COURT FILE NO.: 105/17 DATE: 2018 07 19
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: THE BANK OF NOVA SCOTIA and SCOTIA DEALER ADVANTAGE INC. Plaintiffs AND: 1736223 ONTARIO LIMITED operating as ORANGEVILLE FINE CARS, 1736222 ONTARIO LIMITED and ARASH SEYRAFIANPOUR also known as ARASH SEYRAFIAN, Defendants
BEFORE: Trimble, J.
COUNSEL: O. Ferlisi, Counsel for the Plaintiffs A. Seyrafian – self represented
HEARD: June 25, 2018
ENDORSEMENT
The Parties
[1] The Defendant, 1736233, Ontario Limited, operates as Orangeville Fine Cars, a Dealer in used cars. The Defendant, 1736222 Ontario Inc. owns the land on which Orangeville Fine Cars operated. Arash Seyrafianpour, also known as Arash Seyrafian, is the controlling mind of both corporations.
The Motion
[2] This is a motion for partial summary judgment, brought by two Lenders against the Defendants. The Lenders seek judgment in contract and in fraud. They seek to pierce the corporate veil and affix Mr. Seyrafianpour with the corporation’s liability.
[3] The Plaintiffs are Lenders who had a contractual arrangement with the Dealer, which permitted the Dealer to submit auto loan applications on behalf of Borrowers who wished to borrow money to purchase used cars from the Dealer. The Lenders were to receive registerable security in the automobiles.
[4] The Lenders say (as I describe in more detail, shortly) that Seyrafianpour, through the Dealer, operated a massive fraud operation wherein the Dealer defrauded the Plaintiffs into advancing millions of dollars to Borrowers on the intentionally false pretence that the funds advanced were being used by Borrowers to buy automobiles from the Dealer. The documentation was submitted and the money advanced. In fact, there was no sale of automobiles. Mr. Seyrafianpour knew this.
[5] This motion for summary judgment is brought in respect of 16 of at least 152 such transactions.
Material Filed On The Motion
[6] The Lenders filed a complete record including affidavits setting out the facts in support of the relief they seek. The Defendants filed nothing until the date of the motion, at which time Mr. Seyrafianpour handed up a 15 paragraph Affidavit which was commissioned on April 25, 2018. The Lenders consented to my receiving the Affidavit, but argued that much of what was in the Affidavit was argument, bald assertion, or inadmissible.
Decision
[7] For reasons that follow, the motion is allowed. Judgement shall issue in the form attached to these reasons.
Facts
[8] The Bank of Nova Scotia is a chartered bank. Its business includes financing the purchase of new and used automobiles by the automobiles’ purchasers (the Borrowers). Scotia Dealer Advantage Inc. is BNS’ wholly owned subsidiary which engages in similar financing, but respect to sub-prime, or higher risk Borrowers.
The Financing Process, Generally
[9] The process and the contractual arrangements by which both Lenders finance Borrowers’ automobile purchases are almost identical, for the purposes of this motion. The process is:
a) The Borrower agrees with the Dealer to buy a car;
b) The Dealer, with the Borrower, fills out the Lender’s standard form credit package by which the Borrower seeks to borrow money to finance the purchase of the car. The package includes a Credit Application, a statement by the applicant confirming detailed information about the Borrower, and the Dealer’s verification form confirming the identity of the Borrower and details of the automobile;
c) If the Lender approves the Credit Agreement it advances funds to the Dealer in the amount to be financed for the automobile purchase, and the Lender takes an assignment of the Dealer’s interests and rights in the Credit Agreement;
d) The Lender often pays the Dealer a monetary incentive called a “volume bonus” (by BNS) or a “reserve fee” (by SDA). The payment and amount depends on a number of factors including the amount financed and the volume of financing in any calendar year;
e) The Lender registers a security interest in the financed automobile according to the automobile identification number as provided by the Dealer. The Lender relies on the Dealer for this information; and
f) Following the assignment of the Credit Agreement, the Borrower makes his or her loan payments directly to the Lender.
What Actually Happened?
