Court of Appeal for Ontario

Date: 20210909 Docket: C68472

Feldman, Paciocco and Coroza JJ.A.

BETWEEN

Kenneth James Plaintiff (Appellant)

and

Anna Chedli and Anna Chedli as Estate Trustee with a Will of the Estate of Amdouni Chedli aka Dennis Chedli Defendants (Respondents)

Counsel: Patrick Bakos, for the appellant Michael R. Kestenberg and Aaron Hershtal, for the respondents

Heard: March 9, 2021 by videoconference

On appeal from the judgment of Justice Andrew Pinto of the Superior Court of Justice, dated June 9, 2020, with reasons reported at 2020 ONSC 3235.

Feldman J.A.:

A. Introduction

[1] When Dennis Chedli died in 2015, he had not repaid two significant loans totalling well over $1 million, that he had obtained from lenders represented by a lawyer, the appellant, Kenneth James. The loans were advanced based on two promissory notes. The first promissory note was signed by both Dennis Chedli and his wife, the respondent Anna Chedli. It was secured by a collateral mortgage on the couple’s home which was held solely in Anna Chedli’s name. The second note was signed by Dennis Chedli alone.

[2] A demand was made for payment of both loans on October 11, 2016, and this action was commenced on February 23, 2017.

[3] The issue on the respondents’ summary judgment motion was whether those notes had become unenforceable, either because they were statute-barred, or because they had been materially altered without the assent of the borrowers, rendering them void under the Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 144(1). Because Dennis Chedli had passed away and the action is against his estate, s. 13 of the Evidence Act, R.S.O. 1990, c. E.23, requires that the appellant’s evidence that Dennis Chedli had assented to the alteration of the notes be corroborated by some other material evidence.

[4] The motion judge granted summary judgment in favour of the respondents and dismissed the claims against them. He found that: 1) the first note was not enforceable, either because it had already been paid off in full, or if it had not, then it had been materially altered without the assent of the borrowers and was voided and not enforceable against them; and 2) the second note was not enforceable because it was statute barred. There was no independent corroboration that it had been consensually converted to a demand note and, because it remained a term note, the action was out of time.

[5] I would allow the appeal with respect to the enforcement of the first note against the estate of Dennis Chedli. The motion judge’s finding that the first note was repaid in full and then re-advanced as a fresh loan was not available on the evidence. The motion judge further erred by finding there was no independent corroborating evidence that Dennis Chedli had assented to the alterations to the note, including its conversion from a term note to a demand note. The first note was therefore not voided as against Dennis Chedli, and the action to enforce the note as a demand note against his estate was not statute-barred.

[6] However, I would dismiss the appeal from the judgment of the motion judge dismissing the claim against Anna Chedli on the first note and collateral mortgage. While Dennis Chedli assented to the conversion of the first note to a demand note, there was no evidence that Anna Chedli assented to it. Therefore, the note is void against Anna Chedli under s. 144(1) of the Bills of Exchange Act, and the collateral mortgage she gave is also unenforceable.

[7] With respect to the second note, the motion judge did not err in finding that the note had not been effectively converted to a demand note because there was no corroborating material evidence that Dennis Chedli had assented to that change. I agree, therefore, that the second note remained a term note and the action to enforce the second note was out of time.

B. Background Facts

a) The First Note

[8] The first loan came about when Dennis Chedli had the opportunity to purchase and immediately “flip” a valuable property in Mississauga to a major property developer or pension fund manager. He was doing this in conjunction with his business associate, Joseph Chetti. To take advantage of the opportunity, Dennis Chedli required a loan of $500,000 for a deposit. The funds were provided by a group of investors who made the loan through the appellant, a lawyer known to all the parties, in trust.

[9] The documentation securing the loan consisted of a promissory note and a collateral mortgage. The note was signed by both Dennis Chedli and his wife, the respondent Anna Chedli. The collateral mortgage on the couple’s home residence, which was held solely in Anna Chedli’s name, was given by her with Dennis Chedli’s consent. The note was dated October 18, 2006 and was in the amount of $531,000 plus simple interest of 10% per annum, payable monthly in the amount of $4,425, with the balance due on October 25, 2007. The $531,000 principal amount included a loan arrangement fee of $25,000 and $6,000 for the appellant’s legal fees and disbursements.

