Court Information

Court: Ontario Court of Justice

Date: May 4, 2017

Between:

Her Majesty the Queen

— AND —

Ali Salahi

Before: Justice H. Borenstein

Heard on: April 3, 4, 5, 7 and 10, 2017

Reasons for Judgment released on: May 4, 2017

Counsel:

• Mr. D. Frost — counsel for the Public Prosecution Service of Canada
• Mr. S. Bergman — counsel for Ali Salahi

BORENSTEIN J.:

[1] Charge

[1] Ali Salahi is charged with fraudulently disposing of property contrary to s. 198 (1) (a) of the Bankruptcy and Insolvency Act ("B.I.A.").

[2] Facts

[2] Mr. Salahi financed the purchase of a BMW in August 2009. He was supposed to make 60 monthly payments on the loan. He made only the first three payments. His next two payments were NSF. Thereafter, BMW finance left him numerous voice mail messages which were not returned. On April 20, 2010, BMW sent a Bailiff to repossess the car. The car was not there. Salahi told the Bailiff the car went missing from his driveway several months earlier and he thought BMW repossessed it. However, he continued paying insurance on the car for at least three further months. Later that year, Salahi made an assignment into bankruptcy. In July 2011, when Salahi was examined by the Official Receiver, he repeated his assertion that, when the car went missing, he believed at that time that BMW repossessed the vehicle. BMW never repossessed the vehicle. It has never been recovered and M.O.T. records do not show it ever having been sold or transferred. The Crown theory is that Salahi disposed of the BMW. He is charged with one count of fraudulently disposing of property contrary to s. 198(1)(a) of the "B.I.A." sometime between August 11, 2009 when he acquired the car and April 20, 2010 when he spoke to the Bailiff.

[3] Elements of the Offence

[3] There are four elements to this offence:

1. That Salahi was a bankrupt within the meaning of the B.I.A.
2. That he disposed of the BMW between August 11, 2009 and April 20, 2010
3. That he intended to dispose of that property
4. That he did so fraudulently, meaning he knew that disposing of the BMW could result in a risk of deprivation to BMW

[4] As a result of the focus of this trial, the only real issue in contention is # 2; has the Crown proved beyond a reasonable doubt that Salahi disposed of the BMW at the relevant time. If so, there can be no question that he did so fraudulently given what would then amount to his deceitful statements to the Bailiff, the Trustee and the examiner.

I heard from three Crown witnesses and received nine volumes of records as exhibits.

I turn now to the evidence in more detail.

Acquisition of the BMW on Credit

[5] On August 11, 2009, Salahi traded in a used, damaged BMW and purchased a used 2006 BMW X5. After the trade in allowance, he financed $48,007.29 of the purchase price through BMW Finance.

[6] In his application for finance, he stated that his average annual income was $65,000.00. He also stated that he lived at his residence on Huntley Street for the previous 16 years.

[7] At the time he bought the BMW, he had about $90,000 in debts.

Mary Roussopolos and Efforts to Collect Payment

[8] Mary Roussopolos is the Accounts Receivable Co-ordinator for BMW Finance. By January 2010, she received this delinquent file and made efforts to collect this debt. Her business records were introduced as exhibits. It was agreed that her records were business records other than notes of what the private investigator she hired told her. Those comments were hearsay and were not business records.

[9] Salahi's obligation to BMW was to pay $690.50 per month for 60 months. Salahi made only three payments; August, September and October 2009. His December and January payments were not processed due to insufficient funds. Between January and March 11, 2010, Ms. Roussopolos left numerous messages at the phone numbers she had for Salahi but they were never returned. On March 30th, she sent Salahi a demand letter.

[10] Salahi's credit application stated his annual income to be $64,500. As was later learned, that was incorrect. According to the exhibits filed, his 2009 gross business income was $25,730 and net income was $9,578. Those records were prepared in 2010 however. In 2009, his gross income was $18,137 and his net income was $13,206. His 2007 income was $82,000 gross, $18,000 net.

[11] In his application for credit, he listed his address as 77 Huntley Street and stated that that had been his address for 16 years. However, in the credit Bureau report, he listed that as his address since only 2009. In his s. 161 examination, he stated that he lived on Huntley Street from 2005 to 2007 and thereafter, on Manor Heights and Major Mackenzie.

