Executive Summary: Key Legal and Evidentiary Issues

• The plaintiff bank sought judgment for a dishonoured cheque and claimed personal liability and fraud against the corporate director.

• The cheque, worth $36,156.74, was deposited and withdrawn before being dishonoured due to an alleged “material alteration.”

• No evidence was provided to establish who altered the cheque or whether the alteration was intentional.

• The court found insufficient proof to support allegations of fraud or oppression against the individual defendant.

• Punitive damages were denied as the conduct did not meet the threshold for high-handed or malicious behavior.

• Costs of $7,500 were awarded on a partial indemnity basis due to the plaintiff's mixed success.

Facts and outcome of the case

Background of the dispute

This case involves a default judgment motion brought by the Bank of Montreal (BMO) against Andrzej and Associates Property Management Inc. (AAPMI) and its principal, Miguel Russell. On June 29, 2023, a cheque in the amount of $36,156.74 was deposited into AAPMI’s business account at BMO. Over the following 32 days, various withdrawals and e-Transfers depleted the account. On July 31, 2023, the cheque was dishonoured by the Royal Bank of Canada due to “material alteration,” leaving the account overdrawn by nearly the full amount.

BMO’s business banking agreement with AAPMI did not authorize overdrafts, and interest at 21% per annum applied to any such balance. BMO claimed that Russell, as the authorized signing officer and director of AAPMI, orchestrated a fraudulent scheme and sought to hold him personally liable.

Claims advanced by the plaintiff

BMO advanced several claims in its statement of claim:

• Judgment against both defendants for $36,807.33, representing the value of the dishonoured cheque and interest.

• An additional $5,000 in punitive damages.

• A declaration that the debt arose from fraud, thereby surviving bankruptcy.

• A finding that Russell was personally liable under the Ontario Business Corporations Act (OBCA), section 248, due to oppressive conduct.

Court’s findings on fraud and personal liability

The court carefully scrutinized BMO’s allegations of fraud and found them unsupported by sufficient evidence. While BMO asserted that the cheque was materially altered, no details were provided about the nature or origin of the alteration. The cheque appeared normal on its face, and the only proof offered was a generic internal bank form. No clear evidence linked Russell to any fraudulent conduct, nor was it established that he knew the cheque would be dishonoured.

As a result, the court held that fraud was not proven and declined to pierce the corporate veil to hold Russell personally liable. Likewise, the court rejected the oppression claim under OBCA section 248, finding that the conduct did not meet the threshold for oppressive or unfair behavior. The use of corporate funds over a month before the dishonour, without clear knowledge of the cheque’s invalidity, did not justify personal liability.

Denial of punitive damages

The court declined to award punitive damages. It held that this case involved a dishonoured cheque and a resulting overdraft, but lacked the malicious, oppressive, or high-handed behavior that would justify exceptional relief. The standard for punitive damages—namely conduct that offends the court’s sense of decency—was not met.

Award of damages and costs

BMO was granted judgment against the corporate defendant, AAPMI, for the value of the dishonoured cheque in the amount of $36,156.74. The court awarded pre-judgment and post-judgment interest on this amount at the contractual rate of 21% per annum. It also awarded $7,500 in partial indemnity costs, reflecting BMO’s limited success, particularly in failing to prove its claims against Russell. The claim against Russell was dismissed entirely.