COURT FILE NO.: CV-19-139361-00

DATE: 20191216

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: The Toronto-Dominion Bank, Plaintiff/Applicant

AND:

P.M.J. Holdings Limited and Miriam Finklestein, Defendant/Respondents

BEFORE: The Honourable J. Dawe

COUNSEL: Natalie Marconi, Counsel for the Plaintiff/Applicant

Paul Starkman, Counsel for the Defendant/Respondent Miriam Finklestein

No one appearing for the Defendant/Respondent P.M.J. Holdings Limited

HEARD: October 10, 2019

ENDORSEMENT

[1] This is a motion for summary judgment brought by the plaintiff Toronto-Dominion Bank (“TD Bank”) against the defendant Miriam Finklestein.

I. The facts

A. Overview

[2] The defendant P.M.J. Holdings Limited (“PMJ Holdings”) is a corporation controlled by Allen Finklestein, who is its President and Director. His wife, the defendant Miriam Finklestein, acknowledges that she was at one time an employee of the company. Whether she had any further management role or ownership interest is disputed, as discussed below.

[3] In April 2000, TD Bank and PMJ Holdings entered into an agreement in which the bank extended the company a $10,000 line of credit. Allen Finklestein signed the credit agreement on behalf of the corporation. At some point – exactly when is not clear from the filed materials – TD Bank also issued PMJ Holdings a credit card.

[4] At some point in 2002 – exactly when is also not clear from the materials – Miriam Finklestein purportedly signed a loan guarantee in which she agreed to be personally responsible for all of PMJ Holdings’s debts to the TD Bank. The authenticity and validity of the guarantee document is disputed.

[5] In January and February 2019, TD Bank sent the defendants demand letters seeking repayment of PMJ Holdings’s debts, which at the time stood at approximately $37,000 in total – approximately $23,000 on the line of credit and approximately $14,000 on the credit card. Later that month TD Bank brought an action against both defendants under the simplified procedure provisions of Rule 76 of the Rules of Civil Procedure. PMJ Holdings did not defend against the action and in April 2019, TD Bank obtained default judgment against it.

[6] However, Miriam Finklestein has served and filed a Statement of Defence in which she denies signing the guarantee relied on by the bank. In the alternative, she takes the position that the guarantee is unenforceable on the basis of undue influence.

[7] TD Bank seeks summary judgment against Miriam Finklestein, arguing that her proposed defences do not raise any triable issues.

B. The disputed loan guarantee

[8] The loan guarantee document relied on by TD Bank as the basis for its action against Miriam Finklestein purports to have been signed by her on a date of “03/07/2002”. However, it is unclear from the document itself whether this date was written using the British-style day-month-year format, in which case it would represent a date of July 3, 2002, or using the US-style month-day-year format, in which case it would represent a date of March 7, 2002. TD Bank’s Statement of Claim interprets the document in this second way, stating that its claim against Ms. Finklestein “is on a Guarantee in writing given by the said defendant on or about March 7, 2002”. Confusing the matter further, however, in its January 15, 2019 demand letter to Ms. Finklestein TD Bank asserted that she had signed the guarantee on June 13, 2000.

[9] The pre-printed loan guarantee form at issue contains a section headed “Certificate of Independent Legal Advice” with signature lines for both an independent lawyer and for the guarantor. On the guarantee document at issue in this case this section is only partially filled in, and is unsigned by either Ms. Finklestein or by anyone representing himself or herself to be an independent lawyer.

[10] Miriam Finklestein deposes in her affidavits that PMJ Holdings was her husband’s company, and that she never had any financial interest in it or any knowledge of its financial affairs. She acknowledges that she was director of the company but maintains that she resigned from this position in November 2011. She also acknowledges having signing authority on PMJ Holdings’s TD Bank account but denies ever actually exercising this authority.

[11] With respect to the loan guarantee, Miriam Finklestein attests that she has no recollection of ever signing the document and maintains that the signature on the document “does not appear to be my signature”. She states further that if she did sign the loan guarantee “it would have been only because Allen requested that I sign it”, and that only he would have benefited from her signing the document. Ms. Finklestein also denies ever receiving any independent legal advice with respect to the signing of the guarantee. As noted above, this is consistent with the fact that this section of the form is not completed on the copy of the guarantee document that has been adduced by TD Bank.

