2017 ONSC 4578
COURT FILE NO.: 11230/16
DATE: 2017/07/27
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Meridian Credit Union Limited
Alyssa M. Adams, for the Plaintiff
Plaintiff
- and -
2428128 Ontario Limited and Kiky Arraf Bishara aka Kiky Arraf-Bishara
Harold S. Albrecht, for the for the Defendants
Defendants
LONG MOTION HEARD at WELLAND: June 23, 2017
The Honourable Justice T. Maddalena
ENDORSEMENT ON MOTION
The Issues
[1] The plaintiff, Meridian Credit Union Limited (“Meridian”) seeks summary judgment as against the defendant, Kiky Arraf Bishara, also known as Kiky Arraf-Bishara (“Kiky”) pursuant to a Small Business Credit Agreement dated November 7, 2014, between the plaintiff and the defendant and pursuant to a personal guarantee given by the individual defendant Kiky to the plaintiff, Meridian, to secure the indebtedness of the defendant corporation, 2428128 Ontario Limited (“the Company”).
[2] Summary judgment against the Company in the amount of $153,241.20, together with interest, pursuant to the Small Business Credit Agreement dated November 7, 2014, is conceded by the defendants.
[3] However, the defendant, Kiky, submits that only 25% of the original amount of the loan of $182,000.00 should be the judgment against her personally. She states that it was represented to her at all times by the bank that she, upon signing the guarantee and other necessary documents, would be responsible for only 25% of the original loan to the Company.
Position of the Plaintiff (Meridian)
[4] Meridian submits that Kiky was at all material times the director, president and secretary of 2428128 Ontario Limited.
[5] The plaintiff and the Company entered into a Small Business Credit Agreement, executed November 7, 2014. This agreement provided for a loan payable in the amount of $182,000.00 with interest as specified therein.
[6] As security for the Company’s indebtedness to Meridian, Kiky executed an Unlimited Guarantee and Postponement of Claim (“the Guarantee”) dated November 7, 2014.
[7] The Company defaulted under the terms of the credit agreement. Various demands for payment were made by Meridian.
[8] As of August 4, 2016, the outstanding balance on the credit agreement was $153,241.20, plus interest, plus fees as outlined in the credit agreement.
[9] No payments have been made by either of the defendants since August 4, 2016.
Position of the Defendant (Kiky)
[10] The defendant, Kiky, asserts that on November 7, 2014, she met with the Meridian Small Business Advisor, Mr. Modi (“Modi”), to sign the loan documentation.
[11] Kiky submits that Modi advised her that her personal liability upon executing the documents required to obtain the loan was 25% of the entire loan amount.
[12] Further, Kiky acknowledged that as a result of her executing all of the documents, the Company did, in fact, receive $182,000.00
[13] Unfortunately, the business did not go well, and Kiky acknowledged that on August 4, 2016, Meridian made a demand for the payment of the loan.
[14] Kiky does not dispute the amount of the loan outstanding to the Company effective August 4, 2016, and in accordance with the demand letter dated August 4, 2016.
[15] Kiky does dispute that she provided a personal guarantee for the entire loan that Meridian made to the Company. She asserts that both Modi from Meridian and Dana Clark, her broker who assisted in securing the loan with Meridian, advised her she was only responsible for 25% of the entire loan if default occurred. She asserts that had she known that she was 100% liable she would have not executed the agreement.
Analysis
[16] It is clear that Kiky signed the Small Business Credit Agreement, as well as the Guarantee.
[17] It is clear further from the cross-examination of Kiky that she did admit she did not read either the loan agreement or the Guarantee prior to signing.
[18] Further, she stated she did not ask anyone about an opportunity to read the loan documents and guarantee, nor did she request to take the documents for independent legal advice.
[19] Kiky has a degree in Industrial Engineering and has been working at the Royal Bank of Canada since appropriately 2006.
[20] The Guarantee and the Postponement of Claim document, as well as the original loan documents are abundantly clear.
[21] The Guarantee and Postponement of Claim state as follows:
• Paragraph 5: This Guarantee shall be binding on the Guarantor as a continuing guarantee and shall cover any present liabilities of the Member of the Credit Union, all liabilities incurred after the date hereof whether from dealings between the Credit Union and Member or from any other dealings by which the Member may become in any manner whatever liable to the Credit Union and any ultimate balance due or remaining due to the Credit Union.
• Paragraph 10: The Guarantor shall make payment to the Credit Union of the amount of the liability of the Member forthwith after demand therefor is made in writing. Such demand shall be deemed to have been made when an envelope containing the demand and addressed to the Guarantor at the last address of the Guarantor known to the Credit Union is deposited, postage prepaid and registered, in the Post Office. The liability of the Guarantor shall bear interest from the date of such demand at the rate or rates then applicable to the liabilities of the Member to the Credit Union. The limitation period provided under Section 4 of the Limitations Act, 2002 shall be suspended until, and shall commence only when, the Credit Union makes a demand for payment of the Guarantor pursuant to this section, which demand the Guarantor fails to honour.