[10] The Mississauga property transactions were completed within a few weeks, and around November 20, 2006, Dennis Chedli and Joseph Chetti attended at the appellant’s firm office and gave him a certified cheque for $550,000 from a numbered company acting on Dennis Chedli’s behalf, which the appellant deposited into his trust account. On Dennis Chedli’s instructions, the appellant then issued a cheque to Dennis Chedli for $50,000 and a second cheque for $500,000 to Shibley Righton, a law firm that acted for Joseph Chetti. The $31,000 fee portion of the loan was paid at that time, although the mechanics of that payment were not clearly explained in the record.

[11] The explanation for the $500,000 cheque to Shibley Righton was that Dennis Chedli asked the appellant, representing the lenders, if he could retain the loaned funds until the note was due in order to invest in other opportunities with Joseph Chetti, and the appellant agreed. The first loan was referred to by the appellant in correspondence as “the Chetti loan”.

[12] The appellant documented the transaction in a letter dated November 20, 2006, addressed to both Dennis and Anna Chedli. The letter stated:

RE: Promissory Note and Collateral Mortgage loan to secure advance of good faith deposit for acquisition of North West corner Eglinton Avenue West and Hurontario Street, Mississauga

We confirm receipt of the sum of $550,000.00 from 2003361 Ontario Ltd., on your behalf, and Mr Chedli’s request that the said sum of $500,000.00 be re-advanced on the above noted loan.

Accordingly we are enclosing our trust cheques drawn in accordance with your instructions as follows

1. Shibley Righton $500,000.00
2. Dennis Chedli $50,000.00 $550,000.00

The amount secured by the promissory note is now reduced to $500,000.00 and the interest payments due thereunder remain at ten (10%) percent per annum but will now be payable quarterly in the amount of $12,500.00 each on the 15 th day of February, May, August and November in each year until repaid.

Our client is also prepared to accept prepayment of the principal and interest at any time or times, in whole or in part, without notice or bonus.

[13] The loan was extended to November 15, 2008 by another letter from the appellant to Dennis and Anna Chedli dated November 15, 2007. The $50,000 of interest for the original term had already been paid in May 2007 to the appellant by Joseph Chetti.

b) The Second Note

[14] Dennis Chedli borrowed a further $650,000 in April 2008, secured by a promissory note he gave to a Panamanian company, Tithe Holdings Inc., in trust, which held the note in trust for the appellant. The note was dated April 17, 2008 and was due on July 17, 2008. Interest was 15% annually, compounded monthly. This second loan was referred to by the appellant in correspondence as “the share purchase loan”.

c) Payment History on Both Loans

[15] Both loans had fallen into arrears by the late summer and fall of 2008, although Dennis Chedli made sporadic payments over the course of 2008. By a letter dated November 19, 2008 addressed to Dennis and Anna Chedli and headed: “RE: Chetti Loan”, the appellant referenced Dennis Chedli’s concerns with Joseph Chetti not meeting his payment obligations to him. The appellant stated that he and Nick De Luca, an accountant and a friend and business associate of both Dennis Chedli and the appellant, had reviewed the issue with the lenders, who had agreed “to further extend the loan to you on a month to month basis to hereafter become due on demand.”

[16] The letter also stated that the payments on both loans would be combined. The Chetti loan would change back from quarterly payments to monthly payments of $4,166.67, and combined with the monthly payment of $8,125 on the share purchase loan, the monthly total interest payments would be $12,291.67. The letter noted that a payment of $28,750 was currently due, and memorialized Dennis Chedli’s advice to the appellant that he was arranging to secure that amount from the broker holding shares for him. The letter asked that the $28,750 payment be made before the new revised re-payment plan, established by the letter, began.

[17] Following this letter, in January 2009, Dennis Chedli provided the appellant with a series of post-dated cheques to cover the period from January 2009 to March 2010, drawn on the account of another business associate, Matthew Sacco. A number of those cheques were dishonoured. Dennis Chedli provided four further payments of $30,000 each between July and November 2009. Each payment was documented and applied by the appellant to the loans and receipted in a letter to Dennis Chedli.

[18] I pause this narrative to note that all of the correspondence in the record is from the appellant to the Chedlis, or to Dennis Chedli alone; there is no correspondence going the other way. However, the appellant’s letters refer to discussions with Dennis Chedli about the loans and document the application of all payments and the balance outstanding.

