COURT FILE NO.: 15-62995
DATE: 2019/09/16
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Royal Bank of Canada
Plaintiff/Respondent
– and –
1643937 Ontario Inc., Lorraine MacDonald, Shawn McHale, Patrick McHale, and Beverly McHale
Defendants/Moving Parties
J. Ross MacFarlane, Counsel for the Plaintiff
Pavle Masic, Counsel for the Defendant/Moving Parties Patrick McHale and Beverly McHale
Jason Dutrizac, Counsel for the Defendant/Moving Party Lorraine MacDonald
HEARD: January 10, 2019 (Ottawa)
REASONS FOR DECISION
H.J. Williams, J.
Overview
[1] The plaintiff Royal Bank of Canada and three of the defendants[^1] have brought competing summary judgment motions.
[2] RBC seeks summary judgment against four of the defendants enforcing guarantees of RBC loans to a now-bankrupt Renfrew, Ontario glass manufacturer. RBC seeks summary judgment against 1643937 Ontario Inc. for $400,000.00, against Lorraine MacDonald for $300,000.00 and against Patrick McHale and Beverly McHale for $600,000.00 each.
[3] RBC also seeks an order striking certain paragraphs from the statements of defence and counterclaims of three of the defendants and dismissing the counterclaims of two of them.
[4] The defendants Lorraine MacDonald, Patrick McHale and Beverly McHale seek summary judgment against RBC, discharging the guarantees on the basis that they are unenforceable.
[5] Rule 20.04(2) of the Rules of Civil Procedure provides that the court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. A trial is not required if a summary judgment motion can achieve a fair and just adjudication, if the process allows the judge to make the necessary findings of fact and apply the law to those facts and if the motion is a proportionate, more expeditious and less expensive means to achieve a just result. (Hryniak v. Mauldin, 2014 SCC 7 at para. 4.)
Background
[6] Ottawa Valley Glass Enterprises Limited was founded in 1978 by Lorraine MacDonald’s husband, Jack. The company changed its name to OVG Inc. in July, 2011.
[7] Lorraine MacDonald, Shawn McHale and Patrick McHale are siblings. Beverly McHale is married to Patrick McHale.
[8] In these reasons, I will refer to Patrick McHale as “Mr. McHale.” On the relatively few occasions when I mention Shawn McHale, I will refer to him as Shawn McHale.
[9] The five defendants to RBC’s action all guaranteed OVG’s indebtedness to RBC.
[10] In 2007, in exchange for a $1,000,000.00 credit facility, RBC took a general security agreement over OVG’s assets and a $300,000.00 personal guarantee from Ms. MacDonald. Ms. MacDonald signed her guarantee on October 10, 2007.
[11] In the fall of 2008, OVG increased its loan to $1,500,000.00. At that time, Shawn McHale, Mr. McHale and Ms. McHale all signed personal guarantees in the amount of $600,000.00. Shawn McHale signed his guarantee on December 11, 2008. Mr. McHale and Ms. McHale signed their guarantees on December 15, 2008.
[12] OVG and RBC entered into further loan agreements in January, 2010, January 2011 and finally in November, 2011, when a revolving demand loan of $3,000,000.00 was established and 1643937 signed a $400,000.00 guarantee.
[13] OVG struggled financially and began to default on its obligations to RBC in the fall of 2012.
[14] On February 12, 2013, RBC demanded payment from OVG and under the five guarantees.
[15] On February 22, 2013, OVG filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3.
[16] In December, 2013, OVG made an assignment in bankruptcy.
[17] Ernst & Young Inc. was appointed as receiver in January, 2014.
[18] As of the date of its fourth report, September 30, 2015, the receiver had $170,472.56 in its trust account, after realizing on a majority of OVG’s assets and paying the priority payables.
[19] RBC’s evidence is that as of June 15, 2016, OVG’s indebtedness was $3,465,369.87.
The Issues
[20] The issues on the two summary judgment motions are the same:
Is there a genuine issue requiring a trial in respect of whether the guarantees of Ms. MacDonald, Mr. McHale and Ms. McHale are valid and enforceable?
