
Legal Blog:
Trust
A constructive trust is a remedy that can arise from a successful claim for unjust enrichment. The concept of unjust enrichment has made its way to the Supreme Court of Canada on several occasions, most recently in Moore v. Sweet 2018 SCC 52.
Context
Husband and wife were separating and ultimately divorced. They made an oral deal in early 2000 about one aspect of their financial relationship: wife would pay the premiums of husband’s $250,000 insurance policy and remain designated as the sole beneficiary. Wife was true to her word and paid the annual premiums for the next 13 years (about $7,000 in total) until husband died.
Husband was not true to his word (men, you just can’t trust ’em). Within about 6 months after making his deal with wife, husband began cohabiting with another woman (call her Risa) and continued to do so until husband died. Within 9 months after making his deal with wife, husband, who seemingly had a short memory, executed a change of beneficiary, designating Risa as the irrevocable beneficiary under his insurance policy. Risa testified that husband did so because he did not want her to worry about how she would pay the rent or buy medications. Both very commendable reasons were it not for his deal with wife.
Continue Reading >Interest Bonus
Most charge terms contain a provision that, upon default of the payment of principal, a mortgagee is entitled to demand that the mortgagor pay an additional 3 months’ interest. When the standard charge terms are silent as to a bonus, mortgagees can rely on section 17(1) of the Mortgages Act. Or can they? That was the issue in 2468390 Ontario Inc. v. 5F Investment Group Inc., a 2017 decision of the Ontario Superior Court of Justice. A mortgagor failed to pay principal after maturity. The mortgagee issued a notice of sale, claiming principal and interest plus an additional 3 months’ interest as bonus. The mortgagee had to rely upon section 17(1) of the Mortgages Act because the mortgage documents made no provision for this bonus.
Forbear
Financial institutions use sophisticated loan agreements which, for the most part, are bullet-proof. Assuming that a debtor defaults under a loan agreement, is the agreement likely to be interpreted in a manner that would force the creditor to forbear collecting the debt until the occurrence of another event? This was the question with which the court had to grapple in Royal Bank of Canada v. Everest Group Inc., a 2018 decision of the Ontario Superior Court of Justice.
Debt
The bank financed a franchisee to open and operate a restaurant. The franchisee signed loan and security agreements: a $350,000 small business financing loan, a $5,000 overdraft demand loan facility, a $256,000 variable-rate term facility, a $10,000 Visa facility, and a general security agreement. Two principals signed guarantees limited to $87,000 for the small business loan and $271,000 for the other loans.
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