DATE: 20000420
DOCKET: C27635
COURT OF APPEAL FOR ONTARIO
McMURTRY C.J.O., OSBORNE and FELDMAN JJ.A.
BETWEEN: )
) Joshua J. Siegel
BANK OF MONTREAL ) for the appellant
)
Appellant )
)
- and - ) Geoffrey T. Mullin
) for the respondent
CAROL DUGUID )
)
Respondent )
) Heard: November 30, 1998
)
On appeal from the judgment of Day J. dated May 30, 1997
OSBORNE A.C.J.O.:
OVERVIEW
[1] I have had the advantage of reading the reasons of Feldman
J.A., who would dismiss the Bank?s appeal but not for the reasons
of the trial judge. I agree with Feldman J.A. that the Bank, in
these circumstances, was not required to tell its customers
(specifically, Mrs. Duguid, a co-signer) of its views on the
quality of the investment. I also agree that the Bank?s failure
to follow its internal policies (specifically, advising Mrs.
Duguid to get independent legal or financial advice) is not a
basis upon which to dismiss the Bank?s action on the note. I
cannot, however, agree with my colleague?s conclusions on the
issue of presumed undue influence.
[2] Mrs. Duguid alleges that the guarantee was procured by the
undue influence of her husband; however, she does not seek any
relief as against her husband, who is now bankrupt. Rather, she
now seeks to set aside the transaction as against a third party,
the Bank. The question then is in what circumstances a party can
set aside a transaction on the ground of undue influence as
against a third party to the alleged wrongdoing.
[3] In my view, the relationship between Mr. and Mrs. Duguid in
respect of their financial affairs was not a relationship that
would trigger a presumption of undue influence when Mrs. Duguid,
at her husband?s request, co-signed a promissory note (prepared
by the Bank). In any case, having regard to the trial evidence,
it seems to me that if a presumption of undue influence was
established, the presumption was rebutted. Thus, I think that
the Bank?s appeal should be allowed.
ANALYSIS
[4] As a general proposition, a party may set aside a
transaction where that party was induced to enter into the
transaction by another?s undue influence. Thus, where a husband
induces his wife to enter into a transaction by means of undue
influence, the wife will be entitled to set aside the transaction
as against her husband.
[5] As Feldman J.A. has noted, the House of Lords reviewed the
doctrine of undue influence in Barclays Bank plc v. O?Brien,
[1993] 4 All E.R. 417. The facts of O?Brien are somewhat similar
to the facts of this case. Mr. O?Brien was a shareholder in a
company with an unsecured overdraft. He sought an increase to
the company?s overdraft limit to be secured by a second charge
over the matrimonial home owned jointly by him and his wife. The
Bank agreed to grant the increase and prepared the necessary
documents, which Mr. O?Brien signed. The following day, Mr.
O?Brien brought his wife to the Bank so that she could sign. No
one explained the transaction or the documents to her or
suggested that she receive independent legal advice. Mrs.
O?Brien simply signed the documents. Eventually the company
failed, and the Bank sought to realize on its security.
[6] Mrs. O?Brien defended the Bank?s action on the ground that
she had been induced to sign the agreement by her husband?s undue
influence. The trial judge found that there was no undue
influence, and ruled in favour of the Bank. The Court of Appeal
granted the wife?s appeal, finding that married women providing
security for their husbands? debts constituted a specially
protected class, requiring the Bank to ensure that the wife
received independent legal advice. The House of Lords dismissed
the Bank?s appeal. While undue influence was not an issue
directly before the House of Lords, Lord Browne-Wilkinson
reviewed the law regarding undue influence, and noted that there
were two different categories of undue influence ? actual and
presumed. He set out the following classification:
Class 1: actual undue influence. In
these cases it is necessary for the claimant
to prove affirmatively that the wrongdoer
exerted undue influence on the complainant to
enter into the particular transaction which
is impugned.
Class 2: presumed undue influence. In
these cases the complainant only has to show,
in the first instance, that there was a
relationship of trust and confidence of such
a nature that it is fair to presume that the
wrongdoer abused that relationship in
procuring the complainant to enter into the
impugned transaction. ? [O]nce a
confidential relationship has been proved,
the burden shifts to the wrongdoer to prove
that the complainant entered into the
impugned transaction freely, for example by
showing that the complainant had independent
advice. Such a confidential relationship may
be established in two ways, viz:
Class 2A: Certain relationships (for
example solicitor and client, medical advisor
and patient) as a matter of law raise the
presumption that undue influence has been
exercised.
Class 2B: Even if there is no
relationship falling within class 2A, if the
complainant proves the de facto existence of
a relationship under which the complainant
generally reposed trust and confidence in the
wrongdoer, the existence of such a
relationship raises the presumption of undue
influence. In a class 2B case therefore, ?
the complainant will succeed in setting aside
the impugned transaction merely by proof that
the complainant reposed trust and confidence
in the wrongdoer ? .
[7] Lord Browne-Wilkinson then considered whether the specific
relationship of husband and wife, without more, gave rise to a
class 2A presumption of undue influence. He found that it did
not. However, noting the continued existence of relationships
where the wife is still subjected to, and yields to, influence by
her husband, he concluded at p. 424 that:
? in any particular case a wife may well be able to
demonstrate that de facto she did leave decisions on
financial affairs to her husband thereby bringing
herself within class 2B ? Thus, in those cases which
still occur where the wife relies in all financial
matters on her husband and simply does what he
suggests, a presumption of undue influence within
class 2B can be established solely from proof of such
trust and influence without proof of actual undue
influence.
In my view, it is clear from O?Brien that a wife seeking to set
aside a transaction on account of undue influence may raise a
class 2B presumption of undue influence by demonstrating that her
relationship with her husband was one in which she relied on her
husband so that it would be reasonable to presume that the
transaction in question was procured by the undue influence of
her husband. In O?Brien, Lord Browne-Wilkinson rejected at p.
428 a ?special equity? theory based on the fact of marriage (or
cohabitation) that would allow wives to set aside a transaction
where they acted as surety for their husbands? debts:
? Should wives (and perhaps others) be accorded special
rights in relation to surety transactions by the recognition
of a special equity applicable only to such persons engaged
in such transactions? Or should they enjoy only the same
protection as they would enjoy in relation to their other
dealings? In my judgment, the special equity theory should
be rejected. ? [T]o require the creditor to prove knowledge
and understanding by the wife in all cases is to reintroduce
by the back door either a presumption of undue influence of
class 2A (which has been decisively rejected) or the
Romilly heresy (which has long been treated as bad law).
