In a recent edition of Fully Secured (June 26, 2013 – Volume 4, No. 2), we reported on the Ontario Court of Appeal's decision inin Samson1 and its impact on the enforceability of standard form guarantees. In Samson, the Court of Appeal overturned the earlier decision of the Ontario Superior Court of Justice which held that a continuing guarantee of a borrower's present and future debt was unenforceable on the basis that the guarantor had not consented to material changes to the underlying loan agreement. In summarizing its conclusions, the Court of Appeal determined that while the increased loan advances made by the lender to the borrower were material alterations to the principal loan agreement, they were also contemplated by the parties, permitted by the clear language of the guarantee, and inherent in a continuing all accounts guarantee that contemplates increases in the size of the underlying indebtedness.
The Guarantor applied for leave to appeal the Court of Appeal's decision, and that application was dismissed by the Supreme Court of Canada on November 14, 2013. Lenders can take comfort that the clear language of a standard form guarantee continues to be enforceable in accordance with its specific terms in circumstances similar to those present in Samson.
Footnotes
1 Royal Bank of Canada v. Samson Management & Solutions Ltd., 2013 ONCA 313 [Samson].
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