Court File and Parties

COURT FILE NO.: CV-14-3262-00 DATE: 2017 09 14 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: WESCOM SOLUTIONS INC. – AND – NADIA MINETTO AKA NADIA ARSENAULT, ERIC YIP AKA SAM YIP AKA SAMUEL YIP AKA SAMSON MAN CHUN YIP, GF INTERNATIONAL, GABRIEL KIT CHUN FUNG, PLUS ONE SOLUTIONS, JOHN DOE #1 AND JOHN DOE #2

BEFORE: EMERY J.

COUNSEL: Jeffrey Brown and Camille Dunbar, for the Plaintiff Wescom Solutions Inc. Scott C. Hutchison and Nicola Langille, for the Defendants GF International, Gabriel Kit Chun Fung and Plus One Solutions Michael Bury, for the Defendants Eric Yip a.k.a. Sam Yip a.k.a. Samuel Yip a.k.a. Samson Man Chun Yip Nadia Minetto a.k.a. Nadia Arsenault, Self-Represented

HEARD: November 14-18, 2016

REASONS FOR JUDGMENT

[1] Gabriel Fung purchased the first iPad from Nadia Minetto under circumstances that were inauspicious enough. They agreed to meet when Mr. Fung responded to an ad she had placed on Kijiji offering the iPad for sale. They met in a parking lot at Yorkdale Mall one day in November, 2011. She sold him an iPad still in its original package. He paid cash. Quite an ordinary transaction between two people.

[2] Over the next 32 months (the “transaction period”), Mr. Fung would go on to purchase 4,942 iPhones and 5,321 iPads from Ms. Minetto in increments of up to 10 or 20 pieces at a time. She always insisted he pay her in cash. Mr. Fung would eventually pay her cash totalling 5.2 million dollars for those Apple products over the course of the transaction period. In the final stage of their arrangement, Ms. Minetto would have Apple Inc. ship products directly to Mr. Fung.

[3] Ms. Minetto could no longer supply Apple products to Mr. Fung when her employer, Wescom Solutions Inc. (“WSI”), discovered that she had purchased those Apple products using WSI’s corporate credit card. Ms. Minetto’s employment with WSI was terminated immediately on July 25, 2014.

[4] The legal question at trial was whether Mr. Fung knew, or was wilfully blind to the fraudulent means by which Ms. Minetto was obtaining the Apple products he purchased from her at any time during the transaction period. This legal determination will turn on findings of fact I must make about the circumstances existing during the transaction period.

Agreement on Facts and Issues for Trial

[5] WSI obtained judgment, on consent, against Nadia Minetto in the amount of $6,831,834.17, plus interest on October 31, 2014.

[6] The judgment against Ms. Minetto includes a paragraph where the court declares the damages awarded in the judgment are for a liability to which subsections 178(1) (d)(e) of the Bankruptcy and Insolvency Act applies. As a consequence, an order of discharge shall not release Ms. Minetto from any of the amounts owing under that judgment in the event Ms. Minetto is or should become a bankrupt.

[7] WSI also joined Mr. Fung, along with his businesses Plus One Solutions and GF International, collectively referred to as “the Fung defendants”, as defendants in the action. The Fung defendants entered into an agreement with WSI effective as of April 5, 2016 to conduct a summary trial of the claims made against them (the “Agreement”). The Agreement recites the intent of WSI and the Fung defendants to move the action forward in an efficient and cost effective manner. In the Agreement, they agreed to adopt a simplified and practical approach to litigate the issues in dispute, and to work cooperatively to achieve that goal.

[8] Further to the spirit and letter of the Agreement, WSI and the defendants Gabriel Fung and Eric Yip obtained an order dated August 5, 2016, on consent, directing a trial of the following issues:

1. Whether the defendant Gabriel Kit Chun Fung knew or was willfully blind to the fact that he was purchasing stolen goods or goods fraudulently obtained by Nadia Minetto; and
2. If Mr. Fung in fact knew or was wilfully blind to the fact that he was purchasing stolen goods or goods fraudulently obtained by Ms. Minetto, did this apply to all the transactions or just transactions after a certain date.

[9] The order directing a trial also contained the following term pursuant to the agreement between the relevant parties:

It is admitted that if this Honourable Court finds that Fung knew or was willfully blind to the fact that he was purchasing goods or goods fraudulently obtained by Minetto, then he will be liable to WSI. It is further admitted that if this Honourable Court finds that Fung did not know and was not willfully (blind) to the fact that he was purchasing stolen goods or goods fraudulently obtained by Minetto, he will not be liable to WSI and the action against him will be dismissed.

[10] The order directing a trial further provided that if the Fung defendants are found liable to WSI, the court will determine the following:

1. The amount of their liability to WSI; and
2. Whether the Fung defendants are entitled to judgment against Ms. Minetto for contribution and indemnity in relation to any or all of the amounts they are found liable to pay WSI, and if so, what are those amounts.

[11] In addition to the terms agreed upon in the Agreement, WSI and the Fung defendants also included an agreed statement of facts to the Agreement as admissions at trial. The admitted facts were set out in Schedule B as follows:

Schedule “B” – Agreed Statement of Facts

1. Minetto was employed with WSI as its Accounting Manager from June 9, 2008 until July 25, 2014.
2. Minetto’s employment was terminated on July 25, 2014 on the basis that she misappropriated certain funds and assets from WSI between the period of May 1, 2009 and July 9, 2014.
3. Minetto began defrauding WSI at some date prior to January 2011 through the fraudulent use of the company’s corporate American Express credit card (“AMEX Card”).
4. In January, 2011, Minetto began purchasing new Apple products using the AMEX card, which she then sold for her own personal gain.
5. Prior to April, 2013, Fung began buying Apple products from Minetto.
6. Minetto would advise Fung of what Apple products she had access to and Fung would indicate how many he could buy.
7. Minetto would then order these Apple products and forward shipment notifications to Fung directly.
8. At all material times, Fung owned a store, Plus One Solutions (“Plus One”) located in First Markham Place, 3255 Highway 7 East, Unit 155 B, Markham, Ontario L3R 3P9.
9. Plus One is a retail business that sells accessories, phones, and iPads. In addition, it provides services such as the unlocking of phones and repairs.
10. Of the Apple products Minetto supplied to Fung, approximately 10% to 15% were sold through Plus One. The remaining 85% to 90% of the Apple products were sold to offshore companies in Hong Kong, to local wholesalers, to other stores and to online purchases.
11. Yip and Fung had a business relationship and Yip assisted Fung with the sale of the Apple products through his network.
12. For the purpose of the summary trial, the parties agree that the Attached Schedule 1 sets out each individual transaction where Minetto purchased Apple products using the AMEX Card which she sold to Fung. The parties also agree that a. The date in column A of Schedule 1 is the date the product was ordered from Apple and the date of the amount in Column C of Schedule 1 was charged by Minetto to her AMEX Card to WSI; b. The amount set out in column C of Schedule 1 is the amount WSI paid on its AMEX Card for each individual transaction and therefore represents the loss suffered by WSI on that transaction, excluding interest; c. The amount set out in column E to Schedule 1 is the net amount for each individual transaction; d. The amount set out in column F to Schedule 1 is the approximate profit Fung would have made on each individual transaction based on a 20% profit margin on the net amount set out in column E.
13. Fung conducted a largely cash business at his store. Fung also paid Minetto for all of the transactions in cash.
14. Fung and Yip rented a “virtual office space” at 15 Allstate Parkway (the “Allstate Address”) used, in part, as a delivery location for the shipments of Apple products.
15. From April 16, 2013 to July 2014, 224 shipments were delivered to the Allstate Address totalling $3,124,361 worth of Apple products.
16. WSI obtained a judgment against Minetto for $6,831,834.17 on October 31, 2014. This amount represents the total amount of fraudulent transactions on the AMEX Card.
17. According to the transaction history on the AMEX Card, Minetto made purchases of Apple products in the amount of $6,239,711.43.
18. WSI recovered some Apple products, which were discovered at the Allstate Address and at Plus One. It returned these unopened products to Apple and was credited $54,720.79. These amounts have been excluded from the amounts set out in Schedule 1 to this Agreed Statement of Facts.