[Emphasis added.]
Lord Browne-Wilkinson concluded that it was ?not necessary to
have recourse to a special equity theory for the proper
protection of the legitimate interests of wives,? since the
combination of the class 2B presumption and the doctrine of
constructive notice provided ample protection for such interests.
[8] A similar approach was employed by the Supreme Court of
Canada in Geffen v. Goodman Estate, [1991] 2 S.C.R. 353, a case
decided before Pitt and O?Brien. In Geffen, the testatrix left
$1000 to each of her three sons, with the residue to her daughter
for life and remainder to her grandchildren. The daughter had a
history of mental illness. The brothers were concerned that
their sister might make an unwise disposition of the house
because of her condition, and this concern was shared by the
daughter. Thus, she and her brothers met with a solicitor to
discuss their concerns. After the daughter met the solicitor on
her own on several occasions, she decided to settle the house in
a trust for herself for life, with the remainder to her children
and her nephews and nieces. After the daughter died, her
executor brought an application to set the trust aside for undue
influence. The trial judge held that there had been no undue
influence, or in the alternative, that any presumption of undue
influence had been rebutted by the independent legal advice. On
appeal, the majority of the Alberta Court of Appeal held that the
presumption of undue influence had not been rebutted. On further
appeal, the Supreme Court of Canada allowed the appeal and upheld
the trust. Wilson J., dissenting but writing for the majority on
this point, set out the proper approach at p. 378:
What then must a plaintiff establish in order
to trigger a presumption of undue influence? In my
view, the inquiry should begin with an examination
of the relationship between the parties. The first
question to be addressed in all cases is whether
the potential for domination inheres in the nature
of the relationship itself. ? .
Having established the requisite type of
relationship to support the presumption, the
next phase of inquiry involves an examination
of the nature of the transaction. ? .
It is clear that the approach set out by Wilson J. is
substantially the same as the approach set out in O?Brien: where
a claimant relies upon a presumption of undue influence, the
court must look to the nature of the relationship and determine
whether the potential for domination exists as a matter of fact
or whether it may be presumed.
[9] The principles of undue influence outlined in O?Brien were
affirmed by the Supreme Court of Canada in Gold v. Rosenberg,
[1997] 3 S.C.R. 767. Gold v. Rosenberg did not concern undue
influence or the presumption of undue influence; nor did the
Supreme Court of Canada consider Lord Browne-Wilkinson?s
statement on that issue. In Gold v. Rosenberg, a testator left
his estate to his son, Rosenberg, and grandson, Gold, as
executors and equal beneficiaries. The assets of the estate were
held by two companies. Both Rosenberg and Gold were directors of
the companies; however, only Rosenberg was involved in the
estate?s business. Rosenberg arranged a bank loan to a business
of his own, secured by a guarantee from one of the estate
companies, and supported by a mortgage over the estate company?s
assets. Gold signed a directors? resolution authorizing the
guarantee, and the law firm acting for both parties gave an
opinion that the guarantee was valid. Subsequently, Gold brought
an action against Rosenberg, the bank, and the law firm, alleging
that he had been misled. The trial judge held the bank and law
firm liable, finding that the bank had knowingly assisted in a
breach of trust. An appeal by the bank was allowed by this
court, and a further appeal to the Supreme Court of Canada was
dismissed. Sopinka J. referred to O?Brien when he considered the
bank?s duty to enquire. He said, at pp. 799-801:
In certain circumstances, a third party in the position of
the bank will not have discharged its duty to inquire unless
the guarantor has been advised to obtain independent legal
advice. In certain cases, the law imposes on a creditor a
duty to inquire when the transaction is clearly detrimental
to the person offering security and the relationship between
that person and the principal debtor is particularly close. In
such circumstances, the law presumes undue influence on the
part of the principal debtor. The clearest type of relationship
giving rise to this presumption is that of husband and wife.
Iacobucci J. cites Barclays Bank plc v. O'Brien, [1993] 4 All
E.R. 417 (H.L.), in which the House of Lords extended this
presumption to include cohabitees. Lord Browne-Wilkinson held
that when a creditor is approached by cohabitees, one the
principal debtor and the other the surety, and the proposed
transaction is clearly to the disadvantage of the surety, it
will be under a duty to inquire. A creditor can discharge
this duty by explaining to the surety in a meeting not
attended by the principal debtor the amount of her potential
liability and the risks involved and advising her to take
independent advice: Barclays, supra, at pp. 431-32.
?
When setting out the strict requirements of a separate
meeting with the surety, however, Lord Browne-Wilkinson
spoke of ?the emotional pressure of cohabitation? (p. 431).
Elsewhere, he spoke of how ?the sexual and emotional ties
between the [married] parties provide a ready weapon for
undue influence? (p. 424). When a bank is presented with
such a relationship, it should recognize the risk of undue
influence (assuming that the transaction is on its face
detrimental to the party offering security). But by the same
logic, a relationship that is more distant will raise less
suspicion of undue influence, even if the transaction is
apparently unfavourable to the guarantor. Consequently,
less may be required to satisfy an honest and reasonable
person that the surety or guarantor is aware of the legal
implications of the proposed transaction.
[10] While Sopinka J.?s statement that the law presumes undue
influence ?when the transaction is clearly detrimental to the
person offering security and the relationship between that person
and the principal debtor is particularly close? might seem to
establish a different test from the one set out in Geffen and
O?Brien, it should be viewed in its context. Furthermore, had
Sopinka J. intended to depart from, or change, the law pertaining
to undue influence as set out in Geffen, supra, it seems to me
that he would have stated his intention to do so.
[11] The issues in Gold v. Rosenberg were whether the Bank had
notice of Rosenberg?s wrongdoing such that Gold could set aside
the transaction, and the Bank?s duty to inquire. As I have
noted, Gold v. Rosenberg was not a case where the presence of
undue influence was an issue. In Gold, Sopinka J. referred to
O?Brien for the proposition that, in certain circumstances, a
third party will owe a duty to inquire whether a guarantor had
received independent legal advice. It should be noted that in
the end Sopinka J. concluded that the respondent bank did not owe
Gold a duty to advise him to obtain legal advice. In reaching
this conclusion, he noted that Gold had ?three years of
university education in which he had taken courses in business,
economics and accounting,? and had some business experience.
Whether the Bank owed a duty to inquire in this case is one of
the issues that arises in this appeal, and it is to this issue
that I now turn.
