Business Development Bank of Canada Plaintiff And: Sean Callahan First Defendant And: Sandra Callahan Second Defendant, 2021 NLSC 1

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Business Development Bank of Canada v. Callahan , 2021 NLSC 1 Date : January 5, 202 1 Docket : 201901G3515 Between: Business Development Bank of Canada Plaintiff And: Sean Callahan First Defendant And: Sandra Callahan Second Defendant Before: Justice Garrett A. Handrigan Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: December 18, 2020

Summary: BDC applied for

summary judgment against Sean Callahan and Sandra Callahan on a personal guarantee they gave to the Bank for $100,000 that their company, C’est Moi, borrowed from BDC. Alternatively, BDC asked that the matter proceed by

summary trial if the Court refused

summary judgment. The Court dismissed the application for

summary judgment. While it found that there was a genuine issue for trial, it found further that the issue could be addressed on a

summary trial. It ordered costs in the cause and set parameters for the

summary trial. Appearances:

Thomas M. Munn Appearing on behalf of the Plaintiff Shane R. Belbin Appearing on behalf of the First Defendant Jean V. Dawe, Q.C. Appearing on behalf of the Second Defendant Authorities Cited: CASES CONSIDERED: Ultramar Canada Inc. v. Atjem Holdings Ltd. (1995), (NL SC), 133 Nfld. & P.E.I.R. 31,56 A.C.W.S. (3d) 671 (Nfld. S.C. (T.D.)); LeDrew v. Brake (1999), (NL CA), 176 Nfld. & P.E.I.R. 288, 540 A.P.R.288 (Nfld. C.A.); Marco Ltd. v. Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 405A.P.R. 317 (Nfld.

S.C. (T.D.)) RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D REASONS FOR JUDGMENT Handrigan, J.: INTRODUCTION [1] Sean Callahan and Sandra Callahan are former owners of C’est Moi Fashion Company Inc., a retail business which theyoperated from a store at 8-10 Rowan Street, St. John’s, NL. In March 2017, C’est Moi borrowed $100,000 from the BusinessDevelopment Bank of Canada. The Callahans each owned 50% of the common shares of C’est Moi; both were directors of thecorporation, with Ms. Callahan designated as Managing Director; and they were also spouses.

BDC made it a condition of the loan toC’est Moi that the Callahans guarantee the loan unconditionally; and they did. [2] BDC disbursed the full loan to C’est Moi by January 2018 and by January 2019, the corporation had defaulted on itspayments. BDC sent letters to both the corporation and the Callahans on March 28, 2019, demanding that they pay the balance of theloan in full within 10 days. Neither the corporation nor the Callahans complied with BDC’s demands, so the bank issued a statement ofclaim from this Court against the Callahans on May 15, 2019.

The Callahans each filed defences to the claim and Sandra Callahan alsocounterclaimed against BDC. [3] BDC applied to this Court by interlocutory application on July 2, 2020. It asked for

summary judgment against both parties.BDC also submitted that the issues between it and the Callahans might be dealt with on a

summary trial if entering a

summary judgmentagainst them is not appropriate. I heard the application on December 18, 2020 and reserved my judgment until now. The Issues 1) Are the defences that the Callahans filed to BDC’s claim reasonable and sustainable; and, if not should I grant BDC

summaryjudgment for its claim? 2) If issuing a

summary judgment is not appropriate, could the issues between BDC and the Callahans be dealt with on a

summarytrial? The Law

Summary Judgment Statute [4] Rule 17.01 (1) of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D, says, as relevant here, that:

17.01.

(1) Where the defendant has filed a defence…the plaintiff may, on the ground that the defendant has no defence to a claim in theoriginating document…apply to the Court to enter judgment against the defendant. Case Law [5] Rule 17.01(1) of the Rules offers a measure of expediency to plaintiffs who have indefensible claims.

It provides thoseplaintiffs with timely access to court and ensures that they will not languish in the trial queue simply to find out the inevitable - thedefendant has no defence to their claims and has simply bought time by insisting on compliance with the usual pre-trial processesstipulated in the Rules. [6] While Rule 17.01(1) may be advantageous for plaintiffs, it can be perilous for defendants: the abridged process means thatdefendants do not get to defend claims against them unless they make it clear when they oppose applications under Rule 17.01(1) thatthere is a defence to consider.

