COURT OF APPEAL FOR ONTARIO DATE: 20241031 DOCKET: COA-24-CV-0135
Simmons, Coroza and Sossin JJ.A.
BETWEEN
Sylvia Zwaan Plaintiff (Respondent)
and
Douglas LaFramboise* and DDH Law Firm Defendants (Appellant*)
Douglas LaFramboise, acting in person Robert N. Kostyniuk, for the respondent
Heard: October 10, 2024
On appeal from the order of Justice Susan K. Stothart of the Superior Court of Justice, dated January 2, 2024, with reasons reported at 2024 ONSC 23, 2024 ONSC 0023.
REASONS FOR DECISION
Introduction
[1] The appellant, Douglas LaFramboise (“Mr. LaFramboise”), appeals from the order of the trial judge finding that an unlawful conversion occurred when Mr. LaFramboise intentionally deposited the respondent’s insurance cheque in the amount of $36,200, into his personal bank account, intermingling it with his personal funds without authority to do so. The trial judge ordered the return of the insurance settlement funds in the amount of $36,200, plus pre-judgment interest, and also found that punitive damages in the amount of $50,000 were warranted in this case. The action against DDH Law Firm was dismissed.
[2] For the reasons that follow, we dismiss the appeal.
Background
[3] In April 2018, the respondent, Sylvia Zwaan (“Ms. Zwaan”) received a cheque for $36,200 from Intact Insurance (“Intact”), when a barn on the farm property that she owned burned down. Ms. Zwaan, and her common law partner, Michael Al-Saati (“Mr. Al-Saati”) lived on the farm.
[4] The cheque was payable to Ms. Zwaan as the owner of the property and to Merk Investments Ltd. (“Merk”), from whom she had obtained a first mortgage for the property and who was named as first loss payee under the policy (the mortgage had in fact been transferred to a third party lender named Larry Kelln (“Kelln”), but Ms. Zwaan was unaware of this at the time).
[5] The circumstances under which Ms. Zwaan signed the back of the cheque, and by which Mr. LaFramboise ultimately deposited the cheque in his personal account, were contested at trial. Ms. Zwaan testified that she signed the cheque and gave it to Mr. LaFramboise, a lawyer with whom Mr. Al-Saati dealt, so Mr. LaFramboise could arrange to have Merk sign it as well. He told her he would put it in his trust account. She said she asked him to have the funds applied to the mortgage. He later told her that Merk declined the cheque but said it would be safe in his trust account. Mr. LaFramboise testified that he never dealt with Ms. Zwaan concerning the cheque. He said Mr. Al-Saati gave him the cheque, already endorsed by Ms. Zwaan, and asked him to apply the funds to the mortgage. Although Merk never endorsed the cheque his bank accepted it for deposit into his personal account.
[6] Ms. Zwaan and Mr. LaFramboise had an agreement between them that each would pay certain amounts towards the monthly mortgage payment of $3916.67 on the farm property. The nature of each party’s obligation under this agreement, and its duration, also were contested at trial.
[7] In 2020, power of sale proceedings began for the farm. The farm was sold for over $1,100,000. After paying off the mortgage, there was a substantial amount in equity realized on this sale. Each of Mr. LaFramboise and Ms. Zwaan received $80,000 from this amount [^1], with the balance being placed in court pending the outcome of the related litigation over title of the farm.
[8] According to Ms. Zwaan, the power of sale proceedings prompted Ms. Zwaan and her counsel, Robert Kostyniuk (“Mr. Kostyniuk”), to investigate the whereabouts of the cheque. They discovered from Intact that the cheque had been cashed in April 2018. Mr. Kostyniuk wrote to Mr. LaFramboise on Ms. Zwaan’s behalf, demanding that the money be transferred to Mr. Kostyniuk’s trust account. In response, Mr. LaFramboise responded that no such money had passed through his trust account. Mr. Laframboise later testified that he deposited the single endorsed cheque into his personal bank account and used the money to cover Ms. Zwaan and Mr. Al-Saati’s share of the mortgage payments.
