



COURT OF APPEAL FOR ONTARIO

CITATION: James v. Chedli, 2021 ONCA 593

DATE: 20210909

DOCKET: C68472

Feldman, Paciocco and Coroza
    JJ.A.

BETWEEN

Kenneth James

Plaintiff (Appellant)

and

Anna Chedli and Anna Chedli as
    Estate Trustee with a Will of the Estate of Amdouni Chedli aka Dennis Chedli

Defendants (Respondents)

Patrick Bakos, for the appellant

Michael R. Kestenberg and Aaron
    Hershtal, for the respondents

Heard: March 9, 2021 by videoconference

On
    appeal from the judgment of Justice Andrew Pinto of the Superior Court of
    Justice, dated June 9, 2020, with reasons reported at 2020 ONSC 3235.

Feldman J.A.:

A.

Introduction

[1]

When Dennis Chedli died in 2015, he had not
    repaid two significant loans totalling well over $1 million, that he had
    obtained from lenders represented by a lawyer, the appellant, Kenneth James.
    The loans were advanced based on two promissory notes. The first promissory
    note was signed by both Dennis Chedli and his wife, the respondent Anna Chedli.
    It was secured by a collateral mortgage on the couples home which was held
    solely in Anna Chedlis name. The second note was signed by Dennis Chedli
    alone.

[2]

A demand was made for payment of both loans on
    October 11, 2016, and this action was commenced on February 23, 2017.

[3]

The issue on the respondents summary judgment
    motion was whether those notes had become unenforceable, either because they were
    statute-barred, or because they had been materially altered without the assent
    of the borrowers, rendering them void under the
Bills of Exchange Act
,
    R.S.C. 1985, c. B-4, s. 144(1). Because Dennis Chedli had passed away and the
    action is against his estate, s. 13 of the
Evidence Act
, R.S.O. 1990,
    c. E.23, requires that the appellants evidence that Dennis Chedli had assented
    to the alteration of the notes be corroborated by some other material evidence.

[4]

The motion judge granted summary judgment in
    favour of the respondents and dismissed the claims against them. He found that:
    1) the first note was not enforceable, either because it had already been paid
    off in full, or if it had not, then it had been materially altered without the
    assent of the borrowers and was voided and not enforceable against them; and 2)
    the second note was not enforceable because it was statute barred. There was no
    independent corroboration that it had been consensually converted to a demand
    note and, because it remained a term note, the action was out of time.

[5]

I would allow the appeal with respect to the enforcement
    of the first note against the estate of Dennis Chedli. The motion judges
    finding that the first note was repaid in full and then re-advanced as a fresh
    loan was not available on the evidence. The motion judge further erred by
    finding there was no independent corroborating evidence that Dennis Chedli had
    assented to the alterations to the note, including its conversion from a term
    note to a demand note. The first note was therefore not voided as against
    Dennis Chedli, and the action to enforce the note as a demand note against his estate
    was not statute-barred.

[6]

However, I would dismiss the appeal from the
    judgment of the motion judge dismissing the claim against Anna Chedli on the
    first note and collateral mortgage. While Dennis Chedli assented to the
    conversion of the first note to a demand note, there was no evidence that Anna
    Chedli assented to it. Therefore, the note is void against Anna Chedli under s.
    144(1) of the
Bills of Exchange Act
, and the collateral mortgage she
    gave is also unenforceable.

[7]

With respect to the second note, the motion
    judge did not err in finding that the note had not been effectively converted to
    a demand note because there was no corroborating material evidence that Dennis Chedli
    had assented to that change. I agree, therefore, that the second note remained
    a term note and the action to enforce the second note was out of time.

B.

Background Facts

a)

The First Note

[8]

The first loan came about when Dennis Chedli had
    the opportunity to purchase and immediately flip a valuable property in
    Mississauga to a major property developer or pension fund manager. He was doing
    this in conjunction with his business associate, Joseph Chetti. To take
    advantage of the opportunity, Dennis Chedli required a loan of $500,000 for a deposit.
    The funds were provided by a group of investors who made the loan through the
    appellant, a lawyer known to all the parties, in trust.