Injustices can occur because of that possibility, and judges dealing with Rule 17.01(1) applications mustgive them the “good hard look” that Barry, J. of this Court referred to in Ultramar Canada Inc. v. Atjem Holdings Limited (1995), (NL SC), 133 Nfld. & P.E.I.R. 31, 56 A.C.W.S. (3d) 671 (Nfld. S.C. (T.D.)). [7] Rule 17.01(1) involves a two-step process: the plaintiff must show by affidavit that it has a valid claim, and it must furtherassert that the defendant has no defence to the claim. If the plaintiff succeeds in that, the onus shifts to the defendant to “resist the claimfor

summary judgment”: LeDrew v. Brake (1999), (NL CA), 176 Nfld. & P.E.I.R. 288, 540 A.P.R. 288 (Nfld. C.A.),paragraph 6. [8] The defendant may do so by affidavit, in which she must “…disclose facts which, if proven, would constitute a defence. It isnot intended that an application for

summary judgment require the applications judge to assess credibility, weigh evidence or makefindings of fact”: LeDrew, paragraph 6.

Summary Trial Statute [9] Rule 17A.01 of the Rules of the Supreme Court, 1986, says, as relevant here, that: 17A.01.

(1) A plaintiff…may, after defence has been filed and at any time prior to the proceeding being placed on a trial list, apply to theCourt with supporting affidavit material or other evidence for

summary trial seeking judgment on…all or part of the claim in thestatement of claim, as the case may be. Case Law [10] Green, J. (as he was then) explained the Rule 17A procedure in detail in Marco Ltd. v. Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 405 A.P.R. 317 (Nfld. S.C. (T.D.)), shortly after the Rule was adopted.

Atparagraph 13 the learned Justice saw the potential for the procedure to be a “...very beneficial means of disposing of a case without thenecessity of a full trial in a cost-effective and time-efficient manner while still respecting the rights of the parties to have a properdetermination of the issues in dispute.” [11] Not every case is amenable to the procedure and Rule 17A applications should not be made frivolously.

As Green, J. also said(Marco, paragraph 13): ...[C]ounsel have a responsibility to give careful consideration to whether the circumstances are appropriate for bringing an applicationand to ensure that, if brought, the application is carefully prepared and organized so that the matter can be dealt with in a

summaryfashion consistent with the purpose and intent of the rule. [12] It is clear from Rule 17A that

summary trials can be conducted in one of the following circumstances: • There is no genuine issue for trial between the parties (Rule 17A.03 (1)). • There is a genuine issue for trial, but the court can find, from the record, the facts necessary to decide the facts and law pertinent tothat issue. But even then, it must not be “unjust to decide the issues on the application” (Rule 17A.03 (2)). [13] If the only genuine issue for trial is the amount to which a party is entitled, the court may order a trial of that issue or grantjudgment with a reference to determine the amount: Rule 17A.03(3).

Similarly, if the only genuine issue for trial is a question of law, thecourt may answer that question and grant judgment: Rule 17A.03(4). A “genuine issue for trial” is one that “…is not spurious and ...relates to a material fact or point of law that is necessary to be decided to resolve the ultimate controversy between the parties.” (Marco,paragraph 76) [14] The party applying for

summary trial must prove there is no genuine issue for trial; or, if there is, the applicant must show howthe court can find from the record the facts necessary to decide the questions of fact and law in respect of that issue; and the applicantmust also show that it would not be unjust to decide the issue on the application. (Ultramar Canada) [15] The party applying must also offer evidence to support each element of its claim, counterclaim or defence, as may be.

If it does,the onus shifts to the responding party, if it opposes the application, to show there is a genuine issue for trial and that it would be unjustto decide the issue on the application. Each party must “put its best foot forward” when making or opposing a Rule 17A application. [16] When deciding whether it would be unjust to decide the case by

summary trial the court may consider various factors,including, but not limited to (Reference: Ultramar Canada, paragraph 14):

• the absence, for reasons other than the parties' neglect, of material evidence at the time of the application. • the complexity of the matter. • any prejudice from delay in going to trial in the usual course. • any prejudice to a party's ability to present its case properly in a

summary trial; and, • costs. [ 17 ]

