Amended Alberta Guarantees Acknowledgement Act – An Ambiguous Situation

This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

On December 4, 2013, Alberta’s Bill 44: Notaries and Commissioner’s Act was amended (proclaimed, but not in force). Buried within Bill 44 were amendments to the Guarantees Acknowledgement Act (GAA). These amendments create ambiguity regarding how to properly notarize guarantee certificates in Alberta.

The GAA requires that guarantees be executed in a specific format in order to be enforceable. Under the current form of the GAA, any notary could execute the required certificate. The recent GAA amendments provide that no guarantee is effective unless the person entering into the obligation (the guarantor) appears before a lawyer, acknowledges to the lawyer that he/she has executed the guarantee and, in the presence of lawyer, signs the requisite certificate. The amendments go on to state that the lawyer must not represent or be employed by a person or corporation who stands to benefit as a result of the guarantee.

The GAA, which is unique to Alberta,  is already an onerous piece of legislation. In essence, it nullifies the effect of any personal guarantees which do not comply with the required certification process. The recent GAA amendments exacerbate the challenges associated with the statute. They create ambiguity as to which lawyers can execute the certificate such that it is enforceable.

A primary concern rests with the meaning of a lawyer representing a corporation who stands to “benefit as a result of the guarantee”. Arguably, this captures a lawyer (and potentially his/her firm) who provides legal services to a banking institution seeking a guarantee. The argument follows that such a lawyer could not give independent legal advice and notarize the certificate even if that lawyer is not involved with the transaction in question because the lawyer (or his/her firm) acts for the beneficiary of the guarantee (ie. the banking institution), albeit in another capacity.

There is also the question of how to handle a situation where a number of guarantors are executing guarantees in respect of the same obligation. A broad reading of the statute could require each guarantor to attend before a different lawyer (and potentially a different firm) because each guarantor benefits from having other guarantors guarantee the same obligation.

Another concern arises from the term “lawyer” being defined as “a member of the Law Society of Alberta”. This means that lawyers in other jurisdictions cannot notarize a GAA certificate. Students-at-Law would also be excluded. The beneficiary of a guarantee will now need to be more vigilant to ensure that its guarantor is appearing before a lawyer who is in good standing with the Law Society of Alberta or risk becoming the beneficiary of an unenforceable guarantee. Additionally, lawyers could find themselves self-reporting for having inadvertently rendered a GAA certificate unenforceable. These recent amendments have been proclaimed, but have not yet come into force. The CBA Alberta Legislative Review Committee is considering expressing concerns to the Minister of Justice regarding what are hopefully unintended consequences flowing from these amendments. In the meantime, lawyers and lenders should keep a close eye on these pending amendments to the GAA and plan to modify their policies accordingly.