[10] Seyrafianpour is the controlling mind of the Dealer. He is the principal of the company, its sole officer, and its sole director. He is also the controlling mind of 1736222.
[11] From January, 2015 to December, 2016, the Lenders advanced millions of dollars under at hundreds of loan agreements. The Lenders have determined that at least 152 of those loans were fraudulent. The Lenders go further. They say that the individual loans were part of an overall fraudulent scheme by Mr. Seyrafianpour to induce the Lenders into advancing funds where no automobiles were sold.
[12] The Statement of Claim claims for all of those transactions, both in contract and in fraud. In this motion for summary judgment, however, the Lenders seek judgment in only 16 specific loan transactions. Those 16 loans share the same characteristics: namely,
a) Seyrafianpour, filled out the loan transaction documentation and submitted the documentation to one of the two Lenders;
b) The money was advanced pursuant to the agreements;
c) Ownership searches conducted as part of the Lenders’ investigation of the automobiles’ ownership, based on the automobile identification numbers specified in each of the transactions confirmed that the automobiles had never been sold to or registered to the Dealers or of any related person or entity;
d) The automobiles were never were sold, transferred to or registered in the name of the Borrowers who allegedly purchased them;
e) The automobiles in the 16 transactions were registered in the name of owners located in the United States (in one case, Québec);
f) The chain of title in the automobiles indicated that they were never owned by anyone in Ontario or were ever registered in Ontario; and
g) Mr. Seyrafianpour knew all of this.
[13] Mr. Seyrafianpour does not contest these facts.
[14] Because of these facts, although the Lenders registered security, they never actually acquired security in any of the automobiles that were purportedly pledged as security for the loans.
The Contractual Arrangements.
Dealer Agreements
[15] The arrangement between the Dealer and BNS is governed by a Retail Financing Program Dealer Agreement dated July 29, 2008. The arrangement between the Dealer and SDA is governed by a Scotia Dealer Advantage Financing Agreement dated March 17, 2010. The Dealer Agreements are virtually identical.
[16] Mr. Seyrafianpour signed both of the Dealer Agreements on behalf of the Dealer.
[17] In the Dealer Agreements, the Dealer agreed to indemnify and save the Lender harmless against any and all losses, costs and expenses (including reasonable legal expenses) incurred by the Lender in any way related to any fraud that the Dealer was in a position to prevent, any fraudulent activity by the Borrower, and/or any possible money-laundering preventable by the Dealer including fraudulent misrepresentations as to the status of the automobile at issue. If the Dealer breached any terms of the Dealer Agreement or any of its obligations under any individual Credit Agreement or any other obligation the Dealer owed to the Lender or a Borrower, the Dealer agreed to indemnify and pay to the Lender the unpaid balance of the Borrower’s loan including all accrued and unpaid interest and fees and costs.
[18] The Dealer Agreements provided warranties on which the Lenders relied, including that:
a) The loan agreement and all related guarantees were genuine, legal, valid and enforceable;
b) The identity of the Borrower is as disclosed and corresponds to the identity of the person who took delivery of the automobile;
c) The Borrower’s signature is genuine;
d) Title to the automobile and equipment is vested in the Borrower free and clear of all liens and encumbrances;
e) The Dealer had the right to sell the automobile and equipment;
f) The Dealer knew of no facts or circumstances which would impair the viability or value of any loan agreement made by the Borrower and the Lender; and
g) The automobile and equipment were as described in the loan agreement, were delivered to the Borrower, and were for the sole use of the Borrower or a third-party with the written consent of the Borrower.