[12] WSI and Mr. Fung attached Schedule 1 to the Agreement setting out the dates on which Ms. Minetto purchased products by using a WSI credit card from either the Apple online store or an Apple store that she would subsequently sell to Mr. Fung. Schedule 1 is set out in such a way that the total net amount representing the value of Apple products purchased by Ms. Minetto with WSI credit as of a particular date between November 9, 2011 and July 9, 2014 is shown as a running total, net of the HST. This running column also takes into account the value of Apple products in the amount of $54,720.79 that WSI seized from Ms. Minetto in July 2014, and returned to Apple for credit.

[13] The parties filed a “List of Products Purchased by Ms. Minetto and Sold to Mr. Fung” that was marked as Exhibit “E” at trial. Exhibit “E” is a chart that contains much of the same information as that contained in Schedule 1 to the Agreement. It contains two additional columns showing the accumulating balance based on the Apple goods bought and sold to Mr. Fung, and an inverted column showing a reducing balance of the amounts Mr. Fung would owe WSI as of a particular date if it is found that he knew, or was wilfully blind to the fact he was purchasing stolen goods after that date.

[14] Schedule E also includes two columns not shown in Schedule 1 to the Agreement. Those columns set out the number of iPhones and the number of iPads that Mr. Fung would purchase from Ms. Minetto as of particular dates, and show those values as a running total.

[15] Overall, Mr. Fung purchased a total of 10,263 iPads and iPhones from Ms. Minetto throughout the transaction period. The total value of the Apple products acquired by Ms. Minetto through the wrongful use of the WSI credit card that she sold to Mr. Fung added up to $5,356,641.06 as of July 9, 2014.

[16] WSI and Mr. Fung agree that if I determine that Mr. Fung knew, or was willfully blind to the fact that he was purchasing stolen goods or goods fraudulently obtained by Ms. Minetto as of a particular date, the amount for which he would be liable shall be determined by the amount that corresponds with that date on the chart marked as Exhibit “E”.

[17] Mr. Fung made a profit of 20% on that net amount in the amount of $1,027,552.58. WSI seeks recovery of only the amount of the loss it has incurred because of Ms. Minetto’s fraud.

Evidence Given on the Issues

[18] WSI did not call any witnesses at trial. As the plaintiff, WSI relies upon the admissions relevant to Mr. Fung in the agreed statement of facts, his response to the request to admit served by WSI, and admissions made in the course of Mr. Fung’s examination for discovery that were read into the record as part of WSI’s case.

[19] Mr. Fung testified on his own behalf. In addition, Mr. Fung called Ms. Minetto as a witness. Mr. Fung also called Kristine Percy, the accountant at WSI who detected the anomalies in WSI’s books and records that revealed Ms. Minetto’s fraud. This revelation lead to the investigation and discovery that Ms. Minetto had resold WSI’s property purchased from Apple with its corporate credit card.

[20] The trial proceeded in a summary form of a conventional trial with the agreement of counsel and approval of the court. After hearing the submissions of counsel for WSI on the facts agreed upon and the admissions made by Mr. Fung, the testimony of Mr. Fung and the two other witnesses called as part of his case became the focus of the trial.

Gabriel Fung

[21] Mr. Fung gave evidence at trial, which his counsel organized into the following categories:

i. Factors pointing to legitimacy; ii. Consistency between the relationship with Ms. Minetto, and his knowledge of/experience in the secondary market.

[22] I propose to review the evidence of Mr. Fung within this structure, and to make references to the evidence given by the two other witnesses that I find to be relevant, where applicable.

Factors pointing to Legitimacy

[23] Mr. Fung was still employed with WPCI, a Bell Canada dealership, when he first responded to the ad on Kijiji placed by Ms. Minetto. He would ask if she had more products, and she would advise him, in the initial stages, whether she had more product to sell. They would agree on a price and set up another time to meet at Yorkdale Mall.

[24] Mr. Fung admitted at his Examination for Discovery that he did not ask her where, or how, she obtained the product she was selling to him at the time.

[25] Mr. Fung ultimately left his employment at WPCI in 2012. He would go on to devote more of his time to his own store, Plus One Solutions. Plus One Solutions is a computer and cellphone store he had opened in 2005 in First Markham Place at Woodbine and Highway 7.

[26] Mr. Fung testified that he would inquire with any seller of an iPhone at his store to ensure it has not been stolen. He would check to satisfy himself that it was an upgraded model that had been legitimately acquired.

[27] It was also around this time that Mr. Fung and Ms. Minetto changed the location of their parking lot meetings from Yorkdale Mall to the Ikea store at Highway 7 and the 404.

[28] After Mr. Fung left his employment at WPCI, he continued to meet with Ms. Minetto at the Ikea location to exchange Apple products for cash. In one instance, they met at her home in Bolton. Another time, he met her at a children’s clothing store near Ikea where she was shopping with one of her children.

[29] During those months when they would meet at the Ikea store to conduct business, the volume and the corresponding value of the Apple products Mr. Fung was ordering from Ms. Minetto increased. On November 12, 2011, Mr. Fung ordered 6 iPads. On November 28, 2011, he ordered 10 iPads at one time.

[30] Mr. Fung would carry more and more cash to purchase Apple products from Ms. Minetto. He would count the cash and have it bundled with elastic bands so that he would not have to recount it when he and Ms. Minetto met. As Mr. Fung explained at question 231 of his examination for discovery:

231 A. So, also at the same time when I meet with her I can tell her what the bundles were so she could...I mean, the idea behind it is so that the exchange would be faster. She would be able to know what was involved in each bundle, say, this was $5000, this was $2000.

[31] By the time Mr. Fung and Mr. Yip had established the virtual office at the Allstate address, Mr. Fung had suggested to Mr. Minetto that she start shipping Apple products directly to that location. Ms. Minetto agreed with that suggestion as she would not have to drive around with 20 iPads or 20 iPhones in her car to deliver those items to Mr. Fung in a parking lot. This was a convenient arrangement for both Ms. Minetto and Mr. Fung.

[32] In an answer read in from Mr. Fung’s examination for discovery, he stated that he asked Ms. Minetto if the products were stolen. He states that she told him they were “legit”. According to Mr. Fung, Ms. Minetto told him that she would not risk her family and children for something so small. Mr. Fung confirmed this evidence in his testimony at trial.

[33] As of the time Mr. Fung asked Ms. Minetto to direct Apple to ship products to the Allstate address, he states he may have held two conversations with her in which he asked her where she was obtaining the Apple products she was selling to him. He states that he definitely asked her for the first time near the start of their relationship, that is, around the time they would meet to exchange iPads for money at Yorkdale Mall. The second time he may have asked her was in early 2012. This was around the time they changed their meeting location to the parking lot outside the Ikea store in Markham.

[34] Mr. Fung also testified that the Apple products he purchased from Ms. Minetto “checked out” every time. Mr. Fung would draw upon his experience and knowledge in the technology field to know what signs to look for to detect that a product had been stolen. From the first iPad he purchased from Ms. Minetto, he noted that the IMEI, or serial number, on any product Ms. Minetto sold to him had not been covered up or removed. The iPad and the cellphones could be activated. He could detect no sign that would suggest in any way that the product had been stolen.

[35] Mr. Fung also noted the packaging of the products. From experience, he could tell when the shrink wrap on a product had been reapplied. He had no suspicion that the products he was purchasing from Ms. Minetto had been re-wrapped at any time.

[36] Mr. Fung also considered a number of other factors to determine if the products were stolen. He testified that if a cellphone is reported lost or stolen, the IMEI is provided to a national database, and that telephone will not work on the North American network for Wi-Fi and telecommunication services. He stated that he was never advised that customers had any difficulty operating the products he purchased from Ms. Minetto to indicate that they had been reported as stolen.

[37] Apple Inc. itself provided Mr. Fung with an element of confidence that the Apple products he was purchasing from Ms. Minetto were legitimate. He states that the Apple products could be activated normally. If the products had been reported stolen to Apple, he would have expected that it would be difficult to activate those products with Apple.

