Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220607 DOCKET: C69294

Tulloch, Miller and Trotter JJ.A.

BETWEEN

The Toronto-Dominion Bank Plaintiff (Respondent)

and

Overland R.N.C. Inc., 2220430 Ontario Inc., Brian Sack, Daniel Sack, Steven Hilliard also known as Steve Hilliard Defendants (Appellants)

Counsel: Paul J. Pape and Cristina Senese, for the appellants Michael R. Kestenberg and Beverly C. Jusko, for the respondent

Heard: March 2, 2022 by video conference

On appeal from the judgment of Justice Jana Steele of the Superior Court of Justice, dated March 15, 2021.

Reasons for Decision

[1] The appellants appeal the decision of the summary judgment judge, granting summary judgment in the amount of $371,266.16 in favour of the respondent, T.D. Bank, against the appellant Sack Brothers.

[2] The underlying facts are not in dispute, and are worth repeating below.

[3] The appellant Sack Brothers invested in 2220430 Ontario Inc. (“Holdco”), which held shares in the company Overland, an HVAC contractor in Kitchener, Ontario. The Sack Brothers, through Holdco, held 50 percent of the shares in Overland. The appellant Hilliard held the remaining 50 percent of the Overland shares.

[4] Overland and the respondent entered into a credit agreement dated November 2, 2016. As security for the credit facility, the respondent obtained two General Security Agreements, one from Overland and one from Holdco, plus guarantees up to $800,000 from the Sack Brothers and Hilliard.

[5] Contrary to the terms of the credit agreement, the Sack Brothers sold their investment in Holdco to Hilliard on January 30, 2018. In the fall of 2018, an account manager at the respondent called Brian Sack to ask about the Guarantee. Brian Sack’s evidence was that he stated that he and his brother “should be taken off the Guarantee.”

[6] On November 30, 2018, Brian Sack emailed the respondent seeking confirmation that he and Daniel Sack had no obligation to the respondent. The email read: “I was going through some papers and I would like to confirm that Myself, Dan and Sax Construction have no obligation for Overland RNC? Please confirm.”

[7] A member of the respondent’s Financial Restructuring Group responded on December 3, 2018 that they would review the account. The respondent conducted its review and concluded that “it is clear that their [the Sack Brothers’] guarantees are the Bank’s only security for our credit exposure and we are not in a position to release same.”

[8] The respondent did not inform the appellant Sack Brothers that they were denying the request for release from the guarantees. The appellant Sack Brothers also did not follow up with the respondent.

[9] The respondent then made a demand on the appellant Sack Brothers under the Guarantee. As of October 26, 2020, the sum of $361,817.60 plus interest at prime plus 2.5 percent per year until paid was owing pursuant to the Guarantees.

[10] At oral argument, the appellants abandoned their arguments on the duty of honest performance. As such, they raise only one issue on this appeal. They argue that the motion judge committed a palpable and overriding error by finding that Brian Sack’s November 30, 2018 email did not constitute clear and unequivocal notice that the Sack Brothers were no longer willing to be liable under the Guarantee.

Analysis

[11] For the reasons that follow, we would allow the appeal.

[12] We agree with the appellants that they provided the respondent with clear and unequivocal notice that they no longer wished to be liable under the Guarantee. A plain reading of the November 30, 2018 email supports the appellants’ contention. Brian Sack wrote in his email that he wanted to “confirm that Myself, Dan, and Sax Construction have no obligation for Overland RNC? Please confirm.” In other words, Brian Sack sought confirmation that he and his brother were not liable under the Guarantee. The motion judge erred in holding that Brian Sack was merely inquiring about the extent of his obligation.

[13] We would distinguish the current case from Dickson v. Royal Bank of Canada, [1976] 2 S.C.R. 834, upon which the motion judge relied to find that the November 30, 2018 email did not constitute clear and unequivocal written notice. The central concern for the court in Dickson was that the bank should not be left with any doubt as to whether the guarantor was terminating his liability under the Guarantee. In the current case, however, the respondent bank had no doubt that the appellants no longer wished to be held liable under the Guarantee. Moreover, in Dickson, the bank continued to advance funds to the debtor after the letter in question. In contrast, the respondent in the current case did not take any action that the appellants might have understood to indicate a continuing relationship.

[14] Accordingly, the appeal is allowed.

“M. Tulloch J.A.”

“B.W. Miller J.A.”

“Gary Trotter J.A.”