ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 07-CV-328190PD3
DATE: 2012/05/17
B E T W E E N:
RONALD SECHON
Victor L. Freidin, for the Plaintiff
Plaintiff
- and -
BEN ALLISON, BENCORP DEVELOPMENT INC., EDWARD LAWRENCE STONE & JOSELLE HACKSHAW
Ben Allison, appearing in person for himself and with leave, for Bencorp Development Inc.
Defendants
HEARD: January 23, 24, 25, 26, 27 and 30, 2012. Written submissions received from the plaintiff on February 29, 2012
Grace J.
[ 1 ] At its core, this action raises three questions: first, was the agreement Ronald Sechon (“Sechon”) and Bencorp Development Inc. (“Bencorp”) made concerning 11100 Rutledge Drive, Campbellville, Ontario (the “Campbellville property”) [1] fulfilled; second, if not, what consequences follow and third, is Bencorp liable to indemnify Mr. Sechon for the amount paid to Bank of Montreal (“BMO”) on account of an overdraft and a charge/mortgage (the “BMO charge”) it held on 57 Heathcliffe Square, Brampton, Ontario (the “Brampton property”)?
A. Background
[ 2 ] This extraordinary tale involves two principals: an investor Ronald Sechon and a promoter, Benito or Ben Allison.
[ 3 ] At the time of trial, Mr. Sechon was 49 years old. He obtained a bachelor of commerce degree from Concordia University in 1984. Later, he completed the necessary requirements to become a licensed mortgage agent.
[ 4 ] Mr. Sechon lives alone. He has spent much of his working career as a part time cashier at a grocery store. At an earlier stage, Mr. Sechon worked for a payday loan company and registered the business name Ace Financial.
[ 5 ] Mr. Sechon was introduced by his then lawyer to Mr. Allison in the early 1990s. A business relationship evolved.
[ 6 ] Mr. Allison maintained that Mr. Sechon was the chief executive officer of Ace Financial: an “utterly brilliant” individual experienced in real estate investment. He suggested Mr. Sechon is actively working as a mortgage agent for CENTUM National Mortgage Loans Inc. to this day.
[ 7 ] Mr. Sechon testified that he is not sophisticated or experienced as a mortgage agent or real estate investor. To the contrary, he stated that he relied on Mr. Allison in participating in the real estate acquisitions described in these reasons. Mr. Sechon alleged that Ace Financial has always been inactive and has never facilitated a single transaction.
[ 8 ] Four defendants are listed in the title of proceedings. Joselle Hackshaw was – and still may be – a real estate agent. She was Mr. Allison’s common law spouse and purported to witness some of the documents bearing – or appearing to bear - Mr. Sechon’s signature. The action was discontinued against her.
[ 9 ] Edward Lawrence Stone is also named. He was shown as the transferee’s solicitor in the transactions to which this action relates. In 2011, a Law Society Hearing Panel made findings of professional misconduct against Mr. Stone. [2] He was suspended. It should be noted that the transactions in issue in this proceeding were not mentioned by the panel. I was advised the claim against Mr. Stone was settled.
[ 10 ] The action proceeded against Mr. Allison and Bencorp only. I learned very little about Mr. Allison. For now the following observations will suffice. He is the sole officer, director and shareholder of the defendant Bencorp. Mr. Allison has been involved in buying and selling real estate for many years.
B. The First Property – the Campbellville property and claim
[ 11 ] At the outset I should say that information with respect to the properties has been cobbled together from the documents introduced at trial. Mr. Stone did not testify. It does not appear that he ever reported on the transactions to anyone. Indeed, Mr. Sechon testified that Mr. Stone acted for Bencorp, not him and that he did not receive copies of documents which he signed until after his relationship with Bencorp and Mr. Allison disintegrated. [3]
[ 12 ] The Campbellville property was acquired upon registration of a transfer in favour of Mr. Sechon on February 13, 2004 for a purchase price of approximately $444k. Based on the transfer, Mr. Sechon appeared to be the owner of this parcel.
[ 13 ] However, Mr. Sechon testified he owned the Campbellville property equally with Bencorp.
