ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-403078
DATE: 20130625
B E T W E E N :
THE ROYAL BANK OF SCOTLAND PLC
Plaintiff
– and –
PETER OBLAK, JOHN HAMILTON and RS GROUP OF COMPANIES, INC.
Defendants
Aaron Kreaden
for the Plaintiff
Judy Hamilton
for the Defendants
HEARD: June 6, 2013
CHAPNIK J.:
[1] Due to an administrative error, the plaintiff, the Royal Bank of Scotland PLC (RBS) wired funds in the sum of $99,975 TWICE to the defendant, Peter Oblak’s bank account at the Royal Bank of Canada (RBC). The instructions were to send $100,000 but the bank subtracted a $25 fee. It is undisputed that Oblak received both payments and that the second one was sent in error.
[2] The plaintiff moves for summary judgment pursuant to rule 20.04(2) of the Rules of Civil Procedure seeking the return of the duplicate funds plus interest and costs as against Oblak. Judgment was previously obtained against the other two defendants, on consent, but the plaintiff has been unable to realize on the judgments. It is not disputed that the defendant John Hamilton (Hamilton) is the sole owner and directing mind of the defendant RS Group of Companies Inc.
[3] Oblak contends that he acted as a trustee only, by receiving funds and disbursing them on the instructions of the defendant, Hamilton; and that he disbursed the impugned funds without knowing that they were sent in error.
[4] Moreover, he received no benefit from them. Accordingly, he is not legally responsible for the repayment of the funds.
[5] According to the plaintiff, the defendant, Oblak, did receive a “benefit” arising from the receipt of the mistaken funds. As well, he disbursed the funds knowing they were sent to him in error. In the circumstances, there is no genuine issue for trial.
the relevant law
[6] The Supreme Court of Canada has endorsed the position that a bank has a right to recover from the recipient a payment made under a mistake of fact. See for example, B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15, [2009] 1 S.C.R. 504, at para. 21.
[7] This recovery is rooted in principles of unjust enrichment, which for a successful claim require an enrichment by means of a benefit to the defendant, a corresponding deprivation of the plaintiff and the absence of a juristic reason for the enrichment. However, such a claim may be defeated where it is established either that:
The plaintiff intended the defendant to have the mistaken payment;
The plaintiff made the payment for good considerations; or
The defendant changed his position in good faith, or is deemed in law to have done so.
[8] The defendant relies on the third defence in this motion. The underlying rationale for the “change of position” of defence was articulated in the case of Garland v. Consumers’ Gas Co. 2004 SCC 25, [2004] 1 S.C.R. 629, at paras. 63-64 as being:
… where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution. [Emphasis added.]
[9] It is well established that the defence of change of position is not made out if the defendant knew or ought to have known he was not entitled to the funds; that is, if the change of circumstances occurs after the defendant has knowledge of the mistaken facts. The defendant must be, in effect, an “innocent recipient of the excess funds” (RBC Direct Investing Inc. v. Khan, 2010 ONSC 3100, [2010] O.J. No. 2241, at paras. 21-22).
[10] As noted in National Trust Co. v. Newmaster (2003), 2003 64233 (ON SC), 67 O.R. (3d) 310 (S.C.), at para. 25:
In the “bank error” cases, the circumstances are rare indeed: the recipient must be “innocent” in the sense of not realizing that she had actually been a “recipient” at all …
analysis
[11] According to Oblak, the other two defendants were the beneficial owners of the funds placed in his account and they exercised rights of ownership by instructing him how and where to disperse the funds. Oblak, therefore, alleges that he was, in effect, an innocent recipient of the funds which he disbursed as instructed by Hamilton, without knowing that the plaintiff had sent the monies to his account in error. Though he knew there were two similar payments, he did not know they were duplicitous.
[12] The documentary evidence is, however, to the contrary. It leads to the inevitable conclusion that the defendant knew or ought to have known that he was not entitled to the mistaken payment. Moreover, the defendant has not satisfied the onus to establish the expenditures he made were not debts or “ordinary everyday expenditures” but rather the type of payments that would qualify as “change of position” and thus, allow him to escape the obligation to repay the monies mistakenly sent to him.