Summary trial is an abridged procedure, but it is no less a “trial”: the court judges and decides the issues as on a trial and the burdens and standards of proof apply with the same vigor. There is, however, latitude afforded to the parties in the form and presentation of evidence. Thus, evidence may be presented by affidavit, or it may be drawn from answers to interrogatories or examinations for discovery. Affiants may be cross-examined and re-examined on their affidavits and inferences can be drawn from a failure to file affidavits or cross-examine on those affidavits that are filed (Rule 17A.02). [ 18 ] The court may dismiss an application for

summary trial if the procedure is not appropriate in the circumstances of the case, but it “shall” grant

summary judgment if there is no genuine issue for trial: Rule 17A.03(1). Rule 17A applies, as stated by Green, J. in Ultramar Canada on an “issue by issue basis” so that “...issues...[that] can be disposed of summarily ... ought to be, leaving only those issues which cannot be disposed of to be dealt with on a more limited and focused trial.” ( Ultramar Canada , paragraph 15) [ 19 ] This is the law I will apply to the issues I stated above. I turn now to discuss those issues, beginning with the background to them. Discussion Background [ 20 ] The Callahans incorporated C’est Moi on October 31, 2006.

At the time, they operated from a retail store on Water Street, also in St. John’s, where they remained until October 2011, when they moved to their current location, in that part of St. John’s known as Churchill Square. It appears that the Callahans may have thought about relocating their business again in 2015, but nothing came of it. [ 21 ] As I noted above, each of the Callahans took 50% of the common shares issued in C’est Moi and both became directors of the corporation.

Sandra Callahan took on the duties of Managing Director. [ 22 ] In March 2017, the Callahans met with Joshua Butt, a Senior Manager, Special Loans and Advisory Services at BDC, to discuss borrowing $100,000 from BDC through C’est Moi, to use in the business. In paragraph 6 of his affidavit, Mr. Butt says what happened at their meeting of March 10, 2017: On or about March 10, 2017, I met with [Sandra] Ennis [i.e., Sandra Callahan] and [Sean] Callahan. I explained the terms and conditions of the Loan Agreement and the Guarantee, while we reviewed each page of both documents on an Apple iPad.

Both Ennis and Callahan were given the opportunity to read, review, and clarify all terms and conditions of the Loan Agreement and the Guarantee. After reviewing the Loan Agreement, Ennis signed it on behalf of C’est Moi, and I countersigned on behalf of BDC. After reviewing the Guarantee, Ennis and Callahan both executed same, and I signed next to both their names as a witness. The Guarantee was executed on March 10, 2017, despite the date incorrectly stating March 17, 2017.

The inconsistency in the dates was a clerical error. [ 23 ] BDC advanced the loan to C’est Moi in two instalments: $70,000 on March 21, 2017 and the balance of $30,000 on January 5, 2018. Mr. Butt says in paragraph 7 of his affidavit that BDC deposited the advances to C’est Moi’s “corporate bank account as instructed by C’est Moi”; and he attached to his affidavit as Exhibit “C”, a copy of a “cheque specimen provided by C’est Moi to BDC indicating the Royal Bank of Canada corporate bank account information for disbursement”. [ 24 ] By January 2019, C’est Moi was in default of the loan.

BDC sent a registered letter to Sean Callahan’s attention, at C’est Moi’s mailing address, on March 28, 2019. It advised Mr. Callahan, on behalf of C’est Moi: You are in DEFAULT under the terms of the security for the subject loan and BDC hereby invokes the acceleration clause contained in the security and demands the repayment of the loan in full. [ 25 ] On the same date, BDC sent registered letters to both Sean Callahan and Sandra Callahan.

After noting that a copy of the demand letter to C’est Moi was enclosed, the letters advised each of the Callahans: This letter constitutes demand upon you for the satisfaction of your guarantee obligation, concurrent with BDC’s demand upon the company, and, if the indebtedness to BDC is not settled within 10 days from date of this letter, we propose to take such action as may be necessary for collection thereof. [ 26 ] Neither C’est Moi nor the Callahans complied with BDC’s demand letters, so the bank issued its statement of claim against the Callahans on May 15, 2019, demanding $91,624.12, as of May 13, 2019 and interest, at a per diem of $15.74, compounded monthly from that date until the date of judgment.

