Court File and Parties

COURT FILE NO.: CV-19-82025 (Ottawa) DATE: 20210519

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

THE BANK OF NOVA SCOTIA Plaintiff

– and –

HALA JARADA Defendant

– and –

ANTRANIK KECHICHIAN Third Party

COUNSEL: Ian Klaiman, for the Plaintiff Keith A. MacLaren and Bryce Dillon, for the Defendant, Hala Jarada Antranik Kechichian, litigant in person

HEARD at Ottawa: 26 January 2021 (via videoconference)

REASONS FOR decision

MEW J.

[1] These reasons address claims by the Bank of Nova Scotia to enforce personal guarantees given by Hala Jarada in respect of the obligations of two companies, namely 8283648 Canada Inc. (“828”) and 8348111 Canada Inc. (“834”).

[2] 828 and 834 were corporations controlled by Antranik Kechichian, and were associated with two optical clinics in Québec operating under the Laurier Optical banner.

[3] This action involves a loan of $360,000 made by the plaintiff to 834 on 8 February 2013. An unlimited personal guarantee of 834’s obligations to the Bank was signed by the defendant.

[4] The defendant also guaranteed a business loan of $300,000 and a credit line of $50,000 extended by the Bank to 828. The Bank’s claim against Dr. Jarada in respect of those guarantees in set out in Court File No. CV-19-82023 in which Hala Jarada is a defendant along with Antranik Kechichian, who also guaranteed the loan and credit line provided to 828.

[5] The Bank has brought concurrent motions for summary judgment in this action and in Court File No. CV-19-82023.

[6] As advised in my endorsement in Court File No. CV-19-82023, while I have granted summary judgment to the Bank as against Antranik Kechichian, I find that there is a triable issue as to the enforceability of the guarantees given by Hala Jarada. The Bank’s motions for summary judgment against her are, accordingly, dismissed.

[7] My reasons for coming to this conclusion, applicable both to this action and Court File No. CV-19-82023, are as follows.

Background

[8] Ms. Jarada swore an affidavit in which she asserts little or no knowledge of the business operations of 823 or 834. She is, by profession, an optometrist, licensed in both Ontario and Québec. She held the title of “Medical Director – Québec” in the Laurier Optical group. She was also a part owner of two Québec stores in the Laurier Optical group. However, she was not asked to be, and as far as she knows never was, a director or shareholder of 834 and never had any ownership interests in the company, believing Mr. Kechichian to be the owner. She understood that 834 operated an optical store in St. Jean, Québec. It was a similar situation with 828. Dr. Jarada was not a shareholder, did not believe herself to be an officer, and received no financial benefit from being “Medical Director”.

[9] Dr. Jarada said that, initially, Mr. Kechichian “presented himself as a farther [sic] to me”. She had been hired by Mr. Kechichian straight out of school. In 2012, when Mr. Kechichian decided to expand his Laurier Optical business into Québec, Mr. Kechichian was able to put Dr. Jarada’s Québec licence as a medical optometrist to good use (Québec law required that a Québec optometry store have a licensed medical optometrist, a qualification which Mr. Kechichian did not possess. Dr. Jarada said that she agreed to hold the title of Medical Director as long as she did not have any personal liability with respect to the businesses. She says he assured her that she did not.

[10] According to Dr. Jarada, it was not uncommon for Mr. Kechichian to call her in and ask her to sign documents. She claims that he did not always explain what these documents were for. She often did not question him about what she was asked to sign. She says he was always impatient and in a hurry. She added that Mr. Kechichian was and remains a very intimidating figure to her. She says that when she asked Mr. Kechichian if she would ever have personal liability for any of the Québec stores, he promised her that she would not, stating in Arabic, “I will not let a speck of dust touch your shoe”, which means that he would protect her from any liability.

