COURT FILE AND PARTIES

COURT FILE NO.: CV-10-4060 and CV-10-4061-00
DATE: 2012-08-23
SUPERIOR COURT OF JUSTICE – ONTARIO

RE: TERI WALDERMAN and BEVERLY SMITH
Plaintiffs

AND

CMC MARKETS CANADA INC., SHORCAN BROKERS LIMITED, PANFINANCIAL GROUP SERVICES LTD., PANFINANCIAL INVESTMENTS INC., PANFINANCIAL INVESTMENTS MANAGEMENT LTD., PANFIN WEALTH MANAGEMENT GROUP INC., PANFINANCIAL GROUP SERVICES INC., PANFINANCIAL INVESTMENTS GROUP INC., PANFINCIAL INVESTMENTS SERVICES INC., PANFINACIAL SERVICES INC., PAN FINANCIAL INC., PANFINANCIAL SERVICES CORP.,PANFINANCIAL INSURANCE AGENCIES LIMITED, PANFIN EQUICAP LTD., GORDON BERGER, TREVOR RABIE and AARON COHEN
Defendants

RE: TERI WALDERMAN
Plaintiff

AND

INVESTIA SERVICES FINANCIERS INC. INVESTIA FINANCIAL SERVIES INC. ASL DIRECT INC., ASG FINANCIAL CORP., PANFINANCIAL GROUP SERVICES LTD., PANFINANCIAL INVESTMENTS INC., PANFINANCIAL INVESTMENTS MANAGEMENT LTD., PANFIN WEALTH MANAGEMENT GROUP INC., PANFINANCIAL GROUP SERVICES INC., PANFINANCIAL INVESTMENTS GROUP INC., PANFINANCIAL INVESTMENTS SERVICES INC., PANFINANCIAL SERVICES INC., PAN FINANCIAL INC., PANFINANCIAL SERVICES CORP.,PANFINANCIAL INSURANCE AGENCIES LIMITED, PANFIN EQUICAP LTD., GORDON BERGER, TREVOR RABIE
Defendants

BEFORE: M.J. DONOHUE J.

COUNSEL: JULIAN BINAVINCE, for the Plaintiffs
BRANDON JAFFE, for the Defendant Rabie

HEARD: July 11, 2012

ENDORSEMENT

[ 1 ] The defendant, Mr. Trevor Rabie, brings a motion to set aside the default judgments in these two actions entered on September 30, 2011 against him pursuant to per Rule 19.08(2) and (3) Rules of Civil Procedure .

[ 2 ] The actions were commenced and served in February, 2011 at which time Mr. Rabie was recovering from a heart attack of October 2010. He was in and out of rehabilitation. The default judgment did not come to his attention until October 2011.

[ 3 ] To set aside default judgment the motion judge must be satisfied that:

a) the motion to set aside a default judgment was made as soon as possible after the moving party became aware of the judgment;

b) the affidavit filed in support of the relief must set out a plausible explanation for the default; and

c) that a valid defence exists on the merits;

( Phan v Jevco Insurance Company , 2006 CarswellOnt 3937 (S.C.J.) para. 15 ) ( Bank of Montreal v Chu , 1994 CarswellOnt 260 para 21 )

[ 4 ] The parties agree that the defendant, Mr. Rabie, has satisfied the first two tests. The argument was whether he satisfied the third test. Has he shown there was a valid defence on the merits?

[ 5 ] The Court in Bank of Montreal v Chu said the principles applicable in a motion for summary judgment should be considered in assessing whether a default judgment ought to be set aside. At that time those principles were :

A. Does the defence on the merits raise a genuine issue for trial?

B. Does the defence have an air of reality about it in light of the evidence brought forward in the motion?

C. Are there real credibility issues relating to important facts?

Background

[ 6 ] The plaintiffs were clients of the defendants, Panfinancial. The defendant Rabie was a representative of Panfinancial and sold certain investments to the plaintiffs.

[ 7 ] The plaintiffs did not receive their initial investment back as promised nor an accounting as to what happened to their funds that the defendant invested on their behalf.

[ 8 ] The plaintiffs sued the defendant Rabie alleging negligence, misrepresentation and breach of fiduciary duty.