[9] In his statement of defence, Mr. LaFramboise claimed that this money was owed to him for “legal services”. At trial, Mr. LaFramboise submitted that Ms. Zwaan had agreed to apply the Intact cheque towards a debt owed to him by Mr. Al-Saati (relating to a loan for which Mr. LaFramboise agreed to act as guarantor, and on which Mr. Al-Saati defaulted). Mr. LaFramboise acknowledged in cross-examination that he had never received authorization from Ms. Zwaan to deposit the cheque into his personal account.
[10] The trial judge found that Ms. Zwaan was a credible witness and Mr. LaFramboise was not.
[11] The trial judge concluded that an unlawful conversion occurred when Mr. LaFramboise intentionally deposited the Intact cheque into his personal bank account, intermingling it with his personal funds, without the knowledge and authorization of Ms. Zwaan or Merk. She noted that even if she was wrong and depositing the cheque did not amount to a conversion, his later deception in response to Mr. Kostyniuk’s letter and refusal to return the funds upon request did. The trial judge found that none of the funds were applied to the mortgage.
Preliminary Issues
[12] There are two interrelated preliminary issues which must be addressed.
[13] First, Mr. LaFramboise seeks to have certain bank statements from Ms. Zwaan’s CIBC account introduced as fresh evidence.
[14] Second, Ms. Zwaan seeks to have an affidavit of the Merk CEO, Michael Slattery (“Mr. Slattery”), struck from the record on the basis that Mr. LaFramboise failed to seek leave to rely upon the affidavit as fresh evidence.
The fresh evidence motion
[15] With respect to fresh evidence, the party seeking to introduce the fresh evidence must show that the proposed evidence is: (1) credible; (2) could not have been obtained by reasonable diligence before trial or application; and (3) if admitted, would likely be conclusive of an issue in the appeal. The overriding factor is that fresh evidence will be admitted only where it is in the interests of justice to do so: St. Amand v. Tisi, 2018 ONCA 106, 89 R.P.R. (5th) 1, at para. 8.
[16] According to Mr. LaFramboise, the proposed fresh evidence demonstrates that he did not keep the $36,200 Intact insurance cheque proceeds for his personal use, but instead put those funds towards the mortgage payments on the farm property.
[17] Mr. Laframboise asserts that the proposed fresh evidence demonstrates that Ms. Zwaan’s evidence was inaccurate. He argues that, at trial, Ms. Zwaan perjured herself by testifying that she and Mr. Al-Saati made every one of their half of the 38 mortgage payments totalling $76,000. [^2] According to Mr. LaFramboise, the arrangement between him and Mr. Al-Saati (or the three of them, including Ms. Zwaan), was that they would split the $3,916.67 monthly mortgage payments with Al-Saati/Zwaan paying $2,000 per month and Mr. LaFramboise paying the balance. Mr. LaFramboise claims that the bank records show that Ms. Zwaan did not transfer $2,000 per month to him for 38 months as she claimed at trial. Rather, they show that she paid him a total of $30,980 during the 18-month period between November 2017 and April 2019, most months paying $2,000, some months paying $1,000, and some months nothing. Even if the insurance proceeds are added to the $30,980 that Ms. Zwaan actually paid, the total sum of $67,180 is still less than the Al-Saati/Zwann share of the mortgage payments.
[18] Ms. Zwaan argues that the bank statements are not admissible, as they do not meet the reasonable diligence requirement of the fresh evidence test and would not have the potential of changing any issue in the appeal.
[19] When asked about Ms. Zwaan’s contributions at trial, Mr. LaFramboise testified that Ms. Zwaan did not always make full payment of her share of the mortgage. In his submissions on the appeal, Mr. LaFramboise underscored the following exchange between the trial judge and himself:
THE COURT: So you would get a monthly e-transfer from a bank account? A. Yeah. Not every month, but, yeah, they were monthly. THE COURT: So you'd get an e-transfer from the bank account, not every month, but monthly. Sometimes, you would get $2,000. Sometimes, you'd get $500. Sometimes... A. Yeah. THE COURT: ...you wouldn't. And then, that continued until November 1st? A. Correct. THE COURT: 2020? A. Yeah.
