Executive Summary: Key Legal and Evidentiary Issues

• O3 Industries' liability under a corporate guarantee was upheld, subject to defences raised.

• The court enforced issue estoppel, barring re-litigation of an “equipment defence” already dismissed in arbitration.

• The Dalton Project accounts receivable issue raised a triable question regarding potential misrepresentation.

• Attempt to avoid liability based on guarantee wording and “see to it” arguments was rejected.

• The court declined to require arbitration of Antamex’s liability before enforcing the guarantee against O3.

• Summary judgment was granted in part, but trial is required on the Dalton Project misrepresentation claim.

Facts and background of the dispute

Oldcastle BuildingEnvelope Canada, Inc. (later renamed Oldcastle Building Products Canada, Inc.) sold its curtain wall manufacturing business to Antamex Industries ULC in December 2018. The sale was governed by an asset purchase agreement, and Antamex was to pay $6 million in two $3 million instalments. O3 Industries LLC, the parent company of Antamex, provided a guarantee of Antamex’s obligations under the agreement.

The transaction closed in December 2018, and Antamex paid the first $3 million instalment in January 2021. However, it failed to make the second payment due in January 2022. In response, Oldcastle initiated legal proceedings in Ontario for payment under the guarantee from O3.

In its defence, O3 argued that the guarantee was either void or unenforceable due to alleged breaches by Oldcastle, including issues with the condition of the equipment and facility (the “equipment defence”), and failure to transfer certain accounts receivable relating to a project called One Dalton Place (the “Dalton Project defence”). O3 also claimed that Oldcastle needed to establish Antamex’s liability through arbitration before enforcing the guarantee.

The arbitration proceedings and estoppel finding

Prior to the litigation, O3 and Antamex had initiated arbitration proceedings against Oldcastle in the United States, governed by Ontario law. The arbitration decision, released in July 2023, dismissed all of Antamex and O3’s claims, including those relating to equipment defects and missing permits. The arbitrator found that O3 and Antamex had conducted extensive due diligence and that Oldcastle had not breached the agreement.

The Ontario court applied the doctrine of issue estoppel to bar O3 from re-litigating the equipment defence. Since the issue was already decided in arbitration, with the same parties and legal representation, the court held that it could not be raised again in the current proceedings.

The guarantee and enforceability arguments

The court found that the language of the guarantee was clear and binding. O3 had agreed to guarantee “the due and punctual performance” by Antamex, “including without limitation, the due and punctual payment of the Purchase Price.” The court rejected O3’s argument that the guarantee was merely a “see to it” guarantee, which would have imposed only secondary liability.

O3 had attempted to rely on prior drafts of the guarantee to argue that its liability was limited, but the court enforced the agreement’s entire agreement clause and declined to consider extrinsic evidence. It emphasized that the written language of the contract was unambiguous and sufficient to determine the parties' intentions.

The argument that Oldcastle was required to establish Antamex’s liability through arbitration before enforcing the guarantee was also dismissed. The court held that there was no need for a separate arbitration process, as Antamex’s default was uncontested and established in the record.

The Dalton Project issue

The court did, however, find that one issue raised by O3 required a full trial. O3 alleged that Oldcastle had either misrepresented or failed to transfer accounts receivable relating to the Dalton Project, which were significant in value.

Although the original Dalton Project contract had been excluded from the asset purchase agreement by amendment, there was ambiguity as to whether the related accounts receivable were also excluded. The agreement treated receivables and contracts as separate asset categories. The Dalton Project receivables were not specifically listed as excluded in the relevant schedule. Additionally, Oldcastle had provided Antamex with financial documents showing the Dalton Project receivables as part of the business’s assets.

O3 also submitted uncontroverted evidence that it would not have guaranteed Antamex’s obligations if it had known that Oldcastle USA, and not Oldcastle, was the party entitled to those receivables. The court held that these issues raised genuine questions requiring trial on whether the guarantee should be void due to misrepresentation.

However, the court rejected O3’s claim for a set-off in relation to the Dalton Project, finding that any damages arising from the alleged breach belonged to Antamex, not to O3 as the guarantor.

Outcome of the motion

The Ontario Superior Court of Justice granted summary judgment in part. It ruled that O3 was bound by the guarantee and had breached its payment obligation, and it dismissed the equipment defence and procedural arguments raised by O3. However, it allowed the Dalton Project misrepresentation claim to proceed to trial, as it raised a genuine issue requiring further evidence and credibility assessments.

The court ordered that each party bear its own costs, given the divided outcome.