Credit Agreements Between Dealer and Borrower
[19] The Borrower and Dealer entered into a Credit Agreement. Pursuant to the Dealer Agreements, the Dealer’s interest in the Credit Agreements was assigned to the Lender. Those Credit Agreements were governed by terms and conditions in a section entitled “Seller's Assignment” which provided, among other things:
a) The automobile is clear of all legal claims except those of the Borrower, and where there is more than one Borrower at least one of the Borrowers is the registered owner of the automobile;
b) The cash payment specified in the Credit Agreement has been received by the Dealer and that no part of it has been loaned to the Borrower;
c) There has been a bona fide and unconditional sale of the automobile to the Borrower;
d) The automobile has been delivered to the Borrower;
e) The Credit Agreement contains the correct description of the automobile and the total balance under the Credit Agreement;
f) If any of the Dealer’s promises under the Sellers Assignment section of the Credit Agreement are broken, the Dealer will indemnify the Lender for any losses or damage that results; and
g) The Dealer expressly warranted in each Credit Agreement that all of the terms and conditions related to the Seller’s Assignment section had been adhered to, will in the future be adhered to, are true and correct in all respects, and that the Dealer agreed to indemnify the Lender as set out in those terms and conditions.
Seyrafianpour’s Role
[20] Mr. Seyrafianpour either admits, or does not contest certain facts. These include:
a) He is the sole officer, director and controlling mind of the Dealer;
b) Except for the Borrower’s signature, he completed and signed all the documents in each transaction;
c) He submitted all documents through his designated electronic portal;
d) The money was advanced pursuant to the agreements;
e) The automobile in the subject 16 transactions had never been sold, transferred or registered to the Dealer or of any related person or entity;
f) The automobiles were never sold, transferred to or registered in the name of the Borrowers who allegedly purchased them;
g) The automobiles in the 16 transactions were registered in the names of owners located in the United States (in one case, Québec);
h) The chain of title in the automobiles indicated that they were never owned by anyone in Ontario or were ever registered in Ontario.
[21] In addition, the Lenders say that Mr. Seyrafianpour fabricated transactions as sham transactions designed to defraud BNS and SDA into advancing funds for which they would receive no security.
Status of the 16 Loans
[22] The 16 specific loans which are the subject of this motion are all in default. Demands have been made of the Borrowers for payment. No payment has been advanced since the demand. Some of the Borrowers have filed consumer proposals.
[23] The Lender has made demand for payment from the Dealer. It has not paid.
Quebec Proceedings
[24] The National Bank of Canada, in an action in Quebec for similar relief on similar bases, received Judgment against the Dealer and Seyrafianpour of $1,248,899.59, and received an order that the two not deal with assets owned by them in Ontario. On June 13, 2017, the Ontario Superior Court agreed to recognize and enforce the Quebec Judgment, and the Bank has begun proceedings to enforce.
GOVERNING LEGAL PRINCIPLES
The New Approach
[25] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87 Justice Karakatsanis set out principles to be applied on a summary judgement motion (see paras. 49, 50, 57 to 59, and 66). These are:
a) Summary Judgment is granted when there is no genuine issue requiring a trial. There is no genuine issue requiring a trial where the judge is able to reach a fair and just determination on the merits on a motion for summary judgment.
b) A fair and just determination on the merits can be made where the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result than a trial.
c) When the judge can find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. On the other hand, a process that does not give a judge confidence in their conclusions can never be the proportionate way to resolve a dispute.
d) The standard for fairness applicable to summary judgment motions is not whether the process is as exhaustive as a trial, but whether it gives the judge confidence that s/he can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.
e) On a summary judgment motion, the evidence need not be as complete as at trial. It must be such that the judge is confident that s/he can fairly resolve the dispute. A documentary record supplemented by the new fact-finding tools in Rules 20.04(2.1) and (2.2) may be sufficient to resolve material issues fairly and justly.
f) Proportionality is assessed in relation to the full trial. It may require the motion judge to assess the relative efficiencies of proceeding by way of summary judgment, as opposed to trial. This would involve a comparison of, among other things, the cost and speed of both procedures, and a comparison of the evidence that will be available at trial and on the motion as well as the opportunity to fairly evaluate it.
g) Whether it is against the “interest of justice” to use the new fact-finding powers will often coincide with whether there is a “genuine issue requiring a trial”.
