Court File and Parties

COURT FILE NO.: CV-15-528081 DATE: November 29, 2018

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Wolseley Canada Inc. Plaintiff/Moving Party – and – Caesar’s Plumbing and Heating Ltd., Jules Côté and Linda Scheffer-Côté Defendants/Respondents

COUNSEL: Jeffrey A. Armel for the Plaintiff/Moving Party Christian Pilon for the Defendants/Respondents

HEARD: November 26, 2018

JUSTICE SALLY GOMERY

[1] Wolseley Canada Inc. (“Wolseley”) seeks summary judgment for $64,517.33 against Linda Scheffer-Côté. Wolseley supplied materials to Caesar’s Plumbing and Heating Ltd. (“CPH”), a company owned by Ms. Scheffer-Côté’s husband Jules Côté. It alleges that Ms. Scheffer-Côté is liable for CPH’s unpaid invoices and interest because she signed a continuing and unlimited personal guarantee for all amounts it owed to Wolseley.

[2] Wolseley has not produced the personal guarantee allegedly signed by Ms. Scheffer-Côté. The document was apparently lost when the company was scanning its files into its computer system in 2013.

[3] On a contested summary judgment motion, I must first determine if there is a genuine issue requiring a trial. If there is, then I may use the special powers set out at subrules 20.04(2.1) and (2.2) to resolve the issue, if it is in the interest of justice to do so on the motion.

[4] Having reviewed the record, I conclude that there is no genuine issue requiring a trial and that the action against Ms. Scheffer-Côté should be dismissed. Even accepting all of the evidence presented by Wolseley as true, it does not establish, on a balance of probabilities, that Ms. Scheffer-Côté signed a personal guarantee that would require her to pay CPH’s debt to Wolseley.

Wolseley’s evidence on the motion

[5] Wolseley has produced affidavits from Bob Lagasse, Wolseley’s branch area manager in Ottawa, and Terry Paley, its former credit manager at its head office in Burlington, Ontario. Transcripts from Mr. Lagasse’s examination for discovery and Mr. Paley’s cross-examination were also filed.

[6] The evidence from Mr. Lagasse and Mr. Paley regarding the alleged guarantee can be summarized as follows.

[7] In 2012 or 2013, Mr. Paley and Mr. Lagasse became concerned about CPH’s financial situation. Wolseley has not produced any invoicing records from 2013, and Mr. Paley did not testify as to how much CPH owed at the time. He recalls that CPH had a credit limit of $500,000 and Mr. Côté was seeking an increase in this amount for some larger ongoing projects. At a certain point, CPH’s account was put on hold, meaning that Wolseley would not process any further orders. Neither Mr. Paley nor Mr. Lagasse say exactly when this happened.

[8] Mr. Côté had signed a personal, continuing and unlimited guarantee in May 2012. Mr. Paley cannot recall the policy in place at Wolseley with respect to seeking personal guarantees from third parties such as Ms. Scheffer-Côté. He believes that Wolseley got net worth statements from both Mr. Côté and Ms. Scheffer-Côté and that these showed that she had greater assets than her husband. Mr. Paley cannot recall when Wolseley would have obtained these statements and Wolseley has again not produced them. Mr. Paley also cannot recall any of their content, except that Ms. Scheffer-Côté’s situation was “far different” from that of her husband.

[9] On June 6, 2013, Mr. Lagasse sent an email to Mr. Côté with a subject line “Personal Guarantee for Linda Cote”. In the email, he asked Mr. Côté to have Ms. Scheffer-Côté complete attached documents as soon as possible and return the signed originals in a sealed envelope so he could forward them to Mr. Paley. He attached a form for a continuing and unlimited personal guarantee in Wolseley’s favour to the email. The other attachments to this email have not been produced.

[10] According to Mr. Lagasse, Ms. Scheffer-Côté came to his office several days after June 6, 2013 and handed him a sealed envelope addressed to Mr. Paley. Mr. Lagasse did not open the envelope but instead couriered it to Mr. Paley in the Burlington office.

