Court File and Parties
COURT FILE NO.: CV-21-0094 DATE: 2024-01-02 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: Sylvia Zwaan, Plaintiff – and – Douglas Laframboise and DDH Law Firm, Defendants
COUNSEL: Robert Kostyniuk, for the Plaintiff Douglas Laframboise, on his own behalf and for the Defendant DDH Law Firm
HEARD: September 14, 2023
Reasons for Judgment
S.K. Stothart, J.
Introduction
1The plaintiff, Sylvia Zwaan (“Zwaan”), brings this action seeking the return of $36,200 that she says the defendant Douglas Laframboise (“Laframboise”) unlawfully converted to his own use when he deposited a cheque belonging to her into his own bank account. She also seeks general and punitive damages as a result of the defendant’s conduct.
2The defendants, Laframboise and DDH Law Firm (“DDH”) admit that Laframboise deposited the cheque into his personal bank account, however they deny that there was an unlawful conversion.
3This trial proceeded under Rule 76 Simplified Procedure, Rules of Civil Procedure, R.R.O 1990, Reg. 194.
Evidence at Trial
The insurance claim
4Zwaan, and her common law partner, Michael Al-Saati (“Al-Saati”) lived on a farm located at 27 Farm Lane, in Britt, Ontario.
5Zwaan moved in with Al-Saati on the farm in 2009 and remained living there until 2021. Al-Saati operated a garage near the farm and also had a fleet of tow trucks. Zwaan looked after the farm. Zwaan contributed financially to the farm in 2009 by investing an inheritance she received from her mother.
6In 2015, Al-Saati defaulted on his mortgages on the farm and power of sale proceedings were commenced. Zwaan purchased the farm with funds received from her family and by way of a mortgage with Accomplish Capital. At some point following this, a portion of the farm property was expropriated by the province and funds received from the province were applied against the mortgage.
7In 2017, Zwaan obtained a first mortgage for the farm from Merk Investments Ltd. (“Merk”). While this first mortgage was initially held by Merk, it was quickly transferred to another lender named Larry Kelln (“Kelln”).
8On January 26, 2018, a fire broke out at the farm and a barn was destroyed. At the time, the farm was insured by Intact Insurance. Zwaan provided Intact Insurance with a proof of loss claim and Intact Insurance agreed to pay $36,200 which represented the cost of cleaning up after the fire.
9On April 3, 2018, Intact Insurance issued a cheque in the amount of $36,200 payable to Zwaan as the owner and Merk as the first mortgagee. At the time Zwaan thought that Merk was still the mortgagee. She was not aware it had been transferred to Kelln.
10Zwaan testified that she received the cheque in the mail. She testified that she was surprised that it was both in her name and Merk’s. However, in cross-examination she agreed that there had been e-mail communication with Intact Insurance wherein the insurance company advised that the cheque would be in both names.
The insurance cheque
Evidence of Zwaan
11Zwaan testified that she sought the advice of Al-Saati with respect to how she could cash the insurance cheque given there were two payees. Al-Saati told her that he would show the cheque to Laframboise who was his lawyer at the time.
12On March 24, 2018, Laframboise contacted Intact Insurance and asked if the cheque could be made out to him, “in trust” to facilitate the cashing of the cheque. According to Zwaan she did not instruct Laframboise to contact Intact Insurance, but she agreed that Intact may have told her about Laframboise’s request.
13Zwaan testified that she was not sure if she contacted Laframboise, or if he contacted her, however at some point Laframboise told her that he would run the cheque down to the Skylark office, where Merk was located, and have them sign the back of the cheque.
14Zwaan testified that she drove to Mississauga, where the Skylark office was located. She had the cheque with her and went into the office. She met with Laframboise who told her to sign the back of the cheque and that he would get Merk to sign the back of the cheque as well. Laframboise told her he would put the cheque into his trust account. Zwaan testified that she asked Laframboise to apply the funds from the cheque to the first mortgage. At the time, Laframboise did not tell her that Merk was no longer the mortgagee for the farm.
15Zwaan testified that when she went to the office in Mississauga, she had the impression that Laframboise was friendly with the people at Merk by the way he was acting.