[26] On a motion for summary judgment, the judge should determine, first, if there is a genuine issue requiring trial based only on the evidence before the judge, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides the judge with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, the judge should determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). S/he may use those powers, provided that their use is not against the interest of justice, in other words, if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[27] In Butera v. Chown, Cairns LLP, 2017 ONCA 783, at paras. 26 to 34 Justice Pepall discussed the principles governing granting of partial summary judgement. These are:
a) Partial summary judgment should only be granted in the clearest of cases where the issue on which judgment is sought is clearly severable from the balance of the case, in order to eliminate the possibility of inconsistent findings and results on the summary judgment motion and later motions or trials on similar facts or claims;
b) The court must analyze the issue of partial summary judgment from the perspective of whether (i) there was a risk of duplicative or inconsistent findings at trial and whether (ii) granting partial summary judgment was advisable in the context of the litigation as a whole.
c) In addition, the court must consider whether partial summary judgment raises further problems that are anathema to the stated objectives underlying Hryniak. Does the motion cause the main action to be delayed? Does it cause increased costs? What would the effect be of an appeal from the motion’s outcome?
d) What is the effect of a partial summary judgment motion on already strained judicial and public resources? The courts face a significant increase in summary judgment motions that have flowed since Hryniak. Judges are required to spend time hearing partial summary judgment motions and writing comprehensive reasons on an issue that does not dispose of the action in its entirety.
e) The record available at the hearing of a partial summary judgment motion will likely not be as expansive as the record at trial therefore increasing the danger of inconsistent findings.
[28] In Mason v. Perras Mongenais, 2018 ONSC 1477 Justice Myers further elaborated on those principles (see paras. 13, 16 to 19, and 32 to 33):
[13] At para. 60 [of Hryniak], the Supreme Court of Canada recognized the risks of allowing summary judgment against one defendant while the claim continued against others:
The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach. [Emphasis added.]
[16] There will be cases where a summary process would resolve so little of value and/or create too much risk of costly duplication or inconsistent verdicts to be viewed as either just or proportionate. But to implement a change in the legal culture – a “culture shift” – judges have to be able to say that in appropriate cases, viewed in the context of the litigation as a whole, partial summary resolution achieves the goals of fairness and promoting access to justice as was the case in Hryniak itself.
Assessing Claims for Partial Summary Judgement in the Context of the Litigation as a Whole
[17] Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 is the leading case that discusses the parameters for assessing claims for partial summary judgment in the context of the litigation as a whole. It drew its approach from Hryniak and the discussion of the contextual approach in para. 60 recited above. In Baywood, the motions judge held that a trial was required to determine the validity of two promissory notes asserted by the defendant in a counterclaim. However, the judge held that he could determine summarily the question of the validity of a release that was part of the same set of deal documents as the promissory notes. The judge held that the release provided a defence to the plaintiff’s claim while resolution of the counterclaim on the promissory notes required a trial.
[18] The Court of Appeal overruled, reasoning that it was an error for the judge to isolate and make findings on the release when it was intertwined with all the deal documents including the promissory notes:
[37] In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motions judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motions judge’s finding that the Third Release is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.
[38] In light of the factual connection between the promissory notes and Third Release, and Ralph’s testimony, it was an error in principle for the motions judge to refer the enforceability of the promissory notes to trial while summarily determining the enforceability of the Third Release.
[19] It readily follows that where a trial is required involving the same parties, the same witnesses providing the same evidence about the same facts in issue as are relied upon for summary judgment, the risk of duplication and inconsistent outcomes is particularly acute. In such cases, the benefits of summary judgment as a cost saving or tool for efficiency are lost since a trial is required on all the same facts among all the same parties anyway.
[32] Discrete issues, like limitation periods, which do not overlap with the merits that are left for trial, occupy the most efficient end of the spectrum. Cases like Baywood, where the same parties will go to trial with the same witnesses testifying to the very same facts as are in issue on a motion for summary judgment represent the other end of the spectrum. In the middle, are cases like this one and Hryniak where the litigation against a party can be brought to an end by partial summary judgment. …
[33] The Supreme Court of Canada did not impose a bright line rule to default to a trial if there is no wholly discrete or bifurcated issue. Approaching trials as the default process is not a culture shift at all. It perpetuates the practical roadblocks on access to justice that the Supreme Court of Canada identified as being the greatest challenge to the rule of law in Canada. The shift required is an understanding that judges will be deciding cases summarily as much as possible to avoid the expense and delays of the trial process that put civil justice beyond the reach of most Canadians. The shift is that, instead of defaulting to trials, judges will exercise judgment, where possible, to find proportionate processes to allow a fair and just resolution on the facts of each case that avoids the cost and delays of the trial process. If the risk of duplication and inconsistent verdicts is high, then Baywood and Hryniak dictate that a trial is required. But that is the last option not the best one. This requires buy-in to the notion that judges will exercise discretion to determine in each case the amount of process required on the facts and law to give them confidence that the case can be resolved fairly, justly, and proportionately. That is the “culture shift.”
