CITATION: Castle Building Centres Group Ltd. v. The Rehill Company Limited et al.,  
2022 ONSC 3428  
PETERBOROUGH COURT FILE NO.: CV-20-76  
DATE: 20220706  
ONTARIO  
SUPERIOR COURT OF JUSTICE  
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BETWEEN:  
Castle Building Centres Group Ltd.  
Plaintiff/Defendant to the Counterclaim  
– and –  
Mark Freake & Robert Kennedy, Counsel  
for the Plaintiff  
Chris Besant, Counsel for the Defendants  
The Rehill Company Limited, Steven D.  
Parkes & Jeff A. Parkes  
Defendants/Plaintiff by Counterclaim  
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) HEARD: May 18, 2022  
RULING ON MOTION FOR SUMMARY JUDGMENT  
VALLEE J.  
[1]  
This matter concerns a family business. The Rehill Company Ltd. (“Rehill”) operated as  
a building supply retailer for many years in Peterborough. In 2015, it had financial  
difficulties and was unable to pay a creditor, the plaintiff, Castle Building Centres Group  
Limited (“Castle”). Castle states that Rehill owes it $2,327,538.66 and brings this motion  
for summary judgment. It seeks to enforce the personal guarantees given to it by the  
defendants, Jeff Parkes and Steven Parkes, for Rehill’s debt. I will refer to them as Jeff,  
Steven or the defendants. Shawn Winters is one of Castle’s credit risk and assessment  
managers. He was the defendants’ contact at Castle and swore the affidavits in support of  
this motion. No relief is sought from the corporate defendant, Rehill. It is in receivership  
and bankruptcy proceedings so the plaintiff’s action against it is stayed.  
The Test for Summary Judgment  
[2]  
There is no issue regarding the legal test for summary judgment. The court must determine  
whether, based on the record before it, there is a genuine issue that requires a trial (see  
Hyrniak v. Mauldin, 2014 SCC 7).  
Page: 2  
Issues  
[3]  
This summary judgment motion raises two issues:  
1) Do the issues raised by the defendants regarding enforceability of the guarantees  
require a trial?  
2) Can the defendants’ counterclaim succeed?  
Background  
[4]  
[5]  
An understanding of the chronology of this dispute is important to the issues in this case.  
Castle operates a not-for-profit, membership based Buying Group. It makes arrangements  
with vendors who provide discounts for high volume purchases. Castle provides a buyers’  
guide to its members with a list of its vendors. The members then may choose to buy from  
those vendors at discounted prices.  
[6]  
Jeff operated Rehill for many years. Rehill was a member of Castle’s Buying Group.  
Rehill’s membership agreement with Castle is dated May 23, 1984. During the 1990’s  
recession, on November 23, 1994, Jeff executed a personal guarantee in favour of Castle,  
at its request, for Rehill’s account. The guarantee contains 15 terms. Term 2 states:  
This Guarantee is an original direct, absolute, unconditional,  
unlimited, continuing and irrevocable obligation of Guarantor to  
Castle. This Guarantee shall remain in full force and effect without  
respect to future changes and conditions, including changes of law  
or any invalidity or irregularity with respect to Liabilities of the  
Member to Castle or with respect to the execution, delivery and  
performance of any present or future agreement between the  
Member and Castle. This Guarantee shall not be revoked or  
terminated and Guarantor shall not be released from Liability to  
Castle under this Guarantee until all Liabilities are paid in full.  
[7]  
[8]  
Term 11 states that “No alteration or waiver of this Guarantee or any of its provisions shall  
be binding on Castle unless made in writing and signed by Castle.”  
To order materials through the Buying Group, Rehill sent purchase orders to the listed  
vendors. Castle paid the vendors’ accounts, the goods were shipped to Rehill, and Castle  
invoiced Rehill. Once Castle received information from the vendors about the discounts,  
it credited them to Rehill’s account. The discounts are referred to as “rebates”.  
[9]  
Jeff retired from Rehill in 2010. His son Steven, who had worked in the family business  
for many years, took over. According to his evidence, all of Rehill’s common shares were  
transferred to his holding company. Jeff was issued $3,500,000 of preferred shares which  
provided a small dividend. Of those shares, $500,000 was converted to a shareholder loan.  
Page: 3  
Jeff was repaid $120,000 before the Castle debt arose. There is no evidence that when  
Steven took over, he offered to provide a personal guarantee to Castle for the Rehill  
account. Nor did Castle request one.  
[10] In 2015, Rehill was having financial difficulties. Its outstanding account with Castle had  
grown considerably. Its bank put it into a “special loans” category. Rehill sought further  
financing through a lender called Waygar Capital Inc.  