BDC served Sandra Callahan and Sean Callahan with copies of its statement of claim on June 6,

2019 and July 3, 2019 respectively. [ 27 ] Sandra Callahan filed a defence to BDC’s claim on June 20, 2019 and added a counterclaim against both BDC and Sean Callahan to her defence. In her defence, Ms. Callahan: • Denies that C’est Moi was indebted to BDC; • Denies she had any knowledge of the Loan Agreement, or that there was a valid loan agreement between C’est Moi and BDC; • Denies she signed the Guarantee; • Denies she knew that BDC advanced funds to C’est Moi; • Says she “…was instructed by the Bank’s representative to sign a document he had on his iPad, which she was given no opportunity to read or even to see, other than the line for her signature”: Paragraph 9(

c) of the defence; • Says she believed she provided “…her signature on the iPad on the understanding that the Bank required it to follow through on its 2015 approval of C’est Moi’s application for funds to effect Leasehold Improvements to new retail space in the event it made a decision to relocate its retail premises, which did not occur”: Paragraph 9(

d) of the defence; • “…[P]leads non est factum as to the guarantee alleged in paragraph 7 of the Statement of Claim in that she never saw the alleged guarantee and, therefore, cannot be liable in respect of an agreement she did not make, nor in support of an alleged loan for which no consideration was given to the alleged debtor”: Paragraph 11 of the defence; and • Says “…there is no valid debt of C’est Moi to the Bank and no valid guarantee from her, even if there was a valid debt…”: Paragraph 13 of the defence. [ 28 ] As to the counterclaim against BDC, Ms.

Callahan: • Says any funds BDC advanced on the loan went to Sean Callahan, not C’est Moi; • Says BDC never consulted or advised her as Managing Director of C’est Moi (which BDC knew she was) that it had advanced funds on the loan, or that it would do so; • Says BDC acted negligently and improperly in advancing funds on the loan without authorization from her, as Managing Director and guarantor of C’est Moi, or from C’est Moi itself; • Says BDC breached its duty of care to her “…to act as a reasonable and prudent financial institution…” (paragraph 20 of the counterclaim) and caused her damages; and • Claims general and special damages and costs from BDC. [ 29 ] As to the counterclaim against Sean Callahan, Ms.

Callahan: • Says he deceived her about the purpose of meeting with BDC in 2017; • Says he breached fiduciary duties to C’est Moi as its director and to her as an equal shareholder of C’est Moi and his spouse;

• Says he misappropriated funds from C’est Moi; • Says he diverted C’est Moi’s income to BDC to “…‘repay’ the funds he misappropriated”; and • Claims general and special damages and costs from him. [ 30 ] Ms. Callahan’s defence and counterclaim prompted the parties to make multiple other filings; so that the pleadings in this cause now are complicated, multifarious and far removed from the simple statement of claim BDC filed May 15, 2019 to start the process, then claiming only a liquidated debt.

The other filings are: • Third party claim against Sean Callahan filed on June 20, 2019 by Sandra Callahan; • Third party claim against Sandra Callahan filed on August 1, 2019 by Sean Callahan; • Defence to Sandra Callahan’s counterclaim filed on June 28, 2019 by BDC; • Defence to Sandra Callahan’s third party claim filed on August 6, 2019 by Sean Callahan; • Defence to Sandra Callahan’s counterclaim filed on August 6, 2019 by Sean Callahan; • Defence to BDC’s statement of claim filed on August 6, 2019 by Sean Callahan; and • Defence to Sean Callahan’s third party claim filed on October 7, 2019 by Sandra Callahan. [ 31 ] I will not review each of these additional pleadings in the detail that I provided for BDC’s statement of claim, Sandra Callahan’s defence to it and her counterclaims against BDC and Sean Callahan.

Sean Callahan also filed a defence to BDC’s statement of claim, as did BDC to Ms. Callahan’s counterclaim. I will, of course, refer to some of the relevant pleadings as I follow through with my analysis of the issues that arise from the application that is before me now. [ 32 ] Finally, I note for background of this matter, the ambivalent stance that Sean Callahan adopted toward BDC’s applications against Sandra Callahan in the Memorandum of Law and argument that he filed on these applications.

This is how he expressed it in paragraph 2 of his Memorandum: [2] Callahan agrees that if [Sandra] Ennis [i.e., Sandra Callahan] is found liable to BDC then he is also liable to BDC. The essence of Callahan’s defence is that if Ennis is not found liable, then Callahan is also not liable to BDC. [ 33 ] This is the background to the issues I stated above. I turn now to analyze those issues, starting with BDC’s application to strike Sandra Callahan’s defence. Analysis Application for