If the guarantees are enforceable, are they discrete or is the total exposure of all guarantors $600,000.00?
If the guarantees are enforceable, is a further hearing required to determine OVG’s indebtedness to RBC?
Is there a genuine issue requiring a trial in respect of the counterclaims of Mr. McHale and Ms. McHale?
Should certain paragraphs of the statements of defence of Mr. McHale, Ms. McHale and 1643937 be struck on the basis that the allegations will prejudice or delay a fair trial in this action, are scandalous, frivolous and vexatious and are an abuse of the process of the court?
ISSUE #1: Is there a genuine issue requiring a trial in respect of whether the guarantees of Ms. MacDonald, Mr. McHale and Ms. McHale are valid and enforceable?
The position of the guarantors
[21] The guarantors, Ms. MacDonald, Mr. McHale and Ms. McHale, argue that they should be released from their guarantees because RBC and OVG changed the terms of their loan agreements after the guarantees were signed, without notice to the guarantors.
[22] It is agreed that RBC and OVG entered into new loan agreements after Ms. MacDonald signed her $300,000.00 guarantee on October 10, 2007 and after Mr. and Ms. McHale signed their $600,000.00 guarantees on December 15, 2008.
[23] The guarantors rely on Manulife Bank of Canada v. Conlin, 1996 CanLII 182 (SCC), [1996] 3 S.C.R. 415 (SCC), which held that a guarantor will be released from liability where the principal debtor and the creditor agree to a material alteration of the terms of their contract without the guarantor’s consent, provided the guarantor did not contract out of that protection.
[24] In Royal Bank of Canada v. Samson Management & Solutions Ltd., 2013 ONCA 313, however, Ontario’s Court of Appeal considered a guarantee with the same wording as those signed by the guarantors and described the guarantee as a “continuing all accounts” guarantee. The Court upheld the guarantee, noting that the purpose of such a guarantee is to permit the borrower and the lender to make changes to their business arrangements without being required to involve the guarantor.
[25] Ms. MacDonald, Mr. McHale and Ms. McHale argue that in upholding the “continuing all accounts” guarantee in RBC v. Samson, the Court considered the factual context. They argue that their guarantees should be set aside on the basis of the following facts:
• That they did not have independent legal advice; and
• That RBC acted in a commercially unreasonable manner and failed to mitigate its damages, exposing them to liability under the guarantees when RBC could have collected what it was owed from other sources.
[26] Ms. MacDonald also argues that her guarantee should not be enforced because she sold her shares in OVG in November, 2011 and understood that her liabilities were extinguished at that time.
Should the guarantors be released from their guarantees because they did not have independent legal advice before signing them?
[27] The guarantors argue that OVG was a family business, that it was Shawn McHale who actually operated the company and that they had relatively little involvement with OVG. The guarantors argue that RBC was aware of these dynamics and should have ensured that the guarantors received independent legal advice before they signed their guarantees.
[28] The guarantors rely on two Ontario cases in which guarantees were set aside because the lenders did not recommend independent legal advice: Del Grande v. Toronto-Dominion Bank, [1995] O.J. No. 2005 (Gen. Div.); and Duca Community Credit Union Ltd. v. Fulco Automotive Ltd., [1994] O.J. No. 1162 (Div. Ct.)
The evidence of the guarantors
[29] In order to consider this issue, I will review the evidence of each of the guarantors in respect of their connection with OVG and what they understood about the guarantee they signed.
Ms. MacDonald
[30] Ms. MacDonald first became involved in OVG around 1980 and became a director and shareholder of the company in 1986 or 1987.
[31] Ms. MacDonald worked for the company in client services and bookkeeping.
[32] In 2006, Ms. MacDonald’s husband, Jack, the founder of the company, sold his 38 shares in the company to a holding company owned by Mr. McHale. At the same time, Ms. MacDonald sold 13 of her 37 shares to Mr. McHale’s company and five to a company owned by Shawn McHale.
[33] Ms. MacDonald resigned as a director of OVG in 2006.