[29] Justice Firestone in Griva v. Griva, 2016 ONSC 1820, was also of the view that partial summary judgment should not be granted where the motion will not resolve the damages issues in their entirety and the additional damage claims are based on the same factual matrix and evidentiary record as the damages claimed for which the Plaintiff seeks partial summary judgment. That would create the risk inconsistent factual findings and a duplication of evidence from not only the Plaintiff but also from the many other witnesses who will give evidence both on this summary judgment motion and at trial regarding the Plaintiff’s damages.
[30] Some cases have allowed partial summary judgment. They are factually driven and have a common element: the partial summary judgment resolved a discrete issue that could be separated from the other claims or parties in the surviving case.
[31] In Sirois v. Weston, 2017 ONCA 1002, the court upheld a lower court decision to dismiss a claim due to the expiry of a limitation period on the finding that limitation periods are distinct issues that can be severed from the surviving issues in the case.
[32] In Kueber v. Royal Victoria Regional Health Centre, 2018 ONCA 125, a motions judge’s order granting summary dismissal of several, but not all, claims against doctors and ambulance attendants was upheld even though claims against a hospital were left to be determined at trial. The Court of Appeal stated, at para. 3, that “ this is precisely the type of case that summary judgment is designed to address ”, because it achieved the objectives of proportionate, cost-effective and timely dispute resolution without impacting the remaining elements to be adjudicated.
[33] In TD Bank v. Lloyds Underwriters, 2016 ONSC 8006, the court granted partial summary judgment on 3 of 19 claims because the scope of the issues was narrow, concerning interpretation of the insurance policies, and there was no risk of duplication or conflicted findings. The court was able to make claim specific findings of fact that did not affect other transactions or claims.
The Burden
[34] The moving party has the burden of persuading the court, on the balance of probabilities, through evidence, that there is no genuine issue requiring a trial. Once the moving party has met its burden, the responding party has an evidentiary burden to show that its claim has a real chance of success: Sanzone v. Schechter, 2016 ONCA 566, 402 D.L.R. (4th) 135, at para. 30; Connerty v. Coles, 2012 ONSC 5218, at para. 9.
[35] What evidence is required?
[36] The moving party must “… move with supporting affidavit material or other evidence to support its motion ”: Cuthbert v. TD Canada Trust, 2010 ONSC 830, 88 C.P.C. (6th) 359, at para. 12.
[37] The responding party cannot rely solely on the allegations in its pleading. Pleadings are not evidence: MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, 127 O.R. (3d) 663, at para. 50; Hawthorne v. Markham Stouffville Hospital, 2016 ONCA 10, at para. 8.
[38] Each side must “put their best foot forward” by adducing evidence with respect to each of the material issues to be tried: Hryniak, at paras. 57, 66; Cuthbert, at para. 12; Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423, 2 O.T.C. 146, at p. 434, aff’d [1997] O.J. No. 3754 (C.A.). In Chernet v. RBC General Insurance Company, 2017 ONCA 337, at para. 12, the Court of Appeal stated: “ Summary judgment motions are decided by evidence of the facts and by inferences drawn from those facts. Not by speculation about the facts .”
[39] The motion judge is entitled to presume that the parties have lead all of the evidence on the motion that they would have led at trial, and that there is no more evidence on the issues on the motion: Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, 137 O.R. (3d) 570, at para. 54, citing Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 111 O.A.C. 201 (C.A.), at para. 17.
