Citation and Court Information
CITATION: Ghaeinizadeh et al. v. Cusmariu et al., 2015 ONSC 1953
DIVISIONAL COURT FILE NO.: 421/14
DATE: 20150325
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
A.C.J.S.C. MARROCCO
Parties
BETWEEN:
ARMON GHAEINIZADEH, by his litigation guardian Bahieh Sharifi, PAYAM GHAEINIZADEH, AZETA GHAEINIZADEH, MANOUCHEHR GHAEINIZADEH, ILINAZ NAELI, ILA NAELI, JACLYN ORSETTO, BAHIEH SHARIFI, ARASH SHARIFI, MASOUMEH ABBASIAN, MEHRAN YAZDANI,
LERPON PAUL GREENSPOON, ARMONICO CORP., 6740197 CANADA CORP., OPERATING AS DUX HOLDINGS, and
KU DE TA CAPITAL INC.
Plaintiffs/Respondents
– and –
JEAN JEROME CUSMARIU
Defendant/Applicant
GARFINKLE, BIDERMAN LLP, WENDY H. GREENSPOON-SOER, DOROTA SMOLARKIEWICZ, MICHELLE R. FROST, RAJAN KATYAL, ROBINS APPLEBY & TAUB LLP and PEGGY SPADAFORA
Defendants
Counsel and Hearing
Jerome R Morse, for the Plaintiffs/Respondents
Daniel Bernstein and Erin Pleet, for the Defendant/Applicant
HEARD: In Writing
Reasons for Judgment
[1] All of the plaintiffs, other than Ku De Ta Capital Inc., are members of the same family or companies controlled by them and their family friends. They provided funds to Bashir Syed and Ku De Ta Capital Inc. for investment in mortgages. In May 2009 Bashir Syed caused Ku De Ta Capital Inc. to cease making payments on the mortgages. In a separate action, in May 2011, the plaintiffs, other than Ku De Ta Capital Inc., obtained judgment against Bashir Syed and Ku De Ta Capital Inc. for approximately $2,800,000 plus approximately $350,000 in costs.
[2] In October 2011, the Court of Appeal gave the investor plaintiffs leave nunc pro tunc, effective May 20, 2011, to pursue Ku De Ta Capital Inc.’s claim in the present action on a derivative basis pursuant to the Canada Business Corporations Act, R.S.C. 1985, c. C-44.
[3] The action as regards Ilinaz Naeli and Ila Naeli has been resolved, as have the actions against Robbins Appleby & Taub LLP and Peggy Spadafora.
[4] The plaintiffs claim the following damages from the applicant Jean Jerome Cusmariu:
• $185,000, being the principal amount of mortgages alleged to be wrongfully transferred by the applicant;
• damages arising out of the investor plaintiffs’ investigation and quantification of their losses;
• legal costs from the lawsuit against Bashir Syed and Ku De Ta Capital Inc.;
• Prejudgment interest, post judgment interest and the costs of this claim.
[5] Four specific transactions involving Jean Jerome Cusmariu are pleaded:
• the May 22, 2009 transfer of a charge from HRO Future Company Limited securing the principal sum of $150,000 to 2199221 Ontario Corp. for $70,000:
• the May 22, 2009 transfer of a charge collateral to the HRO charge from Akram Dow and Hiyam Samara to 2199221 Ontario Corp.;
• the June 17, 2009 discharge of a charge from Shelley Jean Baxter and Gary John Alexander; and
• the July 24, 2009 transfer of a charge securing the principal sum of $80,000 from William and Mary Volovic to Shaw Syed for $30,000.
[6] Pedram Ghaeinizadeh provided an affidavit in response to the applicant’s motion for summary judgment. Mr. Ghaeinizadeh testified to the following. He was introduced to the applicant by Bashir Syed in September 2007. Towards the end of September 2007 he attended with his sister at the applicant’s law office. His sister was planning to borrow $2 million to invest in Ku De Ta Capital Inc. and as a result required independent legal advice. Bashir Syed not only recommended the applicant to Mr. Ghaeinizadeh and his sister but also made the independent legal advice appointment with the applicant.
[7] Mr. Ghaeinizadeh stated that when sister attended at the applicant’s law office he went with her.
[8] Mr. Ghaeinizadeh stated that at this meeting he told the applicant in the presence of his sister that his sister was borrowing the money to invest in Ku De Ta Capital Inc. According to Mr. Ghaeinizadeh, the applicant commented that his sister was paying a high rate of interest to borrow the money and that he, that is Mr. Pedram Ghaeinizadeh, explained that investment in Ku De Ta Capital Inc. was expected to return a higher interest rate than his sister was being charged.
