The Litigator

THE LITIGATOR

Commentary on Law Affecting Business

The Litigator
AGM :: Affleck Greene McMurtry LLP

THE LITIGATOR

Affleck Greene McMurtry LLP
365 Bay Street, Suite 200  ·  Toronto, Canada
416 360 2800  ·  info@agmlawyers.com  ·  www.thelitigator.ca

Lenders not liable for failing funds

If investors borrow money to invest in mutual funds, and the funds do not perform up to expectations, are the financial institutions on the hook? This question was the subject of the recent Court of Appeal decision in Baldwin et al. v. Daubrey et al.[1] A number of plaintiffs sought compensation from their financial advisors and the financial institutions that loaned the plaintiffs the money they invested in poorly performing investments. The Ontario Court of Appeal upheld Spence J.’s decision granting summary judgment dismissing the claims against the financial institutions.

The plaintiffs had all purchased mutual funds. Relying on the advice of their financial advisors, they obtained loans from various financial institutions to purchase those mutual funds on . All of the loans had requirements that required the borrowers to pay down the loan if the underlying investments dropped below a certain value. Unfortunately, the funds did not perform as well as hoped, and the called the loans.

The appeal panel agreed that the action against the lenders should be dismissed, relying upon well-established law that the relationship of lender and borrower is not a relationship. Instead it is a typical commercial relationship “in which the interests of the parties are not the same and each party seeks to secure its own interest.” The nature of the relationship between the parties was governed by contracts in which the plaintiffs each acknowledged responsibility for the loans. The court agreed that there was no duty on the lender to advise the investors regarding their investments.

Published November, 2006
 

 

 

[1] For full text of Baldwin v. Daubrey decision, visit the Court of Appeal’s website at: http://www.ontariocourts.on.ca/decisions/
2006/september/C44719.htm

article keywords: confidentiality, departing employees, fiduciary duties, Merrill Lynch, RBC, Wellington West, advisors, , firm, stock , firm, restrictive covenant, non-solicitation, non-competition, clients, customers, clean hands, injunctions, interlocutory injunctions, Nesbitt, Dominion

 

Kyle J. Peterson*
Affleck Greene McMurtry LLP

Kyle J. Peterson*

Kyle’s commercial litigation and advocacy practice offers particular expertise in securities, insurance, construction and employment disputes. A fierce advocate for clients, Kyle has a proven ability to approach client issues in a strategic manner, always balancing their business and commercial interests with their legal rights. Kyle’s clients benefit from his experience in business and politics, and appreciate his common sense and results-driven style.

* Presently on leave of absence from the Firm.
Kyle Peterson was elected as a Member of the House of Commons of the Canadian Parliament in the 2015 Canadian Federal Election.

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