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Contracts - Debt Contracts. Barber v Magee
In Barber v Magee (Ont CA, 2017) the Court of Appeal briefly sets out some indicia distinguishing a cash gift from a loan:[4] Generally, there are objective indicators that can assist in determining whether an advancement is a gift or a loan: Locke v. Locke, 2000 BCSC 1300 (CanLII), [2000] B.C.T.C. 681, at para. 21; Klimm v. Klimm, 2010 ONSC 1479 (CanLII), [2010] O.J. No. 968, at para. 28-32; Mora v. Mora, 2011 ONSC 2965 (CanLII), [2011] O.J. No. 2188, at paras. 38-40. A gift is a transfer in which the absence of an expectation of repayment tends to be reflected in the absence of security, recording, payments or efforts to collect payments. A loan often involves a formal, recorded transfer in which terms are set out and in which repayment is made or sought. In evaluating whether the presumption of resulting trust has been rebutted, a trial judge will naturally look at such indicia. . Toronto-Dominion Bank v. Konga
In Toronto-Dominion Bank v. Konga (Ont CA, 2016) the Court of Appeal set out the simple principle that a debtor is entitled to reasonable notice of a payment demand:[14] The jurisprudence since R.E. Lister Limited v. Dunlop Canada, 1982 CanLII 19 (SCC), [1982] 1 S.C.R. 726, confirms that a debtor is entitled to a reasonable time to pay. That determination is fact-specific and dependent upon the conduct of the parties, before and after the demand. It would not be possible, or indeed workable, for the creditor to arbitrarily establish that timeframe for the debtor. . Bank of Montreal v. Wilder
In Bank of Montreal v. Wilder the Supreme Court of Canada set out the equitable basis on which a debt guarantor might be released of their commitment:26. It is trite law that any material variation of the terms of the contract between the creditor and the principal debtor to the prejudice of the guarantor without the guarantor's consent will discharge the guarantor. Seaton J.A. in his dissenting reasons says that is not this case. The variation, if it is properly so‑called, was made in this case with the consent and active participation of the guarantors and in fact constituted a binding agreement, so the trial judge found, to which the creditor, the principal debtor and the guarantors were all parties. Herein lies the point of divergence between the view of the majority and the view of the minority on the Court of Appeal. Lambert J.A. approached the case on the basis that if a variation of the principal contract without the guarantor's consent discharges the guarantor, so also should a breach of a variation made with the guarantor's consent. In other words, Lambert J.A. would apply the law of guarantee and suretyship to that situation. Seaton J.A., on the other hand, saw no reason to stretch the law of guarantee and suretyship to cover a case involving a straight breach of contract. The following excerpt from his reasons sets out Seaton J.A.'s position:The case law provides that guarantors will be discharged if a creditor unilaterally varies a term of the principal contract guaranteed. These cases may be rationalized on the basis that a guarantor is entitled to some relief where his risk is materially altered and where there are no remedies available to him in contract. In these circumstances, the guarantor is on his own and must look to equity because the principal debtor has suffered no loss upon which the guarantor could rely in counterclaim or set‑off. I see no merit in extending the reasoning in these cases to the situation of a breach of a contract by a creditor where adequate contractual remedies lie. If a guarantor's interests can be protected in contract, there is no reason to extend the application of equitable principles. 27. Lambert J.A. states the principle on which he relies as follows:The principle on which I rely in reaching my conclusion on this point may be stated in this way. Where the creditor, by his own conduct, (a) causes the default of the principal debtor, (b) materially increases the risk to the guarantor, and (c) impairs the security that is available to the guarantor on payment of his guarantee obligation to the creditor, then the guarantor is discharged.
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