[34] Ms. MacDonald signed her $300,000.00 guarantee on October 10, 2007. She was a shareholder of OVG at the time. She read the guarantee before she signed it. She understood that it was a $300,000.00 guarantee and that it meant that $300,000.00 might be owed to the bank. She believed it to be a joint and several guarantee. She thought that the rest of her partners would also be signing it; she said that it had always been her understanding although she could not remember whether anyone from RBC had told her this.
[35] Ms. MacDonald said that she was never advised that she could obtain independent legal advice and that she never received independent legal advice.
[36] Ms. MacDonald retained 19 shares in OVG until she sold them to Shawn McHale’s company in November of 2011. Ms. MacDonald said that she understood that when she sold her shares in OVG, her obligations under the guarantees were extinguished; she said that her lawyer told her that when she sold her shares to Shawn McHale’s company in November, 2011, she was selling all of her liabilities too.
[37] Ms. MacDonald did not ask RBC to cancel her guarantee and RBC did not tell her that her guarantee had been cancelled.
Mr. McHale
[38] Mr. McHale has a Grade 10 education. At the time of his examination for discovery in December, 2015, he was operations managing for a mining company and was responsible for 500 employees. He was also part owner of another mining company.
[39] Mr. McHale said that he and his wife Ms. McHale owned 51 per cent of the shares in OVG.
[40] Mr. McHale said that he and Ms. McHale were also directors, but not officers, of the company.
[41] Mr. McHale signed a $600,000.00 guarantee on December 15, 2008. He said that he quickly looked over the guarantee before signing it. He said that no one prevented him from reading it and no one either recommended or recommended against obtaining independent legal advice. He agreed that he was not prevented from obtaining independent legal advice.
[42] At an examination for discovery, Mr. McHale said that he had assumed that the total amount he and his wife were guaranteeing was $600,000.00. He did not say that anyone had told him this; he said that no one had told them otherwise.
[43] In the affidavit he later swore in response to this motion, however, Mr. McHale said that his understanding and belief that the collective maximum exposure he, Ms. McHale and Shawn McHale had under the guarantees was $600,000.00 was based on information provided and representations made by Kevin Bossy of RBC. Mr. McHale’s affidavit did not set out what Mr. Bossy had said that left Mr. McHale with this understanding and belief.
[44] Mr. McHale said that he had previously signed a $300,000.00 or $400,000.00 RBC guarantee and that, at that time, the guarantee had been explained to him. Mr. McHale said that he had understood that if something “went haywire” it would cost him $300,000.00 or whatever the amount was.
Ms. McHale
[45] Ms. McHale’s evidence was from an examination for discovery. She did not file an affidavit.
[46] Ms. McHale has a Bachelor of Education degree.
[47] She was a shareholder and director of OVG but not an officer of the company.
[48] Ms. McHale believed that $600,000.00 was the total amount she, Mr. McHale and Shawn McHale were guaranteeing collectively. She said that it was never explained to her that it would be otherwise.
[49] Ms. McHale had signed a $300,000.00 guarantee previously.
[50] Ms. McHale did not read the guarantee before she signed it. She said that no one prevented her from doing so.
[51] Ms. McHale understood that the guarantee was required to show that she had confidence in OVG and was willing to put some money behind it. She knew that she would have a payment obligation if OVG were to go down.
[52] Ms. McHale did not formally work for OVG but began to attend staff meetings in 2010.
[53] Ms. McHale signed the final facilities agreement between OVG and RBC in November, 2011. She understood the credit facility was being increased to $3,000,000.00 and that a guarantee of $400,000.00 was being requested from 1643937.
Analysis
[54] The lack of independent legal advice does not invalidate a guarantee in the absence of evidence of non est factum, unconscionability, fraud, misrepresentation or undue influence. (Bank of Montreal v. Featherstone, 1989 CanLII 4218 (ON CA), 1989 CarswellOnt 164 (C.A.))
