CITATION: Royal Bank v. Edna Granite & Marble Inc., 2014 ONSC 3377
COURT FILE NO.: CV-16-553987
DATE: 20170531
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Royal Bank of Canada
Plaintiff
– and –
Edna Granite & Marble Inc., Saman Wickramasinghe and Anita Linthotage aka Anita Wickramasinghe
Defendant
Natali Marconi, for the Plaintiff
Chandralal Handapangoda, for the Defendant
HEARD: May 31, 2017
REASONS FOR JUDGMENT
E.M. Morgan J.:
[1] The Royal Bank of Canada (the “Bank”) brings this action on an amount owing under a loan and guarantee on which the Defendants have defaulted.
[2] The borrower is the Defendant, Edna Granite & Marble Inc. (“Edna”), who borrowed $158,100.00 with interest at the rate of prime plus 3% per annum under a loan agreement dated May 29, 2013 (the “Loan Agreement”). Edna was to make monthly instalment payments in the amount of $2,402.04. Under the terms of the Loan Agreement, if any instalment remains unpaid after the date on which it became due, the whole of the principal and accrued interest becomes due and payable at the option of the Bank.
[3] Edna’s loan was guaranteed by the Defendants, Saman Wickramasinghe and Anita Linthotage aka Anita Wickramasinghe (the “Guarantors”) under a Guarantee Agreement dated June 13, 2013. The loan to Edna was a government guaranteed loan, which required a personal guarantee for 25% of the loan. The Guarantors’ liability under the Guarantee Agreement was therefore limited to $39,525.00.
[4] Edna has failed to pay regular monthly instalments. The Bank sent a demand letter in respect of the default on May 8, 2014.
[5] On March 23, 2014, the solicitor for the Defendants sent a letter to the Bank proposing an arrangement whereby the Defendants would pay $500 per month for a year. The Bank did not respond in writing to this proposal, but in a series of telephone calls the collection officers for the Bank acknowledged that the Defendants had made this proposal and insisted that after a year the payment schedule would have to be revised.
[6] The conversations between the Bank’s collection officers and the Defendants were memorialized in a series of notes to file written by the collection officers. Unfortunately, the collection officers were extremely abbreviated and cryptic in the way they composed these notes. Reading them, I cannot help but wonder what they thought they were accomplishing by writing notes to file in this way. They certainly did themselves and their employer no favor by saving the extra 5 minutes it might have taken to use full sentences so that a subsequent reader of their notes might have a chance of following their train of thought. I can only say that if their telephone conversations with the Defendants were as difficult to follow as their written notes, it is little wonder that the Defendants thought that the Bank had agreed to something to which the Bank insists it did not agree.
[7] In any case, it turns out that the Defendants did provide a series of post-dated cheques for $500 each, but that some of those cheques were returned for non-sufficient funds (“NSF”). Accordingly, counsel for the Bank submits, correctly, that even if the Bank is taken to have agreed to forebear on collecting the debt owed to it as proposed by the solicitor for the Defendants, the Defendants ultimately defaulted on their own proposed agreement. The first default occurred when the cheque dated August 1, 2014 was returned NSF, and another default occurred when a cheque dated October 1, 2014 was likewise returned NSF. Neither of these cheques were replaced by the Defendants. A number of other defaults ensued after these two.
[8] Counsel for the Defendants points out that the cheques delivered to the Bank under this forbearance arrangement were issued not by Edna but by the Guarantors. Although the last payment made by the Guarantors was in May 2016, the last payment on the loan actually made by Edna itself was in November 2013. The Statement of Claim in this action was issued in June 2016; accordingly, counsel for the Defendants argues that the Bank is out of time, having waited more than 2 years from the date of the actual lender’s (i.e. Edna’s) default.
[9] I must say that I admire counsel for the Defendants’ ingenuity in fashioning this argument, although I think he is incorrect as a matter of law. Whether the Guarantors or the principle debtor make the payments, the payments are made to the credit of the loan. As counsel for the Bank points out, the Guarantors and Edna would not be very happy if the Bank considered the two of them to be unrelated, and accepted payments from the Guarantors without crediting Edna’s loan account in respect of those payments.
