Ozden v CBA [2014] VSCA 127

The bank provided three loans secured over the family home and a second property with a marina berth attached. No mortgage was taken over the berth. When the borrowers experienced financial difficulties, they tried to sell the berth, but the bank refused to release title for the berth and the offer was withdrawn.  When the bank sought possession, the borrowers argued that the bank’s lack of cooperation meant they were unable to sell the property adjoining the berth and in this time, the property decreased in value. They argued that the bank’s right to enforce was limited by their duty to cooperate so as not to prevent the borrowers from accessing their resources to repay the loans. 

The lower court found that the bank breached a duty of cooperation by failing to return the berth title and awarded damages. The court assessed damages at $5000, as the loss of a chance to obtain funds from the sale of the berth title which would have probably been used to make repayments and reduce interest on the debt. However the court found no breach in relation to the sale of the property. The lower court granted the bank possession. The borrowers appealed.

The Appeal Court held the lower court correct in its assessment of damages as the loss of a chance because there was no concluded contract on foot. All that was lost was an opportunity to conclude a contract or raise funds on the security of the marina berth. The Appeal Court noted that damages of $5000 represented a 12% likelihood of sale of the marina berth, which had a value of about $200,000.

The Appeal Court agreed there was no breach in relation to the sale of the property and said:

Whatever the conduct of the Bank, in this case being unclear, unprofessional and tardy at best, this did not absolve the appellants from their obligations. They could have surrendered the property if they really wanted to. Such surrender is a unilateral act and does not need the assent or even cooperation of the Bank. To suggest that they could not surrender the property for 18 months because of the Bank — a creditor/mortgagee — defies belief and stretches credulity to the limit.

The Appeal Court rejected the borrowers’ challenge to the validity of the bank’s demand and held that the borrowers’ right to unliquidated damages for wrongful retention of the marina berth certificate did not impeach the bank’s claim.

The Appeal Court said:

It does not go to the root of the Bank’s claim so as to preclude the Bank from making or relying on the demand. Any claim for damages is precisely that, namely a claim or cross-claim that can — and indeed was — properly made. Although the final result may diminish the Bank’s claim by way of set-off at common law, where each amount is certain, it does not at the stage of demand affect the demand or the Bank’s right to make it. The claims are distinct and not sufficiently closely related. 

The appeal was dismissed.

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