Legal Blog

Undue Influence

JGB Collateral v. Rochon 2020 Ont CA

The trial judge concluded that a mortgage was not enforceable against wife because it was the product of presumed undue influence from husband, the mortgagee had constructive notice of the undue influence, and the mortgagee did not adequately ensure that wife received independent legal advice. The Court of Appeal reversed. The presumption of undue influence is rebuttable. It arises if the relationship between the debtor and guarantor, coupled with the nature of the transaction between them, justifies an inference that the transaction was the result of undue influence. If the presumption applies, then the lender is put on notice and must take reasonable steps to try to ensure that the guarantor understands the transaction and is entering into it voluntarily by encouraging the guarantor to seek independent legal advice. If the lender does not take these steps, then the lender has the evidentiary onus to adduce sufficient evidence to rebut the presumption of undue influence. In this case, there was evidence from the mortgagee that it had obtained an oral confirmation from the two lawyers who acted for the corporate debtor, husband, and wife that they had explained the transaction to both husband and wife. Further, wife had a financial interest in the debtor corporation. More importantly, wife admitted that she signed the documents of her own free will and that husband did not threaten or force her to sign any of the documents. She merely said that she signed the documents because husband asked her to so. Wilful blindness is not proof of undue influence.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.