Ruling holds director of property development companies personally liable for sum due
The Ontario Court of Appeal did not consider a judge’s palpable errors in failing to address potentially relevant evidence significant enough to override his factual finding that an unsecured bank loan was a personal, not corporate, line of credit (LOC).
Under a June 2007 agreement, the Bank of Montreal (BMO) issued an unsecured LOC with a $400,000 limit to the appellant in Bank of Montreal v. Ieradi, 2026 ONCA 311. At that time, he was a director of several corporations involved in property development.
The respondent bank eventually commenced a claim against the appellant. At trial, the only issue was whether he executed the LOC on a personal basis and was therefore liable for it, or did so on behalf of his companies.
BMO said it was a personal LOC (PLOC), for which the appellant was personally liable. He countered that he executed the LOC on behalf of three corporations.
On Apr. 15, 2025, Justice Charles Chang of the Ontario Superior Court of Justice awarded BMO damages of $632,564.31 for the amount owed under the unsecured loan, plus $105,000 in costs.
The trial judge acknowledged that neither party produced a copy of the agreement nor asserted a spoliation claim. However, he said he could determine whether the LOC was personal or corporate through the parties’ post-agreement conduct and other admissible evidence.
The appellant challenged this judgment.
Personal liability affirmed
The Court of Appeal for Ontario dismissed the appeal and awarded BMO the appeal costs of $10,000, including taxes and disbursements. The appeal court ruled that the trial judge explained how the evidence led to his factual finding that the appellant had entered a PLOC.
First, the appeal court rejected the appellant’s argument that the judge erred by declining to draw an adverse inference against BMO based on its failure to produce the LOC documents. The appeal court noted that BMO had provided bank records that amply supported the judge’s factual finding.
The appeal court noted that the adverse inference could apply equally to BMO and the appellant, both of whom had failed to produce documents available to them.
The appeal court also rejected the appellant’s submission that he had legitimately explained the loss of the documents, while BMO had failed to do so. According to the appeal court, even if it accepted this submission, he did not clarify how the adverse inference would apply in the circumstances.
Next, the appeal court addressed the appellant’s arguments that the judge erred in overlooking evidence that a $400,000 unsecured PLOC was rare in 2007 and that the funding decision had considered the borrower’s recorded net worth of over $10 million.
The appeal court accepted that the judge committed palpable errors in failing to tackle the issues involving the rarity of unsecured loans in that amount and the borrower’s net worth of $10,082,867, compared with the appellant’s much lower total personal assets, as listed in the records.
However, the appeal court did not consider these overriding errors that vitiated, contradicted, or undermined the judge’s factual finding about the LOC’s nature, based on the LOC’s use and the documentary evidence that had repeatedly referred to the product as a PLOC.
Lastly, the appeal court rejected the appellant’s argument that the judge erred in assessing the commercial reasonableness of an umbrella LOC allegedly available to multiple current and future corporations linked to him.
The appeal court saw no misapprehension of the evidence in the judge’s refusal to accept the umbrella facility theory, which supposedly allowed the appellant to unilaterally amend the agreement and add corporate entities without BMO’s involvement or concurrence.
The appeal court noted that the judge based his finding that the concept was commercially unreasonable on the lack of evidence typically associated with a facility involving separate corporations, including corporate records authorizing borrowing and accounting and tax records reflecting each entity’s indebtedness under the LOC.
