ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-50303
DATE: 2012/10/10

BETWEEN:

Lukus Abraham Plaintiff – and – Khalid Ben Hassan Defendant

Daniel H. McGuire, for the Plaintiff
Severin N. Ndema-Moussa, for the Defendant

HEARD: September 25 and 26, 2012

REASONS FOR JUDGMENT

MINNEMA J.

1This is a dispute over money owing to the Plaintiff by the Defendant as secured by a mortgage.

Issue

2At the conclusion of trial there was only one issue, namely whether the Plaintiff’s business relationship with the Defendant was as an investor or as a partner.

Facts

3The Plaintiff is a young man who had access to working capital. The Defendant is an automobile mechanic who devised a business venture of buying and shipping automobiles to Libya for sale. The potential for profits in this venture was huge. The Defendant needed capital. The parties already knew each other because of a previous business venture where they had both assisted an individual who was buying automobiles in the U.S.A. and selling them in Canada.

4After a small investment by the Plaintiff’s father with some lucrative returns essentially to test the Defendant’s profit claims, the Plaintiff’s father withdrew and the Plaintiff and Defendant started their business arrangement. Their Investment Agreement, dated August 23, 2007, provided that:

a) the Plaintiff would pay to the Defendant $150,000;

b) the parties would share equally in all the profits;

c) the Defendant would register a lien against his property at 2046 Scott Street in Ottawa in favour of the Plaintiff, and it would continue until both the profit payments and investment payments were made in full or subject to another agreement; and

d) the Plaintiff’s role was “only an investor”.

5The Defendant claims that the full sum of $150,000 indicated in the Investment Agreement was never advanced, only $78,000 over time and in varying denominations. In his evidence he could only recall payments totaling $74,000. The Plaintiff, to the contrary, claims the whole amount was advanced. He had no records or clear recollection of when specific payments were made. He said all payments were in cash at the request of the Defendant.

6A mortgage was registered against the Defendant’s property on March 11, 2008 for $225,000. The Defendant says that he did not know how that mortgage was put on. He claims never to have signed it. However, the parties did sign an Addendum to the Investment Agreement on May 8, 2008, which provided that:

a) the Defendant will pay $80,000 to the Plaintiff as “partial payment” against the Investment Agreement;

b) upon receipt of the payment the Defendant would discharge “the existing mortgage”; and

c) a new mortgage would be registered for $155,000 “representing the balance owing on the Investment Agreement.”

It is noted that the sum of the debt represented in the Addendum was $235,000, which was greater than the then existing mortgage.

7On May 9, 2008 the $225,000 mortgage was discharged, and on July 18, 2008 a new mortgage not for $155,000 but rather for $213,500 was registered in favour of the Plaintiff. It is this one upon which this action is based.

8The evidence from both the parties and the lawyer who acted on the mortgage confirmed $213,500 was owing at the time. There was no disagreement on that critical point. The disagreement was over how that amount was calculated. Neither party produced any accounting or records.

9The Plaintiff said the $213,500 represented all principal payments that he made to the Defendant to support the cars-to-Libya venture.

10The Defendant said that the $213,500 was roughly the $78,000 in principal payments he received plus the Plaintiff’s share of the profits that the Plaintiff did not receive. He would send four to five cars by boat to Libya every 25 days, and the net profit from this venture was consistently $16,000 each trip. Per the Investment Agreement that profit was split equally between the parties but the Plaintiff would leave most of his profits with the Defendant who said it “went into the capital.” After 16 or 17 shipments the amount owing to the Plaintiff on July 18, 2008 for both his initial investment and the profit was $213,500.

11The Plaintiff’s evidence was that other than providing the capital, he knew little of the cars-to-Libya arrangement. He claims his requests for documentation were rebuffed. The Defendant denies the Plaintiff ever asked for documentation which he says he would have provided.

12On January 30, 2009 the parties signed an agreement titled Promissory Note. It says that the Plaintiff will not act on his mortgage and sell the property for five years as long as the Defendant does not default on any of the payments agreed to in the original Investment Agreement.

13At some point the Defendant began paying the Plaintiff $1,400 a month which the parties say was roughly designed to be eight percent on the principal sum of the mortgage.

14The Defendant began having financial difficulties. In a meeting in the lawyer’s office in September, 2010 he tried to make different repayment arrangements with the Plaintiff with no success. Afterwards the Defendant stopped the $1,400 monthly payments, and the Plaintiff learned that the Defendant was in significant arrears of property taxes on the property. The Defendant brought this claim on December 30, 2010.

15The Defendant indicated that he advised the Plaintiff why he could not pay him. He said the government in Libya was restricting the flow of money out of the country. He claimed the parties created a limited company to try to transfer the funds without success. The Defendant also indicated that people in Libya involved in this venture had been arrested, although it was not clear why. It was also not clear how or why the entire sum of the Defendant’s money or profits were in Libya, how the money had been “lost” as the Defendant claimed, or whether the money remains in Libya today available for the Defendant’s use.

16The Defendant’s property has now been sold and pursuant to Interim Minutes of Settlement dated July 6, 2011 the Plaintiff has been paid $80,000 with the balance of the sale proceeds after other encumbrances being $108,794 which remains in trust.

Analysis

17The Plaintiff seeks the full amount of the mortgage plus costs. With $80,000 already paid the remaining claim is $133,500.

18As noted the Defendant’s main argument was that the parties were partners. He maintained that as a partner the Plaintiff should only get back the principal sums he invested, and share equally the losses. As the Plaintiff has already received $80,000 from the sale of the property, the Defendant argued that he has gotten back all of his principal payment and therefore the sum remaining in trust should be returned to him. The Plaintiff should get nothing.

19A problem for the Defendant is the wording of the Investment Agreement. To address this he argued that the Investment Agreement itself was void as there is no evidence that the initial advance of $150,000 was ever made. The inconsistency here is that the Defendant treated the Investment Agreement as valid in the subsequent Addendum, in the subsequent Promissory Note, and even in his Statement of Defense dated February 25, 2011.

20There is much about the dealings between the parties and their investment scheme that is unknown, and I am not convinced that I have heard the whole story. However I can only decide on the evidence before me, and it overwhelming favours the Plaintiff. I rely heavily on the documentation as summarized above. In the Investment Agreement the Defendant agreed to pay both the profit and investment payments. He acknowledges that when the Plaintiff did not take his profits they went into capital. In the Addendum he acknowledged a total debt owing of $235,000. Shortly afterwards he gave a mortgage for $213,500 and confirmed it was the correct amount. Looking at these agreements and the subsequent dealings there is no evidence that the arrangement between the parties was a partnership in the sense that the Plaintiff was sharing the risk of any loss suffered by the Defendant after the $213,500 mortgage. It needs to be noted that there is no evidence of any actual loss at all.

Decision

21I therefore make the following orders:

1. The money held in trust by solicitor Paul F.C. Devlin in the amount of $108,794 shall be paid to the Plaintiff.

2. There shall be judgment for the Plaintiff in the amount of $24,706, being the amount of the mortgage less the $80,000 paid to the Plaintiff on the sale of the 2046 Scott Street property and less the amount in paragraph 1.

3. The Plaintiff shall have prejudgment interest on the sum of $213,500 from December 30, 2010 to January 26, 2012, and on the sum of $133,500 thereafter.

Costs

22If the parties cannot agree on costs, a date can be set for argument regarding the same.