[11] In particular, Dr. Jarada claims not to have understood that she had signed personal guarantees. Although she was reluctant to confirm that her signature appeared on the various documents produced by the plaintiff, for the purposes of this motion, I have proceeded on the basis that the signatures are hers and that Dr. Jarada did, in fact, sign the documents. That said, she claims that some of the documents that she signed had blank spaces, which she believes would have been filled in by Mr. Kechichian after Dr. Jarada had applied her signature. The trial judge will no doubt have to assess this evidence and its effect.

[12] Dr. Jarada was cross-examined on her affidavit. She acknowledged that the loan documentation contained correct information about her social insurance number, properties owned by her and net worth statements. She was unable to explain how these may have been obtained by Mr. Kechichian and, ultimately, the plaintiff. Nor was she able to explain how her income tax returns, which she said she kept confidential, had ended up in the Bank’s hands.

[13] However, according to Dr. Jarada, she never saw a general ledger, bank statement or financial statement of either 828 and 834. She did not have copies of any of the agreements which Mr. Kechichian asked her to sign and claims that she only saw the credit agreements after she was sued on her guarantees.

[14] Dr. Jarada later learned that some special non-voting shares may have been issued in her name. She claims that she did not subscribe for any shares, nor were any issued to her.

[15] In September 2016, Mr. Kechichian sold the Laurier Optical business to Gestion Éric Savard and its affiliated companies (the “Savard group”).

[16] Dr. Jarada subsequently discovered that Mr. Kechichian had sold the business assets of Laurier Optical to the Savard group without advising secured lenders that a sale had taken place. As a result, she understands that many lenders lost their ability to enforce their security against the former Laurier Optical assets. No provision was made to pay these creditors. A few months later, the Savard group filed for protection under the Companies’ Creditors Arrangement Act.

[17] According to Dr. Jarada, Mr. Kechichian agreed to fully indemnify her for any liability which she might incur as a result of the various documents that he had asked her to sign.

[18] The only evidence of the circumstances under which the creditor agreements and guarantees were signed comes from Dr. Jarada. Mr. Kechichian’s affidavits filed in this motion, and in the companion summary judgment motion in Court File No. CV-19-82023, are silent on the issue. In his submissions on the companion motion, Mr. Kechichian described both himself and Dr. Jarada as “victims of circumstances beyond my control”.

[19] On cross-examination, Mr. Kechichian said that he had had many loans with Scotiabank as their client for over twenty years. While he does not dispute either the loans, guarantees or the signatures on them, he said that he has no recollection of the credit agreements in these actions. He also said that it was not his practice to ensure that anyone he asked to sign a guarantee for his companies had first obtained independent legal advice.

[20] Mr. Kechichian was vague and evasive when questioned about the loans in question and, in particular, Dr. Jarada’s guarantees. He claimed that “we didn’t let her sign something she doesn’t want to sign”. But went on to concede that it was not his practice to advise Dr. Jarada to get independent legal advice.

[21] The plaintiff’s witness, Marsha Singh, is a senior litigation officer at Scotiabank’s head office. She had no direct involvement with the file. In a supplementary affidavit in which she provided copies of various documents, including Dr. Jarada’s tax returns, RRSP statement, summary of personal finances and other information, Ms. Singh was unable to explain how these documents had come to be in the credit file. All she could say is that they had been imaged into the system. She took no steps to look at the original credit file to see whether the documents had been forwarded to the Bank by Dr. Jarada, by Mr. Kechichian or by someone else.

[22] Nor was Ms. Singh able to assist when asked whether there was a policy to request guarantors to obtain independent legal advice before signing documents guaranteeing a loan. She said that was “a branch-level decision”. Nor had she made any efforts to find out whether or not the loan documents were sent directly to Dr. Jarada as opposed to some other third party, such as Mr. Kechichian. She was also unable to say whether it was the Bank’s policy to have the signature of borrowers or guarantors witnessed by someone at the Bank or by an independent lawyer. And she cannot say whether anyone at the branch involved with the loans and guarantees had ever spoken to Dr. Jarada.

[23] Mr. Kechichian does not appear to challenge Dr. Jarada’s assertion that he agreed to indemnify her. While at one point, there was talk of a formal document to such effect, ultimately the existence of such agreement is dependent on the testimony of Dr. Jarada and an exchange of emails which on their face support her assertion that such an agreement or understanding existed.

