Call us: (905) 366 9700

Legal Blog


Posted on October 6, 2014 | Posted in Collections

We have repeatedly stressed that lawsuits should really be called “factsuits” because, usually, the proven facts are far more important than the law. A debtor may allege all sorts of facts that, if proven, would result in a successful defence to a creditor’s claim for payment, the key words being “if proven.” In Meridian Credit Union Limited v. Vrankovic, a 2013 Ontario Superior Court of Justice decision, the debtors were given a concrete example of our thesis.


Husband and wife guaranteed a loan from creditor to husband’s corporation. The corporation defaulted and a court-appointed receiver realised some of the security that the corporation had posted in addition to the two guarantees. Without waiting for the receiver to realise on all of the security, the creditor commenced an action against husband and wife on their guarantees.

Husband claimed that creditor had no right to sue husband because the security had not been fully realised; he also claimed that the receiver had sold some of the secured assets for an undervalued amount. These were his only defences. The judge dealt with them succinctly. The loan agreement gave creditor the right to move on guarantees before realising on its other security. Further, it was the court-appointed receiver, not the creditor, who was realising on the security. Husband might complain to the court about the receiver’s conduct, but that was not a defence to creditor’s action.

Kitchen Sink


Wife had four defences to creditor’s claim. The first three were so silly as to almost merit no response; regardless, the judge still had to give reasons for her refusal to give effect to them. These defences, and the judge’s rulings on them, follow.

1. Husband exerted undue influence over wife.
– There was no evidence of undue influence. There was nothing to suggest that husband “bullied, coerced, or forced her to sign the documents.” It was wife who chose to rely on husband and failed to ask any questions about the documents. Creditor was entitled to presume, in the absence of any evidence to the contrary, that there was no undue influence.

2. Husband was an agent for creditor in having the guarantees signed. Husband failed to explain the consequences of wife signing the guarantee, for example the loss of her house. Therefore husband made an innocent misrepresentation that bound creditor.
– Creditor did not give husband the documents and tell him to get wife’s signature. Creditor merely accepted the security and the guarantees proposed by the corporation. The corporation had its own lawyer, who completed the security on behalf of the corporation. Husband was not the agent of creditor.

3. Wife had no financial interest in the corporation and was not a director or officer of it. Therefore it would be unfair and unconscionable to permit creditor to rely on the guarantees.
– Merely signing a guarantee does not mean that the guarantee is unconscionable. Wife owned a $3 million house, although she had never been employed other than for menial labour 30 years previously. Wife was instructed on cross-examination not to explain how she purchased that house. She also owned a house in Florida. Although she may not have been an officer, director, or shareholder of the corporation, she did very well financially because of it. The guarantee was not unconscionable.

Non Est Factum

For her 4th and final defence, wife alleged she did not understand the documents she signed. They were signed in the office of the corporation’s lawyer and were never explained to her. She did not speak or read English and she was not given independent legal advice. This is the non est factum defence. This defence was more problematic to creditor. If everything that wife alleged were true, this could be a classic case in which the guarantee would be set aside.

However, the judge did not buy one thing that wife alleged. The judge found it “incredible” that “with five children raised in Canada and almost 40 years being a resident (of Canada), let alone from interacting with 15 grandchildren, that she speaks little English.” She found it “incredible” that wife, who was served with the “statement of claim from a process server who has to access her home from a gated entrance, made no enquiry about the document.” She found it “incredible” that the corporation’s lawyer would not know that wife did not speak or read English and would fail to explain the documents to her or arrange for a translator. She found it “unbelievable” (the judge used a different synonym) that wife did not know anything about the litigation until, as alleged, April 2013, even though her lawyer filed her statement of defence in 2011. The judge concluded that wife was wilfully blind.

Accordingly, the judge held that the guarantees were valid against husband and wife and granted judgment accordingly. Wife had one great defence on paper – were it not for the fact that the judge did not believe a word she said.


Judges accept or reject a witness’ testimony by asking themselves two questions. Is the witness credible (i.e. is the witness telling the truth as the witness recalls it)? If the witness is credible, is the testimony reliable (i.e. is the witness able to make an accurate observation or recall or describe the events properly)?

Judges often review factors that would indicate that a witness’ testimony may be unreliable or untruthful. For example, they may note that the witness’ evidence conflicts with another document, contradicts what the witness previously said, or demonstrates favouritism or bias. They may then say: “when this witness’ testimony differs from other testimony, the other testimony is preferred.” Judges usually refrain from commenting on credibility directly – although the judge in this case was uncommonly forthright.

Occasionally a witness’ lies are just so obvious that a judge has to comment in a more forceful manner. In Wilson v. Semon, a 2014 Ontario Superior Court of Justice decision, the judge could not restrain himself. He said,

“If it was not clear before (which I believe it was), it can now be stated beyond any doubt that Ms. Semon is a liar. She has misled counsel for the Applicant throughout this process about where her money is and where and to whom she has sent it. She has also misled the court, and has demonstrated that her previous apologies to the court for her actions were altogether hollow.”

The judge then went on to describe in graphic detail all the instances in which the debtor lied in her examinations. One of the reasons why she lied, she said, was because she did not want to jeopardise other business opportunities by telling the truth. In other words, the court noted, she did it for the money.


The judge, who had already imprisoned the debtor for 30 days for contempt of court, would have been more than happy to throw the debtor back into jail, but he was concerned that this would be of little assistance to the creditor. The judge asked the creditor’s lawyer what he wanted. The lawyer replied that he “wants one full, honest, and fair examination of (the debtor).”

The judge therefore ordered, as suggested, that the debtor attend for examination in aid of execution to be held before a Master of the Superior Court. Normally, these examinations are simply held in a reporter’s office. The judge hoped, perhaps vainly, that the presence of a judicial officer during the examination might have some small impact on the debtor’s attitude towards the truth.

Image courtesy of Flikr, Creative Commons.


Jonathan Speigel


Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.


Download our free checklist:

“10 Questions to ask before hiring a law firm”


Speigel Nichols Fox LLP