[ 9 ] The plaintiffs acknowledge their claim with respect to breach of fiduciary duty cannot be disposed of summarily and will require a trial to fully appreciate the evidence and issues.

[ 10 ] The plaintiffs’ position on this motion is that regarding their claims for negligence and misrepresentation, the court should dismiss Mr. Rabie’s motion because the court can fully appreciate the evidence and issues required to make a dispositive finding in favour of the plaintiffs.

Defence on the Merits

[ 11 ] The defence argued that there were genuine issues requiring a trial set out in their defence, namely:

• The plaintiffs were sophisticated investors who were aware of the risks and voluntarily assumed the risks.

• The defendant Rabie did not provide advice regarding investments and any misrepresentations would be an issue for trial with issues of credibility.

• The damages claimed required further proof and there was contributory negligence by the plaintiffs.

(i) Affidavit Support for the Defence

[ 12 ] The defence relied on two affidavits by the defendant Rabie each dated February 13, 2012 that were largely identical in content.

[ 13 ] Mr. Rabie deposes that the plaintiffs were sophisticated businesswomen and investors. This is a bald assertion with no explanation or other evidentiary support, as required in proving a genuine issue for trial. ( Phan v. Jevco Insurance , 2006 Carswell ONT 3937 (S.C.J.) paragraph 38 citing Rozin v. Ilitchev , 2003 21313 (ON CA) , [2003] O.J. No. 3158 (Ont. C.A.) )

[ 14 ] In any event, whether they were sophisticated businesswomen does not preclude them from relying on his expertise as an investment advisor.

[ 15 ] His affidavit specifically does not deny the plaintiffs’ evidence that they relied on his advice and on his recommendations of where to invest. His evidence does not deny that he was trusted by the plaintiffs to handle their investment accounts. He does not deny the representations made by him of providing high yield, low risk investments as set out in the plaintiffs’ affidavits.

[ 16 ] He does not deny that he represented to the plaintiffs that he was an experienced, successful investment advisor.

[ 17 ] He attaches documents that the plaintiffs signed of their acknowledgement of risk in the investments but does not give any further explanation or evidence of his discussions with the plaintiffs.

[ 18 ] The evidence by each of the plaintiffs was much more detailed.

[ 19 ] Ms. Smith's affidavit of July 8, 2011 actually says that Mr. Rabie confirmed to her that he was an experienced, successful investment advisor who would ensure that her savings earned a healthy return without undue risk.

[ 20 ] Her affidavit also says that Mr. Rabie advised that Panfinancial was a highly successful and reputable investment adviser.

[ 21 ] Her affidavit attaches the web site information of Panfinancial and that it “accurately summarizes what Mr. Rabie told us about himself and Panfinancial, in particular the following passages:

Other wealth managers can't do what we do. Unlike them, we have the essential resources, financial expertise, and network of professionals to implement our sophisticated strategies. That's what makes us special. More important, we believe it is vital to understand a client before making any recommendations. After we conduct a thorough analysis of your financial situation, we develop a customized plan that meets your current needs future aspirations."

[ 22 ] Her affidavit states that she told Mr. Rabie the details of their financial circumstances and told him that their investment objective was capital preservation with a conservative rate of return, given the conservative objective.

[ 23 ] Her affidavit states that from her discussions with Mr. Rabie she understood the Dow Jones Funds to be relatively safe or very low risk but the rate of return would be very lucrative. She says the Panfinancial website where it says, "As Panfinancial, we turbo charge our investments. Driven by the pursuit of high-yield, low risk investments, our group creates our own tax-preferred investment opportunities," accurately describes Mr. Rabie's portrayal of the Dow Jones Funds.

[ 24 ] Ms. Walderman, in her affidavit of September 6, 2011, echoes Ms. Smith's statement of what Mr. Rabie told her about himself and Panfinancial, consistent with the website claims.

[ 25 ] Ms. Walderman states that Mr. Rabie assured her that funds invested through Panfinancial would earn a healthy return without undue risk and he would personally look after her investment portfolio to ensure that her overall investment objectives were being met.

[ 26 ] I find in fact there is very clear evidence of misrepresentations made. Mr. Rabie in his affidavit of February 13, 2012 does not deny the evidence cited above and elsewhere. At best he says the plaintiffs are "sophisticated businesswomen and investors." I do not know what the basis of the statement would be. Mr. Rabie refers to Ms. Walderman signing a certificate of accredited investor form to suggest that she was an experienced investor. The form however simply confirms that she held assets of value of more than $1 million.