[11] On July 6, 2017, Steven sent an email to Shawn stating, among other things, that he  
anticipated the “restructure to be in place sometime in July…Once that is formalized, I will  
be in a strong position to propose a plan to settle the outstanding portion of the account in  
a timely manner.” Shawn responded on August 12, 2017, stating, “On my last board report  
I had included that new financing should be in place by July and now things are looking at  
the end of August. I have not taken any action against the account, but the account is up  
another 400K and I will be forced to do something.” He requested a call and an update  
from Steven. Steven called Shawn on August 15, 2017 and left a message.  
[12] Waygar required a priority position over Castle in order to lend money to Rehill. It asked  
Castle to sign a document entitled “Postponement, Subordination and Standstill  
Agreement”, which I will refer to as the Subordination Agreement. The effect of it is in  
dispute. I will address that below.  
[13] On November 7, 2017, Steven sent a letter to Shawn setting out a proposed payment plan  
contingent on Waygar’s financing being in place in the next 15-20 days.  
[14] Castle signed the Subordination Agreement in favour of Wagar and returned it by email  
dated November 8, 2017. Shawn states that Steven promised to pay Rehill’s outstanding  
account from the Wagar financing. This is why Castle signed the Subordination  
Agreement.  
[15] Castle considered Steven’s proposed payment plan and added some terms after Steven’s  
last term. Castle added a heading “Additional Requirements”. Castle’s term #1, which is  
in dispute, states, “Updated security will be required, including, and not limited to a  
General Security Agreement and a Guarantee, Assignment and Postponement of Claim  
from Steve Parks” [emphasis added]. On November 17, 2017, Castle sent a letter to Steven  
incorporating the additional requirements. Steven signed at the bottom of the page under  
the statement “I agree with the terms and conditions.”  
[16] On December 6, 2017, Shawn sent an email to Steven stating, “We are expecting an  
additional payment of $100,000…An additional immediate payment of $50,000 is due for  
the main account for the old balances…An additional $80,000 is also needed for  
November; The security documents are attached, please sign these and return them to me  
by Friday.”  
[17] On February 2, 2018, Shawn sent Steven an email stating, “I have not been able to connect  
with you as I would have preferred to speak directly with you about this. A credit hold  
notice is going out on the accounts today to the vendors. Please call me anytime to discuss.”  
Page: 4  
[18] On February 9, 2018, Steven sent an email to Shawn providing an update on certain  
payments being made by Rehill. Among other things, he stated that the General Security  
Agreement (GSA) requested by Castle had been sent to Rehill’s lawyer for review. He  
stated, “Funds advance on our LoC of $160,000…is pending. We hope to be able to make  
this payment on the Rehill account as early as the evening of February 9th (TBA).”  
[19] On February 13, 2018, Shawn sent Steven an email asking for an update on the “Security  
Paperwork Signatures, Payment of $160,000 to get back on track for the payment plan with  
another $80,000 due at the end of the month…”  
[20] On March 28, 2018, Steven signed the GSA. Subsequently, Rehill defaulted on the  
payment agreement terms.  
[21] In an April 2018 letter, Steven made a revised payment proposal to Castle. By letter dated  
April 20, 2018, Castle responded stating that it agreed with most of the terms but added  
some “stipulations”. The first one was the same as in the first payment plan: “Updated  
security will be required, including, and not limited to a General Security Agreement and  
a Guarantee, Assignment and Postponement of Claim from Steve Parks.” The letter stated,  
“If you agree with these conditions, please sign below and we will begin the payment plan  
on April 23, 2018. All terms of this agreement will not take effect until such time that all  
required security has been received and registered.” As before, Steven signed at the bottom  
of the page under the statement, “I agree with the terms and conditions.” I will refer to this  
agreement as the “Amended Payment Agreement.”  
[22] The defendants state that there is a dispute between the parties as to what happened before  
Steven sent the signed Amended Payment Agreement back to Shawn. Steven states that he  
spoke to Shawn and said that he would not return it unless Shawn agreed that Castle would  
waive Jeff’s guarantee. He states that Shawn agreed.  
[23] There is also a dispute regarding the date when Steven sent the signed Amended Payment  
Agreement to Castle. Castle states that Steven signed it on April 20, 2018 and returned it.  
Steven states that he returned it a week later and that this supports his position that he held  
off on returning it until Castle agreed to waive Jeff’s guarantee.  
[24] Shawn states that he told Steven that Jeff’s guarantee would be waived once the Rehill  
account was current. Neither Steven nor Shawn made a contemporaneous memo about  
this conversation.  
[25] Shawn states that he and Steven met in early April 2019. At that meeting, Steven asked  
Castle to discharge Jeff’s guarantee. Shawn denies agreeing to do so. He states he told  
Steven that this would be done only after Rehill’s account was current.  