[40] The judge may decline to make this presumption if s/he is concerned that there is material evidence that has not been produced such that the evidentiary record on the motion is inadequate to ensure a fair and just determination. For example, a moving party who does not make full documentary production or who improperly restricts examination questioning risks a finding that its summary judgment motion fails due to inadequacy of the evidentiary record. It would be unjust to grant summary judgment if there is the possibility that material documents exist that ought to have been produced and tendered in evidence, but were not due to inadequate discharge of the duty to conduct a diligent search: 90 George St. v. Reliance Construction, 2012 ONSC 1171; Grossman et al. v. Toronto General Hospital et al. (1983), 41 O.R. (2d) 457, 146 D.L.R. (3d) 280 (H.C.J.).
ANALYSIS
Can I Make a Fair and Just Determination on this Record?
[41] I can.
[42] The Plaintiffs have filed a detailed affidavit, providing material facts and contracts regarding each of the 16 individual transactions and the legal and contractual relationship between the parties.
[43] Mr. Seyrafianpour has not “put his best foot forward”. His affidavit is perfunctory and unhelpful. He challenges none of the specific facts set out in the Plaintiff’s record. I cannot rely on what Seyrafianpour says.
[44] He says at paragraph 3... “I do not believe I am indebted to the Plaintiff in the alleged amount claimed or any amount whatsoever.” This is a bald assertion and an opinion unsupported by specific facts set out elsewhere in the affidavit.
[45] He says at paragraph 4 “Majority of these loans are current and the customers are till today making payments on amounts of principal and interest. Very few are late in payments.” This is a bald assertion. He does not provide evidence with respect to which loans he speaks of, which ones are current and which ones are late. He does not indicate whether the loans of which he speaks are contained in the 16 for which the Lenders seek summary judgment. Further, he does not address his own contractual liability.
[46] He states in paragraphs 7, 9 and 10 that the Lenders ought to have known about the defects in the contract and the fraud. They had all the documents, and the loans had existed for some time (in most cases more than two years). He says in paragraph 9 “(should not take two years for the bank to find out about a fraud)”. This is opinion or submission. There is no evidence to support it.
[47] He says in paragraph 11 that the Lenders accused him of receiving commissions when the documents produced by the Lenders say otherwise. The documents he attaches do not pertain to any of the 16 transactions at issue.
[48] He says in paragraphs 12 and 13 that the Lenders’ salespeople were receiving gifts from him. He believes the Lenders knew about these loans and that the Plaintiffs’ salespeople were sending him congratulatory emails on a regular basis encouraging him to do more loans. These are bald statements of fact or belief, without any evidence in support.
[49] I conclude that I can make the necessary findings of fact, apply the law to the facts, and that proceeding by summary judgment is a proportionate, more expeditious and less expensive means to achieve a just result in terms of the specific transactions at issue on this partial summary judgment motion.
Is There Any Issue Requiring a Trial?
[50] No. In my view, this is one of those rare circumstances in which partial summary judgment can and should be awarded.
[51] In saying this, I specifically limit my comments solely to the 16 transactions on which the Lenders have sought Judgment.
Claims in Contract Against the Dealer
[52] Dealing first with the contractual claims, the Lenders have met their burden to prove that there is no issue that requires a trial. Further, the Dealer and Mr. Seyrafianpour have not met their evidentiary burden. Mr. Seyrafianpour has provided no evidence that, with respect to the 16 transactions at issue, he or the Dealer has any defense to the breach of contract claims. The evidence is clear that the Dealer breached both the Dealer Agreements and the Credit Agreements. The Dealer is liable to the Lenders.
Claims in Fraud Against the Dealer and Seyrafianpour
[53] Turning to the fraud claims in respect of the 16 transactions, the Lenders have met their burden to prove that Mr. Seyrafianpour, on behalf of the Dealer, perpetrated a fraud with respect to each. Mr. Seyrafianpour and the Dealer has not met their evidentiary burden to raise an issue that requires a trial.
[54] Why do I say this?