[12] Miriam Finklestein has also adduced an affidavit from her husband Allen in which he states that he does not believe his wife signed a guarantee for PMJ Holdings’s indebtedness, but that if she did “it would have been because I asked her to at the request of the bank”.

[13] Because this action was brought under the Rule 76 simplified procedure regime, none of the affidavit evidence adduced by either party has yet been tested by cross-examination.

II. Analysis

A. Evidential issues

[14] In its factum, TD Bank notes that liquidated debt claims are “document-driven and uniquely suitable to be disposed of” by way of summary judgment, and observes further that:

It is in everyone’s interest that debt enforcement be time and cost-effective. The motions court does no favour to a debtor by prolonging this process where there is no defence. Sending the case to a trial would lead to potential costs awards far exceeding the amount in issue.

I agree with these observations. However, the “shift in culture” called for by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 at para. 28 requires litigants and their counsel to take seriously their task of providing the court with adequately prepared summary judgment motion materials that establish a proper evidential foundation for the order being sought. Sending a case to trial when it can properly be disposed of summarily is inefficient and wasteful. However, it is even more inefficient and wasteful for the parties on a summary judgment motion to present the court with haphazardly-prepared materials that do not permit the motions judge to fairly adjudicate a dispute that might very well have been amenable to summary judgment on a proper evidential record.

[15] As Brown J.A. explained in his recent decision for the Ontario Court of Appeal in Drummond v. Cadillac Fairview Corporation Limited, 2019 ONCA 447 at paras. 21-23:

The principles governing the admissibility of evidence on a summary judgment motion are the same as those that apply at trial, save for the limited exception of permitting an affidavit made on information and belief found in r. 20.02(1): Sanzone v. Schechter, 2016 ONCA 566, 402 D.L.R. (4th) 135, leave to appeal refused, [2016] S.C.C.A. No. 443, at para. 15. Rule 20.02(1) provides, in part, that “[a]n affidavit for use on a motion for summary judgment may be made on information and belief as provided in subrule 39.01(4)” which, in turn, requires that the affidavit specify “the source of the information and the fact of the belief”. However, r. 20.02(1) continues: “[B]ut, on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts.”

In Armstrong v. McCall (2006), 213 O.A.C. 29 (C.A.), at para. 33, this court expressed strong reservations about using r. 20.02(1) to admit affidavits that assert contested facts on information and belief. That caution regarding the use of hearsay evidence on summary judgment motions in respect of contested facts was repeated recently by this court in Kawartha-Haliburton Children’s Aid Society v. M.W., 2019 ONCA 316, at para. 80:

The court must conduct a careful screening of the evidence to eliminate inadmissible evidence. The court should not give weight to evidence on a summary judgment motion that would be inadmissible at trial.

Although that caution was made in the context of a summary judgment motion in a child protection proceeding, the caution applies equally to the treatment of hearsay evidence that goes to fundamental issues in dispute on a summary judgment motion under the Rules of Civil Procedure. As Edwards J. stated in Mitusev v. General Motors Corp., 2014 ONSC 2342, at para. 20: “If the hearsay evidence is on a fundamental aspect of the motion, it is unlikely that the motion judge will decide the motion favourably to the party adducing the hearsay evidence.”

[16] In the case at bar, TD Bank relies on two affidavits sworn by a bank employee named Michael Perfetto, who describes himself as a TD Bank account manager who “as such [has] knowledge of the matters hereinafter deposed to”. Ms. Finklestein states in her own affidavit that she has never met or communicated with Mr. Perfetto, while Mr. Finklestein attests that he has no recollection of ever doing so. Mr. Perfetto does not suggest otherwise in his own affidavits, nor does he claim to have any personal knowledge of TD Bank’s dealings with PMJ Holdings or the Finklesteins. In short, TD Bank appears to have chosen Mr. Perfetto as its affiant solely because he has access to TD Bank’s documents, both paper and electronic, and can accordingly append them to his affidavits as exhibits and attest to his “information and belief” of matters discussed in these documents.