[10] Furthermore, counsel for the Bank also observes that the cheques signed by the Guarantors and payable to the Bank specifically note that the amounts are being paid in respect of Edna’s loan account. As the Bank’s counsel puts it, it does not matter whether the payments to the Bank in respect of Edna’s loan are made “by the borrower, by the Guarantors, or by Santa Claus”, the payments are made on account of the borrower’s outstanding debt to the Bank and are credited as such. Since the Guarantors and Edna’s last payments to the Bank were only a month before the Statement of Claim was issued, the Bank cannot be said to be out of time in bringing this action.
[11] The Defendants have brought a Counterclaim against the Bank alleging, among other things, that the Bank failed to act in good faith and failed to take action required to help the Defendants mitigate their losses. There is no evidence in the Record to support any cause of action pleaded in the Counterclaim. The Counterclaim is therefore dismissed.
[12] The Record before me establishes that Edna’s indebtedness to the Bank under the Loan Agreement is currently in the amount of $58,561.47. The Guarantors’ indebtedness to the Bank under the Guarantee Agreement stands at $29,025.00. This latter amount takes into account an agreement by the Bank to waive interest to date on the amount owed by the Guarantors.
[13] Accordingly, Edna shall pay the Bank $58,561.47 and the Guarantors shall pay the Bank $29,025.00. Any amount paid by the Guarantors will serve to reduce by an equivalent amount the amount that Edna must pay the Bank.
[14] Counsel for the Bank has submitted a Bill of Costs in which she seeks a total of $16,514.09. She submits that the Bank is entitled under the terms of the Loan Agreement and the Guarantee Agreement to complete indemnity for its legal costs, and is not limited to the usual partial indemnity or substantial indemnity scales used by the courts.
[15] In response, counsel for the Defendants indicates that his clients are suffering financial hardship and cannot afford costs at this level. He asks me to use my discretion to lower the costs award to a more affordable amount.
[16] It is certainly true that costs are discretionary under section 131 of the Courts of Justice Act, and that Rule 57.01 of the Rules of Civil Procedure provides a series of factors to be used for guidance in exercising this discretion. That said, the costs sought by the Bank here are payable as a matter of contract, not as a matter of judicial discretion.
[17] The Loan Agreement provides that, “The Borrower agrees to pay the Bank all fees…(including legal fees), costs and expenses incurred by the Bank in connection with…the enforcement or termination of this Agreement and the Security.” Similarly, paragraph 12 of the Guarantee Agreement specifically states that the Guarantors are “liable to the Bank for all legal costs (on a solicitor and own client basis) incurred by or on behalf of the Bank resulting from any action instituted on the basis of this guarantee.” These contractual clauses with respect to full payment of the Bank’s legal expenses are enforceable in the same way as the rest of the Loan Agreement and Guarantee Agreement are enforceable. They are not a matter for judicial discretion in the way that court ordered costs typically are characterized.
[18] The Defendants shall pay the Bank $16,514.09 in costs, inclusive of fees, disbursements, and HST. For greater certainty, this liability for costs is owed to the Bank jointly and severally by Edna and the Guarantors.
[19] Post-judgment interest on any of the above amounts is payable at different rates under the two agreements. Counsel for the Bank has agreed that post-judgment interest on any amounts owed by any of the Defendants can be limited to 2% per annum, which is lower than in both of the relevant agreements.
[20] There shall be a Judgment to go as submitted by counsel for the Bank and as amended by me.
Morgan J.
Released: May 31, 2017
CITATION: Royal Bank v. Edna Granite & Marble Inc., 2014 ONSC 3377
COURT FILE NO.: CV-16-553987
DATE: 2017053
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Royal Bank of Canada
Plaintiff
– and –
Edna Granite & Marble Inc., Saman Wickramasinghe and Anita Linthotage aka Anita Wickramasinghe
Defendant
REASONS FOR JUDGMENT
Morgan J.
Released: May 31, 2017