Summary Judgment [ 34 ] To succeed in its application for

summary judgment, BDC must show that it has a valid claim, and it must further assert that Ms. Callahan has no defence to the claim. If BDC succeeds in that, the onus shifts to Ms. Callahan to “resist the claim for

summary judgment.” She may do so by affidavit, in which she must, as Cameron, J.A. said in LeDrew (at paragraph 6 ), “…disclose facts which, if proven, would constitute a defence. It is not intended that an application for

summary judgment require the applications judge to assess credibility, weigh evidence or make findings of fact.” I will examine first if BDC has a valid claim. [ 35 ] Joshua Butt set out the substance of BDC’s claim against Ms. Callahan in the affidavit he filed to support the bank’s application for

summary judgment. He noted, in particular, that BDC relies on the March 10, 2017 loan agreement for $100,000 between it and C’est Moi, the joint and several guarantee that Sean Callahan and Sandra Callahan gave to support the loan agreement, how the bank disbursed the funds to C’est Moi and various documents confirming its claim that C’est Moi defaulted on the loan. [ 36 ] Mr.

Butt also notes C’est Moi’s default and how BDC tried to collect the money by issuing demand letters to C’est Moi and to the Callahans, calling on then to honour their guarantee; all without the intended result, of course, leading BDC to provide details from its accounting records showing that C’est Moi owed BDC $99,414.11, as of December 9, 2020. In effect, BDC views its claim against

C’est Moi and the Callahans as a simple claim for a liquidated amount which it sees as indefensible. [ 37 ] Ms. Callahan disagrees. In the Memorandum of Fact and Law she filed in response to BDC’s interlocutory apply, Ms. Callahan says, that: • She did not know until December 2018 that C’est Moi had borrowed $100,000 from BDC; • Her signature appears on both the loan agreement and the guarantee, but she says Mr.

Butt did not allow her to read either document before signing it; • She signed the documents, believing BDC required the documents to keep current an earlier loan application C’est Moi presented to BDC in 2015 when it contemplated relocating to a new retail location; • Sean Callahan negotiated the loan for C’est Moi with BDC and he withheld any information about the loan from her until they separated; • Neither she nor C’est Moi acquired any benefit from the loan, because Sean Callahan received and directed the funds to his own personal uses; and • BDC was either wilfully blind or even possibly complicit in its dealings with Mr.

Callahan thereby enabling him to obtain money for himself and not for C’est Moi. [ 38 ] BDC denies that Ms. Callahan has provided grounds to defend the claim it makes against her. It points to Joshua Butt’s affidavit and the exhibits that he attached to it. The bank notes, for example, that the loan agreement and the loan guarantee are both written in plain language and their purposes are self-evident. The loan agreement is called a “LETTER OF OFFER” to C’est Moi and the loan guarantee is a single-page document which is entitled “GUARANTEE”. [ 39 ] The bank says that Ms.

Callahan signed twice on the loan agreement to accept its terms, first as the “Authorized Signing Officer” of C’est Moi and then, together with Mr. Callahan, as “GUARANTOR”. BDC says it disbursed the loan proceeds in two instalments of $70,000 and $30,000 respectively, by depositing them electronically to C’est Moi’s corporate bank account with the Royal Bank of Canada.

It relied on a canceled cheque that it received from C’est Moi, dated September 17, 2015 (given by C’est Moi to pay the application fee when it applied for funding to relocate in 2015) to obtain the particulars of that account to make its deposit. [ 40 ] In the Memorandum of Fact and Law BDC filed to support its application, the bank describes Ms. Callahan as “an intelligent business operator” who “…cannot succeed on opposing

summary judgment by taking the position that she executed a loan transaction totalling $100,000 without asking for and taking the opportunity to read the loan documents”: Paragraph 40 of the Memorandum. [ 41 ] Elsewhere in its Memorandum, BDC denies that the plea of non est factum, which Ms. Callahan made in her defence to its claim, is available to her. In paragraph 54, it submits: 54.

The wording of the agreements are clear and unambiguous and, as mentioned above, Ennis [i.e., Sandra Callahan] is a sophisticated and experienced businessperson and knew, or ought to have known, the implications of the agreements being entered into. Further, it is clear solely from the signature lines of each of the Loan Agreement and the Guarantee that whoever is signing same is respectively binding the company to the terms and conditions of the Loan Agreement and acting as “Guarantor” under the Guarantee. [ 42 ] Finally, BDC submits that Ms.

Callahan “…has not put forward facts which, if proven would constitute a defence to the claim by BDC…” (Paragraph 60 of the Memorandum). To be fair to BDC, it is true that Ms. Callahan stated minimal facts in her defence to ground the claims she makes about the loan agreement and her guarantee. [ 43 ] Subsequently, after BDC filed its Memorandum and quite late in the process, I note, Ms. Callahan filed a more comprehensive affidavit, to support her Memorandum of Fact and Law.