[19] The last payment on both loans was made on March 17, 2010. On March 20, 2010, the appellant wrote to Dennis Chedli regarding the consolidation and revision of both loans. The letter noted that Dennis Chedli had arranged for additional security for the loans through a convertible debenture from a company that he had invested in. The appellant stated in the letter that he was “prepared to agree” to various terms, including the following:

• after March 16, no further interest would accrue on the loans and the then current balance would become due on demand;
• quarterly payments of $30,000 would continue until certain shares were sold; and
• when the debenture was converted, the proceeds would be applied to the “share purchase” portion of the debt (the $650,000 loan secured by the second note).

[20] In the following years, there were discussions among the group (Dennis Chedli, Joseph Chetti, Nick De Luca, Matthew Sacco and the appellant) about how Dennis Chedli would be able to repay the loans, but no further payments were made. Dennis Chedli died on September 12, 2015 and demand was made for payment of both loans on October 11, 2016. This action was commenced on February 23, 2017.

C. Findings by the Motion Judge

[21] The motion judge first considered whether the action could be determined on summary judgment. He found that there was a full record, consisting of affidavits appending the relevant documents from the appellant, the appellant’s bookkeeper, Anna Chedli, and several other deponents, including Dennis Chedli’s business associates. The record also included the transcripts of cross-examinations of some of the deponents. The motion judge concluded that summary judgment would be a proportionate, more expeditious and less expensive means to achieve a just result.

[22] The first substantive issue was the enforceability of the first promissory note and the collateral mortgage. The motion judge accepted the respondents’ argument that when Dennis Chedli brought the certified cheque for $550,000 to the appellant and he deposited it into his trust account, the legal effect was that the note was paid off, and as a result, the collateral mortgage “fell away”. The motion judge found that the loan for $500,000 was then “re-advanced” to Dennis Chedli only, as a new loan. Therefore, because the first note loan was repaid, neither the first promissory note nor the collateral mortgage were enforceable by the appellant in this action.

[23] The motion judge also addressed the respondents’ alternative submission that if the first note was not paid off, it was nevertheless unenforceable as the claim was statute-barred. This submission relied on the different limitation periods that apply to term notes and demand notes. If the notes remained term notes, then the action to enforce them was statute-barred, having been brought seven years after the last payment on the notes: Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 13(1). However, if they were converted from term notes to demand notes with the assent of the promisors, Dennis and Anna Chedli, then the action was not statute-barred as it was commenced less than two years after demand for repayment was made: Limitations Act, 2002, s. 5(3).

[24] Two letters from the appellant referred to the notes becoming demand notes. The first was the letter dated November 19, 2008 from the appellant to Dennis and Anna Chedli. The second was his letter dated March 20, 2010, addressed to Dennis Chedli alone, in which the appellant stated that he was “prepared to agree” to a series of terms. The motion judge found that the March 2010 letter was merely a proposal for a new agreement to change the terms of the notes, and that the conditions of the new agreement never materialized. He also observed that neither Anna Chedli nor Dennis Chedli acknowledged the letters in writing or signed anything agreeing to a change of terms of the notes.

[25] The issue, therefore, was whether there was evidence that either Dennis or Anna Chedli had agreed to convert the notes from term notes to demand notes. With respect to Anna Chedli, the appellant acknowledged that he never spoke with her about the issue. With respect to Dennis Chedli and the action against his estate, s. 13 of the Evidence Act was applicable, requiring corroboration of any evidence from the appellant that Dennis Chedli had assented to any material change to the notes.

[26] The motion judge considered six potential pieces of corroborative evidence that Dennis Chedli had agreed to amend the notes from term notes to demand notes, and rejected all six. These pieces of evidence included reports of conversations about repayment of the loan and how to accomplish it with Nick De Luca, Matthew Sacco and Joseph Chetti, as well as cheques and bank drafts delivered to the appellant, which he recorded as paying down the loans up to March 17, 2010.

[27] Section 144(1) of the Bills of Exchange Act provides that where there has been a material alteration of a note, the note is void against any party liable under it who did not assent to the material alteration. Having found there was no independent corroborative evidence that Dennis Chedli had agreed to the amendment of the notes, the motion judge found that the notes were voided and not enforceable against the estate.

