Ontario Superior Court of Justice

Court File No.: CV-15-2378-0000
Date: 2025-04-15

Between

Bank of Montreal
Plaintiff
J. Siegel and A. Fox, for the Plaintiff

-and-

Joseph Ieradi
Defendant
K. Borg-Olivier, for the Defendant

Heard: March 31, 2025, and April 1, 2, 3, and 8, 2025

Reasons for Judgment

C. Chang

Introduction

1The plaintiff brings this action for collection of moneys due under a credit agreement. There is no dispute respecting any of the following: the fact that a credit agreement was executed, the facility was a line of credit, the credit limit, the amounts drawn, the amounts repaid, the applicable interest rate, and the current amount due.

2The sole disputed issue is whether the defendant entered into the credit agreement personally or on behalf of his corporations. The plaintiff says that the defendant executed the agreement personally, and repayment of the indebtedness is his responsibility. The defendant says that he executed the agreement on behalf of his corporations only, and repayment of the indebtedness is not his responsibility. At the heart of the controversy is the fact that neither party has produced a copy of the executed agreement.

Factual Background

3In June 2007, the parties entered into a written credit agreement under which the plaintiff provided a line of credit with a $400,000.00 limit (the “LOC”). The LOC account number ended in 188, and the available credit could be accessed by cheque, by a designated credit card, online, or in-branch. The subject cheques bore the defendant’s name and home address, and the subject credit card bore the defendant’s name.

4Before the plaintiff closed the LOC account in 2014, the defendant had drawn on it and made repayments to it. After drawing on the LOC, the defendant directed the funds to himself, various corporations, his wife, and others. The defendant says that all of the funds drawn from the LOC were used for the businesses of his corporations, he repaid moneys used by his corporations with corporate funds, and he repaid moneys that he personally used with personal funds.

5Neither party has produced a copy of the executed LOC agreement.

Issue

6Although the statement of defence pleads that this action is statute-barred, the defendant abandoned that defence at trial. Furthermore, neither party advances a claim in spoliation respecting the lost LOC agreement. Therefore, the sole issue to be determined in this action is whether the defendant executed the LOC agreement personally, or on behalf of his corporations.

Analysis

Parties’ Positions

7The plaintiff submits that the LOC account was personal and not corporate. It argues that, although the applicable agreement was lost, the other evidence shows that the account couldn’t have been anything other than personal. The plaintiff further argues that, at the relevant time, it didn’t offer the type of “umbrella line of credit” alleged by the defendant, the defendant has failed to adduce evidence that the LOC was such an “umbrella” facility, the defendant has failed to adduce any evidence that his corporations were party to the LOC agreement, and the defendant’s use of the LOC is completely consistent with it being a personal account.

8The defendant submits that the LOC account was corporate and not personal. He argues that he executed the LOC agreement on behalf of Westmount-Keele Limited (“Westmount”), Old Market Lane Developments Inc.[1] (“OMLD”), Lombard Victoria Group Inc. (“Lombard”), and any further corporations that he chose to add. The defendant also argues that how he used the LOC proves that it was a corporate account. Given this, and the fact that he didn’t execute a personal guarantee of the corporate indebtedness to the plaintiff, the defendant submits that he is not liable for repayment on the LOC.

Decision

9For the reasons set out below, I find that the LOC was a personal line of credit, and the defendant personally executed the LOC agreement. I will first discuss the applicable legal framework, and then explain my reasons for concluding that the defendant is liable for the amounts due under the LOC agreement.

The Legal Framework

10The law respecting contractual interpretation is well settled.

11The overriding consideration is giving effect to the parties’ objective intent at the time of contract formation based on a reading of the contract as a whole; giving the words used their ordinary and grammatical meaning consistent with the surrounding circumstances that were objectively known to the parties at the time of contracting (see: 1201466 Ontario Inc. v. 1799144 Ontario Inc., 2024 ONSC 1511, para. 63; Harvey Kalles Realty Inc. v. BSAR (Eglinton) LP, 2021 ONCA 426, para. 5). The nature of the “surrounding circumstances” evidence to be considered will depend on the specific facts of each case, but must be limited to “objective evidence of the background facts at the time of the execution of the contract” and “should never be allowed to overwhelm the words of the agreement” (see: 1201466 Ontario, at para. 64; Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592, para. 46).

12A commercial contract is to be interpreted as a whole document, i.e., “in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective” (see: 1201466 Ontario, at para. 65; 2651171 Ontario Inc. v. Brey, 2022 ONCA 148, para. 16). It should also be interpreted in a manner that is commercially reasonable and avoids commercial absurdity (see: 1201466 Ontario, at para. 65; Harvey Kalles, at para. 6).