[12] The duty to inquire about the prospect of undue influence in
the context of the circumstances in which a third party will be
subject to a complainant's equity to set aside a transaction
procured by undue influence was central to the House of Lords?
decision in CIBC Mortgages plc v. Pitt, [1993] 4 All E.R. 433, a
companion decision to O'Brien. In Pitt, the Bank agreed to grant
a loan to Mr. Pitt on the security of the matrimonial home. Both
Mr. and Mrs. Pitt signed the loan agreement; however, Mrs. Pitt
did not read the documents before signing or receive any
independent legal advice, nor did any Bank employee suggest that
she do so. When Mr. Pitt was unable to keep up the mortgage
payments, the Bank sought possession of the house. Mrs. Pitt
defended the application on the grounds that she had been induced
to sign the agreement by misrepresentation and undue influence on
the part of her husband. The trial judge allowed the Bank's
application, and Mrs. Pitt's appeal was dismissed. On further
appeal, the House of Lords found that there was actual undue
influence; however, the Bank was not affected by it as there was
nothing to put the Bank on inquiry. In determining what would
put the Bank on inquiry, Lord Browne-Wilkinson found that a
complainant will be able to set aside a transaction where he or
she can establish either (a) that the wrongdoer acted as a third
party's agent in procuring the transaction, or (b) that the third
party had actual or constructive notice of the wrongdoing.
[13] As noted by Feldman J.A., the cases in which the wrongdoer
will be found to have acted as the third party's agent will arise
rarely. It is not argued in this case that the Bank had actual
notice of the alleged undue influence. Therefore, it is
necessary to consider when a third party, such as the Bank, will
have constructive notice of a party's equity to set aside a
transaction.
[14] The House of Lords considered this question in O'Brien.
Lord Browne-Wilkinson stated at p. 429 that:
? a creditor is put on inquiry when a wife offers to stand
surety for her husband?s debt by the combination of two
factors: (a) the transaction is on its face not to the
financial advantage of the wife; and (b) there is a
substantial risk in transactions of that kind that, in
procuring the wife to act as surety, the husband has
committed a legal or equitable wrong that entitles the
wife to set aside the transaction.
In such circumstances, the creditor will be put on inquiry and
will be taken to have constructive notice of the complainant?s
rights unless the creditor has taken reasonable steps to satisfy
himself that the complainant?s agreement was properly obtained.
[15] Lord Browne-Wilkinson?s statement regarding constructive
notice was accepted by the Supreme Court of Canada in Gold v.
Rosenberg. In the course of his majority reasons, Sopinka J.
commented generally on the duty owed by the Bank to Gold. He
cited O?Brien at p. 800 for the proposition that ?when a creditor
is approached by cohabitees, one the principal debtor and the
other the surety, and the proposed transaction is clearly to the
disadvantage of the surety, it will be under a duty to inquire.?
In such circumstances, a creditor is required to explain to the
surety in the absence of the principal debtor the amount of the
sureties and the risks involved, and to advise the surety to
obtain independent advice. However, a transaction is not
automatically vitiated merely by the failure of a creditor to
satisfy these requirements. The surety must establish her legal
entitlement to set aside the transaction. If she is successful,
the creditor?s failure to satisfy its duty to inquire will
prevent the creditor from avoiding the rights of the surety.
[16] The case law, then, establishes that a wife may set aside a
transaction where she can establish that the transaction was
actually procured by undue influence (class 1 ? actual undue
influence) or where she can raise a presumption of undue
influence by demonstrating that de facto she left decisions on
financial affairs to her husband (class 2B ? presumed undue
influence). A third party, such as a bank, will be bound by the
wife?s equity to set aside the transaction where it has
constructive notice of the wrongdoing, that is of undue influence
or the real prospect of undue influence. Constructive notice may
be established by a close relationship between the parties ? such
as husband and wife ? coupled with a manifestly disadvantageous
transaction. However, it must be noted that the mere fact of a
close relationship does not give rise to a presumption of undue
influence. Rather, a spouse must establish in each case that the
relationship was on in which he or she ?generally reposed trust
and confidence in the wrongdoer?.1
[17] Applying these principles to this case, it is clear that the
Bank is fixed with constructive notice of any wrongdoing between
the parties. The existence of a marital relationship is marked
by the characteristics of trust and confidence, which create an
increased risk of undue influence. Further, as found by the
trial judge, the transaction was to the material disadvantage of
Mrs. Duguid. Accordingly, the Bank was subject to a duty to
inquire. The Bank?s failure to discharge the duty to inquire (to
determine if there was undue influence) by advising Mrs. Duguid
to obtain independent legal advice precludes the Bank from
setting aside the finding of constructive notice of the potential
for undue influence.
[18] However, the transaction is not vitiated by the mere fact
that the Bank had constructive notice of Mrs. Duguid?s rights, if
any, and failed to take reasonable steps to ensure that her
consent was voluntary and informed. Rather, these facts only
mean that Mrs. Duguid may set aside the transaction as against
the Bank if, and only if, the transaction was procured by undue
influence. Since there is no evidence of actual undue influence,
the issue is whether there is a basis in the evidence to presume
undue influence.
[19] I am unable to agree with my colleague?s conclusion that the
transaction was procured by undue influence. Feldman J.A. states
in her reasons, correctly in my view, that ?this is not a
situation where the wife put her trust and confidence in the
husband for financial matters in the classic sense ??. Feldman
J.A. presumes undue influence on the basis that Mrs. Duguid?s
concerns about her relationship with her husband provided ?a
ready weapon? for undue influence. I see a number of problems
with this approach. First, Mrs. Duguid must establish that she
did in fact repose trust and confidence in her husband. This
burden may be met by showing that she left decisions on financial
affairs to him. In my opinion, there is little or no evidence
that Mrs. Duguid reposed trust and confidence in her husband.
Indeed, as I have said, in respect of her financial affairs
Feldman J.A. finds that this was not a situation where the
?classic? requirements for presuming undue influence were made
out.
[20] In my opinion, there is ample evidence that Mrs. Duguid did
not repose trust and confidence in her husband in the manner
required for a presumption of undue influence. In the
circumstances, I will limit my references to the evidence to
highlight that part of it that is, in my view, of significance on
the presumed undue influence issue.
[21] This was a tax-driven real estate investment by Mr. Duguid,
a school principal and another school principal. Mrs. Duguid,
was a real estate agent. A short time before she signed the
promissory note, the Bank took the position that the income and
net worth of Mr. Duguid and his associate were not sufficient.
