Credit Union Atlantic Ltd. v. Roy, (2002) 202 N.S.R.(2d) 278 (SC)

• Judge: Moir, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: February 07, 2002
• Jurisdiction: Nova Scotia
• Citations: (2002), 202 N.S.R.(2d) 278 (SC);2002 NSSC 36

Credit Union Atlantic v. Roy (2002), 202 N.S.R.(2d) 278 (SC);

 632 A.P.R. 278

MLB headnote and full text

Temp. Cite: [2002] N.S.R.(2d) TBEd. MR.033

Credit Union Atlantic Limited (plaintiff) v. Wendy Roy (defendant)

(S.H. 98-151898; 2002 NSSC 36)

Indexed As: Credit Union Atlantic Ltd. v. Roy

Nova Scotia Supreme Court

Moir, J.

February 7, 2002.

Summary:

The defendant executed a mortgage on her home in favour of the plaintiff credit union as security for a line of credit agreement executed by her husband with respect to his business. The husband's business became in­­solvent. The credit union commenced an ac­tion against the defendant wife for fore­closure and sale.

The Nova Scotia Supreme Court dismissed the action.

Fraud and Misrepresentation - Topic 603

Undue influence - What constitutes undue influence - Roy executed a line of credit agreement with a credit union for his business - The credit union advised Roy that it required either a reduction in the line of credit or security - Without being advised to obtain independent legal advice, Roy's wife executed a mortgage on her home as security for the line of credit - Roy's business failed - The credit union commenced a foreclosure action against the wife - The Nova Scotia Supreme Court held that the mortgage had not been ren­dered unenforceable on the ground of un­due influence - A potential for domi­nation was inherent in the spousal relation­ship where the wife depended entirely on the husband for judgment with respect to one aspect of their financial affairs (his busi­ness) - However, an examination of the transaction did not disclose an undue dis­advantage or undue benefit - Further, the credit union had the right to make the de­mand and any pressure on the wife did not come from the husband but from the situa­tion created by his business expansion and the credit union demand - See paragraphs 14 to 20.

Fraud and Misrepresentation - Topic 627

Undue influence - Conditions precedent - Disadvantage to person influenced - [See Fraud and Misrepresentation - Topic 603 ].

Fraud and Misrepresentation - Topic 726

Undue influence - Independent advice - Effect of lack of - [See Fraud and Mis­representation - Topic 603 ].

Guarantee and Indemnity - Topic 324

The contract - Extent of guarantee - Lines of credit - A wife executed a mortgage in favour of a credit union as security for a $50,000 line of credit obtained by her hus­band for his business - The line of credit agreement executed by the husband on January 6, 1997, stated that it would expire on November 1, 1997, but it could be re­newed on or before that date - No­vember 1, 1997, passed without anything being done - On March 4, 1998, the hus­band signed a new agreement, which pro­vided the same limit of $50,000, but the pro­vision for interest increased by .75% - The wife knew nothing of that agreement - The husband's business failed - The credit union commenced a foreclosure action against the wife - The Nova Scotia Supreme Court dismissed the action - The court held that the January 1997 loan agreement had expired and the liability under the mortgage collateral to it became discharged - The court would also have found for the wife on the defence of material alteration of risk due to the change in the provision for interest in the March 1998 loan agreement - See para­graphs 24 to 34.

Guarantee and Indemnity - Topic 2518

Discharge and other defences of surety - Mortgages - A wife executed a mortgage in favour of a credit union as security for a line of credit obtained by her husband for his business - The mortgage form used by the credit union assumed that the mort­gagor was also the debtor on the line of credit - As a result, some provisions in the mortgage did not make sense - The mort­gage also stated that the line of credit agreement was "of even date herewith" and was attached as a schedule - However, there was no line of credit agreement of the same date as the mortgage and no agreement was attached to the mortgage - The husband's business failed - The credit union commenced a foreclosure action against the wife - The wife's counsel ar­gued that the defects in the mortgage made it invalid and that contra proferentem, as applied for sureties in Manulife Bank of Canada v. Conlin (S.C.C.), assisted that position - The Nova Scotia Supreme Court disagreed, stating that an error in a docu­ment was not necessarily an ambiguity - When the sur­rounding circumstances were looked at, there was no ambiguity as to what liabili­ties were being secured - See paragraphs 21 to 23.

