Rozin v. Ilitchev et al. [Indexed as: Rozin v. Ilitchev]

66 O.R. (3d) 410

[2003] O.J. No. 3158

Docket No. C37575

Court of Appeal for Ontario,

Borins, Sharpe and Armstrong JJ.A.

August 6, 2003

Civil procedure -- Summary judgment -- Genuine issue for trial -- Judge on motion for summary judgment required to assess record with view to determining whether there is genuine issue of disputed facts -- Self-serving affidavits that merely assert defences without providing some detail or supporting evidence insufficient to create genuine issue for trial.

In 2000, the defendant II, who presented himself as a financial advisor and stock promoter, persuaded the plaintiff, GR, to invest in Thermal Conversion Ltd. ("Thermal"), which II represented as a successful company planning an initial public offering. The investment was made through Northwest Financial & Investment Corporation (Canada) ("Northwest"), of which II was president and a director. However, Thermal did not exist, and GR lost his money. He sued Northwest, II and II's wife, MI, who was an officer of Northwest, for fraud, and he sued II for repayment of two loans, one for $7,500 (Cdn) and the other for $7,500 (US). In his defence, II said that he too was a victim of fraud. Rozin moved for summary judgment. The motion was successful, and Northwest, II and MI appealed.

Held, the appeal should be allowed in part.

The motions judge did not err in granting summary judgment against Northwest and II for fraud. There were many gaps, inconsistencies and contradictions in II's evidence, and he failed to satisfy a long list of undertakings to produce documents that would support his bald assertions that he was the victim and not the [page411] perpetrator of a fraud. While a judge on a motion for summary judgment must avoid making findings on contested factual issues, he or she is required to assess the record with a view to determining whether there is a genuine issue of disputed facts. Self-serving affidavits that merely assert defences without providing some detail or supporting evidence are not sufficient to create a genuine issue for trial. On the record, it was open to the motions judge to find that the defendants' evidence was so disingenuous as to not constitute a genuine issue for trial. However, the motions judge erred in law in granting summary judgment against MI and against II with respect to the two loans. GR's case against MI essentially rested on her failure to provide evidence denying her personal knowledge or complicity in her husband's fraudulent scheme. The claim against MI was supported by very little evidence, and the evidence failed to establish a prima facie case for her. While a party faced with a motion for summary judgment is required to put his or her "best foot forward", there must be a case to answer. As for the claim with respect to the loans, in the face of conflicting evidence and in view of the fact that the notes were executed only on behalf of Northwest and not on behalf of II personally, there was a genuine issue for trial.

Cases referred to 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 21 O.R. (3d) 547, 43 R.P.R. (2d) 161 (C.A.); Aguonie v. Galion Solid Waste Material Inc. (1998), 38 O.R. (3d) 161, 156 D.L.R. (4th) 222, 17 C.P.C. (4th) 219 (C.A.), revg (1997), 33 O.R. (3d) 615 (Gen. Div.); Blackburn v. Lapkin (1996), 28 O.R. (3d) 292, 134 D.L.R. (4th) 747 (Gen. Div.); Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, 49 B.L.R. (2d) 68, [2000] I.L.R. Â1-3741, 178 D.L.R. (4th) 1, 247 N.R. 97, 39 C.P.C. (4th) 100; Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), 22 O.R. (3d) 25 (Gen. Div.); Royal Bank of Canada v. Feldman (1995), 27 O.R. (3d) 322n (C.A.), quashing (1995), 23 O.R. (3d) 798 (Gen. Div.); ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481, 129 D.L.R. (4th) 711 (C.A.); Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.) APPEAL of a summary judgment in an action for damages for fraud.

Sandra L. Secord and Jeffrey Simpson, for respondent. Mark Joseph, for appellants.

The judgment of the court was delivered by

[1] SHARPE J.A.: -- The respondent plaintiff was persuaded by the appellant Igor Ilitchev to invest money in the shares of Thermal Conversion Ltd. ("Thermal"). Ilitchev presented Thermal as a successful company planning an initial public offering. Thermal did not exist, there was no initial public offering, and the respondent's money, which he paid to Northwest Financial & Investment Corporation (Canada) ("Northwest"), was lost. Igor Ilitchev is the president and director of Northwest. Igor Ilitchev blames others for the Thermal fraud and says that he too was a victim, but he failed to satisfy undertakings given on cross-examination to produce documents that would support his defence. [page412] The respondent also claims payment of two loans to Igor Ilitchev, one for $7,500 (Cdn) and the other for $ 7,500 (U.S.).

[2] The respondent also alleges that Marina Ilitchev, Igor's wife, is liable for the alleged fraud as a principal officer and directing mind of Northwest, but offered scant evidence of her actual involvement in the company and no evidence of her involvement in the fraud. Marina Ilitchev did not file an affidavit to deny the respondent's allegations.