[11] Mr. Paley recalls receiving an envelope by courier from Mr. Lagasse shortly after June 6, 2013. His affidavit states that:

I further recall opening the envelope and seeing a personal guarantee executed by Linda. After I opened the envelope, I contacted Mr. Lagasse and advised him that I had Linda’s personal guarantee and therefore the Ottawa branch could continue to supply materials to Caesar’s. I would not have permitted the Ottawa branch to continue to supply materials to Caesar’s in the absence of receipt of Linda’s signed personal guarantee.

[12] Mr. Paley says he then gave the guarantee to a staff member for scanning, after which he never saw it again. Mr. Lagasse never saw the alleged signed guarantee. In his affidavit, he confirms a discussion with Mr. Paley a day or two after he forwarded the envelope to him. In examination for discovery, however, he did not recall Mr. Paley telling him at the time what documents he had actually received.

[13] In cross-examination, Mr. Paley was asked why Ms. Scheffer-Côté was not initially named as a defendant in this lawsuit, but only added after both CPH and Mr. Côté declared bankruptcy. He gave the following evidence:

Q: Can you explain to me why Linda wasn’t initially included in the claim? A: No, I can’t. I can only assume that it was not in the terms and conditions of the guarantee to initiate it. I’m not sure. Q: Are all the personal guarantees the same in Wolseley or is [sic] there different personal guarantees for different accounts? A: No. I think there’s different guarantees. I think it kind of varies depending upon the business structure. Q: What were the terms of Linda’s guarantee? A: It has been too many years and I have not seen the document. It’s been so long. I do know we had – I can’t remember the name of it. We had a term for certain types of personal guarantees.

Is there a genuine issue for trial?

[14] Further to section 4 of the Statute of Frauds, RSO 1990, c S.19, a personal guarantee is not enforceable unless the agreement is in writing and signed by or on behalf of the debtor:

No action shall be brought … to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person … unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.

[15] Citing Heichman v. National Trust Co., 1920 CarswellSask 98 (S.C.C.), counsel for Wolseley argues that section 4 does not prevent a creditor from enforcing a written personal guarantee that was lost after it was signed. But even accepting this argument, the problem with Wolseley’s claim is not just that it cannot produce the document. The more fundamental and fatal problem is that Wolseley cannot prove that Linda signed the guarantee or that the terms of the alleged guarantee permit it to make the claim that it is now making against her.

[16] Wolseley has produced no direct evidence on the terms of the personal guarantee allegedly received from Ms. Scheffer-Côté. It argues that I should infer that the signed guarantee that Mr. Paley says he received was in the same form sent to her husband on June 6. But this inference was not supported by Mr. Paley’s evidence on cross-examination. When asked about the terms of the guarantee, he did not point to the form sent by Mr. Lagasse to Mr. Côté. He instead said that Wolseley used different forms of guarantee and could not recall the terms of the document that Ms. Scheffer-Côté signed.

[17] Wolseley has not even proved that Ms. Scheffer-Côté signed the document ostensibly received by Mr. Paley. As he acknowledged, he did not recognize her signature and took no steps to verify its authenticity. Neither he nor Mr. Lagasse ever talked to Ms. Scheffer-Côté about a personal guarantee at any point. Neither individual contacted her before June 6 to confirm that she would sign a personal guarantee or to advise her of its implications, or after June 6 to confirm that she had signed it. On this evidence I could not find, on a balance of probabilities, that she signed anything.

[18] Wolseley asks me to infer that Mr. Paley received a signed guarantee from Ms. Scheffer-Côté because, a short time later, the hold on CPH’s account was lifted. There are two problems with this argument. First, even if I made this inference, the terms of the alleged guarantee remain unknown. Second, there is evidence that Wolseley may have lifted the hold on the account even if it did not receive a signed personal guarantee from Ms. Scheffer-Côté. Mr. Côté has produced a ledger that shows that CPH paid Wolseley just over $285,000 in late June 2013, and almost $350,000 a few days later. In his cross-examination, Mr. Paley agreed that it was “entirely possible” that the first payment alone would have led Wolseley to take the hold off of the account.

