Business Development Bank v, 2021 ABQB 141

Court of Queen’s Bench of Alberta Citation: Business Development Bank v 1956680 Alberta Inc, 2021 ABQB 141 Date: 20210222 Dockets: 1703 13509 and 1703 13510 Registry: Edmonton Between: Business Development Bank of Canada Plaintiff/Respondent - and - 1956680 Alberta Inc. Defendant/Not Party to Appeal -and- Jasbinder Sekhon Defendant/Appellant And Between Business Development Bank of Canada Plaintiff/Respondent -and- 1959985 Alberta Inc. Defendant/Not Party to Appeal -and-

Vijay Punjabi Defendant/Appellant _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice John T. Henderson _______________________________________________________ I. BACKGROUND [ 1 ] The Appellants, Jasbinder Sekhon and Vijay Punjabi appeal from the decision of Master Birkett Q.C. pronounced February 5, 2019 and filed May 6, 2019 which granted

summary judgment in favour of the Business Development Bank of Canada (the “BDB”). [ 2 ] On April 25, 2016, the Defendants 195980 Alberta Inc. and 1959985 Alberta Inc. (the “Borrowers”) entered into loan agreements with the BDB. The Appellants signed the loan agreements as the authorized signing officers of the Borrowers. [ 3 ] On April 25, 2016, the Appellants also signed personal guarantees (the Guarantees) in which they guaranteed the obligations of the Borrowers to BDB. Attached to both Guarantees were Certificates under the Guarantees Acknowledgement Act , RSA 2000, c.

G- 11 , as amended (the Act ) signed by Nitu Sohi, a Barrister and Solicitor. Ms. Sohi certified that the Appellants appeared before her in person and acknowledged that they had signed the Guarantees. She also certified that she assured herself that the Appellants were aware of the contents of the Guarantees and that they understood the terms of the Guarantees. [ 4 ] Funds under the loan agreements were advanced in May 2016. Interest only payments on the loans began May 2016 and payments of principle and interest began in February 2017.

Some months later the loans went into default and BDB then made demands upon the Borrowers for the repayment of the loans. [ 5 ] On July 5, 2017, BDB also made demands on the Guarantees seeking from the Appellants repayment of the amount of the loans along with interest at the rate specified in the loan agreements. [ 6 ] On July 17, 2017, two weeks after making the demands on the Guarantees, BDB issued Statements of Claim in both of these actions seeking judgment against the Borrowers in relation to the loan agreements and also judgment against the Appellants on the Guarantees. [ 7 ] On August 8, 2017, Statements of Defence in both actions were filed which are, for all practical purposes identical.

All Defendants denied that they refused or neglected to pay the amounts outstanding. The Appellants also denied that the Guarantees were taken in accordance with the provisions of the Act . [ 8 ] On October 22, 2018, Master W.S. Schlosser granted a consent order allowing both actions to be tried together because of the common questions of law and fact. In their Written Brief in relation to this appeal, the Appellants confirm that the “facts and issues are not only common, they are exactly the same”. [ 9 ] BDB then brought an application for

summary judgment in both actions against all Defendants. The application was returnable in Master’s Chambers on February 5, 2019. Before BDB’s application was heard, but also on February 5, 2019, the Appellants sought to amend their Statements of Defence to plead “ non est factum ” on the basis that the Appellants were never told that they were guaranteeing any loans and, to the contrary, a representative of BDB assured them that the “loan was unsecured” and therefore there was “nothing to worry about”. The amendment was allowed by Master Birkett Q.C. [ 10 ] In support of the

summary judgment application, BDB filed affidavits of two BDB employees, Sundeep Shiota and Helen Cheng. Those affidavits set out the history of the loans and the guarantees and provide details regarding the amount outstanding. Both employees deposed that, in their belief, there was no defence to the claims of BDB and that there was no genuine issue to be tried in the actions. [ 11 ] BDB also filed the affidavit of Ms. Sohi in support of the

summary judgment application. Ms. Sohi was cross-examined on her affidavit. [ 12 ] In response, the Appellants each filed their own affidavits in which they, among other things, deposed to representations made by a BDB employee regarding the unsecured nature of the loans and a statement to the effect “what are you guys worried about, it’s unsecured”. The affidavits of the Appellants also provide a description of their meeting with Nitu Sohi.