[9]

The documentation securing the loan consisted of
    a promissory note and a collateral mortgage. The note was signed by both Dennis
    Chedli and his wife, the respondent Anna Chedli. The collateral mortgage on the
    couples home residence, which was held solely in Anna Chedlis name, was given
    by her with Dennis Chedlis consent. The note was dated October 18, 2006 and
    was in the amount of $531,000 plus simple interest of 10% per annum, payable
    monthly in the amount of $4,425, with the balance due on October 25, 2007. The $531,000
    principal amount included a loan arrangement fee of $25,000 and $6,000 for the
    appellants legal fees and disbursements.

[10]

The Mississauga property transactions were
    completed within a few weeks, and around November 20, 2006, Dennis Chedli and Joseph
    Chetti attended at the appellants firm office and gave him a certified cheque for
    $550,000 from a numbered company acting on Dennis Chedlis behalf, which the
    appellant deposited into his trust account. On Dennis Chedlis instructions,
    the appellant then issued a cheque to Dennis Chedli for $50,000 and a second
    cheque for $500,000 to Shibley Righton, a law firm that acted for Joseph Chetti.
    The $31,000 fee portion of the loan was paid at that time, although the
    mechanics of that payment were not clearly explained in the record.

[11]

The explanation for the $500,000 cheque to
    Shibley Righton was that Dennis Chedli asked the appellant, representing the
    lenders, if he could retain the loaned funds until the note was due in order to
    invest in other opportunities with Joseph Chetti, and the appellant agreed. The
    first loan was referred to by the appellant in correspondence as the Chetti
    loan.

[12]

The appellant documented the transaction in a
    letter dated November 20, 2006, addressed to both Dennis and Anna Chedli. The
    letter stated:

RE: Promissory Note and Collateral Mortgage
    loan to secure advance of good faith deposit for acquisition of North West
    corner Eglinton Avenue West and Hurontario Street, Mississauga

We confirm receipt of the sum of $550,000.00
    from 2003361 Ontario Ltd., on your behalf, and Mr Chedlis request that the
    said sum of $500,000.00 be re-advanced on the above noted loan.

Accordingly we are enclosing our trust cheques
    drawn in accordance with your instructions as follows

1.
Shibley Righton
$500,000.00

2.
Dennis Chedli
$50,000.00
$550,000.00

The amount secured by the promissory note is now reduced to $500,000.00 and the interest
    payments due thereunder remain at ten (10%) percent per annum but wilable quarterly in the amount of $12,500.00 each on the 15
th
day
    of February, May, August and November in each year until repaid.

Our client is also prepared to accept
    prepayment of the principal and interest at any time or times, in whole or in
    part, without notice or bonus.

[13]

The loan was extended to November 15, 2008 by
    another letter from the appellant to Dennis and Anna Chedli dated November 15,
    2007. The $50,000 of interest for the original term had already been paid in
    May 2007 to the appellant by Joseph Chetti.

b)

The Second Note

[14]

Dennis Chedli borrowed a further $650,000 in
    April 2008, secured by a promissory note he gave to a Panamanian company, Tithe
    Holdings Inc., in trust, which held the note in trust for the appellant. The
    note was dated April 17, 2008 and was due on July 17, 2008. Interest was 15%
    annually, compounded monthly. This second loan was referred to by the appellant
    in correspondence as the share purchase loan.

c)

Payment History on Both Loans

[15]

Both loans had fallen into arrears by the late
    summer and fall of 2008, although Dennis Chedli made sporadic payments over the
    course of 2008. By a letter dated November 19, 2008 addressed to Dennis and
    Anna Chedli and headed: RE: Chetti Loan, the appellant referenced Dennis
    Chedlis concerns with Joseph Chetti not meeting his payment obligations to him.
    The appellant stated that he and Nick De Luca, an accountant and a friend and
    business associate of both Dennis Chedli and the appellant, had reviewed the
    issue with the lenders, who had agreed to further extend the loan to you on a
    month to month basis to hereafter become due on demand.