[26] On April 11, 2019, Shawn sent an email to Castle’s VP of finance, Sarina Kaluzny,  
summarizing the meeting. It states,  
I told Steve that he as [sic] in jeopardy of Castle pursuing his  
security including the GSA and GAP’s [sic] on him and his Dad. He  
Page: 5  
argued that we had agreed to discharge his Dad if he gave his  
guarantee and I corrected him. His Dad would be discharged once  
his account was current. His tone changed a little…  
[27] On September 20, 2018, Steven sent an email to Shawn describing Rehill’s struggles, and  
requesting that some of the interest charges on the account be reversed.  
[28] Rehill obtained financing from Waygar but did not use any of it to pay its account with  
Castle.  
[29] On May 14, 2019, Castle sent a demand letter to Jeff and Steven. By then, Rehill’s account  
was $2,102,991.91. It states,  
Since last Fall, we have tried to work with you, Steve, on a  
repayment plan but that has been carried out unsuccessfully. Castle  
wants this debt repaid without further delays. Rehill’s debt to Castle  
has been guaranteed by each of you. Before Castle proceeds further  
regarding your guarantees, we want to give you an opportunity to  
arrange for the repayment of this debt. We look forward to hearing  
from you by 5:00 pm on May 22, 2019, after which time Castle will  
initiate steps to collect its debt [emphasis added].  
[30] Steven’s response dated May 16, 2019, states that the situation needed to be addressed and  
that he had retained a restructuring specialist.  
[31] On November 26, 2019, Castle’s lawyer sent a demand letter to Rehill. By then, the  
account was $2,232,729.42. He requested full payment by December 9, 2019, failing  
which Castle would take steps to seek repayment. He enclosed a Notice of Intention to  
Enforce Security in accordance with s. 244 of the Bankruptcy and Insolvency Act, R.S.C.  
1985, c. B-3.  
[32] On March 17, 2020, Castle terminated Rehill’s membership in the Buying Group.  
[33] On April 24, 2020, Castle issued its claim against Rehill and the defendants for  
$2,327,538.66 together with interest at 19.5% per annum.  
Jeff and Steven’s Position  
[34] Jeff and Steven stated that Castle cannot succeed on the enforcement of their personal  
guarantees for 10 reasons. I will address them in (a) to (j) below.  
a) The Rehill receivership order stays this action against Rehill. Castle failed to seek an order  
lifting the stay so the action cannot proceed. The court should exercise its jurisdiction  
pursuant to s. 106 of the Courts of Justice Act, R.S.O. 1990 c. C43 to stay this proceeding  
against Jeff and Steven.  
Page: 6  
[35] This argument has no merit. The receivership order applies only to Rehill. As noted above,  
Castle is not proceeding against Rehill. It is proceeding against Jeff and Steven pursuant to  
their personal guarantees. The defendants have not provided any jurisprudence in which  
the court has exercised its authority to grant a stay in circumstances like these.  
b) Castle’s maintaining a guarantee from Jeff does not make sense because he was retired. He  
understood that his guarantee would be waived when he retired.  
[36] The defendants state that this matter is not about the terms of the guarantees. Rather, it is  
about the relationships around them. Jeff understood that his guarantee would terminate  
when he retired in 2010, that this was “how it worked”, and that this was “how Castle did  
business”. Castle had a “policy” regarding releasing former owners’ guarantees. For  
example, after 2010, Rehill bought another company located in Cobourg, referred to as  
“Cobourg”, which merged into Rehill. Before the purchase, Cobourg was a member in its  
own right of the Buying Group. Castle waived Cobourg’s former owners’ guarantees after  
Rehill bought it.  
[37] Rehill’s account was not in arrears for several years after Jeff retired. Having a guarantee  
from someone who sells a business and has no control over it is unusual and makes no  
sense. The defendants refer to several occasions in which Castle never said Jeff’s guarantee  
was continuing.  
Analysis  
[38] The defendants misconstrue “how Castle did business”. Rehill’s purchase of the Cobourg  
company illustrates this. There is no dispute that this transaction was an arm’s length, third  
party sale to Rehill. When Castle received formal notice of the sale, and after the guarantees  
of the new owners were in place, it waived the third party sellers’ guarantees. Steven’s  
taking over Rehill was not a third party sale. Castle did not receive formal notice of a sale.  
Steven’s evidence is that he and Jeff met with Castle at Rehill’s office to explain that “the  
reins were being handed over to Steve”. On the defendants’ theory of how Castle did  
business, Castle would have required a guarantee from Steven and then waived Jeff’s  
guarantee at that time. But that is not what happened. There is no evidence that Steven  
offered to sign a guarantee when he took the reins nor that one was requested. Steven did  
not sign his guarantee until April 2018, eight years later, when Rehill was in financial  
trouble and Castle requested it.  
[39] Steven alleges that Castle never said that Jeff’s guarantee was continuing; however this  
misses the point. By its terms, Jeff’s guarantee continued until Castle waived it in writing.  