[9] Mr. Ghaeinizadeh deposed that the applicant did not disclose a conflict of interest or otherwise indicate that he could not provide independent legal advice.
[10] Mr. Ghaeinizadeh then described in his affidavit the real estate transactions carried out by the applicant to which his sister objected.
[11] Mr. Ghaeinizadeh deposed that as of May 22, 2009 the applicant had knowledge that other parties had invested in Ku De Ta Capital Inc. and the applicant knew or could not have been unaware that his sister invested in Ku De Ta Capital Inc.
[12] Finally Mr. Ghaeinizadeh stated in his affidavit that Bashir Syed’s direction to the applicant to disperse funds derived from one of the mortgages to a corporation other than Ku De Ta Capital Inc. had an impact on the interests of that company and its investors and that the applicant knew or should have known this.
[13] Pedram Ghaeinizadeh was not cross-examined.
[14] Azeta Ghaeinizadeh, a plaintiff in this action, also provided an affidavit in response to the applicant’s motion for summary judgment. She testified that she suffers from severe migraines and that her prescribed medication affects her memory.
[15] She deposed that she entered into an agreement with a company called Xerxes Capital Management Ltd. for the purpose of borrowing $2 million to invest in Ku De Ta Capital Inc.
[16] She stated that she went to the applicant to obtain independent legal advice and that she brought her brother Pedram Ghaeinizadeh with her. She did remember that the applicant asked her why she was borrowing the $2 million and that she explained that she was investing in second mortgages on residential properties. She recalls discussing Bashir Syed with the applicant and mentioning his name in the context of her plan to invest in second mortgages.
[17] Azeta Ghaeinizadeh was not cross-examined.
[18] The applicant’s motion for summary judgment was dismissed with costs by C. Brown J.
[19] At paragraph 26 of her decision, after having previously discussed Hyrniak v Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87,and Bruno Appliance and Furniture, Inc. v Hyrniak, 2014 SCC 8, [2014] 1 S.C.R. 126, the motions judge states: “Given the material facts in dispute and credibility issues arising therefrom, and given the complex legal issues raised in this action, including scope of the retainer, whether Cusmariu owed a fiduciary duty or any duty to the investor plaintiffs or any of them, the accepted standard of practice in the circumstances of these transactions, whether there was a conflict of interest which existed, whether Cusmariu failed to appropriately warn his clients of particular legal risks, and whether there was any actual knowledge on the part of those plaintiffs relying on his advice, are all issues that involve complex legal and factual evidence, and are not appropriately determined on a summary judgment motion.”
[20] The defendant Jean Jerome Cusmariu moves for leave to appeal the order of C. Brown J.
[21] An order dismissing a motion for summary judgment is an interlocutory order unless the motions judge has finally determined a question of law. See Middlesex Condominium Corp. 229 v. WMJO Limited, 2014 ONCA 203.
[22] There are two branches of test for leave to appeal an interlocutory order set out in Rule 62.02(04) of the Rules of Civil Procedure¸R.R.O. 1990, Reg. 194. Leave shall not be granted unless there is a conflicting decision on the matter involved and “it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted” or there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal “involves matters of such importance that, in his or her opinion, leave to appeal should be granted.” (Emphasis added)
[23] Regardless of which branch of the test is referenced, the applicant must identify questions of broad significance or general application that warrant resolution by a higher court because they affect the development of the law and the administration of justice. See: Ash v. Lloyd’s Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div.); Greslik vs. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.).
[24] The applicant maintained before the motions judge that as a matter of law it is impossible for a corporation to be defrauded by its sole shareholder, officer and director and that as a result Ku De Ta Capital Inc.’s derivative claim should be dismissed. The applicant complains that the motions judge did not address this argument.
[25] The applicant relies upon Vine Hotels Inc. v. Frumcor Investments Ltd., [2003] O.J. No. 4768 (S.C.) to support its position. Vine Hotels dealt with an endorsement that made it virtually impossible to determine the disposition of the motion for summary judgment. At paragraph 10 the court made the following observation: “What I am saying is that in the particular circumstances of this case when the words the motions judge used to communicate his reasons may or may not lead to the conclusion that upon the proper application of the relevant principles, the motion ought to be dismissed leave should be granted.”