[16]

The letter also stated that the payments on both
    loans would be combined. The Chetti loan would change back from quarterly
    payments to monthly payments of $4,166.67, and combined with the monthly
    payment of $8,125 on the share purchase loan, the monthly total interest payments
    would be $12,291.67. The letter noted that a payment of $28,750 was currently
    due, and memorialized Dennis Chedlis advice to the appellant that he was
    arranging to secure that amount from the broker holding shares for him. The
    letter asked that the $28,750 payment be made before the new revised re-payment
    plan, established by the letter, began.

[17]

Following this letter, in January 2009, Dennis Chedli
    provided the appellant with a series of post-dated cheques to cover the period
    from January 2009 to March 2010, drawn on the account of another business
    associate, Matthew Sacco. A number of those cheques were dishonoured. Dennis Chedli
    provided four further payments of $30,000 each between July and November 2009.
    Each payment was documented and applied by the appellant to the loans and
    receipted in a letter to Dennis Chedli.

[18]

I pause this narrative to note that all of the
    correspondence in the record is from the appellant to the Chedlis, or to Dennis
    Chedli alone; there is no correspondence going the other way. However, the
    appellants letters refer to discussions with Dennis Chedli about the loans and
    document the application of all payments and the balance outstanding.

[19]

The last payment on both loans was made on March
    17, 2010. On March 20, 2010, the appellant wrote to Dennis Chedli regarding the
    consolidation and revision of both loans. The letter noted that Dennis Chedli had
    arranged for additional security for the loans through a convertible debenture
    from a company that he had invested in. The appellant stated in the letter that
    he was prepared to agree to various terms, including the following:

·

after March 16, no further interest would accrue
    on the loans and the then current balance would become due on demand;

·

quarterly payments of $30,000 would continue
    until certain shares were sold; and

·

when the debenture was converted, the proceeds
    would be applied to the share purchase portion of the debt (the $650,000 loan
    secured by the second note).

[20]

In the following years, there were discussions
    among the group (Dennis Chedli, Joseph Chetti, Nick De Luca, Matthew Sacco and the
    appellant) about how Dennis Chedli would be able to repay the loans, but no
    further payments were made.
Dennis Chedli died on
    September 12, 2015 and demand was made for payment of both loans on October 11,
    2016. This action was commenced on February 23, 2017
.

C.

Findings by the Motion Judge

[21]

The motion judge first considered whether the action
    could be determined on summary judgment. He found that there was a full record,
    consisting of affidavits appending the relevant documents from the appellant, the
    appellants bookkeeper, Anna Chedli, and several other deponents, including
    Dennis Chedlis business associates. The record also included the transcripts
    of cross-examinations of some of the deponents. The motion judge concluded that
    summary judgment would be a proportionate, more expeditious and less expensive
    means to achieve a just result.

[22]

The first substantive issue was the
    enforceability of the first promissory note and the collateral mortgage. The
    motion judge accepted the respondents argument that when Dennis Chedli brought
    the certified cheque for $550,000 to the appellant and he deposited it into his
    trust account, the legal effect was that the note was paid off, and as a
    result, the collateral mortgage fell away. The motion judge found that the
    loan for $500,000 was then re-advanced to Dennis Chedli only, as a new loan.
    Therefore, because the first note loan was repaid, neither the first promissory
    note nor the collateral mortgage were enforceable by the appellant in this
    action.

[23]

The motion judge also addressed the respondents
    alternative submission that if the first note was not paid off, it was
    nevertheless unenforceable as the claim was statute-barred. This submission
    relied on the different limitation periods that apply to term notes and demand
    notes. If the notes remained term notes, then the action to enforce them was
    statute-barred, having been brought seven years after the last payment on the
    notes:
Limitations Act
, 2002
, S.O. 2002, c. 24, Sched. B, s. 13(1).
    However, if they were converted from term notes to demand notes with the assent
    of the promisors, Dennis and Anna Chedli, then the action was not
    statute-barred as it was commenced less than two years after demand for
    repayment was made:
Limitations Act
, 2002
, s. 5(3).

[24]

Two letters from the appellant referred to the
    notes becoming demand notes. The first was the letter dated November 19, 2008 from
    the appellant to Dennis and Anna Chedli. The second was his letter dated March
    20, 2010, addressed to Dennis Chedli alone, in which the appellant stated that
    he was prepared to agree to a series of terms. The motion judge found that
    the March 2010 letter was merely a proposal for a new agreement to change the
    terms of the notes, and that the conditions of the new agreement never
    materialized. He also observed that neither Anna Chedli nor Dennis Chedli
    acknowledged the letters in writing or signed anything agreeing to a change of
    terms of the notes.

