Executive Summary: Key Legal and Evidentiary Issues

• Bank obtained summary judgment to enforce a $500,000 personal guarantee signed by a company director and shareholder.

• Appellant claimed she did not understand the nature of the document and raised a defence of non est factum.

• Court found she was a sophisticated party with real estate experience and financial acumen, undercutting her defence.

• Allegations of procedural unfairness were rejected, as she failed to follow proper steps for amending pleadings or admitting evidence.

• The Court of Appeal upheld the motion judge’s conclusion that no genuine issue required a trial.

• Appeal was dismissed and $7,500 in costs awarded to the Bank.

Facts and outcome of the case

Utility Engineers Corporation obtained a $500,000 overdraft facility from the Bank of Montreal, which was secured by a General Security Agreement and supported by personal guarantees from Pegman Meleknia and his mother, Shahin Songhorigakien. Ms. Songhorigakien was a 50% shareholder and officer of the company. After the company defaulted on its obligations, the Bank obtained default judgment against the company and Mr. Meleknia and proceeded to seek summary judgment against Ms. Songhorigakien based on her signed guarantee.

Ms. Songhorigakien opposed the motion, raising several defences. She argued that she did not know she was signing a personal guarantee and that the Bank had a duty to explain the loan documents to her. She also asserted that her son had misled her and that the Bank contributed to the company’s default by refusing a government-backed HASCAP loan. Additionally, she advanced a non est factum defence, claiming a lack of understanding of the nature of the document due to language and educational barriers.

The motion judge dismissed all of these arguments. She found that Ms. Songhorigakien had a background in real estate, held a broker’s licence, and had regularly dealt with legal documents. She concluded that the appellant was not misled and had sufficient English proficiency and business experience to understand the guarantee. The judge also found no special relationship that would require the Bank to explain the documents to her, and that the document itself clearly indicated it was a personal guarantee.

Ms. Songhorigakien also raised concerns about procedural fairness. She had attempted to serve an amended statement of defence without leave and submitted her own discovery transcript as evidence without following the required procedures. The judge declined to consider both, finding no procedural unfairness since she had failed to bring a motion for leave and the transcripts were inadmissible under Rule 39.04(2) without consent.

On appeal, the Ontario Court of Appeal upheld the motion judge’s decision. It found that the motion for summary judgment had been properly granted because the evidentiary record was sufficient to resolve the dispute. The panel affirmed that there was no duty on the Bank to explain the guarantee to Ms. Songhorigakien, particularly given her role as a director, officer, and shareholder of the borrowing company. It also agreed that her defences, including non est factum and procedural unfairness, lacked merit.

The appeal was dismissed and Ms. Songhorigakien was ordered to pay $7,500 in costs to the Bank. The case serves as a clear statement that personal guarantors—especially those with business experience—are held to the terms of the documents they sign, and that failure to comply with procedural rules will not be excused, even for self-represented litigants.