[40] After the reins were handed over, Jeff continued to hold Rehill shares and maintained his  
shareholder loan. He was still involved in Rehill. He did not sell to a third party and walk  
away, as the Cobourg company sellers did. From a creditor’s perspective, having two  
guarantees for Rehill’s significant increasing debt makes more sense than having only one.  
Page: 7  
c) A request for “updated” security means “replacement” security.  
[41] The defendants state that what happened in between the payment agreements is a central  
issue. Both required updated security. They say “updated” means “replacement” security.  
Steven states in his affidavit that Shawn told him in the fall of 2017 that,  
…the GSA on file for Rehill was out of date and that he would like  
to update the security. Specifically, he said that the GSA was an old  
one executed by [Jeff]. He reassured me that the file would be  
updated to reflect only myself [sic] as guarantor once I had Rehill  
execute a GSA and that any residual rights of Castle against Jeff  
would be deemed waived.  
[42] The defendants state that Castle’s “Additional Requirements” which requested “Updated  
security…including and not limited to a [GSA] and a Guarantee, Assignment and  
Postponement of Claim from Steve Parkes” is evidence of this. Steven also refers to three  
emails that he sent to Shawn regarding the payments that Rehill would make to Castle.  
Steven’s guarantee was given to Castle to replace Jeff’s.  
[43] Steven also states that he would not return the executed amended payment agreement  
unless Castle waived Jeff’s guarantee. Castle “had the pen” and created the requirement  
for updated security. If the term has any ambiguity, it should be construed against Castle.  
Analysis  
[44] The three emails to which Steven refers address proposed payment arrangements. They do  
not mention security. Castle added a heading “Additional Security” in both payment  
agreements. The requirement for updated security is set out under that heading. The Collins  
Dictionary1 says this about the verb update: “If you update something, you make it more  
modern, usually by adding new parts to it or giving new information.” I do not accept the  
defendants’ position that the word “update” means to “replace.”  
d) Castle is breaching the Subordination Agreement with Waygar by making this claim against  
Jeff and Steve. It was supposed to standstill.  
[45] The defendants state that the Subordination Agreement has broad provisions. Its purpose  
was to create a stable basis for rebuilding. Steven states, “It was never intended that Castle  
could take any steps against any guarantor of the Castle debt while the Subordination  
Agreement was in effect. In the Subordination Agreement, Castle agreed with Rehill and  
Waygar to defer collection of its debt until Waygar was paid.” The Subordination  
Agreement states that Castle cannot take any steps to enforce the debt owed by Rehill. By  
1 www.collinsdictionary.com/dictonary/english/update  
Page: 8  
trying to enforce the guarantees, Castle is trying to collect the debt. Steven states, “Jeff and  
I assert status as third party beneficiaries of the Subordination Agreement.”  
Analysis  
[46] The Subordination Agreement is between Castle and Waygar. It relates only to Waygar’s  
security in Rehill’s assets. Jeff and Steven are not privy to the agreement. In his cross-  
examination, Steven agreed that neither he nor Jeff were signatories to it.2 The  
Subordination Agreement does not relate to Jeff and Steven’s personal assets. The  
defendants’ argument misses the point that Rehill is a separate entity from Jeff and Steven.  
Castle is not taking steps against Rehill. It is taking steps to enforce personal guarantees  
for Rehill’s debt. The defendants provided no authority for their argument that they can  
be “third party beneficiaries of the Subordination Agreement”. In contrast, Castle’s counsel  
inquired of Waygar’s counsel whether Waygar considered Castle’s taking steps to enforce  
the personal guarantees to be a breach of the Subordination Agreement. Waygar replied  
that it did not. Steven signed his guarantee after Castle signed the Subordination  
Agreement. I find that Castle has not breached the Subordination Agreement.  
e) Neither Jeff nor Steven had independent legal advice when they signed the guarantees;  
therefore, they are not enforceable.  
[47] The defendants state that they ought to have had independent legal advice (ILA). They  
may not have appreciated what they were signing. The absence of ILA renders the  
guarantees unenforceable.  
Analysis  
[48] If there is fraud or if an agreement is unconscionable, the absence of ILA might be a  
consideration. Neither is pleaded. Furthermore, in his cross-examination, Steven agreed  
that he understood that his guarantee was a personal guarantee of payment of any  
indebtedness owing by Rehill to Castle.3 The fact that Steven did not have ILA before he  
signed the guarantee does not render it unenforceable.  
f) Castle failed to pay rebates to which Rehill was entitled.  
[49] The defendants state that Castle failed to credit some of the rebates to which Rehill was  
entitled for its various purchases. Steven states that in 2015, Rehill discovered that it was  
being overcharged by Castle. Rehill conducted,  
…an exhaustive study of Vendor Rebates Earned vs. Vendor  
Rebates Received for the years ended 2013 & 2014 in order to  
answer an inquiry [of our chartered accountant]…The analysis…  
revealed that rebates totalling $359,367.32 had not been passed  
2 Transcript of cross-examination of Steven Parks March 8, 2022, p. 69  
3 Transcript Steven Parks p. 52  
Page: 9  
through Rehill just in those periods, suggesting that the total of  
unremitted savings and rebates over the course of the relationship  
since 1984 could total in the millions…The issue was raised with  
Castle but no satisfactory explanation or solution was reached.  
