2016 QCCQ 8855, 2016 QCCQ 8855

Financière Castleton ltée c. Singh 2016 QCCQ 8855 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-22-205510-137 DATE: July 15, 2016 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ FINANCIÈRE CASTLETON LTÉE Plaintiff v.

SURINDER PAL SINGH Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Financière Castleton Ltée (“Castleton”), a provider of hypothecary lending, sues the Defendant, Surinder Pal Singh, under the terms of a commitment letter dated June 14, 2013 (P-1), for the amount of $ 18,550, described as a “Commitment Fee” stipulated in paragraph 8, alleging that Mr Singh failed to conclude a loan agreement, prepared by the notary charged with the hypothecary transaction that the loan related to on July 4, 2013. [ 2 ] Because this transaction did not go ahead, Castleton also claims notary fees of $ 1,347.59, as well as lost interest foreseen from the loan in the amount of $ 5,950. [ 3 ] There are two versions of the oral Defence, the first being set out in the “Gestion de temps” document, dated December 6, 2013: - P-1 non signé par le défendeur - Montant réclamé exagéré et non dû - Présence du notaire non nécessaire - Admission que documentation de prêt étant préparé [sic] à la demande de la demanderesse - Admission que le défendeur a refusé de signé [sic] - Admission de P-3 [ 4 ] A document signed by the Defendant’s attorney on October 22, reads as follows : The Defendant denies that he ever entered into a commitment letter with the Plaintiff as the signature on the letter is not his.

Furthermore, in any event, the amounts claimed by the Plaintiff are exaggerated and are not due. [ 5 ] The Defence is essentially a denial of the signature of Surinder Pal Singh on Exhibit P-1 of which the Court was provided with a photocopy. There was no formal denial of the signature under what was then

article 89 of the Code of civil procedure , although no contestation is raised as to this formality. Perhaps the oral Defence is a context in which practitioners may feel that is not appropriate to follow the formalities of

article 89. This question is not really raised in the proceedings, because both parties treated the trial as being chiefly an exercise to determine by way of testimonial evidence whether Mr Singh’s signature was adequately established. [ 6 ] The question whether the clause in paragraph 8 of the contract is enforceable in whole or in part, assuming the contract was agreed to, came up in the argument. [ 7 ] The case also raises indirectly the duties of a real estate broker engaging in the practice of obtaining hypothecary financing for clients.

The context of the case is of course not disciplinary, but the conduct of the broker has a bearing on the probative value of the document presented in evidence. ISSUES

[ 8 ] To resolve this case, the Court must determine: 1) Can Castleton rely upon the commitment letter to obtain payment of the amount of $ 8,550? 2) Is Castleton entitled to notary fees? 3) Is Castleton entitled to damages representing lost interest? [ 9 ] Castleton became involved because Mr Singh did not quality for standard bank financing with the RBC.

He was referred to something called “outsourcing of loans for non-qualifying clients”. [ 10 ] The financing involved two properties referred to in the commitment letter as “Property 1” and “Property 2”, the first being in Ste-Rose and the second, in Montreal on Champagneur Street. [ 11 ] The commitment mentions $ 175,000 with $ 60,000 to be used for the purchase of Property 1, and $ 22,000 to be used to pay the borrower’s debts, and the balance of $ 75,000 for the completion of the renovations on Property 2, required to support the loan. [ 12 ] It is a fairly complicated loan structure with various modalities, including appraisals and various other conditions that the borrower would have to meet. [ 13 ] The commitment letter includes clause 8: A commitment fee in the amount of $ 18,550.00 shall be paid to Castleton Financial Ltd. in connection with the issuance of the present Commitment.

The Borrower may chose that such fee shall be paid from the loan proceeds. [ 14 ] The Court heard some rather inconclusive evidence about why Mr Singh and the other family members with whom he was associated in this transaction decided not to go ahead with the entire project. [ 15 ] Nor was this evidence not particularly relevant, although it did provide some background to understanding the parties’ motivations and their dealings. [ 16 ] Key to the transaction was the real estate broker Kamal Jeet Tamber. She was instrumental in the completion of the commitment letter dated June 14, 2013.

She testified (having been brought pursuant to a bench warrant) that she dropped the letter off at the residence where Mr Singh lives, attended at the residence later to pick it up once it had been signed, and then faxed it back to Antonio Fulminis, the broker specializing in outsourced loans for non-qualifying clients at BMO. [ 17 ] She testified that she considers the signature on the document to be that of Surinder Pal Singh, and believes that it matched up with another signature of his that she had seen on another document relating to the transaction, as well as on his ID.

