Executive Summary: Key Legal and Evidentiary Issues

• Enforcement of a personal guarantee for a corporate loan after the borrower’s bankruptcy.

• Application of Rule 20 summary judgment procedure to determine liability without trial.

• Evaluation of defences including lack of independent legal advice, language barriers, and non est factum.

• Determination of whether the guarantor acted under direction of another individual without actual authority.

• Analysis of the bank’s obligations toward the guarantor in commercial lending relationships.

• Judicial finding that there was no genuine issue requiring a trial, justifying summary judgment.

Facts and outcome of the case

The Royal Bank of Canada (RBC) initiated a civil action to enforce a personal guarantee signed by Nagina Wahab, who had been the sole officer and director of HI & DQ’s Foods Inc., a corporation now bankrupt and dissolved. The guarantee, signed in May 2024, made Wahab personally liable for up to $300,000 of the corporation’s debt to RBC. The company had defaulted on a credit agreement with a total outstanding debt of over $1.1 million. RBC sought summary judgment against Wahab under Rule 20 of the Ontario Rules of Civil Procedure.

Wahab did not appear in court for the motion, but she filed an affidavit raising several defences. She claimed she was a “sleeping partner” and that a third party, Junaid Mujtaba Rizvi, was the real controller of the corporation. She also asserted that she lacked independent legal advice, could not understand English, and did not know what she was signing. She argued that RBC had a duty to ensure she understood the nature of the guarantee.

The court rejected all of Wahab’s defences. It found no evidence to support her claim that Junaid controlled the business or that she was unaware of her role. In fact, the court noted that Wahab had previously communicated in English with RBC, signed corporate documents, and handled the company’s financial obligations. Her own affidavit was written in English with no indication of translation. The court also held that independent legal advice is not required when a guarantor is a director and officer of the borrowing company. Further, it concluded that RBC had no fiduciary duty toward Wahab, only a standard commercial creditor-debtor relationship.

The judge reviewed the applicable legal standards for summary judgment and concluded that RBC had met its burden to show there was no genuine issue for trial. The court found that the summary judgment process allowed for a fair and just resolution without the need for further evidence or credibility assessments. Wahab’s defences lacked factual support and did not raise triable issues.

Accordingly, the court granted summary judgment in favour of RBC. Wahab was ordered to pay $300,000 under the guarantee, plus interest at RBC’s prime rate plus 5% from November 2, 2023. The court also awarded $15,000 in fixed costs to RBC, finding this amount fair and proportionate in light of the proceeding.