Issues

[24] On behalf of Dr. Jarada, it is submitted that the issues in this motion are as follows:

a. Is there a genuine issue for trial as to whether Dr. Jarada’s signature on the credit agreement is authentic?

b. Is there a genuine issue for trial relating to non est factum and/or undue influence?

c. Is “partial summary judgment” appropriate in the context of the litigation as a whole?

d. In the event that Scotiabank is entitled to summary judgment, is Dr. Jarada entitled to judgment for contribution and indemnity as against Mr. Kechichian?

Authenticity of Dr. Jarada’s Signature

[25] On the issue of authenticity of Dr. Jarada’s signature on the loan documents, she does not, as I have already indicated, disavow the signature as being hers. Although for some period of time after this litigation began, the Bank was unable to produce the original documents, they did eventually surface. Unlike cases in which alleged guarantors denied signing the loan documents altogether (see Hanson v. Caputo, 2012 ONSC 2347 and Tarion Warranty Corporation v. Heritage Homes by Invidiata (Phase 3) Inc., 2010 ONSC 5056), Dr. Jarada’s evidence concerning the signatures is at best equivocal. She does acknowledge having signed documents. She claims, however, that she does not know what documents she signed.

[26] As I have already indicated, given my conclusion that there are triable issues regarding the undue influence (non est factum defence), it should be for the trial judge to resolve this issue.

Non Est Factum and Undue Influence

[27] Non est factum is available to someone who, as a result of misrepresentation, signs a document, but is mistaken as to its nature and character, and was not careless.

[28] The magnitude and extent of the carelessness and the circumstances which may have contributed to it, will depend on the circumstances of each case: Marvco Color Research Ltd. v. Harris, 1982 CanLII 63 (SCC), [1982] 2 S.C.R. 774 at 787.

[29] The absence of independent legal advice is relevant to a determination of the viability of a non est factum defence. Where someone signs a document without understanding its nature and character, the absence of independent legal advice will be relevant to whether the individual was “careless” in signing the loan documents, which is a factor in a non est factum defence: see Royal Bank of Canada v. 214973 Ontario Ltd., 2020 ONSC 6047 at paras. 104-107.

[30] As Perell J. explained in Toronto-Dominion Bank v. 1538646 Ontario Inc., 2009 CanLII 28651 (ON SC) at para. 20:

Although independent legal advice is not a prerequisite to an enforceable guarantee, as a factual matter, the absence of independent advice might be a genuine issue for trial if there is a plea of non est factum, unconscionability, fraud, misrepresentation, mistake, or undue influence.

[31] Dr. Jarada asserts undue influence in the present case, based upon her longstanding relationship with Mr. Kechichian. She argues that there is a presumption of undue influence where there is a close relationship between the parties coupled with a manifestly disadvantageous transaction. In Toronto-Dominion Bank v. PMJ Holdings Limited, 2019 ONSC 7297, for example, it was held that the fact that a guarantor has no financial interest in the company whose indebtedness he or she guarantees militates in favour of a presumption of undue influence.

[32] What is presently uncontradicted is that Dr. Jarada never dealt with anyone at the Bank of Nova Scotia about any of the loans, lines of credit, guarantees or anything to do with 834, 828, Laurier Optical or Mr. Kechichian. There is no evidence that she obtained or was advised to obtain, independent legal advice. There is evidence that she was assured by Mr. Kechichian that the documents she was signing would not give rise to any personal liability on her part. And, as previously indicated, Mr. Kechichian presented himself to Dr. Jarada as a father figure to her. She says that he “promised to take care of me like one of his family members”.

[33] The plaintiff argues that Dr. Jarada is well-educated and not unsophisticated in matters of business. She has practised as an optometrist for seventeen years and, through holding companies, was a part owner of two Laurier Optical franchises. As the plaintiff puts it, this is “not a case where an individual is vulnerable, semi-literate, or uneducated”.

