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GUARANTEES AND INDEMNITIES - Liability of guarantor - Defences

Thursday, April 15, 2021 @ 6:31 AM  

Lexis Advance® Quicklaw®
Appeal by the defendants from summary judgment enforcing personal guarantees of indebtedness owed to the plaintiff, Royal Bank of Canada (RBC). The defendants provided personal guarantees as security for several million dollars in loan advances to their family business. The plaintiff demanded payment from the company and the defendants under the governing loan agreements and guarantees. The company made an assignment into bankruptcy. The plaintiff commenced litigation to recover $1.5 million under the guarantees. The defendants alleged that the plaintiff’s representatives led them to believe that their personal guarantees were collectively limited to $600,000 on a joint and several basis, and that had they been told otherwise they would not have executed the guarantees. The motion judge found no genuine issue for trial regarding the scope of the defendants’ liability under the guarantees and rejected the allegation that the plaintiff’s account manager had misrepresented the scope of liability. The defendants appealed.

HELD: Appeal allowed. The motion judge’s reasons failed to demonstrate appropriate application of the summary judgment principles. In particular, the judge’s reasons did not demonstrate analysis of the entirety of the evidentiary record or consideration of whether a trial was required on the issue of the defendants’ allegations related to misrepresentation. No explanation was provided for rejection of the defendants’ unchallenged evidence that, if accepted, would support the allegation of misrepresentation. No weighing, evaluation or findings of credibility were made prior to rejection of that evidence. Additionally, the judge failed to address the absence of evidence from the plaintiff challenging the defendants’ understanding of the scope of their guarantees. The aspect of the order finding no genuine issue for trial regarding the validity and enforceability of the guarantees was sustained. A trial was required on the issue of the scope of the defendants’ liability under their personal guarantees, having regard to the allegations of misrepresentation.

Royal Bank of Canada v. 1643937 Ontario Inc., [2021] O.J. No. 779, Ontario Court of Appeal, D.H. Doherty, L.B. Roberts and A.L. Harvison Young JJ.A., February 19, 2021. Digest No. TLD-April122021007