[12] Between his purchase of the BMW in August 2009 and March 30th, 2010, he ran up the credit on virtually all of his credit cards. She retained the bailiff to try to recover the car but he was unsuccessful. She also hired a private investigator. She learned on November 2010 that Salahi has made an assignment into bankruptcy.

S. 161 Examination by the Official Receiver

[13] Mr. Anand Thadani testified. He was a retired Senior Bankruptcy Analyst with the Office of the Superintendent of Bankruptcy. He explained the basic process someone undergoes when going bankrupt. The person signs a Statement of Affairs ("S.O.A.") when he makes an assignment into bankruptcy. In this case, Salahi met with a Trustee in Bankruptcy, Ralph Culp and, on November 11, 2010, he assigned himself into Bankruptcy.

[14] On July 26, 2011, armed with Salahi's S.O.A., Mr. Thadani examined Salahi under oath pursuant to s. 161 of the B.I.A. Salahi swore that his average annual income for the preceding five years was between 30,000 and 32,000 dollars a year with his highest annual income of $67,000 in 2007. His debts increased from about $80,000.00 in March 2008 to $280,000 in November 2010. He swore that he first became aware that he could not pay his debts in mid 2010 but stopped paying his creditors at the end of 2009 or early 2010. He listed a $51,000 unsecured debt with BMW finance though the amount owing was a little less.

[15] He was asked whether he had disposed of any property in the preceding one and five years and did not list the BMW as property he disposed. He swore that, at the end of 2009 or the beginning of 2010, he came home and the BMW was gone. He had been behind on his payments. His friend told him that, when that occurs, a car company will send a bailiff to seize the car. When the car was gone, he no longer received any calls from BMW. He felt relieved. He did not report the car stolen or call BMW. Then, in April, a bailiff showed up saying he was there to repossess the BMW. He said he told the bailiff the car had been taken a few months earlier. He was asked if he cancelled the insurance. He replied that he did, approximately three months after the car went missing. He told Mr. Thadani that the car was insured and, if it had been stolen, he would have been reimbursed.

The Bailiff

[16] Dwayne Corniffee, the licenced bailiff who was hired by BMW Finance to try to recover the BMW testified. He did not have a recollection of this case as he deals with about a thousand cases a year.

[17] He explained his general procedure when repossessing cars. While he has the right to remove the car without speaking with the debtor, he likes to speak with the debtor to allow them to clean out their belongings before repossessing the car. However, on occasion, he will repossess a car without speaking to the debtor. When he does, he does not leave a note or other documentation but notifies the local police detachment in case the person reports the car stolen.

The Transponder

[18] According to the Trustee's records of January 7, 2010 which is a typo and is January 7, 2011 (in light of the timing and exhibit 8 tab I), Salahi advised Trustee Culp that the transponder was shared between three cars and it was removed from the BMW before the BMW went missing. He stated to Culp that, sometime between February and April 2010, he came home and the BMW was gone.

[19] That, together with the filed exhibits, was essentially the evidence in this case. No defence was called.

Positions of Counsel

[20] The Crown submits that Salahi fraudulently disposed of the BMW.

[21] He was in substantial debt when he purchased the car. He did not have the means to pay off the loan. Further, he misrepresented his income and length of residency in his credit application. He indicated an annual salary of approximately $64,000. After acquiring the BMW, Salahi began maxing out his credit cards. Judgments were obtained against him. Garnishment of his income was ordered. The only thing he had of any value was the BMW which was encumbered.

[22] He stopped making payments on the BMW. He never called the police or BMW when he says it went missing. He told the Trustee Mr. Culp that the BMW went missing sometime between February and April, 2010. He told Mr. Thadani in his s. 161 examination that it was the end of 2009 or early 2010. He told the bailiff who came on April 20, 2010 that it had been gone for several months. He told Mr. Thadani during the s. 161 examination that BMW did not call him once the car went missing however Roussopolos left messages for Salahi at his various numbers from January 11 and March 11, 2010 which were never returned.