[55] There is no evidence to suggest that any of these circumstances existed in this case. Although Mr. McHale said in his affidavit that Mr. Bossy of RBC had made representations that left Mr. McHale with the understanding and belief that his $600,000.00 liability under the guarantee was shared with his wife and his brother, I cannot accept that Mr. Bossy made any misrepresentations to this effect to Mr. McHale. Mr. McHale provided no particulars of what Mr. Bossy said to him. Mr. McHale did not give evidence at his examination for discovery that he had relied on any representations made by Mr. Bossy and there was no evidence that Mr. McHale had ever corrected his examination for discovery evidence.
[56] Mr. McHale’s evidence about Mr. Bossy was not corroborated by Ms. McHale, who signed her guarantee at the same time and who had an opportunity to file an affidavit in response to RBC’s motion and in support of her own but did not do so.
[57] The two cases relied on by the guarantors in which guarantees were set aside because of a lack of independent legal advice, Del Grande and Duca Community Credit Union Ltd., are readily distinguishable. In Del Grande, a guarantee signed by a wife was set aside in part due to the bank’s failure to recommend independent legal advice in circumstances when the bank knew or should have known about undue influence and misrepresentations on the part of the guarantor’s husband. In Duca, summary judgment on a guarantee was set aside because of conflicting evidence about whether the guarantor had received independent legal advice and about whether she understood the nature of the guarantee
[58] Ms. MacDonald, Mr. McHale and Ms. McHale all understood that they were signing guarantees and knew what a guarantee was; they all knew that they were potentially assuming personal liability for OVG’s debts. At the time they signed their guarantees, they were all shareholders of the company. Together, Mr. and Ms. McHale were the majority shareholders of the company. Mr. and Ms. McHale were also directors. Ms. MacDonald was a former director who had worked at the company for more than 20 years. The fourth shareholder, Shawn McHale, who was also OVG’s president, signed a guarantee in the same amount as the McHales’ guarantee and at approximately the same time. Ms. MacDonald described herself, the McHales and Shawn McHale as “partners.” The guarantors were all familiar with the company and their interests were aligned with those of the company. They were all free to obtain legal advice before signing the guarantees had they chosen to do so.
[59] In these circumstances, I find that the fact that RBC did not recommend that the guarantors obtain legal advice and that the guarantors did not obtain legal advice has no bearing on the validity or the enforceability of the guarantees.
Should the guarantors be released from their guarantees on the basis that RBC acted in a commercially unreasonable manner and failed to mitigate its damages, exposing them to liability under the guarantees when RBC could have collected what it was owed from other sources?
[60] The guarantors argue that, after OVG defaulted on its obligations to RBC, RBC took steps that reduced the likelihood that OVG would be able to repay its loans, thereby increasing the guarantors’ liability.
[61] The guarantors argue, for example, that RBC had retained Ernst & Young Inc. to analyze OVG’s financial situation and that, in late 2012, Ernst & Young had concluded that continued support of OVG would not have been unreasonable. Despite Ernst & Young’s conclusion, RBC demanded payment of the entire amount owed by OVG in February, 2013 and also demanded payment under the guarantees. The guarantors argue that RBC knew that by demanding payment at that time, it would force the company into insolvency and significantly limit the assets available to OVG to repay its obligations to RBC.
[62] The guarantors argue that RBC’s behaviour was unreasonable and represents a failure to mitigate its losses.
Analysis
[63] Although, in the absence of contractual terms to the contrary, a creditor owes a duty to preserve and protect security, guarantors may contract out of their right to have the security realized for their benefit, provided clear and express language is used. The terms of a guarantee may preclude guarantors from arguing that a financial institution has not taken all commercially reasonable steps to enforce its security. (Bauer v. Bank of Montreal, 1980 CanLII 12 (SCC), [1980] 2 S.C.R. 102, 110 D.L.R. (3d) 424.)
