COURT OF APPEAL FOR ONTARIO

DATE: 20260327

DOCKET: COA-25-CV-0887

Lauwers, Huscroft and Gomery JJ.A.

BETWEEN

Bank of Montreal

Applicant (Appellant)

and

Master Manoj Makhija also known as Manoj Makhija

Respondent (Respondent)

Sean Zeitz and Jakob Bogacki, for the appellant

Peter Neufeld, for the respondent

Heard: February 23, 2026

On appeal from the order of Justice William S. Chalmers of the Superior Court of Justice, dated June 9, 2025, with reasons reported at 2025 ONSC 3407.

REASONS FOR DECISION

[1] The Bank of Montreal appeals the dismissal of its civil fraud claim against Master Manoj Makhija. The Bank contends that the application judge misapplied the legal test for civil fraud; ignored or misapprehended the evidence; and issued reasons for judgment insufficient to permit meaningful appellate review.

[2] As we are not persuaded that the application judge made such errors, the appeal is dismissed.

Background

[3] In 2019, Makhija applied for and obtained a loan and credit facilities from the Bank for his company, Seven Colors Entertainment Ltd. After Seven Colors ceased repaying the loan in 2020, the Bank sued both the company and Makhija, who had signed two limited personal guarantees. The action was undefended, and the Bank was granted default judgment against Seven Colors for $356,711.24 (plus interest and costs) owed on the loan and credit facilities, and against Makhija for $142,500 (again plus interest and costs).

[4] After obtaining the default judgment, the Bank learned that Makhija was not the registered owner of real property as represented in the Personal Financial Statement he submitted in support of Seven Colors’ loan application. It applied to the court for a declaration that Makhija was personally liable for the full amount owed by the company pursuant to the default judgment. The Bank claimed that Makhija fraudulently misrepresented his net worth in the Personal Financial Statement and that this misrepresentation induced the Bank to lend money to Seven Colors. It further alleged that Makhija had falsely represented that the loans would be used to finance the start-up of a printing business that did not in fact exist.[^1]

[5] In his affidavit in response to the Bank’s application, Makhija claimed that he himself had been duped. Two fraudsters, introduced to him by a coworker at the mattress store where he worked, convinced him to apply for financing for a printing business that they said they would set up and manage. In return for Makhija’s assistance, he would be entitled to a share of the business’ profits. Makhija denied that he prepared or signed the Personal Financial Statement and said that he was pressured to submit it without first reviewing it. He affirmed that he believed that printing business would go ahead, based on his interactions with the fraudsters. After the Bank agreed to provide a loan and credit facilities to Seven Colors, the fraudsters convinced Makhija to give them access to the company’s bank accounts. They then absconded with the borrowed funds, leaving Makhija with nothing.

[6] The application judge dismissed the Bank’s claim. He was satisfied that Makhija did not prepare or sign the Personal Financial Statement, and that Makhija reasonably believed that the information provided to the Bank was truthful at the time. He further found that the Bank relied only on the information in the Personal Financial Statement in extending the loan and credit facilities to Seven Colors.

The application judge did not err in applying the test for civil fraud

[7] The Bank acknowledges that the application judge identified the four elements of the tort of civil fraud set out in Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 21:

(1) A false representation made by the defendant;

(2) Some level of knowledge of the falsehood of the representation on the part of the defendant, whether through knowledge or recklessness;

(3) The false representation caused the plaintiff to act; and

(4) The plaintiff’s actions resulted in a loss.[^2]

[8] Elaborating on the second element, the application judge noted that the tort of fraudulent misrepresentation includes reckless misrepresentation, that is, a statement made “without caring whether it was true or false”: Precision Drilling Canada Limited Partnership v. Yangarra Resources Ltd., 2017 ABCA 378, 60 Alta. L.R. (6th) 57, at para. 33, citing Motkoski Holdings Ltd. v. Yellowhead (County), 2010 ABCA 72, [2010] 5 W.W.R. 603, at para. 58; see also Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922, 133 O.R. (3d) 561, at para. 42, application for leave to appeal discontinued, [2017] S.C.C.A. No. 58.

[9] The Bank argues that, although the application judge recognized a pathway to civil fraud based on recklessness, he failed to consider whether Makhija was reckless. We disagree.

[10] At the application hearing, the Bank alleged both that Makhija knowingly misrepresented his net worth in the Personal Financial Statement and that the entire loan application was a sham. Even if Makhija did not know that the proposed printing business was pretextual, he attested in the loan application that the information provided was accurate despite having failed to make appropriate inquiries about the business.

[11] The application judge addressed these assertions. First, he found that the signature on the Personal Financial Statement did not belong to Makhija and that he did not prepare the Statement. He then considered whether Makhija acted recklessly in the broader context of the loan application:

Makhija denies that he provided any false statements at the initial meeting with [the Bank employee and the two fraudsters]. He admits that he signed the loan documents. He believed the information in the loan application was truthful. He had been assured that the business was legitimate, and he had no reason to believe otherwise. He denies that he was reckless.

I am of the view that there was a reasonable basis for Makhija’s belief that the loan was bona fide. In the fall of 2018, he met with [the fraudsters] on several occasions at their home, where they laid out their plans for the printing business. Makhija understood that Seven Colors was incorporated, and that a lease was entered into. After the loan was advanced, Makhija received a tour of the facility. Although there were no workers at the time of the tour, there was printing equipment and supplies in the facility.

[12] There was furthermore no evidence that the Bank relied on any statement made by Makhija except those in the Personal Financial Statement. In his affidavit in support of the application, the Bank’s deponent, Jeffrey Kilpatrick, referred to Makhija’s representations in the Personal Financial Statement about his net worth and his ownership and the value of his personal residence, and affirmed that it was this information that “was relied upon by the Bank when it decided to offer credit to Seven Colors and accept Makhija to act as the guarantor of the debt.” As the application judge noted, Mr. Kilpatrick did “not depose that BMO relied on any other representations that may have been made by Makhija in the loan application.”