[ 14 ] Mr. Sechon alleges he paid $19,900 on account of the purchase price which was intended to give him a fifty percent interest in the property. The bulk of the price was financed by Royal Bank of Canada. [4]
[ 15 ] Mr. Sechon says most of his investment ($15k) was drawn on a line of credit he had arranged with the Toronto Dominion Bank (“TD”). [5] The balance was paid from an account Mr. Sechon maintained with Canadian Imperial Bank of Commerce (“CIBC”).
[ 16 ] A “Declaration of Trust and Indemnification” dated March 4, 2004 (the “Campbellville declaration”) signed by Mr. Sechon and Bencorp muddies the picture. In this oddly worded document, Mr. Sechon agreed that he held title to the Campbellville property as bare trustee for Bencorp.
[ 17 ] A reading of the Campbellville declaration suggests Mr. Sechon never had a proprietary interest in the Campbellville property. In fact, in that document Mr. Sechon agreed to transfer title to Bencorp “forthwith upon such requirement from” Bencorp. [6]
[ 18 ] However, Mr. Allison did not dispute the fact that Mr. Sechon had a proprietary interest in the property when it was acquired in Mr. Sechon’s name.
[ 19 ] Mr. Allison acknowledged Mr. Sechon’s participation in the acquisition of the Campbellville property. However, he testfied that only $14,900 was invested. [7]
[ 20 ] Mr. Allison also testified that Mr. Sechon was intimately involved in the various transactions. While I find that highly unlikely, I am not certain anything turns on it.
[ 21 ] Soon after closing, Mr. Sechon became unwilling to hold Campbellville as an investment. He had lost money in other business dealings and needed cash. He says a deal was struck with Bencorp. Mr. Sechon agreed to release his interest in the Campbellville property. According to his version of events, in return Bencorp agreed to retire the TD line of credit and pay Mr. Sechon two amounts: first, the balance of his investment ($4,900) and an additional “buy out fee” of $10k. Mr. Sechon insists all of this was to occur “within a few days”.
[ 22 ] Mr. Allison agrees that an arrangement was made to extricate Mr. Sechon from the Campbellville property. However, he says the terms did not involve Mr. Sechon’s line of credit at TD. Mr. Allison alleged the consideration for the transfer from Mr. Sechon was the return of his investment.
[ 23 ] Mr. Sechon was shown two home drawn promissory notes dated March 20, 2004. They included Bencorp’s promise to pay him the principal sums of $10k and $4,900. Each contained a March 25, 2004 notation followed by Mr. Sechon’s signature. Mr. Sechon acknowledged two things: first, he agreed he had received payment [8] and second, he agreed he had no interest in the Campbellville property.
[ 24 ] Mr. Sechon alleges the statement with respect to ownership is not binding because the TD line of credit was never retired. According to Mr. Sechon the effect of non-payment is this: Bencorp repudiated its agreement, Mr. Sechon accepted the repudiation and is once again to be treated as if its ownership interest in Campbellville was equal to that of Bencorp.
[ 25 ] The economic significance of the position is readily apparent. The Campbellville property was sold in July, 2004, for $736k. If Mr. Sechon’s position prevails, he is entitled to one-half of the $312k capital gain. [9]
[ 26 ] I return to the first two questions posed at the outset of these reasons. Was the agreement Mr. Sechon and Bencorp made concerning the Campbellville property fulfilled?
[ 27 ] There is no written document to turn to. Most of what exists distorts rather than clarifies. For example, the evidence included a transfer in Form 1 of the Land Registration Reform Act signed by Mr. Sechon in favour of a company called Bencorp Investments and Developments Inc. dated February, 2004.
[ 28 ] That document is strange for two reasons. First, the Campbellville declaration was signed by Bencorp. It made no mention of and was not signed by Bencorp Investments and Developments Inc. Second, its date is prior to the time Mr. Sechon and Mr. Allison discussed a revised arrangement.
[ 29 ] In any event, a transfer in favour of Bencorp Investments and Developments Inc. was electronically registered on July 9, 2004. The parcel register was then amended to reflect the name of Bencorp on title and Bencorp then completed the previously mentioned sale.