[28] The motion judge also considered the potential application of the ten-year limitation period under the Real Property Limitations Act, R.S.O. 1990, c. L.15, s. 43(1), in respect of the collateral mortgage to the first promissory note, assuming that note had not been paid off. While that provision would have applied, the first note was not enforceable against Anna Chedli because of the application of s. 144(1) of the Bills of Exchange Act. Because Anna Chedli did not assent to the amendment of the first note from a term note to a demand note, that note became void as against her and therefore both the note and the collateral mortgage were not enforceable against her.

[29] In the result, the motion judge granted the respondents’ motion for summary judgment and dismissed the appellant’s claims.

D. Issues

[30] The seven issues raised by the appellant on the appeal can be consolidated into the following:

a) Did the motion judge err by deciding the motion on summary judgment? b) Did the motion judge make an unreasonable inference from the evidence that the first promissory note was repaid by Dennis Chedli in November 2006 and the funds re-advanced as a new loan? c) Did the motion judge err by finding that s. 144(1) of the Bills of Exchange Act applied and voided the first note as against Anna Chedli? d) Did the motion judge err by finding that there was insufficient corroborative evidence that Dennis Chedli assented to the amendment of the notes from term notes to demand notes?

E. Analysis

a) Did the motion judge err by deciding the action on summary judgment?

[31] While the appellant raised this issue on the appeal, his real complaint was with the inferences the motion judge drew from the evidence rather than with the summary judgment procedure. As the motion judge stated, he had a full record before him. Any missing evidence was from Dennis Chedli, who had passed away. In responding to the motion for summary judgment, the appellant had an obligation to “put its best foot forward”: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 26, aff’d 2014 ONCA 878, leave to appeal refused, [2015] S.C.C.A. No. 97. It was not open to him to rely on the prospect that additional evidence may be tendered at trial to justify the necessity of proceeding to trial. The motion judge was entitled to treat the record as complete and to conclude that it was sufficient to determine the action on summary judgment.

Standard of review

[32] Deference is to be accorded to a summary judgment motion judge’s findings of fact, unless the judge has misapprehended the evidence, resulting in a palpable and overriding error, or where the inference-drawing process from the proved evidence is palpably in error, unreasonable or unsupported by the evidence: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 23; H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1. S.C.R. 401 at para. 56. Errors of law are reviewed on a correctness standard: Housen, at para. 8.

b) Did the motion judge err by making an unreasonable inference from the evidence that the first note was repaid by Dennis Chedli in November 2006 and the funds “re-advanced” as a new loan?

[33] The motion judge accepted the respondents’ submission that the term “re-advanced” was suggestive of funds coming in (and being paid off) and then going out again. Therefore, the appellant’s use of the term “re-advanced” in his letter of November 20, 2006 to Dennis and Anna Chedli, in which he reported on the status of the outstanding $500,000 loan, meant that the original loan that was secured by a promissory note and collateral mortgage had been paid off, and a new loan for $500,000 was re-advanced. In my view, the motion judge erred by accepting this submission. There was no basis either in fact or in law for this finding.

[34] The evidence was that Dennis Chedli came to the appellant’s office with the certified cheque for $550,000, and asked if he could repay the $31,000 fee portion of the $531,000 loan, but retain $500,000 for further investment with Joseph Chetti until the maturity date of the first note. The appellant agreed.

[35] From the lenders’ point of view, it was clearly important that the loan was secured by a promissory note and collateral mortgage. There was no evidence that the appellant, who represented the lenders, intended to undermine the efficacy of that security. His letter of November 20 makes that clear. Nor was there evidence that Dennis Chedli wanted anything other than to retain the funds until the maturity of the note.

[36] It appears that the appellant believed he could amend the note with the concurrence of the borrowers, and that he could obtain their concurrence through oral agreement with Dennis Chedli only, confirmed by a letter addressed to both Dennis and Anna Chedli. In other words, he did not give deliberate consideration to s. 144(1) of the Bills of Exchange Act, and how to ensure that he had demonstrable evidence of assent to amendments. That led to the evidentiary issues that arose on the motion, that will be discussed later in these reasons.

[37] However, there is no evidence that either the appellant or Dennis Chedli intended to start fresh with a new loan for $500,000. The appellant’s evidence on cross-examination, which the motion judge quoted, confirms that:

Q. So from my understanding of this letter, Mr. Chedli came in, paid off the promissory note and then asked for an indulgence and additional or new monies so that he could do something else that he was involved in and use the promissory note as security for that fresh advance, is that correct?

