ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-08-361811
DATE: 20120416

BETWEEN:

WALTER KELLY JARMAIN
Plaintiff

– and –

CANADIAN IMPERIAL BANK OF COMMERCE and CIBC INVESTOR SERVICES INC.
Defendants

Kelly Friedman , for the Plaintiff
Laura Paglia and Rebecca Wise , for the Defendants

HEARD: February 27, 2012

T. Mcewen j.

Reasons for decision

Introduction

[ 1 ] The Plaintiff, Walter Kelly Jarmain (“Jarmain”) makes two motions to the court for the following orders:

(a) an order granting him leave pursuant to rule 26.01 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 to amend his Statement of Claim in the form attached to the Notice of Motion; and

(b) an order continuing the stay of the judgment in action number CV-08-00360205-0000 granted by Stewart J. on April 4, 2011.

Overview

[ 2 ] Jarmain alleges in this action that Lisa Henriques (“Henriques”), a former employee of the Defendants, induced Jarmain into a securities purchase. He asserts that the agreement to purchase the securities is void ab initio as a result of the misrepresentations made by Henriques. The central issue involves Jarmain’s assertion that Henriques told him that the Canadian Imperial Bank of Commerce (“CIBC”) would provide a 50% margin to him for the purchase. The margin was not provided and Jarmain alleges that he has sustained significant damages as a result.

[ 3 ] CIBC brought its own action in court file # CV-08-0036205-000 (“the CIBC action”) against Jarmain to collect on a mortgage debt that it was owed. Jarmain alleges that the mortgage fell into default due to financial difficulties he encountered as a result of Henriques’ actions. In any event, a summary judgment motion in the CIBC action proceeded before Stewart J. on April 11, 2011 and she granted judgment against Jarmain in the amount of $1,633,812.94 plus prejudgment interest and costs.

leave to amend the statement of claim

[ 4 ] The Defendants do not oppose the amendments sought, save and except for the allegations of forgery found at paragraphs 23, 49, 51(II) and 53 of the proposed Statement of Claim.

[ 5 ] With respect to paragraphs 23, 51(II) and 53, the Defendants argue that the limitation period has expired for such pleadings and that the allegations are irrelevant and therefore prejudicial.

[ 6 ] With respect to the issue of the limitation period argument, I allow the amendments subject to the Defendants being allowed to plead the applicable provisions of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. It is not clear to me from the materials that the limitation period has expired based on the principle of discoverability. This is an issue better left for trial. With respect to the issues of relevance, I do not agree with the Defendants that the allegations contained in the paragraphs are irrelevant. Even though the paragraphs deal with documents that pertain to accounts that Jarmain never opened at CIBC, the allegations in those paragraphs claim that Henriques falsified documents. In my view, this makes the pleading relevant as it goes to the overall alleged claim that Henriques falsified documentation to the detriment of Jarmain.

[ 7 ] With respect to the amendments sought in paragraph 49, the Defendants claim that these amendments deal with issues that were fully before Stewart J. when she granted summary judgment against Jarmain in the CIBC action. As such, they are res judicata . I disagree. Jarmain does not dispute that he agreed to the mortgage he received that was the subject matter of the summary judgment motion before Stewart J. The only issue in dispute in paragraph 49 relates to a document pertaining to Jarmain’s automobile. He alleges that Henriques forged his name on a specific document dealing with the automobile. Given the allegations Jarmain has made in the Statement of Claim, the pleading, in my view, is appropriate for that sole reason. The allegation is not being made to attempt to undo Jarmain’s obligation to pay the mortgage itself as that matter has already been dealt with by Stewart J., but rather to raise the issue of his allegation that Henriques forged documents.

[ 8 ] Lastly, although the Defendants do not specifically oppose the amendments to paragraph 50, there is some ambiguity in their factum in this regard. I would allow the amendment. I agree with Jarmain’s counsel that it repeats the same allegations contained in Jarmain’s previous pleading at paragraph 43 of his Statement of Defence and Counterclaim that was before Stewart J. and she specifically allowed that paragraph to stand.

CONTINUING THE STAY OF THE JUDGMENT IN the CIBC Action

[ 9 ] As noted, on April 4, 2011, after hearing the summary judgment motion, Stewart J. ordered that Jarmain pay CIBC the amount of $1,633,812.94 plus prejudgment interest and costs.

[ 10 ] Stewart J. also temporarily stayed her order with respect to the payment of the judgment to December 31, 2011. Her order specifically envisioned that the Defendants could bring a motion to lift the stay. That motion that is now before me.

[ 11 ] Rule 20.08 of the Rules of Civil Procedure provides that a court can order a stay with respect to the enforcement of a summary judgment order pending the determination of any other issue in the action or a counterclaim, crossclaim or third party claim on terms that are just. The following factors are relevant to the court’s exercise of its discretion under rule 20.08 of the Rules of Civil Procedure :

(i) whether CIBC resides out of the jurisdiction or is impecunious and potentially unable to satisfy a judgment of Jarmain’s claim;

(ii) whether the transactions in question are closely connected;

(iii) whether Jarmain’s claim appears to be meritorious;

(iv) whether CIBC will suffer prejudice in the event of a stay; and

(v) whether or not Jarmain has taken any steps to advance his claim.