[64] I find that the following terms of the guarantees signed by the guarantors preclude them from arguing that their guarantees should not be enforced because RBC acted in a commercial unreasonable manner:
• The last phrase in paragraph 1 provides that “no loss of or in respect of any securities received by the Bank from the customer or others, whether occasioned by the fault of the Bank or otherwise, shall in any way limit or lessen the liability of the undersigned under this guarantee; ” and
• Paragraph 3 provides that “[t]he Bank shall not be bound to exhaust its recourse against the Customer or others or any securities it may at any time hold before being entitled to payment from the undersigned of the liabilities…”
[65] RBC used express language in its guarantee to preclude the guarantors from raising the argument they are raising. In the circumstances, if RBC acted in a commercially unreasonable matter, it would have no bearing on the validity or the enforceability of the guarantees.
Is Ms. MacDonald’s guarantee unenforceable because she sold her shares in the company in November, 2011 and understood that her liabilities were extinguished at that time?
[66] Ms. MacDonald’s liability under the guarantee did not end when she sold her shares in OVG.
[67] Paragraph 6 of the guarantee provides that it will not be affected by a change in the membership of the borrower’s firm through the death or retirement of a partner or by “any change whatsoever in the objects, capital structure or constitution of the customer…but shall notwithstanding the happening of any such event continue to apply to all the liabilities whether theretofore or thereafter incurred or arising…”
[68] Paragraph 4 of the guarantee provides that a guarantor may provide notice in writing to RBC that he or she will not guarantee any future liabilities of the borrower. Ms. MacDonald did not do this. At the time she sold her shares, Ms. MacDonald could have limited her liability for future advances but did not do so.
Conclusion with respect to Issue #1:
[69] The issues raised by the guarantors, the lack of legal advice and their assertion that RBC acted in a commercially unreasonable manner, are not issues requiring a trial; they have no effect on the validity or enforceability of the guarantees.
[70] I find that the guarantees, including the guarantee of Ms. MacDonald, are valid and enforceable.
ISSUE #2: If the guarantees are enforceable, are they discrete or is the total exposure of all guarantors $600,000.00?
[71] The guarantors, Ms. MacDonald, Mr. McHale and Ms. McHale, argue that their liability under the guarantees is shared and that their total, collective exposure is at most $600,000.00, with Ms. MacDonald’s exposure being at most $300,000.00.
[72] Each of the guarantors signed a separate guarantee.
[73] The guarantors argue that the guarantees they signed clearly stated that their liability was to be joint and several.
[74] The guarantors rely on the opening words of their guarantees:
FOR VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the undersigned and each of them (if more than one) hereby jointly and severally (emphasis added) guarantee(s) payment on demand to the Royal Bank of Canada…
[75] In order to accept the guarantors’ position that their liability under the guarantees was joint and several, and therefore shared, it would be necessary to ignore the fact that each of them signed a separate guarantee that makes no reference to a guarantee or guarantees signed by anyone else. It would also be necessary to ignore paragraph 9 of the guarantee which reads as follows:
- This guarantee is in addition to and not in substitution for any other guarantee, by whomsoever given, at any time held by the Bank, and any present or future obligation to the Bank incurred or arising otherwise than under a guarantee, of the undersigned or any of them or of any obligant, whether bound with or apart from the customer; excepting any guarantee surrendered for cancellation on delivery of this instrument.
[76] I cannot accept the guarantors’ argument that their liability under the guarantees is shared. RBC’s position is that the reference to guaranteeing payment “jointly and severally” applies when more than one person signs that particular guarantee but does not apply when a guarantee has only one “undersigned.” There is no ambiguity here. RBC’s interpretation, which I accept, is consistent with the other provisions of the guarantee.
[77] For the reasons I identified in paragraph 55 of this decision, I do not accept Mr. McHale’s evidence that his understanding and belief that his personal liability under the guarantee was joint and several with the other guarantors was based on information and representations provided by Mr. Bossy of RBC. If I had accepted that evidence, I would have found that, because of paragraph 13 of the guarantee, Mr. McHale was not entitled to rely on any representations that were not set out in the guarantee itself. Paragraph 13 provides that the guarantee covers all agreements between the parties and says that none of the parties shall be bound by “any representation or promise made by any person relative thereto which is not embodied herein.”
Conclusion with respect to Issue #2:
[78] The guarantees state that they are “in addition to and not in substitution for” each other.