[ 30 ] Other documents reveal the rest of the terms the parties negotiated. Bencorp made payments aggregating $8,852.86 on account of Mr. Sechon’s TD line of credit in March, April, May, August and September, 2004. [10]
[ 31 ] Those payments do not fit with Mr. Allison’s evidence. Mr. Allison testified that the $15k investment related to the Brampton property and that it was not to be repaid until the Brampton property was sold. Sale did not occur until late 2005.
[ 32 ] This is an appropriate time to comment on the credibility and reliability of the principal witnesses Mr. Sechon and Mr. Allison.
[ 33 ] Mr. Sechon was reasonably articulate as one might expect from a well educated person. He was plain speaking and I have no doubt he honestly believed the testimony he was giving. What endures is the impression of a person who is literal, naïve, vulnerable, trusting and lacking common sense.
[ 34 ] Mr. Allison came across quite differently. While not a lawyer, he loved the courtroom. He started his closing argument with his back to the court, hands wide, speaking passionately to eight surprised students sitting in the gallery. “ Ex turpi causa non oritur actio ” , “ volenti non fit injuria ” he began. Mr. Allison was unable to explain the relevance of those legal maxims to this case.
[ 35 ] Flashy, confident – no arrogant, flipping and flopping, prepared to say anything he thought helped him along. Suffice to say Mr. Allison did not come across as trustworthy or reliable.
[ 36 ] I accept that the arrangement with Bencorp involved something more than Mr. Allison volunteered. There is no reason for payments to have been made by Bencorp on account of the TD line of credit unless it was part of an arrangement negotiated by Messrs. Sechon and Allison. It is more likely than not that Bencorp also agreed to satisfy the liability Mr. Sechon had incurred with TD as a result of drawing $15k on his line of credit and paying that money to Bencorp for its use.
[ 37 ] The payments made by Bencorp were insufficient to satisfy that obligation.
[ 38 ] I turn to the second question: what consequences follow?
[ 39 ] If the personal attributes of the parties were determinative this case would be no contest.
[ 40 ] Sadly for Mr. Sechon, those observations do not carry the day. The simple fact is this: I have seen nothing which supports a finding that a proprietary interest in the Campbellville property was retained by Mr. Sechon or resurrected. In fact, such a finding would be contrary to the earlier mentioned written acknowledgements Mr. Sechon signed. Without equivocation, he confirmed that he had no interest in the Campbellville property.
[ 41 ] Furthermore, that conclusion is inconsistent with Mr. Sechon’s own evidence at trial. For many years Mr. Sechon adopted a fiscally conservative approach. Meeting Mr. Allison and others like him caused Mr. Sechon to take increased risk. Lines of credit were established and accessed. He borrowed using his credit cards.
[ 42 ] By March, 2004, it began to dawn on Mr. Sechon that he had acted rashly and foolishly. Promises had been made to him by others and not fulfilled. Mr. Sechon became justifiably concerned about business associates such as Mr. Allison. With increasing desperation he sought to extricate himself from those with whom he had invested. His objective was a simple one: a return to his former circumstances. I am fortified in that conclusion by the fact Mr. Sechon turned to Mr. Smedmor in that time frame. Mr. Smedmor is a customer of the grocery store at which Mr. Sechon works and an accountant.
[ 43 ] Mr. Sechon sought and received Mr. Smedmor’s help in trying to determine precisely what he had done. However, Mr. Sechon rushed ahead largely on his own. His objective was to be disentangled from Mr. Allison as quickly as possible.
[ 44 ] As stated, I am satisfied that Mr. Sechon and Bencorp reached a “deal” of some kind with respect to the Campbellville property. However, it was never reduced to writing in any comprehensive way. I conclude that Mr. Sechon was prepared to accept payments on account of the line of credit over time once the payments contemplated by the promissory notes were in hand.
[ 45 ] Furthermore, Mr. Sechon relinquished his interest in the Campbellville property unconditionally. Bencorp’s obligation to satisfy $15k of borrowings on the TD line of credit was unsecured. Given that finding, it is unnecessary to address s. 4 of the Statute of Frauds which was raised in the statement of defence of Bencorp and Mr. Allison.
[ 46 ] The balance which Bencorp was obligated to but did not pay is the principal sum of $15,000 less payments made by Bencorp on account. As mentioned earlier, those totalled $8,852.86. The principal balance still owing is $6,147.14.
