Ontario Securities Commission v. Bridging Finance Inc., 2026 ONSC 5607
Can a creditor enforce a $213 million guarantee that was never properly authorized?

Summary: The Ontario Superior Court of Justice has dismissed an appeal by CERIECO Canada Corp. seeking to enforce a $213 million guarantee allegedly provided by a Bridging Finance investment fund in connection with financing for The One, the troubled luxury condominium project in downtown Toronto. Justice Kimmel upheld a claims officer’s determination that Bridging Finance’s former chief investment officer lacked the authority to bind Bridging Income Fund LP to the guarantee, which secured more than $200 million advanced to the project’s developer. The Court found that the guarantee was outside the ordinary course of the fund’s investment business and required approval from its limited partners, which had never been obtained. Although CERIECO had received legal opinions confirming that the guarantee was valid and enforceable, the Court held that several warning signs, including the absence of an apparent commercial benefit to the fund, inconsistencies surrounding signing authority and requests for confidentiality, should have prompted further investigation. The Court also rejected CERIECO’s reliance on the indoor management rule, finding that it could not protect a creditor that had been put on notice of suspicious circumstances.

CERIECO Canada Corp. (“CERIECO”) claimed the amount of CAD $213,000,000, plus interest and out-of-pocket costs (the “Claim”) against the Bridging Income Fund LP (the “Bridging LP”) under a Joint and Several Limited Guarantee and Indemnity Agreement (the “Guarantee”). The Guarantee stated that the Bridging LP unconditionally guaranteed payment to CERIECO of all present and future indebtedness owing to CERIECO by Mizrahi Commercial (The One) LP (“MCLP”) in connection with a proposed 85-storey mixed-use tower in downtown Toronto (the “Project”).

The Guarantee was signed on or about August 24, 2017, by, among others, Natasha Sharpe (“Natasha”) for the general partner on behalf of the Bridging LP. Natasha was, among other things, the Chief Investment Officer and a principal of Bridging Finance Inc. (“BFI”), a company that had been delegated the exclusive and absolute authority to provide investment management services to and manage the property of the Bridging LP “in its sole discretion” pursuant to a Sub-Advisory Agreement. The Bridging Receiver issued a Notice of Disallowance of the Claim in 2023, which was subsequently upheld by the Claims Officer. The Claims Officer found that Natasha, the individual who signed the Guarantee and purported to bind the Bridging LP to it, did not have any actual, ostensible, or implied authority to do so and the indoor management rule did not assist CERIECO in the circumstances.

The Claims Officer found that at the time Natasha signed the Guarantee on behalf of the general partner, she was not an authorized signing officer of the general partner. A Confirmation of Guarantee Agreement was subsequently executed and delivered in the name of the Bridging LP (as guarantor) by its general partner, with Natasha’s signature. By this time, Natasha was a signing officer of the general partner.

CERIECO appealed the disallowance to the Ontario Superior Court of Justice, arguing that the Claims Officer, among other things, failed to give due consideration to whether BFI was authorized to bind the Bridging LP to the Guarantee pursuant to the Sub-Advisory Agreement, and erroneously placed an obligation of “enquiry” on CERIECO to look behind Natasha’s apparent authority derived from the positions she held with BFI. The Bridging Receiver argued that the Claims Officer made no reversible errors and there were no grounds to justify the court’s interference with the determination. 

The Court held that while Natasha stated she had the authority to bind the corporation under her signature when she signed the Guarantee, the Claims Officer did not make an obvious error when he concluded that she, in fact, did not have the authority to bind the general partner. At best, she was authorized to sign for BFI, the Sub-Advisor under the Sub-Advisory Agreement, but only in respect of matters that BFI had been delegated the authority to deal with under the Sub-Advisory Agreement. The Sub-Advisory Agreement could only delegate to the Sub-Advisor the authority originating from the general partner to sign for matters in furtherance of or ancillary to the Bridging LP’s investment objectives in the ordinary course of business. The Guarantee was not an investment, nor was it granted in furtherance of any investment made by the Bridging LP. The Claims Officer did not make any palpable or obvious error in his Determination that this Guarantee was not provided in the ordinary course of the Bridging LP’s business.

Even if the general partner could have approved the granting of the Guarantee (i.e., if the Guarantee had been within the ordinary course of business), Natasha had no authority within the general partner at that time. Further, even if Natasha had the authority to sign for the Sub-Advisor (BFI) on behalf of the general partner under the Sub-Advisory Agreement, the Claims Officer did not make an obvious error in concluding that this authority would not have extended to signing a Guarantee in light of the finding that this Guarantee was not in respect of an investment made by the Bridging LP in the ordinary course of its investment business.

CERIECO had received legal opinions from counsel to the Bridging LP and its own counsel confirming that the Guarantee was valid and enforceable. However, the Court upheld the Claims Officer’s finding that CERIECO could not reasonably rely on these opinions without further investigation. The opinion provided by counsel to Bridging expressly stated that the firm had not reviewed the general partner’s minute book, the limited partnership agreement or the partnership records, and had relied on an officer’s certificate signed by Natasha without independent investigation. The Court found that several red flags, including inconsistencies concerning Natasha’s signing authority, the absence of an apparent business reason for the Guarantee and requests for confidentiality, should have prompted CERIECO and its lawyers to make further enquiries rather than simply relying on the legal opinions.

The Claims Officer found that CERIECO knew of Natasha’s lack of authority, limitations on her authority or other suspicious circumstances. In other words, CERIECO was found to possess the type of knowledge about suspicious circumstances that trigger the exemptions or limitations to the indoor management rule. The Court held that this did not improperly reverse the onus onto CERIECO. It was the result of the Claims Officer’s proper application of the law regarding the exemptions or limitations upon resort to the indoor management rule to the circumstances of this case. The Court could not conclude that the Claims Officer made any palpable (obvious) and overriding errors in his finding that the indoor management rule did not apply.

The Court dismissed the appeal.

Judge: Justice Kimmel

Professionals involved include: