ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 08-CV-363866
DATE: March 27, 2012
BETWEEN:
The Cash House Inc.
Plaintiff
- and -
Lai Kwan Choy, HSBC Bank Canada, Andrew Mantella, Maple Trust Company, and 1682689 Ontario Limited
Defendants
COUNSEL:
• B. Pearce for the Plaintiff
• R. L. Youd for Andrew Mantella
• N. Westlake Maple Trust Company
HEARING DATE: March 27, 2012
PERELL, J.
REASONS FOR DECISION
[ 1 ] On the eve of trial, scheduled for next week, the Plaintiff, The Cash House Inc., moves for an order joining a new co-defendant and amending its statement of claim. The proposed new defendant is Robert (Bob) Chung and the proposed amended pleading includes claims against Mr. Chung and also advances new allegations against the other defendants.
[ 2 ] The Defendants Lai Kwan Choy, Andrew Mantella and Maple Trust Company oppose the motion.
[ 3 ] Cash House describes the requested amendments against the existing defendants as cosmetic or descriptive or as particulars of heads of damages. In contrast, the Defendants Choy, Mantella, and Maple Trust describe the changes as statute-barred causes of action.
[ 4 ] For present purposes, the background facts, which are complex and which at this juncture must be taken as unproven allegations, can be oversimplified to the following narrative.
[ 5 ] In November 2007, Maple Trust advanced $375,000 to a person being or pretending to be Mr. Choy as security for a mortgage loan. Mr. Mantella was the lawyer ostensibly acting for Mr. Choy and for Maple Trust. The money was paid to the apparent Mr. Choy, who used it to purchase a $325,158.90 draft from HSBC Bank Canada. Mr. Choy then attended at Cash House to have the draft cashed. Cash House was given identification depicting an elderly man with the name Choy. Here it may be noted that Mr. Chung is a young man who formerly was married to Mr. Choy’s daughter. In any event, Cash House paid the funds to Mr. Choy, and it deposited the bank draft only to have it later charged back against its account. Money House and Maple Trust now both claim the funds, which are presently being held in a trust account earning very little interest.
[ 6 ] In October 2008, Cash House commenced an action. It sued Mr. Mantella for negligence alleging that “he knew or ought to have known that a third party would rely on his delivery of a draft to have been made so that when being verified it was not reported as stolen or otherwise a fraudulent draft.”
[ 7 ] Cash House now seeks to add the following allegation against Mr. Mantella:
He was reckless or in the alternative wilfully blind to the fraud that was being perpetrated through his office and as a result had constructive knowledge of the fraud and was a co-conspirator.
[ 8 ] Cash House sued Maple Trust for negligence for dealing with an allegedly incompetent solicitor “knowing that he would not be able to conclude the mortgage transaction in a lawful and prudent manner.”
[ 9 ] Cash House now seeks to add the following allegation against Maple Trust:
It was reckless or in the alternative wilfully blind to the fraud that was being perpetrated through his office and as a result had constructive knowledge of the fraud and was a co-conspirator.
[ 10 ] Maple Trust does not oppose the amendment provided that the trial is not adjourned. Since the trial may be adjourned, I take Maple Trust to oppose the amendment, which was the position it took during the motion today.
[ 11 ] As for the Defendant Mr. Choy, Cash House alleged that he “was in fact the real Lai Kwan Choy, who swore a false declaration in respect of his alleged failure to receive proper consideration or any consideration in respect of the mortgage proceeds that were advanced to him and which he negotiated …”
[ 12 ] As will be seen the proposed amendments would make Mr. Choy a co-conspirator.
[ 13 ] Cash House now seeks to add Mr. Chung as a co-defendant and to amend the Statement of Claim to make the following allegations against him. The proposed pleading is as follows:
15 (A) with respect to Bob Chung:
i He participated with one or more of the Defendants, and other parties unknown, to perpetrate a fraud as against the Plaintiff.
ii. He, together with the Defendants Choy and Mantella conspired to defraud the Plaintiff of the sum of $ 325,158.90 by executing documents suggesting that Choy was a victim of fraud, when they knew such was not the case.
iii. He received the benefit of the monies negotiated at the premises of the Plaintiff, fraudulently, and thereby caused the loss being claimed by the Plaintiff.
[ 14 ] Here it may be noted that the proposed amendment with respect to Mr. Chung is as much if not more against the existing co-defendants as it is against Mr. Chung. The proposed amendment purports to make the co-defendants Choy, Mantella, and Maple Trust co-conspirators to the perpetration of a fraud.
[ 15 ] Cash House says that it only recently had the basis to make these allegations that turn on the alleged involvement of Mr. Chung. This is denied by the co-defendants who submit that Mr. Chung’s participation as the fraudster was known or should have been known several years ago.