As a result of the Bank?s position, Mr. Duguid asked Mrs. Duguid
to send an income and net worth statement to the Bank and she did
so. Thus, the Bank?s request that Mrs. Duguid sign the note did
not come out of the blue. Finally, this was not the first time
that Mr. Duguid and his associate had made an investment of this
type. Mrs. Duguid knew that. These and other features of the
evidence support the conclusion that she did not repose trust and
confidence in her husband when it came to her, or their,
financial affairs.
[22] Moreover, it is clear from the authorities to which I have
referred that the mere fact that a close relationship may give
rise to ?ready weapons for undue influence? is not sufficient to
establish the presumption. If that was not the case, every close
relationship would give rise to a presumption of undue influence.
This would have the very result that Lord Browne-Wilkinson
cautioned against in O?Brien ? it would reintroduce a class 2A
presumption of undue influence for every husband and wife
relationship (or any other close relationship, for that matter).
[23] There is nothing to suggest that Mr. and Mrs. Duguid had a
relationship that would give rise to a finding of presumed undue
influence. At trial, Mrs. Duguid testified that she signed the
documents because she was not in a stage of her marriage where
she would question anything. However, this statement must be
viewed in the context of the remainder of her testimony. She
testified that she was not aware that her marriage was in a
precarious state, and that while she and her husband were ?in a
valley at that point in time,? she did not think that the
marriage would end.
[24] Given that there was no actual undue influence and no basis
upon which to presume undue influence, Mrs. Duguid has no equity
to set aside the transaction as against the Bank. However,
assuming that undue influence can be presumed, the inquiry must
continue. The presumption of undue influence may be rebutted.
As Wilson J. stated at p. 379 in Geffen, ?[o]nce the plaintiff
has established that the circumstances are such as to trigger the
application of the presumption ? the onus moves to the defendant
to rebut it.? Typically, proof that the complainant received, or
was advised to receive, independent legal advice will rebut the
presumption: Pitt, supra; O?Brien, supra; Geffen, supra.
[25] In my view, evidence that the surety obtained, or was
advised to obtain, independent legal advice is not the only way
to rebut the presumption of undue influence. While Cheshire,
Fifoot and Furmston?s Law of Contract (13th ed.) notes the
significance of independent legal advice, the authors state at p.
329 that ?the Privy Council has emphasized that if evidence is
given of circumstances sufficient to show that the contract was
the act of a free and independent mind, the transaction will be
valid even though no external advice was given.? Such
circumstances might include commercial knowledge, experience,
general sophistication or independence. See M.H. Ogilvie, ?No
Special Tenderness for Sexually Contracted Debt? Undue Influence
and the Lending Banker? (1996) Can. Bus. L.J. 365 at 388.
[26] The proposition that a presumption of undue influence may be
rebutted was accepted in Laird v. Mulholland, [1998] O.J. No. 855
(Gen. Div.), where Lax J. considered the nature of proof required
to rebut the presumption that a transaction was procured by undue
influence. Laird v. Mulholland concerned a gift made by the
deceased to her attorney. All parties conceded that the
presumption of undue influence applied to the gift. The question
was whether the presumption could be rebutted. The deceased did
not obtain independent legal advice, and the respondents argued
that such advice is necessary to rebut the presumption. Lax J.
rejected this argument, stating at para. 37:
I do not understand the Supreme Court of Canada in [Geffen
v.] Goodman Estate to have laid down such an inflexible
requirement. ? Obviously, legal advice is desirable in all
instances where there is any possibility of influence. In may
cases, it will go some distance to rebutting the presumption.
However, each case turns on its own facts and the Court must
examine the evidence it has to decide if the presumption has been
rebutted.
[27] In the end, Lax J. found that the presumption was rebutted
notwithstanding the absence of independent legal advice. I agree
with Lax J.?s conclusion on this issue.
[28] Even if undue influence may be presumed, in my view, the
presumption is rebutted in the circumstances of this case. Those
features of the evidence that demonstrate that Mr. and Mrs.
Duguid?s relationship was not one giving rise to a presumption of
undue influence also serve to rebut any presumption that might
arise. To repeat, Mrs. Duguid was a real estate agent. As such,
it is likely that she knew about the risks involved in her
husband?s investment, and almost certain that she would have
understood the significance of co-signing his promissory note.
In addition, I think that it is significant that Mrs. Duguid did
not plead, or contend at trial, that her husband procured her
signature by exercising actual undue influence. Nor did she
defend the Bank?s action on the basis of presumed undue
influence. Furthermore, in oral argument of this appeal, Mrs.
Duguid did not rely on undue influence, actual or presumed.
Undue influence, as a live issue, only arose when the court
sought written submissions on that issue.
DISPOSITION
[29] For these reasons, I would allow the appeal, set aside the
judgment of Day J. and in its place grant judgment in favour of
the Bank. In light of the Bank?s conduct as referred to by my
colleague, I would not grant costs, here or below.
Released: April 20, 2000 ?C.A. Osborne A.C.J.O.?
?I agree: R.R. McMurtry C.J.O.?
FELDMAN J.A.: (Dissenting)
[30] The Bank of Montreal appeals from the judgment of Day J.
dismissing its action against Mrs. Duguid to enforce a promissory
note which she executed as co-signor of a loan made by the Bank
to her husband. Since that time, Mr. and Mrs. Duguid have
separated. Mr. Duguid went through bankruptcy without repaying
the Bank. The Bank?s appeal seeks judgment against Mrs. Duguid
for the amount of $87,243.84 U.S. together with interest from
August 21, 1996 at the rate of 1% per cent per annum above the
Bank?s prime interest rate per annum in effect from time to time.
FACTS AND FINDINGS OF THE TRIAL JUDGE
[31] In 1989, Mr. Duguid, a school principal, together with a
colleague, applied to the Bank for an investment loan for
participation in Mountainside LaCosta Limited Partnership, a tax-
driven condominium investment in San Diego, California. The Bank
was providing financing on the project to qualified investors
based solely on the ability of the investor to repay the loan.
Although the Bank had investigated the financial viability of the
condominium project, the Bank was not relying on the project?s
viability or value and was taking no security on the loans.
[32] The Bank was not prepared to extend the investment loan of
$76,095.00 U.S. to Mr. Duguid and his associate based only on
their combined income and assets. Mr. Duguid therefore asked his
wife, a real estate agent, to fax her financial information to
the Bank. She did so, following which the Bank was prepared to
extend the loan, if Mrs. Duguid was also on the covenant.
