Recha and Klein v. Yeamans and Gere, (1993) 135 N.B.R.(2d) 360 (CA)

• Judge: Angers, Ayles and Ryan, JJ.A.
• Court: Court of Appeal (New Brunswick)
• Case Date: June 29, 1993
• Jurisdiction: New Brunswick
• Citations: (1993), 135 N.B.R.(2d) 360 (CA)

Recha v. Yeamans (1993), 135 N.B.R.(2d) 360 (CA);

    135 R.N.-B.(2e) 360; 344 A.P.R. 360

MLB headnote and full text

[French language version follows English language version]

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

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George T. Yeamans (defendant/appellant) v. Klaus-Peter Recha and Gabriele Klein (plaintiffs/respondents) and Kalman Gere and Katharina Gere

(162/92/CA)

Indexed As: Recha and Klein v. Yeamans and Gere

New Brunswick Court of Appeal

Angers, Ayles and Ryan, JJ.A.

June 29, 1993.

Summary:

Recha and Klein were citizens of the Federal Republic of Germany. Recha and Klein purchased a New Brunswick restaurant property from the Geres. The same lawyer acted for both sides. The lawyer failed to inform Recha and Klein that he had given a personal guarantee on a collateral mortgage given to the bank by the Geres or that he had been given a second mortgage as con­sideration for that guarantee. Following the closing, Recha and Klein brought an action for damages against the Geres for deceit, fraudulent misrepresentation, negligent mis­representation, negligence and fundamental breach of contract. They also sued the law­yer on the grounds of breach of fiduciary duty, negligence and breach of contract.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at 126 N.B.R.(2d) 136; 317 A.P.R. 136, held that the lawyer was liable for damages on the ground of breach of fiduciary duty. The lawyer appealed the assessment of damages. Recha and Klein cross-appealed seeking solicitor and client costs and extra damages not awarded by the trial judge.

The New Brunswick Court of Appeal dismissed both the appeal and the cross-appeal.

Barristers and Solicitors - Topic 1548

Relationship with client - Duty to client - General - Fiduciary duty - The Geres owned a restaurant property - A lawyer gave a personal guarantee on an $85,000 collateral mortgage given to the bank by the Geres - As consideration, the Geres gave the lawyer a $6,000 second mortgage on the property - Two Germans agreed to purchase the property - The lawyer agreed to represent both sides - The lawyer failed to disclose the guarantee and his interest in the second mortgage to the purchasers - The lawyer also failed to inform the pur­chasers that the price was greater than the appraised value - The purchasers sued the lawyer and the Geres - The trial court allowed the action against the lawyer and assessed damages - An appeal was dis­missed by the New Bruns­wick Court of Appeal - See para­graph 39.

Barristers and Solicitors - Topic 1548

Relationship with client - Duty to client - General - Fiduciary duty - Damages - Calculation of - Two Germans agreed to purchase a restaurant business located in New Brunswick - The appraised value was $155,000 - The purchase price was $220,000 - The same lawyer represented both the vendors and purchasers - The lawyer failed to inform the purchasers that he guaranteed one mortgage and held a second mortgage on the prop­erty - Also, he failed to inform the pur­chasers of the lower appraised value - The purchasers sued the lawyer for damages on the ground of breach of fiduciary duty - The New Brunswick Court of Queen's Bench, Trial Division, assessed damages against the lawyer in the amount of $65,000 and costs - An appeal to the New Brunswick Court of Appeal was dismissed - See paragraphs 25 to 38.

Barristers and Solicitors - Topic 1604

Relationship with client - Conflict of interest - Acting for both sides - Under the Code of Professional Conduct, a law­yer could represent both sides in a trans­action provided there was full disclosure and no conflict of interest - A lawyer gave a personal guarantee on a collateral mort­gage granted to the bank by the owners of a restaurant - The owners informed the lawyer of the property's appraised value - Three years later, two Germans agreed to purchase the property at a price 25% in excess of the appraised value - The lawyer represented both sides - The lawyer failed to inform the purchasers of the property's appraised value - The New Brunswick Court of Queen's Bench, Trial Division, held that the lawyer breached the fiduciary duty owed to the purchasers - An appeal to the New Brunswick Court of Appeal was dismissed.

Barristers and Solicitors - Topic 2599.3

Negligence - Particular negligent acts - Re purchase of business by client - Two Germans agreed to purchase a restaurant business located in New Brunswick - The same lawyer represented the Germans as well as the vendors in the transaction - The lawyer treated the transaction as the sale of a residential property, not a com­mercial transaction - The purchasers re­quested further financial information con­cerning the business - The lawyer failed to provide such material prior to the closing - The New Brunswick Court of Queen's Bench, Trial Division, held that even in the absence of a request from the pur­chasers, the lawyer was obliged to provide those financial details in a com­mercial transaction - An appeal to the New Brunswick Court of Appeal was dismissed - See paragraphs 22 to 24 and 38.

Practice - Topic 7452

Costs - Solicitor and client costs - Enti­tlement - Neglect or misconduct - The Geres owned a restaurant property - A lawyer gave a personal guarantee on an $85,000 collateral mortgage given to the bank by the Geres - As consideration, the Geres gave the lawyer a $6,000 second mortgage on the property - Two Germans agreed to purchase the property - The lawyer agreed to represent both sides - The lawyer failed to inform the purchasers of, inter alia, the guarantee and his interest in the second mortgage - The pur­chasers sued the lawyer and the Geres - The purchasers requested solicitor and client costs against the lawyer - The trial court awarded dam­ages but declined to grant costs on a sol­icitor and client basis - An appeal was dis­missed by the New Bruns­wick Court of Appeal - See para­graph 39.

Cases Noticed:

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109, refd to. [para. 18].

Nocton v. Lord Ashburton, [1914] A.C. 932, refd to. [para. 18].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321, consd. [para. 19].

Frame v. Smith, [1987] 2 S.C.R. 99; 78 N.R. 40, refd to. [para. 20].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14, refd to. [para. 20].

LAC Minerals Ltd. v. International Corona Resources Ltd. - see Inter­na­tional Corona Resources Ltd. v. LAC Minerals Ltd.

Authors and Works:

Smith, Beverley G., Professional Conduct for Canadian Lawyers (1989), pp. 16, 17 [para. 17].

Counsel :

David T. Hashey, Q.C., for the appellant;

Brent R. Hancox, for the respondents;

Kalman Gere and Katherina Gere, were not represented.

This appeal was heard on January 22, 1993, by Angers, Ayles and Ryan, JJ.A., of the New Brunswick Court of Appeal.

The decision of the court was given on June 29, 1993, by Ryan, J.A.