[38] Mr. Fung experienced no difficulties with warranties associated with the products he purchased from Ms. Minetto. He stated that on one occasion, he called Apple tech support in order to correct the start of a warranty period. During this conversation with Apple, nothing was said that caused him concern. Instead, Apple “indicated that it was a legitimate product with a valid warranty and was able to change the warranty date”.

[39] According to Mr. Fung, there was nothing about the volume of the purchases he was making from Ms. Minetto that raised any concern for him. He testified that he had obtained similar volumes from other sellers in the past. Various websites offer electronic devices for sale in much larger volumes.

[40] Often, Ms. Minetto referred to a third party male that she led Mr. Fung believe had the final say in what products she could obtain for resale. At times, Ms. Minetto told Mr. Fung that the orders he placed could not be filled. Ms. Minetto would represent to Mr. Fung that a product was not available. At other times, Ms. Minetto would tell him that she could not fill any of the orders he placed with her at that time. Mr. Fung found that Ms. Minetto would say this when Apple had an anticipated release date for a new product. A few weeks later, her ability to fill orders would resume.

Purchasing from Minetto consistent with Fung’s experience

[41] Mr. Fung gave evidence about his experience in the electronics business, and in particular his under standing of the resale market for cellphones and tablets. He has been in the electronics business since 2001. He has operated his own retail store, Plus One Solutions since 2005. Plus One Solutions is in the business of selling handsets, accessories and providing services related to handsets, including cellphone repairs and unlocking cellphones.

[42] Plus One Solutions is located in First Markham Place. According to Mr. Fung’s evidence, 99%, if not 100%, of the businesses located at First Markham Place are owned or operated by Chinese people, and over 90% of the customer base of those businesses is of Chinese or Asian origin or ancestry. Mr. Fung told the court that it is not unusual for transactions, even those that are substantial in nature, to be carried out using cash at those businesses. According to Mr. Fung, tax is often not paid or collected on cash transactions within the Chinese community.

[43] Mr. Fung also described the secondary market for the resale of handsets as being primarily a cash business. Mr. Fung related his experience at First Markham Place and in reselling cellphones on the secondary market with his arrangement to purchase iPhones and iPads from Ms. Minetto for cash.

[44] Although Mr. Fung offered to deposit money into Ms. Minetto’s account on at least one occasion, all or substantially all of Mr. Fung’s purchases from Ms. Minetto were made with cash.

[45] Mr. Fung also testified that a lack of documentation for the purchase or resale of handsets was consistent with his experience in the secondary market.

[46] Mr. Fung provided a summary of his evidence at trial in which he described the secondary market for electronic goods in paragraph 39 of his trial factum this way:

Mr. Fung described the “secondary market” in electronic goods as being a parallel market dealing in goods that are legitimate, but not distributed through the “normal distribution channels.” According to Mr. Fung, the secondary market accounts for a “very large percentage” of electronic devices circulated throughout the world. Through his 15 years in this market, Mr. Fung has obtained considerable experience in buying and selling secondary goods. To obtain stock for his store, Mr. Fung imports from a seller in the US, he has purchased locally (for example, from Swiftronics), and does trade-in devices. When trying to find a source, Mr. Fung principally looks online to different websites (Howardforums, Kijiji, eBay, Amazon, and other websites like B2Global (an international wholesaler based out of Hong Kong)). At the same time, Mr. Fung began operating a wholesale business very early on (before he had the store). When Mr. Fung sells wholesale, he sells in the range of 10-20-30 pieces per sale. …

[47] In his evidence about the secondary market, Mr. Fung also explained in his evidence that sometimes the sellers of electronic goods depend on the “demand and supply” for those products. He explained that this is consistent with the periodic “slowdowns” he encountered in obtaining product from Ms. Minetto.

[48] Mr. Fung took time at trial to explain that he knows of different ways, but by no means all ways that products might come on to the secondary market for resale. He explained that he sometimes buys products where customers have received new cell phones from their service provider but choose to keep the previous version of that cellphone. From time to time, he purchased products during the liquidation of various products through manufacturers or retailers, and through other mechanisms. He testified that no matter how the products find their way onto the secondary market, there is a large inventory available. He referred to one website, “GSM Exchange,” on which wholesalers from around the world purchase and re-sell electronic devices at a minimum value of 500 pieces at a time.

[49] Mr. Fung stated that Ms. Minetto had referred to a “him” previously as the person she was working with to obtain the products. Mr. Fung expressed the belief in his evidence that the third party male that Ms. Minetto would mention was possibly someone who was obtaining a discount from Apple.

[50] Mr. Fung explained that it is “very common” that participants in the secondary market do not inquire into the source of the products that they obtain for resale. He stated that the source of the products is a “business trade secret”. It is for this reason that he did not ask Ms. Minetto how or where she obtained her products. He states that she did not offer him an explanation except for making reference to the third party male to whom she only referred as “he” or “him”.

[51] It was not a common business practice for him to press his sellers about where they were getting their product from. In his line of work, “everyone is a middle man”. Mr. Fung justified his reluctance to ask questions by rationalizing that once a purchaser knows where the middle man is sourcing products to sell, the middle man is soon removed from the equation. This was the reason Mr. Fung gave for not questioning Ms. Minetto’s role as a perceived “middle man”.

[52] Mr. Fung equated how business in the Chinese community is conducted in cash as a cultural norm, along with his knowledge and experience in how the secondary market operates, with the manner in which Ms. Minetto would sell him Apple products he would then re-sell.

[53] Mr. Fung learned that Ms. Minetto worked at Point Click Care when they changed their delivery place a second time and he began to meet with her in the parking lot at WSI to pay for Apple devices that had been shipped directly to the Allstate address. Mr. Fung took comfort in the fact that Ms. Minetto worked at Point Click Care, the trade name for WSI in its business.

[54] Mr. Fung googled Point Click Care at that point in time. He learned that Point Click Care is a technology company that provides technology to organize health information for the medical community. The fact that she worked at a technology company reassured him that his transactions with Ms. Minetto were legitimate because this would be consistent with Ms. Minetto’s access to a continuous supply of iPads. He rationalized that Point Click Care could have been selling off iPads in order to maintain its ordering quota with Apple. Mr. Fung further rationalized that selling Apple products could have been part of Ms. Minetto’s job, or that she had an “in” somewhere to obtain products at a discount to resell them. As an alternative, Mr. Fung also suggested that WSI could have been selling the Apple products to Ms. Minetto, who in turn could resell them to Mr. Fung to make a personal profit.

[55] Mr. Fung testified that if he had been aware that Ms. Minetto was in fact defrauding WSI by the manner in which she was obtaining Apple products, he would not have purchased them.

[56] Mr. Fung states that he asked Ms. Minetto yet again if the source of the Apple products she was acquiring to sell him was legitimate in June of 2014. Ms. Minetto again assured Mr. Fung that the iPhones and iPads she was selling to him were “legit”. However, in cross-examination, Mr. Fung identified an email dated September 15, 2013 that he had sent to Fiona Yip, his girlfriend at the time, in which he stated, among other things, that:

No 8 GB yet I ask for some waiting. Nadia is starting to get weird hard to explain, but I just want to be cautious. Feels like how that Chris Gary from the US back in the day. Yes, not selling that much many as well, everyone is telling me discounts everywhere…but Apple still has them for $329.

[57] Mr. Fung asked one final time in an email dated July 5, 2014 if the products he was purchasing from Ms. Minetto were legitimate. She assured him they were, even though she told him on July 9, 2014 that they would “have to slow down”.

[58] Mr. Fung testified that he found Ms. Minetto to be a trustworthy business partner, given his encounters with her and the answers she gave to his questions.

Evidence of Nadia Minetto

[59] Ms. Minetto gave evidence on behalf of Mr. Fung.

