Confederation Trust Co. v. Duncan et al., (2000) 226 N.B.R.(2d) 277 (CA)

• Judge: Rice, Turnbull and Drapeau, JJ.A.
• Court: Court of Appeal (New Brunswick)
• Case Date: May 09, 2000
• Jurisdiction: New Brunswick
• Citations: (2000), 226 N.B.R.(2d) 277 (CA)

Confederation Trust v. Duncan (2000), 226 N.B.R.(2d) 277 (CA);

    226 R.N.-B.(2e) 277; 579 A.P.R. 277

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2000] N.B.R.(2d) TBEd. MY.034

Confederation Trust Company (plaintiff/appellant) v. David Duncan (defendant/respondent) and Occo Developments Ltd., Occo Investments Ltd., and Victor O'Connell (third parties/respondents)

(17/98/CA)

Occo Developments Ltd., Occo Investments Ltd., and Victor O'Connell (third parties/appellants) v. David Duncan (defendant/respondent) and Confederation Trust Company (plaintiff/respondent)

(18/98/CA)

Indexed As: Confederation Trust Co. v. Duncan et al.

New Brunswick Court of Appeal

Rice, Turnbull and Drapeau, JJ.A.

May 9, 2000.

Summary:

Confederation Trust Co. provided approx­imately 75% of the capital for the con­struc­tion of a 96 unit retirement residence known as Royal Court (a joint venture). Con­federation obtained a mort­gage of ap­proximately $7,000,000. Royal Court failed to make money and Confeder­ation sold the property privately. Confeder­ation sued Dun­can (an investor in the project and a limited guar­antor to Confederation) under his limited guarantee. Duncan coun­ter­claimed against Confederation and third partied O'Connell (the original pro­moter of the project) and his two companies Occo Devel­opments Ltd. and Occo In­vestments Ltd. (collectively "Occo"). He sought return of his investment, interest, and general dam­ages. Occo claimed against Duncan for amounts it allegedly spent on Dun­can's behalf, plus interest.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported 195 N.B.R.(2d) 278; 499 A.P.R. 278, dis­missed all of the parties' claims. All of the parties appealed.

The New Brunswick Court of Appeal allowed Confederation's appeal. The court dismissed Duncan's cross-appeal against the dismissal of his counterclaim against Con­federation but allowed his cross-appeal against the dismissal of his third party claim. The court also dismissed Occo's and O'Con­nell's appeals.

Actions - Topic 1500

Cause of action - General principles - What constitutes a cause of action - Con­federation Trust Co. provided approx­i­mately 75% of the capital for the con­struc­tion of a 96 unit retirement residence known as Royal Court (a joint venture) - Confederation obtained a mortgage of approximately $7,000,000 - Royal Court failed to make money and Confederation sold the property privately - Confederation sued Duncan (an investor in the project and a limited guar­antor to Confederation) under his limited guarantee - Duncan counterclaimed against Confederation and third partied O'Connell (the original pro­moter of the project) and his two com­panies Occo Developments Ltd. and Occo Investments Ltd. - He sought return of his investment, interest, and general damages - The trial judge dismissed Duncan's claim stating that he failed to establish any legal or equitable basis for any claim, refund or indemnity - The New Brunswick Court of Appeal dismissed Duncan's cross-appeal against the dismissal of his counterclaim but set aside the trail judge's dismissal of Duncan's third party action stating that portions of it did have merit - A new trial was ordered on this issue - See paragraphs 109 to 117.

Equity - Topic 3606

Fiduciary or confidential relationships - What constitutes a fiduciary relationship - O'Connell was the promoter of a 96 unit retirement residence known as Royal Court (a joint venture) - He promoted the project through his two companies Occo Develop­ments Ltd. and Occo Investments Ltd. (collectively "Occo") - Duncan was an investor in the project - When the project failed, Occo claimed against Duncan for amounts it allegedly spent on Duncan's behalf, plus interest under a Rental Man­agement and Guarantee Agreement (the Agreement) - The trial judge dismissed Occo's claim - The Agreement created a fiduciary relationship between Occo and Duncan wherein Occo agreed to perform "all acts necessary on behalf of [Mr. Dun­can] for the proper and efficient man­age­ment of his unit" - Because Occo failed to establish that they performed all obliga­tions pursuant to the Agreement, they could not recover any fees under it - The New Bruns­wick Court of Appeal dismissed Occo's appeal - See paragraphs 106 to 108.

Equity - Topic 3650

Fiduciary or confidential relationships - Breach of fiduciary relationship - Joint ventures - [See Equity - Topic 3606 ].