Guarantee and Indemnity - Topic 2521

Discharge and other defences of surety - Ambiguity in guarantee - [See Guarantee and Indemnity - Topic 2518 ].

Guarantee and Indemnity - Topic 3000

Discharge and other defences of surety - Changes in the principal contract - Interest rate - [See Guarantee and Indemnity - Topic 324 ].

Mortgages - Topic 1441

The mortgage - Validity of - General - [See Guarantee and Indemnity - Topic 2518 ].

Cases Noticed:

Bertolo v. Bank of Montreal (1986), 18 O.A.C. 262; 57 O.R.(2d) 577 (C.A.), consd. [para. 14].

Bank of Montreal v. Featherstone, Cooke and Cross et al. (1989), 33 O.A.C. 377; 68 O.R.(2d) 541 (C.A.), consd. [para. 71].

MacKay v. Bank of Nova Scotia et al. (1994), 20 O.R.(3d) 698 (Gen. Div.), consd. [para. 15].

Royal Bank of Canada v. Druhan and Druhan (1996), 157 N.S.R.(2d) 29; 462 A.P.R. 29 (S.C.), affd. (1997), 163 N.S.R.(2d) 174; 487 A.P.R. 174 (C.A.), consd. [para. 15].

Goodman Estate v. Geffen, [1991] 2 S.C.R. 353; 127 N.R. 241; 125 A.R. 81; 14 W.A.C. 81; 81 D.L.R.(4th) 211; [1991] 5 W.W.R. 389; 80 Alta. L.R.(2d) 293; 42 E.T.R. 97, consd. [para. 15].

Muttart Estate et al. v. Jones (1995), 137 N.S.R.(2d) 116; 391 A.P.R. 116 (S.C.), refd to. [para. 15].

Murphy Estate, Re (1998), 169 N.S.R.(2d) 284; 508 A.P.R. 284 (S.C.), refd to. [para. 15].

Gold v. Rosenberg et al. (1997), 219 N.R. 93; 104 O.A.C. 1 (S.C.C.), consd. [para. 16].

Barclays Bank plc. v. O'Brien et al., [1993] 4 All E.R. 417; 160 N.R. 214 (H.L.), consd. [para. 16].

Manulife Bank of Canada v. Conlin et al., [1996] 3 S.C.R. 415; 203 N.R. 81; 94 O.A.C. 161 (S.C.C.), refd to. [para. 22].

Bank of Montreal v. Wilder, [1986] 2 S.C.R. 551; 70 N.R. 341, refd to. [para. 25].

Holme v. Brunskill (1878), 3 Q.B.D. 495 (C.A.), refd to. [para. 25].

Royal Bank of Canada v. Bruce Industrial Sales Ltd. et al. (1998), 110 O.A.C. 317; 40 O.R.(3d) 307 (C.A.), refd to. [para. 25].

Bauer v. Bank of Montreal, [1980] 2 S.C.R. 102; 32 N.R. 191; 110 D.L.R.(3d) 424; 33 C.B.R. 291, refd to. [para. 25].

First City Capital Ltd. v. Hall and de Haan (1993), 61 O.A.C. 212; 11 O.R.(3d) 792 (C.A.), refd to. [para. 25].

Royal Bank of Canada v. Dickson (1975), 8 N.S.R.(2d) 342 (C.A.), affd. [1976] 2 S.C.R. 834; 7 N.R. 262; 13 N.S.R.(2d) 672; 9 A.P.R. 672, refd to. [para. 32].

Prospect Mortgage Investment Corp. v. Van-5 Development Ltd., [1985] B.C.J. No. 2472 (C.A.), refd to. [para. 33].

Counsel:

David G. Coles, Charles J. Ford and Nicole Godbout, articled clerk, for the plaintiff;

Stanley W. MacDonald and Susan McKinney, articled clerk, for the de­fendant.

This action was heard on October 17 and 18, 2001, at Halifax, Nova Scotia, before Moir, J., of the Nova Scotia Supreme Court, who delivered the following decision on February 7, 2002.