[60] Ms. Minetto testified that:

(a) She never told Mr. Fung that she was defrauding her employer. She did everything she could to convince Mr. Fung that she was obtaining Apple products form a legitimate source. (b) She intentionally created and fostered and elaborate fiction of a third party male in order to make him believe that her access to such devices were legitimate. Her references throughout her dealings with Mr. Fung to this unnamed man were made to make him believe that he was somehow her source or connection to obtain Apple products, and that he also controlled the price. Through this fiction, she intended to lead Mr. Fung with the impression that she had a legitimate “inside man” to acquire Apple products. (c) She placed fake restrictions on the “orders” Mr. Fung could place with her. Only certain products could be ordered; only a certain number of items could be ordered at a time, and orders could only be placed at a certain pace. Ms. Minetto acknowledged in her evidence that in fact there were no real restrictions on her ability to purchase products, number of items, or the pace at which orders could be placed to purchase product from Apple. (d) Ms. Minetto created limitations to reinforce Mr. Fung’s belief that her access to obtain Apple products was legitimate. Telling Mr. Fung from time to time that there were “slowdowns” in procuring product for resale to him supported her fiction that she had a limited supply of product to sell. She blamed this limited supply and the occasional “slowdowns” on the unknown third party male through which she could obtain apple products to make Mr. Fung think that the third party male was her access channel to Apple products.

[61] Ms. Minetto testified that she was concerned that if Mr. Fung had known the products were stolen he might not have purchased those products from her. As a result, Ms. Minetto created this elaborate fiction to make Mr. Fung think that she could acquire Apple products through legitimate means.

[62] Ms. Minetto testified that until the very end of her relationship with Mr. Fung on July 14, 2014, she would reinforce the backstory she had created in every exchange she had with Mr. Fung in order to reassure him that was acquiring the Apple products she was selling legitimately.

Testimony of Christine Percy

[63] Ms. Percy is an employee of WSI. Mr. Fung called Ms. Percy to testify about how she detected Ms. Minetto’s fraud. She was first hired by WSI in 2014 as a consultant when the company contemplated going public.

[64] Ms. Percy confirmed that between May 2009 and July 2014, Ms. Minetto had committed an ongoing and escalating series of frauds on WSI by using WSI’s corporate credit card. She had used the corporate credit card for approximately two and a half years before she started to purchase products from Apple. She would purchase goods and services for her personal use and benefit. Beginning in 2011, she began to purchase Apple products using WSI’s corporate credit card without authorization.

[65] It took WSI approximately five years to detect this fraud.

[66] Ms. Percy testified that she was “surprised” to learn that Ms. Minetto had been capable of conducting this fraud without detection for so long a period of time. WSI has acknowledged that a reasonable outside observer would have expected a corporation as large as WSI to have internal controls for purchases of the nature and scale Ms. Minetto was able to make using its corporate credit card.

[67] Ms. Minetto’s ability to use WSI’s Amex card while at the same time being the employee responsible for paying the corporate credit card invoices was “surprising”, and clearly a vulnerability for the company. Ms. Percy conceded in her testimony that one would have expected a company such as WSI to have controls in place over the payment of its corporate credit cards.

[68] By 2014, WSI had over 600 employees and a significant technology presence. WSI had issued 180 credit cards for employees to use for corporate purposes.

[69] Ms. Percy acknowledged in her evidence that WSI would have appeared in 2014 to be a large company to an outside observer.

Legal Principles

[70] In the Statement of Claim, WSI claims that Mr. Fung participated in Ms. Minetto’s misappropriation of money or property belonging to WSI. By doing so, he was unjustly enriched at the expense of WSI.

[71] In analytical terms, WSI is really alleging that Mr. Fung was in knowing receipt of over 10,000 iPhones and iPads that Ms. Minetto had purchased using its corporate credit card and resold to him. The parties have agreed as a matter of contract that damages would be the appropriate remedy for the value of the Apple products he was purchasing that he knew or was wilfully blind had been stolen or had been obtained through fraudulent means. They have agreed that if the court finds Mr. Fung was wilfully blind as to the illegal nature of those products, Mr. Fung will be found liable for all or part of the amounts charged to the WSI corporate credit card as of the date determined by the court.

[72] WSI claims that Mr. Fung should have known, and was wilfully blind to the fact that Ms. Minetto was selling him stolen property at all material times.

[73] Knowing receipt, as the term suggests, is knowledge-based. Mr. Fung states that he did not know or could not have known that Ms. Minetto was selling him Apple products that she had stolen from WSI, or had obtained by fraud at WSI’s expense.

[74] What elements make up wilful blindness, and what evidence is required to prove it are principles integral to this case.

Standard of Proof

[75] This is a civil action, not a criminal case. There is a different burden of proof in a civil action for theft or fraud.

[76] In F.H. v. McDougall, 2008 SCC 53, 3 S.C.R 41, the Supreme Court of Canada clearly established that there is only one standard of proof for fraud in civil actions, and that is on the balance of probabilities. Justice Rothstein stated at paragraph 40 that:

Like the House of Lords, I think it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences. However, these considerations do not change the standard of proof. I am of the respectful opinion that the alternatives I have listed above should be rejected for the reasons that follow.

[77] Further, at paragraph 49, Justice Rothstein stated:

In the result, I would reaffirm that in civil cases there is only one standard of proof and that is proof on a balance of probabilities. In all civil cases, the trial judge must scrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred.

[78] Based on the decision of the Supreme Court in F.H. v. McDougall, I am of the view that the civil standard is the applicable burden of proof to be applied to find fraud in a civil case. WSI needs only to prove on the balance of probabilities that Mr. Fung knew, or was wilfully blind, to the fact that he was purchasing stolen goods, or goods fraudulently obtained by Ms. Minetto.

What is wilful blindness?

[79] The modern statement defining wilful blindness is found in R. v. Sansregret, [1985] 1 S.C.R 570, which is given in the context of distinguishing wilful blindness from recklessness. Justice McIntyre explained the distinction between wilful blindness and recklessness at paragraph 22 as follows:

Wilful blindness is distinct from recklessness because, while recklessness involves knowledge of a danger or risk and persistence in a course of conduct which creates a risk that the prohibited result will occur, wilful blindness arises where a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant. The culpability in recklessness is justified by consciousness of the risk and by proceeding in the face of it, while in wilful blindness it is justified by the accused's fault in deliberately failing to inquire when he knows there is reason for inquiry….

[80] The court goes on to quote from of the treatise of Glanville Williams, Criminal Law: The General Part, 2nd ed. (London: Stevens & Sons, 1961), at pp. 157 and 159, where the author addresses the application of the wilful blindness doctrine:

Knowledge, then, means either personal knowledge or (in the licence cases) imputed knowledge. In either event there is someone with actual knowledge. To the requirement of actual knowledge there is one strictly limited exception. Men readily regard their suspicions as unworthy of them when it is to their advantage to do so. To meet this, the rule is that if a party has his suspicion aroused but then deliberately omits to make further enquiries, because he wishes to remain in ignorance, he is deemed to have knowledge….

The rule that wilful blindness is equivalent to knowledge is essential, and is found throughout the criminal law. It is, at the same time, an unstable rule, because judges are apt to forget its very limited scope. A court can properly find wilful blindness only where it can almost be said that the defendant actually knew. He suspected the fact; he realized probability; but he refrained from obtaining the final confirmation because he wanted in the event to be able to deny knowledge. This, and this alone, is wilful blindness. It requires in effect a finding that the defendant intended to cheat the administration of justice. Any wider definition would make the doctrine of wilful blindness indistinguishable from the civil doctrine of negligence in not obtaining knowledge.

[81] It is apparent in the discussion from Glanville Williams that the circumstances giving rise to the duty or obligation to inquire must be sufficiently strong that the wilful blindness arising from the failure to inquire is equivalent to knowledge of the facts as they truly are.

[82] The requirement of sufficiently strong circumstances to give rise to a duty to inquire was reinforced in R. v. Jorgensen, [1995] S.C.J. No. 92, 102 C.C.C (3d) 97, at para. 102. In Jorgensen, Justice Sopinka quotes from Glanville Williams at pages 157-159:

The rule is that if a party has his suspicion aroused but then deliberately omits to make further enquiries, because he wishes to remain in ignorance, he is deemed to have knowledge….

This is frequently expressed by saying that he “shut his eyes” to the fact, or he was “wilfully blind”….

Before the doctrine of wilful blindness applies, there must be realisation that the fact in question is probable, or, at least, “possible above the average”.