[50] Steven acknowledges that, “The unresolved question of the past overcharges was not  
addressed in the 2017 and [sic] payment plan agreement or its revised version in April  
2018. While I would have preferred that to be addressed, enough was being achieved to  
assist Rehill in its rebuilding that was worth doing the deal without resolving that.”  
[51] The defendants state that when interest is added in favour of Rehill, and the amount is set  
off against Castle’s claim, it could negate anything that Rehill owes Castle. A spreadsheet  
done in 2015 shows unpaid rebates. It is still a live issue. A trial is necessary to resolve  
this.  
Analysis  
[52] Any claim for rebates belongs to Rehill and therefore the receiver/trustee. In an email dated  
January 28, 2022, the receiver/trustee confirmed that it will not be proceeding with a claim  
for them. The defendants state that they are entitled to pursue the rebates. Even if they  
could, there are several problems.  
[53] Rehill’s spreadsheet is seven years old. The defendants did not provide any current  
document to support the rebate allegation. Many of Castle’s invoices are more than two  
years old. In his cross-examination, Steven stated that Rehill’s last purchase was in April  
2019.4 The defendants did not address how they would overcome a limitations period issue  
in challenging those invoices.  
[54] Most importantly, Steven did not raise the rebate issue with Castle during the payment plan  
discussions. There is no evidence that Rehill disputed the amount owing on the basis that  
it was entitled to rebates or that it said it owed Castle nothing because of unpaid rebates.  
That would have been an important issue to raise in 2017 and 2018 if it was legitimate  
because Castle’s position was that Rehill owed it over $2,000,000. Rather, Steven on behalf  
of Rehill acknowledged that it had to make payments on the total amount of Castle’s  
statement and proposed two payment plans. In the payment agreements, Rehill  
acknowledged its indebtedness to Castle.  
[55] On cross-examination, Castle gave an undertaking to “advise whether Castle ever received  
any back up from Steve Parkes or Rehill regarding rebates.” The answer was, “Mr. Winters  
and Ms. Kaluzny are not aware of any such backup. Mr. Winters also asked Castle’s rebate  
manger, Kevon Smoke, and he is not aware of any such backup.” At its highest and best,  
4 Transcript Steven Parks p. 98  
Page: 10  
Steven’s evidence that “the total of unremitted savings and rebates over the course of the  
relationship since 1984 could total in the millions” is only speculative.  
[56] The plaintiff’s claim was served on August 20, 2020. Castle’s motion for summary  
judgment was served on February 4, 2022. The defendants had ample opportunity to  
present evidence regarding the alleged rebates owing. The defendants mentioned  
difficulties in obtaining Rehill’s documents because it is in receivership and bankruptcy  
proceedings. If that were the case, the defendants could have requested an adjournment of  
this motion to obtain the documents.  
[57] Castle states that it has always passed on rebates to Rehill even though it was not obliged  
to do so when Rehill’s account was not current. Section 7(a) of the membership agreement  
states that, “Castle may, in its discretion, during the term of this Agreement apply any  
amounts owing or which may become owing by Castle to the Member including without  
limitation…rebates..against indebtness of the Member to Castle” [Emphasis added].  
[58] Steven stated in his cross-examination that Rehill had not commenced an action against  
Castle for rebates.  
[59] I find that the allegation of rebates owing is not supported by the evidence.  
g) By its misconduct, Castle forced Rehill into receivership. Jeff’s preferred shares and the  
balance of his shareholder loan is worthless. Castle has caused Rehill, Jeff and Steven huge  
losses. The equitable set-off and counterclaim flow from these losses. The amount claimed  
exceeds the debt to Castle.  
[60] The defendants state that Castle wrongfully issued demands against Jeff and Steven’s  
guarantees. Steven states that Castle issued enforcement notices to Rehill on November  
26, 2019, that,  
…undermined Waygar’s confidence in Rehill and its future by  
demonstrating that Rehill had an unstable major creditor who could  
not be trusted despite its written commitments and who Rehill was  
not able to keep in line. As a result, Waygar began to edge towards  
exiting the loan via receivership instead of funding a workout to  
achieve growth. Rehill’s access to credit was curtailed, and its future  
liquidator was soon appointed as an on site monitor…Had Castle  
not done this, Rehill would have recovered…Castle’s outrageous  
and continuing breaches of the subordination agreement from 2019  
to 2021 deprived Rehill and the Parkes family of the opportunity to  
save its family heritage and rebuild its equity and caused substantial  
damage to me, Jeff and Rehill.  
