Executive Summary: Key Legal and Evidentiary Issues

• Whether the default judgment obtained by BDC against Troy Brake should be set aside under Rule 19.08(1) of Ontario's Rules of Civil Procedure.
• Application of the factors from Franchetti v. Huggins, 2022 ONCA 111 and Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, including promptness, explanation for the default, and an arguable defence on the merits.
• Mr. Brake provided no proper explanation for his failure to deliver a defence within the required time or for the delays in bringing his motion.
• Enforceability of unlimited personal guarantees against a signatory who was a 25% shareholder and President, but not a director, of the borrower.
• Absence of evidence supporting Mr. Brake's allegations that BDC's representative assured him he would not be personally liable, with documentary evidence in the record to the opposite.
• Whether the balance of prejudice, which favoured Mr. Brake, could outweigh the lack of an arguable defence with an "air of reality."

Facts of the case

Business Development Bank of Canada ("BDC") made two loans to Henderson Security Solutions Inc. (the "Borrower"): a first loan in the principal sum of $250,000.00 and a second loan in the principal sum of $29,238.75. The defendants, Douglas Henderson and Troy Brake, each signed unlimited personal guarantees of the Borrower's obligations for each loan, dated October 3, 2022, and May 24, 2023. The Borrower made an assignment in bankruptcy on November 1, 2024, which constituted an event of default under the loan agreements. BDC made a demand upon the defendants pursuant to their guarantees on April 21, 2025, and issued its statement of claim on June 6, 2025, claiming $289,994.72, plus interest and costs. Mr. Henderson made an assignment in bankruptcy on June 25, 2025, staying the proceedings against him. Mr. Brake was served with the statement of claim on June 11, 2025, but no defence was filed, and on August 20, 2025, BDC obtained default judgment against him, signed by the registrar. Mr. Brake contacted BDC's counsel on September 24, 2025, requesting that the judgment be set aside, retained counsel under an agreement he signed on December 2, 2025, and served his motion material on January 29, 2026, moving to set aside the default judgment.

Guarantee terms at issue

The terms of the guarantees were quite clear: the signatories personally, on a joint and several basis, unconditionally guaranteed payment to BDC of all amounts owing under the loans made to the Borrower, together with interest from the date of demand plus all legal and professional fees incurred by BDC in enforcing the guarantees. The guarantees also included a provision that the obligation to pay would not be reduced or discharged for any reason. Nothing in the guarantees or any other document in the record required a guarantor to be a director of the Borrower or stated that the guarantees were enforceable only against a director. Mr. Brake's proposed defence rested on assertions that he held only 25% of the shares and was not a director, that he expressed reservations before signing, that he signed only after assurances from Mr. Henderson and BDC's representative, Kevin Pryce, that he would not be personally liable, that Mr. Henderson confirmed he would be removed from personal obligations when he left the Borrower's employ in December 2023, and that he never had access to or control over the loaned funds.

The court's reasoning and analysis

Associate Justice Kriwetz applied the principles from Franchetti v. Huggins and Mountain View Farms Ltd. v. McQueen, which direct the court to consider the promptness of the motion, whether there is a plausible excuse for the default, whether the defendant has an arguable defence on the merits, the balance of prejudice, and the effect on the integrity of the administration of justice. On promptness and excuse, the court found no evidence that Mr. Brake followed up with the lawyer he initially contacted, no evidence explaining why a defence could not be served in time, and no proper explanation for the delays of more than a month before contacting BDC's counsel and more than three months before retaining counsel. On the merits, the court noted that Mr. Brake had not included a draft statement of defence, and found his proposed defences unpersuasive: he was the President and an authorised signing officer of the Borrower when the loans were made; there was no evidence the guarantees were amended or that BDC ever released him; Mr. Henderson's representations did not bind BDC; and there was no evidence supporting the alleged assurances from Mr. Pryce — indeed, e-mail correspondence dated August 5, 2022, included in BDC's responding materials, made it quite clear that by signing as a guarantor Mr. Brake would assume personal liability upon default. The court also held that his lack of access to or control over the funds, even if true, did not constitute a defence. While the balance of prejudice favoured Mr. Brake, and civil matters are preferably decided on their merits, the proposed defence raised neither an arguable defence on the merits nor one with an "air of reality" in what was a straightforward, document-driven claim. The court also agreed with BDC's submission that setting aside the judgment would likely lead to the same outcome on a summary judgment motion while consuming further costs and judicial resources.

Ruling and outcome

For all the foregoing reasons, Mr. Brake's motion to set aside the default judgment was dismissed, leaving BDC as the successful party with its default judgment against Mr. Brake intact — a judgment arising from a claim for $289,994.72, plus interest and costs. The decision itself does not fix a specific monetary award or costs amount; if the parties cannot agree on the costs of the motion, they may make written submissions, not exceeding three pages, within seven days of the release of the endorsement.