[17] Unfortunately, Mr. Perfetto’s affidavits do not make even a perfunctory effort either to comply with the requirements of Rule 39.01(4) for “information and belief” affidavits, or to establish a proper foundation for the substantive admissibility of the documents he appends as exhibits.

[18] As noted above, Rule 39.01(4) provides that “[a]n affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit.” Mr. Perfetto’s affidavits append various documents without explaining where they came from, why he believes them to be authentic or, in relation to those that he relies on for the truth of their contents, why he believes their contents to be true.

[19] In his first affidavit, Mr. Perfetto appends a number of documents that appear on their face to be documents taken from TD Bank’s files. These include copies of the disputed loan guarantee said to have been signed by Ms. Finklestein in 2002 and the original loan agreement signed by Mr. Finklestein in 2000, one of PMJ Holdings’s credit card statements, the demand letters sent to the Finklesteins in 2019 by TD Bank’s counsel, and the default judgment obtained by the bank against PMJ Holdings. While it may seem excessively formalistic to insist that the affiant expressly identify where all of these documents came from, this is in my view not something that should be left to the court’s guesswork, even when the answer seems apparent on its face.

[20] Mr. Perfetto’s second supplemental affidavit and some of the documents appended to it raise even more serious and substantive concerns. For instance, Mr. Perfetto appends what appears to be a printout of four computer file notes made on various dates in February 2002, which he describes in his affidavit as “contemporaneous Notes made by TD employees from February 15-21, 2002”. Two of these notes, apparently made by someone named “Percy Kissoon, Underwriter”, purport to record the events that led to the bank rejecting PMJ Holdings’s request for a credit limit increase on February 14, 2002 and then granting it the next day after the request was resubmitted “with the addition of Miriam Finkelstein’s [sic] personal guarantee (Allen’s spouse).” The authors of the last two notes are not identified. The first of these notes, dated February 19, 2002, states: “Miriam is a signing authority on the account and Al Fin (a.k.a. Al Fink) her husband says that she is an owner”. The second note, which is dated February 21, 2002, states: “Miriam is now on EREL as a 30% shareholder”. Mr. Perfetto also appends as a further exhibit a computer screenshot containing a note that apparently directs TD Bank customer service staff dealing with PMJ Holdings’s account to “Speak only to Allen or Miriam Fink about account and to confirm cert. cheques”.

[21] In his affidavit, Mr. Perfetto relies on these notes for the truth of their contents – that is, as an accurate record of past events and/or of representations made to TD Bank by one or the other of the Finklesteins. However, he provides no information about where these notes came from, who wrote them – beyond the bare assertion that some of them were “made by TD employees” – or why he believes their contents to be true and accurate. In my view, this falls well short of what Rule 39.01(4) requires.

[22] The even more serious problem is that Mr. Perfetto’s affidavit makes no real attempt to lay a foundation that would allow me to conclude that these notes and computer screen shots – all of which are hearsay if used for the truth of their contents – would be admissible on this basis at trial. Without any evidence about who made these notes and the circumstances in which they were made, it cannot be concluded that they are admissible either as business records or under some other hearsay exception. Moreover, while these notes all appear to be printouts or screenshots of digital files, making them “digital records” within the meaning of s. 34.1 of the Ontario Evidence Act, Mr. Perfetto’s affidavit makes no attempt to establish the authenticity or integrity of these records as provided for in that section.

[23] In Drummond, supra, Brown J.A. explained (at para. 24):

If the evidence on information and belief in an affidavit goes to a fundamental contested aspect of the summary judgment motion, the motion judge should first determine whether the evidence would be admissible under the rules governing admissibility at trial. If the evidence meets those criteria, it is admissible on the motion. If the evidence does not meet the criteria for admissibility at trial, the onus should fall on the party proffering the evidence to justify some expansion of the rules governing admissibility in the context of the motion. For example, there may be cases in which an affidavit complies with r. 20.02(1) and it can be said that the opposing party had a fair chance to challenge the hearsay evidence, even though the evidence might not qualify as admissible hearsay.

As discussed further below, the content of the computer file notes and screen shots appended to Mr. Perfetto’s affidavit bear on “a fundamental contested aspect of the summary judgment motion”. I am not satisfied based on the material filed that any of this evidence would be substantively admissible at trial under an exception to the hearsay rule, nor has TD Bank presented any justification for relaxing the rules of admissibility in the context of this motion. In any event, as discussed above, Mr. Perfetto’s affidavit also does not comply with Rule 20.02(1).