[83] According to Justice Sopinka, “A finding of wilful blindness involves an affirmative answer to the question: Did the accused shut his eyes because he knew or strongly suspected that looking would fix him with knowledge?”: R. v. Jorgensen, at para. 103.

[84] In R. v. Lagace, [2003] O.J. No. 4328, 181 C.C.C (3d) 12 (Ont. C.A.), the offender appealed a conviction for having possession of stolen motor vehicles. The appeal was allowed on the narrow ground that the trial judge had failed to examine the evidence to determine whether the accused remained suspicious after he made a telephone call to an individual involved in providing the vehicles to inquire about the source and nature of the vehicles. Doherty J.A. discussed the application of the wilful blindness doctrine where an accused has made some inquiry, finding that the nature of the inquiry made is an important consideration in determining whether the accused remained suspicious yet chose to refrain from further inquiry in order to remain ignorant of the truth. Doherty J.A held that:

[28] … Culpability on the basis of wilful blindness rests on a finding of deliberate ignorance. An accused who suspects that property is stolen but declines to make the inquiries that will confirm that suspicion, preferring instead to remain ignorant is culpable. Where an accused makes some inquiry, the question remains whether that accused harboured real suspicions after that inquiry and refrained from making further inquiries because she preferred to remain ignorant of the truth. Where some inquiry is made, the nature of that inquiry will be an important consideration in determining whether the accused remained suspicious and chose to refrain from further inquiry because she preferred to remain deliberately ignorant of the truth. For example, a finding that an accused took all reasonable steps to determine the truth would be inconsistent with the conclusion that the accused was wilfully blind: R. v. Mara, [1997] 2 S.C.R. 630 at para. 51.

[85] Most cases involving the doctrine of wilful blindness arise in the context of criminal law. However wilful blindness arises in a civil action from time to time. In Cora v. Adwokat, [2005] O.J. No. 4, Justice Loukidelis of this court held that the definition of wilful blindness is the same in civil cases as it is in criminal law. See also Bartin Pipe & Piling Supply Ltd., v. Epscan Industries Ltd., 2004 ABCA 52, A.J. No. 126, at para. 28.

[86] The Court of Appeal in Assaad v. Economical Insurance Group, [2002] O.J. No. 2356, 59 O.R. (3d) 641 (Ont. C.A), at paras. 19-21 examined the question of wilful blindness in the context of whether an owner of a motor vehicle had an insurable interest in a vehicle that was previously stolen. The issue was whether the plaintiff suspected the motor vehicle had been stolen from a prior owner given the circumstances in which it was purchased. In Assaad, the court found that the owner was wilfully blind to the origins of the vehicle, and that he must have had suspicions that there was something wrong but refrained from asking questions.

[87] The “knowing receipt” cases provide some insight into what kinds of facts give rise to a duty to inquire. In Gold v. Rosenberg, [1997] 3 S.C.R 767, at para. 76, the Supreme Court of Canada held that a bank had a duty to inquire where knowledge of the circumstances would alert an honest and reasonable person of the need for further inquiries. The law does not require one to exercise a standard of perfection; rather, one must do what is expected of an honest and reasonable person. To go further would be to impose “an impractically extensive duty of inquiry” on a party who is otherwise acting reasonably: Gold v. Rosenberg, at para. 83; and Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805.

[88] In R. v. Barbeau, [1996] J.Q. no. 1030, at para. 90, the Quebec Court of Appeal defined the test for wilful blindness as “not whether the appellant “should” have known or should “normally” have known from the suspicious circumstances that her husband was probably involved in a conspiracy to import cocaine, but whether the circumstances were such that she was suspicious about this at the time, but deliberately refrained from making inquiries so that she could remain in ignorance to the truth.

[89] The Supreme Court of Canada had occasion to review the law on wilful blindness in R. v. Briscoe, 2010 SCC 13, 1 S.C.R. 411. In Briscoe, the question for the court turned on whether the trial judge committed a legal error by failing to instruct the jury to consider whether the wilful blindness of the accused met the mens rea element of the offence.

[90] In Briscoe, the court determined that wilful blindness could be substituted for actual knowledge. The court held that once suspicion about a certain fact or set of facts is aroused, a duty to inquire is raised. To deliberately choose not to make those further inquiries to determine the truth or what truth would be revealed by those inquiries is to essentially know the truth about those facts. The court made reference to the reasons of Justice Sopinka in R. v. Jorgensen, at para. 103 to consider what circumstances are sufficient to arouse suspicion and raise the duty to inquire, that is, whether a person knew or strongly knew that the answer to his inquiry would fix him with knowledge. The court also adopted an expression used by Professor Don Stuart that wilful knowledge is “an actual process of suppressing a suspicion”: R. v. Briscoe, at para. 24.

[91] In R. v. Farmer, 2014 ONCA 823, O.J. No. 5736 (Ont. C.A.), the Ontario Court of Appeal held that the court must first make a finding that the person had a strong suspicion before a duty to inquire arises. Even where a duty to inquire can be established, there are circumstances that fall short of a situation where, as stated by the court, “it can almost be said that the defendant actually knew” so as to amount to wilful blindness: R. v. Farmer, at para. 26.

[92] There are civil cases that show where the distinction lies between suspicious circumstances that would give rise to a duty to inquire, and those that would not. In Healthy Body Services Inc. v. 1261679 Ontario Ltd., 2013 ONSC 6396, O.J. No. 4689, the court found that it was not reasonable to expect a corporation receiving payments for court ordered restitution from a previous employee to be “unduly suspicious” about the source of those funds. It was later found that the former employee was stealing funds from his current employer in order to make that restitution.

[93] The court in Healthy Body Services Inc. distinguished those facts from those in Treaty Group Inc. v. Simpson, [2001] O.J. No. 725 (S.C.). In Simpson, a wife was perpetrating a fraud against her employer by stealing great amounts of money. Justice Pardu, as she then was, found that the husband, while not participating in the fraud, knew or was wilfully blind to the continuing misappropriation of funds by his wife. He was found to be wilfully blind to the fraud because he had knowledge of his wife’s criminal past, the many unexplained deposits into their bank account, and improvements to their home, but chose to suppress suspicions about where she was finding the money,

[94] Justice Pardu found that the husband had knowledge of facts that would have put a reasonable person on notice to inquire. By not making that further inquiry to learn the truth, the husband was wilfully blind and fixed with that knowledge. He was, therefore, found liable for at least half of the amount misappropriated by the wife and ordered to pay damages.

[95] The facts in Treaty Group Inc. v. Simpson must be compared to those in Ontario (Securities Commission) v. Buckingham Securities Corp., [2002] O.J. No. 4036 (S.C.). In that case, Justice Ground was not satisfied on the facts that the defendant had knowledge of facts or circumstances that would have put a reasonable person in his circumstances on inquiry.

[96] Even if there is evidence before the court that there is a sufficient factual basis or set of circumstances that would put a reasonable and honest person on notice to make further inquiries, the second part of the analysis requires a determination of whether a party in that person’s circumstances would or should have made further inquiries.

[97] Buckingham Securities brings into sharp focus the requirement that a person must have knowledge of facts that would put a reasonable person having knowledge of those facts on alert to make further inquiry. This is the preliminary analysis that sets the stage for the finding of whether a party acted reasonably in refraining from making a further inquiry, or chose to remain deliberately ignorant about the facts or circumstances to be found wilfully blind.

[98] Wilful blindness is therefore a concept made up of two components:

a. In circumstances that arouse the suspicions of a reasonable and honest person that are strong or sufficient enough to raise a duty to inquire; and b. Whether someone in that person’s position chooses to remain deliberately ignorant to the knowledge that inquiry would reveal.

[99] Wilful blindness occurs when it is proven on the balance of probabilities that the person would have had actual knowledge about the true facts but for his or her choice to remain deliberately ignorant in the face of that suspicion. Liability for wilful blindness to knowingly receiving stolen goods arises where the person proceeds to engage consciously and deliberately without asking for further information or verification from a reliable source that he knows would furnish him with knowledge.

