Michael Tweedie

The plaintiff leasing company sought to enforce a personal guarantee and collateral mortgage granted by family members of the principals of a restaurant business in support of an equipment lease.

The defendants argued that their consent to the guarantee and mortgage was obtained through undue influence and without independent legal advice.

The court examined the principles governing undue influence in guarantee transactions, including the requirement that lenders be alert to manifestly disadvantageous transactions involving close relationships.

Given the vulnerable position of the sureties, the absence of meaningful independent legal advice, and circumstances placing the lender on notice of potential undue influence, the court found the guarantees and mortgage unenforceable.

The claims against the two sureties were therefore dismissed.

Following a trial in which the plaintiffs obtained judgment for $25,000 in punitive damages but failed on other claims, the court determined costs of the action.

The plaintiffs sought substantial indemnity costs exceeding $276,000, while the defendants argued costs should be limited given the modest recovery.

The court considered proportionality, the reasonable expectations of an unsuccessful party, and factors under Rule 57.01 of the Rules of Civil Procedure.

Although the plaintiffs were only moderately successful, the defendants’ deceitful conduct and litigation behaviour lengthened the proceeding and justified an enhanced costs award.

The court fixed costs payable by the defendants at $50,000 inclusive of fees, HST, and disbursements.

A group of related corporate plaintiffs alleged that a planning consultant and licensed real estate salesperson breached fiduciary duties during a land acquisition initiative by secretly purchasing the target property through his own company.

The court found that the consultant acted as an agent and fiduciary for the plaintiffs, given the trust placed in him, his role negotiating with the seller, and his undertaking to act on their behalf.

By failing to disclose his personal interest, misleading the plaintiffs about negotiations, and purchasing the property himself, the defendant placed himself in a conflict of interest and breached his fiduciary obligations.

Although the plaintiffs suffered no pecuniary loss and failed to establish negligence in the planning advice, the court held that the egregious and deceptive conduct warranted punitive damages.

Punitive damages of $25,000 were awarded to punish and deter such misconduct.