Background
Sacred Heart Seniors Health and Recreation Center Inc. obtained a Canada Small Business Financing (CSBF) loan from the Royal Bank of Canada. When the corporation failed to make required payments, RBC brought a summary judgment motion. At first instance, Justice Roger Chown of the Superior Court of Justice found the corporation liable for the defaulted loan and found Iram Partap, its principal, personally liable as guarantor. Judgment was entered against both defendants on April 28, 2025.
On appeal, the appellants — Partap self-represented and Nanak P. Singh appearing for the corporation — re-ran the arguments from the summary judgment motion and raised a new procedural fairness argument: that the motion judge had coerced Mr. Singh into making oral submissions on behalf of the corporation, rendering the proceeding unfair.
The Court’s Holding
The Court of Appeal dismissed the appeal in its entirety. It found no error in any of the motion judge’s six challenged conclusions: the action was not statute-barred because it was commenced within two years of an acknowledgment of the debt; defective service was immaterial because the appellants had filed a statement of defence; the corporation was in default under the actual terms of the loan agreement, not merely by reference to minimum-payment thresholds in the Canada Small Business Financing Regulations, SOR/99-141; and the personal guarantee was enforceable regardless of whether the full loan amount had been disbursed.
The court rejected the procedural fairness argument, noting that the record showed Mr. Singh had voluntarily filed materials and chosen to make oral submissions — facing no obligation to do so — because the alternative was leaving the corporation unrepresented. That argument was further undermined by the fact that Mr. Singh himself sought leave to represent the corporation on appeal. The court also confirmed that RBC owed neither a contractual obligation nor a duty of care to disburse the full loan amount, even though the bank’s decision not to do so had serious consequences for the business. Costs of $7,500 (all inclusive) were awarded to RBC.
Key Takeaways
- A borrower’s default is measured against the actual loan agreement, not the minimum-payment floor set by the Canada Small Business Financing Regulations — regulatory minimums do not cap or override contractual obligations.
- A personal guarantee is enforceable even where the lender did not disburse the full loan amount; the CSBF Program Guidelines (including s. 7.3) are interpretive policy documents, not binding law, and do not add conditions to guarantee liability.
- A lender has no general contractual obligation or common-law duty of care to advance the full amount of a committed loan, and catastrophic business consequences from non-disbursement do not give rise to liability.
- A procedural fairness objection based on alleged coercion into making submissions will fail where the record shows the representative acted voluntarily and later sought the same representative role on appeal.
Why It Matters
This decision reinforces the primacy of loan agreement terms over regulatory framework defaults in CSBF lending disputes, a point of practical importance to both small-business borrowers and their lenders. Borrowers cannot rely on regulatory payment minimums as a ceiling on their contractual obligations, and guarantors cannot escape liability by pointing to partial disbursement of the underlying loan.
The ruling also provides useful guidance on the limits of procedural fairness arguments in summary proceedings involving self-represented or informally represented corporate parties, making clear that voluntary participation — even under difficult circumstances — precludes a later claim of coercion.