[100] It is within this framework that I now turn to examine the evidence on the claim against Mr. Fung. Based on the principles found in the authorities, the case against Mr. Fung will turn on the answers to the following questions:

1. Would the suspicions of a reasonable and honest person in Mr. Fung’s circumstances have been aroused to a sufficient extent to raise a duty to inquire from a reliable source about the legitimacy of the Apple products he was purchasing from Ms. Minetto?
2. If the answer to the first question is yes, has WSI proven on the balance of probabilities that a person in Mr. Fung’s position made the conscious choice to remain deliberately ignorant as of a particular date?

Discussion

[101] There is no dispute that Ms. Minetto used WSI’s credit cards to purchase iPhone and iPad units having a total value of $5,356,641.06 that she then sold to Mr. Fung during the transaction period between November 2011 and July 2014. All of these Apple products were purchased without WSI’s knowledge or permission. Those Apple products were therefore stolen property.

[102] There is also no dispute that Mr. Fung learned the Apple products he purchased from Ms. Minetto were stolen when WSI obtained judgment against Ms. Minetto, if not before.

[103] In his opening statement and in his closing submissions, counsel for the Fung defendants asked the court to pay careful attention to the evolution of the relationship between Ms. Minetto and Mr. Fung to fully understand the nature of the business relationship between them. While I acknowledge that the evolution of their relationship and the nature of business dealings between them was fluid, for the purpose of my analysis I have identified the following stages of their relationship with the dates and related facts associated with the designated locations where they would meet:

1. Between November 2011 and early 2012, when they would meet to exchange Apple products for cash, in the parking lot of Yorkdale Mall;
2. From Early 2012 to mid-April, 2013, when they would meet in the parking lot of the Ikea store at Highway 7 and the 404;
3. From mid-April 2013 to July 2014, when Ms. Minetto would direct Apple Inc. to ship products directly to the address of a virtual office that Mr. Fung and Mr. Yip had rented at 15 Allstate Parkway (the “Allstate address”).

[104] It is difficult to assess Mr. Fung’s credibility on the evidence he gave when WSI did not call witnesses to provide evidence to the contrary. However, making a credibility assessment is far from impossible. I have considered all of the evidence given by Mr. Fung, Ms. Minetto and Ms. Percy, as well as the admitted facts, to make findings on what part of Mr. Fung’s evidence is internally inconsistent, or the basis to draw inferences of fact, or that simply defies common sense where there was an evidentiary basis to do so.

1. Yorkdale Mall

[105] Ms. Minetto’s sale of the first iPad to Mr. Fung had all the appearances of a private transaction between two consumers. The fact that Ms. Minetto gave her real name and provided her contact information to Mr. Fung would not have caused him to suspect otherwise.

[106] As time progressed, Mr. Fung would contact Ms. Minetto to place orders for multiple iPads and she would fill those orders. They would meet as they always did in the parking lot at Yorkdale Mall where Mr. Fung would exchange cash for iPads.

[107] The fact that Mr. Fung and Ms. Minetto quickly fell into the roles of customer and supplier of Apple products would arguably suggest to a reasonable person that the nature of the transactions between them had shifted from one of a private nature to that of a commercial character. Given the volume of orders Mr. Fung would place with Ms. Minetto and the corresponding increase in amounts of cash he would pay for those products at the parking lot level, it is also reasonable to conclude a reasonable person would not consider this to be a legitimate way to conduct business.

[108] The suspicious nature of how Ms. Minetto and Mr. Fung would conduct their business is highlighted by Mr. Fung’s evidence that he asked Ms. Minetto if the Apple products were stolen as a precaution, or because he felt the need to quiet his own misgivings. He asked this question early in the business relationship when he would meet Ms. Minetto at Yorkdale Mall. He was informed by Ms. Minetto on this occasion that the iPads were “legit”, and he was content to leave it at that.

[109] Mr. Fung was likely compelled to question the legitimacy of the Apple products he was purchasing from Ms. Minetto because of the discounted price he was paying for the products, as well as the nature of their meetings.

[110] Mr. Fung readily admits that people in the business of reselling electronic goods often sell those goods for cash and provide no receipts. Mr. Fung did not make any inquiries about the channels through which Ms. Minetto was acquiring the iPads for resale to him, how they were being purchased from Apple, or whether there was any risk to acquiring these iPads this way for him or his customers who would ultimately buy those iPads from him. He relied on his knowledge of the parallel market, also known as the secondary market, for the purchase of electronic goods in cash. He also relied on the fact that he never received any indication from customers or from Apple that any of the iPads had been stolen. According to Mr. Fung, none of the Apple products he re-sold were ever rendered inoperative on the system, for telephone and data services, and that Apple Inc. always honoured the warranties for each product.

[111] During the time that Mr. Fung would meet Ms. Minetto at Yorkdale Mall, he was only purchasing iPads from her. Mr. Fung testified that when he purchased iPads from Ms. Minetto, he was not purchasing upgrades to various models. The iPad market is competitive, and his customers were interested in purchasing only the most recent models released by Apple.

[112] This is important evidence because Mr. Fung testified later that one of the reasons a person would sell a new model of an iPhone is that Apple or a cell phone provider had provided an upgraded telephone to the customer either free of charge, or for a nominal price as an inducement to enter or renew a service or plan. The customer would then keep the current cellphone they were already using, and resell the upgraded model privately.

[113] Mr. Fung testified that he purchased cell phones from people selling them for this reason through his store, Plus One Solutions in First Markham Place. In those instances, he would ask a customer for proof of ownership for that product, which often revealed it to be the sale of an upgraded model. He would ask for proof of ownership because he did not have their cell number as some kind of assurance that the customer was selling him a legitimate unit. He says he did not require any proof of ownership for any of the products Ms. Minetto was selling because she had been candid with him, and because she had given him her cell phone number. From this I take that she had developed a certain level of trust with him.

[114] I find this explanation to be disingenuous, and self-serving evidence. A cell phone number would not assure Mr. Fung that other Apple products he was purchasing had been legitimately acquired. Ms. Minetto’s cell phone number would give Mr. Fung no assurance about the legitimacy of the products she was selling.

[115] On February 18, 2012, Mr. Fung purchased two iPhones from Ms. Minetto. As of that date, he had already purchased 248 iPads from her. Prior to that date, Ms. Minetto had told Mr. Fung she would sell only iPads to him. He gave no evidence at trial about the reason Ms. Minetto gave him for having the ability to expand the range of products for sale at that time, or if he ever asked for one.

[116] Mr. Fung would purchase two more iPhones from Ms. Minetto on March 10 and March 13, 2012, and another four iPhones on March 18, 2012. On March 24, 2012, Mr. Fung purchased two orders of 10 iPhones each. As of March 30, Mr. Fung had purchased 30 iPhones and 400 iPads from Ms. Minetto.

[117] It is possible that a reasonable and honest person would have suspected that the iPhones and iPads that Ms. Minetto would obtain on request and would sell for cash had been stolen or obtained through fraudulent means just in time to meet Mr. Fung’s requests, given all of the prevailing circumstances. However, Mr. Fung was not shaken in his evidence or on cross-examination from his evidence that he believed Ms. Minetto when she told him that the Apple products she was selling to him were “legit” and that she would not take a chance on such a venture if they were not. His evidence was unshaken when he described how his manner of dealing with Ms. Minetto was consistent with how the secondary market for electronic products operated, as well as his experience when dealing with the Chinese community.

[118] Of equal or more significance, WSI did not call an expert witness to provide opinion evidence on the spending and payment preferences of the Chinese community in the Greater Toronto Area, including Markham. No expert evidence was called on how the secondary market operates in Ontario, over the internet, or with respect to resales into the Hong Kong market. I make no finding of how members or other participants in the Chinese community in Canada conduct business, or on what basis goods are purchased in the retail or resale markets.

[119] Mr. Fung takes the position that Ms. Minetto made misrepresentations to him. He says that she deceived him just as she deceived WSI. She reassured him that the products he was purchasing from her were legitimate. She employed the fiction of the third party male who controlled access to products she could sell to reinforce the appearance of legitimacy. Mr. Fung told the court that Ms. Minetto’s restrictions on the specific models and the number of units he could buy led him to believe that the products he was purchasing had been obtained from a source connected with Apple. Ms. Minetto told him that he could only order 20 iPhones or 20 iPads at time. She never allowed Mr. Fung to purchase the latest model of either device.