[ 47 ] I realize that figure differs from that mentioned by Mr. Smedmor in his testimony. According to him, Mr. Sechon had paid $14,372.94 on account of the TD line of credit. The difficulty is the $15k advance was not the only time Mr. Sechon accessed that facility. No evidentiary or legal basis has been provided for holding Bencorp liable for anything other than the initial advance.
[ 48 ] One issue relating to the Campbellville property remains. In their statement of defence, Bencorp and Mr. Allison raised the Limitations Act, 2002 . Given the time frame involved in the narrative relating to this parcel (February – September, 2004) and the fact this action was commenced in February, 2007, I expected the parties to be prepared to address the issue in argument.
[ 49 ] They weren’t. I asked for written submissions on this issue and one other I will mention later in these reasons. Counsel for Mr. Sechon delivered submissions in a timely fashion. [11] In the context of the limitations issue affecting this portion of the claim, Mr. Freidin wrote simply:
No submissions are made regarding application of the Limitations Act to the claims related to the Rutledge property.
[ 50 ] Rutledge is another name for the Campbellville property. With respect, Mr. Freidin’s submission is tantamount to a concession that the claims I am addressing in this section of my reasons were commenced too late.
[ 51 ] Was that apparent concession appropriately made? It was.
[ 52 ] If one accepts Mr. Sechon’s position that the TD line of credit was to be satisfied in short order, the claim would have been discovered within the meaning of s. 5 of the Limitations Act, 2002 in March, 2004. The two year limitation period set forth in s. 4 of that statute would have expired almost a year before this action was started.
[ 53 ] If, as appears, payment was required over time, when did the two year timeframe begin to run? As noted earlier, Bencorp made consecutive payments on account of the TD line of credit in March, April and May, 2004. There was then a two month gap, followed by payments in August and September, 2004. A consistent pattern did not emerge. Payments were not made on the same day of a month or in equal amounts.
[ 54 ] However, there were no payments after September, 2004. In my view, the elements of s. 5 (1) of the Limitations Act, 2002 were fulfilled when October passed without any payment. It was at that time Mr. Sechon knew or ought to have known that the balance of the TD line of credit was not going to be voluntarily satisfied by Bencorp and that a proceeding would be an appropriate means to seek to remedy its default.
[ 55 ] No evidence was led to suggest any agreement to defer payments. To the contrary. In a November 29, 2004 letter Mr. Sechon wrote that Mr. Allison had put him “in a corner/terrible position” with respect to the TD line of credit. [12]
[ 56 ] As mentioned, Mr. Allison testified that the TD line of credit was used to facilitate the purchase of the Brampton property and was to be repaid upon its sale. I recognize that property was eventually sold in December, 2005 by BMO exercising the power of sale contained in the BMO charge. However, I do not accept Mr. Allison’s evidence on this point.
[ 57 ] Regrettably, I conclude that this aspect of the claim was commenced after the second anniversary of the day on which it was discovered and must fail. [13]
C. The Second Property – the Brampton property and claim
[ 58 ] The Brampton property was acquired March 12, 2004 for approximately $235k. The seller was Federico Procopio as trustee. [14] Once again, a transfer was registered in favour of Mr. Sechon. A mortgage for approximately $230k was registered the same day in favour of Bank of Montreal (“BMO”).
[ 59 ] The parties’ versions of events again differ.
[ 60 ] Mr. Sechon says the property was acquired without his knowledge or consent. However, he acknowledged his signature on a number of documents including one autograph appearing on the agreement of purchase and sale dated December, 2003 (the “APA”).
[ 61 ] However, Mr. Sechon maintained that his signature had been forged at the base of the APA and on several other transactional documents including a Waiver of Condition dated December 28, 2003, a January 6, 2004 amendment to agreement and a March 9, 2004 Irrevocable Letter of Direction. Ms Hackshaw’s signature appeared as witness on two occasions. Mr. Sechon testified that he never signed any document in her presence.