[ 16 ] There is considerable merit in the co-defendants’ submission. In its statement of defence, Maple Trust alleges that the Bank Draft was not negotiated by Mr. Choy but by a rogue passing himself off as Choy. The statement of defence of Mr. Mantella asserts that he was retained by Mr. and Mrs. Choy or persons purporting to be them. Mr. Choy’s statement of defence alleges that he was the victim of a fraud committed by a person or persons unknown, who falsely arranged for a mortgage to be registered.
[ 17 ] During the examinations for discovery, it was disclosed to Cash House that Mr. Choy had reason to believe that his son-in-law had defrauded him in another unrelated transaction. Cash House, however, took this as evidence as being relevant only with respect to the unrelated transaction. During his examination for discovery, Mr. Choy refused to finger his son-in-law as the perpetrator.
[ 18 ] Cash House’s solicitor deposed that based on this disclosure on the discoveries and based on the fact that the personal identification for the transaction depicted an elderly man, it believed that Mr. Choy was no imposter. This belief persisted at a mediation session, where, once again, Mr. Choy’s position was that an unknown person had arranged the mortgage fraud.
[ 19 ] Cash House’s state of belief, however, recently changed, when on March 8, 2012, at the pre-trial conference, counsel for Mr. Choy informed the parties that Mr. Chong had admitted to being the fraudster and would be called as a witness at the trial.
[ 20 ] Cash House now submits that it would be prejudiced if the trial proceeded without Mr. Chung being joined as a co-defendant. It seeks to make the amendments to the statement of claim set out above. It submits that these allegations stem from the same facts that have already been pleaded and discerned from the productions and discoveries held to date, and raise no new cause of action at law.
[ 21 ] I agree that Cash House would be prejudiced if Mr. Chung is not joined to this action. Mr. Chung is a proper and perhaps a necessary party; he is possibly the perpetrator and possibly the only person liable for the losses suffered by Cash House.
[ 22 ] If there was no allegation that Mr. Chung was a co-conspirator, his joinder simply as a co-defendant would not be prejudicial to the existing defendants who simply will be able to put a name to the person that they already plead is responsible for the harm caused to Cash House.
[ 23 ] Mr. Chung may have a limitation period defence, but that is a matter for him to raise, which apparently he may not do, given his apparent willingness to admit wrongdoing.
[ 24 ] If Mr. Chung is not joined and does not confess judgment, then there is the possibility of inconsistent results in the current action and in other proceedings against Mr. Chung.
[ 25 ] Thus, there is a case to be made for joining Mr. Chung. However, there is the problem that the proposed joinder is not simply as a co-defendant but rather as a co-conspirator.
[ 26 ] The problem here is that it is now too late to plead a conspiracy action or a fraud action as against Mr. Choy, Mr. Mantella, or Maple Trust. The proposed amendments are not cosmetic but they raise serious and decidedly different causes of action against the co-defendants. For instance, before these amendments, it was alleged that Maple Trust was liable for retaining an allegedly incompetent lawyer, which is a far different claim from the bald allegation that it was a party to a conspiracy to defraud Cash Money. Moreover, and in any event, the pleading of conspiracy is grossly deficient in pleading the constituent elements and the particulars of a conspiracy.
[ 27 ] Further still, these new causes of action are statute-barred. Apart from putting a name to the alleged co-conspirator, Cash House knew or ought to have known about these claims from the time of the delivery of the statements of defence when the co-defendants denied their own wrongdoing and indicated that somebody else was responsible.
[ 28 ] As against the co-defendants, the proposed amendments are prejudicial and the prejudice cannot be cured by allowing the proposed amendment and adjourning the trial or by awarding costs.
[ 29 ] I, therefore, conclude that the appropriate order to make for the circumstances of the case at bar is to grant leave to add Mr. Chung as a co-defendant with the following amendments to the statement of claim:
15 (A) with respect to Bob Chung:
i He perpetrate a fraud as against the Plaintiff.
ii. He received the benefit of the monies negotiated at the premises of the Plaintiff, fraudulently, and thereby caused the loss being claimed by the Plaintiff.
[ 30 ] During argument, the co-defendants conceded that they would not be prejudiced by the joinder of Mr. Chung provided that the respective claims against them were not changed.
[ 31 ] Pursuant to the above order, Mr. Chung must be served with the amended statement of claim and the co-defendants have the right to deliver amended statements of defence, which they may decide is not necessary. If they do, I order that they have until March 30, 2012 to deliver their amended statement of defence.
[ 32 ] The process of serving Mr. Chung will test whether or not it will prove true that Mr. Chung is prepared to admit wrongdoing. If he is prepared to confess judgment, then it may be possible for the trial to proceed. I leave it to the trial judge to decide whether the trial should be adjourned.
[ 33 ] Order accordingly.
Perell, J.
Released: March 27, 2012
COURT FILE NO.: 08-CV-363866
DATE: March 27, 2012
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
The Cash House Inc.
Plaintiff
‑ and ‑
Lai Kwan Choy, HSBC Bank Canada, Andrew Mantella, Maple Trust Company, and 1682689 Ontario Limited
Defendants
REASONS FOR DECISION
Perell, J.
Released: March 27, 2012.