ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-642-SR
DATE: 2012/05/07
BETWEE N:
HEIDI SIEGEL and ROGER SIEGEL
M. Jaeger, for the Plaintiffs
Plaintiffs
- and -
MARLON GARY HIBBERT also known as GARY HIBBERT, VERNA HIBBERT also known as SHELLEY HIBBERT, ASHANTI CORPORATE SERVICES INC., MARLON GARY HIBBERT and VERNA HIBBERT operating as KABASH RESOURCE MANAGEMENT, POWER TO CREATE WEALTH INC.
Self Represented
Defendants
HEARD: January 10, 11, 12, 13, 19, February 1 and 28, 2012
AND
Court File No. CV-10-651-SR
B E T W E E N:
NITIN JESSE SOLOMAN and LALETTA CHANG-SOLOMON, and SOLOMON CHANG CAPTIAL MANAGEMENT INC.
Plaintiffs
- and –
MARLON GARY HIBBERT also known as GARY HIBBERT, VERNA HIBBERT also known as SHELLEY HIBBERT, ASHANTI COPRORATE SERVICES INC., MARLON GARY HIBBERT and VERNA HIBBERT operating as KABASH RESOURCE MANAGEMENT, POWER TO CREATE WEALTH INC.
Defendants
AND
Court File No. CV-10-652-SR
B E T W E E N:
ISAIAH SOLOMON and TAMMY MARIE SOLOMON
Plaintiffs
- and –
MARLON GARY HIBBERT also known as GARY HIBBERT, VERNA HIBBERT also known as SHELLEY HIBBERT, ASHANTI CORPORATE SERVICES INC., MARLON GARY HIBBERT and VERNA HIBBERT operating as KABASH RESOURCE MANAGEMENT, POWER TO CREATE WEALTH INC.
AND
Court File No. CV-11-251-SR
B E T W E E N:
DIADEM CONSULTING INC.
Plaintiff
- and –
MARLON GARY HIBBERT also known as GARY HIBBERT, VERNA HIBBERT also known as SHELLEY HIBBERT, MARLON GARY HIBBERT and VERN HIBBERT operating as KABASH RESOURCE MANAGEMENT, ONTARIO CORPORATION 2124329 operating as ASHANTI CORPORATE SERVICES INC., POWER TO CREATE WEALTH INC., POWER TO CREATE WEALTH INC. (PANAMA), DOMINION INTERNATIONAL RESOURCE MANAGEMENT INC., and DOMINION WORLD OUTREACH MINISTRIES DOMINION WORSHIP CENTRE INC.
Defendants
AND
CV-11-631-SR
B E T W E E N:
MARCIA DIXON
Plaintiff
- and -
MARLON GARY HIBBERT also known as GARY HIBBERT, VERNA HIBBERT, also known as SHELLEY HIBBERT, MARLONG GARY HIBBERT and VERNA HIBBERT operating as KABASH RESOURCE MANAGEMENT, ONTARIO CORPORATION 2124329 operating as ASHANTI CORPORATE SERVICES INC., POWER TO CREATE WEALTH INC., POWER TO CREATE WEALTH INC. (PANAMA), DOMINION INTERNATIONAL RESOURCE MANAGEMENT INC., and DOMINION WORLD OUTREACH MINISTRIES DOMINION WORSHIP CENTRE INC.
Defendants
The Hon. Mr. Justice Arrell
JUDGMENT
Introduction:
[ 1 ] Greed is a vice that makes normally rational people act irrationally. It plays exceeding well into the old maxim “If it looks too good to be true it usually is”. This case proves that both theories are alive and well.
[ 2 ] The plaintiffs invested funds with the defendant Marlon Hibbert and his assorted companies, all of which are also defendants.
[ 3 ] The investments were lost. The defendants have consented to judgment for the principal amount but not interest. The plaintiffs now seek interest and a declaration that they were defrauded of these funds by the defendant Hibbert and his wife, the defendant Verna Hibbert, and assorted defendant companies. They also seek a declaration that the defendants fraudulently conveyed their home from a joint tenancy to Verna solely contrary to The Fraudulent Conveyances Act , R.S.O. 1990, c. F.29.
Facts:
[ 4 ] Marlon Hibbert is a Pastor and founder of Dominion World Outreach Ministries. Verna is his wife and they owned as a joint tenants 48 Reginald Lamb Crescent in Markham, Ontario. The corporate defendants were all incorporated by the defendant Marlon Hibbert at various times with him as the sole shareholder, president and directing mind.