13Contracting parties’ conduct after execution of the agreement is not part of the factual matrix, and evidence of such subsequent conduct is only admissible if, “after considering the text and the factual matrix, the contract remains ambiguous” (see: Prism Resources Inc. v. Detour Gold Corporation, 2022 ONCA 326, para. 18).

14There is a dearth of Ontario jurisprudence respecting how the court is to address the issue of a lost written agreement in adjudicating a claim in contract. Counsel did not direct me to any such authority, and my own research has disclosed none. However, there is jurisprudence from British Columbia and Alberta that, although not binding, is persuasive and, in my view, assistive.

15In Martenyi v. Advance Yacht Sales Ltd., 2012 BCSC 906, para. 42, the plaintiff sought judgment following a summary trial of his claim for return from the defendant of moneys paid toward the purchase of a yacht. Although Humphreys J. did not adjudicate the issue of the lost agreement, she did cite the following principle: “courts will accept secondary evidence of a written agreement if the written agreement is not available”.

16In Canada Trustco Mortgage Company v. McDade, 2004 ABQB 51 (aff’d 2005 ABCA 94), the plaintiff brought an action against the defendants for collection of moneys due under a line of credit agreement. The plaintiff obtained summary judgment against one of the defendants, and its claim against the other defendant proceeded to a summary trial before Veit J., who granted judgment in favour of the plaintiff. She held that the loss of the applicable agreement was not fatal to the plaintiff’s claim, and was satisfied, based on all of the evidence, that the plaintiff had proven the agreement and its terms (see: McDade, at paras. 48-50). Veit J. also held that the content of the parties’ agreement could be “reverse engineered” from the other evidence adduced at the trial, including the account statements sent to the defendants (see: McDade, at para. 52).

17From these two authorities, I distill the following applicable principles:

a. a written agreement is not a creature in its own right, but, rather, is evidence of the existence of an agreement and of its terms;

b. the loss of a written agreement is not fatal to a party’s claim under the agreement;

c. the agreement and its terms can be proven by other admissible evidence that speaks to its existence and terms; and

d. the success of a party’s claim under an agreement whose written form has been lost will depend on that party’s ability to otherwise prove its existence and its terms.

The Legal Framework Applied

18Given the loss of the LOC agreement in the case-at-bar, I find evidence of the parties’ post-contracting conduct to be admissible. Indeed, neither party raised any objection to the admission of such evidence, and, in my view, I am free to consider it.

19Applying the above legal principles to the admitted facts and the evidence in the case-at-bar, I find that the LOC account was personal, and the defendant personally executed the LOC agreement.

20It is an agreed fact that the LOC agreement was entered into, and the defendant admits to, among other things, the following:

a. he signed the agreement (albeit on behalf of his corporations);

b. he was the only one (other than the plaintiff) who could draw funds from the LOC;

c. he drew funds from the LOC by issuing the applicable cheques;

d. those cheques showed only his name as the issuer, and showed only his home address;

e. he also drew funds from the LOC by effecting electronic funds transfers between the LOC account and his personal bank account;

f. he personally used funds drawn from the LOC; and

g. he received monthly statements for the LOC account that stated, “YOUR PERSONAL LINE OF CREDIT” [capitalization in original], showed only his name as the holder of the account, and showed only his home address.

21In addition to those admissions, I accept the following evidence:

a. the applicable data in the plaintiff’s CCAPS computer system:

i. shows the defendant as the customer, and his home address,

ii. lists the defendant’s personal assets and personal liabilities, and

iii. shows the LOC as a “PLOC” (personal line of credit) and a personal liability of the defendant;

b. the plaintiff’s “Customer Snapshot” for the defendant as of November 2013 shows the LOC, and describes it as a “PLOC”;

c. the applicable data in the CACS/ECP computer system used by the plaintiff’s collection department shows the LOC as a “PLOC”; and

d. the LOC account was set up to protect the defendant’s personal chequing account against overdraft: funds would automatically be drawn from the LOC and transferred to the plaintiff’s personal account to prevent the latter from being overdrawn.

22I do not accept the defendant’s argument that the LOC was an “umbrella” facility for Westmount, OMLD, Lombard, and any other corporations he later chose to add. He has failed to adduce any evidence to corroborate his testimony on this point, including, without limitation, corporate records showing that those corporations authorized the applicable borrowings, and accounting or tax documentation showing the corporations’ treatment of the applicable indebtedness. This lack of evidence is particularly concerning because Westmount, OMLD, and Lombard have different shareholders and directors.

