Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the 2022 loan as either a secured debt with an equitable mortgage over the home or merely a security over business assets.
• Competing interpretations of the “Securities” clause in the Loan Commitment and “Security and Terms” clause in the Loan Agreement, including the handwritten references to 300 Eagleview Road and store locations.
• Effect of the defendants’ consumer proposal under the Bankruptcy and Insolvency Act on enforcement rights, depending on whether the plaintiff qualifies as a secured creditor.
• Ambiguity in the standard-form loan documents and the court’s reliance on contractual interpretation principles and surrounding circumstances.
• Application of the doctrine of contra proferentem against the drafting lender to resolve unclear security language in favour of the borrowers.
• Determination of the outstanding principal of $83,350, the scope of the security interest over the “goods” or “stocks” of the business, and the applicable post-judgment interest rather than 21% contractual interest.

Background and parties

Values Financial Services Inc. is a private lender in Winnipeg operated by its president, Olayinka Brimoh, offering loans as an alternative to traditional financial institutions. The defendants, Emmanuel and Ebosetale Imiefoh, are a married couple who emigrated from Nigeria and operate small businesses, including a gift shop business under the trade name Gifted Fingers International. Over a period of years, Values Financial advanced several loans to the Imiefohs, including loans in 2018, 2019 and 2023, and the 2022 loan that is the subject of this case. At the time of the 2022 transaction, the Imiefohs operated Gifted Fingers from two Winnipeg locations, at 955 St. Mary’s Road and 1006 Nairn Avenue, and resided at 300 Eagleview Road, where they also stored inventory in their garage.

The 2022 loan transaction

In early 2022, the Imiefohs decided to purchase merchandise from a supplier in Nigeria for resale at their stores, at an estimated cost of $140,000. To finance this purchase, they approached Mr. Brimoh. The parties met at his home on September 8, 2022 and negotiated the terms of the financing. Their agreement was recorded in two documents prepared by Mr. Brimoh: a “Loan Commitment” and a “Loan Agreement”. These were standard-form templates with blank spaces to be completed by inserting the particulars of the deal. Some information was typed in before printing; other terms, including key security references, were added by hand. The principal amount of the loan was set at $83,350, with an advance date of September 15, 2022. Under the terms, the defendants were to make twenty-four interest-only payments of $1,425 on the twentieth day of each month, commencing September 20, 2022, and to repay the full principal on September 15, 2024. The defendants received $80,000; the balance of $3,350 was deducted to cover an application fee, legal fee, broker’s fee and lender’s fee, all specified in the documents.

Performance of the loan and financial difficulties

From September 20, 2022 to August 20, 2024, the Imiefohs made all 24 interest-only payments of $1,425, totaling $34,200, in accordance with the contract. However, the business performance of Gifted Fingers deteriorated, and by 2024 the enterprise was failing. This financial stress ultimately led the defendants to seek insolvency relief. They did not pay the principal of $83,350 when it fell due on September 15, 2024, leaving the loan’s principal outstanding while the interest payments had been kept current up to that point.

Consumer proposal and statutory stay

In August 2024, the defendants filed a consumer proposal under section 50 of the Bankruptcy and Insolvency Act. Their proposal was accepted on August 20, 2024, triggering the statutory stay of proceedings under section 69.1(1) of the Act. The stay generally prevents unsecured creditors from starting or continuing actions or other proceedings to collect provable claims, but does not bar secured creditors from enforcing their security. This made the characterization of Values Financial’s interest critical: if it held an enforceable mortgage or equivalent security interest over the home at 300 Eagleview Road, it would not be caught by the stay; if it held only an unsecured claim, it would be stayed like other unsecured creditors. Shortly after the default, on September 17, 2024, Values Financial registered a caveat against title to 300 Eagleview Road in the Manitoba Land Titles Registry, asserting an equitable mortgage over the property.

Key contractual provisions on security

The core dispute concerned the meaning of the security language in the two documents. In the Loan Commitment, under the heading “Securities”, the document stated that the loan was a secured loan/security charge and identified as security: “All goods at both Gifted Fingers International, Winnipeg locations (955 St. Mary’s Road and 1006 Nairn Avenue) and 300 Eagleview Road, Winnipeg, Manitoba.” The plaintiff argued that this wording created a security charge not only over the business assets but also over the real property at 300 Eagleview Road, effectively forming an equitable mortgage. The Loan Agreement contained a “Security and Terms” clause indicating that the borrowers would provide certain “collateral security”, including a Promissory Note in the amount of $83,350 and handwritten text referencing “300 Eagleview Rd, Winnipeg, MB and the stocks at 955 St. Mary’s Rd and 1006 Nairn Avenue”, along with a General Security Agreement. The lender contended that these references, especially the handwritten mention of the residential address, demonstrated a clear intention to charge the home as security for the loan.

Arguments about equitable mortgage and security scope

Values Financial submitted that any written agreement, however informal, by which property is made security for a debt, can create an equitable charge or equitable mortgage. On this basis, it argued that both the Loan Commitment and the Loan Agreement, read together, granted it an equitable mortgage over the defendants’ home at 300 Eagleview Road in addition to a security interest over the business goods and stocks at the store locations. The defendants countered that, properly interpreted, the contract language granted only a security interest in goods and stocks of Gifted Fingers located at the specified addresses, including goods stored at their home, but not in the home itself. They further argued that, at the very least, the wording was ambiguous and should be resolved in their favour using the doctrine of contra proferentem, given that the lender drafted and controlled the form of the documents.