[24] It is well-established that a party who seeks summary judgment in its favour must “put its best foot forward” and “lead trumps or risk losing” (see, e.g., Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at para. 26, aff’d 2014 ONCA 878). As the moving party, it is TD Bank’s obligation to prove the essential facts on which its argument depends. As Dunphy J. explained in 2313103 Ontario Inc. v. JM Food Services Ltd., 2015 ONSC 4029 at para. 40:

In bringing a motion for summary judgment, the court is entitled to assume that both parties have put before the court all of the evidence they would intend to adduce at trial (even if not in the same form) that relates to the issues for decision on the motion. Ambush and surprise have no legitimate place in modern litigation, but this is particularly so in motions for summary judgment where the entire action or a substantial part of it may be disposed of in favour of one or the other party. Summary judgment is no place for a party to look to keep powder dry for another day and it is rather late in the process to sit down and ensure the issues are thoroughly understood.

While it is certainly possible that TD Bank will be able at trial to present admissible evidence establishing the truth of the facts asserted in Mr. Perfetto’s affidavits, I cannot simply assume that this will be the case.

[25] It follows that I disagree with TD Bank’s assertion that its “documentary and affidavit evidence … is overwhelming in contrast to the defendant’s bald assertions”. While TD Bank’s pejorative characterization of Ms. Finklestein’s position as based on “bald assertions” has some justification, its own position is also based very largely on bald assertions by an affiant with no firsthand knowledge, who relies on hearsay documents of unknown origin and reliability and of doubtful evidential admissibility.

C. Authenticity of the guarantee document

[26] As noted above, Miriam Finklestein takes issue with both the authenticity and the enforceability of the loan guarantee. On the issue of authenticity, I tend to agree with TD Bank that Ms. Finklestein’s rather vague claim that she does not recall signing the document and that the signature does not look like hers would not present an issue that requires a trial, if TD Bank had met its own burden of establishing the prima facie authenticity of the document.

[27] TD Bank relies on Byfield v. Toronto-Dominion Bank, 2012 ONCA 814, in which the Ontario Court of Appeal upheld a decision to grant summary judgment in a home renovation contract dispute. After the renovation work had been completed the homeowner had denied signing the contract for the work. The Court of Appeal noted (at para. 8) that:

[T]he appellant’s forgery claim was based solely on her bald assertion of forgery without corroborative evidence of any kind. This allegation stood in stark contrast to the contemporaneous documentary evidence and the respondent’s sworn affidavit of the fact of, and the circumstances surrounding, the appellant’s execution of the contract.

In the case at bar, however, the contrast between the evidence assembled by the competing parties is far less stark, in that TD Bank’s claim that Ms. Finklestein signed the guarantee is itself based on a bald assertion. In his first affidavit, Mr. Perfetto states that Ms. Finklestein “is on a guarantee in writing given by the said Defendant on or about March 7, 2002” and that a copy of this document is appended to his affidavit. However, he provides no evidence whatsoever about the circumstances in which this document was allegedly signed. While Mr. Perfetto attempts to fill this gap in his second affidavit by appending and adopting the notes apparently made in 2002 by Percy Kissoon, which purport to explain the events that led to Ms. Finklestein signing the guarantee, Mr. Perfetto’s affidavit fails to establish any proper foundation that would support the admission of these notes for the truth of their contents.

D. Undue influence

[28] Even if I were prepared to conclude that TD Bank could meet its burden at trial of establishing the authenticity of the guarantee document and of Ms. Finklestein’s signature on the document, she raises a further defence, alleging that even if she did sign the document, TD Bank will not be able to meet its burden of establishing that her signature was not procured by the undue influence of her husband.

[29] In CIBC Mortgage Corp. v. Rowatt, 2002 CanLII 45110 (Ont. C.A.), Feldman J.A. adopted the approach to the issue of undue influence in the context of spouses signing loan guarantees that was taken by the House of Lords in Royal Bank of Scotland v. Etridge (No. 2), [2001] 4 All E.R. 449. She explained (at paras. 15-16):

In the Etridge case, the court clarified that the presumption of undue influence in a spousal or like relationship, arising from the emotional interdependency of the parties, has two effects in this context.

