Case Analysis of Bank of Montreal v. Duguid

Running head: BUSINESS LAW
Business Law
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Date: 17 February 2019
Subject: Case Analysis of Bank of Montreal v. Duguid (2000) 47 O.R. (3d)
737 (C.A.)
In this case the defendant Mrs. Duguid signed a loan with the Bank
of Montreal on the persuasion of her husband. The bank sued the
defendant when her husband defaulted in paying back the loan. The
defendant put forwarded in her defence that she was made to sign the
loan under undue-influence by her husband. She had held that such an
action was taken to maintain the tranquillity of the marriage and without
considering the content and adverse consequence of the matter. She
alleged that she was deprived of receiving any sort of independent legal
advice as well as an independent financial advice before taking such step.
The Ontario Court (General Division) had accepted Mrs Duguid's prayer
and dismissed the Bank's action.
On appeal, the Ontario Court of Appeal set aside the order of the
General Division and delivered a judgment in favour of the Bank of
Montreal. In accordance to the court’s decision, the following essentials
would allow the presumption of undue influence:

2BUSINESS LAW
1. There needs to be a close relationship between the principal debtor or the
co- signatories and the guarantor;
2. The guarantor must have confidence and trust on the principal
debtor; and,
3. The transaction might be injurious or harmful for the guarantor.
However, in the absence of relevant evidence proving the
presumption, the guarantee is not enforced.
The decision of the Court of Appeal was in harmony of the decision
given in the case of Barclays Bank v. O'Brien [1994] 1 AC 180. In this
case, the husband being the principal debtor convinced his wife to sign a
security deed that comprised of her home for her husband's company.
Similar to the Duguid’s case, the wife did not receive an independent legal
or financial advice pertaining to the security deed that she signed. On the
failure to repay the loan amount, the Bank took-over the property. Here,
the wife brought the charges of misrepresentation and undue influence to
her defence. The court dismissed the allegation of undue influence and it
held that the wife was supposed to have used her independence of
thought pertaining to the financial consequences as she was not a novice
related to such matters as she have had experience of handling family
finances in her husband's absence. However, the charges of
misrepresentation were proved to be successful. The court held that the
bank was aware of the constructive notice of the misrepresentation yet it
failed to take measures to ensure that Mrs. O'Brien signed the security
without any influence along with the fact that she was aware of her full
liability on the company’s failure to repay the loan.