[ 5 ] There are 5 sets of plaintiffs, all of whom invested various sums of money with the defendant Marlon Hibbert in and around late 2006 through 2008. All heard of the defendant generally by word of mouth through members of the defendant’s church or his brother-in-law, Jessie Solomon, also a plaintiff.
[ 6 ] There is no evidence that the defendants actively recruited any of the plaintiffs. Indeed I find as a fact that the plaintiffs approached the defendant Marlon Hibbert. It does appear, however, that he would pay a referral fee to an investor who referred another investor. It is unclear from the evidence before me as to whether any of the plaintiffs ever received such a referral fee. There was also evidence of some workshops put on by the defendant and a video produced by him. There is no evidence any of these plaintiffs invested because of such programs.
[ 7 ] The defendant Marlon Hibbert traded in the currency exchange market. He had no training, experience or formal education in investments other than self taught. Neither he, nor any of his companies, were ever registered with any regulatory body or government agency.
[ 8 ] The plaintiffs would not be considered sophisticated investors, however, they generally had some post secondary education, families and responsible jobs.
[ 9 ] In all cases the plaintiffs would hear of the defendant Marlon Hibbert and approach him to see if he would invest funds for them. He would explain that he traded in the currency exchange market; that he guaranteed a 5 % return per month or 8 ½ % per month if the funds were locked in for 1 year; he and the respective plaintiff would sign a contract for the amount of the investment where it was written that he personally would guarantee the principal amount and the interest payment.
[ 10 ] In most cases the plaintiff would invest $10,000.00 to start, get a copy of the contract with the guarantee and would start to receive the monthly interest payment or a monthly investment statement showing the monthly interest amount being added to the principal.
[ 11 ] The plaintiffs, after receiving the interest over a period of time, would then invest further funds, usually without any solicitation by the defendants, with the same written guarantee.
[ 12 ] Over time monthly interest payments were missed and phone calls were not returned. The plaintiffs started to demand the return of their funds and the defendant stalled and made excuses. It finally became clear that the investments were lost and a cease trading order was issued by the Ontario Securities Commission as a result of complaints to it by some investors. The defendant alleges these losses were as a result of the recession and volatility of the markets such that the investments lost money. No evidence was produced by him to indicate that any investments were even made never mind whether they ever made a profit.
Analysis:
[ 13 ] The plaintiffs claim that the defendants defrauded them in a classic “ponzi scheme”.
[ 14 ] The plaintiffs allege fraud on the basis that the investment funds were pooled; that the defendant Marlon Hibbert used the funds to finance the business to pay himself, to purchase vehicles, make donations to charities of his choice and to give himself and his wife loans, and dishonestly misappropriated their funds. All of which is true. As well he has not accounted for the funds, nor provided any documentation to show where they went or how they were lost.
[ 15 ] The plaintiffs have clearly proven a breach of contract. The defendant Marlon Hibbert guaranteed the principal the plaintiffs invested and the rate of return, as unrealistic as the amount was.
[ 16 ] The gullibility of the plaintiffs in believing the misrepresentations of the defendant, or lack of care on their part in failing to make an independent investigation, is no defence to an action based on fraud. It does not lie in the mouth of one who makes a statement on which another relies to say that the other was careless in believing him. Mikealice Management Corp. and Dr. Michael Laiv. De Thomas Financial Corp. et al 2003 43753 (ON SC) .
[ 17 ] Criminal Fraud requires proof of (a) a dishonest act involving “deceit, falsehood or other fraudulent means” which (b) causes detriment or deprivation to the victim. R. v. Theroux , [1993] 2 S.C.R.
[ 18 ] In a civil action there need not be a false representation; it is sufficient if there is a fraudulent means. Harland v. Fancsali , 1993 8457 (ON SC) , [1993] O.J. No. 961 .
[ 19 ] To find “deceit’ or “falsehood” the trier of fact must determine whether there was an actual representation that a situation was of a certain character, when, in reality, it was not . R. v . Theroux, supra. Para. 18
[ 20 ] The issue is determined objectively, by reference to what a reasonable person would consider to be a dishonest act. Courts have found that the concealment of important facts, the unauthorized diversion of funds, the unauthorized use of an investors’ funds and the unauthorized taking of funds to be fraudulent. R. v. Theroux , supra. Paras16, 17; R. v. Currie, [1984] O.J. No. 147 (Ont.C.A.) .