[ 27 ] He only says in his affidavit that they instructed him to invest their funds in high risk investments as they wanted to receive better returns than mutual funds offer.

[ 28 ] Mr. Rabie does not deny that he made recommendations as to where to invest. He does not deny that he advised them he could provide high-yield low risk investments. He does not deny that he knew they were relying on his advice.

[ 29 ] The materials simply do not raise real credibility issues on important facts. I find there is no genuine issue requiring a trial.

(ii) The defence argued that the plaintiffs did not take reasonable care in signing the agreements and so could be held contributorily negligent.

[ 30 ] Mr. Rabie’s affidavit provides no support for this allegation.

[ 31 ] Above it is noted that the evidence does not dispute that Mr. Rabie was being relied upon; that he gave recommendations of where to invest and that he was being trust by the plaintiffs to handle their accounts.

[ 32 ] I find no basis to support this argument.

(iii) The defence argued that the plaintiffs may have had some return on their investment and that would have to be deducted from their claim.

[ 33 ] Again, there is nothing in the affidavit material saying that they received anything back on their evidence. Mr. Rabie did not assert any such fact.

Conclusion

[ 34 ] The defence does not have an air of reality in light of the evidence presented at the motion. I am not satisfied that a valid defence exists on the merits, nor is there a genuine issue requiring a trial. I deny the defendant Rabie’s motion to set aside the default judgements in the two actions.

Debt Discharge Orders

[ 35 ] In the defendant’s factum I note a request in the alternative to set aside the orders in the para. 6 or Court File No. CV-10-4060-00 and paragraph 5 of Court File No. CV-10-4061-00 in relation to discharge or release of the debt of the defendant from bankruptcy, pursuant to the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3.

[ 36 ] This relief was not set out in the Notice of Motion. The plaintiffs did not address it in their responding materials or factum. I will not make such order in these circumstances.

[ 37 ] If the parties are unable to agree on costs they may file written submissions of 3 pages or less within 14 days of this order.

M.J. DONOHUE J.

Date : August 23, 2012

COURT FILE NO.: CV-10-4060 and CV-10-4061-00

DATE: 2012-08-23 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: TERI WALDERMAN and BEVERLY SMITH Plaintiffs AND CMC MARKETS CANADA INC., SHORCAN BROKERS LIMITED, PANFINANCIAL GROUP SERVICES LTD., PANFINANCIAL INVESTMENTS INC., PANFINANCIAL INVESTMENTS MANAGEMENT LTD., PANFIN WEALTH MANAGEMENT GROUP INC., PANFINANCIAL GROUP SERVICES INC., PANFINANCIAL INVESTMENTS GROUP INC., PANFINCIAL INVESTMENTS SERVICES INC., PANFINACIAL SERVICES INC., PAN FINANCIAL INC., PANFINANCIAL SERVICES CORP.,PANFINANCIAL INSURANCE AGENCIES LIMITED, PANFIN EQUICAP LTD., GORDON BERGER, TREVOR RABIE and AARON COHEN Defendants RE: TERI WALDERMAN Plaintiff AND INVESTIA SERVICES FINANCIERS INC. INVESTIA FINANCIAL SERVIES INC. ASL DIRECT INC., ASG FINANCIAL CORP., PANFINANCIAL GROUP SERVICES LTD., PANFINANCIAL INVESTMENTS INC., PANFINANCIAL INVESTMENTS MANAGEMENT LTD., PANFIN WEALTH MANAGEMENT GROUP INC., PANFINANCIAL GROUP SERVICES INC., PANFINANCIAL INVESTMENTS GROUP INC., PANFINANCIAL INVESTMENTS SERVICES INC., PANFINANCIAL SERVICES INC., PAN FINANCIAL INC., PANFINANCIAL SERVICES CORP.,PANFINANCIAL INSURANCE AGENCIES LIMITED, PANFIN EQUICAP LTD., GORDON BERGER, TREVOR RABIE Defendants ENDORSEMENT M.J. DONOHUE J.

Released: August 23, 2012