When debtors are sued for amounts owing under a contract, it is not unusual for them to plead the defence of non est factum.  This often serves as a defence of last resort.  However, it is a difficult defence to argue successfully as it only applies in a relatively narrow set of circumstances.  In this regard, reviewing the law around the defence is helpful.

The doctrine of non est factum can be traced back to a U.K. court decision of 1869.   It is used as a defence to a claim to enforce a contractual covenant.  Translated from the Latin, non est factum means “it is not [my] deed.”  If successful, the defence is that the party who signed the contract did not actually agree to it; in other words, they did not sign consensually.  It is often raised by a party that contends it was unaware of what he or she signed and, therefore, should not be held to the terms of the signed document.

A Non Est Factum Lawsuit Often Involves The Reliance By A Third Party On Documents Signed By A Defendant

The leading case in Canada on the defence is Marvco Colour Research Ltd. v. Harris.  In that case, the Supreme Court of Canada considered the doctrine’s applicability in the context of a mortgage signed by the defendants and relied upon by the plaintiff.  The defendants signed the mortgage based on a representation made to them by another individual that the document simply corrected details on an earlier mortgage they had given to a bank.  However, the document granted a mortgage over the defendants’ property to the plaintiff.  The plaintiff relied on the document to release another individual from certain obligations owed to it.  On an action for foreclosure by the plaintiff, the defendants argued that the doctrine of non est factum applied even though they had been careless in signing the documents in issue.  Both defendants were educated, literate and spoke English, and both had a “basic understanding of mortgages.”

A Defendant Who Carelessly Signs A Document And An Innocent Third Party Who Relies On It Should Generally Be Liable For Any Losses

The primary issue before the Court was whether a person who did not exercise “reasonable care” in signing a contract could successfully raise the doctrine against someone who relied on the signed document in good faith.  The Court noted that the rationale for the rule was that, as between an innocent party and the party raising the defence, the law needed to consider the fact that the innocent party was “completely innocent of any negligence, carelessness or wrongdoing.”  Conversely, the party that raised the defence had “made it possible for the wrongdoers to inflict a loss.”  Since that party could have avoided the loss by exercising “reasonable care,” they should bear it.

The Defence of Non Est Factum Poses a Challenge to the Need for Certainty and Security in Commerce

The Court also emphasized an additional basis justifying the conclusion it reached.  Specifically, the Court noted “the need for certainty and security in commerce.”  It referenced the earlier U.K. case of Muskham Finance Ltd. v. Howard, in which that Court had stated:

“much confusion and uncertainty would result in the field of contract and elsewhere if a man were permitted to try to disown his signature simply by asserting that he did not understand that which he had signed.”

Carelessness on the Part of the Signer is Usually Fatal to the Defence of Non Est Factum

Evidence of carelessness on the part of the party that raises the defence of non est factum will disentitle that party from claiming the document was not theirs.  As the Court noted in Marvco, “the magnitude and extent of the carelessness, the circumstances which may have contributed to such carelessness, and all other circumstances must be taken into account” in determining whether the defence is applicable.

What constitutes carelessness? In Sharif v. Shaikh et al., the Superior Court of Justice referred to the decision of the Court of Appeal in The Guarantee Company of North America v. Ciro Excavating & Grading Ltd. and stated that “failing to read a document, ask questions about it, ask for an opportunity to obtain independent legal advice about it, ask for a translation of it, or to ask to speak to a friend about it is careless.”

Evidence of a Misrepresentation is a Necessary Element of the Defence

The Marvco case gave rise to the modern formulation of the defence of non est factum.  In its decision in Bulut v. Carter, the Court of Appeal summarized the defence as being available to a person who signs a document based on a misrepresentation, is mistaken as to the “nature and character” of that document, and has not been careless in signing it.  As the Court emphasized in Bulut and the Guarantee Company case, misrepresentation is an essential defence element.  In other words, the absence of misrepresentation and evidence of carelessness in signing on the defendant’s part is fatal to a plea of non est factum.

A Plea of Non Est Factum May Be Ripe for a Motion for Summary Judgment

Given the difficulty defendants face in successfully arguing the defence of non est factum, creditors may wish to give significant consideration to bringing a motion for summary judgment to forestall protracted litigation.

Toronto Litigation Lawyers Advising On Complex Corporate Commercial Litigation And Business Dispute Matters 

The team at Milosevic & Associates in Toronto is available to provide effective legal representation in business disputes, including contractual claims against debtors that plead non est factum or other defences.  Contact us online or by phone at (416) 916-1387 for a consultation.