[33] Although the Bank officer signed the documents executed by
the Duguids as witness, and testified that they had attended her
office for that purpose, the Duguids both testified that they
signed the documents at home in their kitchen, and not in front
of the Bank officer. The trial judge accepted and found that the
documents were executed by the Duguids in their kitchen at home
and that the Bank officer did not witness their signatures.
[34] It was the written policy of the Bank for this project, that
it suggest to investors that they obtain independent legal or
financial advice. Again, the Bank officer who purported to
witness the signatures of the Duguids also testified that she
would have advised them to obtain the independent advice,
although she had no specific recollection of the closing. Having
rejected her evidence, the trial judge found that the Bank did
not suggest to Mr. or Mrs. Duguid that either of them obtain
independent legal or financial advice.
[35] The trial judge found that the Bank had concerns about the
investment arising from the investigation of the financial
viability of the project which it had undertaken for the purpose
of deciding whether to extend loans to investors. The Bank
nonetheless proceeded to grant financing to qualified investors
because it wanted to retain the goodwill of the project promoters
for future business. However, the Bank made no disclosure to Mrs.
Duguid of any of its information or concerns.
[36] It was pointed out by counsel for the appellant that in
making his findings, the trial judge erred by referring to an
internal document of the Bank which related to a proposal by four
specific investors, not including Mr. Duguid. However, it is
clear from all of the evidence including other memoranda filed as
exhibits, that the Bank considered the project to be a highly
speculative investment and noted the high vacancy rate.
[37] The trial judge found that the Bank?s knowledge of the
problems with the project made it aware that the transaction was
disadvantageous to Mr. and Mrs. Duguid. He held that the Bank
therefore had a minimum obligation to impart its information
about the project to the co-signor, Mrs. Duguid, as it was
requiring her to underwrite the risk. He also held that the Bank
had a further minimum obligation, because of its specific policy
for this investment, to insist that Mrs. Duguid obtain
independent legal or financial advice. Because the Bank did
neither, the trial judge dismissed its action.
[38] With respect to the trial judge, I do not agree with these
legal conclusions. First, unless it is established that the Bank
owes a fiduciary duty to the customer, it has no obligation to
provide the customer with either its information or its concerns
about the viability of the investment for which the funds are
borrowed: Bertolo v. Bank of Montreal (1986), 57 O.R. (2d) 577 at
583-4 (C.A.); Bossé v. Mastercraft Group Inc. (1994), 3 C.C.L.S.
264 at 285 (Ont. Gen. Div.)2. Second, the fact that a bank does
not comply with its own internal lending practices does not, by
itself, render its loan unenforceable or give the borrower a
right of recourse: Bossé, supra, at 2833.
UNDUE INFLUENCE AND INDEPENDENT LEGAL ADVICE
[39] However, that does not end the matter. The trial judge
indicated at the opening of his reasons for judgment that Mrs.
Duguid was defending the action ?on the basis that she did not
receive and was entitled to independent legal advice and/or
independent financial advice?. He stated that the Bank relied on
the decision of this court in Bank of Montreal v. Featherstone
(1989), 68 O.R. (2d) 541 at 547 where the court states:
In the absence of any evidence of undue influence, fraud
or misrepresentation or any evidence supporting a defence
of non est factum, the failure of the bank to ensure that
the spouse obtained independent legal advice before signing
the guarantee may not be fatal to the claim of the bank.
[40] This remains an accurate statement of the law. However,
since Featherstone, in two seminal decisions, Barclays Bank plc
v. O?Brien, [1993] 4 All E.R. 417, together with a companion
decision, CIBC Mortgages plc v. Pitt, [1993] 4 All E.R. 433, the
House of Lords has elucidated and clarified the concept of undue
influence within certain defined relationships such as marriage
and or other co-habitation relationships, as well as the
circumstances where lenders must address the issue of independent
legal advice in the context of loans to be guaranteed or co-
signed by people in such relationships. Furthermore, in its
decision in Gold v. Rosenberg, [1997] 3 S.C.R. 767, the Supreme
Court of Canada adopted the principles articulated by the House
of Lords. The result is that there is now a clear procedure which
lenders may follow to protect themselves when making a loan to
one co-habitee which is to be co-signed or guaranteed by the
other, where the lender has constructive notice of actual or
presumed undue influence by one over the other.
[41] In Barclays Bank, the bank agreed to increase the overdraft
limit for Mr. O?Brien?s business on the basis of his guarantee
secured by a second mortgage on the matrimonial home. Although
the bank branch was supposed to ensure that the parties
understood what they were signing and to suggest that they speak
to their solicitors, in fact no explanation was given to Mrs.
O?Brien and she signed the documents without reading them or
seeking legal advice. Eventually, the bank called on the
husband?s guarantee and sought to enforce its security on the
home. Mrs. O?Brien defended the action on the basis that she was
induced to enter the transaction by her husband?s undue influence
and misrepresentation as to the extent of the liability.
[42] In approaching the issues raised by this case, Lord Browne-
Wilkinson first recognized the competing policy considerations
involved. On one side he noted the recognition by society of
equality of the sexes and the concomitant equality of partners
within a marriage or co-habitation relationship, as well as the
prevalence of joint ownership of the matrimonial home and the
need to be able to obtain a loan based on the security of that
home without the bank being unwilling to risk lending on that
security because of the spectre of the defence of undue
influence. On the other side, he noted that despite society?s
recognition of equality of the sexes, there are still many
marriages where the wife is willing to follow the husband?s
advice and where wives are subjected to and yield to undue
influence by their husbands. In those circumstances, Lord Browne-
Wilkinson concluded at p. 422 that, ?Such wives can reasonably
look to the law for some protection when their husbands have
abused the trust and confidence reposed in them.? Significantly,
Lord Browne-Wilkinson concluded the judgment at p.431 by
extending the same protection of the law to all co-habitees:
I have hitherto dealt only with the position where a wife
stands surety for her husband?s debts. But in my judgment
the same principles are applicable to all other cases where
there is an emotional relationship between co-habitees. The
?tenderness? shown by the law to married women is not based
on the marriage ceremony but reflects the underlying risk
of one cohabitee exploiting the emotional involvement and
trust of the other. Now that unmarried cohabitation,
whether heterosexual or homosexual is widespread in our
society, the law should recognise this. Legal wives are
not the only group which are now exposed to the emotional
pressure of co-habitation. Therefore if, but only if, the
creditor is aware that the surety is co-habiting with the
principal debtor, in my judgment the same principles should
apply to them as apply to husband and wife.
