Although the Court didn't break much new legal ground in The Bank of Nova Scotia v. Renatoneil Consultants Ltd., Justice Petersen reminded lawyers about some critical best practices when enforcing guarantees.
The Motion before the Court was brought by the Plaintiff, the Bank of Nova Scotia (the "Bank") for summary judgment against the Defendant Lois Virgo ("Virgo") for payment of $12,087.05 plus interest since April of 2009. The money related to a loan that the Defendant's ex-husband ("Renatoneil") had received from the Bank which was guaranteed by Virgo (the "Guarantee").
In early 2005, Renatoneil was in discussion with the Bank to receive a $72,000 loan. According to Virgo, as part of the loan, Renatoneil told Virgo that the Bank required her signature on a couple of documents because she was his spouse. Virgo, who was in Jamaica at the time, had a Jamaican lawyer review the guarantee and provide a certificate of independent legal advice.
By September of 2008, Virgo and Renatoneil's marriage broke down, and in January of 2009, Renatoneil defaulted on his monthly payments to the bank.
On April 9, 2009 counsel for the Bank wrote to Virgo demanding full payment of the guaranteed amount, but addressed it to Renatoneil's corporate address. Since Virgo and Renatoneil had little contact after their divorce, she never received the notice.
After receiving no payment from Virgo, the Bank commenced an action. Virgo did not file a Statement of Defence. The Bank obatined default judgment and a writ of execution. On May 8, 2014 Virgo entered into an agreement of purchase and sale for a home, and discovered the Writ of Execution.
Virgo successfully brought a motion to set aside the default judgment, and subsequently filed a defence. Virgo argued that the Guarantee was not given voluntarily, free from duress, or with the benefit of independent legal advice.
The issues before the Court were:
- Was the Guarantee given voluntarily, free from duress and with the benefit of independent legal advice?; and
- If the Guarantee was enforceable, when did interest begin accruing – April of 2009 when Scotiabank wrote to Virgo, or when Virgo discovered the Bank's claim?
The Court found that in the circumstances of this case, Virgo received independent legal advice, and there was no undue influence. While on the facts, the Court found that relationship between Virgo and Renatoneil was not one that would give rise to a presumption of undue influence, even if it was, the Court held that the presumption of undue influence was rebutted by the existence of independent legal advice.
Although the Court sounded a cautionary note about legal advice from foreign jurisdictions, there was no evidence before the Court that the legal advice provided by Virgo's Jamaican lawyer was deficient. As a result, the Bank was entitled to judgment on the motion.
While the Bank was successful regarding the enforceability of the Guarantee, the Court found that the interest period began in June of 2014 rather than April of 2009. This was because the Bank did not serve Virgo personally with a demand for payment.
According to the Guarantee, Virgo's liability bore interest from the date of the Bank's written demand for payment when the envelope was delivered to the last known address of Ms. Virgo. Since there was no evidence that Renatoneil's corporate address was the last known address of Ms. Virgo, interest did not begin to accrue when the Bank's lawyer sent the letter.
Additionally, the Court held that interest did not begin to accrue on the guaranteed amount when the Statement of Claim was filed since the Bank did not personally serve Virgo with the Statement of Claim as required under the Rules of Civil Procedure. As a result, the Court awarded interest beginning in June of 2014.