A. He asked that the loan be -- the loan was paid off within a month of it being advanced, and he asked that the money -- that the 500 [i.e. $500,000] be allowed to run to maturity of the note which was the subsequent year.

Q. I understand, but you'll agree with me that when he came in and paid the $550,000 he, for all practical purposes, paid off the promissory note and then there was a fresh advance and used the promissory note as security for that fresh advance.

A. Well, no. My -- my recollection is that he paid the costs of the note. The $31,000.

[38] The motion judge put his focus on the word “re-advanced” that the appellant used in his November 20, 2006 letter. I agree with the position taken by counsel for the appellant on the motion that that word was poorly chosen. However, it has no legal significance in determining the intention of the parties when they took the steps they did. The balance of the principal ($500,000) continued to accrue interest at the rate provided in the note until the original maturity date, although the appellant changed the payments from quarterly to half-yearly. It is clear from the letter that the appellant intended that both Chedlis would continue to be bound by the note and the collateral mortgage would continue to exist. There is no reference to a new loan.

[39] In my view, with respect, the motion judge’s finding that the appellant, as the lenders’ representative, issued a new loan for $500,000 is unreasonable and not available on the record.

c) Did the motion judge err by finding that s. 144(1) of the Bills of Exchange Act applied and voided the first note as against Anna Chedli?

[40] Sections 144(1) and (2) of the Bills of Exchange Act address the consequences when there is a material alteration to a bill, including a promissory note. Section 145 sets out five circumstances that constitute material alterations. These sections state:

144(1) Subject to subsection (2), where a bill or an acceptance is materially altered without the assent of all parties liable on the bill, the bill is voided, except as against a party who has himself made, authorized or assented to the alteration and subsequent endorsers.

(2) Where a bill has been materially altered, but the alteration is not apparent, and the bill is in the hands of a holder in due course, the holder may avail himself of the bill as if it had not been altered and may enforce payment of it according to its original tenor.

145 In particular, any alteration

(a) of the date, (b) of the sum payable, (c) of the time of payment, (d) of the place of payment, (e) by the addition of a place of payment without the acceptor’s assent where a bill has been accepted generally,

is a material alteration.

[41] These sections make it clear that a note can be altered with the assent of all parties, and the alteration will be binding as between them. However, by making a material alteration without the assent of all the parties to the note, the note becomes void against any party who did not assent to the material alteration: Ian F.G. Baxter, The Law of Banking, 4th ed. (Scarborough: Thomson Canada Limited, 1992), at p. 31. The only issue in this case was whether either Dennis or Anna Chedli had assented to the alteration of the notes. It was accepted that a note could be materially altered by an agreement or a letter. Baxter states, in the context of discussing s. 144 of the Bills of Exchange Act, that “[o]n principle a written agreement can be varied by consent, and even by a later oral agreement”: Baxter, at p. 31, fn. 189. [1] He references Goss v. Nugent (1833), 5 B & Ad. 58, 110 E.R. 713 (Eng. K.B.).

[42] In this case, the first note was materially altered by the appellant in his letter of November 20, 2006 to the Chedlis. He reduced the principal amount of the note from $531,000 to $500,000, and the timing of the interest payments on the new principal amount. The appellant acknowledged in his testimony that Anna Chedli never gave her assent to this or any subsequent changes to the first note. Therefore, in accordance with s. 144(1) of the Bills of Exchange Act, the first note is void as against Anna Chedli and unenforceable against her. Since the collateral mortgage was given only by Anna Chedli as the sole person on title to the couple’s home residence, the mortgage is also unenforceable, and any potential limitation period consequences that may have arisen from the application of the Real Property Limitations Act do not arise.

d) Did the motion judge err by finding that there was insufficient corroborative evidence that Dennis Chedli assented to the amendment of the first and second notes to make them demand notes?

[43] In order to determine whether Dennis Chedli had assented to the alterations to the first note, including its conversion from a term note to a demand note in the letter of November 19, 2008, the motion judge had to apply s. 13 of the Evidence Act, which provides:

13. In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.

[44] The motion judge noted that the independent evidence can be direct or circumstantial, and can consist of a single piece of paper or several pieces considered cumulatively, referring to Burns Estate v. Mellon (2000), 48 O.R. (3d) 641 (C.A.), at para. 29.

