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Cassels Brock Successful on Appeal in Overturning Trial Decision Based on an Unwritten Guarantee

Published: 08/28/2017

Team: Christopher Horkins

In Ontario, a personal guarantee must be in writing to be enforceable. The Divisional Court recently granted an appeal by Cassels Brock clients, Verick International Inc. and its individual director, based on this principle, overturning a decision holding the individual director personally liable for the debts of his bankrupt company, Handy Home Products Inc.

The plaintiff, Costa Printing Limited, a printing company, brought a claim in the Small Claims Court for outstanding amounts under two invoices for printing services with Handy. Although the claim against Handy was stayed, Costa opted to pursue the claim against the individual director personally and his other unrelated business, Verick. Following a trial in the Small Claims Court, the presiding judge dismissed the claim against Verick finding there were no grounds to pierce the corporate veil between the two affiliated corporations. However, the trial judge accepted the plaintiff’s evidence at trial that the individual director provided a personal guarantee for all work done for his companies, including the two invoices at issue. On appeal, Justice Lemon of the Divisional Court held that the trial judge erred in law in finding the individual director liable on the basis of an oral personal guarantee since, even if that agreement had been made, it would be unenforceable pursuant to Ontario’s Statute of Frauds which states that such contracts must be in writing. The Divisional Court granted the appeal, dismissing all claims against Verick and the individual director and awarded costs in their favour.

The defendants were represented by Chris Horkins at trial and on the appeal to the Divisional Court. A copy of the decision is available here.