[26] The present case is different because the motions judge gave six pages of reasons and stated quite clearly that the applicant’s motion was dismissed. The motions judge viewed the issues raised by this case as complex and requiring a trial. Even if I disagreed with the motions judge, which I do not, her decision did not set out any principle of law concerning the derivative claim which gave rise to a question of broad significance that warranted resolution by a higher court because it affected the development of the law and the administration of justice. In Vine Hotels the court was concerned with the articulation of the disposition of the motion for summary judgment. The disposition of the motion in this matter is clear, including the reasons why the motions judge thought a trial was required. The only principle concerning the applicant’s derivative claim argument articulated here is that it is complex and should be decided upon a full evidentiary record.
[27] As a result, the motion judge’s silence concerning the derivative claim cannot be said to give rise to a question of broad significance that warrants resolution by a higher court because it affects the development of the law and the administration of justice.
[28] Azeta Ghaeinizadeh claims that the applicant was her lawyer for the purpose of providing independent legal advice concerning her $2 million investment in Ku De Ta Capital Inc. Azeta Ghaeinizadeh’s position is that the applicant had a conflict of interest when he purported to provide her with independent legal advice. There is no dispute that the applicant provided independent legal advice; there is a dispute concerning the applicant’s knowledge that Ku De Ta Capital Inc. was going to be the vehicle for Azeta Ghaeinizadeh’s investment in second mortgages.
[29] The motions judge decided that the factual issues surrounding this alleged conflict of interest should be decided after a trial where the court had the benefit of a full evidentiary record. The motions judge’s decision in this regard did not give rise to a question of broad significance that warranted resolution by a higher court because it affected the development of law and the administration of justice.
[30] The balance of the investor plaintiffs allege that the applicant breached duties owed to them and knowingly assisted in breaches of trust and fiduciary duty by Ku De Ta Capital Inc. and Bashir Syed. If one accepts the evidence of Pedram Ghaeinizadeh, it is possible to infer that the applicant knew that the Ku De Ta mortgage funds came from investors and this raises the question of how Mr. Cusmariu rationalized moving payments associated with Ku De Ta Capital Inc. mortgages to a company other than Ku De Ta Capital Inc. Absent a proper reason for the applicant’s actions in this regard, it could be inferred that Mr. Cusmariu knowingly assisted Mr. Syed. The motions judge decided that resolution of this issue required a trial. The motions judge’s decision in this regard did not give rise to a question of broad significance that warranted resolution by a higher court because it affected the development of law and the administration of justice.
[31] The motions judge did not decide that the applicant owed in law duty to non-clients. The motions judge described the question of “whether Cusmariu owed a fiduciary duty or any duty to the investor plaintiffs.” (Emphasis added) as complex and best resolved after a trial. The motions judge’s decision in this regard did not give rise to a question of broad significance that warranted resolution by a higher court because it affected the development of law and the administration of justice.
[32] Accordingly, I am satisfied that this application must be dismissed because the applicant is unable to demonstrate that any decision by the motions judge gave rise to a legal question of sufficient importance to justify an appeal.
[33] This application is dismissed with costs payable to the respondents. I have the applicant’s costs outline; I do not appear to have the respondents’ costs outline. If the parties cannot agree on costs, submissions not exceeding five pages may be made within five days of the release of this decision.
MARROCCO A.C.J.S.C.
Released: 20150325
CITATION: Ghaeinizadeh et al. v. Cusmariu et al., 2015 ONSC 1953
DIVISIONAL COURT FILE NO.: 421/14
DATE: 20150325
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
ARMON GHAEINIZADEH, by his litigation guardian Bahieh Sharifi, PAYAM GHAEINIZADEH, AZETA GHAEINIZADEH, MANOUCHEHR GHAEINIZADEH, ILINAZ NAELI, ILA NAELI, JACLYN ORSETTO, BAHIEH SHARIFI, ARASH SHARIFI, MASOUMEH ABBASIAN, MEHRAN YAZDANI,
LERPON PAUL GREENSPOON, ARMONICO CORP., 6740197 CANADA CORP., OPERATING AS DUX HOLDINGS, and
KU DE TA CAPITAL INC.
Plaintiffs/Respondents
– and –
JEAN JEROME CUSMARIU
Defendant/Applicant
GARFINKLE, BIDERMAN LLP, WENDY H. GREENSPOON-SOER, DOROTA SMOLARKIEWICZ, MICHELLE R. FROST, RAJAN KATYAL, ROBINS APPLEBY & TAUB LLP and PEGGY SPADAFORA
Defendants
REASONS FOR JUDGMENT
Released: 20150325