Court File and Parties

COURT FILE NO.: CV-15-541965 DATE: 20160901 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Royal Bank of Canada, Plaintiff AND: Mohammed Elsioufi also known as Mohamed Fouad Elsioufi, Defendant

BEFORE: S. F. Dunphy

COUNSEL: B. Diamond, for the Plaintiff/Moving Party undefended

HEARD: August 18, 2016

Endorsement

[1] This was a motion for judgment brought by the plaintiff bank following the noting in default of the defendant.

[2] The claim arises from two lending transactions, the most material of which was intended to finance the purchase of a 2014 Porsche Cayenne. The defendant made no payments under the loan and has vanished, apparently without a trace. Efforts to locate the car or the defendant have thus far been in vain.

[3] The plaintiff claims that the defendant made fraudulent misrepresentations about his employment and income in order to obtain the loan. The fact of the defendant vanishing so soon after securing the loan would certainly appear to be a good indicator that something is amiss in this file. Ockham’s Razor suggests that the simplest explanation – dishonesty – is likely more probable than any other more fanciful one.

[4] Be that as it may, the statement of claim itself claims only the debt and, in any event, the allegations of fraud add nothing to the liquidated damages of the bank on the loans which – by reason of the defendant having been noted in default – are admitted. At the hearing of the motion, I signed judgment in favour of the bank for the full amount claimed $6,761.53 plus $106,003.58 plus costs that were fixed at $2,500.

[5] My reason for releasing this endorsement arises from a request of the moving party that I include in my order a declaration that the judgment “shall survive an order of discharge from any proceedings brought by or against the Defendant…pursuant to the Bankruptcy and Insolvency Act”. I indicated at the time that I would not agree to make such a declaration and intended to issue brief reasons explaining that decision. These are those reasons.

[6] I start by stating that I am not concluding that the defendant is innocent of the claimed fraudulent misrepresentations. The issue is squarely pleaded in the statement of claim. Further, the deemed admissions in the statement of claim coupled with the evidence filed in support of the motion for judgment suggests that there is clearly a strong case to be answered in that regard. However, reaching a conclusion of fraud was not necessary for me to sign the judgment claimed in paragraph 1 of the Statement of Claim in light of the liquidated loan amounts pleaded.

[7] Even if I had been required to make a positive finding of fraud in order to issue my judgment, I should still have declined to make an advance declaration under s. 178(1)(e) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 as requested because I have reached the conclusion that I have no jurisdiction to make such a hypothetical declaration before the issue actually arises.

[8] Section 178(1)(e) of the BIA provides that “An order of discharge does not release the bankrupt from…(e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim”.

[9] The plaintiff has referred me to the case of Millard v. North George Capital Management Ltd., 2006 ONSC 41287, [2006] O.J. No. 4902, 26 B.L.R. (4th) 231 (S.C.) as authority for his requested advance declaration. Cumming J. did indeed issue such a declaration after making positive findings of fraudulent misrepresentation following a contested motion for summary judgment. However, the declaration he made in that case was in respect of the defendant (Mr. Alton) who was a discharged bankrupt in an action that his trustee was a party to. The issue was thus alive. Millard is no authority for making a pre-emptive determination of the issue under s. 178(1)(e) of the BIA without notice to a Trustee in Bankruptcy and before a bankruptcy proceeding has even been initiated.

[10] I am in agreement with the analysis of Stinson J. in B2B Bank v. Batson, 2014 ONSC 6105 where he refused to grant a declaration similar to the one sought in this case, even when the request was made on the consent of all of the parties. Judicial declarations ought to be made on the basis of examined evidence and not solely on the basis of admissions or even consent: B2B Bank at para. 11 and in any event ought not to be made in the case of hypothetical circumstances that may never arise: B2B Bank at para. 13.

[11] I am moved to issue this brief endorsement for publication purposes as I have noticed a growing practice of some to request such declarations on a routine basis. I may even have signed one or two before giving the matter further thought and research and I have reached the conclusion that the practice is to be discouraged.

[12] I note that it is now well established that any future court considering whether the defendant can claim the benefit of a bankruptcy discharge notwithstanding this judgment will be able to go behind the formal judgment issued by me to consider both the claim on which it was based and these reasons. The strong policy of our courts in discouraging wrong-doers from abusing the bankruptcy process is in no way blunted by maintaining our court’s traditional unwillingness to pronounce on hypothetical issues before their time.

S.F. Dunphy J. Date: September 1, 2016