Equity - Topic 3711

Fiduciary or confidential relationships - Commercial relationships - General - [See Equity - Topic 3606 ].

Guarantee and Indemnity - Topic 146

The contract - Consideration - Statement of - [See Guarantee and Indemnity - Topic 173 ].

Guarantee and Indemnity - Topic 173

The contract - Form - Seal - Confed­eration Trust Co. sued Duncan (an investor and limited guarantor in a project Confed­er­ation financed) under his limited guaran­tee - Duncan asserted that the guarantee was not binding because it was given without consideration - The New Bruns­wick Court of Appeal reviewed the guar­antee and held that it was binding and enforceable - Not only did consideration in fact pass, the guarantee stipulated that it was given "in exchange 'for valuable con­sideration, receipt whereof is hereby acknowledged'" - Moreover, it was under seal - See para­graphs 80 to 89.

Guarantee and Indemnity - Topic 1034

Liability of surety to creditor - Construc­tion of contract - Extent or scope of lia­bility of surety, as principal debtor - [See Mortgages - Topic 5425 ].

Guarantee and Indemnity - Topic 3012

Discharge and other defences of surety - Changes in the principal contract - Excep­tions - Changes beneficial to surety - Con­fed­eration Trust Co. sued Duncan (an investor and limited guarantor in a project Confed­eration financed) under his limited guaran­tee - Duncan asserted that the guar­antee was not binding because there had been an amendment to the mortgage he guaranteed subsequent to the guarantee's execution - The New Brunswick Court of Appeal rejected this argument - Although the mortgage contract was amended with­out Duncan's consent, the amendment (which decreased the rate of interest chargeable under the mortgage, reduced the monthly mortgage payments, prolonged the mort­gage term by one year and extended the amortization period by five years) was "necessarily beneficial" to Duncan and therefore did not discharge the guarantee - See paragraphs 80 to 92.

Joint Ventures - Topic 1402

Relations between parties - Fiduciary - [See Equity - Topic 3606 ].

Mortgages - Topic 5425

Mortgage actions - Duties of mortgagee - Re sale of mortgagor's property -  Confed­eration Trust Co. provided approximately 75% of the capital for the construction of a 96 unit retirement residence known as Royal Court - Confederation obtained a mortgage of approximately $7,000,000 - Royal Court failed to make money and Confederation sold the property privately - Confederation sued Duncan (an investor in the project and a limited guarantor to Confederation) under his limited guarantee - The trial judge dismissed Confed­eration's claim where it did not use appro­priate sale tech­niques when it sold the property - The New Brun­swick Court of Appeal allowed Confederation's appeal - The burden of proving that Confederation was negligent and failed to meet certain standards when selling the property was on Duncan - He failed to adduce any evidence on what the standard might be, and therefore failed to establish that the sale was inappropriate - The court further noted that even if Dun­can succeeded in establishing negli­gence, he would not be entitled to a full discharge from the guarantee - Rather, he would only be "discharged 'to the extent of the preju­dice which he or she suffers as a result of the loss of the security'" - See paragraphs 80 to 104.

Cases Noticed:

Banque Nationale du Canada v. Desrosiers (1996), 167 N.B.R.(2d) 241; 427 A.P.R. 241 (C.A.), refd to. [para. 1].

Gateway Realty Ltd. v. Arton Holdings Ltd. and LaHave Developments Ltd. (1991), 106 N.S.R.(2d) 180; 288 A.P.R. 180 (T.D.), affd. (1992), 112 N.S.R.(2d) 180; 307 A.P.R. 180 (C.A.), refd to. [para. 80].

Crawford et al. v. Agricultural Develop­ment Board (N.B.) et al. (1997), 192 N.B.R.(2d) 68; 489 A.P.R. 68 (C.A.), refd to. [para. 80].

First City Trust Co. v. 569381 Sas­katchewan Ltd. et al. (1989), 77 Sask.R. 298 (Q.B.), affd. (1989), 79 Sask.R. 158 (C.A.), dist. [para. 82].

North West Life Assurance Co. of Canada v. Shannon Height Developments Ltd. (1987), 12 B.C.L.R.(2d) 346 (C.A.), affing. [1986] B.C.W.L.D. 1543 (S.C.), dist. [para. 82].

Acadia Marble, Tile & Terrazzo Ltd. v. Oromocto Property Developments Ltd. (1998), 205 N.B.R.(2d) 358; 523 A.P.R. 358 (C.A.), refd to. [para. 87].

