Thread by @jmcrookston

Banks must not mislead, and customers signing for overdrafts and debts must receive independent legal advice (Bank of Montreal v Hancock, 1982)

A thread ⬇️ crookston.ca/wp/2021/02/15/…

An old, but interesting, case. Banks must ensure that customers that are taking on debt and signing guarantees for the loans of others are fully apprised of the situation, and receive independent legal advice (Bank of Montreal v Hancock, 1982. See canlii.org/en/on/onsc/doc…)

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In 1974, husband's account was turned into a joint account with wife. She understood for convenience. She did not know it was substantially in overdraft. She did not ask for overdraft privileges.

In 1975, husband signed promissory note in favour of the bank for $27,000. Again, the wife did not know at the time.

Bank may have realized that these facilities were in the name of the husband, and the couple's home was in the wife's name.

In 1976, the husband applied for a $63,974 loan of $64,000. She was asked to sign a promissory note for this amount as well. She understood it was to refinance a demand loan her husband had taken out and pay off the overdraft on the account. She signed.

All of this took place during a difficult time in her life. She was having personal troubles and issues with drugs. The marriage ended in 1979.

In 1977 she was asked to sign a renewal note. She did not understand what it was for, or her obligations under the 1976 promissory note, and so refused to sign. Her husband's business went bankrupt.

Court dismissed the action against her. She was not aware of the borrowing and had not been advised to obtain ILA.

Regarding overdraft, the court held the wife had never consented to overdraft facilities, etc. and dismissed that claim against her.

The Court noted that there was very little case law on this point, except Vaillancourt, which was a case in which two brothers deposited cheques into their joint account. One brother asked the bank to release funds before the cheques cleared.

The other brother's cheques were fraudulent and bounced. and the bank sued both brothers and won. Both were liable for the overdraft created by the cheque deposits.

Regarding the loan document, the Court held that the bank ought to have sent the wife to get independent legal advice before signing the promissory note in 1976.

The Court referred to two cases

- Nova Scotia v MacLellan, in which a New Brunswick court found a wife had been forced to sign a promissory note by her husband, who completely dominated her. The bank ought to have sent her for independent legal advice (ILA).

- Royal Bank of Canada v.

Hinds, in which it was held that where a widow, shortly following her husband's death, was asked to sign documents by the bank which amounted to her taking over the husband's debts to the bank, and signed the documents without appreciating the nature and effect of the…

…documents, nor her own legal position, the documents were not enforceable.

The Court concluded by noting that the first case MacLellan, had recently been reversed by the New Brunswick Court of Appeal, on the basis that the bank did not owe the wife a fiduciary duty. The Court in this case found such a relationship and relied on Hinds.

This thread can be read here: crookston.ca/wp/2021/02/15/…

Well, that was a test of Wordpress posting a "thread" instead of a single post.

Interesting. Not sure I like it, frankly. Bit too rapid fire.

It appears it broke certain posts at strange places. I like the idea, but there is no indication before you click post how many posts it will make.

With a preview, this would be a great feature.