[25]

The issue, therefore, was whether there was
    evidence that either Dennis or Anna Chedli had agreed to convert the notes from
    term notes to demand notes. With respect to Anna Chedli, the appellant
    acknowledged that he never spoke with her about the issue. With respect to
    Dennis Chedli and the action against his estate, s. 13 of the
Evidence Act
was applicable, requiring corroboration of any evidence from the appellant that
    Dennis Chedli had assented to any material change to the notes.

[26]

The motion judge considered six potential pieces
    of corroborative evidence that Dennis Chedli had agreed to amend the notes from
    term notes to demand notes, and rejected all six. These pieces of evidence included
    reports of conversations about repayment of the loan and how to accomplish it with
    Nick De Luca, Matthew Sacco and Joseph Chetti, as well as cheques and bank
    drafts delivered to the appellant, which he recorded as paying down the loans
    up to March 17, 2010.

[27]

Section 144(1) of the
Bills of Exchange Act
provides that where there has been a material alteration of a note, the note is
    void against any party liable under it who did not assent to the material
    alteration. Having found there was no independent corroborative evidence that
    Dennis Chedli had agreed to the amendment of the notes, the motion judge found
    that the notes were voided and not enforceable against the estate.

[28]

The motion judge also considered the potential
    application of the ten-year limitation period under the
Real Property
    Limitations Act
, R.S.O. 1990, c. L.15, s. 43(1), in respect of the
    collateral mortgage to the first promissory note, assuming that note had not
    been paid off. While that provision would have applied, the first note was not
    enforceable against Anna Chedli because of the application of s. 144(1) of the
Bills
    of Exchange Act
. Because Anna Chedli did not assent to the amendment of
    the first note from a term note to a demand note, that note became void as
    against her and therefore both the note and the collateral mortgage were not
    enforceable against her.

[29]

In the result, the motion judge granted the
    respondents motion for summary judgment and dismissed the appellants claims.

D.

Issues

[30]

The seven issues raised by the appellant on the
    appeal can be consolidated into the following:

a)

Did the motion judge err by deciding the motion
    on summary judgment?

b)

Did the motion judge make an unreasonable
    inference from the evidence that the first promissory note was repaid by Dennis
    Chedli in November 2006 and the funds re-advanced as a new loan?

c)

Did the motion judge err by finding that s.
    144(1) of the
Bills of Exchange Act
applied and voided the first note
    as against Anna Chedli?

d)

Did the motion judge err by finding that there
    was insufficient corroborative evidence that Dennis Chedli assented to the
    amendment of the notes from term notes to demand notes?

E.

Analysis

a)

Did the motion judge err by deciding the action on summary judgment?

[31]

While the appellant raised this issue on the
    appeal, his real complaint was with the inferences the motion judge drew from
    the evidence rather than with the summary judgment procedure. As the motion
    judge stated, he had a full record before him. Any missing evidence was from
    Dennis Chedli, who had passed away. In responding to the motion for summary
    judgment, the appellant had an obligation to put its best foot forward:
Sweda
    Farms Ltd. v. Egg Farmers of Ontario
, 2014 ONSC 1200, at para. 26, affd
    2014 ONCA 878, leave to appeal refused, [2015] S.C.C.A. No. 97. It was not open
    to him to rely on the prospect that additional evidence may be tendered at
    trial to justify the necessity of proceeding to trial. The motion judge was
    entitled to treat the record as complete and to conclude that it was sufficient
    to determine the action on summary judgment.

Standard of review

[32]

Deference is to be accorded to a summary
    judgment motion judges findings of fact, unless the judge has misapprehended
    the evidence, resulting in a palpable and overriding error, or where the
    inference-drawing process from the proved evidence is palpably in error, unreasonable
    or unsupported by the evidence:
Housen v. Nikolaisen
, 2002 SCC 33,
    [2002] 2 S.C.R. 235, at para. 23;
H.L. v. Canada (Attorney General)
,
    2005 SCC 25, [2005] 1. S.C.R. 401 at para. 56. Errors of law are reviewed on a
    correctness standard:
Housen
, at para. 8.

b)

Did the motion judge err by making an unreasonable inference from
    the evidence that the first note was repaid by Dennis Chedli in November 2006
    and the funds re-advanced as a new loan?