[45] The motion judge then considered and rejected the six pieces of evidence submitted by the appellant as independent corroboration that Dennis Chedli assented to the conversion of both notes to demand notes. The motion judge found either that the proffered evidence did not refer specifically to the conversion of the notes to demand notes, or it was not independent of the appellant’s letters that documented the conversion.

[46] The first piece of evidence was the affidavit evidence of Nick De Luca, Dennis Chedli’s long-time accountant, regarding many conversations between them. He confirmed the extension of the first note; Dennis Chedli’s ongoing difficulties obtaining money from his business associates; and his regular meetings with Dennis Chedli, from 2010 until his death, in which they discussed repayment of the combined debt, restructuring his affairs to generate money to pay the debt, and cheques Dennis Chedli provided, many of which were returned due to insufficient funds. The motion judge rejected this evidence as corroborative because it did not include evidence that Dennis Chedli had specifically assented to the conversion of the notes to demand notes.

[47] The motion judge similarly discounted the evidence of four other witnesses: Dennis Chedli’s business associates Matthew Sacco, Joseph Chetti and Patrick Carbone; and Rosemary Cremer, the appellant’s accountant.

[48] Finally, the motion judge was directed to a $30,000 bank draft dated July 28, 2009 that Dennis Chedli provided to the appellant’s law firm in trust. The appellant documented the receipt and application of the $30,000 in his letter to Dennis Chedli dated August 5, 2009, which reads:

Personal and Confidential

Dear Dennis:

RE: Loans for Chetti and Share Purchase

Further to my letter of January 29, 2009, I acknowledge receipt of a further sum of $30,000.00 for application towards the afore-noted loans. I have applied the said sum as follows:

Chetti loan May 15 and August 15, 2009 (2 x $12,500.00) $25,000.00 Applied to outstanding interest on share purchase loan 5,000.00 Total $30,000.00

You will note the $500,000.00 loan is now current and in fact paid to August 15, 2009.

With regard to the $650,000.00 loan, it is currently unpaid for the monthly payments of $8,125.00 due October 17, 2008 to July 17, 2009 inclusive totally [sic] $81,250.00 less the sum of $2,000.00 applied as per my letter of January 29, 2009 and the sum of $5,000 as aforesaid leaving a net due as of July 17, 2009 of $74,250.00.

I confirm the borrower’s commitment to continue monthly payments commencing August 31, 2009 of at least $30,000.00 towards the remaining unpaid interest and thereafter in reduction of the principal.

Please stress the absolute need that the commitment of $30,000 per month is maintained.

Yours truly,

Ken James

[49] The motion judge noted that the $30,000 bank draft itself contains no information other than that it is payable to the appellant’s law firm in trust. He concluded that although there is “some alignment between the $30,000 amount and the combined interest payments that are referenced in [the appellant’s] letters”, this was not evidence that was independent of the appellant, because it is the appellant’s own evidence, contained in his affidavit, that was the source of the information about the bank draft.

[50] Having rejected all of the proffered evidence as lacking the corroborative independence required by s. 13 of the Evidence Act, the motion judge found that neither Dennis nor Anna Chedli had assented to the material alterations to the notes.

[51] The issue for the court on appeal is whether the motion judge erred in law in concluding that there was no independent evidence to corroborate Dennis Chedli’s assent to the conversion of the notes from term loans to demand loans, or whether the motion judge made a palpable and overriding error of fact or drew an unreasonable inference by concluding that Dennis Chedli’s payment of $30,000 was not necessarily a payment of the two loans and therefore an acceptance of the revised terms.

[52] In my view, there were two pieces of potentially cogent, independent evidence to corroborate Dennis Chedli’s assent to the alteration of the first note, including its conversion from a term loan to a demand loan as described in the appellant’s letter of November 19, 2008. The first was the evidence of Nick De Luca of his conversations with Dennis Chedli following the conversion of the note, where Dennis Chedli clearly acknowledged his intent to repay both notes. While Nick De Luca does not say that they specifically discussed the conversion of the first note, one can infer that Dennis Chedli believed he remained bound to repay the first note, which indicates that he accepted that its terms had been revised.