[23] The Crown submits that the myriad of dishonesty by Salahi surrounding his obtaining credit and his dishonesty to Thadani support the inescapable conclusion that he disposed of the car in some fashion. Even if he is concealing it and keeping it, it would amount to an offence under section 198 (1) (a).

[24] The defence submits that, on the evidence, there are three possible scenarios.

[25] First, that the car was stolen.

[26] Second, that Salahi still has and is concealing the BMW. He submits that this scenario is supported by the fact that the transponder connected with the BMW continued to be used after Salahi said it went missing. Moreover, the fact that Salahi continued paying insurance after he said the car went missing further supports this scenario as a possibility. The defence submits that this scenario would amount to an offence but to a different offence than the one charged.

[27] Finally, the third possibility is that the accused disposed of the vehicle. Eventually, the defence conceded that, if I were to find that Salahi transferred the vehicle in some fashion, it would be a fraudulent disposition.

[28] The defence submits that three possibilities do not amount to proof beyond a reasonable doubt of the offence charged. This is a circumstantial case and, as such, the only reasonable inference on the evidence must be that he fraudulently disposed of the BMW. If theft or concealment are possibilities, then Crown has not proved its case.

[29] He concedes BMW did not repossess the car.

[30] In reply, the Crown submits that, concealment is just another way to dispose of property in light of the purpose of the BIA and its intention to protect creditors.

Analysis and Findings

[31] Has the Crown proved beyond a reasonable doubt that Salahi disposed of the BMW between August 11, 2009 when he obtained it and April 20, 2010 when he told the Bailiff it had been taken from his driveway.

[32] It is clear that Salahi obtained the BMW in August. He did not pay for it nor did he return it. He says it is gone.

[33] As defence concedes, there really are only three possibilities; that Salahi has it and is hiding the car, that he transferred it by selling it or giving it away, or that it was stolen. He concedes BMW did not repossess it.

[34] The issue is whether the Crown has proved its case beyond a reasonable doubt. I do not have to choose which possibility I believe or have a reasonable doubt about. The accused need not prove anything. If I have a doubt, he will be acquitted.

[35] Despite the able submissions of Mr. Bergman, the theory that the BMW was stolen from Salahi is pure speculation dependant on the inconsistent out of court statements of Salahi, a man who's dealings with BMW was suspect to say the least. The BMW was probably one of his most valuable assets at a time when his debts were mounting. The context of the acquisition and payment for this car further undermines the credibility of this theory. He bought the car knowing he could not afford it. That is the reasonable inference. He was drowning in debt and running up almost all of his credit card prior to assigning himself into bankruptcy. He only made three payments on this car loan. He then did not return BMW's calls even though he was not paying for the car. He misrepresented his income and the length of his residency in his credit application. When the car went missing, he never called BMW. He could not even pinpoint the date the car allegedly went missing. He told the Bailiff in April 2010 that the car went missing a few months earlier. He told his Trustee it went missing between February and April. He told the examiner it went missing at the end of 2009 or early 2010. He said he was relieved because BMW stopped calling after it went missing. Yet BMW Finance was leaving messages at Salahi's various numbers until March 11th. His statement that BMW stopped calling after it went missing is incorrect. I accept that Ms. Roussopolos's evidence that she left those messages. I do not find it credible nor do I have a reasonable doubt about the BMW having been stolen. The fact that he continued paying insurance for the vehicle for some time does not cause me to have a doubt.

[36] I am satisfied beyond a reasonable doubt that Salahi either transferred the BMW to someone or he still has, is concealing it and is lying about the BMW. In both cases, his conduct is fraudulent. He acted dishonestly in a manner which created a risk of deprivation to his creditors. More than a risk in this case. There was actual deprivation.

[37] The defence submits that even those two possibilities require an acquittal because, if he is concealing it, he is committing a different offence than the one charged. The Crown disagrees and submits that concealing it is just another manner of disposing of the property.

[38] The case therefore boils down to a question of statutory interpretation.

