The mortgage in this case was a “caveat loan” with a extraordinary high interest rate of 87 percent (lower) and 174 percent (higher rate) with a provision for the interest to compound with daily rests. The loan of $240,000 advanced in March 2005 had by June 2007 been calculated at $11,588,845. The court heard that the lender’s insistence on the full payout figure prevented the refinance of the loan. The lender did not abandon its claim for the full amount of interest until after the trial started. Justice Hamilton held:
The defendants’ need for finance was desperate. This was known to the plaintiff. The money was needed in a few days. The offer of finance was made on a take it or leave it basis. There was no room for negotiation. The possibility that the loan might go into default was known to the plaintiff. The rate of interest was extortionate, even by the standards of the caveat loan trade. I find that the contract, insofar as it related to the guarantees given by the second defendant and the fourth defendant, was unjust within the meaning of the CRA.
The judge held that it would not be fair to enforce the guarantee for the principal amount and a reasonable interest rate because the lender had destroyed the chances of refinancing by insisting on the full payout. Accordingly the guarantees were held to be unenforceable in their entirety.