ONTARIO
SUPERIOR COURT OF JUSTICE
MILTON COURT FILE NO.: 161/12
BETWEEN:
HER MAJESTY THE QUEEN
– and –
James J. Gibb and Petros Grigorovsky
Accused
A. Khoorshed, for the Crown
James Gibb, In Person
S. Kim, for the accused Petros Grigorovsky
HEARD in Milton: June 18, 20, 21, and 24, 2013
Daley J.
Introduction:
1Both accused were charged with the offence of fraud pursuant to s. 380 (1) (a) of the Criminal Code, it being alleged that they defrauded Theresa and Dino Puglia ("Puglias") of a sum in excess of $5,000 in the period between December 5, 2003 and June 9, 2011.
2Both accused pleaded not guilty to the charge and the case proceeded to trial before me without a jury. The accused James J. Gibb ("Gibb") represented himself in the defence of the charge and during the course of the trial, he sought legal advice from counsel outside the courtroom on issues as they arose when necessary.
Background:
3Theresa and Dino Puglia have resided in Stoney Creek since 1999. Theresa has been a homemaker and Dino, who is retired from Stelco works as a carpenter.
4In 2000 the accused Petros Grigorovsky ("Grigorovsky") and his family moved into the home immediately next-door to the Puglias and they became friends.
5In 2003 Grigorovsky introduced Gibb to the Puglias and they agreed to lend him $15,000, which sum was repaid to them with interest.
6In March 2004, following further discussions with both Gibb and Grigorovsky the Puglias agreed to lend the sum of $50,000 to the corporation Micropayments Inc. ("Micropayments"). This loan was repaid to the Puglias with the interest.
7In June, 2005, following further discussions with both accused, the Puglias agreed to advance a further loan to Micropayments in the sum of $100,000 pursuant to a promissory note which required the repayment of the total sum of $200,000 to them by December 30, 2006. The loan amount and interest payable under the terms of the promissory note were never paid back to the Puglias.
Overview of Evidence:
8At the commencement of the trial the parties agreed to the filing in evidence of an exhibit book of documents.
9On the agreement of the parties the documents contained in the exhibit book were admitted in evidence on the basis that they acknowledged both the authenticity of the documents and the truth of the contents of the documents.
10During the course of the trial the parties also executed and filed in evidence an agreed statement of fact which provided as follows:
(1) neither accused will assert that he invested the money in the manner that Mrs. Puglia believed;
(2) each accused party will assert that he, personally, did not commit fraud; and
(3) neither accused will, at the close of the Crown's case, bring a motion for nonsuit.
The evidence of Dino and Theresa Puglia:
11Theresa Puglia testified that in 2003 Grigorovsky advised the Puglias that he had a friend, namely Gibb, who required a loan for a short term. He advised the Puglias that he and Gibb were friends.
12Ms. Puglia acknowledged that her husband and Grigorovsky had separate conversations with respect to investments before this first loan.
13She first met Gibb on the day the money was given to him. She could not recall if Grigorovsky was present at the time the promissory note was signed by her, her husband and Gibb, although there is a signature on the promissory note above Grigorovsky's name. She had not seen the promissory note before it was presented to them for signature.
14She understood and agreed that this first transaction was a loan to Gibb alone and that it did not involve Grigorovsky.
15Ms. Puglia testified that she and her husband agreed to advance the loan to Gibb because he was a friend of Grigorovsky's and they trusted him. The Puglias met with Gibb and Grigorovsky in December 2003, at their home, at which time a promissory note was presented to them calling for the payment of a principal sum of $28,750 to Gibb as the borrower. As Ms. Puglia testified they were not comfortable with advancing that sum of money, they agreed to provide the sum of $15,000 which was paid to Gibb by cheque dated December 5, 2003. The promissory note which formed the basis of that loan was neither amended to reflect the true loan amount nor was a new promissory note prepared and executed.
16Dino Puglia was called as a witness by Gibb and testified with the assistance of an Italian interpreter. He acknowledged that he had worked at Stelco for 25 years, however he testified that he speaks only a little English but understands most of what is said in English.