She offers a more robust factual basis in that affidavit, both for the claims she makes about signing the bank’s documents and her understanding of them, as well as about the disbursement of the loan proceeds. Overall, I am satisfied that Ms. Callahan has met the burden, as Cameron, J.A. says in LeDrew , to “disclose facts which, if proven, would constitute a defence”. Let me explain. [ 44 ] In paragraph 11 of her affidavit, Ms. Callahan stated the circumstances of signing the loan agreement and the loan guarantee on March 10, 2017: 11.

THAT in 2017 I was totally unaware of any efforts by Sean to obtain a loan for C'Est Moi, from BDC or anyone else. Out of the blue, Sean told me he had arranged for us to meet with Mr. Butt of BDC at Smitty's Restaurant in Terrace on the Square before I would have to get to the store at about 9:40 a.m., for its 10:00 a.m. opening. Sean told me the meeting was to ensure that if and when C'Est Moi did relocate, the monies would be available for leasehold improvements. Sean and the BDC representative had breakfast while I just ordered coffee because I had to leave.

There was no discussion about the terms of any arrangements or about the documents to be signed. All I knew about the situation was what I was told by Sean who I trusted and believed would be protecting my best interests. Mr. Butt at no time suggested I read over the documents and had no printed copy of anything with him. All he had was his iPad.

[ 45 ] Ms. Callahan denies Mr. Butt’s claim in his affidavit that she was “given the opportunity to read, review and clarify all terms…Guarantee”. She denies similarly that she knew BDC advanced funds to C’est Moi in 2017 and she questions why BDC relied on a cheque it received from C’est Moi in September 2015 as the “cheque specimen” from which it obtained C’est Moi’s banking particulars to deposit the loan proceeds to C’est Moi’s corporate bank account. [ 46 ] Ms. Callahan also says she tracked the disbursement of the loan proceeds after C’est Moi received the funds from BDC. From her forensic accounting, Ms.

Callahan claims that $70,000 of the funds passed into and through C’est Moi’s account the same day, on March 21, 2017, destined for Mr. Callahan’s Scotialine account, on which he wrote a cheque for $67,174.43 to pay off a personal loan he had on a motor home. Ms. Callahan also claims that Mr. Callahan was siphoning off funds from C’est Moi to support other struggling or failing businesses with which he was engaged. She says that C’est Moi did not need the $100,000 it received from BDC in 2017 (for which she is now being held to account by BDC) and it conferred no benefit on the company, or on Ms.

Callahan personally. [ 47 ] I acknowledge that some of Ms. Callahan’s claims relate more to Mr. Callahan than to BDC and may not be especially relevant to BDC’s claim against both of them. But it is hard to compartmentalize Ms. Callahan’s claims about the documentation that BDC relies on, so neatly between BDC and Mr. Callahan without some overlap. [ 48 ] This is especially so because of the ambivalent position that Mr. Callahan has adopted to the merits of BDC’s claim against Ms. Callahan. As Mr.

Callahan said in his Memorandum, when responding to this application: [2] Callahan agrees that if [Sandra] Ennis [i.e., Sandra Callahan] is found liable to BDC then he is also liable to BDC. The essence of Callahan’s defence … is that if Ennis is not found liable, then Callahan is also not liable to BDC. [ 49 ] While Ms. Callahan directs her most serious criticisms to Mr. Callahan, she also alleges malfeasance by the bank, as the ultimate paragraph of her December 16, 2020 affidavit shows: 23.

THAT BDC failed to act as a prudent and responsible lender in assessing the financial viability of C'Est Moi and the serious red flags contained in its financial statements evidencing the significant diversion of funds to Sean's failed companies thereby creating a substantial working capital deficiency unrelated to the activities of C'Est Moi, and in failing to require proof of a signed lease or invoices supporting payments as conditions precedent to disbursement and failing to discharge its duty of care to me by giving me no opportunity to review the document on the iPad, instructing me to electronically sign a document that I had not read and had no chance to read, and acceding to instructions from Sean only, without contact with me, which abetted Sean's conversion of funds for purposes unrelated to the business of C'Est Moi, and conferring no value to C'Est Moi. [ 50 ] In these circumstances, I will not grant BDC