[20] At the end of the trial, Ms. Zwaan was recalled for reply evidence and asked her to confirm her mortgage payments:
Q. Sylvia, with respect to the payment schedule for the Merit, Merk mortgage, which in fact was the Kelln mortgage, you indicated earlier that there was $4,000 almost. You paid $2,000 by transferring those funds after covering the NSF cheque, that you paid that every month and that you've produced bank account records in the other action to establish that? A. Correct. Q. Okay. And do you have any recollection of payments of $500? There were a couple of payments of $1,000 at the end. A. Yeah. There... Q. Okay. A. ...there was never no payment, like zero dollar... Q. Yeah. A. ...payments. Q. Okay. Okay. A. But without having like all the pages in front of me, I….
[21] With respect to the first prong of the St. Amand test, the bank statements appear credible. Ms. Zwaan does not take issue with the fact that the bank statements reflect transfers relating to the monthly mortgage payments during the relevant period.
[22] With respect to the second prong, as to whether the fresh evidence could have been obtained had Mr. LaFramboise acted with reasonable diligence, Mr. LaFramboise argues that he had no option of providing these bank statements at trial as counsel for Ms. Zwaan had not provided them. Mr. LaFramboise contends that he requested a copy of the bank statements from Ms. Zwaan in July 2021, and that she provided an undertaking to do so in her examination but she never did. That request and undertaking related to the other litigation between the parties over title to the farm. The bank statements finally were provided in July 2024 as part of Law Society of Ontario (“LSO”) proceedings against Mr. LaFramboise.
[23] The trial judge addressed the absence of bank statements in her reasons, linking it directly to Mr. LaFramboise’s failure to plead the defence he ultimately relied upon with respect to the use of the $36,200 proceeds from the Intact cheque towards the mortgage payments. In his statement of defence, as set out above, Mr. LaFramboise alleged the proceeds were used to pay legal fees owed by Ms. Zwaan to Mr. LaFramboise. The trial judge observed:
I find that this was an area where an unfairness arose due to Laframboise’s failure to plead the defence he tendered at trial in his statement of defence. Had Laframboise pled that the funds from the insurance cheque were applied against the mortgage, the plaintiff would have been in a position to tender her banking records and mortgage statements at trial.
[24] The trial judge also referred to Ms. Zwaan’s reply testimony reproduced above and summarized it as follows:
Zwaan testified in reply with respect to Laframboise’s assertion that the money from the insurance cheque had been used to make mortgage payments on her behalf in relation to the farm. According to Zwaan, she made the monthly payments each month via e-transfer and there was never a month when she made no payments at all. Zwaan did not have her bank records with her at this trial, however she had filed them in the other legal proceedings with Laframboise. She was not cross-examined on her evidence in reply.
[25] The trial judge further referred to the absence of Mr. LaFramboise’s own bank records in her reasons with respect to her finding that the funds from the cheque were not applied to the mortgage. She noted, at para. 82, that “LaFramboise did not challenge Zwaan’s evidence by producing his bank records which would have shown where the $36,200 went.” Nevertheless, on this point, she concluded, at para. 85, “[i]n any event, I am satisfied and accept Zwaan’s evidence that the [Intact cheque] funds were not used to pay her portion of the mortgage payments.”
[26] In these circumstances, it is clear that Ms. Zwaan’s bank statements could have been obtained by Mr. LaFramboise for purposes of this litigation with reasonable diligence. Had he pleaded the defence he advanced at trial, or even disclosed it at the trial management meeting held two days prior to the trial, the bank records could have been produced in the ordinary course or as part of the trial management order. Mr. LaFramboise has failed to meet the second prong of the test as set out in St. Amand.
[27] If it were necessary to address the third prong of the test, we do not accept Mr. LaFramboise’s submission that, if the bank statements were before the trial judge, she would not have concluded that he diverted the Intact cheque funds for his personal use. The trial judge made it clear that she found Ms. Zwaan credible and similarly that she found Mr. LaFramboise’s evidence lacked credibility.