[43] Lord Browne-Wilkinson set out the law of undue influence,
first, as between the parties in the relationship, and then, as
it affects a third party in the transaction who was not involved
in the undue influence which induced it. He began at p. 423 with
the following basic proposition:
A person who has been induced to enter into a transaction
by the undue influence of another (the wrongdoer) is
entitled to set that transaction aside as against the
wrongdoer. Such undue influence is either actual or presumed.
[44] In the case of actual undue influence, the claimant must
prove affirmatively that the wrongdoer exerted undue influence to
induce the transaction. In the case of presumed undue influence,
the claimant must show only that there existed a relationship of
trust and confidence such that it is fair to presume that the
wrongdoer abused that relationship to procure the transaction.
The onus then shifts to the wrongdoer to prove that the
complainant in fact entered into the transaction freely. One way
to rebut the presumption is to demonstrate that the complainant
received independent legal advice.
[45] Presumed undue influence may arise in two classes of
relationships. The first, class 2(A), are relationships which, in
and of themselves raise a presumption, such as solicitor and
client or medical adviser and patient. In those the onus is
immediately on the wrongdoer to disprove undue influence. The
second, class 2(B), are relationships where the complainant can
show that de facto, she reposed trust and confidence in the
wrongdoer. Once that is shown, then the onus shifts to the
wrongdoer to disprove undue influence. Lord Browne-Wilkinson
pointed out that in the cases of Howes v. Bishop, [1909] 2 K.B.
390 (C.A.) and Bank of Montreal v. Stuart, [1911] A.C. 120
(P.C.), it was established that the relationship of husband and
wife did not, as a matter of law, raise a presumption of undue
influence within the first category (class 2(A)). However, he
noted that in any particular case, it is open to a wife (and
ultimately to any co-habitee), to demonstrate that de facto she
did leave decisions on financial matters to her husband and
reposed trust and confidence in him (class 2(B)), so that undue
influence is presumed without proof of actual undue influence.
[46] He then explained his approval of this legal result in the
following way at p. 424:
In my judgment this special tenderness of treatment
afforded to wives by the courts is properly attributable
to two factors. First, many cases may well fall into
the Class 2B category of undue influence because the wife
demonstrates that she placed trust and confidence in her
husband in relation to her financial affairs and therefore
raises a presumption of undue influence. Second, the
sexual and emotional ties between the parties provide a
ready weapon for undue influence: a wife?s true wishes can
easily be overborne because of her fear of destroying or
damaging the wider relationship between her and her
husband if she opposes his wishes.
For myself, I accept that the risk of undue influence
affecting a voluntary disposition by a wife in favour of
a husband is greater than in the ordinary run of cases
where no sexual or emotional ties affect the free
exercise of the individual?s will. [Emphasis added]
[47] I pause here to note that Ontario cases often state baldly
that there is no presumption of undue influence in a transaction
between husband and wife, and therefore the onus of proving undue
influence is on the person who seeks to set aside the
transaction, and they refer as authority back to the 1917
decision of this court in Hutchinson v. Standard Bank of Canada,
39 O.L.R. 286. However, that proposition of law was taken at the
time from the Howes and Stuart cases which held only that there
was no automatic class 2(A) presumption arising from the
relationship of husband and wife alone.4 As Lord Browne-Wilkinson
pointed out in Barclays Bank, those cases did not deal with class
2(B) presumed undue influence where the impugned transaction was
disadvantageous to the wife and she showed that she reposed trust
and confidence in her husband regarding financial matters.
[48] In Barclays Bank, Lord Browne-Wilkinson then discussed the
effect on a creditor bank of undue influence between a husband
and wife, and in particular, under what circumstances a wife may
be able to set aside her guarantee, grant of security or covenant
given to a bank.
[49] The court set out two circumstances. The first is where the
husband is the agent of the bank. Such cases are rare, but where
that is the case, the bank is fixed with the wrongdoing of its
agent.
[50] The other is where the bank has either actual or
constructive notice of the undue influence, and therefore of the
wife?s equity to set aside the transaction. The bank will be put
on constructive notice of the risk of undue influence when a wife
agrees to guarantee or co-sign for her husband?s debts where
there is the combination of two factors: 1) the transaction on
its face, is not to the financial advantage of the wife; and 2)
?there is a substantial risk in transactions of that kind that,
in procuring the wife to act as surety, the husband has committed
a legal or equitable wrong that entitles the wife to set aside
the transaction.? (p. 429)
[51] When the bank sees those two circumstances, it will be fixed
with constructive notice of any undue influence by the husband,
whether actual or presumed, which may have existed, unless it
takes reasonable steps to satisfy itself that the wife?s
participation in the transaction was properly obtained. Otherwise
the bank will retain constructive notice of the wife?s rights and
will take subject to them. Lord Browne-Wilkinson then set out a
suggested procedure which a bank may follow which he referred to
as ?reasonable steps? to protect itself from being fixed with
constructive notice: the bank must 1) meet with the wife
privately, 2) tell her of the extent of her liability, 3) warn
her of the risk, and 4) urge her to obtain independent legal
advice. Furthermore, where the bank has specific information
which may make undue influence not only possible, but probable,
in those circumstances it must go further and insist that she
obtain independent legal advice.
[52] Lord Browne-Wilkinson recognized that his formulation of the
constructive notice doctrine, that is, requiring no actual
knowledge by the bank in any particular case of the circumstances
which would raise the 2(B) presumption, but only a recognition of
the risk or possibility of undue influence because of the
relationship and the disadvantageous transaction, is an extension
of the law of constructive notice. However, he was satisfied that
knowledge of the possibility of influence is enough to put a
third party on inquiry.
[53] In my view, this reasoning and result accord with common
sense and commercial reality. They result in a rule which applies
in easily identifiable circumstances, and which is not onerous
for the bank. It obviates any need for a bank, when extending a
loan to one co-habitee but guaranteed or secured by both, to have
to make personal inquiries as to the nature of the relationship
between the parties or the extent of the literacy or
sophistication of the party who is guaranteeing or co-signing the
loan. Nor is the bank required (in the case where it has no
specific knowledge) to ensure that that party actually obtains
the independent advice, but only to urge the party to do so.
Unless the bank learns of anything more which would again put it
on notice, it can proceed to lend and rely on the covenant or
security it receives, if it has taken the reasonable steps set
out above.
