John Eagle Imports, L.L.P. v. Deluce, 2008 ONCA 836

DATE: 20081211

DOCKET: C47299

COURT OF APPEAL FOR ONTARIO

Weiler, Juriansz and MacFarland JJ.A.

BETWEEN:

John Eagle Imports, L.L.P.

Plaintiff (Respondent)

and

William Deluce, Maguro Investments Inc., William B. Cook and Mondial Commerce Bank

Defendants (Appellant)

Terrence O’Sullivan and Andrew Winton for the appellant

Chris MacLeod and R. Phalavong for the respondent

Heard: December 8, 2008

On appeal from the judgment of Justice J.A. Ramsay of the Superior Court of Justice dated May 23, 2007.

ENDORSEMENT

[1] This is an appeal from the judgment of Ramsay J. in the Superior Court of Justice dated May 23, 2007 finding the appellant liable for fraud and awarding of the respondent $216,000 and costs on a substantial indemnity basis fixed in the amount of $100,000. The basis of the appellant’s liability was his participation in a fraudulent scheme perpetrated by the defendant Cook, who by the time of trial was nowhere to be found.

[2] Cook induced the respondent to invest US$200,000 in a fraudulent scheme. In order to give the scheme an air of legitimacy, Cook claimed to be the agent of the appellant who is a well-to-do businessman. Cook represented that the appellant was involved in the transaction. Cook instructed the respondent to provide the US$200,000 to be invested in the form of a bank draft payable to Maguro Investments Inc., a single-purpose company incorporated by the appellant.

[3] The single-purpose for which the appellant says he incorporated the company was to engage in a “show of money transaction” with one Gibbons. Deluce had known Gibbons since 1996 and had participated with him in “show of money transactions” in the past. The transaction between the appellant and Gibbons worked as follows. Gibbons would pay a fee of $100,000 to the appellant upon the appellant and his company proving they had $10 million in the bank and agreeing to keep it there for a period of 30 days and passing a board resolution naming Cook director of finance of the company. The whereabouts of Gibbons is also unknown.

[4] On September 6, 2000, a representative of the respondent met with the appellant and Cook at the appellant’s lawyer’s office. The representative asked Cook: “Is this the man that I turn the cheque over to?” Cook answered: “Yes.” The representative gave the bank draft to the appellant and asked him to sign a copy of the draft as a receipt, which the appellant did. The representative then asked the appellant if the trades would “start now” and the appellant replied “Yes.” Cook also confirmed that the trades would start now. The appellant accepted the bank draft for $200,000, kept his fee of $100,000 for the “show of money” transaction, and remitted the remaining $100,000 to Gibbons. The board resolution appointing Cook director of finance of Maguro was passed the next day, though a draft had been circulated earlier.

[5] The appellant submits that there is no evidence that he was aware of or participated in Cook’s fraudulent scheme. He pointed out there is no evidence he knew anything about what Cook told the respondent. He argued that the respondent was not induced to make the investment by anything he said or did, and in particular the investment money had already been delivered to him when he confirmed that the trades would start now. Moreover, he argued there was no basis to infer he had anything in mind other than his own transaction with Gibbons. Finally, since the board resolution was passed after the respondent delivered the money, there is no basis upon which Cook could be found to be his agent, nor is there any basis upon which he could be found to have ratified Cooke’s acts.

[6] Despite the able argument of the appellant’s counsel, we do not agree. The appellant was asked by Gibbons to meet with Cook and the respondent. He realized the purpose of the meeting was for the respondent to mitigate its risk with respect to the transaction with Cook. Specifically, he admitted that he knew that the purpose of the meeting was for the respondent to confirm that $10 million was available. He met with the respondent. In fact, while the appellant had committed to hold $10,000,000 on deposit in the bank, Gibbons and Cook had no access to it and it could not legitimately provide any comfort to their investors. The trial judge observed that a sophisticated and astute investor like the appellant would appreciate the only possible value of the “show of money” transaction would be to allow someone like Cook to claim falsely that he was backed by the money. The trial judge inferred that the appellant allowed Cook to use the appellant’s name and that of his company and the fact they had $10 million in the bank to support any investments he solicited. The trial judge stated “If [the appellant] did not know what Cook was telling people, that is because he did not want to know.”

[7] In so finding the trial judge made an inference of fact that was logically grounded in the evidence. It was open to him to conclude that the appellant was, at least, wilfully blind to the fraudulent scheme and to his role in it. We see no error in this conclusion.

[8] Given this conclusion, it is not necessary to consider the appellant’s argument, which was raised for the first time in this court, that his liability should be limited to disgorging the $100,000 he received from the transaction. Nor are we persuaded that leave should be granted to appeal the trial judge’s award of costs.

[9] The appeal is dismissed. As agreed by counsel, the costs of the appeal are fixed in the amount of $10,000 inclusive of disbursements and GST.

“K.M. Weiler J.A.”

“R.G. Juriansz J.A.”

“J. MacFarland J.A.”