[61] Steven states that because of Castle’s conduct, $500,000 that he had advanced to the  
company is now unrecoverable. He states that,  
Page: 11  
Jeff’s residual preferred share investment of $3 million and his  
residual loan of $380,000 has also been rendered unrecoverable by  
Rehill’s receivership and subsequent bankruptcy. Jeff also had  
made an additional old loan of $256,000 to the company which will  
not be repaid. In other words, our direct losses apart from the upside  
in the company equity exceed $4 million.  
[62] The defendants assert that determining and quantifying the set-offs are triable issues that  
cannot be resolved on a summary judgment motion.  
Analysis  
[63] Castle accommodated Rehill a number of times. Castle’s statement of account shows  
unpaid invoices beginning in June 2017. It entered into two fruitless payment agreements  
with Rehill. Castle began sending demand letters in 2019.  
[64] David Hammond, senior vice president of Waygar, and Kerry Colantonio, vice president  
of Waygar, both swore affidavits dated October 28, 2020, and May 5, 2021, respectively,  
in support of Waygar’s receivership application. The only default that they state is Rehill’s  
default in payment. Ms. Colantonio’s affidavit refers to seven forebearance agreements  
between Waygar and Rehill before Waygar brought a motion to appoint a receiver. They  
both state that neither of the receiver’s reports dated October 15, 2021, nor December 31,  
2021, refer to any act or omission of Castle that caused or contributed to Rehill’s failure.  
[65] I accept Castle’s position that any losses suffered by Rehill were caused by the business’  
failure. Castle had nothing to do with that nor do any of Castle’s actions constitute  
misconduct. In fact, Castle held off on enforcement proceedings. The defendants’  
counterclaim on this issue has no merit.  
h) The sale of Rehill’s realty might be enough to pay Castle’s debt. If the proceeds are  
insufficient to pay Waygar, Castle remains subject to the standstill obligations. Proceeding  
with this summary judgment motion is premature.  
[66] The defendants state that Rehill’s real estate has not yet been sold. There is an offer that  
has been accepted by the receiver and approved by the court but the price will not be  
disclosed until the transaction closes. If the proceeds of realization on the realty and other  
assets are high enough, Castle would not be owed any debt. If the proceeds are insufficient  
to pay Waygar, Castle is still subject to the Subordination Agreement.  
Analysis  
[67] As noted above, the Subordination Agreement does not apply to the defendants’ personal  
guarantees. Rehill owes Waygar money; and it is to be paid in priority to Castle. Even if  
proceeds from the sale of the realty is enough to pay Wagar, that does not address the  
amount that Rehill owes Castle. The defendants provided no evidence as to the value of  
the realty. Their position is speculative. It does not justify deferring this motion.  
Page: 12  
i) This matter is not appropriate for summary judgment because there is a factual dispute  
regarding an oral agreement  
[68] Steven’s evidence is that Castle agreed orally to waive Jeff’s guarantee when he retired.  
Steven states that this oral agreement is valid.  
[69] To support their argument regarding the validity of this oral agreement, the defendants rely  
on Kendell v. Kendell, 2006 ABQB 664. That case concerns a mortgage. Parents lent their  
son and his wife money to build a house. A mortgage was registered. After that, the son  
and his wife needed more money, which the parents advanced based on an oral agreement.  
They did not register a further mortgage. The court stated that subsequent oral agreements  
may create collateral contracts but they “cannot contradict the main written contract and,  
if they do, they are inadmissible.” (see para. 18)  
Analysis  
[70] Steven’s evidence that he would not return the amended signed payment agreement unless  
Jeff’s security was released implies that Steven had some bargaining power and therefore  
got the concession he wanted; however, Rehill’s account was in significant arrears. Steven  
was trying to keep the company afloat and satisfy Castle. Steven’s evidence on his cross-  
examination confirms this. He stated, “I was not in a position to be difficult. I was sort of  
at Castle’s mercy, and I had a business that was floundering…They certainly had a lot of  
leverage on me.”5  
[71] Shawn states that Castle did not agree to waive Jeff’s guarantee at that time nor in April  
2019. His evidence is corroborated by the April 11, 2019, email he sent to Ms. Kaluzny,  
as noted above. To repeat, it states “I told Steve that he as [sic] in jeopardy of Castle  
pursuing his security including the GSA and GAP’s [sic] on him and his Dad. His tone  
changed a little…”  
[72] The defendants rely on Kendall and state that an oral agreement to waive a guarantee that  
can only be waived in writing creates an enforceable collateral contract. But Kendall  
concerns a mortgage. The facts are quite different.  
