The recent Court of Appeal decision, Bank of Montreal v. Utility Engineers Corporation et al., 2025 ONCA 311 ("Utility Engineers"), serves as a good reminder that it is difficult, if not impossible, to escape a personal guarantee by claiming that you did not know what you were signing.
In this case, the bank had provide a credit facility to a company that was secured by personal guarantees given by an officer of the company and his mother. When the company defaulted, the bank sued the company for breach of the loan agreement, and sued the mother and son on their personal guarantees. The mother's defence (among other things) was that the bank was obliged to explain the loan documents to her, and that she did not know that she was signing a personal guarantee (known as a defence of non est factum – "not my act"). The bank succeeded on a summary judgment motion in its claim for the company's debt against the mother, and the mother appealed.
The Court of Appeal has previously explained that non est factum is available to someone who, as a result of misrepresentation, has signed a document mistaken as to its nature and character and who has not been careless in doing so.1 As Utility Engineers makes clear, this is a difficult test to satisfy.
The mother argued that she was an immigrant with limited proficiency in English, and had spent most of her life as a stay-at-home mother. She asserted that she did not read the personal guarantee document and did not understand its significance. The Court of Appeal dismissed her appeal, noting that she was a real estate agent, who regularly dealt with standard forms and agreements relating to the purchase and sale of property. The Court of Appeal agreed with the motion judge that she ought to have known the document was a guarantee, and that if she did not read it or seek legal advice about it, that was her failure.
It will be a rare case when someone who does not take the time to read a personal guarantee document carefully, or ask someone for help if they can't, will be excused from liability. Even for people with limited ability to read the language of the contract, it will be difficult to convince a court that they were not being careless in signing something they do not understand.
Footnote
1. Bulut v. Carter, 2014 ONCA 424 at para. 18
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