Executive Summary: Key Legal and Evidentiary Issues

• The Ontario Superior Court of Justice dismissed an $8.8-million counterclaim brought by the Rooneys and their corporations against TD Bank.
   
• Justice Smith found that TD's admitted breach of a $350,000 small business loan agreement was not the effective cause of the Tosh Steakhouse's business failure.
   
• Expert evidence on business valuation diverged sharply, and the court preferred TD's expert over the plaintiffs by counterclaim's expert on profitability assumptions and an uncollectible loan.
   
• Claims of deceit, negligent misrepresentation, and entitlement to punitive or exemplary damages against TD were all rejected.
   
• Guarantees signed by Matthew Rooney, Haley Rooney, and 2362378 Ontario Inc. barred them from claiming damages against TD.
   
• TD was granted judgment for the outstanding loan balance, HELOC, and credit card debts owed by the defendants.
   

Facts of the case

The Toronto-Dominion Bank sued 1633092 Ontario Ltd. ("163"), 2362378 Ontario Inc. ("236"), Matthew Rooney, and Haley Rooney for defaulted loans and a line of credit totaling $929,106. The defendants counterclaimed for damages of approximately $9,000,000, alleging negligence, negligent misrepresentation, breach of contract, and the tort of deceit. Matthew and Haley Rooney had operated a successful restaurant, Tosh Steakhouse & Bar, through 163 in Arnprior, Ontario, until a fire destroyed the premises in April 2014. Seeking to rebuild at a new location, they applied to TD for a Canada Small Business Financing Act loan ("CSBFL") of $350,000. TD granted conditional approval in April 2015 and removed the remaining conditions in November 2015, at which point the Rooneys signed a credit agreement, and Matthew Rooney, Haley Rooney, and 236 executed unlimited guarantees. A dispute arose when TD advised in February 2016 that it would reimburse only 55.11% of the leasehold improvement receipts submitted by 163, rather than the full amount the Rooneys expected. On a summary judgment motion, O'Bonsawin J. (as she then was) found that TD had negligently breached its contract with 163 by failing to advance the full loan amount, bifurcated the damages question for trial, and held that Haley Rooney's separate claim concerning an allegedly overstated home appraisal was barred by accord and satisfaction because she had accepted a reduced HELOC interest rate after learning of the alleged error. The Court of Appeal for Ontario limited the breach-of-contract finding to 163 alone and referred the remaining issues, including damages, to trial.

Separately, the Rooneys had borrowed $500,000 from the Business Development Bank of Canada ("BDC"), secured against 163's assets, and loaned that sum to a related company, 2382805 Ontario Inc. ("238"), to open a second restaurant, Skirt Steak, in Kanata. Skirt Steak closed after roughly six months when its landlord terminated the lease for non-payment of rent, having sustained losses that the source states variously as $650,000, $657,183, and $624,000 [inconsistency in source] during that period, which left the loan from 163 uncollectible. TD's failure to advance the loan balance amounted to $301,540 of the promised $350,000, calculated against the $48,459.82 principal that 163 acknowledged remained outstanding.

Policy and legislative provisions at issue

The case turned on the terms of the CSBFL credit agreement and the personal guarantees rather than any insurance policy. The guarantees signed by Matthew Rooney, Haley Rooney, and 236 stated that TD owed the guarantors no duty, whether fiduciary or otherwise, and that the guarantors waived any right to raise a claim, counterclaim, or set-off against the bank. The CSBFL itself was structured under requirements set by Industry Canada, which guaranteed repayment to TD only if the bank funded 55.11% of eligible leasehold improvement costs, a condition the court found TD was contractually bound to follow even though it created friction with the Rooneys' understanding that TD would reimburse 100% of costs up to $350,000. The Limitations Act, 2002 was raised regarding whether the deceit claim over the HELOC was time-barred, though the court resolved that issue on the separate ground that it was already foreclosed by the prior finding of accord and satisfaction.

Reasoning and analysis

The central question was whether TD's failure to advance the remaining $301,540 was the "effective cause" of 163's inability to rebuild and operate the steakhouse. Two valuation experts testified: Greg McEvoy for the plaintiffs by counterclaim and Mr. Polson for TD, both using a discounted cash flow approach. Justice Smith preferred Polson's evidence, citing his standing within the business valuation profession and identifying several flaws in McEvoy's opinion. McEvoy had assumed future profitability of 16% based solely on figures supplied by the Rooneys, whereas Polson relied on independent industry data showing sit-down restaurants typically earn 2% to 6% net profit. The court found a reasonable profitability estimate of 5%, factoring in the Rooneys' historical practice of not taking a fixed salary. The court also found that McEvoy had failed to deduct the $524,000 loan to Skirt Steak from 163's valuation once that loan became uncollectible, and had ignored required capital expenditures, debt owed by 236, and the effect of the COVID-19 pandemic on restaurant profitability. Applying these corrections, the court found that 163's losses were reduced to nil.

On causation, the court concluded that 163's business failure stemmed from the fire itself, the decision to expand into the Kanata market by investing roughly $2,000,000 in Skirt Steak, that venture's rapid failure, and the resulting inability to use fire insurance proceeds to rebuild after they were consumed by a first mortgage, the BDC loan, and other creditors. Evidence that the Rooneys' counsel had demanded an additional $357,000 beyond the CSBFL balance further supported the finding that the shortfall in TD's funding was not what prevented the rebuild. Claims by 236, which the court found had never operated as a business and held no assets or goodwill, were valued at nil. Personal claims by Matthew and Haley Rooney for lost income, home repair costs, rental expenses, a seized vehicle, and reputational harm were all dismissed, either because the guarantors had contractually waived any right to claim against TD or because the losses were caused by the Rooneys' own choices, including their decision to forgo a salary at the Greenfields restaurant they later helped manage in order to avoid wage garnishment by creditors. The tort of deceit was not established, as the court found that bank employees Richard Bernier and Tanya Laughlin (referred to at points as "Loughlin" [source uses both spellings]) acted honestly, with the interest rate reduction on Haley Rooney's HELOC approved automatically by TD's computer system rather than through any manipulation. Claims for punitive and exemplary damages were dismissed for lack of malicious, oppressive, or high-handed conduct.

Ruling and overall outcome

The counterclaim by 163, 236, Matthew Rooney, and Haley Rooney against TD Bank was dismissed in its entirety, with the court finding no compensable damages flowing from TD's admitted breach of the loan agreement. TD Bank was successful on its claim and granted judgment against 163, 236, Haley Rooney, and Matthew Rooney, jointly and severally, for $48,459.82 plus interest at the TD prime rate plus 3% from May 17, 2016. Haley Rooney was ordered to pay the principal sum owing on the HELOC, stated in the judgment as $752,511.50 [the source states this figure differently elsewhere as $752,571.50] plus fees and interest at TD's prime rate plus 0.5% from August 31, 2016, with TD granted exclusive possession of the mortgaged Pine Ridge property and the right to sell it under power of sale. Haley Rooney was further ordered to pay $23,108.27 owing on her TD Visa card with 21% annual interest from March 23, 2026, and Matthew Rooney was ordered to pay $22,940.71 on one TD Visa card and $5,658.51 [stated elsewhere in the source as $5,685.51] on a second, both carrying 21% annual interest. The parties were given leave to make submissions on costs.