Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff sought repayment under personal guarantees for business loans following corporate default.

• Defendant acknowledged signing the guarantees but raised a non est factum defense, alleging misunderstanding of their nature.

• Core dispute centered on conflicting affidavit evidence regarding whether personal guarantees were explained or required.

• The bank relied on standard practices and employee affidavits not directly involved in the disputed transactions.

• Defendant submitted a questionable email as evidence, which the bank claimed was falsified, raising credibility concerns.

• The court found that credibility issues and evidentiary gaps made the matter unsuitable for summary trial.

Facts and outcome of the case

The case involved a claim by the Bank of Montreal against Mohammed Shaheed Khan for repayment of approximately $438,000 in overdue loans. Mr. Khan was the sole director and officer of two companies that had taken out business loans from the bank. As part of the loan agreements, Mr. Khan signed personal guarantees securing the debt. When the companies defaulted and entered receivership, the bank pursued Khan directly for the outstanding balance.

Mr. Khan did not dispute that he had signed the personal guarantees or that the loan amounts were unpaid. However, he argued that the guarantees were unenforceable because he had not been properly advised or informed about their legal effect. He claimed the bank did not recommend independent legal advice and did not clearly communicate that he was assuming personal liability. His primary defense was non est factum, asserting that he misunderstood the nature of what he was signing.

The bank brought a summary trial application, arguing that the matter was straightforward and that no trial was necessary. It presented affidavit evidence describing the bank’s usual practices in such lending situations and submitted that Mr. Khan’s evidence was unreliable, particularly pointing to an allegedly falsified email he had produced. The bank suggested that the court could resolve the matter on the written record by rejecting Mr. Khan’s version as not credible.

The court rejected the bank’s request for a summary trial. It held that the conflicting affidavit evidence, particularly regarding what was communicated to Mr. Khan, raised significant credibility issues that could not be resolved without live testimony and cross-examination. The court noted gaps in the bank’s evidence, including the absence of testimony from all bank employees involved in the loan transactions. It also found that proportionality considerations, the lack of urgency, and the seriousness of the issues for the individual debtor weighed against proceeding summarily.

Ultimately, the court dismissed the bank’s summary trial application and ruled that the matter should proceed to a conventional trial. Costs were left in the cause, meaning they would be decided later in the proceedings.