Business Development Bank of Canada v. Reid Gulf Inc. et al., 2025 ONSC 1631

Court File No.: CV-24-87334
Date: 2025-03-14
Ontario Superior Court of Justice

Between:
Business Development Bank of Canada
Plaintiff/Moving Party
Counsel: D. Lilko

-and-

Reid Gulf Inc. and Kuruppu Appuham Jayatissa
Defendants/Responding Parties
Counsel: M. Ali Khan

Heard: February 20, 2025

Decision on Summary Judgment
Justice J. Krawchenko

Introduction

[1] This is a simplified procedure motion for summary judgment against the Defendant Kuruppu Appuham Jayatissa (“KAJ”) brought by the Plaintiff Business Development Bank of Canada (“BDC”).

[2] The relief sought is a judgment as against KAJ for $97,158.46 pursuant to a personal guarantee along with a declaration that KAJ had fraudulently misrepresented the purpose of the loaned funds.[^1]

[3] KAJ resists the motion for summary judgment and argues that summary judgment is inappropriate, given the existence of genuine issues for trial being (a) that the third party named in this action made fraudulent misrepresentation to KAJ and she relied upon them with regards to money she borrowed from the BDC and paid to that third party, (b) that BDC had not provided a proper accounting of their damages, (c) that the misuse of the BDC funds by the third party was “central to the dispute” and needed to be adjudicated in a full trial.

[4] For the following reasons, I find that summary judgment to the BDC as against KAJ is appropriate as is a declaration that KAJ fraudulently misrepresented the purpose of the loan to the BDC.

The Facts

[5] KAJ made a financing request of BDC on behalf of Reid Gulf Inc. for the amount $100,000.00. The stated purpose of the loan: “cash for day to day expenditures for the business.” KAJ advised BDC in writing of the following:

a. That the loan would be used exclusively by Reid Gulf Inc.
b. Reid Gulf Inc. was a home based business.
c. Reid Gulf Inc. has been in business since 2017.
d. That the corporation had annual sales of $267,369.00 and had one employee.
e. That KAJ was the president and director of Reid Gulf Inc. and sole shareholder.

[6] Based on the financing request, BDC prepared and forwarded a loan agreement and guarantee to Reid Gulf Inc. and KAJ.

[7] The relevant portions of the Loan Agreement/Guarantee contained the following terms:

a. 2.1 Be honest with us. Any information you give us must be accurate, including the information you provided in the loan application process. Our decision is based on this information. You must let us know as soon as any of the information you gave us changes.

b. 2.6 Stay away from activities BDC does not finance. As a Crown corporation, we do not finance business associated with the following activities: …Market speculation. Residential property financing.

c. 4.4 You cannot transfer the loan to someone else. You cannot transfer the loan to another person or entity without our written consent.

d. 5.1 Borrower. By signing below, you confirm that you have read and understood this agreement. You agree to honour all the obligations described in it. You also confirm that you have consulted a lawyer who advised you on this agreement, or chosen not to consult a lawyer.

e. 5.2 Guarantors. Remember, as a guarantor, repaying the loan is as much your responsibility as the borrower’s. You also take on all the other obligations listed in this agreement. If the borrower defaults, we will ask you to pay the full amount they owe us. If you refuse to pay, we will have no choice but to take you to court. In legal terms, you are unconditionally liable on a joint and several basis with the borrower and any other guarantor. In order for the loan to be disbursed, you need to sign 2 documents in the following order: 1. This agreement 2. The Guarantee. By signing below, you confirm that you have read and understood this agreement. You agree to honour all the obligations described in it. You also confirm that you have consulted a lawyer who advised you on this agreement, or chosen not to consult a lawyer.

[8] The agreement provided that the interest rate on the loan was calculated at the rate based upon the lender’s floating base rate of interest plus 4%.

[9] In consideration of a promise of the advance of funds, KAJ signed the loan agreement both as principal of the corporation and as a guarantor.

[10] The BDC loan was deposited into Reid Gulf Inc.’s bank account on November 8, 2022.

[11] Reid Gulf Inc. subsequently defaulted on the Loan and BDC made written demand for payment of the outstanding amount due upon both the Defendants by registered letter dated August 19, 2024.

[12] In her Statement of Defence, KAJ (as guarantor) acknowledged the following:

a. The existence of the Loan Agreement.
b. That she was a director of Reid Gulf Inc. at the relevant times.
c. That she provided her personal guarantee.
d. That she signed the relevant documents.
e. That she transferred the loaned funds to the third party believing that the third party would invest these funds in real estate ventures and confirmed that she provided BDC with a personal Guarantee but denied having made any fraudulent misrepresentations to BDC, having obtained the Loan on behalf of Mr. Oberoi (the third party), a person who intentionally deceived her regarding the purpose and repayment of the loan.