17Dino Puglia testified that Grigorovsky initially approached him about lending money to Gibb. He could not recall if Grigorovsky was present at the time the promissory note with respect to this first loan was executed and the funds were provided to Gibb. However, in cross-examination he stated that Grigorovsky did not simply provide him with Gibb's name and contact information, he brought Gibb to meet him. He acknowledge that he had no information of any financial benefit flowing to Grigorovsky in regard to this first loan and no monies were paid to him by the Puglias, nor was he identified in the promissory note relating to this loan.
18Dino Puglia acknowledged that he requested identification information from Gibb namely his driver’s license number and address which he wrote on to the promissory note.
19Dino Puglia testified that when he was first introduced to Gibb, Grigorovsky advised him that he worked in the stock exchange in Toronto.
20In accordance with the terms of the promissory note, the sum of $18,000 including interest was repaid to the Puglias by Gibb.
21Ms. Puglia testified that after this first loan was paid off that Grigorovsky approached them about the further loan. Again, there was a meeting held at their home between the Puglias, Grigorovsky and Gibb.
22At this meeting, which was held in March, 2004, Ms. Puglia agreed that as was customary in their family, wine was served, although she stated she did not drink.
23In this meeting Grigorovsky and Gibb stated to the Puglias that they had a company known as Micropayments and that they were both partners in this company. In this meeting she testified that there were discussions regarding the company doing business in eastern Europe in the cell phone industry. A loan in the sum of $50,000 was requested. In this meeting Grigorovsky indicated to the Puglias that he would be going to Florida, New Jersey and Europe regarding business.
24Grigorovsky also advised the Puglias that Gibb was an investment banker who worked in the stock market in Toronto.
25Ms. Puglia stated that she did not know the purpose of the loan other than it was to go to Micropayments. Grigorovsky indicated to the Puglias in this meeting that he had invested money in the company in an amount greater than the loan requested.
26A promissory note was provided to the Puglias for execution in this meeting. Ms. Puglia testified that she understood that both Grigorovsky and Gibb were partners in Micropayments. She read the promissory note before signing it.
27Immediately below the signature lines in the promissory note, for Grigorovsky and Gibb appeared the words "Director/Authorized Signatory." Dino Puglia testified that he noted this reference on the promissory note and, although no one explained the reference to him, he testified that this reinforced his understanding that Grigorovsky and Gibb were both involved with Micropayments.
28He further testified that it was after the first loan to Gibb was paid back and prior to making the second loan, which was to Micropayments, that Grigorovsky advised him that he was involved with the company. However, he also testified that before he met with Gibb and Grigorovsky at his home when the promissory note was signed, he and his wife thought they were making a loan to Grigorovsky and Gibb. The cheque was ultimately made payable to Micropayments.
29The Puglias provided the cheque payable to Micropayments in the sum of $50,000 on April 5, 2004.
30Dino Puglia testified that, before agreeing to advance this second loan to Micropayments, he would not advance the money unless Grigorovsky signed as a witness. Although he stated that he was a little concerned about making this second loan, he was comfortable with doing so as he knew Grigorovsky and that he trusted Gibb.
31He further testified that Grigorovsky and Gibb told him in the meeting regarding this second loan and promissory note that the money would be invested in Europe in a cell phone company. At no time was he told the money was not invested in Europe as had been stated.
32The time of the execution of this second promissory note, Dino Puglia acknowledged that he did not have any information as to where Gibb lived and he did not request any particulars as to his address or driver's license number as he had at the time the first promissory note was executed.
33This second promissory note was signed by the parties in a meeting at the Puglias' home which lasted approximately 3 hours. Ms. Puglia testified that her husband served drinks to the accused. She did not drink and she was in and out of the kitchen where the meeting took place, from time to time. She agreed that several drinks were consumed by her husband and the accused, however she denied that they were intoxicated at the time the second promissory note was executed. She stated that the note was signed before they began drinking.
34Dino Puglia acknowledged that he served alcohol and that both Grigorovsky and Gibb had drinks. He agreed that he provided them with alcoholic drinks when they first arrived and that he was also drinking. He acknowledged that he had wine in his home and agreed that he may have served them cognac as well.