[33]

The motion judge accepted the respondents submission
    that the term re-advanced was suggestive of funds coming in (and being paid
    off) and then going out again. Therefore, the appellants use of the term re-advanced
    in his letter of November 20, 2006 to Dennis and Anna Chedli, in which he
    reported on the status of the outstanding $500,000 loan, meant that the
    original loan that was secured by a promissory note and collateral mortgage had
    been paid off, and a new loan for $500,000 was re-advanced. In my view, the
    motion judge erred by accepting this submission. There was no basis either in
    fact or in law for this finding.

[34]

The evidence was that Dennis Chedli came to the
    appellants office with the certified cheque for $550,000, and asked if he
    could repay the $31,000 fee portion of the $531,000 loan, but retain $500,000
    for further investment with Joseph Chetti until the maturity date of the first
    note. The appellant agreed.

[35]

From the lenders point of view, it was clearly
    important that the loan was secured by a promissory note and collateral
    mortgage. There was no evidence that the appellant, who represented the
    lenders, intended to undermine the efficacy of that security. His letter of November
    20 makes that clear. Nor was there evidence that Dennis Chedli wanted anything
    other than to retain the funds until the maturity of the note.

[36]

It appears that the appellant believed he could
    amend the note with the concurrence of the borrowers, and that he could obtain
    their concurrence through oral agreement with Dennis Chedli only, confirmed by
    a letter addressed to both Dennis and Anna Chedli. In other words, he did not
    give deliberate consideration to s. 144(1) of the
Bills of Exchange Act
,
    and how to ensure that he had demonstrable evidence of assent to amendments.
    That led to the evidentiary issues that arose on the motion, that will be
    discussed later in these reasons.

[37]

However, there is no evidence that either the
    appellant or Dennis Chedli intended to start fresh with a new loan for
    $500,000. The appellants evidence on cross-examination, which the motion judge
    quoted, confirms that:

Q.      So from my understanding of this
    letter, Mr. Chedli came in, paid off the promissory note and then asked for an
    indulgence and additional or new monies so that he could do something else that
    he was involved in and use the promissory note as security for that fresh
    advance, is that correct?

A.      He asked that the loan be -- the loan
    was paid off within a month of it being advanced, and he asked that the money
    -- that the 500 [i.e. $500,000] be allowed to run to maturity of the note which
    was the subsequent year.

Q.      I understand, but you'll agree with me
    that when he came in and paid the $550,000 he, for all practical purposes, paid
    off the promissory note and then there was a fresh advance and used the
    promissory note as security for that fresh advance.

A.      Well, no. My -- my recollection is
    that he paid the costs of the note. The $31,000.

[38]

The motion judge put his focus on the word re-advanced
    that the appellant used in his November 20, 2006 letter. I agree with the
    position taken by counsel for the appellant on the motion that that word was
    poorly chosen. However, it has no legal significance in determining the
    intention of the parties when they took the steps they did. The balance of the
    principal ($500,000) continued to accrue interest at the rate provided in the
    note until the original maturity date, although the appellant changed the
    payments from quarterly to half-yearly. It is clear from the letter that the
    appellant intended that both Chedlis would continue to be bound by the note and
    the collateral mortgage would continue to exist. There is no reference to a new
    loan.

[39]

In my view, with respect, the motion judges
    finding that the appellant, as the lenders representative, issued a new loan
    for $500,000 is unreasonable and not available on the record.

c)

Did the motion judge err by finding that s. 144(1) of the
Bills
    of Exchange Act
applied and voided the first note as against Anna Chedli?

[40]

Sections 144(1) and (2) of the
Bills of
    Exchange Act
address the consequences when there is a material alteration
    to a bill, including a promissory note. Section 145 sets out five circumstances
    that constitute material alterations. These sections state:

144(1) Subject to subsection (2), where a bill
    or an acceptance is materially altered without the assent of all parties liable
    on the bill, the bill is voided, except as against a party who has himself
    made, authorized or assented to the alteration and subsequent endorsers.