23I also do not accept the evidence of the defendant’s witness, Steve Fabian, that the LOC was corporate. Although Mr. Fabian is a former employee of the plaintiff who received the defendant’s application for the LOC and inputted it into the CCAPS computer system, his evidence was that he has no personal knowledge of what happened to that application after he uploaded it. He testified as to what the defendant said he was looking for by way of the applicable credit facility, but could not speak to what credit agreement the parties ultimately entered into. Moreover, Mr. Fabian’s evidence that multiple corporations could not execute the same line of credit agreement unless they all had the same shareholders or were “parent-subsidiary” contradicts the defendant’s evidence that Westmount, OMLD, Lombard, and Construction Labour Force Ltd. (“CLF”) were all parties to the subject agreement. It was the defendant’s evidence that all of those corporations have different shareholders, and there is no evidence that they were parents/subsidiaries.

24In addition, I have concerns about Mr. Fabian’s credibility, given his clear animus toward the plaintiff and its legal representatives. Although the defendant consented to Mr. Fabian speaking with the plaintiff’s counsel before trial, Mr. Fabian refused to do so, and provided no explanation other than to say that it was his personal preference. Moreover, his animosity toward plaintiff’s counsel during his cross-examination was clear and went beyond what would normally be expected in the circumstances of this case.

25The defendant has also failed to adduce evidence that the LOC agreement permitted him to unilaterally amend it to add parties of his choice without the plaintiff’s assent or involvement. Specifically, CLF, which the defendant says was also a party to the LOC agreement, was incorporated more than two years after that agreement was executed. In my view, this type of open-ended arrangement is not commercially reasonable, and does not make commercial sense.

26I also do not accept the defendant’s argument that his evidence that funds he drew from the LOC were ultimately used for corporate purposes proves that the LOC account was corporate and not personal. As set out above, the defendant was the only person who could, and did, draw funds from the LOC, and he directed where those funds went, but, in many cases, he couldn’t identify the specific use to which LOC funds were put. In addition, as set out above, the defendant admitted to personally using LOC funds. In any event, the fact that some LOC funds ended up in the hands of one or more of the defendant’s corporations is, in my view, insufficient to prove that the LOC was corporate.

27Moreover, the defendant has failed to adduce any evidence in support of his argument that each corporation’s responsibility to repay funds drawn on the LOC commensurate with the moneys it received proves that the LOC account was corporate. Among other things, the defendant has failed to adduce evidence respecting how he, his partners, and any of the subject corporations accounted for the moneys that they received from, and repaid to, the LOC. As a director of Westmount, OMLD, Lombard, and CLF, the defendant owes to each of them, among other things, duties to properly account for moneys it borrows and repays, and to properly maintain relevant corporate books and records. The defendant produced no evidence of any such accounting, or any such books or records. Furthermore, the alleged financial arrangements between the corporations respecting their accountability for repayment on the LOC is contradicted by the defendant’s evidence that CLF made repayments to the LOC, but never received any funds from it.

28For the reasons set out above, I am satisfied that the plaintiff has discharged its burden of proving, on a balance of probabilities, that the LOC agreement was for a personal line of credit, and was personally executed by the defendant. The plaintiff is therefore entitled to judgment on its claim accordingly.

Costs

29I urge the parties to resolve the issue of costs, upon which resolution, they are to jointly advise me according to the directions below. Failing such resolution, they are to deliver their written submissions according to the directions below.

Disposition

30I therefore make the following orders:

a. judgment to go in accordance with the draft at Case Center master pp. A1386 to A1388, except para. 2;

b. if the parties are able to resolve the issue of costs, they shall jointly advise me accordingly by email sent to the Milton Administration Office by no later than May 2, 2025; and

c. if the parties are unable to resolve the issue of costs, they shall deliver their respective written submissions (each limited to two pages plus a bill of costs, and any relevant offers to settle) as follows:

i. the plaintiff, by no later than May 9, 2025,

ii. the defendant, by no later than May 16, 2025,

iii. there shall be no reply, and

iv. I will consider any failure to meet either of the above deadlines to be the result of informed choice, and decide the issue of costs accordingly.

C. Chang
Released: April 15, 2025

1The Agreed Statement of Facts does not include a reference to Old Market Lane Developments Inc. (only to Old Market Lane Inc.), and the defendant’s evidence at trial was that Old Market Lane Developments Inc., not Old Market Lane Inc., was a party to the applicable line of credit agreement.