Summary Judgments and Bank Claims

In my last blog post, I discussed the ready availability of summary judgments in wrongful dismissal cases.

Several weeks ago, the Superior Court of Justice released a summary judgment in a bank claim on a guarantee, reinforcing another aspect of summary judgment motions that might be of interest.

In this case, the Toronto Dominion Bank v. 1745361 Ontario Corporation, Glenn Carter and Jennifer Smith, the bank made a small business loan to the corporate Defendant. The Defendant Carter gave a personal guarantee to the extent of 25% of that loan. The loan went into default and the bank sued Carter on his guarantee.

Whether or not this evidence, taken on its own, would have been sufficient to justify the Court in granting summary judgment in the face of Carter’s story will never be known

Carter’s defence centered around discussions and an “understanding” that he had reached with the bank representative at the time that he signed the guarantee.

Carter claimed that at that time, he had not yet finalized his arrangements with Smith, the principal of the company, on the terms of his involvement in the business venture. Accordingly, he claimed that he had told the bank representative that he was signing the guarantee on a conditional basis only, i.e., conditional on his finalizing his arrangements with Smith.

He claimed that he had never actually done so and as a result, the guarantee could not be enforced.

The evidence showed that Carter advanced funds into the company’s account, took back something in the nature of a fee for doing so, and obtained an indemnity from the company in respect of his guarantee. There was also evidence before the court that he never actually followed up with the bank with respect to his concern that his execution of the guarantee was conditional on the completion of his business arrangement with Smith.

These facts all seemed to suggest that Carter’s story was not true. Whether or not this evidence, taken on its own, would have been sufficient to justify the Court in granting summary judgment in the face of Carter’s story will never be known, because the Court based its judgment on the legal principles involved, having nothing to do with those facts.

The guarantee itself took the form that is almost universally used by banks these days, and specifically excluded any prior representations or discussions inconsistent with what the guarantee said. It specifically provided that the Guarantor’s liability was “continuing, absolute, and unconditional”. Carter’s attempt to introduce evidence suggesting that the guarantee was conditional was inconsistent with the wording in the guarantee. That type of evidence, referred to as parol evidence, is not available where the terms of a guarantee are clear and unambiguous. That has been the law in Canada for decades.

As a result, the judge had no difficulty granting judgment to the bank.

This is another aspect of the summary judgment rule that one might bear in mind. It is not sufficient to raise any number of factual disputes in the hope of derailing a summary judgment motion on the basis that one has raised triable issues, where there is a legal principle that is crystal clear and squarely against you. In those circumstances, the party whose position is consistent with the clear legal principle will succeed no matter what factual controversies the other side might be able to create.

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