16Zwaan testified that after a week or so, she called Laframboise to follow up and ensure that the funds were put towards her mortgage. Laframboise told her that he tried to give Merk the cheque or the funds to pay down the mortgage and they declined it. Laframboise did not explain why. Zwaan thought it was odd that a lender would reject money. Zwaan testified that she could not recall the exact words, but that Laframboise told her that the cheque would be safe in his trust account and that it wasn’t going anywhere.
17Zwaan testified that from time to time she would ask about the cheque and Laframboise would tell her not to worry about it. He did not tell her that he had deposited the cheque into his personal bank account.
Evidence of Laframboise
18At the commencement of this trial, Laframboise admitted as a fact that the Intact Insurance cheque was deposited into his personal bank account at the National Bank of Canada on April 17, 2018.
19Laframboise testified that he only dealt with Al-Saati about the cheque and never dealt with Zwaan. According to Laframboise, Al-Saati spoke to him and asked how they could get the money directly. Laframboise suggested that if they could get the cheque made payable to him, in trust, and they then provided a direction to him, he could then direct the money back to them.
20Laframboise testified that he met with Al-Saati, probably in Parry Sound, and that Al-Saati gave him the Intact Insurance cheque which had already been endorsed by Zwaan. Laframboise testified that Al-Saati told him to apply the insurance money towards the mortgage.
21Laframboise testified that he did not go to Merk to have the back of the cheque signed. Instead, he deposited the single endorsed cheque into his personal bank account and used the money to cover Zwaan and Al-Saati’s portion of the mortgage payments.
22With respect to his March 24, 2018 e-mail to Intact, Laframboise testified that he sent this e-mail on the instruction of Al-Saati.
23Laframboise testified that he did not have anything in writing that reflected his conversations with Al-Saati about the cheque or Al-Saati’s direction to apply the funds towards the mortgage.
Evidence of Michael Slattery
24Michael Slattery was called as a witness at trial. Slattery is CEO of Merk investments. Slattery testified that in 2017, Laframboise referred a mortgage to him for 27 Farm Lane, in Britt. Initially Merk registered the mortgage, however it was almost immediately transferred to Larry Kelln. The funds advanced under the mortgage came from Kelln.
25At the time, Kelln was a client of Merk, and Merk handled a lot of Kelln’s mortgages. Between 2017 to 2019, Laframboise would bring in a cheque for the mortgage to Slattery and he would forward it to Kelln. In 2019, Laframboise made payments directly to Kelln.
26The mortgage was an interest only mortgage, and the monthly payments were $3,916.67, payable to Kelln.
27Slattery testified that he could not recall if Laframboise approached him about signing the Intact insurance cheque. He testified that if he was asked, he would not have signed the cheque because he was not the mortgage holder at that time.
The relationship between the parties
28Zwaan testified that the mortgage payments for the Merk mortgage were approximately $4,000 per month. At the time, she had an arrangement with Laframboise where he would pay her $2,000 in exchange for using a portion of the farm property to grow marijuana. Each month she would forward $2,000 to Laframboise and then Laframboise would forward her contribution and his own contribution to Merk to cover the mortgage payments.
29Zwaan testified that she and Al-Saati each contributed to the $2,000 portion of the monthly mortgage payments. The amount of money she received from Al-Saati varied from month to month.
30With respect to the $36,200 cheque, Zwaan testified that none of these funds were ever applied to the Merk/Kelln mortgage.
31Laframboise testified and denied that he ever paid for the use of land on the farm. According to Laframboise, he was effectively partners with Al-Saati with respect to the farm and their intent was to sell the farm. Laframboise testified that he had a personal financial interest in ensuring that the farm was not lost due to power of sale proceedings.
32According to Laframboise, he introduced Zwaan to Merk for the purposes of arranging a mortgage so that they could keep running the farm.
33Laframboise testified that he contributed $2,000 of his own money each month as partial payment of the Merk/Kelln mortgage, and not for the use of the land. According to Laframboise, the parties agreed that the monthly mortgage payments would be covered as follows: Laframboise would pay $2,000 a month, Zwaan would pay $1,000 a month, and Al-Saati would pay $1,000 a month.