[13] The evidence as to knowledge must, as always, be determined by the surrounding circumstances which in this case may be summarized as follows:
Under Oblak’s arrangement with Hamilton, Hamilton would notify Oblak in advance to expect a wire transfer, following which Oblak would repeatedly monitor the RBC account until the money was received. In July 2009, Oblak received wire transfers from Hamilton through his lawyers, in the amounts of $75,000 and $200,000. In and around September 10, 2009, Hamilton informed Oblak he would receive another transfer into the RBC account. When Oblak became aware that the payment he was expecting was taking longer than usual, he made inquiries to the bank and was informed the delay could have been caused by bank error.
On cross-examination, Oblak admitted that his expectation had been for one payment and that in mid-September, 2009, he knew of the mistake in wiring the initial transfer. At questions 263-269, there is the following exchange:
Q. 263
Q. Sorry, the bank told you that there was two transfers made?
A. Yes.
Q. So the bank told you at around this September 17th, September 18th period that there were two transfers made?
A. Right.
Q. And did you tell Mr. Hamilton that there were two transfers made?
A. Yes.
Q. And had Mr. Hamilton previously told you to expect two transfers?
A. My understanding of it was that he wired the first one and because that wasn’t coming in for seven days he had wired, asked them to wire, another one. September 18th, that’s when they both showed up. So I just figured because he asked them to wire two wires they both showed up.
Q. But the reason he asked them to wire two wires was because the first one was being held up, correct?
A. I believe so.
Q. And your understanding is that then he wanted to – he arranged for a second one to be transferred because you hadn’t been receiving the first wire, correct?
A. Right.
Q. But throughout this time the amount of money that you were expecting to receive was the $99,975.00?
A. Yes.
The timing of the receipt of funds is significant. By September 17, 2009, the plaintiff had discovered the payment was held up due to the misspelling of Oblak’s name. The error was corrected that day and the monies transferred to the RBC account. The following day RBS erroneously transferred a further identical sum of $99,975 for the benefit of Oblak.
By September 25, 2009, when RBS discovered the duplicate payment, Oblak had already depleted over $112,000 from the RBC account by:
(i) making 25 separate cash withdrawals totaling over $60,000;
(ii) issuing six cheques from the RBC account totaling over $16,000;
(iii) making over $11,000 in credit cash payments; and
(iv) making various expenditures at gas stations, stores and restaurants including a $949.34 charge at Ruth’s Chris Steak House.
[14] The expectation of one cheque, the knowledge of a “hold up”, the likeness of the amounts and the timing of the cheques, and the rapid disbursement of the funds all go towards the issue of the defendant’s knowledge of the mistake.
[15] In what has been referred to in the materials as a “screen shot”, dated September 30, 2009, RBC informed RBS it was unable to secure the mistaken payment because “Oblak refused to permit RBC to debit the amount from the RBC account”. At this time, there was still a balance of over $50,000 remaining in the RBC account. Though the defendant objected to admissibility of this document, I agree with the plaintiff that it is properly classified as a business record made in the ordinary course of business and therefore, is admissible in this hearing. Moreover, the defendant’s assertion that he never declined to return the funds as he was unaware of the request until later simply does not hold water in light of the information produced in this document.
[16] Subsequently, on November 16, 2009, a representative for the plaintiff wrote directly to Oblak requesting debit authority for the return of the funds. At this point, Oblak had dispersed all but $27.94 from the account. He says he never received the letter although it was properly addressed to him.
[17] In the period between September 18, 2009 and November 18, 2009, Oblak withdrew cash on 84 occasions, issued 15 cheques, made 16 credit cash payments and made several branch to branch transfers, in addition to various expenditures made at restaurants, appliance stores, gas stations, etc.
[18] Oblak says that each transaction was made upon the explicit instructions of Hamilton. However, Oblak was unable to provide any information regarding the transactions, other than the bald statement they were made at Hamilton’s request. For example, when asked about the six separate withdrawals on September 28, 2009, the following exchange took place:
Q. You don’t remember the specific instructions for any of those?
A. No.
Q. Do you remember the details of any single instruction on the remaining cash withdrawals in this schedule to your affidavit?
