HSBC Bank Bermuda Ltd v Wales

• Jurisdiction: Bermuda
• Judgment Date: 18 December 2018
• Date: 18 December 2018
• Docket Number: Civl Jurisdiction 2017 No 393
• Court: Supreme Court (Bermuda)

[2018] Bda LR 116

In The Supreme Court of Bermuda

Civl Jurisdiction 2017 No 393

Between:

HSBC Bank Bermuda Limited (Formerly the Bank of Bermuda)

Plaintiff

and

Leroy Scott Wales and Kimberlee Ann Wales

Defendant

Mr J Hindess for the Plaintiff

Mr B Swan for the Defendant

The following cases were referred to in the judgment:

National Commercial Bank (Jamaica) Ltd v Hew and ors [2003] UKPC 51

Banbury v Bank of Montreal [1918] AC 628

Allied Irish Banks plc v Counihan [2016] IEHC 752

Duty of lending bank to customer — Whether bank owes customer a duty of care — Whether bank owes customer a duty to advise customer — Purpose for loan

JUDGMENT ON PRELIMINARY ISSUE of Kessaram AJ

1. In this case HSBC Bank Bermuda Limited (“the Bank”) seeks to recover certain debts owed by the Defendants. The Bank's claim is made by Originating Summons dated 18^th October 2017. On this date the debts claimed were as follows:

• i. BD$725,884.71 being the principal and interest due under a loan secured by a mortgage dated 19^th May 2008 on certain real property situate at 13 Woodlawn Road, Sandys Parish (“the Mortgage Loan”); and

• ii. BD$2,607.04 being the principal and interest due under a promissory note dated 6^th October 2017.

2. In the course of the proceedings, the Bank withdrew its claim for the payment of the sum due under the said promissory note which it acknowledged had been paid in full, and sought instead to recover against only Mr. Wales the sum of $28,078.58 which it alleged was due under a promissory note dated 5^th October 2007 (“the Promissory Note Debt”). No formal amendment of the Bank's Originating Summons has yet been sought.

3. The matter was listed for trial on 12^th September 2018. Being a claim made by Originating Summons, no formal pleadings were exchanged. Consequently, it was not clear to what issues the evidence of the Defendants was directed. What emerged from counsel's addresses to the Court, however, was a question as to the duties owed by the Bank to the Defendants at the time of the creation of the Mortgage Loan. I therefore ordered that there be a trial of a preliminary issue in the following terms, namely, whether or not on the evidence before the Court the Plaintiff Bank owe a duty of care to the Defendants in entertaining their application for the Mortgage Loan.

4. The trial of this issue took place on 6^th November 2018. This is the judgment of the Court on that issue. The question at issue relates only to the granting of the Mortgage Loan. The First Defendant's liability to the Bank for repayment of the Promissory Note Debt is a separate and distinct issue and is not affected by this Judgment.

The Facts

5. The Defendants (Mr. and Mrs. Wales) are husband and wife. The Second Defendant's father offered to sell to the Defendants his property at 13 Woodlawn Road, Sandys Parish. The property had been a burden to Mrs. Wales' father, who was elderly and was experiencing medical problems. The terms were somewhat unusual. The father offered to sell the property for whatever amount the Defendants could borrow from the Bank on the security of the property. Mrs. Wales was skeptical as to whether the Bank would lend them any amount as her husband was the only person with a job. At the time the Bank was offering 100% mortgages.

6. The Defendants met with a mortgage officer of the Bank and provided information to her which she entered on a loan application form (“the Loan Application Form”). The form required personal information about the Defendants, their employment information and information as to their monthly income. The form also asked for credit information, i.e., as to their assets and liabilities. The information they provided to the Bank as shown on the form stated that Mr. Wales was an employee of the Bermuda Government as an operations engineer and earned $2880 per month with a loan expense of $586 paid monthly. Mrs. Wales was not shown as having any income or expenses.

7. The Loan...