[54] And of what benefit are these reasonable steps on the part
of the bank to the party who is co-signing or guaranteeing the
loan? If there is pressure from the relationship partner to sign,
whether subtle or not, the fact that the guarantor or co-signor
is called to a meeting without the principal debtor, at the
behest of the bank, and is told that she or he should obtain
independent advice, may give that party the ability and excuse to
seek and even rely and act on that advice, without appearing to
betray the partner who is exerting the pressure. Of course, the
independent advice provides the guarantor or co-signor with
specific information about the obligation which she or he may or
may not have already had or understood.
[55] In the companion case to Barclays Bank, the court made it
clear that a precondition to the application of the constructive
notice doctrine is the existence of a manifestly disadvantageous
transaction for one of the parties in the relationship. There is
therefore no constructive notice to the bank of any risk of undue
influence where a loan is made to a husband and wife (or other
parties in a relevant relationship) for their joint benefit,
because in that circumstance, there is no apparent financial
disadvantage for the co-signor: CIBC Mortgages plc v. Pitt,
supra. Again this makes commercial sense. Where parties are
jointly seeking a loan such as a mortgage to purchase a home,
there should be no impediment to obtaining the funds from the
lender on the security of the home, and no hesitation on the part
of the lender as to the enforceability of such a loan against
both parties.
[56] In applying these principles to the facts in the Barclays
Bank case, the House of Lords held that because the Bank failed
to take the reasonable steps, i.e. to meet with Mrs. O?Brien, to
explain the extent of her liability and risk and to urge her to
obtain independent legal advice before pledging security on her
home in respect of the line of credit for her husband?s business,
the Bank was fixed with constructive notice of her husband?s
wrongful misrepresentation to her of the amount at risk. As a
result, Mrs. O?Brien was entitled to set aside the mortgage as
against the bank.
[57] This newly articulated approach to the role of and need for
independent legal advice was recognized in 1997 as the law in
this country by the Supreme Court of Canada in Gold v. Rosenberg,
supra. In that case, Sopinka J., speaking for the majority, set
out the law in the following way at p. 799-801:
In certain circumstances, a third party in the position
of the bank will not have discharged its duty to inquire
unless the guarantor has been advised to obtain
independent legal advice. In certain cases, the law
imposes on a creditor a duty to inquire when the
transaction is clearly detrimental to the person offering
security and the relationship between that person and
the principal debtor is particularly close. In such
circumstances, the law presumes undue influence on the
part of the principal debtor. The clearest type of
relationship giving rise to this presumption is that of
husband and wife. Iacobucci J. cites Barclays Bank plc
v. O?Brien, [1993] 4 All E.R. 417, in which the House of
Lords extended this presumption to include cohabitees.
Lord Browne-Wilkinson held that when a creditor is
approached by cohabitees, one the principal debtor and
the other the surety, and the proposed transaction is
clearly to the disadvantage of the surety, it will be
under a duty to inquire. A creditor can discharge this
duty by explaining to the surety in a meeting not attended
by the principal debtor the amount of her potential
liability and the risks involved and advising her to
take independent advice: Barclays, supra, at pp. 431-32.
At one point in his reasons, Lord Browne-Wilkinson appeared
to extend the duty beyond cohabiting couples when he
characterized the kinds of relationships that will trigger
the duty to inquire as follows, at p. 431:
[I]n a case where the creditor is aware that the surety
reposes trust and confidence in the principal debtor in
relation to his financial affairs, the creditor is put
on inquiry in just the same way as it is in relation to
husband and wife.
When setting out the strict requirements of a separate
meeting with the surety, however, Lord Browne-Wilkinson
spoke of ?the emotional pressure of cohabitation? (p. 431).
Elsewhere, he spoke of how ?the sexual and emotional ties
between the [married] parties provide a ready weapon for
undue influence? (p. 424). When a bank is presented with
such a relationship, it should recognize the risk of undue
influence (assuming that the transaction is on its face
detrimental to the party offering security). But by the
same logic, a relationship that is more distant will raise
less suspicion of undue influence, even if the transaction
is apparently unfavourable to the guarantor. Consequently,
less may be required to satisfy an honest and reasonable
person that the surety or guarantor is aware of the legal
implications of the proposed transaction.
[58] To be clear, a bank is fixed with constructive notice of
the risk of undue influence where 1) the transaction is not
financially advantageous to the guarantor or co-signor, and 2)
the parties are in a relationship which raises the suspicion of
undue influence, such as husband and wife or other co-habitees,
unless the bank takes reasonable steps to satisfy itself that the
co-signature is given freely. However, the surety obligation
remains valid and enforceable by the bank even where it did not
take the reasonable steps to provide information and advice to
the surety, where there was no undue influence, whether actual or
presumed, no misrepresentation or other legal wrong by the
principal debtor. In other words, the mere failure by the bank to
take those steps does not vitiate the guarantee or co-signature
on the covenant. That is the result, however, where it transpires
that the transaction as between the husband and wife (or other
relevant parties) is tainted by undue influence, whether actual
or presumed, by misrepresentation or by other legal wrong.
APPLICATION OF THE LAW TO THIS CASE
[59] Turning to the case before this court, the first issue is,
was the Bank on constructive notice of the possibility of undue
influence by Mr. Duguid? It is clear that the transaction was not
financially advantageous for Mrs. Duguid. Not only was the Bank
aware that there were problems with the viability of the
underlying security and therefore its potential to generate
income, but also, the Bank knew that Mr. Duguid was not
financially able to carry the loan from his own income and
assets. Furthermore, the investment belonged to the husband. He
would obtain the tax advantage and any increase in the value of
the underlying realty. The fact that the loan was not to the
financial advantage of Mrs. Duguid, together with the husband and
wife relationship, put the Bank on notice of the risk of undue
influence. However, the Bank did not take the reasonable steps
(or do anything at all) to satisfy itself that Mrs. Duguid?s
participation was properly obtained.
[60] Although these events occurred before the decision in
Barclays Bank, there is no hardship on the Bank in this case
because it intended to advise Mrs. Duguid to obtain independent
legal advice in accordance with its written policy for this
project loan. Ironically, the Bank believed that it had advised
Mrs. Duguid to obtain independent legal advice because of the
signature of the Bank officer who purported to witness the
documents. The trial judge found that it had not. The Bank is
therefore fixed with constructive notice of any undue influence,
whether actual or presumed, or misrepresentation by the husband.
[61] The next issue is, was there evidence led at trial of a
relationship between Mr. and Mrs. Duguid giving rise to a
presumption of undue influence? In my view, there is substantial
evidence of presumed undue influence by Mr. Duguid.
