Canada: Important Changes Coming To Alberta’s Guarantees Acknowledgment Act

Long-awaited changes to Alberta's Guarantees Acknowledgment Act1 ("GAA") will come into effect on April 30, 2015.2 These changes will have a significant effect on the practice of providing personal guarantees in Alberta.

Current Requirements for a Personal Guarantee under the GAA

The GAA is a reasonably simple piece of depression-era legislation and is regarded as one of the first pieces of consumer protection legislation in Canada.

As presently drafted, a person giving a guarantee must appear before a notary public and acknowledge giving the guarantee. The notary public must satisfy himself or herself that the person signing the guarantee is aware of the contents of the guarantee and understands it. The notary must then sign a certificate (in the prescribed form) to that effect.

Failure to strictly comply with the requirements of the GAA result in the guarantee being unenforceable. The courts do not have jurisdiction to waive non-compliance with the GAA, or to apply the rules of equity, even where the result may seem to be absurd (including a recent case where the guarantor herself was a lawyer and drafted the guarantee):

The Act clearly expresses obligations that must be complied with as a matter of public policy and as a pre-requisite to enforceability of a guarantee by an individual in Alberta. The performance of those obligations cannot be waived or estopped regardless of the individual guarantor's actual knowledge of the obligations undertaken in the guarantee. The fact that the [guarantor] in this circumstances is a lawyer does not exempt compliance with the Act.3

The GAA applies to guarantees given under Alberta law by natural persons. It does not apply to guarantees given by corporations.

Currently, the fee that may be charged by a notary for providing a certificate under the GAA must not exceed $5.

Changes to Who Can Issue a GAA Certificate

Recent changes to the GAA will fundamentally change the practice of obtaining a personal guarantee and GAA certificate.

First, and most significantly, GAA certificates in the prescribed form may only be executed by an active lawyer.

"Lawyer" is defined in the GAA as either (i) for acknowledgements made in Alberta, an active member of the Law Society of Alberta (other than a suspended or honorary member), or (ii) for acknowledgments made outside Alberta, a lawyer entitled to practice law in that jurisdiction."

This is a significant change to current law and practice. Any person who is a notary public but who is not also an active lawyer must no longer give certificates under the GAA.

The change will primarily affect articling students (who are also notaries public in Alberta and many jurisdictions) as well as persons such as paralegals or landmen who have been appointed as notaries.4 Lawyers who hold status with the Alberta Law Society other than "active" are also excluded.5

Second, the cap on fees ($5) has been removed.

The changes come into effect on April 30, 2015. Accordingly, Alberta lawyers should ensure that, as a regular part of other commercial practices, certificates under the GAA only be signed by lawyers who are active members of the Law Society, and not by inactive members, articling students or other notaries. Where an Alberta guarantee is to be signed in another jurisdiction, care will have to be taken to ensure that the person giving the certificate is entitled to practice in that jurisdiction.

Legislative History

The legislative history of these changes is somewhat complicated. In 2013, the Legislature passed the new Notaries and Commissioners Act.6 That Act included consequential amendments7 which significantly amended the GAA. The 2013 Notaries and Commissioners Act received Royal Assent in 2013 but has remained unproclaimed, until March 2015, when a proclamation date of April 30, 2015 was announced8.

The Notaries and Commissioners Act was amended after it received royal assent but while it remained unproclaimed. The first version of the Act, as passed, would have required, in addition to all the changes discussed above, that the lawyer giving the certificate not be employed by or represent anyone who would benefit from the guarantee. This would have meant, for example, that a shareholder giving a guarantee on behalf of his or her corporation could not appear before a lawyer who also represents that corporation.

This requirement for independence was removed from the unproclaimed Notaries and Commissioners Act by the Justice Statutes Amendment Act9, passed by the legislature and proclaimed in the fall of 2014.

Accordingly, while it may continue to be good practice for the avoidance of conflicts to seek an independent lawyer to provide a certificate under the GAA, it will not be a legislative requirement (on pain of unenforceability) to do so.

Footnotes

1. RSA 2000, c G-11.

2. For a more comprehensive outline of the legislative change, see below.

3. Bharwani v. Chengkalath, 2008 ABCA 148.

4. Commissioners for Oaths have never been authorized to sign certificates under the GAA.

5. The Legal Profession Act, RSA 2000, c L-8 defines "Active Member" as a member other than an inactive member or a member whose membership is under suspension. It is interesting that the revised GAA chose to specifically mention suspended members as members not acknowledged under the GAA, as those members are (by the definitions in the Legal Profession Act) not active members.

6. SA 2013, c N-5.5.

7. Ibid s. 31.

8. OC 67/2015, (Notaries and Commissioners Act).

9. SA 2014, c 13.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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