Contract interpretation and surrounding circumstances

The court set out the modern principles of contractual interpretation: the goal is to give effect to the parties’ objective intentions based on the words used, read in the context of the contract as a whole and the surrounding circumstances. The judge recognized that surrounding circumstances can include the aim and genesis of the contract, and in some cases evidence of negotiations, but emphasized that subjective intentions of the parties are not admissible to alter clear wording. Both sides had filed evidence about earlier loan transactions in 2018 and 2019 and about what they each thought this contract was supposed to do. The court found much of that evidence unhelpful or inadmissible. The earlier loans involved different facts and purposes and could not reliably illuminate the meaning of the 2022 security clauses. The admissible surrounding circumstances did show that the commercial purpose of the loan was to finance the purchase of inventory for the Gifted Fingers business, but this did not conclusively resolve whether the parties also intended to mortgage the home.

Ambiguity in the security wording

After carefully reviewing the text, the court held that both key security provisions were genuinely ambiguous. In the Loan Commitment, the phrase “All goods at both Gifted Fingers International, Winnipeg locations … and 300 Eagleview Road” could reasonably be read in two ways. One reading is conjunctive: a single object (“all goods”) located at any of the three addresses, meaning only goods at the home and stores are encumbered. The other reading is disjunctive: security over goods at the two store locations plus a separate security interest over the real estate at 300 Eagleview Road. The same duality arose in the Loan Agreement. The handwritten wording “$83,350; and 300 Eagleview Rd, Winnipeg, MB and the stocks at 955 St. Mary’s Rd and 1006 Nairn Avenue” could be taken either as securing only “stocks” at all three locations, or as securing stocks at the two stores and, separately, the land at 300 Eagleview Road. The court then looked for clarification elsewhere in the documents. The Loan Commitment included a section titled “Mortgage Commitment” stating that the lender’s fees and costs “constitute an interest in the land and the personal property of the borrower”, which at most suggested an intention to secure the $3,350 in fees and costs, not the entire principal, by way of an interest in land. Another section, “Clients Authorization/Financial Information”, referred to “mortgage financing” as the purpose of the application, but immediately noted that signing did not obligate the client to proceed with a mortgage and later spoke of “loan approval” rather than “mortgage approval”. The Loan Agreement itself made no explicit mention of mortgage financing, referring only to “collateral security”. Taken together, these provisions did not remove the uncertainty around whether the home was meant to be directly encumbered.

Use of contra proferentem

Having found that standard interpretive tools and surrounding circumstances left a “true legal ambiguity”, the judge turned to the doctrine of contra proferentem as a last resort. This rule provides that where contractual language is ambiguous and reasonably open to more than one meaning, the interpretation least favourable to the drafter or party who put forward the wording should prevail, especially where the clause creates or expands an exclusion, limitation, or significant advantage. Here, Values Financial had created and used a standard-form lending package that it controlled, and it was seeking a substantial advantage—an equitable mortgage over the borrowers’ family home—based on imprecise and confusing language. The court stressed that if the lender wished to obtain such powerful security, fairness required that it use clear, unambiguous wording. Applying contra proferentem, the judge resolved the ambiguity against the lender and in favour of the borrowers’ interpretation. On that basis, the court held that the contract did not create an equitable mortgage over 300 Eagleview Road.

Recognition of security over business goods and stocks

Although the court rejected the claim to an equitable mortgage over the home, it accepted that the parties clearly intended, and did in fact create, a security interest over the business assets. Read in a manner least favourable to the drafter but still giving effect to the commercial purpose of the transaction, the wording in both the Loan Commitment and the Loan Agreement was sufficient to grant Values Financial a security interest in any “goods” and “stocks” of Gifted Fingers located at 955 St. Mary’s Road, 1006 Nairn Avenue, and 300 Eagleview Road. In other words, inventory and stock-in-trade stored at those addresses could be treated as secured collateral for the loan, even though the real property itself remained unencumbered.

Debt, interest and final outcome

On the monetary side, there was no real dispute about the payment history. The defendants had paid all 24 interest installments required under the contract but did not pay the principal when it matured on September 15, 2024. The court therefore granted summary judgment in favour of Values Financial for the unpaid principal amount of $83,350 against all defendants, jointly and severally. Turning to interest, the court examined the contract and found that it did not expressly provide for the stated 21% interest rate to continue after maturity, default, demand or judgment. Since such a term could have been clearly written but was not, the court refused to imply it. Instead, it ordered that the judgment amount bear interest only at the applicable post-judgment statutory rate from September 15, 2024 until payment. The question of litigation costs was left open; the parties were invited to make further submissions if they could not agree.

Conclusion and significance of the decision

In the result, the court granted Values Financial summary judgment for the outstanding principal of the 2022 loan and confirmed its security over the goods and stocks of the Gifted Fingers business, but refused to recognize an equitable mortgage over the defendants’ home because of ambiguous drafting. The decision underscores that lenders using standard-form documents must draft security clauses with precision, particularly when seeking to encumber a borrower’s residence, and that genuine ambiguity will be resolved against them through contra proferentem. Ultimately, Values Financial, as plaintiff, was the successful party and obtained a monetary judgment for $83,350 plus post-judgment interest at the statutory rate from September 15, 2024, while any specific dollar amount for interest and costs cannot be determined from the judgment because those items are left to calculation over time and, for costs, to further agreement or submissions.