Bank of Montreal v. Minaki International Resort Corp.

Bank of Montreal v. Minaki International Resort Corp. Collection Decisions of the Court of Appeal Date 1998-08-26 Docket numbers C28458 Judges Finlayson, George Duncan; Goudge, Stephen Thomas; Feldman, Kathryn N. Subject Civil Decision Content DATE: 19980826 DOCKET: C28458 COURT OF APPEAL FOR ONTARIO RE: BANK OF MONTREAL (Plaintiff/Defendant by Counterclaim/Respondent) and MINAKI INTERNATIONAL RESORT CORP. (Defendant/Plaintiff by Counterclaim/Appellant) BEFORE: FINLAYSON, GOUDGE AND FELDMAN JJ.A. COUNSEL: Anne McNeely, for the appellant Robert J. M. Janes, for the respondent HEARD: August 13, 1998 ENDORSEMENT [1] The only argument raised on this appeal from summary judgment was that the respondent bank was under an obligation to insist that the appellant corporation receive independent legal advice because the appellant was represented in its negotiations with the bank by Donald Wing of Mancon International Inc. ("Mancon"). Mancon had been retained by the sole shareholder of the appellant to manage the corporation's one asset, Minaki Lodge. The shareholder is the Wabaseemoong Independent Nations of One Man Lake, White Dog and Swan Lake (the "Band"). Wing was also the principal of Wing Construction Limited ("Wing Construction"), which had contracted to renovate the Lodge. [2] The loan structure arranged by Wing with the respondent bank required that the Band act as guarantor of the loan and deposit GIC's as security to the full value of the loan of $3,500,000. Of this loan, $1,400,000 went to the Band to repay advances it had made to the appellant corporation and this latter amount became part of the security pledged by the Band. $750,000 went as a mortgage payment to the Four Seasons Hotel, which had taken the mortgage back on its sale of the Lodge to the Band, $500,000 was retained as an operating line of credit and $850,000 went to Wing Construction in payment of its contract for renovations. [3] The argument in support of the premise that the appellant borrower should receive independent legal advice was that there was conflict of interest between the appellant and Donald Wing because of the two hats that Wing was wearing, one as representing Mancon in negotiating the loan and the other as principal of Wing construction which received a substantial benefit from the loan. However, whatever merit this argument might have in the abstract, involving as it does a commercial borrower and an established lending institution, there is no evidence before us that raises a triable issue as to the need in this case for independent advice. Whether the appellant had or did not have legal advice would not be evident to the respondent bank, and in any event, the lack of it appears to have created no prejudice to the appellant. There is no suggestion in the evidence as to what a legal advisor could have drawn to the appellant's attention that would have caused it to reconsider its lending requirements or the nature of the loan it negotiated. [4] It is clear that as manager of the Lodge, it was part of Mancon's area of responsibility to arrange the loan that was intended to provide $2,250,000 for renovations, a payment on account of the purchase of the Lodge of $750,000 and the establishment of a line of credit of $500,000 . There is no suggestion that the appellant and the Band were not fully aware of Wing's ownership of Wing Construction and that as a contractor it would receive funds generated by the loan. [5] Moreover, on this record, there is no evidence that the appellant and the Band did not understand the loan, the Band's guarantee and other obligations thereunder. There is no suggestion that the Band did not fully appreciate the nature of the security that was pledged or the consequence of a default in payment of the loan. While the appellant had argued before the motions judge that the respondent bank was under an obligation to insist that the appellant obtain an independent analysis of the commercial viability of this project, there is no evidence that such had not been obtained before the initial purchase of the Lodge by the Band from Four Seasons Hotel. [6] In our opinion, the motion judge's reasons on this issue and others referred to in the appellant's factum indicate no error. Accordingly, the appeal is dismissed with costs.