summary judgment without exploring further the relationships between the bank, Ms. Callahan and Mr. Callahan and determining whether they yield a potential defence to the bank’s claim against Ms. Callahan. I note, in particular, what Cameron, J. said in LeDrew about the limitations on the court’s mandate in applications for

summary judgment: “It is not intended that an application for

summary judgment require the applications judge to assess credibility, weigh evidence or make findings of fact”. I turn now to consider whether I can make that determination on a

summary trial. Application for

Summary Trial [ 51 ] As I noted earlier in these reasons,

summary trials may be conducted in one of the following circumstances: • There is no genuine issue for trial between the parties (Rule 17A.03 (1)); and • There is a genuine issue for trial, but the court can find, from the record, the facts necessary to decide the facts and law pertinent to that issue. But even then, it must not be “unjust to decide the issues on the application” (Rule 17A.03 (2)). [ 52 ] Ms. Callahan makes claims that raise a genuine issue for trial: Is the guarantee she signed for C’est Moi enforceable against her? She says that Mr.

Butt for BDC did not offer or permit her to review the loan agreement and guarantee before she signed them; that Mr. Butt and Mr. Callahan met at some length (for breakfast actually) on March 10, 2017, and she attended only perfunctorily, leaving after a brief appearance, to open the store; that Mr. Butt had no hard copies of the documents, but displayed them on an iPad; that she saw only the signature pages of the digital documents, where she signed at Mr. Butt’s direction; that Mr.

Callahan told her she was signing only to maintain the loan approval they had received from BDC from their 2015 application, if they decided to relocate; and that she knew nothing of the loan until months after she and Mr. Callahan separated in 2017. [ 53 ] I heard from Mr. Butt on this application. Counsel for Ms. Callahan cross-examined him at length on the affidavit he filed to support BDC’s request for a

summary judgment. Mr. Butt’s recall of what happened between him and the Callahans varies from what Ms. Callahan says in her affidavit. I set out several portions of his affidavit earlier in these reasons and will not repeat them now. Suffice it to say that his testimony was consistent with his affidavit. [ 54 ] That said, his testimony does raise questions for me which must be addressed: • The bank approved funding of $245,000 for C’est Moi in 2015, which the company never drew down. It appears that the bank compressed the 2017 lending process because of the prior approval. Ms. Callahan says Mr.

Callahan alluded to their 2015 application to justify why they were signing the loan agreement and the guarantee in 2017. Did Mr. Callahan mislead Ms. Callahan by drawing on their earlier experience with the bank? • Mr. Butt acknowledges that the BDC committed to lending C’est Moi $100,000 in 2017, all through the compressed process that I refer to in the preceding paragraph, so that Mr. Butt took C’est Moi’s application, he generated the lending documents digitally, he

obtained their signatures on them and he approved the loan without further deliberation. The transaction appears to have been done hastily. Why? Ms. Callahan notes in her Memorandum that BDC’s letter of offer in 2017 was open to the Callahans to accept until March 20, 2017. Did the haste serve the ulterior purposes that Ms. Callahan says Mr. Callahan had for the money? Why would Mr. Butt accommodate Mr. Callahan’s purposes, if he did so? • Mr. Butt says he deposited the money to C’est Moi’s corporate account, and he obtained the company’s banking information from a “specimen cheque” which C’est Moi provided. Ms.

Callahan says BDC did not have a specimen cheque but relied on the cheque that C’est Moi gave to BDC in September 2015 to cover the fee for that application. Is this again, coincidence? Is it because things were done so hastily? Did Mr. Butt look for an actual specimen cheque or did he simply rely on the canceled cheque from C’est Moi that BDC already had on hand? • I have noted several times already that Mr. Callahan offered an ambivalent response to BDC’s application for

summary judgment against him and Ms. Callahan. As Mr. Callahan says: If Ms. Callahan is responsible on the guarantee, I am, too; if she is not, I am not. Why, is Mr. Callahan ambivalent? Is it because he intended to use the $100,000 loan proceeds for personal uses and not to the benefit of C’est Moi? If so, was Mr. Butt aware of Mr. Callahan’s other purposes and, if he was not, did he accommodate Mr. Callahan’s aims, even unwittingly? [ 55 ] While Ms. Callahan has raised a genuine issue for trial, I am satisfied that it can be addressed on a

summary trial. Let me explain. The enforceability of BDC’s loan guarantee, especially between Ms. Callahan and the bank, turns mainly on what happened at Smitty’s Restaurant on March 10, 2017. It is a discrete event and the issue that Ms. Callahan raises in her defence, which arises from that meeting, is not complex. [ 56 ] Three people attended the meeting, Joshua Butt for BDC and both Callahans, each on his/her own behalf and both apparently for C’est Moi. At the meeting, Mr.

