May 5, 2023
The moral high ground strikes again.
THE ISSUE
Though the phrase is seldom used explicitly in judgments, the centrality of this concept to equity is the silent explanation of the result of many civil cases.
THE CASE
This is once again demonstrated by Canadian Imperial Bank of Commerce v. Pena, an Ontario Superior Court decision in a dispute between a lender and the borrower’s tenant.
The tenant had prepaid one year’s rent – thirty thousand dollars. The borrower defaulted. The lender applied for vacant possession of the property.
The tenant was a bona fide purchaser of value of their leasehold interest. When they paid the $30,000 they did not know about the landlord’s default on the mortgage, or the enforcement of the mortgage.
Both parties – the lender and the tenant – were innocent. So, the question becomes “which is more innocent”. That is the concept that Justice John Laskin addressed in his famous (to lawyers) article “Forget the Windup, Make the Pitch”, taken to an extreme.
One of the reasons why equity remains part of our legal system is to protect bona fide purchasers. As the judge noted, it is a long-established equitable principle that courts “will not take an estate from a purchaser who bought for valuable consideration without notice”.
How long established?
The judge quotes an 1872 English decision.
But it is still current law, as the judge also refers to a 2011 Supreme Court of Canada decision, and a 2007 Ontario Court of Appeal decision.
Equity requires “a comparison of the equities as between the two innocent parties”. In other words, “who can seize the moral high ground?”
In this case, the tenants were ordinary individuals, who would lose a year’s prepaid rent that they could not really afford. CIBC is a sophisticated lender who had assessed the risk of the loan, and unfortunately were mistaken about the lender. They waited six months after default to begin enforcement. Though this is common, in this case, it gave the borrower time to pocket the tenant’s money. Ultimately, the bank will sell the property, and the delay can be compensated by a higher claim for the uncollected rent plus interest out of the sale proceeds.
Who would you think has the moral high ground, or, in the judge’s words, is “more innocent”?
If you said, “the tenant”, give yourself a gold star.
TAKEAWAYS
As with virtually all Superior Court and equity cases, this decision turns on it’s facts rather than any great debate about the law. Even on appeals, as Justice John Laskin emphasizes in his article, how you (or your lawyer) present the facts is most important. If you seize the moral high ground, the court will attempt, as Laskin puts it, to “bend the law to reach a fair result.”
HOW WEILERS LLP CAN HELP YOU
This is where Weilers LLP comes in. Our litigation team knows equity and the law, but more importantly we:
- Know the importance of facts;
- Know WHICH facts are important to your case;
- Know how to search out evidence to prove those facts;
- Know how to present that evidence in court;
- Know when to tell you that we just, despite best efforts, cannot prove that you occupy the moral high ground, and how that should influence your strategy; and
- Know the judges and most lawyers in Thunder Bay and Northwestern Ontario, so we can better advise you on the human element of strategy.
If you need lawyers who can help you capture the moral high ground (and who doesn’t?) Weilers LLP might be the right lawyers for you. Give us a call.