[73] The defendants state that I should consider what makes sense. Castle’s having two personal  
guarantees makes more sense in the circumstances because it could look to the assets of  
both Jeff and Steven, if necessary, to satisfy the large debt. I accept Castle’s evidence that  
it told Steven that Jeff’s guarantee would be waived once the debt was paid.  
j) Rehill has two accounts, one with CBS, a subsidiary of Castle, and another with Castle’s  
Buying Group. The personal guarantees to not apply to the amount owed by Rehill to CBS.  
5 Transcript Steven Parks p. 65-66  
Page: 13  
[74] In addition to operating the Buying Group, Castle had a subsidiary, Commercial Builders  
Supplies (CBS), through which high volume purchasers could buy products. It was  
membership based, like the Buying Group.  
[75] The defendants’ position is that after 2010, Rehill was switched from the Buying Group to  
CBS. Castle demanded two different payment amounts. One was $1,951,501.85 from  
Rehill as a member of CBS, account #1310. The other was $151,490.06 from Rehill  
regarding Cobourg, account #2106. When Rehill bought the Cobourg company, Cobourg  
was already a member of Castle’s Buying Group. The defendants state that a number of  
invoices that comprise Castle’s claim are actually for materials purchased by Rehill  
through CBS. Jeff and Steven’s guarantees do not apply to CBS; therefore, the amount  
that Castle seeks to recover is incorrect. The defendants allege that Castle has refused to  
produce Rehill’s membership agreement with CBS. An adverse inference should be  
drawn.  
Analysis  
[76] Rehill criticizes Castle for not providing Rehill’s membership agreement with CBS. If it  
exists, Rehill would have signed it. Rehill ought to have provided a copy of it. Castle states  
that Rehill was never a member of CBS. Something that does not exist cannot be provided.  
[77] Steven does not provide any evidence in his affidavit regarding Rehill’s alleged  
relationship with CBS. He does not mention CBS at all. The fact that the defendants sent  
additional documents to counsel for Castle immediately before cross-examinations after all  
of the motion documents had been served is very troubling.  
[78] In the transcript of Steven’s cross-examination, counsel for Castle, Mr. Freake, begins with  
a statement to the effect that 30 minutes earlier, counsel for the defendants, Mr. Besant,  
had emailed him 34 megabytes of additional documents that were not mentioned in  
Steven’s affidavit nor attached as exhibits. The deadline for filing responding materials  
was February 4, 2022. Mr. Freake stated that he had not had an opportunity to review the  
documents nor to seek instructions from Castle. He stated that he would proceed with the  
examination but reserved his right to resume the cross-examination regarding those  
additional documents. In addition, he also reserved all rights regarding the admissibility  
of those documents.  
[79] In his cross-examination of Shawn, Mr. Besant asked him many questions about these  
documents. Some of the questions related to CBS, over the continuing objections of  
counsel for Castle. In argument, Mr. Besant stated that the documents were properly before  
the court because they were made an exhibit to Shawn’s cross-examination. I note that  
they were described as “Exhibit 1 for identification.” In the transcript, Mr. Besant states  
that the defendants found these documents (which are their own) after Steven’s affidavit  
was sworn. He stated that it was “not inappropriate” for them to be used. The defendants’  
position appears to be that Rehill became a member of CBS after 2010, and Steven and  
Jeff’s guarantees apply only to Rehill’s pre-2010 indebtedness to Castle for purchases  
Page: 14  
made through the Buying Group. Therefore, the amount that Castle seeks to recover  
pursuant to the guarantees is more than it should be.  
[80] Castle states that CBS was also membership based. Its prices were better because its  
members purchased high volumes. Rehill was never a member of CBS. Castle did allow  
Rehill to purchase some CBS products because it was trying to assist Rehill; however, all  
of the invoices were rendered by Castle. Both Cobourg and Rehill were members of the  
Buying Group.6  
[81] Castle’s statement of account for the debt that it seeks to collect is 16 pages long, comprised  
of two different accounts. At the top of the first account, the text states, “Account No.  
2160, Rehill Company Limited (The)” and then Rehill’s Peterborough address. At the top  
of the second account, the text states, “Account No. 1310 Cobourg Building Centre Ltd”  
and then the Cobourg address. On Shawn’s cross-examination, he stated that after Rehill  
bought Cobourg, at Rehill’s request, the Buying Group accounts for the two locations were  
kept separate.7  
[82] The documents show that Castle continued to use the two different Buying Group account  
numbers for Rehill and Cobourg after Rehill bought Cobourg. It does not show that either  
account was a CBS account. Castle’s letter to Jeff and Steve dated May 14, 2019, supports  
this. It states,  
As we have discussed with you, Steve, Rehill is indebted to Castle  
for $2,102,991.91 made up of:  
Castle Member #2160 – location High Street, Peterborough -  
$1,951,501.85  
Castle Member # 1310 – location 4 Elgin Street East, Cobourg -  
$151,490.06  
[83] Despite the fact that Mr. Besant asked Shawn questions on cross-examination about CBS  
to which Mr. Freake objected, Castle did provide an answer to an undertaking regarding  
Rehill’s status as a buyer. Number 3 in Castle’s answer to undertakings chart in the section  
“Questions Taken Under Advisement” states:  
Q: To advise whether members on the “CBS system” purchase  
supplies through CBS instead of Castle.  