[34] Certainly, there are cases where a guarantor’s defence of non est factum will fail because of the guarantor’s carelessness. But, contrary to the plaintiff’s position, I disagree that the question of Dr. Jarada’s carelessness is so clear that it can be resolved on a motion for summary judgment.

[35] The plaintiff’s position would be a lot stronger if there was any evidence of any involvement by representatives or employees of the Bank at the time that the loan agreements were obtained. Instead, there is nothing. There were not even rudimentary steps taken by the Bank to verify Dr. Jarada’s identity, let alone that her agreement to guarantee these corporate loans was an informed one.

[36] In short, I am satisfied that there are triable issues as between the plaintiff and the defendant which are more appropriately resolved at trial. While I have considered whether the need for a trial could be avoided by the use of the enhanced fact-finding powers conferred by Rule 20.04(2.1), I have concluded that the parties would be best served by moving this matter on to trial. In that regard, I am of the view that it would be appropriate for the court to exercise its powers under Rule 20.05 to provide directions and terms for moving this matter to trial. Given the previous involvement of the Master’s Office in Ottawa with the conduct of this matter, I will consult with the Masters’ office and, either directly from me or through the Master’s office, further guidance will be provided to the parties in due course.

Indemnification by Mr. Kechichian

[37] Dr. Jarada advances a crossclaim against Mr. Kechichian in this action for indemnification in respect of the plaintiff’s claims. She seeks summary judgment against Mr. Kechichian based on her crossclaim in Court File No. CV-19-82025, and her third party claim in the present action.

[38] Given her uncontradicted evidence as to the existence of Mr. Kechichian’s agreement to fully indemnify her, she should have judgment on the crossclaim and the third party claim against Mr. Kechichian requiring him to fully indemnify her to the extent of her ultimate liability, if any, to the plaintiff. However, the quantum of such indemnity cannot be determined until the Bank’s claims against Dr. Jarada have been resolved, by trial, settlement or otherwise. Accordingly, I grant partial summary judgment at this time on the issue of Mr. Kechichian’s obligation to indemnify, and reserve the issue of damages or quantum. In doing so, I am satisfied that this is one of those rare situations where partial summary judgment is appropriate.

[39] I will not remain formally seized of this matter for the purposes of hearing the remainder of this summary judgment motion on Dr. Jarada’s claim for indemnity as it pertains to quantum. In the interests of judicial efficiency however, the parties should in the first instance contact me through my judicial assistant in Kingston to determine my availability to hear such motion, prior to delivering a notice of return of motion in the usual way if I am not available to assist.

Costs

[40] I am also presumptively of the view that Dr. Jarada should have her costs of the summary judgment motion against the plaintiff on a partial indemnity scale and, further, her costs of the cross-motion against Mr. Kechichian, also on a partial indemnity scale. I reserve to the judge dealing with the quantum of Mr. Kechichian’s obligation to Dr. Jarada the question of the extent to which, if at all, he is required to indemnify her for costs which she incurs defending the Bank’s action against her going forward.

[41] The plaintiff has filed a costs outline. If the plaintiff and the defendant cannot agree on the issue of the defendant’s costs, the parties can make written submissions. Dr. Jarada should provide those submissions, not to exceed four pages in length, plus her costs outline, within 21 days of receipt of these reasons. The plaintiff shall have fourteen days to respond. If either party relies on any offers of settlement, copies should also be provided.

[42] With respect to the costs against Mr. Kechichian, Dr. Jarada should provide her submissions within 21 days. Mr. Kechichian will have 14 days after Dr. Jarada delivers her submissions to respond. All submissions should be sent to me via my judicial assistant.

Mew J.

Released: 19 May 2021

COURT FILE NO.: CV-19-82025 (Ottawa) DATE: 20210519

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

THE BANK OF NOVA SCOTIA Plaintiff

– and –

HALA JARADA Defendant

– and –

ANTRANIK KECHICHIAN Third Party

REASONS FOR decision

Mew J.

Released: 19 May 2021