[ 13 ] The Learned Master provided detailed oral reasons for her decision in which she: • granted judgment against the Borrowers, since “there was no challenge made by the defendants to the amount of the judgment sought, or the interest rate ...” • considered the then existing case law and determined that the record was such that it was fair and just to decide the case summarily; • reviewed the provisions of the Act and, after specifically considering the affidavit evidence of the two Appellants, concluded that the provisions of the Act had been properly complied with and that Guarantees were enforceable against the Appellants; and • concluded that the defence of non est factum was not available to the Appellants because of their carelessness in failing to recognize what they were signing, particularly given the obviousness of the documents themselves. [ 14 ] The Appellants seek to overturn the decision of the Master and have these actions proceed to trial.

No additional evidence was presented on this appeal. Thus, I have the very same record before me that the Master had. II. STANDARD OF REVIEW [ 15 ] The standard of review on an appeal from the decision of a Master is correctness in relation to all issues, including questions of law, fact and mixed questions of fact and law: Bacheli v Yorton Securities , 2012 ABCA 166 at para 30 . III. ISSUES TO BE DECIDED [ 16 ] The question on this appeal is whether the test for

summary judgment described in Weir-Jones Technical Services Incorporated v Purolator Courier Ltd , 2019 ABCA 49 has been met. This will involve a consideration of the following issues: • Did BDB prove on a balance of probabilities that the requirements of the Act were satisfied in relation to the execution of the Guarantees? • Does the plea of non est factum give rise to a genuine issue to be tried in the circumstances of this case? IV. ANAYSIS A. Weir-Jones Test for

Summary Judgment [ 17 ] On February 6, 2019, the day after the Leaned Master gave the decision under appeal, the Alberta Court of Appeal released its Reasons for Judgment Reserved in Weir-Jones . In that decision the Court of Appeal reviewed the law with respect to

summary judgement and clarified the framework for such applications. At para 47 the law is summarized as follows: The proper approach to

summary dispositions, based on the Hryniak v Mauldin test, should follow the core principles relating to

summary dispositions, the standard of proof, the record, and fairness. The test must be predictable, consistent, and fair to both parties. The procedure and the outcome must be just, appropriate, and reasonable. The key considerations are: 1. Having regard to the state of the record and the issues, is it possible to fairly resolve the dispute on a

summary basis, or do uncertainties in the facts, the record or the law reveal a genuine issue requiring a trial? 2. Has the moving party met the burden on it to show that there is either “no merit” or “no defence” and that there is no genuine issue requiring a trial? At a threshold level the facts of the case must be proven on a balance of probabilities or the application will fail, but mere establishment of the facts to that standard is not a proxy for

summary adjudication. 3. If the moving party has met its burden, the resisting party must put its best foot forward and demonstrate from the record that there is a genuine issue requiring a trial. This can occur by challenging the moving party’s case, by identifying a positive defence, by showing that a fair and just

summary disposition is not realistic, or by otherwise demonstrating that there is a genuine issue requiring a trial. If there is a genuine issue requiring a trial,

summary disposition is not available. 4. In any event, the presiding judge must be left with sufficient confidence in the state of the record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute. To repeat, the analysis does not have to proceed sequentially, or in any particular order. The presiding judge may determine, during any stage of the analysis, that

summary adjudication is inappropriate or potentially unfair because the record is unsuitable, the issues are not amenable to

summary disposition, a

summary disposition may not lead to a “just result”, or there is a genuine issue requiring a trial. [ 18 ] While no deference is owed to the decision of the Master, I note that at pages 1 to 2 of her reasons, the test for

summary judgment is discussed with specific reference to Hryniak v Mauldin . Her description of the test is not identical to the Weir-Jones test, but it is at least strikingly similar in many respects. For example, she focused on the question of whether she would be able to reach a fair and just disposition given the state of the existing record, which is now a key feature of the test. She also cites a paragraph from Hryniak that focuses on whether there is a genuine issue requiring trial, which is also a key issue in the Weir-Jones test. Finally, she

noted the obligation to satisfy the onus of proving its case on a balance of probabilities. B. Has BDB Proven Compliance with the Guarantees Acknowledgment Act? [19] The Act mandates the criteria that must be met before a personal guarantee can have any effect. The proposed guarantor mustappear before a lawyer to acknowledge that they have signed the guarantee. The Act imposes two basic requirements on the lawyer. First, the lawyer must certify that the proposed guarantor acknowledged having signed the guarantee.