[19] Wolseley has also suggested that I should conclude that Ms. Scheffer-Côté completed and signed the personal guarantee attached to Mr. Lagasse’s June 6, 2013 email to Mr. Côté because she did not clearly deny doing so in her affidavit or examination for discovery.

[20] I have serious reservations about the evidence from Ms. Scheffer-Côté’s examination for discovery. Although she testified in French, the transcript filed contained only her answers translated into English. If Ms. Scheffer-Côté had testified in a language other than French, this would be acceptable. But the whole point of a bilingual proceeding is that evidence will be received in both official languages. There is no reason to produce a translation, which inevitably fails to capture all of the nuances in the deponent’s evidence. In the circumstances, I am not certain I should be even considering the transcript and I would certainly not make any findings based on any subtleties in Ms. Scheffer-Côté’s answers.

[21] But even assuming I should accept an English translation in lieu of her original testimony in French, Ms. Scheffer-Côté at no point admitted that she signed a personal guarantee with respect to CPH’s indebtedness to Wolseley. On the contrary, she testified that she does not recall doing so and that it is “almost impossible” that she did so. She explained that she had her own company, entirely separate from CPH, and would not have agreed to take on potential liability for her husband’s company. She also said that she has no copy of the alleged guarantee even though she keeps all such records meticulously. She does not recall delivering a sealed envelope to Mr. Lagasse shortly after June 6, 2013 but says that, during this period, she sometimes delivered cheques to Wolseley in sealed envelopes during this time period.

[22] Beyond this, Mr. Côté has sworn an affidavit saying that he never even asked his wife if she would execute the personal guarantee form sent by Mr. Lagasse on June 6, 2013, or any personal guarantee to secure CPH’s indebtedness. In his words:

Linda a constamment diamétralement refusé de signer quelconque garantie personnelle pour CPH or même ses propres compagnies et je n’aurais même pas eu l’audace de demander qu’elle signe un tel document.

[23] Mr. Côté was not cross-examined on his affidavit, so this evidence is unchallenged.

[24] I have not mentioned the evidence of Ms. Scheffer-Côté and Mr. Côté not for the purpose of weighing their credibility against that of Mr. Paley and Mr. Lagasse, but because it shows that the existence of a signed personal guarantee by Ms. Scheffer-Côté is clearly denied.

[25] Ms. Scheffer-Côté did not bring a cross-motion seeking summary judgment in her favour. It is however open to me to find, on Wolseley’s motion, that there is no genuine issue for trial because it cannot succeed in its claim; Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008.

[26] On the evidence, I find that there is no genuine issue requiring trial with respect to the alleged personal guarantee. I must assume for the purpose of the motion that Wolseley has presented all of the evidence it has to support its claim. It has not produced the personal guarantee it alleges that she completed and signed, nor evidence establishing the terms of the alleged guarantee or even any persuasive evidence that she signed any guarantee.

[27] In its amended amended statement of claim, Wolseley also makes claims against Ms. Scheffer-Côté based on oppression and breach of trust. [1] At the hearing, counsel for Wolseley acknowledged that it has no evidence to support these claims and was proceeding only on the claim based on the alleged personal guarantee.

[28] I am therefore granting summary judgment in Ms. Scheffer-Côté’s favour and dismissing the action against her.

[29] If the parties cannot agree on costs, Ms. Scheffer-Côté may make written costs submissions within seven days of release of this decision. Wolseley may make responding costs submissions within seven days of receipt of Ms. Scheffer-Côté’s submissions. Submissions should not exceed three pages in length in addition to a costs outline. Counsel should forward the submissions to me at my office at 161 Elgin Street. If I do not receive submissions within the deadline set out here, I will assume that the parties have resolved the issue of costs.

Justice Sally Gomery Released: November 29, 2018

COURT FILE NO.: CV-15-528081 DATE: November 29, 2018

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Wolseley Canada Inc. Plaintiff/Moving Party – and – Caesar’s Plumbing and Heating Ltd., Jules Côté and Linda Scheffer-Côté Defendants/Respondents REASONS FOR JUDGMENT Justice S. Gomery Released: 2018/11/29

Footnotes

[1] At the outset of the hearing, counsel for Wolseley sought leave to amend its statement of claim, which I granted.