[120] In view of the lack of evidence from any fact witness or expert witness to contradict Mr. Fung’s evidence, I have no basis to make a finding that Mr. Fung knew or that the circumstances during the time they conducted business at Yorkdale Mall were sufficiently strong to arouse his suspicions that the Apple products he was purchasing at the time had been stolen or obtained through fraud. Ms. Minetto confirmed in her evidence that she had told Mr. Fung that the products were “legit”, and that she had created a fictional backstory to give him the impression that there were limitations to her ability to acquire products. There is no evidence to contradict this evidence. On the occasions Mr. Fung was purchasing Apple products from Ms. Minetto during this phase, I find that Mr. Fung did not know, or had reason to suppress his suspicion about the source of those products. He was not wilfully blind to the knowledge any inquiry might reveal, because the circumstances were consistent with his own knowledge and experience about how the secondary market operates.

2. Ikea at Number 7 Highway and the 404

[121] There was no definitive evidence given by Mr. Fung or Ms. Minetto on the date they moved the meeting place from Yorkdale Mall to the parking lot at the Ikea store at Highway 7 and the 404, except to say that it was early in 2012.

[122] I consider it important to determine on the evidence when that change in location was probably made. Starting on April 1, 2012, Mr. Fung was placing orders for both iPhones and iPads in multiples of 10 or 15 at a time. The Ikea location is closer to First Markham Place where Mr. Fung was operating his business, Plus One Solutions, than it is to either Yorkdale Mall, or to WSI in Mississauga. It is logical to assume that Mr. Fung requested the change in location to exchange of Apple products for cash in order to accommodate him because of the increasing volume and frequency of his orders.

[123] Mr. Fung gave evidence that he was working for WPCI in 2012. Although he could not identify exactly when in 2012 he left WPCI, he testified that he would go on to devote more of his time to his own store, Plus One Solutions. He also testified that he would conduct 10 to 15 percent of his business through Plus One, and 85 to 90 percent of his business with customers in Hong Kong. Mr. Fung left WPCI in 2012, which was during the time he was purchasing more and more product from Ms. Minetto. I infer as a fact from this evidence that Mr. Fung was in a position to buy more Apple products from Ms. Minetto for resale to customers and that this was a growing priority for him in early 2012.

[124] I also refer to Mr. Fung’s evidence that he had never purchased electronic goods from GSM Exchange online, where he could source 500 units of a given electronic product on the secondary market. This suggests to me that Mr. Fung had not developed his business model for selling cell phones and iPads to buyers in Hong Kong to any great extent before he met Ms. Minetto.

[125] Mr. Fung also stated in his evidence that he may have asked Ms. Minetto once again whether these products were legitimate after they moved the meeting place to Ikea. This evidence is curious because he had already asked this question when he and Ms. Minetto were in the early stages of their business relationship when they would meet at Yorkdale Mall. If he had believed her then and had there been no further reason to suspect otherwise, he would not have asked her the same question again. The evidence that he may have asked her this question again suggests that he may have had reason to suspect that the Apple products she was selling to him, particularly in greater numbers and frequency and for increasing amounts of cash, were stolen or had been obtained through fraudulent means.

[126] I find as a fact that there were sufficient circumstances for a reasonable and honest person to suspect during this period of time that the Apple products Mr. Fung was purchasing from Ms. Minetto were not legitimate. Mr. Fung’s suspicions would have been sufficiently aroused to ask Ms. Minetto to produce receipts in her name for the Apple products he was purchasing as proof of ownership. He could have required Ms. Minetto to provide a letter of authorization from the source of the products. Finally, he could have stopped purchasing those products altogether until he received satisfactory proof that those products had not been stolen, or acquired through fraud.

[127] I make this finding because of the nature of the transactions that had already occurred during the first phase of their relationship. These transactions continued between cars and for cash when they would meet at Ikea. This is compounded by the evidence that Ms. Minetto was able to sell Mr. Fung greater quantities of both iPhones and iPads during this period without encountering difficulty in filling his orders. Purchasing Apple products from Ms. Minetto in this volume either required or allowed him to leave his employment at WPCI and devote his time to selling these products through Plus One Solutions and to customers in Hong Kong.

[128] I also reach this conclusion because Mr. Fung admitted not once, but twice that the iPhones and iPads he was purchasing from Ms. Minetto were not upgrades. This is contrary to his evidence that he took comfort in purchasing cell phones through his store that were mostly upgraded products that had been legitimately obtained. As the availability of Apple products in this volume that were not upgrades, Mr. Fung had to know they were probably products that had been stolen or obtained through fraud.

[129] There was no evidence given to suggest that the third party male that Ms. Minetto described was not complicit in acts of theft, conversion or fraud to obtain the Apple products she had available for sale. Mr. Fung admitted under cross-examination that there was no evidence that the third party male was a member of the Chinese community, or a trader on the secondary market. The third party male fiction was therefore not an appropriate or effective shield for Mr. Fung to refrain from asking difficult questions.

[130] I further find as a fact that Mr. Fung made a conscious choice not to seek verification or further information about the source of the Apple products he was purchasing from Ms. Minetto. He chose to remain deliberately ignorant as to the source of those products. I make this finding of fact because of Mr. Fung’s evidence that he may have asked Ms. Minetto a second time if the products he was purchasing from her were legitimate.

[131] His evidence that buyers in the secondary market do not ask persons in the middle about the source of the products they are purchasing from is disingenuous in nature and not believable in view of all other evidence. Mr. Fung’s explanation that the manner in which he conducted business with Ms. Minetto was justified by its consistency with his experience does not make sense. Ms. Minetto is not a member of the Chinese community, and there is no evidence to suggest she had told him that she was involved in the secondary market for electronic products during the Ikea phase of the transaction period.

[132] In a candid admission during cross-examination, Mr. Fung admitted that between 2011 and 2014 he did not think about where Ms. Minetto was getting her product.

[133] For these reasons, I find that Mr. Fung was wilfully blind to the fact that the iPhones and iPads that he was purchasing from Ms. Minetto during the time they would meet at the Ikea store were stolen or had been obtained by fraudulent means. Since Mr. Fung’s evidence establishes they moved to the Ikea meeting place as early 2012, I fix March 30, 2012 as the date on which he became liable to WSI because it is the midpoint for the first half of 2012.

[134] According to the line in Exhibit E that provides the relevant information for March 30, 2012, I find that Mr. Fung and the Fung defendants are liable to WSI in the amount of $5,094,674.72. Judgment is therefore granted against the Fung defendants in this amount pursuant to the terms of the Agreement that governs how judgment shall be determined if and when the court makes findings of liability.

3. The Allstate Address

[135] In or around April 2013, Mr. Fung and Mr. Yip leased a virtual office at 15 Allstate Parkway. They rented this virtual office in part as a delivery location for the shipment of Apple products. Mr. Fung testified that he and Mr. Yip leased this space to keep Mr. Fung’s business under Plus One Solutions separate from their new venture, which he characterized as “Flyto”. Mr. Fung testified that Ms. Minetto paid part of the rent for the Allstate address.