34Laframboise testified about a separate legal proceeding involving Al-Saati and a loan that Laframboise guaranteed with the TD bank. Those proceedings appear to have commenced sometime in 2012. In the course of those proceedings, which are ongoing, Laframboise was ordered to make certain payments including costs awards. According to Laframboise, he was motivated to have the farm property sold so that he could pay these orders.
The power of sale proceedings in 2020
35Zwaan testified that she continued to make her portion of the monthly mortgage payments on the farm property up until November 1, 2020. At that time power of sale proceedings were commenced.
36In December 2020, Zwaan went to see her lawyer, Mr. Kostyniuk (“Kostyniuk”) about the power of sale proceedings.
Efforts to locate the cheque
37During Zwaan’s consultation with Kostyniuk, they came across reference to the insurance cheque and wondered what had happened to it. They contacted the insurance company who told them that the cheque had never been cashed. At the time this was good news for Zwaan because she was in dire financial need. Kostyniuk made several requests to Intact, on behalf of Zwaan, to have the cheque re-issued.
38In July 2021, Zwaan was examined by Laframboise in relation to a separate legal proceeding. While they were in the examination room, Kostyniuk asked Laframboise if he had possession of the cheque. Laframboise responded that he did not, and he did not know where it was. When asked if he denied having possession and taking the cheque to Slattery to sign, Laframboise replied that he did not remember. A transcript of this exchange was entered as an exhibit at trial.
39In cross-examination, Laframboise was taken to the transcript of this exchange and acknowledged that this exchange occurred. Laframboise testified at trial that when Kostyniuk asked him where the cheque was, he did not know where the physical cheque was at that time. By then the cheque had gone into his account and so he did not know where it was.
40In August 2021, Intact Insurance advised Zwaan that they had been mistaken about the cheque and in fact it had been cashed on April 17, 2018. As a result of this information, on August 25, 2021, Kostyniuk wrote to Laframboise about the cheque as follows:
I understand from Ms. Zwaan and from information received from Intact Insurance Company, that on April 17, 2018, you deposited, to your trust account, a settlement cheque in the sum of $36,200.00, issued by Intact Insurance Company payable to Sylvia Zwaan and Merk Investments Limited. Ms. Zwaan says you have not delivered a report to confirm receipt or deposit of those trust funds, as mandated by the Rules of Conduct of the Law Society.
Enclosed is an Authorization and Direction executed by Sylvia Zwaan to forthwith transfer the said funds from your trust account to the trust account of the Law Offices of Robert N. Kostyniuk Q.C. My firm’s trust account is at TD Canada trust, Branch No. 1741, Account No. 5207509.
41On September 2, 2021, Laframboise replied as follows:
Further to your letter of August 26, 2021, I can advise that Ms. Zwaan was not a client of mine and as such no monies from her, as there weren’t any, or the cheque in question went through my Trust account. I hope you have been clearly informed.
42In cross-examination, Laframboise was taken to this correspondence. When asked why he did not advise Kostyniuk that he had in fact received the cheque and deposited it into his personal bank account and applied it towards the mortgage, Laframboise testified that he was responding only to the issue raised by Kostyniuk, which was whether he had deposited the cheque into his trust account, which he had not. According to Laframboise he was more concerned about an allegation that he had improperly dealt with his trust account and the threat of reporting him to the Law Society.
The Statement of Defence
43In cross-examination, Laframboise was taken to his statement of defence filed in this action. The statement of defence set out the following defence:
a. Zwaan and Al-Saati “owed the Defendant Laframboise significant monies for past legal fees”.
b. Zwaan “was instructed by Al-Saati, and she agreed, to partially pay the amount they owed the Defendant for legal services with the insurance cheque”.
44Laframboise testified that he “mis-typed” the statement of defence and what he meant to say was that he was owed legal monies as a result of the legal action involving the TD bank. The TD bank proceedings were the result of Al-Saati not paying a debt that he owed to TD, and Laframboise was on the hook for that debt and costs orders because he had signed as a guarantor.