The first is to put a bank on notice and inquiry when a spouse or personal partner is guaranteeing the debts of the other partner. In order to protect itself from a claim that the guaranty was procured by undue influence by the benefiting spouse, the bank must take reasonable steps to try to ensure that the proposed guarantor understands the transaction and is entering into it freely by suggesting that the guarantor seek and obtain independent legal advice and a full explanation of the transaction.

After discussing the confusion that had previously existed over how much the bank had to know about the particular details of the spousal relationship at issue, Feldman J.A. stated (at paras. 18-19):

In Etridge, the court clarified that "whenever a wife offers to stand surety for her husband's debts" the bank is put on inquiry (p. 465-66 All E.R.).

The court then went on to discuss in detail the reasonable steps a bank must take in order to protect itself from a later claim by the guarantor/spouse that the guaranty is vitiated by undue influence or misrepresentation. The purpose of those steps is not for the bank to determine if the wife has been wronged by the husband, but “[t]he steps are concerned to minimize the risk that such a wrong may be committed” (p. 465 All E.R.). The consequence of not taking reasonable steps to ensure understanding and free will by the guarantor, is that the bank “is deemed to have notice of any claim the guarantor may have that the transaction was procured by undue influence or misrepresentation on the part of the debtor” (p. 476 All E.R.). If the bank does take these reasonable steps, it is protected from such a claim.

[30] In the case at bar, there is no evidence that TD Bank took the necessary “reasonable steps” to protect itself from any undue influence claim Miriam Finklestein might later make. Although the guarantee form suggests that TD Bank’s usual practice was to have guarantors obtain independent legal advice, on the guarantee document that was ostensibly signed by Miriam Finklestein this section was left incomplete and unsigned. TD Bank has also not adduced any evidence that it ever suggested that Ms. Finklestein seek independent legal advice before she signed the loan guarantee. Indeed, TD Bank has presented no admissible evidence at all about the circumstances in which she apparently signed the document. It follows that the bank is “deemed to have notice” of Ms. Finklestein’s undue influence claim.

[31] Feldman J.A. explained further in CIBC v. Rowatt, supra, at para. 20:

The second effect of the presumption of undue influence arises where the bank has not taken the reasonable steps and the guarantor later seeks to avoid liability on the pledge or guaranty by claiming that it was obtained by undue influence, and relies on a presumption of undue influence based on the relationship of the parties together with the disadvantageous nature of the transaction for the guarantor. In that circumstance, the presumption will not be determinative, but will be one of the evidentiary matters the trial judge considers when deciding whether or not the guaranty or pledge was entered into based on undue influence or misrepresentation by the spouse or partner.

Feldman J.A. adopted Lord Scott’s explanation in Etridge that the presumption of undue influence is a “rebuttable evidential presumption” that:

….arises if the nature of the relationship between two parties coupled with the nature of the transaction between them is such as justifies, in the absence of any other evidence, an inference that the transaction was procured by the undue influence of one party over the other. This evidential presumption shifts the onus to the dominant party and requires the dominant party, if he is to avoid a finding of undue influence, to adduce some sufficient additional evidence to rebut the presumption.

[32] On this analysis, it will be TD Bank’s burden at trial to rebut the presumption of undue influence that arises from its failure to take the “reasonable step” of ensuring that Miriam Finklestein obtained independent legal advice. To obtain summary judgment in its favour, TD Bank must accordingly demonstrate that its ability to rebut the presumption is so clear from the evidence that there is no need for a trial.

[33] In my view, the evidence TD Bank has mustered falls well short of the mark. The bank seems to have attempted to meet its burden by presenting evidence in Mr. Perfetto’s second affidavit that Ms. Finklestein was more actively involved in the operations of PMJ Holdings than she acknowledges, both as a part owner of the company and as someone with control over its purse-strings. If this were firmly established in the evidence, it might help TD Bank rebut the presumption of undue influence by demonstrating that Ms. Finklestein’s action in signing the loan guarantee was to her own financial advantage.