(2) Where a bill has been materially altered,
    but the alteration is not apparent, and the bill is in the hands of a holder in
    due course, the holder may avail himself of the bill as if it had not been
    altered and may enforce payment of it according to its original tenor.

145 In particular, any alteration

(a)
of the date,

(b)
of the sum payable,

(c)
of the time of payment,

(d)
of the place of payment,

(e)
by the addition of a place of payment without the acceptors assent
    where a bill has been accepted generally,

is a material alteration.

[41]

These sections make it clear that a note can be
    altered with the assent of all parties, and the alteration will be binding as between
    them. However, by making a material alteration without the assent of all the
    parties to the note, the note becomes void against any party who did not assent
    to the material alteration: Ian F.G. Baxter,
The Law of Banking
, 4th
    ed. (Scarborough: Thomson Canada Limited, 1992), at p. 31. The only issue in
    this case was whether either Dennis or Anna Chedli had assented to the
    alteration of the notes. It was accepted that a note could be materially
    altered by an agreement or a letter. Baxter states, in the context of
    discussing s. 144 of the
Bills of Exchange Act
, that [o]n principle a
    written agreement can be varied by consent, and even by a later oral
    agreement:
Baxter
, at p. 31, fn. 189.
[1]
He references
Goss v. Nugent

(1833), 5 B & Ad. 58, 110 E.R.
    713 (Eng. K.B.).

[42]

In this case, the first note was materially altered
    by the appellant in his letter of November 20, 2006 to the Chedlis. He reduced
    the principal amount of the note from $531,000 to $500,000, and the timing of
    the interest payments on the new principal amount. The appellant acknowledged
    in his testimony that Anna Chedli never gave her assent to this or any
    subsequent changes to the first note. Therefore, in accordance with s. 144(1)
    of the
Bills of Exchange Act
, the first note is void as against Anna Chedli
    and unenforceable against her. Since the collateral mortgage was given only by Anna
    Chedli as the sole person on title to the couples home residence, the mortgage
    is also unenforceable, and any potential limitation period consequences that
    may have arisen from the application of the
Real
Property Limitations
    Act
do not arise.

d)

Did the motion judge err by finding that there was insufficient
    corroborative evidence that Dennis Chedli assented to the amendment of the
    first and second notes to make them demand notes?

[43]

In order to determine whether Dennis Chedli had assented
    to the alterations to the first note, including its conversion from a term note
    to a demand note in the letter of November 19, 2008, the motion judge had to
    apply s. 13 of the
Evidence Act
, which provides:

13. In an action by or against the
    heirs, next of kin, executors, administrators or assigns of a deceased person,
    an opposite or interested party shall not obtain a verdict, judgment or
    decision on his or her own evidence in respect of any matter occurring before
    the death of the deceased person, unless such evidence is corroborated by some
    other material evidence.

[44]

The motion judge noted that the independent evidence
    can be direct or circumstantial, and can consist of a single piece of paper or
    several pieces considered cumulatively, referring to
Burns Estate v. Mellon
(2000), 48 O.R. (3d) 641 (C.A.), at para. 29.

[45]

The motion judge then considered and rejected
    the six pieces of evidence submitted by the appellant as independent
    corroboration that Dennis Chedli assented to the conversion of both notes to
    demand notes. The motion judge found either that the proffered evidence did not
    refer specifically to the conversion of the notes to demand notes, or it was
    not independent of the appellants letters that documented the conversion.

[46]

The first piece of evidence was the affidavit
    evidence of Nick De Luca, Dennis Chedlis long-time accountant, regarding many
    conversations between them. He confirmed the extension of the first note; Dennis
    Chedlis ongoing difficulties obtaining money from his business associates; and
    his regular meetings with Dennis Chedli, from 2010 until his death, in which
    they discussed repayment of the combined debt, restructuring his affairs to generate
    money to pay the debt, and cheques Dennis Chedli provided, many of which were returned
    due to insufficient funds. The motion judge rejected this evidence as
    corroborative because it did not include evidence that Dennis Chedli had
    specifically assented to the conversion of the notes to demand notes.