[79] I find that the liability of the guarantors is discrete and not shared. For clarity, Ms. MacDonald’s guarantee is in the amount of $300,000.00, Mr. McHale’s guarantee is in the amount of $600,000.00, Ms. McHale’s guarantee is in the amount of $600,000.00 and 1643937’s guarantee is in the amount of $400,000.00.
[80] This is the effect of the guarantors having signed separate guarantees and is set out in clear terms in paragraph 9 of their guarantees.
ISSUE #3: If the guarantees are enforceable, is a further hearing required to determine OVG’s indebtedness to RBC?
[81] The guarantors argue that if the guarantees are found to be enforceable, a further hearing is required to determine OVG’s indebtedness to RBC, to ensure that its losses exceed the amount of the guarantees.
[82] I do not agree.
[83] Paragraph 10 of the guarantees provides that the guarantors shall be bound by any account settled between the Bank and the customer, and if no account has been settled “any account stated by the Bank shall be accepted by the undersigned and each of them as conclusive evidence of the amount which at the date of the account so stated is due by the customer to the Bank or remains unpaid by the customer to the Bank.”
[84] RBC’s evidence is that as of June 15, 2016, the indebtedness of OVG was $3,465,369.87. This total appeared in a statement which was an exhibit to the affidavit filed by RBC. The deponent of the affidavit was not cross-examined.
[85] This amount is well in excess of $1,900,000.00, which is the total amount of the guarantees of Ms. MacDonald, Mr. McHale, Ms. McHale and 1643937.
ISSUE #4: Is there a genuine issue for trial in respect of the counterclaims of Mr. McHale and Ms. McHale?
[86] The counterclaims of Mr. McHale and Ms. McHale seek pecuniary damages of $7,219,131.00 and $6,119,131.00 respectively for “improvident realization on the assets of OVG triggering the bankruptcy of the company”. The counterclaims also seek $100,000.00 in general damages.
[87] The counterclaims incorporate the McHales’ statements of defence.
[88] The McHales plead that by triggering the insolvency and bankruptcy of OVG, RBC dissipated OVG assets worth $4,889,882.00. The McHales plead that they invested almost $2,000,000.00 into restructuring OVG which they were unable to recover because of the company’s bankruptcy. Mr. McHale also pleads that because of the bankruptcy of the company, he suffered damage to his business reputation, lost relationships with customers and suppliers and has found it impossible to establish a successor business due to an inability to obtain credit from suppliers.
[89] In the factum filed on behalf of the McHales and Ms. MacDonald, the McHales did not respond to RBC’s request for an order dismissing the counterclaims but RBC did not object to the McHales’ oral submissions in response to the issue.
[90] The McHales argued that although paragraph 1 of their guarantees, which states that “no loss of or in respect of any securities received by the Bank from the customer or others, whether occasioned by the fault of the Bank or otherwise, shall in any way limit or lessen the liability of the undersigned under this guarantee” may prevent them from raising improvident realization of assets on the part of RBC as a defence to their guarantees, it does not prevent them from asserting a claim against RBC on this basis.
Analysis
[91] For the following reasons, I have concluded that there is no genuine issue requiring a trial in respect of the McHales’ counterclaims.
[92] As I noted previously, the counterclaims are for “improvident realization on the assets of OVG triggering the bankruptcy of the company.”
[93] The McHales were shareholders and directors of OVG as well as being guarantors of OVG’s indebtedness to RBC. The McHales have no contractual relationship with RBC in respect of OVG, other than their guarantees. A bank owes no duty of care or fiduciary duty to a guarantor. (Bank of Nova Scotia v. 2156909 Ontario Inc., 2012 ONSC 2536 at para. 16.)