[34] However, as discussed above, TD Bank has failed to establish that most of the documents from which Mr. Perfetto draws this conclusion are admissible evidence. Essentially, the evidence on which he relies consists of the following:

(a) The February 19, 2002 note in an unidentified data file, made by an unknown person, stating that “Miriam is a signing authority on the account and … her husband says that she is an owner”;

(b) The February 21, 2002 note in the same data file, also made by an unknown person, asserting that “Miriam is now on EREL as a 30% shareholder”. The significance of someone being “on EREL” is not explained in Mr. Perfetto’s affidavit;

(c) A screenshot of an unidentified data file entry by an unknown author, apparently made on March 18, 2003, that appears to direct TD Bank customer service staff to “speak only to Allen or Miriam Fink about account and to confirm cert. cheques”;

(d) An undated loan application, apparently signed by both Allen and Miriam Finklestein, that according to Mr. Perfetto describes a “70%-30% ownership breakdown on page 1”. (The appended document is a poor-quality photocopy, in which the number 70% and 30% are clear but the accompanying text is illegible).

The first note contains multiple layers of hearsay: it was made by an unknown person who apparently made a note of something he or she was told by Allen Finklestein. The second note is likewise a hearsay statement by an unknown declarant based on information from an unknown source. The third screenshot becomes hearsay if it is used to infer that the unknown bank employee who made the note had information that Miriam Finklestein exercised some sort of authority over PMJ Holdings’s account, although its use for this purpose is made less problematic by the fact that Ms. Finklestein herself acknowledges in her affidavit that she had signing authority over the company’s account – although on her account she never actually exercised this authority, to TD Bank’s knowledge. As discussed above, Mr. Perfetto does not establish any foundation that would support the admission of any of these hearsay electronic documents for the truth of their contents at trial.

[35] The loan application does not present the same hearsay problems as the computer file notes and screenshot, insofar as it purports to be a document signed by Ms. Finklestein herself. However, as discussed above, Mr. Perfetto does not make any real attempt in his affidavit to establish the authenticity of this document. Even if this could be established, relying on a document that was ostensibly signed by Ms. Finklestein in entirely unknown circumstances would in my view do very little to rebut the presumption that she was under the undue influence of her husband when she signed the loan guarantee. Accordingly, I do not think the existence of this document will do very much to assist TD Bank at trial, even assuming that its authenticity can be established.

[36] Standing against TD Bank’s position, Ms. Finklestein attests in her own affidavit that she never had any financial interest in PMJ Holdings or had any knowledge of its financial affairs. She states further that if she did sign the guarantee, only her husband benefitted. Allen Finklestein’s affidavits are to the same effect, and he supports the Finklesteins’ position that Miriam Finklestein was never a part-owner of PMJ Holdings with tax documents from the late 2000s.

[37] The Finklestein’s evidence has not yet been tested by cross-examination, and it is certainly possible that they will not emerge unscathed from the crucible of the trial process. However, I am not in any position to conclude on this record that their evidence could not be believed by a trier of fact, nor am I in a position to draw any conclusions of my own about their credibility based on a paper record in a case where there has not as yet been any cross-examination.[^1]

III. Disposition

[38] It follows from the above analysis that I am not satisfied that there is no genuine issue in this case requiring a trial. This is unfortunate, insofar as I think there is at least a reasonable prospect that I might have been able to decide the case on a summary basis, one way or the other, if I had been provided with a proper evidential record.

[39] I am also not satisfied that there would be any real efficiency gains from directing a mini-trial under Rule 20.04(2.2), since an effective mini-trial in this matter would be practically indistinguishable from an actual trial.

[40] Accordingly, the motion for summary judgment is dismissed.

[41] If the parties cannot agree on costs, they may submit written submissions of no more than five pages in length, which I direct may be served electronically by email to opposing counsel and filed by email sent to my judicial assistant. I would ask that Mr. Starkman provide his costs submissions by January 17, 2020. Ms. Marconi will then have two weeks to file her response, by January 31, 2020, and Mr. Starkman may then file a reply within one week.

The Honourable J. Dawe

Date: December 16, 2019

[^1]: See, e.g., Singh v. Concept Plastics, 2016 ONCA 815 at para. 23.