Executive Summary: Key Legal and Evidentiary Issues

• A credit rehabilitation company sued its surety client to recover amounts paid to a lender after the client defaulted on a loan.
• Central to the dispute was whether the defendant was a party to the loan agreement with Gestion Multi-Finance inc. and the suretyship contract with the plaintiff.
• Electronic signatures, identity documents, and bank verification records formed the core of the evidentiary record, while the defendant's testimony was found to be vague and unsupported by any documentary evidence.
• Recovery under the suretyship was limited to what the plaintiff actually paid the lender — $887.84 — not the full amount owed at the time of default ($1,121.49).
• Double recovery was disallowed: the surety fee of $346.33, already paid to the plaintiff by the lender, was deducted from the recoverable amount.
• Professional fees claimed for services rendered by a related company were denied for failure to prove they constituted actual prejudice or a genuine effort to minimize damages.

Facts of the case

On July 10, 2023, Deborah Abbott entered into a loan agreement with Gestion Multi-Finance inc. for a net capital amount of $1,046.33. This capital comprised $700.00 to be deposited directly into Abbott's bank account, and $346.33 representing the surety fee charged by the plaintiff, 9442-4553 Québec inc., for agreeing to act as guarantor. The loan carried a nominal credit rate of 21.20% (effective rate of 27.00%), with total borrower obligations of $1,091.02, payable in periodic instalments of $136.38. On the same date, Abbott signed a suretyship contract with 9442-4553 Québec inc., under which the plaintiff agreed to guarantee the loan in exchange for the $346.33 surety fee — an amount Gestion Multi-Finance inc. paid directly to the plaintiff at the time of funding.

The first pre-authorized payment of $136.38 was debited from Abbott's account on July 27, 2023. Subsequent payments could not be collected due to stop-payment orders or insufficient funds, except for a partial payment of $65.00 debited on September 7, 2023. On October 11, 2023, Gestion Multi-Finance inc. issued a notice of forfeiture of term to Abbott, noting an outstanding balance of $1,060.11. On November 13, 2023, it notified the plaintiff of Abbott's default and demanded payment of $1,121.49 in the plaintiff's capacity as surety. Around January 6, 2024, the plaintiff settled with Gestion Multi-Finance inc. by paying $887.84, in exchange for an assignment of the lender's claim against Abbott. The plaintiff then filed its claim before the Court on January 24, 2024, seeking $1,815.71 from Abbott.

Abbott denied being party to either contract. She claimed her handbag — containing her cellphone and personal effects — was stolen at a festival in June 2023, and that she may have been a victim of fraud. Her partner, Jean St-Pierre, testified that the theft occurred on July 19 or 20, 2023, and that the phone was later traced to Africa. Abbott acknowledged noticing unusual transactions in her bank account in July 2023 but was unable to specify the dates, account, or financial institution involved. She admitted she did not report the theft to police or her bank, and simply purchased a new phone. She presented no documents at trial.

Policy terms and contractual clauses at issue

Two key contracts were before the Court. The loan agreement required Abbott, as borrower, to repay the net capital of $1,046.33, along with interest of $40.69 and electronic withdrawal fees of $4.00, for a total obligation of $1,091.02. The suretyship contract, executed on the same date, authorized the plaintiff to collect its surety fee by debiting Abbott's prepaid credit card or by directing the lender to pay it on her behalf. It also provided that in the event of Abbott's default resulting in a claim against the plaintiff as guarantor, the plaintiff would be entitled to recover from Abbott all amounts it paid, as well as professional fees and costs incurred to recover those amounts, up to a maximum of $1,500.00 for such fees.

The plaintiff's claim for $1,121.49 in capital, interest, and fees was based on the amount Gestion Multi-Finance inc. had demanded from it as surety. However, the agreement between the plaintiff and Gestion Multi-Finance inc. — under which the plaintiff ultimately paid only $887.84 — was never produced in evidence. The plaintiff also sought $756.88 in professional fees, comprising a $182.00 court filing fee and a $500.00 flat-rate service fee charged by Services Administratifs SB inc.

Reasoning and analysis

On the threshold issue of whether Abbott was party to the contracts, the Court applied the civil standard of proof on a balance of probabilities. The plaintiff's testimonial evidence was corroborated by a substantial body of documentary evidence: copies of Abbott's pay stub, employer deposit records, a Canada Revenue Agency assessment notice, and her driver's licence — all submitted in connection with the suretyship application — gave rise to a strong presumption that only Abbott herself could have provided those documents. That presumption was reinforced by the uncontested fact that the $700.00 loan amount was deposited directly into her bank account. Abbott's testimony, by contrast, was described by the Court as vague, imprecise, and unconvincing. She appeared without any supporting documents and could not recall the name of the festival where the theft allegedly occurred, the exact date, the affected bank account, or the financial institution. Her partner's testimony also contradicted her own account of when the theft took place. The Court concluded that Abbott was indeed party to both contracts.

On the recoverable amounts, the Court applied Article 2356 of the Civil Code of Québec, which limits a surety's recourse to what it actually paid in capital, interest, and fees. Since the plaintiff paid only $887.84 to Gestion Multi-Finance inc. — not the $1,121.49 originally claimed — its recovery was capped at that amount. Furthermore, the Court found that the $346.33 surety fee had already been paid to the plaintiff by Gestion Multi-Finance inc. at the time of funding. Allowing the plaintiff to recover it again from Abbott would constitute double recovery and, under Article 8 of the Consumer Protection Act, would create a disproportionate and abusive imbalance in the parties' obligations. Accordingly, $346.33 was deducted from $887.84, leaving a recoverable principal of $541.51.

On the claim for professional fees, the Court noted that Sébastien Boucher — the plaintiff's president and majority shareholder — was also the majority shareholder and president of Services Administratifs SB inc., the third party to whom the collection mandate was entrusted. The evidence did not establish which specific services from the $500.00 flat-rate invoice were actually rendered in connection with this file. The Court further observed that the plaintiff had already conducted its own credit analysis and gathered detailed information about Abbott prior to signing the contracts in July 2023, making it unclear what additional useful information Services Administratifs SB inc. could have provided in January 2024. The plaintiff also failed to demonstrate that the fees paid to Services Administratifs SB inc. constituted actual prejudice suffered as a result of the suretyship, as required under Article 2356 C.c.Q., or that they were necessary and useful costs to recover the sums owed. The Court also found the plaintiff failed to meet its obligation to minimize its damages under Article 1479 C.c.Q., and questioned whether the engagement of a related company at additional expense was aimed at genuine recovery or at enriching itself at Abbott's expense. Professional fees were therefore denied.

The $182.00 court filing fee, however, was recognized as a real and verifiable disbursement and was allowed as court costs.

Ruling and overall outcome

The Court allowed the claim in part. The plaintiff, 9442-4553 Québec inc., was partially successful: the defendant Deborah Abbott was ordered to pay $541.51 in capital, interest, and fees, with interest at 21.20% from January 30, 2024 (the date of service), as well as $182.00 in court costs corresponding to the filing fee. The claims for professional fees and the full amount of $1,121.49 were dismissed. The total amount ordered in favour of the plaintiff was $723.51.