[3] Pitt J. granted the respondent's motion for summary judgment against both Igor and Marina Ilitchev, as well as against Northwest. Igor and Marina Ilitchev appeal, arguing that the respondent failed to meet the test for summary judgment. For the reasons that follow, I conclude that the motions judge properly granted summary judgment against Igor Ilitchev for $145,000 paid by the respondent for the Thermal shares, but that the motions judge erred in granting summary judgment for that amount against Marina Ilitchev and against Igor Ilitchev for the amount of the alleged loans.

1. Claims against Igor Ilitchev

(a) Thermal shares

[4] The respondent filed extensive affidavit evidence setting out in considerable detail his case against Igor Ilitchev. Ilitchev presented himself to the respondent and to other affiants as a financial advisor and stock promoter engaged in various business ventures. Between August and October 2000, Ilitchev persuaded the respondent to invest in the shares of Thermal, a company said by Ilitchev to be producing energy efficient engines. He told the respondent that Thermal was doing well financially, that it was planning an initial public offering, and that it presented a very attractive and profitable investment opportunity. Similar representations were made to other potential investors. None of Ilitchev's representations were true. Thermal did not exist and there was no initial public offering. The respondent swears that he made several advances to Ilitchev totalling $145,000 to purchase Thermal shares. These advances are supported by promissory notes, executed by Ilitchev on behalf of Northwest and, as the notes state, on behalf of "Mr. Igor Ilitchev personally (by own Canadian assets) . . .".

[5] In his responding affidavits, Ilitchev admitted that the respondent had advanced $115,000 to Northwest, but denied that the respondent made the final advance of $30,000. Ilitchev denied any personal liability on the ground that he was the victim, not the perpetrator of a fraud committed by another corporate entity [page413] and stated that he himself had invested and lost $100,000 in Thermal shares. Ilitchev asserts that his liability on the promissory notes was limited to his personal interest in Northwest, an assertion denied by the respondent and difficult to reconcile with the written terms of the notes. Ilitchev was extensively cross-examined on these assertions. Among the many gaps, inconsistencies and contradictions in Ilitchev's evidence are the following:

(a) He failed to satisfy a long list of specific undertakings to produce documents that would support his bald assertions. Most significant was his failure to provide any financial records from Northwest to support his assertion that he too was a victim of the fraud and had lost $100,000.

(b) He never provided the respondent or any of the other investors with a prospectus for Thermal, although he suggested that one existed.

(c) He could provide no details about Thermal, whether it was a Canadian or American company, its stock ticker symbol, or who was its underwriter.

(d) He gave far-fetched accounts of his own educational background.

(e) His evidence that the respondent failed to advance the final $30,000 was contradicted by documentary evidence including the promissory note he signed, and his failure to demand its return or destruction.

(f) When pressed for details about Thermal by a skeptical potential investor, he stated that there were no more shares available, but two weeks later, he tried to sell shares to another individual.

[6] In his brief endorsement, the motions judge found:

With respect to the liability of Igor Ilitchev and the corporate defendant there is not even a resemblance of a genuine issue for trial. It seems clear that the corporate defendant was used as an instrument of fraud in order to induce the plaintiff to invest in a non-existent company. Even if there was no fraud (which is unlikely) the defendants' actions were grossly negligent and reckless and were the direct cause of the plaintiff's loss.

[7] The appellants rely on the well-established rule that on a motion for summary judgment, the judge cannot assess credibility, weigh evidence or find facts. Rather, the judge is limited to assessing the threshold issue of whether there is a genuine issue for trial: see Aguonie v. Galion Solid Waste Material Inc. (1998), 38 O.R. (3d) 161, 156 D.L.R. (4th) 222 (C.A.). [page414] The appellants submit that, in view of Ilitchev's sworn denials of the respondent's allegations, there is a genuine issue for trial issue and that summary judgment should have been refused.

[8] In my view, the motions judge did not err in granting summary judgment against Igor Ilitchev and Northwest. On this record, it was open to the motions judge to find that there was no genuine issue for trial. While a judge must avoid making findings on contested factual issues on a summary judgment motion, a judge is also required to assess the record with a view to determining whether there is a genuine issue of disputed facts. Self-serving affidavits that merely assert defences without providing some detail or supporting evidence are not sufficient to create a genuine issue for trial: Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, 178 D.L.R. (4th) 1, at para. 31. As stated by Borins J. (as he then was) in Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), 22 O.R. (3d) 25 (Gen. Div.), at p. 28"The requirement that the parties put their 'best foot forward' goes together with the requirement that the motions judge 'take a hard look at the merits of the action at this preliminary stage' to determine whether the moving party has succeeded in establishing that there is no genuine issue for trial." Borins J. added, at pp. 28-29 O.R.:

What the defendant's position amounts to is this -- a genuine issue for trial is raised in every case in which a defendant swears that it does not owe a debt, notwithstanding overwhelming evidence to the contrary presented by the plaintiff, and in the absence of any additional evidence by the defendant to support its denial. Although in one sense an issue of credibility is raised on the assumption that a trial judge may believe the defendant, in my view in the context of the record in this case this does not constitute a genuine issue for trial . . .