[13] Relying on Turbo Logistics Canada Inc. v. HSBC Bank Canada, 2013 ONSC 7128, at para. 201, and Buccilli et al. v. Pillitteri et al., 2012 ONSC 6624, 84 E.T.R. (3d) 208, at para. 177, aff’d 2014 ONCA 432, 96 E.T.R. (3d) 6, respectively, the Bank contends that the application judge failed to consider whether Makhija could be held responsible for the inaccurate representations in the Personal Financial Statement even if he were unaware of them; and whether the Bank’s reliance on other misrepresentations could be inferred from all the circumstances.

[14] The trial judges in Turbo Logistics and Buccilli made findings and inferences open to them on the records before them. The application judge was not required to make the same findings and inferences on the record in this case. He accepted that Makhija thought the information in the loan application was truthful and that financing was being sought for a legitimate purpose. This is implicit in his finding that Makhija believed that the loan was bona fide and that this belief was reasonable. The application judge did not need to consider whether fraud could be inferred on the whole of the circumstances, because he found that the Bank relied solely on the Personal Financial Statement.

[15] We conclude that the application judge did not misapply the legal test for civil fraud.

The application judge did not ignore or misapprehend evidence

[16] The Bank contends that the application judge made reversible errors in his findings of fact because he failed to give weight to or misapprehended some of the evidence. In particular, it challenges the application judge’s acceptance of Makhija’s evidence that he was duped and that he did not intend to deceive the Bank.

[17] The Bank argues that Makhija was either complicit in or reckless about the fact that the borrowing scheme was fraudulent, based on his stolid indifference to basic facts, including: the last names of his business partners who were the perpetrators of the fraud, possibly abetted by a Bank employee; telling the Bank that the funds were to be used to purchase equipment but having no idea what the equipment was to be; signing the loan documents without reading them; not knowing what the amount of the loan would be; knowing that the business was not operating; failing to monitor the accounts; and trusting his partners absolutely despite not knowing their true identities.

[18] The Bank’s difficulty is that its own witness, Mr. Kilpatrick, claimed to rely only on the Personal Financial Statement in making the loan, not the other loan documentation. All of the financial misrepresentations were contained in the Personal Financial Statement, which was basically fabricated in its material details, but not by Makhija. He did not see or sign it. The other loan documents that Makhija admitted signing do not directly reference the Personal Financial Statement. The Bank’s evidence was seriously wanting. The application judge found that Makhija’s carelessness was not enough to tie him to the fraud.

[19] This court’s role is not to re-try the case or to substitute its findings of fact for those of the judge of first instance. The application judge’s determinations about whether Makhija had a fraudulent intent or was reckless cannot be revisited absent a palpable and overriding error: Panapers Inc. v. 1260539 Ontario Limited, 2007 ONCA 27, 219 O.A.C. 338, at para. 2.

[20] We find no such error. Based on his review of the evidence, the application judge accepted Makhija’s account of his role and intent in participating in obtaining financing for Seven Colors. He concluded that Makhija believed the reassurances from the fraudsters about the proposed printing business, and that Makhija did not believe that the information presented to the Bank was untruthful at the time. These findings were open to the application judge to make on the record before him.

[21] We conclude that this ground is not made out.

The application judge’s reasons are adequate

[22] The Bank contends that the application judge did not adequately explain why he declined to find that Makhija was reckless. We again disagree.

[23] The principles informing a review of the adequacy of reasons were canvassed in National Steel Car Limited v. Independent Electricity System Operator, 2024 ONCA 265, 495 D.L.R. (4th) 595, at paras. 60-62, leave to appeal refused, [2024] S.C.C.A. No. 244. We need not repeat them here.

[24] The application judge reviewed the evidence at some length. He summarized the parties’ positions and arguments. He explained his reasons for concluding that Makhija did not sign or prepare the Personal Financial Statement, and why he concluded that Makhija had a good faith and reasonable belief that the proposed financing was for a non-fraudulent purpose. The application judge was not obliged to recite every bit of evidence and every submission in his reasons. Nor was he obliged to refer back to the evidence repeatedly in his analysis of the issues.

[25] Read functionally and contextually, the application judge’s reasons allow for meaningful review by this court and allow the parties to understand why the Bank’s claim was dismissed. As already mentioned, the application judge found that Makhija did not make the false misrepresentations in the Personal Financial Statement, that he reasonably believed that the information given to the Bank in the context of the loan application was truthful, and that these were the only misrepresentations that caused the Bank to extend credit to Seven Colors. Given these findings, there was no way that the Bank’s claim for civil fraud could succeed.

[26] This ground of appeal also fails.

Disposition

[27] The appeal is dismissed, with all-inclusive costs in the amount of $22,000 to the respondent.

“P. Lauwers J.A.”

“Grant Huscroft J.A.”

“S. Gomery J.A.”

[^1]: The Bank also advanced claims against Makhija based on s. 241 of the Canada Business Corporation Act, R.S.C. 1985, c. C-44 and s. 178(1)()(e) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. The Bank does not challenge the application judge’s dismissal of these claims on appeal, so we need not deal with them in this decision.

[^2]: A fifth element ― that the defendant intended that the plaintiff act in reliance on the representation ― has been acknowledged in some recent decisions of our court, including Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, 135 O.R. (3d) 481, at para. 162; and Paulus v. Fleury, 2018 ONCA 1072, 144 O.R. (3d) 791, at para. 9. Nothing turns on this in this case.