[62] It is clear from the course of the analysis of presumed
undue influence by Lord Browne-Wilkinson that he recognized two
aspects of the relationship between co-habitees which raise the
risk of undue influence. The first is the concept of trust and
confidence in financial matters which one of the parties,
traditionally a wife, may repose in the other, therefore leaving
the financial decisions to the other. The second is the pressure
or tension within the relationship created by the sexual and
emotional ties. Such pressure can take many forms, including
creating a fear in one partner that failure to co-operate in
financial matters will damage the relationship, obliging that
partner to bow to the will of the other and to sign whatever is
requested.
[63] In fact, these two aspects of the marriage and co-habitation
relationships are related, as both arise from the classic
underlying basis of the relationship, love and affection together
with emotional and sometimes financial dependence.
[64] It is important, I believe, to examine the first aspect
closely in that context because I perceive that there may exist a
misconception of the basis for the belief that traditionally
wives often deferred to their husbands on family financial
matters. It is certainly an out-dated notion in today?s society
that women cannot or do not understand financial matters, and
more specifically, that they do not understand that when they
sign a document, they are committing themselves to its contents.
[65] Therefore, if a wife is asked by her husband to sign a note
or guarantee to the bank for his loan, and she does so because
she has always reposed trust and confidence in him, she agrees to
sign because she has confidence that her husband would not be
asking her unless he believed that in the end it would not be
detrimental to her and he would ultimately protect her. That is
the trust and confidence she reposes in him arising out of their
relationship. She knows that he will not get the money he needs
unless she signs, but believes that he would not be asking her to
take a risk now unless he was convinced there really was no risk
for her.
[66] Furthermore, in the context of the relationship, a co-
habitee may well feel that it would be perceived as a breach of
that trust for her to question whether it would be in her best
interests to sign or for her to suggest that she should
independently see a lawyer. In other words, the ?trust and
confidence in financial matters? aspect of the relationship is an
example or manifestation of the sexual and emotional ties within
a marriage or cohabitation relationship while the relationship
remains strong. The second aspect recognized by Lord Browne-
Wilkinson, sexual and emotional pressure to go along with the
other party?s wishes, is also based on the emotional bond of the
relationship, but may be more likely to arise when the
relationship is undergoing strain and may be in peril.
[67] Clearly this was not a situation where Mrs. Duguid put her
trust and confidence in her husband for financial matters in the
classic sense. However, it is the second type of situation
described by Lord Browne-Wilkinson at p. 424 and referred to by
Sopinka J. at p. 800 where the sexual and emotional ties ?provide
a ready weapon for undue influence?: the wife feared destroying
or damaging the relationship between herself and her husband if
she opposed his wishes. The marriage was foundering, and the
husband knew it, yet he asked his wife to co-sign for his loan.
[68] The trial judge found that Mrs. Duguid signed the loan
documents at the request of her husband and while she was alone
with him in their kitchen. At the time, their marriage was ?at a
low ebb?, and she just signed the documentation without giving
consideration to its contents in order to maintain some level of
tranquility?. In her evidence, Mrs. Duguid testified that her
husband said she had to sign the promissory note, she signed it,
and went out the door. She said that at that time there were
problems in her marriage, that her marriage was not going well
and therefore she was ?walking on eggshells?. She testified that
she signed because she was not ?making waves? at that time. She
said that she was not in a stage of her 22-year marriage where
she would question anything. Mr. Duguid, who testified on behalf
of the Bank, acknowledged that there were difficulties in the
marriage at the time they signed the promissory note.
[69] Mr. Duguid also testified that he induced his wife to co-
sign for the loan by telling her that he hoped the investment
would make enough to help finance their sons? education.
However, he did not put the investment into joint names nor
secure it in any way for the benefit of their three sons. It was
listed as his asset in his later bankruptcy. Counsel for the
Bank submitted that Mr. Duguid?s stated intention to use the
profits from the investment for their sons? education showed that
the transaction was not disadvantageous to Mrs. Duguid. Of
course his statement to her turned out to be false: because the
investment belonged solely to Mr. Duguid, had there been any
profits, they would have belonged only to him to be used at his
sole discretion. Whether or not this amounted to a
misrepresentation in law, had Mrs. Duguid had independent advice,
one of the issues she could have discussed with a lawyer was how
to ensure that the profits would be legally secured for their
sons? education.
[70] The fact that Mrs. Duguid was a real estate agent neither
negates nor rebuts the presumption of undue influence by her
husband arising out of their relationship. It does not speak to
the circumstances under which she signed the note, her fear
regarding the status of her relationship with her husband at that
time and his knowledge that there were difficulties in the
marriage when he asked her to sign the note. Furthermore, there
was no evidence of her level of legal knowledge including whether
her obligation on the note would survive their separation or
divorce, the consequences if her husband were to become bankrupt,
or the non-binding nature of his representation that the profits
from the investment would be used for their sons? education.
These are matters about which a lawyer could give accurate
information and independent, objective advice.
CONCLUSION
[71] As in Barclays Bank, the Bank of Montreal in this case was
on constructive notice of the possibility of undue influence and
consequently of Mrs. Duguid?s equity to set aside the
transaction. The Bank remained on notice because it failed to
take reasonable steps at the time to satisfy itself that she was
entering into the obligation freely. As Mrs. Duguid established
presumed undue influence arising out of the circumstances of the
marital relationship when she signed the note (class 2(B)), the
onus was therefore on the Bank seeking to uphold the transaction
to rebut the presumption of undue influence by proving that Mrs.
Duguid co-signed the loan freely, for example, by showing that
she received independent legal advice. That onus was not met. The
Bank therefore cannot enforce the promissory note against Mrs.
Duguid.
[72] Accordingly, I would dismiss the appeal with costs.
"K. Feldman J.A."
_______________________________
1 These principles were recently applied by Crane J. in Canadian
Imperial Bank of Commerce v. Finlan, [1999] O.J. No. 54 (Gen.
Div.). Finlan concerned an action under a guarantee by a bank
against a husband and wife.
2 Reported under the name Avco Financial Services Realty Ltd. v.
Bhabha.
3 Both of these issues were abandoned on appeal. The decision
was affirmed on appeal: (1995), 123 D.L.R. (4th) 161; leave to
appeal to the Supreme Court of Canada refused: (1995), 126
D.L.R. (4th) vii (note) (S.C.C.).
4 Those cases did not refer to the class of relationship as 2(A),
but to the list of relationships, such as solicitor and client,
which raise a presumption of undue influence.
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