[136] Counsel for WSI read into evidence part of Mr. Fung’s examination for discovery relevant to the time he learned that WSI had purchased the Apple products Ms. Minetto was selling to him. Those questions and responses are part of the evidence introduced at trial, and read as follows:

Q. Well, you said you saw the Wescom name. Where do you recall seeing the Wescom name? A. On the packing slip. Q. Okay. But what does that tell you when you see the Wescom name on the packing slip? A. That it was ordered through some type of account. Q. Presumably Wescom? A. Correct. Q. And that would have presumably been the entity that paid for it? A. Correct. Q. Okay. So you believe that the product you were getting had been paid for by Wescom? A. Correct. Q. And so, when did you come to that conclusion? A. When I saw the packing slips, possibly around the time where the products were being shipped to the Allstate address. Q. So you would agree with me it’s very likely, by the time … when you saw those packing slips when you first started shipping to the Allstate address, that’s when you reached that conclusion? A. Yes. Q. So all of the time you were having Nadia ship goods to you at Allstate, you knew or believed that those goods were being paid for by Wescom? A. Yes, Q. And you were then going and paying her for those products in cash without any kind of documentation between you and Wescom? A. Correct. Q. And so tell me, what steps did you take to confirm that Nadia was legally authorized to sell you these goods that had been paid for by Wescom? A. The products were being shipped from Apple, which read to me there was no type of stolen goods. They weren’t “off the truck” or anything like that. The warranty for all the products were valid. Customers were able to activate their phones and iPads. They were all brand new and sealed. Q. Right. A. There was no indication that they were stolen by any means. Q. So those are things you observed by receiving the goods at Allstate? A. These are things that I have observed just over my experience with trading products. Q. Okay. But you didn’t ask Nadia to give you any proof that she had authority to do what she was doing? A. No. Q. You didn’t ask her for any receipts or records for the amounts you were paying her? A. No. Q. So, Mr. Fung, we’ve had a bit of a break, and before that I was asking you some questions about who you believe was paid for the goods. And during that exchange we had, you made reference to having seen either the Wescom or Point Click Care name on packing slips. Do you recall that? A. Correct. Q. Okay. So you specifically recall, when you were receiving the goods, the slip would include something that identified one of the corporate names? A. Yes. Q. Okay. Can you describe that to me? A. It was … it would have been on the packing slip. Now, I don’t recall what the title was as to, like, a ship from or to/from kind of thing. Q. Right. A. But there was the Wescom or Point Click Care name, and there was the address for that. And then underneath that would be the … and then the Allstate address. There was definitely two boxes of addresses. Q. And this was the physical slip that came with the goods? A. It was on the slip that was outside the shipping box.

[137] It is unclear from the evidence whether a copy of any invoices were included in the shipments that Apple Inc. would deliver to the Allstate address. If a copy of an invoice related to the products in a given shipment was included with those products, Mr. Fung would have seen the unit price of those products he was receiving, and the total amount billed to Ms. Minetto, also known as Nadia Arsenault, at the business address for WSI in Mississauga.

[138] If a copy of the invoice was not included in the shipment, Mr. Fung would have known from any shipping documents taped to the package or contained within that the Apple products had been shipped directly from the factory. In the alternative, the markings or wrappings of the shipping box or boxes containing the units would have indicated they had shipped directly from Apple. Mr. Fung could have contacted Apple to determine the unit price and the total charge for each shipment. This would have answered any suspicions he had about whether the Apple products he was purchasing at that time had been stolen or had been obtained through fraudulent means.

[139] The admission that the shipment of products from Apple were made directly to the Allstate address is consistent with the shipping documents entered in evidence. There are four invoices from Apple Inc. dated April 16, 2013 found between pages 358 and 361 of Volume II of the Apple invoices tendered as business records. These invoices are evidence that April 16, 2013 was the first time Apple products were shipped directly to the Allstate address. These invoices show the products that were shipped, the total number ordered, the total number shipped, the unit price and the extended price showing the amount invoiced on that date.

[140] From April 16, 2013 to July 14, 2014, Apple would deliver 224 shipments to the Allstate address having a retail value of $3,124,361. These facts are admitted in paragraphs 14 and 15 of the agreed Statement of Facts in the Agreement. According to the chart marked as Exhibit E, the total amount purchased by Ms. Minetto using WSI credit as of April 16, 2013 that would be repayable by Mr. Fung under the Agreement would be $2,733,713.97.

[141] On September 5, 2013, Ms. Minetto wrote an email to Mr. Fung at evilgabbi@gmail.com. According to paragraph 2 of the request to admit that forms part of the admissions of fact at trial, evilgabby@gmail.com is one of three email addresses that Mr. Fung used between 2011 and 2014 to send and receive email correspondence.

[142] In this email, Ms. Minetto forwards to Mr. Fung an order from the Apple Store dated September 3, 2013, showing that 10 iPhones at $599 each, and 10 iPad 2s with Wi-Fi, 16 GB at $399 each had been purchased and would be shipped to the Allstate address. In that email, Ms. Minetto asks Mr. Fung, “Did I miss part of the order?” The order form that Ms. Minetto forwarded to Mr. Fung in this email is clear and unequivocal evidence that he knew upon receiving that email that Ms. Minetto was paying full retail value for the iPhones and iPads that Apple was shipping directly to the Allstate address.

[143] Mr. Fung agreed under cross-examination that it would have been clear from this Apple document that Ms. Minetto was the contact person at WSI for billing purposes and that:

(a) WSI was the purchaser (b) WSI was paying retail prices (c) WSI was paying tax on those purchases (d) Ms. Minetto was the person ordering the products and the contact person for billing (e) No other person was shown on those documents exercising control, and (f) The price and manner of payment for him to pay for those products was determined by her.

[144] Mr. Fung agreed that he never saw any documents that differed with the billing information shown on these documents. No volume discount was offered for meeting a purchasing quota, or for purchasing particular items on sale or in volume.

[145] Mr. Fung testified that he could not understand how Ms. Minetto could buy products from Apple at a retail price, and yet sell to him at a discount. He testified that it is his business to know the retail price is for particular products in order to be competitive, as customers can purchase their product of choice directly from Apple at full price. It did not make sense to him that Ms. Minetto would pay the retail price and tax to purchase Apple products, and then sell those same products to him for a lower amount.

[146] It was around this time that Mr. Fung was confronted with the reality that Ms. Minetto was selling products to him in which she had no capital investment. This should have been a sign to Mr. Fung that, by September 5, 2013, Ms. Minetto was selling products to him that were stolen, or obtained through fraudulent means.

[147] On November 26, 2013, Ms. Minetto refused Mr. Fung’s offer to deposit a payment into her account, preferring cash after delivery. This preference was, no doubt, motivated by her desire to leave no paper trail of the payments she was receiving.

[148] The change in the way Mr. Fung would purchase Apple products from Ms. Minetto in phase three of their relationship marked a shift in how they conducted business. By this time, Mr. Fung was ordering products he wished to purchase from Ms. Minetto by email. Ms. Minetto would send him a shipping notification provided by Apple. Mr. Fung could then track the shipment from the factory to the Allstate address. This level of sophistication removed the probability that Mr. Fung was wilfully blind to the nature of how Ms. Minetto was procuring products, and replaced it with actual knowledge.

[149] I find that Mr. Fung had actual knowledge of the source and nature of the Apple products he was purchasing from Ms. Minetto as of September 5, 2013. Had I not concluded the Fung defendants were liable to WSI at an earlier time and for a greater amount, I would have found the Fung defendants liable pursuant to the terms of the Agreement in the amount of $1,906,377.73, according to the last line for September 4, 2013 on Exhibit E.

Conclusion

[150] As the saying goes, if something is too good to be true, it probably is. I find on the balance of probabilities that Mr. Fung knew, or chose not to make inquiries about whether Ms. Minetto was selling Apple products to him that had been stolen or obtained through fraudulent means by March 30, 2012. Instead, he chose to remain deliberately ignorant as to that knowledge.

[151] There shall be judgment as follows:

1. To Wescom Solutions Inc. against the Fung defendants on a joint and several basis, in the amount of $5,094,674.72, plus interest; and
2. On the crossclaim, to each of the Fung defendants against Nadia Minetto, also known as Nadia Arsenault, in the same amount, plus interest, for contribution and indemnity.

Costs

[152] If either party seeks costs on this trial, they may file written submissions consisting of no more than three pages, not including attachments, by September 25, 2017. The other party shall then have until October 12, 2017 to file responding submissions limited to the same extent. No submissions in reply shall be permitted without leave. If the parties seek a ruling on the rate of prejudgment interest to apply, they may include submissions on the applicable interest rates and the date interest should begin to run in their submissions on costs. All written submissions may be sent by fax to my judicial assistant, Ms. Kim Williams, at 905-456-4834 in Brampton.

[153] If no written submissions are received by October 12, 2017, the parties shall be deemed to have resolved the issues of costs and prejudgment interest between them.

Emery J.

Date: September 14, 2017