[13] In her affidavit sworn January 22, 2025, KAJ deposed at paragraph 21 that “Mr. Oberoi encouraged me to take the loan to support his business ambitions. As life partners, I trusted him…” At paragraph 22 KAJ further deposed that “After receiving the loan, I transferred the funds to Mr. Oberoi in portions…”

[14] In summary, the facts support the following conclusions: that KAJ applied for the BDC loan, by signing the Loan Agreement, KAJ agreed that any information she provided to BDC needed to be accurate. By her own admission, KAJ was not honest with BDC from the beginning, she did not advise BDC of Mr. Oberoi’s involvement or that the proceeds of the loan would be transferred to Mr. Oberoi to invest those funds in real estate ventures, being a prohibited form of investment pursuant to the Loan Agreement. In short, by her own admission, the Guarantor misrepresented to BDC what the Loan funds would be used for, her representations were false and she knew them to be false, the corporation defaulted in repaying the loan and she agreed to be the guarantor.

Summary Judgment

[15] Rule 20.04(2) of the Rules of Civil Procedure provide for summary judgment where the court is satisfied that there are no genuine issues requiring a trial.

[16] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada emphasized that summary judgment was appropriate only where the court was able to make a fair and just determination on the merits without the need for a trial, being satisfied that there were no genuine issues requiring a trial, that the record before the court provided a sufficient factual foundation to fairly resolve the dispute and that the process of the summary judgment motion was proportionate, expeditious and less expensive than proceeding to trial.

Analysis

[17] KAJ argued three things:

a. That she was a victim of this named third party and that she required that the third party claim be adjudicated along with the determination of her obligations as a guarantor under the loan to the Plaintiff.

b. KAJ also argues that the plaintiffs have not properly accounted for their alleged damages nor demonstrated efforts to mitigate loss, and

c. Finally, KAJ argued that it was the third party’s misuse of funds that was central to the dispute and needed to be adjudicated.

[18] Dealing with the first issue raised, the third-party is separate and distinct from the Plaintiff’s claim brought on a personal guarantee. The resolution of the third-party claim has no bearing on the issue of whether KAJ is personally liable to the Plaintiff on her guarantee.

[19] With regards to the issue of an accounting, there was sufficient and reliable evidence led by the Plaintiff to quantify damages. This was a bank loan with specific interest rates, penalties and costs provisions set within the loan agreement and provided in the record.

[20] Finally, the issue of what the third party did or did not do in relation to the money provided to him by KAJ, is of no moment.

[21] Based upon the foregoing analysis, this is exactly the type of case that is meant for summary judgment, there are no triable issues, and the record is sufficient and robust enough to adjudicate the case and to grant judgment.

[22] The final issue to determine is whether KAJ fraudulently misrepresented the purpose of the loan. On this point I find she did. The overwhelming evidence, including concessions and admissions from KAJ, support such a finding. Here I find that KAJ represented to BDC that the loan was for her corporation, in existence since 2017, of which she was the officer, director and sole shareholder for “cash for day to day expenditures for the business” knowing this to be false/fraudulent and that her true reason for seeking the loan was to make speculative real estate investments through her life partner Mr. Oberoi, knowing this to be impermissible under the terms of the loan. BDC relied upon KAJ’s fraudulent representation in making the advance, to their detriment.

Conclusion

[23] For the reasons given, summary judgment is appropriate.

[24] Judgment to the Plaintiff moving party BDC in the sum of $97,158.46 owing as of December 13, 2024, plus pre-judgment interest at the rate of 11.59% per annum from December 14, 2024, to today. Post-judgment interest shall be at the rate of 11.59% per annum from the date of this judgment, in accordance with the terms of the Loan Agreement.

[25] The court declares that KAJ fraudulently misrepresented the purpose for which the loan would be utilized and that the BDC relied upon that same false/fraudulent representation and accordingly the funds were procured under false/fraudulent pretenses.

[26] There is no evidence before the court or submissions made regarding the status of the third-party claim including whether it had been served. In the absence of this information and given my finding that the third-party claim had no bearing on the main action, as requested by KAJ, I direct that she may proceed with her third party claim as a separate action under Rule 29.09.

Costs

[27] If the parties cannot come to an agreement on the issue of costs they may provide short written submissions of no greater than 3 pages, double spaced (not including offers to settle and bills of costs) to my attention, through the trial coordinator on the following timetable:

i. The Plaintiff shall serve and file their cost submissions by 28 March 2025;
ii. The Defendant shall serve and file their cost submissions by 4 April 2025;
iii. The Plaintiff shall serve and file their reply to the Plaintiff’s costs submissions, if any, by 11 April 2025.

Justice J. Krawchenko
Released: March 14, 2025

[^1]: The defendant Reid Gulf Inc. was noted in default and a default judgment was granted against that corporation.