[55] The evidence of fraud that the Lenders present is overwhelming. Mr. Seyrafianpour and the Dealer provide no evidence to the contrary. For example, neither Mr. Seyrafianpour nor the Dealer presented any evidence that either obtained a report about the ownership of the 16 vehicles. I draw the adverse inference from Mr. Seyrafianpour and the Dealer’s failure to lead any relevant evidence in this motion that they have no evidence to lead in respect of the 16 transactions.
[56] I also find that Mr. Seyrafianpour admitted the fraud. I say this for four reasons:
a) In his Affidavit, Mr. Seyrafianpour never denied the Lender’s allegation that he committed fraud, nor the evidence the Lenders lead in support of it.
b) In two instances in his Affidavit (paragraphs 8 and 9), Mr. Seyrafianpour all but admitted there was a fraud.
c) In his oral argument, Mr. Seyrafianpour admitted facts against his own interest including that he was aware that the Dealership had no interest in the automobiles sold, that the automobiles sold were owned by others, and that ownership never transferred to the purchasers.
d) In oral argument, I asked Mr. Seyrafianpour if he agreed with the Lender’s allegations that he had perpetrated a fraud and their evidence of it. He responded by saying “I did what I did.” I consider this to be an admission against interest that he knew that he was in violation of the agreements and intended to induce the Lenders into making loans which would never be secured against any automobiles.
My Findings are Limited
[57] I was invited to make the finding that Mr. Seyrafianpour’s and the Dealer’s conduct on the 16 transactions show a pattern of conduct with respect to the other transactions, and therefore, that I should find that there was a fraudulent scheme with respect to all transactions, or at least more than the transactions at issue in this motion.
[58] I specifically limit my findings to the 16 transactions on which the Lenders seek Judgment. I decline to make findings of any grander fraud scheme. I do not have the evidence in any transactions other than in the 16 at issue in this motion.
Should the Corporate Veil be Pierced?
[59] Yes.
[60] Piercing the corporate veil and imposing liability of the corporation on a specific officer or director should only be done in the rarest of circumstances. These circumstances where the corporation is created for an illegal or wrongful purpose, or those in control of the corporation direct illegal or wrongful actions to be done: 642947 Ontario Ltd. v. Fleischer, 2011 ONCA 8623, at para. 68, and Shoppers Drug Mart Inc. v. 6470360 Canada Inc., 2014 ONCA 85, at para.43.
[61] I cannot say that the Dealer corporation was created for an illegal purpose. With respect to the 16 transactions in issue, however, Mr. Seyrafianpour clearly used the Dealer to defraud the Lenders into making the loans knowing the loans did not meet the requirements under the Lenders’ automobile loan plans, knowing that the Lenders would not acquire any security interest in the vehicle, and knowing that he might or would receive commissions or direct benefit because of these transactions. In light of the evidence of the Lenders, I reject the Mr. Seyrafianpour’s bald statements that neither he nor the Dealer received any benefit from his fraudulent loans.
Is This an Appropriate Case for Partial Summary Judgment?
[62] Yes.
[63] As Myers J. said in Mason v. Perras Mongenais, 2018 ONSC 1477, at para. 32 the question to be answered on a motion for partial summary judgment is, do, “… the risks of duplication and inconsistent findings outweigh the benefits of summary resolution and preclude summary resolution from being proportionate where the case is brought to an end against some but not all of the parties ” or that only some issues are resolved with respect to the same parties?
[64] There is no risk of inconsistent findings between findings I have made and findings to be made at trial or another summary judgment motion, since my findings are limited to the 16 specific transactions.
[65] Further, granting partial summary judgment meets the requirement of a proportional resolution. Trial time will be saved in terms of calling the borrowers at trial and proving the facts related to the 16 transactions and the fraud.
Order
[66] I grant summary judgment in the form attached to these reasons.
Costs
[67] I will address costs in writing, with submissions limited to 3 double spaced pages, excluding offers. The Plaintiffs’ submission are to be served and filed by 4:00 p.m., 9 August, 2018 and the Defendants’ are to be served and filed by 4:00 p.m., 23 August, 2018.
Trimble, J. Date: July 19, 2018