45Laframboise suggested in cross-examination that he would simply amend his statement of defence to reflect the defence he was tendering at trial.
46Laframboise acknowledged that he understood that as a lawyer if he received money and applied it to fees (as pled in his statement of defence) he could not convert the money towards fees unless he delivered a statement of account.
47In cross-examination, Laframboise acknowledged that he never received authorization from Zwaan to deposit the cheque into his personal account.
Reply evidence
48Zwaan testified in reply with respect to Laframboise’s assertion that the money from the insurance cheque had been used to make mortgage payments on her behalf in relation to the farm. According to Zwaan, she made the monthly payments each month via e-transfer and there was never a month where she made no payment at all. Zwaan did not have her bank records with her at this trial, however she had filed them in the other legal proceedings with Laframboise. She was not cross-examined on her evidence in reply.
The Law
The Tort of Conversion
49Conversion consists in a wrongful taking, using or destroying of goods or the exercise of dominion over them that is inconsistent with the title of the owner. It is an intentional exercise of control over a chattel which seriously interferes with the right of another to control it. G.H.L. Friedman, The Law of Torts in Canada, 3rd ed. at page. 117.
50The tort of conversion involves the willful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner’s right of possession. The tort of conversion is one of strict liability. Teva Canada Limited v. Bank of Montreal, 2016 ONCA 930 at para. 24; and Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727 (SCC).
51Failure or refusal to return goods because (a) they have been delivered to a third person, (b) they have been destroyed or consumed by the defendant, or (c) they are claimed by the defendant or someone else, may amount to conversion. The Law of Torts in Canada, at page 119.
52The tort of conversion is one of strict liability. Any person who receives and disposes of personal property without satisfying himself/herself as to the state of title does so at his/her peril. The fact that the wrongful act was committed in good faith or in innocence will not excuse the defendant. The Law of Torts in Canada, at pages 125-126.
53An authorized interference is not wrongful. Therefore, it cannot amount to conversion. In 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81, at para. 8, Justice Major described this as follows:
An owner’s right of possession includes the right to authorize others to deal with his or her chattel in any manner specified. As a result, dealing with another’s chattel in a manner authorized by the rightful owner is consistent with the right of possession, and does not qualify as a wrongful interference.
54In Kew v. Kornarski, 2020 ONSC 4677, at para. 22, Justice I.F. Leach summarized the essential elements of the tort of conversion as follows:
There are three essential elements which must be established to make out the tort of conversion:
i. the property forming the subject matter of a conversion claim must be specific personal property;
ii. the plaintiff must have a possessory interest in the relevant chattel; and
iii. the defendant must commit an intentional and wrongful act in respect of the chattel.
As far as the first essential element of conversion is concerned, in most cases the property forming the subject matter of a conversion claim will be a specifically identified or identifiable chattel. While specific exceptions have been created and applied by the courts from time to time, the general rule is that the tort of conversion applies only in relation to specific personal property.
In relation to the second essential element of conversion:
i. In order to maintain an action for conversion, a plaintiff must establish a sufficient possessory right to the chattel. In particular, the plaintiff must prove that, at the time of the conversion, he or she had actual possession of the chattel or a right to its immediate possession.
ii. An owner who has neither possession nor the right to immediate possession of goods accordingly cannot maintain an action, whereas a possessor without title, (such as a finder or bailee), may recover their full value.
iii. A defendant may show that the plaintiff is not entitled to possession of the relevant goods by reason of a valid subsisting lien which the defendant holds over the goods. However, a defendant without a valid lien, who attempts to address the plaintiff's alleged non-payment for services by seizing and retaining property such as vehicles, and by transferring such property into the defendant's name, may be liable in conversion.
