Contact: Diane P.L. Brooks; Blaney McMurtry LLP (Ontario, Canada)
A recent decision of the Supreme Court of British Columbia contains a critical caution for lenders – know and understand the terms of your contracts and their implications completely, and be sure to comply with those terms strictly.
If you do not, you may discover, the hard and expensive way, through litigation, that what you agreed to was not, in fact, what you intended.
The court decision involves three transportation industry companies – Coast Mountain Aviation, Inc., M. Brooks Enterprises Ltd. and A.K.S. Trucking Ltd. – and an operating loan, guaranteed by A.K.S., that Coast Mountain made to Brooks and on which Brooks defaulted.
In the case [Coast Mountain Aviation Inc. v. M. Brooks Enterprises Ltd. (2012 BCSC 1440)], due to an inadvertent error on the part of the lender (Coast Mountain) and its lawyers, the guarantee taken by Coast Mountain to support Brooks’s borrowings was held invalid and the guarantor (A.K.S.) was relieved of its obligation to cover the default.
