mandatory clause, and that he indeed consents to it. [ 20 ] The evidence, in the present case, is that these protective provisions of the regulations were not followed by the Plaintiff.

The effective sanction should be the unenforceability of the penalty clause. [ 21 ] The is also the problem that it is not clear what is meant by “ the Brokerage Fees ”. This amount is not indicated in the document. That lack of clarity is also fatal to the Plaintiff’s case For these reasons, the Court : DISMISSES the Plaintiff’s action;

CONDEMNS the Plaintiffs to pay judicial fees of $118.00 to the Defendants. __________________________________ DAVID L. CAMERON, J.C.Q . Date of hearing: October 6, 2014 [1] Regulation respecting contracts and forms, RRQ, c C-73.2, r 2.