In relation to the third and final essential element of conversion:
i. The plaintiff must show some deliberate act of interference or dealing with the chattel which is inconsistent with or repudiates the plaintiff's right to the chattel. The defendant must have intended to exercise a dominion over the relevant property; the mere fact of possession, when unaccompanied by such an intention, is not sufficient. The crucial decision in most conversion disputes is whether or not the defendant's dealings with the plaintiff's goods were serious enough to amount to a denial of the plaintiff's possessory rights. The interference must be substantial, not temporary or trivial. In that regard, it is useful to remember that the measure of damages for conversion ordinarily is the full value of the chattel, (a special rule of damages placing conversion in an exceptional position among tort remedies), which effectively forces an involuntary purchase on the "convertor". That in turn provides an important clue for determining whether a tortious meddling with property is serious enough to justify the drastic sanction of compelling the wrongdoer to buy the plaintiff out.
ii. In this context, the "wrongful" nature of the defendant's conduct does not mean "blameworthy". The "wrongful" aspect of the tort of conversion is based upon the offending party acting in a manner that is inconsistent with the plaintiff's right of possession.
iii. The defendant's conduct must be "intentional", in the sense of not being accidental. Negligent dealing with goods, or accidental destruction of them, does not constitute conversion. However, an intention to commit the tort of conversion is not required; the perpetrator need only have intended to do the physical act or to authorize the transaction that the court later finds amounted to a conversion.
iv. However, as conversion is a "strict liability" tort, the wrongful act committed by the defendant may be done in innocence or in good faith, and it is no defence that the defendant did not know, nor could not have known by the exercise of any reasonable care, of the plaintiff's interest in the goods. Nor is being mistaken as to the consequences of one's deliberate act any defence to liability for conversion.
v. The requisite intention, (i.e., to interfere or deal with a chattel in a manner inconsistent with a plaintiff's right to the chattel, or which repudiates the plaintiff's right to the chattel), is proved conclusively if the defendant has taken and used the relevant goods as his own. It is also established by the destruction of goods, (including their disappearance), or alteration of their nature.
Analysis
55There is no issue in this trial that the Intact Insurance cheque, and the funds associated with it, amounted to specific personal property. Further, there is no issue that Zwaan had a possessory interest in it given she was one of the payees, and was the person entitled to the insurance proceeds. Zwaan was the policy holder and the owner of the property that had been damaged.
56The issue in this trial is whether Zwaan has established, on a balance of probabilities, that Laframboise committed an intentional and wrongful act with respect to the Intact Insurance cheque and the funds associated with it. This is the third essential element of conversion.
57In order to determine whether the plaintiff has established this third essential element, on a balance of probabilities, I must assess the evidence called at trial.
58I have carefully reviewed the evidence of Zwaan and Laframboise and make the following findings with respect to the reliability and credibility of their evidence.
Zwaan’s evidence
59Overall, I found Zwaan to be a credible witness. She testified in a sincere and forthright manner. Her evidence was, for the most part, consistent and not seriously challenged in cross-examination. She answered questions directly and was not argumentative. I found that she was genuinely attempting to provide an accurate and truthful account of events surrounding the issues at trial.
60It was clear to me that the passage of time had impacted Zwaan’s ability to recall some of the events. On a number of occasions, she was unable to remember certain events and had to be prompted on issues such as dates. I did not find this this detracted from her overall credibility. I was assisted by the documentary evidence tendered at trial which provided independent evidence as to the dates on which certain events occurred.
61When Zwaan was taken to an e-mail which contradicted her evidence in chief that she was surprised that the cheque arrived in two names, she readily conceded the accuracy of the e-mail and agreed that she had been mistaken in her evidence. I did not find this inconsistency to be a material one, and Zwaan’s acceptance of her mistake did not detract from her credibility.
62I found Zwaan’s evidence made sense when assessed against the totality of evidence tendered at trial. For example, her evidence that she understood that the Intact insurance cheque would be placed into Laframboise’s trust account, is supported by the e-mail communication where Laframboise asked Intact insurance to send the cheque to him “in-trust”. The idea of the cheque being placed into Laframboise’s trust had clearly been considered at some point.
63It makes sense that when Zwaan received the insurance cheque payable to both herself and Merk, that she would seek out Laframboise’s assistance in having the cheque endorsed by Merk. Laframboise introduced Zwaan to Merk and was the person who made the monthly mortgage payments directly to Slattery at that time.