[ 62 ] Mr. Allison disputed Mr. Sechon’s narrative. He correctly pointed out that Mr. Sechon’s signature appears on a number of other documents. Those include another Declaration of Trust and Indemnification dated March 12, 2004 (the “Brampton declaration”), another transfer in form 1 under the Land Registration Reform Act in favour of Bencorp Investments & Developments Inc. and a second amendment to the APA.
[ 63 ] Mr. Sechon also acknowledged signing documents required to obtain funding from BMO.
[ 64 ] It was in respect of this acquisition that Mr. Allison says utilization of the TD line of credit occurred. He alleges $15k borrowed from TD was used by Mr. Sechon on account of the purchase of this property and not Campbellville.
[ 65 ] Mr. Sechon responded. He said he signed the APA in blank. BMO documents were signed only after Mr. Allison told him a lawsuit would be commenced against Mr. Sechon if he did not complete the purchase from Procopio. The $15k may have been used by Bencorp for this transaction but that was done without Mr. Sechon’s knowledge or consent.
[ 66 ] I have no hesitation in accepting Mr. Sechon’s version of events as being substantially accurate. Expert evidence was not given with respect to Mr. Sechon’s signature. However, none is required. There are obvious differences between those admitted to be his and those disclaimed. As noted, most of the disputed signatures were witnessed by Joselle Hackshaw. I accept Mr. Sechon’s evidence that he did not sign a single document in her presence.
[ 67 ] When the APA was signed, Bencorp held a mortgage on the Brampton property. Fifteen thousand dollars advanced by Mr. Sechon was used to satisfy that liability before closing. [15] Despite my observations about Mr. Sechon’s nature, I find it difficult to believe he would have knowingly allowed an encumbrance to have been satisfied prior to completion.
[ 68 ] Once again however, I am not certain much turns on these details. The question in this lawsuit is this: is Bencorp liable to indemnify Mr. Sechon for the amounts paid or payable to BMO on account of an overdraft and its charge over the Brampton property?
[ 69 ] The answer is a definitive yes.
[ 70 ] The parties admit signing the Brampton declaration. As before, Mr. Sechon acknowledged holding the Brampton property as bare trustee for Bencorp. However, on this occasion the Brampton declaration was accurate because the parties never intended Mr. Sechon to acquire an interest in this parcel.
[ 71 ] The Brampton declaration contained Mr. Sechon’s promise to transfer the Brampton property to Bencorp on request. The Brampton declaration further stated:
PROVIDED THAT it is understood that the undersigned shall not be liable for any claims harmless (sic), save and except for any acts of gross negligence or illegal acts…
BENCORP DEVELOPMENT INC. hereby signs the declaration in evidence of his (sic) indemnification and saving harmless of RONALD SECHON from all claims of whatsoever nature as I (sic) paragraph (3) hereinbefore. (sic)
[ 72 ] As inelegant as the language may be, the intention is clear. The Brampton property belonged to Bencorp, Mr. Sechon was bare trustee only and responsibility for claims such as the BMO charge rested exclusively with Bencorp.
[ 73 ] In fact, Bencorp made the required payments for a while. They soon stopped. Mr. Sechon’s life became far more complicated.
[ 74 ] A demand for payment was made on the BMO charge and an overdraft created to service obligations thereunder. Assurances from Mr. Allison that the Brampton property would be sold and the problem eliminated did not materialize.
[ 75 ] Mr. Sechon advised BMO that he was not the true owner of the Brampton property both directly and through counsel. BMO held documents signed by Mr. Sechon and moved on.
[ 76 ] Eventually the Brampton property was sold by BMO. A deficiency remained. In due course, BMO obtained judgments against Mr. Sechon for amounts remaining unpaid on the BMO charge (the “deficiency judgment”) and overdraft (the “overdraft judgment”).
[ 77 ] Minutes of settlement dated June 29, 2010 were signed (the “minutes”). It required Mr. Sechon and Bencorp to each pay $2k on account of the deficiency judgment. Mr. Sechon paid his share. Bencorp did not. Mr. Sechon and another signatory fulfilled that obligation.
[ 78 ] Mr. Allison suggested Mr. Sechon lost the protection of the indemnity provisions I have quoted because he failed to tell BMO that Bencorp was the true owner when signing documents in BMO’s favour in March, 2004. Mr. Allison suggested that obligation was absolute since Mr. Sechon is a licensed mortgage agent. I reject that position.