35It was his evidence that the promissory note relating to this second loan was signed at the beginning of the meeting but he conceded that as it was 10 years ago, it may have been signed any time.
36In this meeting Gibb provided the promissory note and Gibb and Grigorovsky stated to the Puglias that they were the owners of the company. Dino Puglia testified that understood that this loan to Micropayments would be paid back by Gibb as that is what happened on the first loan.
37Theresa Puglia testified that she understood the money in the second loan was to go to Micropayments and that both the accused were involved in the company.
38In the civil action that was brought by the Puglias after the third and final loan remained unpaid, Theresa Puglia filed an affidavit to which she was referred in cross-examination, where she stated that the first and second loans were loans granted to Gibb.
39In accordance with the terms of the second promissory note, the loan was repaid by a cheque in the sum of $57,500 payable to Dino Puglia from Micropayments on March 19, 2005.
40As to the third loan by the Puglias in June 2005, Dino Puglia testified that he was initially approached by Grigorovsky about this loan. He was told about two or three days before the parties met that a loan of $100,000 was required. Prior to the meeting that was to be held, Dino Puglia and his wife discussed the loan and they decided that they did not wish to go ahead with it.
41Dino Puglia testified that he contacted Grigorovsky and advised him that he did not wish to go ahead with the loan, however he stated that Grigorovsky pressured him and told him that if he backed out it would cause a problem and therefore Dino Puglia agreed to meet with Gibb and Grigorovsky on June 24, 2005 at his home.
42Both Theresa and Dino Puglia testified that based on what was told to them by Gibb and Grigorovsky at the meeting of June 25, 2004 they understood that the monies to be loaned were to be used in a land subdivision investment in New Jersey.
43Grigorovsky spoke most during this meeting and convinced Dino Puglia to invest in this New Jersey project.
44During this meeting Dino Puglia testified that both Gibb and Grigorovsky indicated to them that they were partners in Micropayments.
45The promissory note in respect of this third loan of $100,000 called for a repayment of $200,000 by December 30, 2006.
46Theresa Puglia testified that it was not until they were presented with the promissory note at the meeting that she realized that the money in this loan was to be invested in Micropayments. She thought the money was being loaned to Gibb and Grigorovsky as partners.
47During this meeting Dino and Theresa Puglia advised Gibb and Grigorovsky that they did not wish to proceed, however Theresa Puglia further testified that she trusted Gibb and Grigorovsky as the earlier loans had been repaid. Despite their misgivings, they agreed to go ahead with the loan.
48Grigorovsky did most of the talking during this meeting and convinced the Puglias to invest in this project. Theresa Puglia testified that when Gibb and Grigorovsky arrived at their home and were advised that the Puglias were not prepared to proceed with the loan, they were agitated and irate. She could not recall how long the meeting lasted, and she agreed that she did not sit in throughout the entire meeting and that she was in an adjacent room.
49Theresa Puglia agreed that alcohol was consumed during this meeting and she believed that her husband may have been drinking more than Gibb and Grigorovsky. She could not say whether the alcohol consumed was consumed at the beginning of the meeting.
50Dino Puglia initially testified that he did not recall alcohol being served in this meeting, but then agreed that he could be wrong and that coffee may have been served at the start of the meeting and alcohol at the end.
51He recalled that when Gibb and Grigorovsky arrived and were advised that they may not proceed with the loan that Grigorovsky was more upset than Gibb.
52The promissory note which was brought to the meeting by Gibb and dated June 24, 2005, which was signed by all four parties at the Puglias’ kitchen table, described Grigorovsky and Gibb as "Managing Partner." Dino Puglia testified that he understood that they were both partners in Micropayments and this reinforced his belief that they were partners in the New Jersey land project.
53Theresa Puglia testified that at the time the promissory note of June 24, 2005 was executed, she believed that both Gibb and Grigorovsky were partners in Micropayments. She confirmed that she provided the cheque on that date in the sum of $100,000, however she as well confirmed that the date and the name of the payee on the cheque were left blank by her.