She testifies that Mr Singh never denied to her having signed the document. [ 18 ] It would seem that she dropped the document off, because she had had trouble confirming appointment to get “them” to sign. [ 19 ] When she learned from the family that they intended not to go through with the transaction, she urged them to go ahead, because there would be “some penalties”, although she did not know how much money was involved. [ 20 ] This is an oblique reference to the commitment fee, which is more than 10% of the contemplated loan. [ 21 ] Mrs Rajwinder Kaur Nigah, the wife of Surinder Pal Singh’s brother, Makhan Singh Nigah, testified that the broker, Kamal Jeet Tamber, never gave her the commitment letter. [ 22 ] Mr Surinder Pal Singh testified that he does not know of Financière Castleton and did not sign the document. [ 23 ] The testimony of Mrs Tamber is that the document was given back to her, in the presence of Mr Singh. [ 24 ] Mr Singh also provided his health insurance card where his signature, which is legible, can be seen.

The signature on P-1 is also legible, but there is no particular resemblance or lack of resemblance that the Court could comment on. ANALYSIS [ 25 ] Taken it literally, the evidence provided by the broker, has not established that Mr Singh signed the document; it may had been signed by him or by another resident of the home, or even by the broker herself. The broker’s credibility is seriously impaired by her lack of knowledge of the document itself.

She testified that when she learned that the clients were not going ahead with the transaction, she urge them to do so to avoid a “penalty” in an amount that she did not know. [ 26 ] A broker representing clients should certainly have known that this document contained an obligation to pay more than 10% of the loan. [ 27 ] The commitment fee is not drafted as a penalty to apply when the borrower fails to complete the loan once the conditions have been met and the lender is bound to lend: it is rather a fee to be paid to Castleton Financial “in connection with the issuance of the present commitment”.

The modality of the commitment being paid from loan proceeds is just that, a modality. So, arguably, even if the clients had sufficient reasons not to go ahead with the transaction, this would perhaps not have exonerated them from paying the commitment fee, at least, if that is a correct

interpretation of the text. [ 28 ] The case is quite different then from the Ace Mortgage Corporation case [1] decided by Judge Brigitte Gouin of this court. That was a case where the obligation to pay the fee was conditional upon the completion of the loan agreements and the Defendants had made

it impossible for the condition to be met, with the result contemplated in

article 1503 CCQ: the obligation became unconditional. [ 29 ] A broker has an obligation to insure that the client, when he signs an agreement presented to him, understands its contents. [ 30 ] It would have been impossible for this broker to insure that he had such an understanding: she wasn’t there when he allegedly signed it, and she, herself, did not have a very good understanding of the contents of the document. [ 31 ] As a means of proof in the case, the document is not admissible, because its authenticity has not been established.

Its authenticity has not been established, because the testimony given to create an inference that it must have been signed by the client is so lacking in probative value. [ 32 ] A broker cannot simply drop off a document that has not been explained to a client, and pick it up later at his home, and then present that document as the client’s acceptance of very onerous obligations that she herself has not been fully aware of.

This is professionally unacceptable and also unacceptable from the point of view of the probative value of the evidence that is presumptively made by mean of a valid written instrument. [ 33 ] The burden of proof was on the Plaintiff, having accepted the Defendant’s denial of the signature despite the lack of formality, without objecting to the Defence’s evidence. [ 34 ] The case presented by the Plaintiff to prove the authenticity of the signature is not sufficient. [ 35 ] On this basis alone, the case for the commitment fee fails.

As to the notary’s fee charged, the case fails as well, because the source of the obligation to indemnify Castleton is the commitment letter. What’s more, the Plaintiff admitted, through a stipulation given after trial, that it did not pay the notary’s bill dated August 30, 2013 (P-3). The bill is made to Mr Surinder Pal Singh, but the notary did not press him for payment either. [ 36 ] Finally, the claim for interest, presumably the lost profit on the loan, constitutes compensatory damages: this could not be claimed if the payment of the commitment fee is a penal clause, taking the form of liquidated damages.

This would be double recovery, not permitted under the regime of anticipated assessment of damages created by articles 1622 and following CCQ. [ 37 ] It is also not really clear that a lending institution loses profit equal to the stipulated interest when it loses the opportunity to lend money, since its profit is only in the spread between the interest charged and its cost of funds, a spread that would be much lower than the interest rate of 6.8% per annum mentioned in the commitment letter.

BY THESE REASONS, THE COURT: DISMISSES the Plaintiff’s Demand; WITH LEGAL COSTS in favour of the Defendant. __________________________________ DAVID L. CAMERON, J.C.Q. Me Louis Brunet GAGNON BRUNET Attorneys for the Plaintiff Me Melvin S. Kronish Attorney for the Defendant Dates of hearing: June 1 and 3, 2016