[28] In responding to the fresh evidence motion, Ms. Zwaan argues that the agreement for splitting the mortgage payments was only until April 2019. This response contradicts Ms. Zwaan’s trial evidence that she made all of the 38 payments between November 2017 and November 2020, which was accepted by the trial judge.
[29] The proposed fresh evidence appears to support Mr. LaFramboise’s position that Ms. Zwaan did not make all of the 38 monthly mortgage payments of $2,000 that she claimed to have made. In our view, however, while this evidence may be relevant in other litigation between the parties, it does not shed light on the trial judge’s analysis or conclusions relating to conversion in the decision on appeal. As set out above, that analysis turned on Mr. LaFramboise’s conduct with respect to the Intact insurance cheque, including his failure to deposit it into his trust account as he told Ms. Zwaan he would do, obtain her authorization to deposit it into his personal account, and his failure to account for the proceeds of that cheque.
[30] Further, we reject Mr. LaFramboise’s submission that the bank records demonstrate perjury. Ms. Zwaan did not have her bank records in front of her when she was asked about the mortgage payments, nor is it likely she would have reviewed them in preparation for trial because Mr. LaFramboise failed to raise the issue of mortgage payments before trial. As we have said, the trial judge found Ms. Zwaan a credible witness. In making that finding, the trial judge recognized that Ms. Zwaan had to be reminded of certain events such as being advised in writing by Merk that the cheque would be made payable to both her and Merk. In all the circumstances, we are not persuaded that any inability on Ms. Zwaan’s part to recall what the arrangements were concerning the mortgage payments or what mortgage payments she made several years after the fact would have affected the trial judge’s assessment of her credibility when the issue was not raised before trial. In this regard, we note that, in her reply evidence, Ms. Zwaan pointed out that she did not have the documents in front of her.
[31] Consequently, we reject the submission that the proposed fresh evidence, if admitted, would likely be conclusive of an issue in the appeal.
[32] For these reasons, the motion to admit this fresh evidence is dismissed.
The affidavit of Mr. Slattery
[33] Ms. Zwaan seeks to strike the admission in this litigation of an affidavit from Mr. Slattery, which was sworn in a related action involving Ms. Zwaan and Mr. LaFramboise. Mr. Slattery’s affidavit asserts that Mr. LaFramboise was responsible for and paid all the amounts under the mortgage on the farm.
[34] Ms. Zwaan sought to cross-examine Mr. Slattery on this affidavit as part of a motion in the other action, but Mr. Slattery did not appear. Therefore, the affidavit has not been subject to cross-examination. Further, Mr. Slattery testified at trial. Mr. LaFramboise did not put the affidavit to him on cross-examination. According to Ms. Zwaan, this affidavit should be struck as it is not relevant to the issues in dispute on this appeal, and Mr. LaFramboise failed to bring a motion to have it admitted as fresh evidence.
[35] As Mr. LaFramboise has not brought a motion in relation to the admission of the affidavit for purposes of this appeal, it is not necessary to address whether the evidence meets the threshold for admission. Consequently, the affidavit is not part of the appeal record.
Analysis
[36] Mr. LaFramboise raised several grounds of appeal in his Notice of Appeal which may be organized into the following three categories:
- Did the trial judge err in holding Mr. LaFramboise to the standard of a lawyer when there was no solicitor-client relationship between Mr. LaFramboise and Ms. Zwaan?
- Did the trial judge make findings of fact based on insufficient evidence, such that they amounted to palpable and overriding errors? (e.g., based on credibility findings without documentary evidence such as bank records, and based on evidence filed in respect of another matter involving the same parties)
- Did the trial judge err by ordering payments to Ms. Zwaan when there is other money at issue in a different proceeding involving these parties?
[37] In his factum, Mr. LaFramboise additionally raised the argument that his Charter rights to a fair and impartial trial allegedly were breached by the trial judge’s reliance on evidence in a related action involving the parties. He did not raise this in oral argument.