54Theresa Puglia testified that when the payment under the terms of the promissory note came due at the end of December, 2006, and the monies were not paid and she and her husband contacted Grigorovsky and Gibb regarding this. She stated that Grigorovsky advised her that Gibb had the money and did not understand why he had not repaid them.
55She further testified that Grigorovsky always told her that Gibb was the person she should be talking to about getting repaid and she acknowledged that she testified in the preliminary inquiry that Gibb had advised her that Grigorovsky had nothing to do with the third loan and requested that she stop calling him.
56Dino Puglia acknowledged that he also heard himself or from his wife that Grigorovsky had nothing to do with the third loan and agreed that he may have heard this from Gibb. He also agreed that he may have heard from Gibb that he would see to paying this loan.
57Dino Puglia testified that he had several conversations with Grigorovsky after the loan remained unpaid. He was told to be patient and that he would be paid back. He also testified that Grigorovsky warned him not to be arrogant or something unpleasant could happen.
58Grigorovsky offered two excuses to Dino Puglia for the monies not being paid, firstly bad weather at the project in New Jersey was causing delays in the project, which resulted in delay in the funds being paid out and secondly the U.S. Customs Office had stopped the money from coming from the U.S. into Canada.
59Both of the Puglias were questioned about a civil action which was brought in their name against Gibb and Micropayments, wherein those parties consented to judgment in the sum of $115,000. Neither Theresa nor Dino Puglia were aware of this consent to judgment. No evidence was offered as to whether a consent judgment was actually obtained and entered with the court.
TD -Canada Trust --- Mary Jane Gallienne:
60Mary Jane Gallienne, a senior investigator with TD Canada Trust (“TD”) testified on behalf of the Crown.
61The exhibit book filed in evidence contained banking records from TD and including account summaries with respect to Micropayments’ accounts 520-3309 and 520-3783, which were reviewed and verified by Ms. Gallienne. These records included account application documents in the name of Micropayments for account 520-3783.
62The witness confirmed that with respect to account 520-3309, the account agreement submitted on behalf of Micropayments was executed by Gibb on August 13, 2003. Attached to the account application is a customer checklist wherein it was indicated that the banking services were required for "potential investment opportunity in future."
63Ms. Gallienne testified that account 520-3309 was closed and the new account 520-3783 was opened also in the name of Micropayments. On the account application for this account dated April 14, 2004 Gibb is shown as the president and Grigorovsky as a director, however, she agreed that the corporate records contained in the bank file do not show Grigorovsky as a Director.
64Ms. Gallienne testified that it was the bank's practice that account application documentation like this must be executed in the presence of a bank employee and not taken away from the bank for execution elsewhere. In cross-examination, she acknowledged that there have been occasions where banking documents have been taken out of the bank for signature contrary to the bank’s practices.
65Ms. Gallienne testified that the summaries included with respect to each of these two bank accounts are accurate and that she had verified the backup documentation to confirm that.
66With respect to the account summaries for account 520-3783, the witness confirmed that she verified the deposits, withdrawals and transfers from that account. She confirmed that a deposit was entered on the account on April 6, 2004 in the sum of $50,000 representing a cheque from Dino Puglia and that on the following day, April 7, 2004 the sum of $35,000 was transferred from that account to the account of Grigorovsky.
67Ms. Gallienne further testified that the TD records show the cheque from Dino Puglia of June 25, 2005 appears as a deposit of $99,999, as opposed to $100,000, as it was deposited to the bank account through an ATM facility. This sum was posted to the account on June 27, 2005 and on July 6, 2005 the sum of $49,000 was transferred from the Micropayments account to Grigorovsky.
68This witness further testified that on July 6, 2005 Gibb made a cash withdrawal of $10,000 and that he signed a release from liability in favour of the bank with respect to this cash.
69In cross-examination Ms. Gallienne acknowledged that based on her review of the banking documents, in respect of the Micropayments' account 520-3783, with respect to monies taken out of this account, she did not see any signatures from Grigorovsky on any of the banking records, only signatures by Gibb. On consent of all parties, the complete account history with respect to the Micro-Payment account 520-3783 was filed as an exhibit.
Evidence of Accused Grigorovsky:
70Grigorovsky testified that he has been married for 24 years and has a 19-year-old daughter. He has been employed as a construction millwright for 20 years.