Second, the lawyer must certifythat he or she is satisfied that the proposed guarantor is aware of the contents of the guarantee and understands it. As proof that theserequirements have been met, the Act requires that the lawyer sign a Certificate “in the prescribed form”. The prescribed form iscontained in the Regulations to the Act.

The Certificate must also be signed by the proposed guarantor. [20] Where the Certificate is regular on its face and accepted in good faith without any reason to believe that the requirements ofthe Act have not properly been complied with, the Certificate is conclusive proof of compliance with the Act. Thus, the person to whomthe guarantee is given need not look behind the Certificate to determine whether the Act has been complied with. [21] The Act provides a balance between the guarantor and the lender.

It creates a mechanism to ensure that the guarantor clearlyunderstands what his or her obligations are as guarantor and it also provides for commercial certainty. [22] In this case, the Appellants appeared before Ms. Sohi on April 25, 2016, at which time the Certificates were completed andsigned by Ms. Sohi and the Appellants. The Guarantees and the Certificates are attached as Exhibits to the Affidavits of Mr. Sihota andMs. Cheng. I have reviewed the Guarantees and the Certificates. They are complete and regular on their face. There is no evidence tothe contrary. [23] The evidence of Ms.

Sohi supports the validity of the Certificates. She deposed that she was a lawyer in a law office in whichone of the Appellants shared space. Ms. Sohi did not know either of the Appellants. She explained that she met with both of theAppellants on April 25, 2016 and she took photocopies of their driver’s licenses to satisfy herself on the issue of identification. Shecharged them a fee for the services that she provided. When cross-examined on May 22, 2018, more than 2 years after the guaranteeshad been signed, she had no specific memory of precisely what was said between herself and the Appellants.

She did however describethe general practice that she follows when having guarantees signed. She explained that she had performed this service approximately100 times. She deposed that her practice is to ensure that the person signing the guarantee understands what they are signing and whattheir liabilities are under the personal guarantees. [24] Both of the Appellants swore affidavits in which they acknowledged meeting with Ms. Sohi for the purpose of signingdocuments and that she charged a fee of $100. The affidavits of both Appellants describe, using identical language, their meeting withMs. Sohi.

They both say: There was absolutely no discussion, inquiry or reference to what we were signing – certainly no explanation of what a guarantee was, ormeant, and whether I understood same. The whole encounter lasted two minutes or less. And then, it was done. [25] The Certificate signed by Ms. Sohi directly contradicts the affidavit evidence of the Appellants. She has certified, as aBarrister and Solicitor, that she satisfied herself that the Appellants understood the guarantees and what their obligations were under theguarantees. Thus, there is a potential conflict in the evidence between the Appellants and Ms.

Sohi. At one time the presence of someconflicting evidence often prevented an Order for

summary judgement. However, the new approach is whether

summary disposition ispossible, considering the record, the evidence, the facts, and the law that must be applied to them. No longer does the mere presence ofsome conflicting evidence on the record preclude

summary disposition: Prominence Resources Inc. v Zargon Oil & Gas Ltd, 2020ABCA 191; Weir-Jones at para 36. [26] The type of defence raised by the Appellants in their Affidavits is precisely the type of dispute that the Act is designed toavoid. There can be no commercial certainty if guarantors can raise a defence of this nature. As was noted by Hearn v Hearn, 2004ABQB 75 at para 58, citing Master Funduk in Alberta (Treasury Branches) v Ronsdale Construction Inc.

(1984) CanLii 1251, this typeof argument, if successful, would make the guarantee certificate not worth the paper it is printed on. [27] In Credit Foncier Trust v 212731 Alberta Ltd. (1985) (AB KB), 64 A.R. 282, Justice Veit also addressedthis type of defence and said at para 4: ... an allegation by a guarantor that financial ramifications of a guarantee were not explained to him by the person before whom theguarantor signed the guarantee acknowledgement certificate does not raise a triable issue. (emphasis added) [28] In this case, at its highest level, the Appellant’s evidence may suggest that Ms.

