Executive summary: key legal and evidentiary issues

• Theresia Exner appealed a summary trial judgment holding her personally liable for business loans under the Canada Small Business Financing Program guaranteed by Bank of Montreal.

• Suitability of summary trial was challenged on the basis that defences of fraud, misrepresentation, unconscionability, and non est factum required viva voce evidence for credibility assessment.

• No positive representation by BMO was established to support the claim that personal guarantees were not required for the CSBFP loans.

• Evidence contradicted assertions of vulnerability due to old age or language barriers, undermining the unconscionability defence.

• Non est factum was effectively disposed of by the trial judge's finding that Ms. Exner signed the guarantees without reading them and absent fraud or misrepresentation had no defence.

• Duplicative judgment was not found to be an issue since Ms. Exner agreed to joint and several liability under the guarantees and the dissolved company never paid any part of the debt.

The spa business and the CSBFP loans

Theresia Exner and her late husband were the owners and directors of 0842729 B.C. Ltd., a company operating under the names Bellissa Spa & Hair and Spa Bellissa & Salon in British Columbia. In July 2016 and November 2016, the Bank of Montreal provided the company with two loans under the Canada Small Business Financing Program. As part of the lending arrangement, Ms. Exner and her husband signed personal guarantees in support of the loans. Under the Canada Small Business Financing Act, the federal government guarantees such loans but requires BMO to exhaust all measures to collect on unpaid amounts before seeking relief under the government's guarantee.

Default, dissolution, and litigation

The business was unsuccessful, and the company defaulted on the loans. BMO demanded payment from the company, and later from Ms. Exner and her husband under the guarantees. Payment was not made, and BMO filed an action against the company, Ms. Exner, and her husband. Unfortunately, Ms. Exner's husband passed away after the claim was commenced, leaving her as the sole remaining guarantor under the guarantees. The company was dissolved on June 17, 2019.

Earlier court proceedings

The litigation had a complex procedural history prior to the appeal. On February 14, 2020, Justice Winteringham (as she then was) granted summary judgment against the company but adjourned BMO's application for summary judgment against Ms. Exner and her husband. On August 31, 2020, Justice Voith (as he then was) dismissed BMO's application for summary judgment against Ms. Exner and her husband, finding they were not "bound to lose" if their evidence was accepted at trial. On June 27, 2024, BMO applied for judgment against Ms. Exner by way of a Rule 9-7 summary trial. The summary trial judge granted judgment in favour of BMO, ordering Ms. Exner to pay BMO $281,733.36 with interest at prime plus 3% per annum to the date of judgment.

Ms. Exner's defences and the summary trial judge's findings

Ms. Exner raised several defences including misrepresentation, fraud, unconscionability, and non est factum. The summary trial judge noted that non est factum, unconscionability, and fraud were not pleaded in her response to claim, and that no application had been made to add these defences, nor had any steps been taken to examine the bank representative Ms. Exner had worked with in obtaining the loan. She contended that BMO's representative, Ms. Rice, had stated the loans would be guaranteed by the government and did not mention a personal guarantee during their initial meetings. The summary trial judge, however, found that Ms. Exner did not point to any positive representations by BMO that a personal guarantee was not required. Ms. Exner's own evidence included a document clearly stating that, under the Canada Small Business Financing Act, "the business owner is expected to provide their personal guarantee in support of this borrowing" in an amount up to 25% of the total loan. The judge found that this militated against Ms. Exner's assertion that there was to be no personal guarantee. The remedy of rescission Ms. Exner sought was also held to be unavailable, given that she, through her company, had benefitted from the loans and there was no way to put BMO in the position it was in prior to the loans. On unconscionability, the judge rejected counsel's submission that Ms. Exner was vulnerable due to old age or a language barrier, finding those assertions to be contradicted by her correspondence, discovery transcript, and personal submissions to the court, all of which supported the conclusion that she is a "self-assured and healthy individual." The fraud defence was similarly dismissed, with the judge rejecting counsel's argument that Ms. Exner's work schedule would have prevented her from attending the bank on the day the documents were executed.

The appeal and the Court of Appeal's ruling

Ms. Exner appealed to the British Columbia Court of Appeal, raising three principal grounds: that the summary trial judge erred in determining the matter was suitable for summary determination; that he erred in failing to consider, or in making palpable and overriding errors in his findings of fact relevant to, her defences of fraud, misrepresentation, unconscionability, and non est factum; and that he erred in permitting duplicative judgments. The Court of Appeal, in oral reasons delivered by Justice Francis with Justices Fisher and Edelmann concurring, dismissed the appeal on all grounds. On suitability, the Court held that the judge did not err in exercising his discretion to proceed summarily, noting that in her affidavit evidence Ms. Exner did not deny signing the second guarantee on November 25, 2016, and that since BMO did not tender any evidence from bank witnesses, Ms. Exner's evidence about the relevant events was uncontested. On the defences, the Court found that the summary trial judge had considered each defence, or the factors relevant to the defences, and gave a reasoned basis for rejecting them, and that the appellant had failed to establish any palpable and overriding error in the judge's findings. On duplicative judgments, the Court noted that under the guarantees, Ms. Exner and her husband agreed to be jointly and severally liable for payment of the company's loan, that the company had been dissolved and had never paid any part of the loan or the judgment against it, and therefore there was no risk of double recovery. The appeal was unanimously dismissed, with BMO as the successful party retaining its judgment of $281,733.36 with interest at prime plus 3% per annum to the date of judgment against Ms. Exner personally.