[47]

The motion judge similarly discounted the
    evidence of four other witnesses: Dennis Chedlis business associates Matthew
    Sacco, Joseph Chetti and Patrick Carbone; and Rosemary Cremer, the appellants
    accountant.

[48]

Finally, the motion judge was directed to a $30,000
    bank draft dated July 28, 2009 that Dennis Chedli provided to the appellants
    law firm in trust. The appellant documented the receipt and application of the $30,000
    in his letter to Dennis Chedli dated August 5, 2009, which reads:

Personal and Confidential

Dear Dennis:

RE: Loans for Chetti and Share Purchase

Further to my letter of January 29, 2009, I
    acknowledge receipt of a further sum of $30,000.00 for application towards the
    afore-noted loans. I have applied the said sum as follows:

Chetti loan May 15 and August 15, 2009 (2 x $12,500.00)
$25,000.00

Applied to outstanding interest on share purchase loan
5,000.00

Total
$30,000.00

You will note the $500,000.00 loan is now current and in fact paid to August 15, 2009.
With regard to the $650,000.00 loan, it is
    currently unpaid for the monthly payments of $8,125.00 due October 17, 2008 to
    July 17, 2009 inclusive totally [sic] $81,250.00 less the sum of $2,000.00
    applied as per my letter of January 29, 2009 and the sum of $5,000 as aforesaid
    leaving a net due as of July 17, 2009 of $74,250.00.
I confirm the borrowers commitment to
    continue monthly payments commencing August 31, 2009 of at least $30,000.00
    towards the remaining unpaid interest and thereafter in reduction of the
    principal.
Please stress the absolute need that the
    commitment of $30,000 per month is maintained.
Yours truly,
Ken James
[49]

The motion judge noted that the $30,000 bank
    draft itself contains no information other than that it is payable to the
    appellants law firm in trust. He concluded that although there is some
    alignment between the $30,000 amount and the combined interest payments that
    are referenced in [the appellants] letters, this was not evidence that was
    independent of the appellant, because it is the appellants own evidence, contained
    in his affidavit, that was the source of the information about the bank draft.
[50]

Having rejected all of the proffered evidence as
    lacking the corroborative independence required by s. 13 of the
Evidence
    Act
, the motion judge found that neither Dennis nor Anna Chedli had
    assented to the material alterations to the notes.
[51]

The issue for the court on appeal is whether the
    motion judge erred in law in concluding that there was no independent evidence to
    corroborate Dennis Chedlis assent to the conversion of the notes from term
    loans to demand loans, or whether the motion judge made a palpable and
    overriding error of fact or drew an unreasonable inference by concluding that Dennis
    Chedlis payment of $30,000 was not necessarily a payment of the two loans and
    therefore an acceptance of the revised terms.
[52]

In my view, there were two pieces of potentially
    cogent, independent evidence to corroborate Dennis Chedlis assent to the alteration
    of the first note, including its conversion from a term loan to a demand loan as
    described in the appellants letter of November 19, 2008. The first was the
    evidence of Nick De Luca of his conversations with Dennis Chedli following the
    conversion of the note, where Dennis Chedli clearly acknowledged his intent to
    repay both notes
.
While Nick De Luca does not
    say that they specifically discussed the conversion of the first note, one can
    infer that Dennis Chedli believed he remained bound to repay the first note, which
    indicates that he accepted that its terms had been revised.
[53]

The question on appeal is whether, applying the
    strict standard of review that applies to findings of fact and inferences drawn
    from facts, was it a palpable and overriding error or unreasonable for the
    motion judge to reject that inference? In my view, that inference is not only
    available, but it is logical and reasonable. However, if that evidence stood
    alone, I would not be prepared to find that the motion judge made a palpable
    and overriding error by requiring a report from Nick De Luca that Dennis Chedli
    had specifically acknowledged that the note had been converted to a demand note
    and he remained bound by it.
[54]

However, the evidence of Nick De Luca does not
    stand alone. Dennis Chedli made a number of payments after the first note was
    converted, including the $30,000 bank draft, $25,000 of which was allocated by
    the appellant to the Chetti loan, which was the first note.
[55]