Oxner v. Bank of Montreal (1967), 2 N.S.R. 1965-69 141; 61 D.L.R.(2d) 599 (C.A.), refd to. [para. 87].

Irving Oil Ltd. v. Dobbin (1982), 44 N.B.R.(2d) 177; 116 A.P.R. 177 (C.A.), refd to. [para. 87].

Noel v. Jarvis Estate and MacKenzie (1987), 80 N.B.R.(2d) 442; 202 A.P.R. 442 (C.A.), refd to. [para. 87].

Bank of Nova Scotia v. Hooper et al. (1994), 150 N.B.R.(2d) 111; 385 A.P.R. 111 (T.D.), affd. (1994), 155 N.B.R.(2d) 132; 398 A.P.R. 132 (C.A.), refd to. [para. 89].

National Bank of Canada v. Scholten (1993), 135 N.B.R.(2d) 236; 344 A.P.R. 236 (C.A.), refd to. [para. 89].

Doe et al. v. Canadian Surety Co., [1937] S.C.R. 1, refd to. [para. 91].

Pax Management Ltd. et al. v. Canadian Imperial Bank of Commerce, [1992] 2 S.C.R. 998; 141 N.R. 324; 15 B.C.A.C. 81; 27 W.A.C. 81, refd to. [para. 91].

Manulife Bank of Canada v. Conlin et al., [1996] 3 S.C.R. 415; 203 N.R. 81; 94 O.A.C. 161, refd to. [para. 91].

Alberta Mortgage and Housing Corp. v. Strathmore Investments Ltd. et al. (1992), 134 A.R. 23; 6 Alta. L.R.(3d) 159 (Q.B.), affd. (1995), 169 A.R. 284; 97 W.A.C. 284; 29 Alta. L.R.(3d) 399 (C.A.), additional reasons (1995), 169 A.R. 286; 97 W.A.C. 286; 31 Alta. L.R.(3d) 189 (C.A.), refd to. [para. 92].

Montreal Trust Co. of Canada v. Jaynell Inc. et al. (1993), 111 Sask.R. 178 (Q.B.), affd. (1993), 116 Sask.R. 13; 59 W.A.C. 13 (C.A.), refd to. [para. 92].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 96].

Bérubé v. Lévesque (1999), 219 N.B.R.(2d) 8; 561 A.P.R. 8; 180 D.L.R.(4th) 694 (C.A.), refd to. [para. 101].

Gallant v. Thibodeau (1998), 206 N.B.R.(2d) 336; 526 A.P.R. 336 (C.A.), refd to. [para. 108].

Young v. Fletcher and Lakeburn Lumber Retail Ltd. (1995), 161 N.B.R.(2d) 116; 414 A.P.R. 116 (C.A.), refd to. [para. 108].

Trizec Equities Ltd. v. Ellis-Don Manage­ment Services Ltd. et al. (1998), 227 A.R. 1; 66 Alta. L.R.(3d) 1 (Q.B.), refd to. [para. 112].

Mitchell, Re, [1913] 1 Ch. 201, refd to. [para. 113].

Douglas v. Maritime United Farmers Co-operative Ltd. (1927), 54 N.B.R. 76 (C.A.), refd to. [para. 113].

Clowater v. Banque Nationale du Canada (1988), 88 N.B.R.(2d) 279; 224 A.P.R. 279 (C.A.), reving. in part (1987), 82 N.B.R.(2d) 243; 208 A.P.R. 243 (T.D.), refd to. [para. 113].

Drager v. Allison, [1959] S.C.R. 661, refd to. [para. 113].

Scott v. Renton et al. (1999), 215 N.B.R.(2d) 263; 551 A.P.R. 263 (C.A.), refd to. [para. 113].

Snider v. New Brunswick Telephone Co. (1986), 69 N.B.R.(2d) 8; 177 A.P.R. 8 (T.D.), refd to. [para. 117].

Authors and Works Noticed:

McGuinness, Kevin Patrick, The Law of Guarantee (2nd Ed. 1996), pp. 216 to 235 [para. 89]; 432 to 444 [para. 96]; 495, 496 [para. 113].

Counsel:

Gregory S. Sinclair, for Confederation Trust Co.;

Eugene J. Mockler, Q.C., and James L. Mockler, for David Duncan;

David G. Coles, for Occo Developments Ltd., Occo Investments Ltd. and Victor O'Connell.

These appeals and cross-appeals were heard on June 15 and 16, 1999, before Rice, Turnbull and Drapeau, JJ.A., of the New Brunswick Court of Appeal.

Drapeau, J.A., delivered the following judgment for the Court of Appeal on May 9, 2000.