[94] A shareholder does not have a personal cause of action for a wrong to a company. (Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189 (Ch.) as cited in Toronto-Dominion Bank v. Schrage, 2009 CanLII 45444 (ON SC) at para. 62.) The rule in Foss v. Harbottle is a consequence of a corporation being a separate legal entity. The company is liable for its contracts and torts; the shareholder has no such liability. The company acquires causes of action for breaches of contract and for torts which damage the company. No cause of action vests in the shareholder: Prudential Assurance Co. v. Newman Industries Ltd. (No. 2), [1982] 1 All E.R. 354, at p. 367 as cited in Hercules Management Ltd. v. Ernst & Young, 1997 CanLII 345 (SCC), [1997] 2 S.C.R. 165 at pp. 211-12.
[95] The rule in Foss v. Harbottle does not preclude an individual shareholder from maintaining a claim for harm done to the shareholder directly. Where a separate and distinct claim, in tort, for example, can be raised with respect to a wrong done to a shareholder in its personal capacity, as distinct from its capacity as a shareholder, a personal action may well lie, assuming that all of the requisite elements of a cause of action can be made out: Hercules Management Ltd. at p. 214.
[96] While the McHales clearly plead that they have suffered damages in their personal capacity, they do not plead any cause of action other than an improvident realization of OVG’s assets that triggered the company’s bankruptcy, an alleged wrong to the company that they have no capacity to assert.
[97] I conclude that the McHales’ counterclaims disclose no cause of action and, as a consequence, raise no genuine issue requiring a trial.
[98] For these reasons, the counterclaims shall be dismissed.
ISSUE #5: Should certain paragraphs of the statements of defence and counterclaim of Mr. McHale, Ms. McHale and 1643937 be struck on the basis that the allegations will prejudice or delay a fair trial in this action, are scandalous, frivolous and vexatious and are an abuse of the process of the court?
[99] As I have found that the guarantees are enforceable and that the counterclaims are to be dismissed, it is not necessary to deal with Issue #5.
Conclusion
[100] To summarize:
I find that there is no genuine issue requiring a trial in respect of the validity and enforceability of the guarantees.
I find that the guarantees are valid and enforceable.
RBC’s summary judgment motion is granted; the summary judgment motion of the three guarantors is dismissed.
RBC shall have judgement against Ms. MacDonald in the amount of $300,000.00, Mr. McHale in the amount of $600,000.00, Ms. McHale in the amount of $600,000.00 and 1643937 in the amount of $400,000.00.
Prejudgment interest shall be in accordance with RBC’s amended notice of motion.
I exercise my discretion and award post-judgment interest in accordance with the Courts of Justice Act.
The McHales’ counterclaims shall be dismissed.
Costs
[101] The parties exchanged and filed bills of costs.
[102] If the parties cannot agree on the costs of these motions,
• RBC may deliver written costs submissions of no more than five pages in length within 14 days of the date of this decision;
• The guarantors may deliver written submissions in response of no more than five pages in length within 14 days of the date of receipt of RBC’s submissions;
• RBC may deliver any reply submissions of no more than three pages in length within seven days of the date of receipt of the guarantors’ submissions.
[103] In deciding the issue of costs, I will consider the bills of costs filed by the parties as well as any further written submissions.
[104] The costs submissions shall be filed by sending them to the trial coordinator.
Date: September 16, 2019
Madam Justice H. J. Williams
COURT FILE NO.: 15-62995
DATE: 2019/09/16
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Royal Bank of Canada
Plaintiff/Respondent
– and –
1643937 Ontario Inc., Lorraine MacDonald, Shawn McHale, Patrick McHale, and Beverly McHale
Defendants/Moving Parties
BEFORE: Madam Justice H.J. Williams
COUNSEL:
J. Ross MacFarlane, Counsel for the Plaintiff
Justin R. Fogarty, Counsel for the Defendant/Moving Parties Patrick McHale and Beverly McHale
Jason Dutrizac, Counsel for the Defendant/Moving Party Lorraine MacDonald
REASONS FOR DECISION
Madam Justice H. J. Williams
Released: September 16, 2019
[^1]: The defendant Shawn McHale did not defend the action; the action is stayed against him because of a proposal in bankruptcy. The defendant corporation, 1643937, defended the action but did not respond to RBC’s motion. The defendants Lorraine MacDonald, Patrick McHale and Beverly McHale responded to the motion and were represented at the hearing.