A short forbearance clause that only postpones entry of judgment will not, by itself, stop a lender from assigning consent judgments signed by co-guarantors. In 1001186491 Ontario Inc. v. 8522146 Canada Inc., 2026 ONCA 801, the Court of Appeal for Ontario held that the assignee could step into the lender's shoes and enter judgment on the consents, because the consents did not restrict assignment (paras. 5–6, 9–11). Delayed disclosure of an assignment that had not yet been finalized was not an abuse of process (paras. 14–15). The Court left open whether s. 2 of the Mercantile Law Amendment Act (MLAA) later limits recovery from the other co-debtors (paras. 17–21). The appeal was dismissed (para. 22).
The decision at a glance
Citation: 1001186491 Ontario Inc. v. 8522146 Canada Inc., 2026 ONCA 801 (van Rensburg, Miller and Monahan JJ.A.; heard September 23, 2026; released November 10, 2026; docket COA-26-CV-0276).
Official text: Court of Appeal for Ontario decision
Result: appeal dismissed (para. 22). The motion judge made no reviewable error in refusing to set aside the judgment or stay the action (para. 6). The Court did not decide the application of Mercantile Law Amendment Act s. 2 (para. 21).
What happened
The appellants, together with one co-guarantor, had jointly guaranteed a loan from First Source Financial Management Inc. to a nominee corporation they controlled. After default, the lender sued on the guarantees. In March 2025, each of the guarantors signed consents to judgment in favour of the lender for $3,188,576.37. The lender agreed not to act on the consents for 20 days, later extended to April 10, 2025 (para. 1).
During that forbearance period, the co-guarantor negotiated an agreement to purchase the lender's rights in the action for $2.7 million. A numbered company, 1001186491 Ontario Inc., was incorporated to complete the purchase, with financing from members of that co-guarantor's family. The lender assigned its rights, including the consents, to the numbered company for $2.7 million (para. 2). The lender informed the appellants of the assignment on April 17, 2025. Relying on the consents, the numbered company obtained judgment against the appellants jointly and severally on May 15, 2025 (para. 3).
The appellants moved to set aside that judgment and to stay or dismiss the action. They argued that they had consented to judgment only in favour of the original lender, and that obtaining judgment without timely notice of the assignment was an abuse of process (para. 4). The motion judge dismissed the motion (para. 5).
What the Court held
The Court held that the motion judge made no reviewable error (para. 6). The consents did not restrict the lender's right to assign its rights in the action, other than the forbearance period itself, which had elapsed before the assignment was complete (paras. 5, 9). If the appellants wanted to restrict assignment, that restriction needed to be written into the consents or otherwise agreed. They identified no such agreement (para. 9). Because the assignment was valid, the numbered company was entitled to step into the lender's shoes and act on the consents. Naming it as plaintiff, and barring claims against it as well as the original lender, simply reflected that assignment (paras. 10–11).
On abuse of process, the motion judge found that although a price had been agreed on March 19, the assignment agreement was not finalized until sometime between April 10 and April 16, and it was disclosed almost immediately afterward, on April 17 (paras. 13, 15). Those findings are entitled to deference (para. 14). A duty to disclose a partial settlement agreement arises only after the settlement has been concluded (para. 14). The appellants did not identify prejudice from that short interval, or from disclosure of the deed of assignment rather than the complete agreement, that could amount to an abuse of process (para. 15). No notice was required before the numbered company entered judgment, because the appellants had already consented to the judgments and acknowledged the debt before the assignment (para. 15).
The appellants also argued that the practical effect of the assignment was to reduce the number of guarantors from whom payment would be sought (para. 17). The parties took opposed positions on whether s. 2 of the Mercantile Law Amendment Act, R.S.O. 1990, c. M.10, limited recovery from the other co-debtors, or whether the numbered company took the rights as a third-party assignee under s. 53 of the Conveyancing and Law of Property Act (paras. 18–20). The Court held that it was unnecessary to decide that issue. The appeal concerned the validity of the assignment, not statutory limits on the assignee's right to recover under it (para. 21).
What changed, and what didn't
The Court held that these consents could be assigned, and entered by the assignee, because neither the consents nor another agreement restricted assignment (paras. 9–11, 22). A duty to disclose a settlement arises once the settlement is concluded, and no further notice was required before entering judgment on already-signed consents (paras. 14–15). The Court did not decide whether MLAA s. 2 later caps recovery among co-guarantors (para. 21).
Who this affects
This decision matters for guarantors and other defendants who are asked to sign a consent to judgment subject to forbearance (paras. 1, 9); for lenders and assignees who take those consents (paras. 2, 9–11); and for parties drafting forbearance terms, who need to say expressly if assignment is restricted (para. 9). It is commercial litigation about loan guarantees and consent judgments, not residential tenancy procedure.
Practical takeaways
If assignment should be restricted, say so in the consent or in a side agreement. A clause that only delays entry of judgment is not a ban on assignment (paras. 5, 9, 13).
A valid assignee can step into the lender's shoes and enter judgment in its own name (paras. 10–11).
Disclosure timing is measured from when the assignment is concluded, not from earlier price talks (paras. 13–15).
Entering judgment on already-signed consents did not, on these facts, require further notice (para. 15).
Questions about contribution and recovery among co-debtors may still arise later. The Court left MLAA s. 2 undecided (paras. 17–21).
Frequently asked questions
Can a lender assign a consent to judgment signed by co-guarantors?
Yes, on these facts, because the consents did not restrict assignment. Any such restriction needed to be in the consents or otherwise agreed (paras. 5, 9–11).
Does a short forbearance period stop the lender from selling the claim?
Not by itself. The only condition found here was that judgment not be entered during the forbearance period. There was no condition that the action not be assigned (paras. 1, 5, 9, 13).
Was delayed disclosure of the assignment an abuse of process?
Not on these findings. The assignment was not finalized until mid-April and was disclosed almost immediately afterward. A duty to disclose a settlement arises only after it is concluded (paras. 13–15).
Did the assignee have to give notice before entering the consented judgment?
No, on these facts. The appellants had already consented to the judgments and acknowledged the debt before the assignment (para. 15).
Did the Court decide how much a co-guarantor's assignee can recover from the others?
No. The Court left Mercantile Law Amendment Act s. 2 undecided (paras. 17–21).
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Written by the lawyers of Francis Mehr LLP. Published [DATE OF PUBLICATION]; reflects the decision released November 10, 2026. This post is general information, not legal advice.