Talking about owing money and the need to make
    payment arrangements is one thing  making payments is quite another. The
    payment constitutes circumstantial evidence that corroborates Dennis Chedlis
    assent to the alteration of the first note, including its conversion to a
    demand note. There can be no explanation for Dennis Chedli making payments to
    the appellant except to pay money that is owing. The inference is further
    supported by the fact that Dennis Chedli never responded or objected to the
    appellants letter that confirms and applies the payment to the loans.
[56]

After November 2008, the date to which the term
    of the first note was initially extended, the whole amount would have been due
    and owing unless the note had been extended by mutual agreement. That further extension,
    including the conversion to a demand obligation, was made in the November 2008
    letter. We can be satisfied that Dennis Chedli assented to the extension and
    its terms because he continued to make payment in accordance with those terms
    following the amendment.
[57]

In my view, the motion judge misapprehended the
    evidence, drew an unreasonable inference, and erred in law by failing to find
    that Dennis Chedlis payment of $30,000 to the appellant after the appellant amended
    the first note and converted it to a demand note constituted independent corroborative
    evidence of his assent. Nick De Lucas evidence of his discussions with Dennis Chedli
    is consistent with that conclusion.
[58]

There is, however, no similarly corroborative
    independent evidence that Dennis Chedli assented to the conversion of the
    second note to a demand note. While there is evidence of discussions with Nick
    De Luca, no payments were made after the appellants March 20, 2010 letter that
    discussed the conversion of the second note to a demand note. I am not prepared
    to find that the motion judge erred in his conclusion that Nick De Lucas
    evidence in relation to the second note, standing alone, is insufficient to
    independently corroborate Dennis Chedlis assent.
F.

Conclusion and Result
[59]

The judgment of the motion judge with respect to
    the enforceability of the first note against the estate of Dennis Chedli must
    be set aside. The motion judge erred in fact and in law by finding that the
    first note was paid off, and in the alternative, that there was no independent
    corroborative evidence from Dennis Chedli that he assented to the conversion of
    the note from a term note to a demand note. Because this action was commenced
    within two years of the appellants demand for repayment, the action is not statute-barred
    as against the estate of Dennis Chedli.
[60]

I would dismiss the appeal from the judgment of
    the motion judge dismissing the claim against Anna Chedli on the first note and
    the collateral mortgage. While Dennis Chedli assented to the conversion of the
    first note to a demand note, there is no evidence that Anna Chedli assented to it.
    Therefore, the note is void against Anna Chedli under s. 144(1) of the
Bills
    of Exchange Act
, and the collateral mortgage she gave is also
    unenforceable.
[61]

I would dismiss the appeal from the judgment
    dismissing the appellants claim against the estate of Dennis Chedli on the
    second promissory note. The motion judge found that either it never was amended
    because the amendment was conditional, in which case it remained a term loan
    and the action is out of time and statute-barred, or the note was amended
    without Dennis Chedlis assent, in which case it is void as against him. The
    motion judge was entitled to find that there is no independent corroborative
    evidence that Dennis Chedli assented to the conversion of the second note from
    a term note to a demand note. The action to enforce the note is therefore
    dismissed.
[62]

In the result, I would allow the appeal in part.
    The parties had agreed on a costs award of $15,000 to the winner. As it turns
    out, success is divided. I would invite the parties to renew their discussion
    regarding costs and advise the court. If the parties cannot agree, they may
    each make a two-page written submission within three weeks of the release of
    these reasons, addressing the costs of the appeal and below.
Released: September 9, 2021 K.F.
K. Feldman J.A.
I agree. David M. Paciocco J.A.
I agree. S Coroza J.A.

[1]
I note that
Bradley Crawford, in his text
Crawford and
    Falconbridge on Banking and Bills of Exchange
, 8th ed. (Toronto, Canada Law
    Book, 1986) at p. 1686, refers to the Nova Scotia Court of Appeal decision in
Royal
    Bank v. Davidson
(1972), 25 D.L.R. (3d) (N.S.C.A.), stating that it stands
    for the proposition that a note can only be amended on its face or back. That
    case has not been referred to by courts in Ontario.
