Bank of Nova Scotia v., 2012 NSSC 269

SUPREME COURT OF NOVA SCOTIA Citation: Bank of Nova Scotia v. 985810 Ontario Limited, 2012 NSSC 269 Date: 20120718 Docket: Hfx. No. 356479 Registry: Halifax Between: The Bank of Nova Scotia Plaintiff v. 985810 Ontario Limited, Tracey Eleanor Jackson, Fabrizio Fronzi Defendants Judge: The Honourable Justice Peter P. Rosinski Heard: July 5, 2012, in Halifax, Nova Scotia Counsel: Ian R. Dunbar, for the Plaintiff Defendants un-represented, not present in Court, By the Court : [ 1 ] The Bank of Nova Scotia [ “ Scotia Bank ” ] has made a Motion for

Summary Judgment on evidence pursuant to Civil Procedure Rule 13.04 as against Fabrizio Fronzi. [ 2 ] Mr. Fronzi is represented by Lisa Wight of Metcalf and Company. By letters dated July 4 and 5, 2012, she advised the Court that Mr. Fronzi did not intend to provide written submissions nor did she intend to appear at the Motion. [ 3 ] Therefore I am satisfied that Mr. Fronzi has been served and with the benefit of legal advice, determined that he does not wish to make submissions, present evidence or appear. I will proceed in his absence. [ 4 ] As evidence I have before me affidavit of Alex Harris, sworn May 23, 2012. His affidavit provides evidence of the following facts:

1. On November 24, 2008, Scotia Bank provided a term loan to 985810 Ontario Limited [the company] and a line of credit with a limit of $70,000. The term loan had a floating interest rate whereas the line of credit had a rate of prime + 2%. [ 5 ] Mr. Fronzi and Tracey Eleanor Jackson both signed personal guarantees regarding the term loan and credit line .

Their guarantees were limited to $31,900.50 plus interest and costs regarding the term loan and $70,000 plus interest costs regarding the credit line. [ 6 ] Both agreements incorporate the Scotia Bank “ business banking services agreement ” [the BSA], Clause 13 of which reads in part: Guarantee and obligations of the guarantor Each guarantor agrees to be bound by the following terms of guarantee: The guarantee is a continuing guarantee...

We are entitled to demand payment from a guarantor even if we have not tried to get payment from the business customer, any other person, any other security or any other guarantee or guarantor... We do not need to demand or get payment from all guarantor’s, we can demand and get the whole payment from any guarantor or guarantors we choose [this is often called joint and several liability...] ... The guarantor must pay us immediately after we demand payment and the guarantors liability to make payment arises forthwith after such demand...

We are not required to marshall property, which is the act of realizing security in a certain order. The guarantor’s liability includes the liability to pay any interest the customer has not paid, and interest from the date of demand. The interest is charged at the applicable rate in the agreement. The guarantor must also pay all of the costs and expenses we incur to get the money the customer owes us, including any costs and expenses of collecting from the guarantor including without limitation legal fees on a solicitor and his/her own client basis.” [ 7 ] Mr.

Fronzi and Jackson both signed the term loan agreement as guarantors which included: Personal guarantees By signing this credit agreement, the guarantor agrees to be bound by this agreement and the credit agreement

section of the business banking services agreement, and is responsible for the repayment of the customer’s obligations to the Bank, to the amount noted below. The guarantor also acknowledges having received and read the business banking services agreement, in particular , the

section of the credit agreement which outlines the guarantor’s obligations. [ 8 ] The company made its last payment on the term loan on June 24, 2011, and it thereby defaulted on its obligations under the term loan. On July 27, 2011 the Bank requested that the company immediately pay both the term loan and the balance outstanding on the credit line. No payments have been received in response to this demand. The Bank also requested payment on the personal guarantees signed by Mr. Fronzi and Jackson. No payment has been received on either of those guarantees.

As of May 14, 2012, the term loan of the company had outstanding principal balance of $110,366.56, and the credit line had an outstanding principal balance of $73,217.37. These amounts continue to accrue per diem interest charges, $16.63 + $10.03 per day. [ 9 ] It also appears form the materials on file that on December 14, 2011 a Default Order of Judgment, Bill of Costs, and Execution Order issued against the company in the amount of $180,664.30.

[ 10 ] In response to the Notice of Action for debt as against the company, Tracey Jackson and Mr. Fronzi, filed September 29, 2011, Mr. Fronzi filed his Defence on December 5, 2011. Tracey Jackson has not filed a defence after she was served with the Notice of Action and the corresponding period to file a defence lapsed. Therefore she is disentitled to further notice pursuant to CPR 31.12(1). [ 11 ] In the Defence filed on his behalf by Lisa Wight, Mr. Fronzi admits paras. 9 and 10 of the Statement of Claim which state: 9. On November 24, 2008, Ms. Jackson and Mr.