Bankruptcy Offences

Section 198(1) — Any bankrupt who:

(a) makes any fraudulent disposition of the bankrupt's property before or after the date of the initial bankruptcy event,

(b) refuses or neglects to answer fully and truthfully all proper questions put to the bankrupt at any examination held pursuant to this Act,

(c) makes a false entry or knowingly makes a material omission in a statement or accounting,

(d) after or within one year immediately preceding the date of the initial bankruptcy event, conceals, destroys, mutilates, falsifies, makes an omission in or disposes of, or is privy to the concealment, destruction, mutilation, falsification, omission from or disposition of, a book or document affecting or relating to the bankrupt's property or affairs, unless the bankrupt had no intent to conceal the state of the bankrupt's affairs,

(e) after or within one year immediately preceding the date of the initial bankruptcy event, obtains any credit or any property by false representations made by the bankrupt or made by any other person to the bankrupt's knowledge,

(f) after or within one year immediately preceding the date of the initial bankruptcy event, fraudulently conceals or removes any property of a value of fifty dollars or more or any debt due to or from the bankrupt, or

(g) after or within one year immediately preceding the date of the initial bankruptcy event, hypothecates, pawns, pledges or disposes of any property that the bankrupt has obtained on credit and has not paid for, unless in the case of a trader the hypothecation, pawning, pledging or disposing is in the ordinary way of trade and unless the bankrupt had no intent to defraud,

Section 198(2) — Is guilty of an offence and is liable, on summary conviction, to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding one year or to both, or on conviction on indictment, to a fine not exceeding ten thousand dollars or to imprisonment for a term not exceeding three years, or to both.

[39] The defence submits that s.198 speaks about concealment in subsections (d) and (f) but not in subsection (a), the section under which Salahi is charged. While concealment would be an offence, it is not the offence charged.

[40] Subsection (d) deals with destroying or concealing books and records and has no application here.

[41] What does it mean to dispose of property?

[42] The modern approach to statutory interpretation is to interpret the words of a statute harmoniously in accordance with the purpose of the provision and context of the Act. The words are to be given their ordinary meaning but in accordance with the act's purpose (see Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 SCR 27, at paragraph 21, and following).

[43] But the words still must be interpreted and given their meaning. It is not for the court to cure any gaps that may exist in the legislation by interpreting a word beyond the meaning it is reasonably capable of bearing.

[44] The purpose underlying all of the offences in s. 198 of the BIA is to ensure that those who go bankrupt and thus avoid paying their creditors, honestly disclose the entirety of their assets including those assets that have been transferred so that the creditors of the bankrupt may receive whatever proceeds they are lawfully entitled to. To that end, s. 198 creates several different though related offences.

[45] While section 198(1)(a) is broad in its intent given the term "any fraudulent disposition" – it remains limited by the word disposition.

[46] The ordinary meaning of disposition, when used as a verb in relation to property, is to get sell or transfer, or give or somehow get rid of something.

[47] Black's Law Dictionary (Tenth Edition) defines disposition as: "The act of transferring something to another's care or possession, esp. by deed or will; the relinquishing of property"

[48] While not defined in the BIA, the term disposition appears many times throughout and in all or almost all of the sections, when used in relation to property, it is used in its ordinary sense.

[49] While not legislation, on the Government of Canada's own web site, under the page Bankruptcy and Insolvency at a Glance, it lists the responsibilities of a bankrupt as follows:

[50] In addition, the bankrupt must:

• disclose all of their assets (property) and debts to the LIT;
• advise the LIT of any property disposed of in the past few years; and
• surrender all credit cards to the LIT.

[51] I do not rely upon that as legislation or binding in any way but that it shows yet another example of the ordinary meaning of the term dispose and disposition. An asset that is concealed is still an asset. A bankrupt must disclose all of their assets. A car that Salahi is hiding would remain an asset though one he was not disclosing. Compare that to the next duty which is to advise of all the property disposed of. It stretches the meaning of the term disposition to interpret disposition as including (keeping and hiding). One does not dispose an asset to oneself.

[52] I am certain Salahi acted fraudulently with respect to the BMW. What I do not know is whether he transferred the car to someone or whether he has it and is concealing it. Given that he was charged with fraudulently disposing of assets, that is what must be proved beyond a reasonable doubt. Based on my interpretation of section 198, he must be found not guilty.

Released: May 4, 2017

Signed: "Justice H. Borenstein"