[ 21 ] Fraud also requires a person to be aware of the risk posed to another’s interests. The subjective awareness can be inferred from the evidence. It may also be established by evidence showing that the perpetrator was willfully blind or reckless as to the conduct and the truth or falsity of any statements made. R. v. Theroux , supra. at paras. 26 and 28.
[ 22 ] A sincere belief or hope that no risk or deprivation would ultimately materialize does not establish an absence of fraud:
“A person who deprives another person of what the latter has should not
escape criminal responsibility merely because, according to his moral or
personal code, he or she was doing nothing wrong or because of a
sanguine belief that all will come out right in the end. Many frauds are
perpetrated by people who think there is nothing wrong in what they are
doing or who sincerely believe that their act of placing other people’s
property at risk will not ultimately result in actual loss to those persons. If
the offence of fraud is to catch those who actually practise fraud, its mens
rea cannot be cast so narrowly as this.”
R. v.Théroux, supra, at para.36)
[ 23 ] The defendant testified that he was simply a bad bookkeeper and businessman; that he had sloppy business and accounting practices; and that he was the victim of worldwide financial markets gone awry. I disagree.
[ 24 ] The defendant Marlon Hibbert was totally unbelievable as a witness. He failed to produce material that would clearly have been in his possession such as trading records, trading accounts, and bank accounts for the various companies. He consistently had a selective memory about where money went, loans to him and his wife, his church or other charities in which he was involved. Certainly some of the letters sent by him to investors were false and misleading and when questioned on those he had no plausible explanation. He was evasive in much of his testimony for example he refused to concede he was investing the plaintiff’s money and insisted the companies he controlled were doing the investing. He spoke of some of the accounts being frozen but produced no evidence to show what was in them. The cheque register he produced showed d/m/y being switched back and forth and has obviously been produced after the fact. He was unable to recall how he paid himself or on what basis. He testified he told every investor that he had no assets or investments to back up his guarantee yet none of the plaintiffs recall any such discussion. I accept the evidence of the plaintiffs. I totally reject the evidence of the defendant Marlon Hibbert as unworthy of belief.
[ 25 ] I also find as a fact that the plaintiffs did no due diligence regarding the defendants and the investment scheme. It strikes this court as somewhat incredulous that they really felt, as they testified, that there was no risk to their money which was going to generate an annualized 60% return in the mid to late 2000’s. They are not credible when they all testify they felt their investment was safe and without risk because of the guarantee and that the defendant Marlon Hibbert was a pastor. However, nothing turns on their lack of credibility on this narrow aspect of the case because the issue is whether they were defrauded regardless of their lack of due diligence and stupidity. Mikealice Management Corp. supra.
[ 26 ] It had become clear by early 2009 that the defendant Marlon Hibbert had been unable to repay funds as requested by his investors. He had been stalling them and testified that he hoped to recoup the losses. I also find as a fact that he knew he had many very disgruntled clients, that he had lost all their investments and that he had no way of repaying what he owed to them. He admitted as much in cross-examination when he acknowledged that he knew he owed millions at that time.
[ 27 ] The evidence is uncontroverted, and admitted by the defendant, that he used the investment funds, at least partially, for his own use, the use of his wife, personal loans, lease payments for expensive cars, and donations to charities of which he was closely tied, and in some cases paid by. None of these arrangements were ever communicated to the plaintiffs. Many of these payments occurred and continued long after he had stopped paying those who had invested with him. It is evident that he lied to investors as to his success as an investor in the foreign exchange markets. He lied to them by providing monthly statements that consistently showed a profit when in fact the investments were showing significant losses. He lied to his clients about why funds were not being repaid when requested and provided a litany of excuses that were patently untrue. As a result of his actions the plaintiffs lost all they invested with him.
[ 28 ] I have no hesitation in finding that the defendant Marlon Hibbert knew he was acting dishonestly. Any reasonable person looking at these facts would also conclude that he was acting in a dishonest and deceitful manner. As a result of his dishonest actions the plaintiffs suffered significant financial losses. I conclude that the plaintiffs have proven fraud against all of the defendants except the defendant Verna Hibbert.
[ 29 ] There is no evidence before me that the defendant Verna Hibbert was anything other than the wife of the defendant Marlon Hibbert. There was nothing presented to me to indicate she played any role in these investments, the investment companies or in dealings with the plaintiffs. She signed none of the contracts with the plaintiffs in any capacity. Indeed counsel for the plaintiffs conceded in his closing argument that he was unable to produce any evidence to implicate the defendant Verna Hibbert and the actions against her should be dismissed.