• Paragraph 12: The Credit Union shall not be bound to exhaust its recourse against the Member, other parties or the securities it may hold before being entitled to payment from the Guarantor under this Guarantee.
• Paragraph 13: This Guarantee is given in addition to and without prejudice to any securities of any kind, including any guarantees and postponement agreements, whether or not in the same form as this instrument, now or hereafter held by the Credit Union.
• Paragraph 14: There are no representations, collateral agreements or conditions with respect to this instrument, or affecting the Guarantor’s liability hereunder, other than those contained herein.
• Paragraph 18: The liability of the Guarantor hereunder shall be unlimited and shall bear interest from the date of demand for payment as heretofore provided.
[22] There is no reference in the Guarantee, or in any other document supporting the allegations of Kiky.
[23] Further, the court is satisfied that independent legal advice is not required prior to the signing of a guarantee if the guaranteeing party is an officer and director of the corporation receiving the loan.
[24] In the case of Toronto-Dominion Bank v. 1503345 Ontario Ltd., [2006] O.J. No. 1960, 148 A.C.W.S. (3d) 457, the court noted in para. 22:
“Insofar as the issue of independent legal advice is concerned, Lang was not required to obtain independent legal advice prior to the signing of the Guarantee as he was and is an officer and director of the Corporation and received the direct benefit of the Loan.”
[25] Furthermore, a bank is in a creditor/debtor relationship with its borrower. Thus the ordinary relation of lender/borrower does not give rise to any fiduciary duty on the part of the lender towards the borrower.
[26] Pertaining to the aforementioned, in the case of the Bank of Montreal v. 1480863 Ontario Inc., 2007 CanLII 13359 at paras. 37 and 38, the court referenced Baldwin v. Daubney in para. 15 therein and stated as follows:
…It is well established that absent special circumstances the relationship between a bank and its customer is that of debtor and creditor….More recently in September 2006, the Court of Appeal reaffirmed the above principle in Baldwin v. Daubney, 2006 CanLII 32901 (ON CA), 83 O.R. (3d) 308… Generally speaking, the relationship between a financial institution lender and its customer borrower is a purely commercial relationship of creditor and debtor. Absent any special relationship or exceptional circumstances such as would give rise to a fiduciary duty (which is not pleaded…) the courts have consistently held that the lender owes no duty to the borrower in connection with the making of the loan. In particular, the bank owes no duty to its customer to advise the customer not to undertake the loan.
[27] The defendant, Kiky’s main argument is that Meridian misrepresented to her the amount for which she was responsible. The court finds absolutely no evidence to support such a claim. In fact, the Guarantee is quite clear. Just above where the defendant signed her name the liability is described as “unlimited”.
[28] The defendant has introduced in affidavit evidence a document pertaining to the website of the Bank of Montreal dealing with financing under the Canada Small Business Financing Act. I find this document is not relevant to these proceedings.
[29] These proceedings relate to the specific documents executed by the defendant, Kiky, with respect to Meridian.
[30] In the proceeding before me, there is no evidence suggesting that the Guarantee was limited to 25%. In fact, the reverse is true. The Guarantee is unlimited.
[31] Therefore, the court finds no evidence of misrepresentation by the plaintiff, Meridian, to the defendant, Kiky. All of the documents executed and tendered into evidence are clear and concise, with no ambiguity as to the amount outstanding.
[32] I do not accept the evidence of Kiky that she was told by the plaintiff, Meridian, that her liability was limited to 25% of the loan.
[33] In conclusion, this is an appropriate case for summary judgment. There is no genuine issue requiring a trial.
Orders Made
[34] Summary judgment is granted in favour of the plaintiff as against both defendants, 2428128 Ontario Limited and Kiky Arraf Bishara, also known as Kiky Arraf-Bishara, in the amount of $153,241.40, together with interest calculated from August 4, 2016, in accordance with the Guarantee.
Costs
[35] The parties may make written submission with respect to costs. Submissions are limited to two pages, plus a bill of costs, plus any offers to settle. The plaintiff’s submissions are due by August 10, 2017. The defendants’ are due August 24, 2017. No reply is permitted.
Maddalena J.
Released: July 27, 2017
2017 ONSC 4578
COURT FILE NO.: 11230/16
DATE: 2017/07/27
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Meridian Credit Union Limited
Plaintiff
- and –
2428128 Ontario Limited and Kiky Arraf Bishara aka Kiky Arraf-Bishara
Defendants
ENDORSEMENT ON MOTION
Maddalena J.
Released: July 27, 2017