Bank of Nova Scotia v. Baird, (2001) 199 Nfld. & P.E.I.R. 159 (NFTD)

• Judge: L.D. Barry, J.
• Court: Supreme Court of Newfoundland and Labrador (Canada)
• Case Date: March 28, 2001
• Jurisdiction: Newfoundland and Labrador
• Citations: (2001), 199 Nfld. & P.E.I.R. 159 (NFTD)

BNS v. Baird (2001), 199 Nfld. & P.E.I.R. 159 (NFTD);

    600 A.P.R. 159

MLB headnote and full text

Temp. Cite: [2001] Nfld. & P.E.I.R. TBEd. MR.046

The Bank of Nova Scotia (plaintiff) v. James Baird (first defendant) and Angela Baird (second defendant)

(1996 St. J. No. 2339; 1997 St. J. No. 1725)

Marketing Services Limited (plaintiff) and James Baird (second plaintiff) and Angela Baird (third plaintiff) v. The Bank of Nova Scotia (defendant)

(1998 St. J. No. 1358)

Indexed As: Bank of Nova Scotia v. Baird

Newfoundland Supreme Court

Trial Division

L.D. Barry, J.

March 28, 2001.

Summary:

The Bairds had personal accounts with the Bank of Nova Scotia. Their company, Mar­keting Services Ltd. (MSL), had a loan and an operating line of credit. MSL sold some of its properties. The Bairds alleged that the Bank had agreed to make the sale proceeds available to MSL as working capital. The Bank denied that allegation and contended that it was entitled to have the proceeds go to pay down its loans since the properties were held as security under a debenture. The Bairds ceased payment on their personal loans, alleging that the Bank's failure to provide the necessary working capital meant that MSL was unable to pay them enough to service their personal debt. The Bank sued the Bairds for the amounts owed under the personal loans. The Bairds and MSL sued the Bank, alleging negligence, negligent misrepresentation, breach of fiduciary duty, breach of a duty of good faith and breach of contract, because of the way in which the Bank distributed the sale proceeds. As a defence to the action against them, the Bairds alleged that the Bank had agreed to accept a reduced amount for payment of the personal loans.

The Newfoundland Supreme Court, Trial Division, allowed the Bank's action and dismissed the action by the Bairds and MSL.

Banks and Banking - Topic 703

Duties of banks - Duty of good faith - [See Banks and Banking - Topic 741 ].

Banks and Banking - Topic 741

Duties of banks - Fiduciary relationships - General - The Bairds' company (MSL) had a loan and an operating line of credit with the Bank of Nova Scotia - MSL sold some of its properties - The Bairds alleged that the Bank had agreed to make sale proceeds available to MSL as working capital - The Bank denied that allegation and contended that it was entitled to have the proceeds go to pay down its loans since the properties were held as security under a debenture - The Bairds and MSL sued the Bank, alleg­ing negligence, negligent misrepresenta­tion, breach of fiduciary duty, breach of a duty of good faith and breach of contract, because of the way in which the Bank distributed the sale proceeds - The New­foundland Supreme Court, Trial Division, dismissed the action - The Bank did not expressly or implicitly agree to MSL's use of the sale proceeds; the Bank was not negligent in its dealings with MSL and the Bairds; a fiduciary relationship did not exist and, if it did, the Bank did not breach any fiduciary duty; and the Bank acted in good faith.

Banks and Banking - Topic 1501

Liability of banks to customers - Negli­gence - General - [See Banks and Bank­ing - Topic 741 ].

Banks and Banking - Topic 5201

Loans - Secured loans - General - The Newfoundland Supreme Court, Trial Divi­sion, stated that "[w]here a bank customer has executed a debenture in which the customer expressly agrees not to permit any change in ownership of secured assets 'without the prior written consent of the Bank', a court should require exceptional circumstances in order to conclude the Bank subsequently gave implicit, unwritten consent to a change in ownership" - See paragraph 69.

Equity - Topic 3607

Fiduciary or confidential relationships - Relationships which are not fiduciary - [See Banks and Banking - Topic 741 ].

Fraud and Misrepresentation - Topic 2508

Misrepresentation - Negligent misrepresen­tation - [See Banks and Banking - Topic 741 ].

Cases Noticed:

Landry v. Pratt & Whitney Canada (1996), 186 A.R. 290; 40 Alta. L.R.(3d) 381 (Q.B.), refd to. [para. 42].

Dassen Gold Resources Ltd. et al. v. Royal Bank of Canada, [1997] 9 W.W.R. 658; 200 A.R. 241; 146 W.A.C. 241 (C.A.), refd to. [para. 59].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 60].

Fletcher v. Manitoba Public Insurance Co., [1990] 3 S.C.R. 191; 116 N.R. 1; 71 Man.R.(2d) 81; 44 O.A.C. 81; 74 D.L.R.(4th) 636; 1 C.C.L.I.(2d) 1, refd to. [para. 62].

Banque Financière Cité S.A. v. Westgate Insurance Co., [1989] 1 All E.R. 952 (C.A.), refd to. [para. 62].

Raypath Resources Ltd. v. Toronto-Domin­ion Bank (1995), 170 A.R. 109 (Q.B.), refd to. [para. 63].

Bank of Montreal v. Minaki International Resort Corp. (1997), 46 O.T.C. 101 (Gen. Div.), refd to. [para. 64].

Vita Health Co. v. Toronto-Dominion Bank, [1993] 7 W.W.R. 242 (Man. Q.B.), refd to. [para. 64].

Counsel:

Shawn Kavanagh and John Mate, for the Bank of Nova Scotia.;

J. Vernon French, Q.C., and John French, for James Baird, Angela Baird and Mar­keting Services Ltd.

These actions were heard on January 11, 12 and 15-19, and February 7-9, 2001, before L.D. Barry, J., of the Newfoundland Supreme Court, Trial Division, who delivered the following decision on March 28, 2001.