[ 30 ] I find that the defendant Marlon Hibbert met with Mr. and Mrs. Morelli, who are not plaintiffs in this action but who had invested with him. They met on April 4, 2009 at the defendant Marlon Hibbert’s office.
[ 31 ] At this meeting the Morrelli’s, in a very forceful way, demanded their money back. The defendant instead offered them his home to hold in trust if he failed to pay them within 2 weeks. He signed a promissory note to that effect. He agreed in cross examination that when he signed the promissory note he could not fulfill it and knew that it was false.
[ 32 ] The defendants Marlon and Verna Hibbert went to see a lawyer on April 6, 2009 and on April 7, 2009 their house at 48 Reginald Lamb Cres., Markham, Ontario, which they had held as joint tenants, was transferred, for love and affection, to Verna Hibbert solely. They have continued to live in the home ever since.
[ 33 ] Mr. and Mrs. Hibbert testified that the transfer was completely coincidental and had absolutely nothing to do with the potential liabilities of the defendant Marlon Hibbert. They testified over the course of the trial and in earlier sworn affidavits and discoveries to 5 different versions of why they “just happened” to transfer their house out of their joint names. They claimed it was for estate purposes; to save taxes; being threatened by Mr. Morelli; or that the defendant was a counselor to prisoners and worried as to what would happen to the house if he was killed by a prisoner.
[ 34 ] I find none of these explanations, when viewed in the context of the large amounts of money owing to these plaintiffs who had demanded a return of their funds, and the promissory note he signed to Mr. Morelli, to have any credibility whatsoever. Indeed the defendant acknowledged in cross examination that he knew at the time he transferred his interest in the house that he owed millions, and specifically knew that he owed substantial amounts to the plaintiffs. I also find as a fact that he knew he had no way of repaying what he owed.
[ 35 ] Intent under the act is made out by various badges of fraud as set out in Beynon v. Beynon, 2001 28147 (ON SC) , [2001] O.J. No. 3653 . The defendants in this case, with the transfer of their house, have met almost all of the non exhaustive list set out in the above case.
[ 36 ] I find as a fact that the defendants Marlon and Verna Hibbert intentionally planned to defeat these plaintiffs and save their house from these creditors.
[ 37 ] I therefore find that the conveyance of 48 Reginald Lamb Cres., Markham, Ontario on April 7, 2009 contravened S. 2 of The Fraudulent Conveyances Act . R.S.O. 1990 c. F29 in that the conveyance of their real property was done with the intent to defeat and defraud the plaintiffs, who were creditors, of just and lawful damages and amounts lawfully owing to them and the conveyance is therefore void.
Conclusion:
[ 38 ] The plaintiffs already have judgment for their principal amount on consent.
[ 39 ] There will be judgment for the plaintiff Marcia Dixon in action CV-11-631-SR, based on her undisputed affidavit and the defendant Marlon Hibbert agreeing to the amount of principal owing, for the principal amount of $190,000.00 as against all defendants except Verna Hibbert.
[ 40 ] There is a finding and a declaration that the judgments against the defendants in favour of the plaintiffs was as a result of the fraud of the defendant Marlon Hibbert and the corporate defendants.
[ 41 ] All actions for amounts owing will be dismissed as against the defendant Verna Hibbert.
[ 42 ] All plaintiffs will have interest on their judgments up to the date of trial at 5% per month as per the guarantee in the contracts signed personally by the defendant Marlon Hibbert and signed by him on behalf of the various defendant corporations less any interest paid.
[ 43 ] The plaintiffs will have post judgment interest fixed pursuant to the Courts of Justice Act.
[ 44 ] The transfer of 48 Reginald Lamb Cres., Markham, Ontario on April 7, 2009 is declared null and void and title will revert back to Marlon and Verna Hibbert as joint tenants forthwith.
[ 45 ] If the parties are unable to agree on costs they may submit their respective positions on 3 double spaced pages in addition to any offers and draft bills of costs within 30 days.
ARRELL, J.
Released: May 7, 2012
COURT FILE NO.: CV-10-642-SR/CV-10-651-SR/
CV-10-652-SR/CV-11-251-SR/CV-11-631-SR
DATE: 2012/05/07
ONTARIO SUPERIOR COURT OF JUSTICE BETWEE N: SIEGEL et al Plaintiffs - and - HIBBERT et al Defendants REASONS FOR JUDGMENT ARRELL, J.
Released: May 7, 2012