[ 79 ] If there was any failing on Mr. Sechon’s part, it was because Mr. Allison asked him to keep that information to himself. In any event, Mr. Sechon was not acting as a mortgage agent in respect of the BMO charge. He was the borrower. Bencorp has not established “gross negligence” or illegality on the part of Mr. Sechon as the Brampton declaration requires. Bencorp’s obligation to indemnify was triggered and has not been fulfilled.
[ 80 ] I have no hesitation in concluding Bencorp is liable to Mr. Sechon for the $3k he paid to BMO pursuant to the minutes. Interest shall accrue on that amount from May 26, 2011 (the date of payment) onward at the prejudgment rate of 1.3%.
[ 81 ] The overdraft judgment was obtained against Mr. Sechon January 23, 2007 in the amount of $3,629.10 together with interest thereafter at the rate of twenty one per cent per year. I accept that the BMO overdraft was created to fund payments on account of the BMO charge that Bencorp failed to pay. Bencorp is liable to Mr. Sechon for all amounts paid or payable under the overdraft judgment
D. Other Claims
[ 82 ] Judgment was also sought against Mr. Allison personally. Paragraph 43 of the Amended Statement of Claim sets forth the basis for that request. In part it reads:
The Plaintiff…states that he always believed that both Ben Allison personally and his company would be responsible to indemnify him…This statement was based on statements and representations made by Allison…In the alternative, the Plaintiff states that Allison is the directing mind of Bencorp…The Plaintiff states that in the circumstances of this case, Allison should not be permitted to hide behind the corporate veil of Bencorp…
[ 83 ] Mr. Freidin’s written submissions addressed this issue as well. I have reviewed the cases he cited. [16] With respect, the evidence in this case simply does not lead to the conclusion
Bencorp was used as a shield for fraudulent or wrongful conduct or that Mr. Allison made the representations alleged. My conclusion at trial is not intended to preclude Mr. Sechon from revisiting the issue later based on evidence uncovered during any subsequent collection efforts.
[ 84 ] Mr. Freidin’s written submissions included sections dealing with mental distress. While that claim is made in the amended statement of claim, I frankly did not realize it was being pursued. I do not recollect it being a topic covered by Mr. Freidin in his oral submissions and it was not one of the items I asked him to address in writing.
[ 85 ] Importantly, there is no factual basis for the request. Mr. Sechon was clearly agitated by Bencorp’s failure to satisfy the portion of the TD line of credit for which it was responsible. Mr. Sechon made a dizzying number of visits to TD to make payments on account of the line of credit. Many of the payments were nominal: as low as one cent. Mr. Sechon’s behaviour was irregular, if not bizarre. However, it is not clear to me that Mr. Sechon’s conduct is a manifestation of “mental distress”.
[ 86 ] Mr. Sechon was also clearly troubled by Bencorp’s failure to satisfy the BMO charge. He was frustrated BMO paid no heed to the fact the Brampton property was held in trust for Bencorp. However, the evidence does not, with respect, go further. Simply put, this portion of the claim was not sufficiently proven.
E. Conclusion and Costs
[ 87 ] Bencorp is liable to Mr. Sechon:
a) On account of the deficiency judgment, in the principal sum of $3k together with interest from May 26, 2011 onward at the prejudgment rate of 1.3% per year;
b) On account of the overdraft judgment, in the principal sum of $3,629.10 together with interest from January 23, 2007 onward at the rate of twenty one per cent per year.
[ 88 ] The action is dismissed as against Mr. Allison.
[ 89 ] The issue of costs is reserved pending receipt of short written costs submissions not exceeding four typed pages each. Those of Mr. Sechon are required by June 1, 2012 and those of Bencorp/Mr. Allison by June 15, 2012. They may be provided to me through Judges’ Administration, Court House, 12 th Floor, Unit “K”, 80 Dundas Street, London, Ontario, N6A 6B2. Those submissions should specifically address rule 57.05 (1) of the Rules of Civil Procedure .
“ Justice A. D. Grace”
Justice A. D. Grace
Released: May 17, 2012