See Cuddy Food Products v. Puddy Bros. Ltd. , [2002] O.J. No. 3181 (S.C.) , Fasco Motors Ltd. General Refrigeration Inc. , [1998] O.J. No. 1751 (Ont. Ct. (Gen. Div.)), McKenna Estate v. Marshall, (2005), 37 R.P.R. (4 th ) 222 (S.C.) at para. 40 .

[ 12 ] I will deal with each of these factors in turn below.

[ 13 ] Firstly, there is no suggestion that the Defendants will be unable to satisfy a judgment should Jarmain’s claims be successful in this action.

[ 14 ] Secondly, Jarmain argues that there is a sufficient connection between this action and the CIBC action. Specifically, Jarmain alleges that Henriques suggested he use the equity in his home for investment purposes and as a result, he placed a mortgage on his home. He further alleges that as a result of CIBC’s failure to provide him with the 50% margin, he defaulted on his home mortgage. While this does provide for some connection between the two actions, in my view, the connection is rather tenuous. The agreements were quite separate and involved different subject matter. The case is more in keeping with the facts in Cuddy Food Products , in which Lane J. refused to grant a stay.

[ 15 ] Thirdly, I am not convinced that Jarmain’s claim appears to be meritorious or that if it is, the damages he seeks will exceed the amount of the judgment obtained by CIBC in the CIBC action. While he may ultimately succeed at trial concerning the issue of liability, a lot of emphasis is placed on the credibility of Henriques in circumstances where the evidence clearly demonstrates that Jarmain was a sophisticated investor who understood the type of investments he was making. The greater issue, however, involves damages. Counsel for the Defendants carefully reviewed the evidence concerning Jarmain’s trading history after he knew the 50% margin would not be granted. At that time, he did not sell the securities he had purchased. He did, however, continue to buy and sell the same type of securities from other accounts, which demonstrated that there was a market for these types of securities. Based on the evidence proffered at the motion, it is fair to conclude that had Jarmain sold the subject securities after the margin was refused, his losses would have been much more modest than those he now claims to have suffered . They would also likely be well below the amount of the judgment in the CIBC action. Jarmain did not offer any evidence at the motion to counter the argument made by the Defendants.

[ 16 ] Fourthly, I accept the Defendants’ argument that they will suffer some prejudice in the event of a stay. Jarmain continues to reside in Mexico. Since Stewart J.’s order, Jarmain has provided a letter from Dr. Silvia Azcarate in Mexico stating that Jarmain cannot travel or participate in legal proceedings lasting over an hour without taking a break and he cannot engage in such activities for more than three to three and half consecutive hours. This raises the issue as to when and how Jarmain can pursue this action. CIBC has been owed the monies, to which it now has judgment, for over three years and it is uncertain as to when this matter will be ready for trial given the recent amended pleadings. I agree with the Defendants that Jarmain’s financial resources may be further depleted to the point where they will never be able to realize on the judgment, all the while being put to the expense of defending this action. Furthermore, Jarmain has not provided the court with any evidence outlining his financial situation that would lead me to conclude that a stay may not be prejudicial to the Defendants.

[ 17 ] Lastly, Jarmain has recently taken steps to advance this action as a result of the order of Stewart J. It cannot be forgotten, however, that prior to that time there were significant delays in prosecuting the action that were caused by Jarmain. The matter is still not set down for trial and now amendments to the pleadings are being undertaken. Furthermore, as noted, Jarmain now resides in Mexico and has obtained a medical opinion stating that the litigation will have to be curtailed, at least to some extent, because of his inability to travel by air and fully participate in the conduct of the litigation. This being the case, it is very uncertain that Jarmain will be able to take reasonable steps to advance this action in the future.

[ 18 ] Given the above, a partial lift of the stay of the judgment of Stewart J. would be appropriate. In my view, it is inequitable to continue to enforce the entire amount of the stay given my above findings. Based on the evidence adduced at the motion, there is no concrete evidence at this stage that the damages allegedly suffered by Jarmain would exceed the amount of the judgment obtained by CIBC in the CIBC action. In all of the circumstances, it would be appropriate to grant a partial lifting of the stay in the amount of $400,000, which is approximately 25% of the judgment amount in the CIBC action.

[ 19 ] Jarmain is to pay one half of the monies to CIBC within 90 days and the remaining $200,000, within 90 days thereafter. If the monies are not paid, the stay of the judgment of Stewart J. will be lifted in its entirety. Further, if the action is not set down for trial within 6 months the Defendants can commence a further motion concerning the stay of the remaining monies.

Disposition

[ 20 ] In summary, the amendments sought by the Plaintiff are granted. The stay granted by Stewart J. will be partially lifted with the Plaintiff paying $400,000 to CIBC, $200,000 of which will be paid within 90 days, and the remainder within 90 days thereafter, failing which the entire stay will be lifted. Lastly, if the action is not set down for trial within 6 months the Defendants can commence a further motion concerning the stay of the remaining monies.

[ 21 ] I received costs submissions at the hearing of the motion. After reviewing these submissions, and given the fact that the Defendants enjoyed the greater success at the motion, I award the Defendants costs in the amount of $10,000 including H.S.T. and disbursements.

T. McEwen J.

Released: April 16, 2012

COURT FILE NO.: CV-08-361811
DATE: 20120416

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

WALTER KELLY JARMAIN Plaintiff – and – CANADIAN IMPERIAL BANK OF COMMERCE and CIBC INVESTOR SERVICES INC. Defendants

REASONS FOR DECISION

T. McEwen J.

Released: April 16, 2012