71He met Gibb through his daughter and was advised by him that he was an investor, banker and accountant. He believed that Gibb was very successful.
72Prior to 2003 he became involved in lending money to Gibb and he was always repaid by him. He testified that he loaned money to Gibb on more than five occasions and made personal loans to him of between $15,000 and $20,000. Grigorovsky's friends also loaned Gibb similar amounts.
73Grigorovsky testified that he had no information as to where Gibb invested the money and he could not recall what Gibb told him in this regard. The loans were generally in cash, as that is what Gibb requested. Upon payment of these loans by Gibb the money would be placed back into Grigorovsky's bank account and then he in turn would pay out money from that amount to his friends.
74The witness was referred to various transfer deposits shown in the account summaries for TD account 520-3783 held by Micropayments to his account, however, he could not recall what these amounts related to, but acknowledged that the monies showing in the account summaries were received by him.
75Grigorovsky was also referred to an account summary relating to Gibb's personal bank account with the Royal Bank, which appears at tab 5 in the exhibit book, which showed the transfer of $50,000 from Gibb's account to Stephanie Grigorovsky’s "education fund" on August 14, 2003. He testified that he recalls this money being paid by Gibb to his daughter's account as a gift. He further testified that he believes Gibb made this gift, to gain his trust.
76Grigorovsky testified that he and his family moved in next door to the Puglias in 2000 and became friends with them within a couple of months.
77As to the first loan made to Gibb, Grigorovsky testified that he learned from Gibb that he needed bridge financing and he spoke with Dino Puglia regarding this and provided him with Gibb's telephone number. He attended a meeting with Dino Puglia and Gibb but was not present at the meeting where the money was actually paid to Gibb.
78He acknowledge that he advised Dino Puglia that he trusted Gibb and that prior to the first loan to Gibb, he had advised Dino Puglia that Gibb worked in the stock market. However, Grigorovsky was confronted with an affidavit he filed in the civil action where he stated he had no knowledge of Gibb working in the stock exchange. He agreed that this contradicted his evidence at trial and he confirmed his evidence that he may have told the Puglias that Gibb worked in the stock market before the first loan to Gibb.
79With respect to the second loan, while he acknowledged that he was aware of Gibb's company, Micropayments and that Gibb was the owner of the company, he denied that he was ever involved in this company at all and denied telling the Puglias that he was a partner in the company.
80Grigorovsky acknowledged that he had invested money in Micropayments, however, he denied that he had invested $500,000 with Gibb in the past. Upon being confronted with an affidavit which he had filed in the civil action, where he stated under oath that he had invested $500,000 with Gibb, he explained that he had not loaned all of that money to Gibb, that some of it was his and some was borrowed money from his investor friends.
81However at the time of the second loan in March 2004, although he agreed that there was a discussion in this meeting with the Puglias, that the loan money was for investment in Micropayments, he denied knowing what the scope of the investment was going to be and he had no recall of any conversation about investing money in a cell phone company in Europe. However, notably, he did not disagree with what had been stated by the Puglias in their evidence regarding investment in a cell phone company, he simply stated he did not recall.
82As to the business banking and services agreement for Micropayments with TD in respect of account 520-3783, Grigorovsky testified that the signature on page 5 of 5 appears to be his, but he denied signing the application and he testified that he had no idea how his signature and name appeared in the banking records.
83After the first loan to Gibb had been paid back to the Puglias, Grigorovsky testified that Dino Puglia approached him as he was interested in further investments.
84With respect to the meeting held at the time of the second loan of $50,000, Grigorovsky recalled that the meeting lasted for 2 to 3 hours and that he, Gibb and Dino Puglia were drinking wine and cognac. He testified that the promissory note executed on March 31, 2004, with respect to this loan, was signed at the end of their meeting when they were all intoxicated.
85Grigorovsky acknowledged that he knew he was signing a document but stated that he never really looked at the promissory note at all because he was intoxicated and he trusted Gibb. He testified further that he believed he was signing as a witness to the document and that Dino Puglia asked him to be at the meeting as a "signatory witness."
86Gibb had brought the promissory note to the meeting.