Sohi failed in her duty to the Appellants andmay have signed a false Certificate. I pause to note that I make no such finding but only describe the most favourable findings of factthat could potentially be made if the action is permitted to proceed to trial. Yet, even in those circumstances, the validity of theGuarantees could not be successfully challenged because they are substantially complete and regular on their face. They were acceptedin good faith by BDB as evidence that the Act had been complied with.

By virtue of s 5 of the Act the Certificate represents “conclusiveproof” that the Act has been complied with. Thus, even if Ms. Sohi failed in her duty (which I am not finding here), the Guaranteeswould still be valid and enforceable. If affidavit evidence of the Appellants is true then their remedy would lie against Ms. Sohi. It doesnot affect the validity of the Guarantees. [29] On behalf of the Appellants, Mr. Lintz argues that s 5 of the Act only permits a creditor to rely on the Certificate if they areacting in good faith.

He argues that the false representations of the BDB representative demonstrate that he was not acting in good faith,and thus the Certificate cannot be relied on by BDB. While s 5(

c) does contain the words “good faith”, this is in the context of whetherthe requirements of the Act have been complied with. Thus, for example, if the creditor did not believe in good faith that the person who

signed the Certificate was a lawyer or if the creditor had some information that the lawyer and the proposed guarantor did not speak thesame language and thus could not communicate with each other, then it is possible that the creditor might not have a good faith beliefthat the Act had been complied with. In these circumstances, the creditor might not be able to rely on the Certificate. Reference to goodfaith in s 5(

c) does not relate to the types of vague discussions that took place between the BDB representative and the Appellants. Onceagain, the reason that the Act requires prospective guarantors to appear before a lawyer is to ensure that they know what their trueobligations are and to potentially dispel any misunderstandings that might have arisen in earlier discussions with the creditor. [30] I conclude that the evidence on this appeal provides a sufficient record to permit me to conclude that the Act was properlycomplied with. There is no genuine issue for trial in that regard. C.

Does the Plea of Non est Factum Raise a Genuine Issue to be Tried? [31] The plea of non est factum was explained by the Supreme Court in Marvco Color Research Ltd. v Harris (SCC), [1982] 2 S.C.R. 774 at page 778: ... where a document was executed as a result of a misrepresentation as to the nature and character and not merely its contents thedefendant was entitled to raise a plea of non est factum on the basis that his mind at the time of the execution of the document did notfollow his hand.

In such a circumstance the document was void ab initio. (emphasis added) [32] The Supreme Court in Marvco observed at page 780 that the plea of non est factum sprang into prominence with the judgmentof Foster v MacKinnon (1989), L.R. 4 C.P. 704 which provides an illustration of the classic situation in which the plea can be raised. Inthat case the Defendant signed a document thinking that it was a guarantee when in fact it was a bill of exchange. The Court concludedthat the Defendant never intended to sign a bill of exchange but intended to sign a contract of an entirely different nature.

As a result, theplea of non est factum was successful. [33] At one time the law in Canada was uncertain regarding whether the presence of negligence or carelessness would prevent thesuccessful operation of a plea of non est factum. Marvco dispelled any uncertainty by expressly concluding that a defendant is barred byreason of carelessness from pleading non est factum. At page 786, the Court explained that there are 2 reasons for this rule. First itplaces the loss on the person guilty of carelessness.

Second, it is a recognition of the need for certainty in commerce. [34] In support of their position that the plea of non est factum raises a genuine issue to be tried, the Appellants refer me to thedecision of Justice Manziuk in Farm Credit Canada v Pacific Rockyview Enterprises Inc, 2020 ABQB 357. In that case the twoRespondents signed personal guarantees in relation to a loan advanced by the Appellant to Pacific Rockyview. The loan went intodefault and the Appellant commenced an action to enforce the guarantees.

The Respondents sought to avoid the guarantees on the basis,inter alia, that at the time of signing they did not understand the nature and effect of the guarantees. They knew that the documents theywere signing were guarantees but thought that the guarantees were only to permit Pacific Rockyview to obtain the loan and that “it wasnot a guarantee that had to do with my own money outside of my investment”. The Court concluded that these facts did not support aplea of non est factum, explaining at para 69 that: The Respondent’s evidence shows that they knew they were signing guarantees.