[38] At the hearing of the appeal, Mr. LaFramboise focused his submissions on the alleged error committed by the trial judge in finding that he diverted the Intact cheque funds for his personal use. He contended that this misapprehension of the evidence was a palpable and overriding error.
[39] Mr. LaFramboise emphasized that Ms. Zwaan received $80,000 from the sale of the property, which he facilitated, and there remains a further sum of approximately $350,000 paid into court in the related action from which she will benefit as well. Mr. LaFramboise argued that the disputed $36,200 from the insurance proceeds, were part and parcel of these business transactions. Specifically, as set out above, he asserts that these funds were put towards the mortgage on the property.
[40] The relevant period of the mortgage payments was from November 2017 to November 2020. [^3] The evidence from the trial record is that between the two of them (or three, including Mr. Al-Saati), they were to pay about $150,000 towards the mortgage, with Ms. Zwaan (together with Mr. Al-Saati) paying $2,000 per month and Mr. LaFramboise paying the remainder. However, Mr. LaFramboise claimed that, after April 2019 when Mr. Al-Saati left, Ms. Zwaan was not consistent in her payments and Mr. LaFramboise thereafter was left to take care of paying the mortgage payments.
[41] Mr. LaFramboise pointed to his own testimony and that of Mr. Slattery to establish that he took on the responsibility of paying for the mortgage. Further, he claims that it was an error for the trial judge to reject that he paid the proceeds of the Intact cheque towards the mortgage.
[42] These submissions miss the point. The trial judge found that Ms. Zwaan was a credible witness and that Mr. LaFramboise was not. She disbelieved his account of how he obtained the cheque and found that he did not have a required signature to deposit the cheque in his personal account, nor did he have authorization from Ms. Zwaan or Merk to do so, and further that he refused to return the cheque when requested by Ms. Zwaan to do so. These findings of fact and credibility formed the basis of her conclusion of liability on the part of Mr. LaFramboise for unlawful conversion.
[43] These findings are entitled to a high degree of deference: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 10. We see no error, never mind a palpable and overriding one, in the trial judge’s careful review of the evidentiary record and in the conclusions she reached on the basis of that record.
[44] It is not necessary to address the other grounds of appeal. They were not pursued at the hearing of the appeal, and in our view, lack merit.
[45] Mr. LaFramboise also asserts that this litigation is being pursued as an attempt to have him disbarred by the LSO. We do not accept this assertion, but would underscore that we express no view on any proceedings at the LSO arising from the decision on appeal.
[46] We would add one additional observation on an issue not included among Mr. LaFramboise’s grounds of appeal. The trial judge’s imposition of $50,000 in punitive damages is well in excess of the $36,200 in funds ordered to be returned from the Intact settlement cheque following her finding that Mr. LaFramboise engaged in unlawful conversion.
[47] As the issue of the quantum of punitive damages was not raised by Mr. LaFramboise, we expressly decline to reach any conclusion on the appropriateness of this quantum of punitive damages in this case.
Disposition
[48] For these reasons, we dismiss the appeal.
[49] Ms. Zwaan is entitled to costs.
[50] Mr. LaFramboise shall pay partial indemnity costs in the amount of $15,000, all-inclusive, to Ms. Zwaan.
“Janet Simmons J.A.”
“S. Coroza J.A.”
“L. Sossin J.A.”
[^1]: For the sake of completeness, we observe that, in her fresh evidence factum, Ms. Zwaan asserts that in April 2019 she transferred the farm to Mr. LaFramboise, in trust, save for one parcel and that she received $80,000 for that parcel on completion of the power of sale. No evidentiary source was identified for these assertions. Nothing in these reasons should be taken as a determination of the source of the $80,000 payment to Ms. Zwaan. [^2]: The reference to $76,000 is an approximation as the exact amount of 38 monthly payments of $3916.67 would total $74,416.73. [^3]: The reference in the trial decision to 38 months appears to be referring to when the mortgage was first brokered with Merk in September 2017, since it would otherwise be thirty-six months.