(Emphasis in original)

[9] In the present case, the failure of Ilitchev to satisfy undertakings to provide the documentary evidence that would support his assertion that he was the victim, not the perpetrator, of the fraud, are particularly telling. One is left with Ilitchev's bald assertion of facts that he himself said could be supported when the relevant documents were produced. The documentary evidence that has been filed, including the promissory notes signed by Ilitchev in his personal capacity, supports the respondent's version. This evidence, combined with the startling inconsistencies and implausible elements in Ilitchev's evidence and his failure to provide any support for his defence, brings this case within the same category as Royal Bank of Canada v. Feldman (1995), 23 O.R. (3d) 798 (Gen. Div.), at p. 800, appeal quashed (1995), 27 O.R. (3d) 322n (C.A.) [page415] where it was held that ". . . considered in the context of all the evidence, the defendant's evidence is so disingenuous as not to constitute a genuine issue for trial." See also 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 21 O.R. (3d) 547, 43 R.P.R. (2d) 161 (C.A.), at p. 557 O.R.; Blackburn v. Lapkin (1996), 28 O.R. (3d) 292, 134 D.L.R. (4th) 747 (Gen. Div.), at p. 313 O.R.; Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), at pp. 434-35, affd [1997] O.J. No. 3754 (QL) (C.A.).

(b) Other loans

[10] The respondent also claims the amount of two loans, one for $7,500 (Cdn) and one for $7,500 (U.S.). The evidence as to these loans is conflicting. The respondent insists that they were personal loans to Igor Ilitchev to assist a friend in Russia. Ilitchev denies that and also denies that the respondent advanced any money on these loans. He relies on the fact that the promissory notes securing the loans were executed on behalf of Northwest only and not on his own behalf. He says that the promissory notes were intended to secure a finders fee for the respondent's introduction of certain other investors to Northwest. Liability of Northwest on the promissory notes is not disputed.

[11] The motions judge did not deal with these loans or notes as items separate and distinct from the Thermal transaction.

[12] In the face of this conflicting evidence and in view of the fact that the notes were executed only on behalf of Northwest, not on behalf of Ilitchev personally, it is my view that there is a genuine issue for trial and that the motions judge erred in granting summary judgment against Igor Ilitchev and Marina Ilitchev for the amount of these notes.

2. Claims Against Marina Ilitchev

[13] The respondent's summary judgment motion against Marina Ilitchev was supported by very little evidence. The respondent swore that he saw a business card naming Marina as on officer of Northwest and there is evidence she signed a personal guarantee for the investment of another investor. However, the respondent had no dealings with Marina Ilitchev. He adduced no evidence of any wrongdoing by her personally, and no evidence linking her with the wrongful conduct of Igor Ilitchev. The respondent's case against Marina Ilitchev essentially rested on her failure to provide any evidence denying her personal knowledge of or complicity in Igor Ilitchev's fraudulent scheme. [page416]

[14] The motions judge recognized that the case against her was "not as crystal clear as that of Igor" but concluded as follows: "Her failure to put her best foot forward as a party by denying in an affidavit the allegation that she was a director in a company that was used as an instrument of fraud and or recklessly to cause loss to the plaintiff renders her position no more defensible than that of Igor."

[15] In my respectful view, the motions judge erred in law in reaching this conclusion. There was hardly enough evidence to conclude that she was a director of the Northwest and, in any event, merely being the director of a company used as an instrument of fraud, without more, is not sufficient to support personal liability: see ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481, 129 D.L.R. (4th) 711 (C.A.). In my opinion, the evidence adduced by the respondent on the summary judgment motion failed to establish a prima facie case for the personal liability of Marina Ilitchev. While a party faced with a motion for summary judgment is required to put his or her "best foot forward", there must be a case to answer. In my view, as the respondent failed to present evidence that could support a judgment against Marina Ilitchev, her failure to respond provides no basis upon which an inference of liability could properly be drawn. Thus, the motions judge erred in law in granting summary judgment against her.

Conclusion

[16] For these reasons, I would allow the appeal in part and vary the judgment by amending para. 2 to provide that both Northwest and Igor Ilitchev are liable for $145,000, and that Northwest Financial & Investment Corporation is also liable for $19,000. Paragraph 3 of the judgment should be amended to provide that the costs order is against Northwest and Igor Ilitchev. The motion for summary judgment against Marina Ilitchev should be dismissed, but in the circumstances of this case and as all parties were represented by the same counsel, I would not alter the motions judge's costs order.

[17] As all appellants were represented by the same counsel and given the divided success on this appeal, it is my view that the parties should bear their own costs of this appeal.

Appeal allowed in part. [page417]