64Zwaan was able to provide detail with respect to how and when she signed the back of the cheque. She testified that she travelled to the office building where Merk was located in Mississauga. She was able to describe the manner in which Laframboise interacted with the individuals at that office, which seemed to be friendly. Further, it makes sense that she would bring the cheque to the Merk offices, so that they could sign back of the cheque as co-payee, and the funds could then be released to her for her use.
The credibility and reliability of Laframboise’s evidence
65With respect to the testimony of Laframboise, I found his overall evidence to be lacking in credibility. At times, I found he was attempting to provide an answer that would best fit the scenario put to him. I noted that at times during cross-examination he became argumentative and combative. He often wished to divert the issues in this trial, to issues arising in other unrelated proceedings. Finally, the evidence of Laframboise had significant inconsistencies which detracted from his credibility.
66Laframboise’s testimony at trial, that he deposited the insurance cheque into his personal bank account, was surprising given he had denied any knowledge of the whereabouts of the cheque in July and August 2021.
67I do not accept Laframboise’s evidence with respect to the answers he provided to Kostyniuk during the July 2021 examination proceedings. The transcript of the brief exchange clearly demonstrates that Kostyniuk was asking Laframboise about where the Intact Insurance cheque went. I find that Laframboise’s responses in July were a clear attempt to evade the question and deny any knowledge of the cheque. The questions were clear, Kostyniuk was asking if Laframboise had the cheque and Laframboise was telling him that he did not.
68Laframboise’s evidence on this issue at trial was that when he was asked in July 2021 about where the cheque was, he did not know where the “physical” cheque was, because by that point it had been deposited. I find this to be an attempt to place a literal and technical spin on what was a very simple question.
69If Laframboise was confused by the July questions, the situation would have become much clearer when he received Kostyniuk’s August 25, 2021 correspondence. Again, this correspondence is clearly an attempt by Kostyniuk to have the cheque returned to Zwaan. The details of the cheque, including the payees and the amount, were clearly set out in the letter. There could be no confusion about what was being sought.
70I find that Laframboise’s response on September 2, 2021, was clearly an attempt to evade the issue. I do not accept Laframboise’s evidence that he thought he only had to respond to the allegation that he had deposited the cheque into his trust account, as opposed to another bank account. Laframboise was faced with a clear inquiry from a fellow lawyer about the whereabouts of a specific cheque. Instead of advising Kostyniuk that the cheque had been deposited into his personal bank account and the funds applied to paying down Zwaan’s portion of the mortgage for the farm, Laframboise evaded the issue and provided a cryptic response.
71In my view, any reasonable lawyer faced with a letter asking for the return of a specific cheque coupled with a suggestion that the Law Society might have to become involved, would have responded by saying that the cheque had not been placed in a trust account, but rather it had been placed in a personal bank account and used to pay off Zwaan’s portion of the mortgage. This would have been a complete response to the issue. It would have been in Laframboise’s interest to provide this information, as it would have absolved him from any wrongdoing with respect to the cheque and associated funds.
72When taken to his statement of defence, in which Laframboise pled that the insurance cheque was used to pay “past legal fees” owed to him by the plaintiff and Al-Saati and that the funds were used to pay for “legal services”, Laframboise testified that this was a “mistype” and that he was referring to the “legal monies owing” in the TD bank litigation. His evidence on this point makes no sense. The legal monies owing in the TD bank litigation were costs orders made against Laframboise personally. They were not “legal fees” for “legal services”. Laframboise is a lawyer and would understand what “legal fees” are and how they relate to “legal services”. I found his response on this point to be disingenuous.
73Further, on Laframboise’s own evidence, Zwaan was never a client of his. As such, there were never any “past legal fees” for “legal services” owed to Laframboise by Zwaan.
74I found Laframboise’s evidence with respect to how he received the cheque to be vague. He testified that it probably happened in Parry Sound, because he went to Parry Sound often when dealing with Al-Saati. He seemed to have no independent recollection of where he was when he allegedly had a conversation with Al-Saati and received the cheque.
75When Laframboise was asked in July 2021 if he denied having possession of the cheque and taking the cheque to Slattery to sign, Laframboise replied that he did not remember. It is hard to reconcile these statements with Laframboise’s evidence at trial that he remembered receiving the cheque from Al-Saati; that he did not have the cheque endorsed by Slattery or Merk; and that he deposited it in his personal account with only one signature.