[53] The question on appeal is whether, applying the strict standard of review that applies to findings of fact and inferences drawn from facts, was it a palpable and overriding error or unreasonable for the motion judge to reject that inference? In my view, that inference is not only available, but it is logical and reasonable. However, if that evidence stood alone, I would not be prepared to find that the motion judge made a palpable and overriding error by requiring a report from Nick De Luca that Dennis Chedli had specifically acknowledged that the note had been converted to a demand note and he remained bound by it.

[54] However, the evidence of Nick De Luca does not stand alone. Dennis Chedli made a number of payments after the first note was converted, including the $30,000 bank draft, $25,000 of which was allocated by the appellant to the Chetti loan, which was the first note.

[55] Talking about owing money and the need to make payment arrangements is one thing – making payments is quite another. The payment constitutes circumstantial evidence that corroborates Dennis Chedli’s assent to the alteration of the first note, including its conversion to a demand note. There can be no explanation for Dennis Chedli making payments to the appellant except to pay money that is owing. The inference is further supported by the fact that Dennis Chedli never responded or objected to the appellant’s letter that confirms and applies the payment to the loans.

[56] After November 2008, the date to which the term of the first note was initially extended, the whole amount would have been due and owing unless the note had been extended by mutual agreement. That further extension, including the conversion to a demand obligation, was made in the November 2008 letter. We can be satisfied that Dennis Chedli assented to the extension and its terms because he continued to make payment in accordance with those terms following the amendment.

[57] In my view, the motion judge misapprehended the evidence, drew an unreasonable inference, and erred in law by failing to find that Dennis Chedli’s payment of $30,000 to the appellant after the appellant amended the first note and converted it to a demand note constituted independent corroborative evidence of his assent. Nick De Luca’s evidence of his discussions with Dennis Chedli is consistent with that conclusion.

[58] There is, however, no similarly corroborative independent evidence that Dennis Chedli assented to the conversion of the second note to a demand note. While there is evidence of discussions with Nick De Luca, no payments were made after the appellant’s March 20, 2010 letter that discussed the conversion of the second note to a demand note. I am not prepared to find that the motion judge erred in his conclusion that Nick De Luca’s evidence in relation to the second note, standing alone, is insufficient to independently corroborate Dennis Chedli’s assent.

F. Conclusion and Result

[59] The judgment of the motion judge with respect to the enforceability of the first note against the estate of Dennis Chedli must be set aside. The motion judge erred in fact and in law by finding that the first note was paid off, and in the alternative, that there was no independent corroborative evidence from Dennis Chedli that he assented to the conversion of the note from a term note to a demand note. Because this action was commenced within two years of the appellant’s demand for repayment, the action is not statute-barred as against the estate of Dennis Chedli.

[60] I would dismiss the appeal from the judgment of the motion judge dismissing the claim against Anna Chedli on the first note and the collateral mortgage. While Dennis Chedli assented to the conversion of the first note to a demand note, there is no evidence that Anna Chedli assented to it. Therefore, the note is void against Anna Chedli under s. 144(1) of the Bills of Exchange Act, and the collateral mortgage she gave is also unenforceable.

[61] I would dismiss the appeal from the judgment dismissing the appellant’s claim against the estate of Dennis Chedli on the second promissory note. The motion judge found that either it never was amended because the amendment was conditional, in which case it remained a term loan and the action is out of time and statute-barred, or the note was amended without Dennis Chedli’s assent, in which case it is void as against him. The motion judge was entitled to find that there is no independent corroborative evidence that Dennis Chedli assented to the conversion of the second note from a term note to a demand note. The action to enforce the note is therefore dismissed.

[62] In the result, I would allow the appeal in part. The parties had agreed on a costs award of $15,000 to the winner. As it turns out, success is divided. I would invite the parties to renew their discussion regarding costs and advise the court. If the parties cannot agree, they may each make a two-page written submission within three weeks of the release of these reasons, addressing the costs of the appeal and below.

Released: September 9, 2021 “K.F.” “K. Feldman J.A.” “I agree. David M. Paciocco J.A.” “I agree. S Coroza J.A.”

[1] I note that Bradley Crawford, in his text Crawford and Falconbridge on Banking and Bills of Exchange, 8th ed. (Toronto, Canada Law Book, 1986) at p. 1686, refers to the Nova Scotia Court of Appeal decision in Royal Bank v. Davidson (1972), 25 D.L.R. (3d) (N.S.C.A.), stating that it stands for the proposition that a note can only be amended on its face or back. That case has not been referred to by courts in Ontario.