A: There is no separate “CBS system” for finance, accounts  
receivable or credit purposes. There is a single “Castle system”.  
Members either sign a membership agreement with Castle or with  
CBS, not both…Rehill signed its membership agreement with  
Castle and never signed with CBS. In an effort to help Rehill  
through its repeated delinquencies, Castle offered Rehill a hybrid  
6 Transcript cross-examination of Shawn Winters March 10, 2022 p. 110  
7 Transcript Shawn Winters p. 32  
Page: 15  
model, where Rehill received the benefits of the Castle  
membership… but was also allowed to purchase through certain  
CBS buying programs such that it could receive higher rebates.  
[84] In Steven’s cross-examination, he acknowledged that he was aware that Rehill’s  
relationship with Castle was governed by the membership agreement dated May 23, 1984,  
signed by Jeff, which he had seen.8  
[85] The additional documents were provided to the court in a zip file. I reviewed them. There  
is some mention of transitioning Rehill to CBS; however, the documents do not show that  
it actually happened. Because there is just one Castle system for accounting purposes, I  
cannot conclude that either of Rehill’s accounts were CBS accounts.  
[86] Rule 37 of the Rules of Civil Procedure sets out filing deadlines for evidence on motions.  
The additional documents in the zip file, do not comply with Rule 37. They are not exhibits  
to an affidavit. This court has serious concerns about the defendants’ late breaking position  
that Rehill was a member of CBS, and their reference to these documents. They are not  
evidence that is properly before the court. Castle had no sworn evidence from the  
defendants on this issue so it could not respond. If the defendants believed that the Trustee  
had important documents which they could not obtain, they could have requested an  
adjournment of this motion for summary judgment on terms. They could have requested  
an order requiring the Trustee to provide the documents. They could have requested leave  
to serve and file a further affidavit setting out their position and attaching the documents  
as exhibits. They could have agreed to a further cross-examination on the new affidavit.  
They did none of this. The defendants did not properly advance the alleged CBS  
membership as a defence to this motion for summary judgment.  
Conclusion  
[87] None of the issues presented by the defendants are genuine issues that require a trial  
[88] Castle’s motion for summary judgment is granted. The defendants’ counterclaim is  
dismissed.  
Costs  
[89] At the conclusion of submissions, counsel made oral submissions on costs. They were  
subsequently requested to provide written submissions.  
[90] Rule 57.01 of the Rules of Civil Procedure sets out the factors that the court must consider  
in assessing costs. The amount involved in this proceeding was large, $2,327,538.66.  
Obtaining judgment was very important to the plaintiff. Enforcement of personal  
guarantees should not be complex, particularly when their terms state that they can be  
8 Transcript Steven Parks p. 12  
Page: 16  
waived only in writing. The matter had a detailed history. The defendants raised 10 issues  
which caused the hearing to be longer than the scheduled time. The defendants’ attempt to  
rely on documents that were not evidence before the court was improper.  
[91] The plaintiff’s bill of costs shows that it incurred acceptable disbursements totaling  
$1,306.98. Two lawyers, Mr. Kennedy who has 20 years of experience and Mr. Freake  
who has 9 years of experience, worked on the file. Mr. Kennedy’s actual rate is $760.00  
per hour. Mr. Freake’s actual rate is $610 per hour. These rates are high. The description  
of the work is general. While the total hours spent by each lawyer on categories of work  
is listed, one cannot determine which lawyer did specific work. The plaintiff’s bill of costs  
shows that 325 hours were spent on the matter. The parties cross-examined each other.  
Undertakings were given and answered. The plaintiff served and filed a detailed factum  
and book of authorities.  
[92] The time spent was excessive. When the actual rates are applied, the amount is $238,462.  
When partial indemnity rates are applied, the amount is $143,077. Even the partial  
indemnity amount is extremely high. A losing party would not expect to pay this amount  
for costs on a motion for summary judgment. In acknowledgement of this, at the conclusion  
of argument, plaintiff’s counsel stated that a costs award of $50,000 would be appropriate.  
[93] The amount of costs is determined by balancing all of the factors set out in r.57.01(1) and  
by taking into account the principles set out in Boucher v. Public Accountants 71 O.R. (3d)  
291.  
[94] Ultimately, in fixing an amount for costs, the overriding principles are fairness and  
reasonableness. In my view, a fair, reasonable and proportionate costs award for this  
motion for summary judgment is $50,000, all inclusive, which the defendants shall pay to  
the plaintiff within 45 days.  
Justice M.E. Vallee  
Released: July 6, 2022  


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