The bank sought possession. The borrower and guarantor alleged equitable set-off on the basis that the bank by its negligence had impaired the ability of the business to earn income to pay what was due under the loan and mortgage. They argued that two potential clients declined to proceed because letters sent by the bank regarding their defaults had been sent to the wrong addresses and had come into their hands as a result.
The law is that the bank owes a duty of confidentiality to its customers, breach of which even if inadvertent, will sound in damages. The question for the court was whether the defence of equitable set-off has a real (more than fanciful) prospect of success. The law is that an injunction will not be granted unless the amount of the mortgage debt, if not in dispute, is paid or unless, if disputed, is paid into court.
The court noted:
The wrongdoing on the bank’s part postdates significantly the entry into the loan agreement and the mortgage. This is not a case where, for example, misrepresentation or misleading and deceptive conduct leading to the making of the agreement is alleged nor where there is unconscionability or an unjust contract is made. Such matters, if established, can be said to impeach the [bank’s] title to the land because of the way that title was obtained. The present complaint is independent of the entry into the contractual arrangements. It arises from subsequent conduct of the bank…. In that way it cannot be said to impeach the title of the [bank] to the mortgage. Again, the complaint about the [bank] is not directly connected with the [bank’s] right to obtain possession.
The court found no defence and gave the bank summary judgment for possession.