There is no broad gulf between what the Respondentssigned and what they thought they were signing: limited guarantees to support a loan to Pacific Rockyview. There is no evidence thatthis was not an ordinary course of business transaction for FCC. There is no evidence that the Respondents were actively or passivelymisled by FCC. ... [35] In the present case, the Appellants focus on the last sentence quoted above.

They contend that this was one important factorthat influenced the Court’s conclusion that the plea of non est factum was not a viable defence. [36] Farm Credit v Pacific Rockyview offers no assistance to the Appellants. In that case there was no evidence of any active orpassive misrepresentation as to the nature and character of the document that was being signed. The same is true in the present case. The BDB employee was not alleged to have said anything about the guarantee other than: “This one needs to be notarized by a lawyer”.

There is no suggestion that the BDB employee told the Appellants that the document was something other than a guarantee. [37] I conclude that the plea of non est factum does not give rise to a genuine issue to be tried for two reasons. First, there issimply no evidence that either of the Appellants thought they were signing something other than guarantees. Thus, there is no evidencethat the nature and character of the document they thought they were signing was different than the nature and character of theguarantee. The Appellants’ affidavits are completely silent on this point.

At its very highest level, the Appellants’ affidavits suggest thatthere were vague responses from the BDB representative in relation to questions about the high interest rate – that the loan was notsecured and that they had nothing to worry about. Even accepting this as true, these vague statements do not contain representations thatthe nature and character of the documents were something other than guarantees.

To the contrary, the BDB employee flagged them assufficiently important to require them to be notarized by a lawyer. [38] Second, I conclude that the Appellants were, at a minimum, careless when they signed the guarantees. In Marvco, at page786, the Supreme Court made the following comments regarding carelessness in the context of non est factum: ... in both cases the carelessness took the form of a failure to determine the nature of the document the respective defendants wereexecuting.

Whether the carelessness stemmed from an enthusiasm for their immediate purpose or from a confidence in the intendedbeneficiary to save them harmless matters not. This may explain the origin of the caress state of mind but is not a factor limiting theoperation of the principle of non est factum and its application. [39] The Master concluded that both Appellants had been careless and I agree. It should have been obvious to anyone who lookedat the Guarantees as to what they were. The word “GUARANTEE” is found at the top of the Guarantee in capital letters. The

Appellants both signed the Guarantees immediately beside the words “Signature of Guarantor”. The Certificate to which the Guarantee is attached, and which the Appellants signed, is entitled “GUARANTEES ACKNOWLEDGEMENT ACT” and they signed immediately under the word in bold capitalized letters “STATEMENT OF GUARANTOR”.

The loan agreements were also signed by both Appellants, as a representative of the Borrower but also as guarantors under the word in bold capitalized letters: GUARANTOR. [ 40 ] As was the case in Marvco , the carelessness of the present Appellants took the form of their failure to determine the nature of the documents they were executing. I conclude that it would have been obvious to anyone who looked at the documents that they were guarantees.

The fact that they were signing guarantees should have been clear to both of the Appellants. [ 41 ] The carelessness of the Appellant’s prevents the operation of non est factum and does not give rise to a genuine issue to be tried . V. CONCLUSION [ 42 ] Having regard to the state of the record and the issues, I conclude that it is possible to fairly resolve the dispute between the parties on a

summary basis. I conclude that there are no material uncertainties in the facts, the record or the law that reveal a genuine issue requiring a trial. [ 43 ] I conclude that BDB has proven on a balance of probabilities that the Guarantees are compliant with the requirements of the Act . Furthermore, the Appellants have not shown any genuine issue to be tried in relation to the validity of the Guarantees. Finally, I conclude that the Appellants have not provided any facts or law that would suggest that the plea of non est factum raises a genuine issue to be tried in these actions. [ 44 ] I conclude that test in Weir-Jones has been met and that the Master properly granted

summary judgment against both Appellants. [ 45 ] I dismiss the appeal. Heard on the 17 th day of February, 2021. Dated at the City of Edmonton, Alberta this 22 nd day of February, 2021. John T. Henderson J.C.Q.B.A. Appearances: Greg J. Lintz for the Appellants Robert A. Farmer for the Respondent