Executive Summary: Key Legal and Evidentiary Issues

• Validity and enforceability of a $150,000 loan to a numbered company, secured by a second mortgage at 12% interest per annum.
• Proof of default through NSF cheques, failure to pay the first mortgage, and an outstanding shortfall after sale of the mortgaged property.
• Personal liability of the sole director, Santina Maria Calidonna, under a guarantee for the corporate borrower’s shortfall.
• Scope of damages in contract, particularly whether expectation damages extend to a claimed $150,000 “lost opportunity” to buy a condominium.
• Application of default judgment principles, including deemed admissions and the court’s duty to scrutinize facts and evidence before granting judgment.
• Determination of monetary relief: principal shortfall, NSF charges, pre-judgment interest at the contractual rate, post-judgment interest, and outstanding issue of costs.

Background and loan arrangements

The case arises from a loan transaction between the plaintiff, Yvonne Qu, and the corporate defendant, 2469908 Ontario Ltd. (“246”). The plaintiff advanced $150,000 to 246, and this loan was secured by a second mortgage on real property. The loan terms included a contractual interest rate of 12% per annum, setting the financial framework for the parties’ obligations under the agreement. Santina Maria Calidonna, the sole director of 246, provided a personal guarantee for any shortfall that might arise, thereby exposing herself to personal liability if the company failed to fully discharge its indebtedness.

Default, sale of property and resulting shortfall

Problems arose when 246 fell into arrears. Several of its cheques to the plaintiff were returned NSF, leading to four specific NSF incidents for which the plaintiff incurred $250 charges per cheque, totalling $1,000. The company ultimately defaulted not only on the loan to the plaintiff but also on the first mortgage secured against the same property. This default triggered a sale of the property. From the sale proceeds, the plaintiff received $80,000, which reduced but did not extinguish the indebtedness. A further payment of $30,000 was made after the sale. Despite these amounts, a shortfall remained on the principal and accrued interest, leaving an unpaid balance that the plaintiff sought to recover from 246 and from Calidonna under her guarantee.

The motion for default judgment and legal framework

The proceeding came before the Ontario Superior Court of Justice on a motion for default judgment, as the defendants failed to defend. Under Rule 19 of the Rules of Civil Procedure, the defendants’ failure to deliver a defence resulted in deemed admissions of the material facts pleaded in the statement of claim. However, the court emphasized that even on a default motion, a judge must scrutinize both the deemed admissions and any evidence tendered to ensure that the requested judgment is warranted. Relying on the Court of Appeal’s decision in Paul’s Transport Inc. v. Immediate Logistics Limited, the judge noted that conclusions of law or mixed fact and law are not automatically admitted by default and that judgment can only be given if the admitted facts entitle the plaintiff to the relief claimed. In this case, the plaintiff also filed an affidavit reinforcing the pleadings. Together, the deemed admissions and affidavit evidence established a valid loan agreement between the plaintiff and 246 and a valid guarantee by Calidonna. They also showed a clear breach of both the loan agreement and the guarantee when the defendants failed to repay the amounts owing when due. Citing principles from Atlantic Lottery Corp. v. Babstock, the court concluded that the plaintiff had proven breach of contract and of the indemnity/guarantee obligations.

Damages claimed and analysis of lost opportunity

On damages, the plaintiff advanced two distinct categories of relief. First, she claimed the contractual amounts due: the outstanding principal shortfall, NSF charges, and interest at the agreed rate of 12% per annum. Second, she claimed an additional $150,000 for a lost opportunity to purchase a condominium, asserting that she had intended to use the loan repayment as the down payment and that the defendants’ default caused her to miss that opportunity. The court reaffirmed orthodox contract principles governing damages, drawing from Bank of America Canada v. Mutual Trust Co. Expectation damages aim to place the plaintiff, so far as money can, in the position she would have occupied had the contract been properly performed. That requires the court to determine the dollar value of the contractual promise at the time performance was due and then apply the appropriate interest rate. Here, the contractual promise was repayment of the principal plus accrued interest at the agreed contractual rate. The judge held that repaying the loan plus accrued interest would fully restore the plaintiff to the position she would have been in if the contract had been performed. The additional $150,000 claimed for the lost condominium opportunity would go beyond this expectation measure and overcompensate the plaintiff, so that head of damage was denied.

Monetary relief, interest and costs

Having rejected the lost opportunity claim, the court focused on the quantifiable contractual entitlements. The judge accepted that the remaining principal shortfall was $40,000. He further awarded $1,000 in respect of the four NSF cheques. For interest, the court applied the contractual rate of 12% per annum, accepting the plaintiff’s calculation that interest accrued up to July 15, 2024 amounted to $55,415. The court also ordered post-judgment interest at the same contractual rate of 12% per annum from the date of judgment forward, with a direction that the plaintiff could submit a draft order (once costs were determined) setting out an updated interest calculation to the date of judgment. On costs, the plaintiff had not yet filed a bill of costs, so the court did not fix any amount at this stage. Instead, the judge gave the plaintiff ten days to file a bill of costs and a brief written submission, meaning the quantum of costs remains undetermined. Overall, the successful party in this case is the plaintiff, Yvonne Qu, who obtained a monetary judgment of $40,000 in principal, $1,000 in NSF charges, and $55,415 in pre-July 15, 2024 interest (a total of $96,415), together with post-judgment interest at 12% per annum and costs still to be assessed, so the exact total including interest to judgment and costs cannot yet be definitively stated.