Butt “received” a loan application from C’est Moi for $100,000 from BDC; he approved the loan summarily; he generated the supporting documentation directly, including the loan agreement and the personal guarantees; he presented those documents to C’est Moi and the Callahans; and he witnessed their execution. [ 57 ] Ms. Callahan recounted what happened at Smitty’s, as did Mr. Butt, both in the affidavits they filed on this application; and Mr. Butt also reviewed what happened before me when Ms. Callahan’s counsel cross-examined him on his affidavit. There are substantial differences between events as Ms.

Callahan and Mr. Butt retell them. Mr. Callahan was there, too, present with Mr. Butt before Ms. Callahan arrived and staying with him after she was gone. [ 58 ] To deal with the issue that Ms. Callahan raised in defending BDC’s claim against her under the personal guarantee, I would need to hear only from the three people who attended the meeting. This should be done viva voce , with each called as a witness by his/her counsel and then made available for cross-examination by opposing counsel. Ms. Callahan and Mr. Butt have provided affidavits setting out what took place at the meeting. I have nothing from Mr.

Callahan about that event, nor I expect do opposing counsel, other than in the pleadings he filed in this cause. Thus, they may wish to discover him before he testifies, or he may wish to file an affidavit in response. [ 59 ] I recognize that Ms. Callahan has concerns about Mr. Callahan’s role in operating C’est Moi. She addressed some of her concerns in the affidavit she filed for this interlocutory application and she has also raised them in the Memorandum of Fact and Law she filed. Those matters are tangential, at best to the main issue in this cause and should receive no more than cursory review during the

summary trial. [ 60 ] Let me summarize how the

summary trial will proceed: • BDC will call Joshua Butt to testify on direct examination about what happened at the March 10, 2017 meeting. Counsel for the Callahans may cross-examine him and counsel for BDC may examine him on re-direct, if appropriate; • Each of the Callahans will testify on direct examination about what happened at the March 10, 2017 meeting. Counsel for the other Callahan may cross-examine that person, as well as counsel for BDC, with re-direct examination, if appropriate; • BDC and Ms. Callahan may discover Mr. Callahan before the

summary trial, or Mr. Callahan may file an affidavit to respond to the application; • Each party may file any additional documents it feels are relevant to the issue to be addressed on the

summary trial; • This Court will assign a trial date when the parties notify the Court that they have completed all pre-trial processes; and • I will preside at the trial.

Costs [ 61 ] Because this matter will continue to the

summary trial process, I make no order as to costs at this stage of the proceedings, other than that they are in the cause.

Summary and Disposition [ 62 ] BDC applied for

summary judgment against Sean Callahan and Sandra Callahan on a personal guarantee they gave to the Bank for $100,000 that their company, C’est Moi, borrowed from BDC. Alternatively, BDC asked that the matter proceed by

summary trial if the Court refused

summary judgment. [ 63 ] The Court dismissed the application for

summary judgment. While it found that there was a genuine issue for trial, it found further that the issue could be addressed on a

summary trial. It ordered costs in the cause and set parameters for the

summary trial. Order [ 64 ] In the result, I order that: 1) The application for

summary judgment is dismissed. 2) The application for

summary trial is granted. 3) The

summary trial will proceed as follows: • BDC will call Joshua Butt to testify on direct examination about what happened at the March 10, 2017 meeting. Counsel for the Callahans may cross-examine him and counsel for BDC may examine him on re-direct, if appropriate. • Each of the Callahans will testify on direct examination about what happened at the March 10, 2017 meeting. Counsel for the other Callahan may cross-examine that person, as well as counsel for BDC, with re-direct examination, if appropriate. • BDC and Ms. Callahan may discover Mr. Callahan before the

summary trial, or Mr. Callahan may file an affidavit to respond to the application. • Each party may file any additional documents it feels are relevant to the issue to be addressed on the

summary trial. • This Court will assign a trial date when the parties notify the Court that they have completed all pre-trial processes. • Handrigan, J. will preside at the trial. 4) The parties may apply for further directions, if needed. 5) Costs are in the cause. _____________________________ Garrett A. Handrigan Justice