DATE: 20060706

DOCKET: C43966

COURT OF APPEAL FOR ONTARIO

RE:

BANK OF MONTREAL (Plaintiff (Respondent)) – and – GLOBAL DIGITAL SOLUTIONS LTD. and JAMES DURBANO (Defendant (Appellant))

A N D B E T W E E N:

JAMES DURBANO (Plaintiff by Counterclaim (Appellant))

– and – BANK OF MONTREAL, GERRY JUTSUN and GLOBAL DIGITAL SOLUTIONS LTD. (Defendants by Counterclaim (Respondent))

BEFORE:

SIMMONS, ARMSTRONG AND LAFORME JJ.A.

COUNSEL:

Richard P. Quance

for the appellant James Durbano

Anthony J. O’Brien

for the respondent Bank of Montreal

HEARD & RELEASED ORALLY:

June 27, 2006

On appeal from the judgment of Justice Michael R. Dambrot of the Superior Court of Justice dated July 27, 2005.

E N D O R S E M E N T

[1] The appellant appeals from a judgment of Dambrot J. dated July 27, 2005, ordering him to pay the sum of $25,000.00 plus pre-judgment interest to the respondent. In addition, the appellant appeals from the costs award of $42,000.00.

[2] The appellant raises two issues on appeal:

i) whether the respondent’s failure to obtain “confirmed future contracts” as required in a loan commitment letter amounted to a material alteration of the contract between the respondent as lender and Global Digital Solutions Limited as borrower so as to discharge the appellant from his personal guarantee; and

ii) whether the trial judge erred in exercising his discretion in relation to costs.

BACKGROUND

[3] In April 1998, the appellant became an officer and director of Global Digital solutions Limited (“GDS”) following business dealings with Gerry Jutsun, the principal of GDS. Although the appellant eventually became president of GDS, Mr. Jutsun remained responsible for the day-to-day operations of the company in his capacity as General Manager.

[4] In 1999, the respondent agreed to advance a loan to GDS in the amount of $100,000.00 on terms that the appellant provide a personal guarantee for $25,000.00. On June 4, 1999, GDS and the appellant signed a commitment letter accepting the terms on which the respondent was prepared to advance the loan. Under the heading Security, the commitment letter included the following requirements:

The following security, evidenced and registered in form and substance satisfactory to the Bank and its counsel, is to be provided prior to drawdown under the facility:

Copies of confirmed future contracts to substantiate future cash flows of the company.

DISCUSSION

[5] The appellant contends that on the evidence of both the appellant and the respondent the requirement for confirmed future contracts was a material term of the loan agreement and that the trial judge erred in holding that it was for the sole benefit of the respondent. The appellant submits that because it is clear on the evidence that neither the respondent or its counsel received copies of confirmed future contracts after the commitment letter was signed, the trial judge erred in failing to find that the appellant was discharged from his guarantee based on a material variation of the loan agreement.

[6] We disagree. The trial judge made a finding of fact that the requirement in the commitment letter was satisfied because the Bank received a number of future customer contracts before the commitment letter was signed. While the appellant does not challenge the trial judge’s finding concerning the receipt of the contracts, the respondent contends that the trial judge made an error concerning when the contracts were received and by whom. In our view, whether the contracts were received before or after the commitment letter was signed, the trial judge made no error in holding that the fact that contracts were received was sufficient to satisfy the requirement in the commitment letter. In light of this conclusion, it is unnecessary that we decide whether the requirement for confirmed future contracts was a material term of the commitment letter.

[7] In relation to costs, the appellant contends that the trial judge failed to fix an amount for costs that is fair and reasonable for the unsuccessful party to pay having regard to the nature of the issues, the amount in dispute and the fact that the trial lasted only one day. We agree. In all of the circumstances, in our view, an appropriate figure for costs in the action below is $25,000.00.

[8] The appellant did not seek leave to appeal costs but the respondent raised no objection on that ground. For the foregoing reasons, leave to appeal costs is granted and the appeal as to costs is allowed. The trial judge’s award of costs is set aside and an award of $25,000.00 inclusive of disbursements and applicable G.S.T. is substituted.

[9] The appeal is otherwise dismissed. Costs of the appeal are awarded to the respondent in the amount of $2,500.00 on a partial indemnity scale inclusive of G.S.T. and applicable disbursements.

Signature: “Janet Simmons J.A.”

“Robert P. Armstrong J.A.”

“H.S. LaForme J.A.”