76Laframboise evidence with respect to the circumstances under which he sent Intact Insurance a request that the cheque be payable to him in trust was problematic. When asked if he received the e-mail from Intact Insurance about the cheque, Laframboise initially testified that he got the e-mail from Zwaan. When asked to look at the e-mail further, he agreed that the e-mail was addressed to him, but he testified that he could not say if he got it from Intact Insurance or Zwaan. This evidence was inconsistent with Laframboise’s earlier evidence that he never dealt with Zwaan and only dealt with Al-Saati when it came to the insurance cheque.
Findings of fact
77I accept the evidence of Zwaan and find as a fact that she spoke to Laframboise about how to cash the Intact Insurance cheque given there were two payees. I further accept the evidence of Zwaan and find as a fact that she travelled to Mississauga where she endorsed the cheque and gave it to Laframboise to have Merk endorse the back of the cheque so that it could be cashed.
78I accept the evidence of Zwaan and find as a fact that she was told by Laframboise that Merk would not accept the cheque as payment towards the mortgage. This is supported by the evidence of Slattery, who testified that had he been presented with the cheque he would not have signed it because Merk did not hold the mortgage on the property.
79I find as a fact that Laframboise, faced with either the inability to have Slattery sign the back of the cheque on behalf of Merk or a refusal by Slattery to sign the back of the cheque, took the cheque and deposited it into his personal bank account without obtaining the required second signature. For reasons unknown, the bank permitted this deposit. I find that Laframboise did this without the prior direction or authorization of Zwaan.
80I accept Zwaan’s evidence and find as a fact that Laframboise told her that he would put the cheque into his trust account and keep it safe for her.
81I accept Zwaan’s evidence, and find as a fact, that the money from the Intact Insurance cheque was not applied to the Merk/Kelln mortgage. I find that Zwaan would be in a position to know whether it was applied to the mortgage given she was the mortgage holder and was involved in power of sale proceedings. Zwaan testified that she reviewed and filed her bank statements in another proceeding on this very issue.
82Zwaan was not challenged on her evidence that the funds from the cheque were not applied to the mortgage. In reply, Zwaan testified that there was no need for the funds to be applied against the mortgage because she made her monthly payments. Laframboise chose not to cross-examine her on this evidence. Further, Laframboise did not challenge Zwaan’s evidence by producing his bank records which would have shown where the $36,200 went.
83I find that this was an area where an unfairness arose due to Laframboise’s failure to plead the defence he tendered at trial in his statement of defence. Had Laframboise pled that the funds from the insurance cheque were applied against the mortgage, the plaintiff would have been in a position to tender her banking records and mortgage statements at trial.
84It was clear to me that the position taken by Laframboise during the trial had been sprung upon the plaintiff at the very last minute. During the trial, which lasted one day, counsel for the plaintiff advised the court that he had not brought all of the banking records with him. Counsel ultimately relied on the evidence of Zwaan that the funds has not been applied towards the mortgage and submitted that the court should accept her evidence on this point.
85In any event, I am satisfied and accept Zwaan’s evidence that the funds were not used to pay her portion of the mortgage payments.
Was there an unlawful conversion?
86I have found that Zwaan gave the insurance cheque to Laframboise with the instruction that he have it endorsed by Merk and then applied towards her mortgage. When that could not happen, Zwaan agreed to have Laframboise place the insurance cheque into his trust account for safe keeping.
87Instead of keeping the insurance cheque in his trust account, Laframboise deposited it into his personal bank account, intermingling it with his personal funds. He did so, without the knowledge and agreement of Zwaan as the first named payee. Further, he did so without the signature and authorization of the second payee, Merk.
88When Laframboise placed the Intact insurance cheque into his personal account, he exercised dominion over the cheque and associated funds and further deprived Zwaan of her possessory right to the cheque and funds. Laframboise did this intentionally. This interference was substantial, as the funds went into Laframboise’s personal account.
89Even if I am wrong, and placing the cheque into Laframboise’s personal bank account did not amount to a conversion (which I find it did), I find that Laframboise’s later refusal to return the cheque or funds to Zwaan upon request in 2021 amounted to a conversion.
