A Sigh Of Relief: Ontario Guarantees Enforceable In Accordance With Their Terms

In the recent case of Royal Bank of Canada v Samson Management & Solutions Ltd., 2013 ONCA 313, the Ontario Court of Appeal overturned a trial-level decision which held that a continuing guarantee was unenforceable where the guarantor had not consented to material changes to the underlying loan agreement. Now that the Supreme Court of Canada has dismissed a motion for leave to appeal, lenders can take some comfort that the clear language of a standard form guarantee will continue to be enforceable in accordance with its terms.

Facts

In 2005, Royal Bank of Canada made a small business loan of $150,000 to Samson Management and Solutions Ltd. The loan was supported by a general security agreement from Samson and personal guarantees from its principal and his spouse, Cheryl Cusack. It was Cusack's spousal guarantee that was the subject of the litigation.

The initial 2005 guarantee from Cusack was for $150,000, and in respect of all present and future liabilities of Samson. The guarantee was not tied to any specific loan...