Fronzi each executed guarantees pursuant to which they promised to make payment on demand of all debts and liabilities owed by the company to the Plaintiff pursuant to the first agreement to a maximum principal amount of $31,900.50 plus interest and costs. 10. On November 24, 2008, Ms. Jackson and Mr. Fronzi executed separate guarantees pursuant to which they promised to make payment on demand of all debts and liabilities owed by the company to the Plaintiff pursuant to the second agreement to a maximum principal amount of $70,000 plus interest and costs. [ 12 ] In his Defence, Mr.

Fronzi states (my paraphrasing): 7 He has no knowledge of the amount owed by the company and puts the Plaintiff to strict proof thereof. 8 Regarding paras. 9, 10 and 16 in the Statement of Claim, he denies the amount alleged owing and puts the Plaintiff to strict proof thereof, and further states “that at no time at the signing of either guarantee did an employee at the Plaintiff explain to him the guarantees were “joint and several”, what this meant, or that the Plaintiff could pursue only one guarantor for the full amount”. 9 Regarding the term loan, Plaintiff has secured equipment and goods and the conditions of that agreement stipulate that the Plaintiff was authorized on default of that agreement by the company to sell the equipment and goods given as security for the loan but is not done so - as such Mr.

Fronzi has no knowledge of the amount owing by the company, and therefore no knowledge of what amount could be owing by him or Ms. Jackson pursuant to any personal guarantee. 10 Neither the company nor Ms. Jackson have been properly served with the Statement of Claim. [ 13 ] I note on file an Affidavit of Service filed December 14, 2011, showing that the company was served on October 31, 2011. The applicable law [ 14 ] Civil Procedure Rule 13.04 has been interpreted by our Court of Appeal recently in Bank of Nova Scotia v. A. Mackenzie ’ s Auto Mart Inc. 2010 NSCA 81 ; Dalhousie University v.

Aylward 2011 NSCA 20 ; and 2420188 Nova Scotia Ltd. v. Hiltz 2011 NSCA 74 . [ 15 ] The upshot of these decisions is that the Plaintiff must show in this case that there is no dispute of material facts, at which point the Defendant must show that its defence has a real chance of success. The Plaintiff has clearly established that Mr. Fronzi is liable under the guarantee for $31,900.50 plus interest and costs regarding the term loan and $70,000 regarding the line of credit of the company. [ 16 ] The question then becomes does the defence of Mr.

Fronzi have a real prospect of success in preventing the Bank from realizing on his personal guarantee?

[17] Scotia Bank argues in relation to his various defence arguments in the Statement of Defence [my paraphrasing]: 7. In the Bank’s letter of July 27, 2011 wherein it demanded payment from him of the total indebtedness owing to the Bank at thattime, his maximum obligation was noted to be $31,900.50 plus interest and costs, and $70,401.13 plus interest and costs arising from theterm loan and credit line respectively. 8.

There is no evidence in support of his pleadings that he did not subjectively understand that the guarantees were “joint andseveral” and that that meant the Bank could pursue only one guarantor for the debt outstanding amount. Moreover, the plain wording ofthe guarantee and other documents here objectively on the evidence confirmed that Mr. Fronzi acknowledges having received and readthe banking services agreement, and in particular the

section of the credit agreement which outlines the guarantor’s obligations. Withinthose documents are also contained the words: “we are entitled to demand payment from a guarantor even if we have not tried to getpayment from the business customer, any other person, any other security, or any other guarantee or guarantor... we do not need todemand or get payment from all guarantors. We can demand and get the whole payment from any guarantor or guarantors we choose[this is often called joint and several liability...]”.

See also the Supreme Court of Canada’s comments in Manulife Bank of Canada v.Conlon (SCC), [1996] 3 SCR 415 at paragraph 79 and in Eli Lilly and Co. v. Novopharm Ltd. (SCC),[1998] 2 SCR 129 at paragraph 56. 9. Although the Plaintiff had security for the company’s debt obligation as specifically stated in the credit

section of the BankingServices Agreement, the Bank is not obliged to rely on any security before demanding payment on a guarantee: the Bank is “not requiredto marshall property, which is the act of realizing security in a certain order”. 10. Not only was the company served, the default judgment was entered against it on December 14, 2011 and thus the amount owingby it is not disputed. Ms. Jackson by not filing a defence is further disentitled to notice, and the Banking Services Agreementspecifically indicates that the Bank is not required to rely on her guarantee prior to Mr. Fronzi’s guarantee in any event.

Conclusion [18] The Bank here has shown that there are no material facts in dispute. Thus I move on to stage two of the analysis in thisSummary Judgment Motion on evidence. Examining the Defence of Mr. Fronzi in this case, I conclude it has no reasonable chance ofsuccess. [19] The Plaintiff's Motion for

Summary Judgment is granted in the amount of $70,000 + $31,900.50 = $101,900.50 + interest for atotal of $111,044.88. Costs are awarded payable forthwith in favour of the Bank pursuant to CPR 77 in the amount of $1000. J.