90I note that even on Laframboise’s own evidence at trial, he received a cheque payable to two payees. He took direction with respect to what to do with the cheque from a third-party non-payee, Al-Saati. Laframboise took no steps to assure himself that the purported signature on the back of the cheque was genuinely Zwaan’s. He took no steps to have the second payee sign the back of the cheque. He obtained no direct approval with respect to what to do with the cheque or the associated funds from either payee. Instead, he deposited the cheque into his personal bank account and used the funds in accordance with a direction received from the third-party. He did so at his own peril.
91For the reasons set out above, I am satisfied, on a balance of probabilities, that the defendant Laframboise unlawfully converted a cheque and funds belonging to the plaintiff Zwaan for his own use.
92As such, Zwaan is entitled to the return of the $36,200 insurance settlement funds.
General and punitive damages
93The plaintiff seeks general damages in the amount of $25,000 and punitive damages in the amount of $50,000.
94I did not receive extensive submissions on this issue, other than the submission that Laframboise’s conduct was so egregious that it warrants punitive damages.
95General damages are compensatory damages. They are awarded primarily to compensate a plaintiff for pecuniary and non-pecuniary losses suffered as a result of the defendant’s conduct. Punishment is not a principal aim of general damages. Hockley v. Riley, 2007 ONCA 804 at para. 24.
96I haven’t received any evidence with respect to any specified harm that arose from the failure to give back the funds from the insurance cheque. The evidence was that Zwaan agreed to have the cheque (funds) placed in Laframboise’s trust account. She did not know that Laframboise had spent the funds. Zwaan did not ask for the funds back until 2021, when she found herself in a difficult financial situation. This action followed shortly after her request for the return of the funds. In my view, any harm that arose from the failure to pay this money back will be addressed by way of pre-judgement interest.
97Punitive or exemplary damages are designed to punish the defendant and to deter both the defendant and other potential wrongdoers from addressing the objectives of retribution, deterrence and denunciation. These types of damages are to be resorted to only in exceptional cases and with restraint. Hockley v. Riley, 2007 ONCA 804, at paras. 24-25.
98I find that punitive damages are warranted in this case. This was a case where the plaintiff trusted the defendant, a lawyer, to keep her asset safe in his trust account. The defendant betrayed that trust and converted the asset to his own use and used it for his own purposes. This type of conduct requires strong denunciation by the court. It was a breach of trust, regardless of the fact that it did not occur within the context of a solicitor/client relationship.
99The defendant’s behaviour became even more reprehensible when faced with repeated requests for the return of the funds by the plaintiff’s lawyer. Instead of simply paying the plaintiff back the funds she was owed and putting an end to the matter, the defendant went on to falsely deny any knowledge of the whereabouts of the cheque. This was deceitful and worthy of denunciation.
100In my view, punitive damages in the amount of $50,000 are appropriate in the circumstances of this case. I find that this is one of those exceptional cases where the court must denounce the repeated unlawful and deceitful behaviour of the defendant.
Orders
101As a result of my findings, I make the following orders:
a. Douglas Laframboise shall pay $36,200 to Sylvia Zwaan within 30 days of the release of this decision;
b. Pre-judgement interest shall apply to the $36,200 from the date of conversion which I find to be April 17, 2018, at a rate of 4%;
c. Douglas Laframboise shall pay $50,000 to Sylvia Zwaan within 30 days of the release of this decision. No pre-judgement interest applies to this amount in accordance with section 128(4) of the Courts of Justice Act, R.S.O. 1990, C.C.43.
102The claim as against DDH Law Firm is dismissed.
Costs
103If the parties cannot agree on the issue of costs, the plaintiff may serve and file written submissions with respect to the issue of costs within 30 days of the release of this decision. The plaintiff’s written submissions shall not be more than 3 pages in length, exclusive of any costs outline.
104Upon receipt of the plaintiff’s written submissions, the defendant shall have 15 days in which to serve and file written submissions of the same length and format.
The Honourable Madam Justice S.K. Stothart
Released: January 2, 2024