A. No.
[19] Not only was Oblak unable to provide any details pertaining to the transactions but he also failed to produce any correspondence, e-mails, phone records, cheques, receipts or other documents related to the disbursement of the funds.
[20] In the circumstances, I do not agree that the monies were disbursed in good faith as Oblak claims. In my view, the “screen shot” reply from RBC to RBS dated September 30, 2009, stating that Oblak had refused repayment, combined with the defendant’s rather hurried disbursement of funds and his evasive answers, leads to the only reasonable conclusion that he knew or ought to have known at the relevant time that he was not entitled to the mistaken payment.
[21] In addition, Oblak has failed to establish that his disbursements were not ordinary every day expenditures or that he derived no benefit from them. For example, when asked about the disbursement of $949.34 to Ruth’s Chris Steakhouse on September 25, 2009, the following exchange took place (at questions 374-381):
Q. So September 25th you spent $949.00 at Ruth’s Chris; do you see that?
A. I see that, yes.
Q. Who was at that dinner?
A. I wasn’t sure if that was a restaurant. I’m not sure.
Q. I believe it’s – so you don’t know what Ruth’s Chris is?
A. Now I do.
Q. Have you ever been to a Ruth’s Chris Steakhouse?
A. Possibly, I might have, yes.
Q. So that is a yes?
A. I don’t remember.
Q. So you don’t remember if you were at a close-to $1,000.00 dinner at Ruth’s Chris Steakhouse on September 25th, 2009?
MS. HAMILTON: That’s what he said.
BY MR. KREADEN:
Q. Would Mr. Hamilton ever use your card without you being there?
A. No.
Q. You never gave him access, like access to your accounts?
A. No.
[22] The defendant could not answer direct questions related to his alleged “change of position” and his responses were inconsistent at best.
conclusion
[23] The monies mistakenly sent to Oblak’s account were, in my view, a benefit which enriched him for a short time, and which must be restored to the plaintiff. As noted in Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at para. 38, “the benefit need not be retained permanently”.
[24] Given the type of goods purchased and the lack of disclosure by the defendant, I do not accept his submission that he acted only as a “bare trustee” for Hamilton. He has not satisfied the onus of showing he was an innocent recipient of the funds who changed his position in good faith without knowledge of the error.
[25] I find that Oblak knew or ought to have known the second payment was a mistake, but spent the monies anyway. In such a case, he cannot rely on materially changed circumstances to claim he should not be compelled to return the funds.
[26] The defendant has not put his best foot forward.
[27] The plaintiff has a right to recover the payment made under mistake of fact and the defendant has not established any juristic reason to deny the plaintiff recovery. I find he has not changed his position in good faith and he is not an innocent recipient of the funds within the meaning of the case law.
[28] It would therefore, not be inequitable to require the benefits be returned to the plaintiff.
[29] This court is able to gain a “full appreciation” of the evidence and issues in order to make dispositive findings in this case within the meaning of Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431, at para. 50. I am satisfied there is no genuine issue requiring a trial for its resolution. Accordingly, the plaintiff is entitled to summary judgment against the defendant Oblak pursuant to rule 20.04(2) for the mistaken payment in the sum of $99,975 plus prejudgment and post-judgment interest in accordance with the Courts of Justice Act.
[30] The plaintiff’s counsel has submitted a Costs Outline seeking costs of $13,819.66 on a partial indemnity scale and $19,398.60 on a substantial indemnity scale. I do not agree that substantial indemnity costs are warranted. The defendant was entitled to raise the defences he did.
[31] The partial indemnity costs requested are, in my view, reasonable. They include a $600 fee for the appearance before me and $2,661.79 for disbursements, well within the reasonable contemplation of the parties. Taking into account the above and the factors set out in rule 57.01, I award costs to the plaintiff as against the defendant Oblak, in the all-inclusive sum of $13,819.66.
CHAPNIK J.
RELEASED: June 25, 2013
COURT FILE NO.: CV-10-403078
DATE: 20130625
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N :
THE ROYAL BANK OF SCOTLAND PLC
Plaintiff
– and –
PETER OBLAK, JOHN HAMILTON and RS GROUP OF COMPANIES, INC.
Defendants
REASONS FOR JUDGMENT
CHAPNIK J.
RELEASED: June 25, 2013