87Grigorovsky testified that he did not see the title under his name on the promissory note of March 31, 2004, namely "Director/Authorized Signatory" at the time he signed the promissory note. He stated that he did not realize that he was shown as a "director" until he became aware of the civil action brought by the Puglias.
88He stated that he did not think there was anything written under his name. When confronted with an affidavit of October 27, 2009, which he filed in the civil proceedings, where he stated that he understood he was signing the promissory note as a person authorized to witness a signature, he then admitted that he saw the line under his name and contrary to what he had said in his earlier testimony he stated that he did not notice the term "director" just the term" authorized signatory."
89At the end of the meeting he did not receive a copy of the promissory note. Gibb was provided with the loan money at the conclusion of this meeting and Grigorovsky subsequently learned that it was repaid in full.
90As to the $100,000 loan and the promissory note of June 24, 2005 that give rise to the present charges, Grigorovsky testified that after the second loan was paid back, Dino Puglia approached him and asked if there was another investment opportunity.
91Following this, he met with Gibb, and the Puglias at their home at which time Gibb had the promissory note. Grigorovsky testified that he never reviewed the note as he trusted Gibb.
92The meeting at the Puglia’s home lasted 2 to 3 hours. Mrs. Puglia was not present for most of the meeting. He testified that they were all drinking wine and cognac and stated that they had "a few drinks" and that at the time they signed the promissory note at the end of the meeting they were intoxicated.
93Grigorovsky acknowledged however that they all knew at the time that they were signing a promissory note.
94As to the title indicated under his name on the promissory note, namely, "Managing Partner" he testified that he did not recall seeing this at the time he executed the promissory note and first realized this was indicated on the note when the civil action was commenced.
95Grigorovsky acknowledged that he and Gibb discussed, in the presence of the Puglias, the fact that they had travelled to Florida and New Jersey together and that they discussed a project in New Jersey after having just returned from there. Notably, he acknowledged that perhaps from this discussion they left the impression with the Puglias that they were in these locations on business. He denied being in any business meetings with Gibb in New Jersey.
96However, Grigorovsky also agreed that the promissory note of June 24, 2005 related to investment in New Jersey and he agreed that the Puglias’ evidence regarding this was truthful and further that the promissory note itself even makes reference to "the initial development phase of the project."
97As to his involvement, if any, with Micropayments, Grigorovsky denied any association with the company, however, he acknowledged that he had invested in the company prior to the loan of June 24, 2005 and he further acknowledged that he advised the Puglias of this and that he had invested in Micropayments in an amount greater than the loan requested. He agreed that he had invested approximately $500,000 in Micropayments but denied telling the Puglias that he had doubled his money.
98Grigorovsky testified that he and his friends loaned $500,000 and that these monies were paid to Gibb, half in the form of cash with the balance in cheques and that this money was to be invested in the New Jersey project.
99Grigorovsky acknowledges that following the loan from the Puglias of $100,000 in June 2005, he received a payment from Gibb in the sum of $49,000, however, he denied knowing that this money had come from the monies paid by the Puglias.
100When he was approached by the Puglias after the loan remained unpaid, he testified that he advised them that their investment was with Gibb and his company and he had nothing to do with it.
101Grigorovsky acknowledged that in the period from March 2004 until December 2008 he received $393,200 from the Micropayments bank account and with additional monies paid to him as shown in Gibb's personal account, he received in the order of $440,000 in that time. He further testified that Gibb still owes him and his investor friends $500,000.
Positions of the Parties:
A- The Crown:
102It was asserted on behalf of the Crown that the Puglias had been deprived of the money which they had paid and that the amount exceeded $5,000. The issues for determination by the court were whether there was dishonesty on the part of both accused and the requisite intent.
103With respect to Grigorovsky, it was urged on behalf of the Crown that he represented to the Puglias that he was a director or officer of Micropayments and that by his representations and actions, he led them to believe that their money would be invested in the construction project in New Jersey and thereby encouraged the Puglias to advance the loan monies. This was false, as it is now agreed by the accused that the monies advanced were not invested as the Puglias thought.
104As to the accused Gibb it was urged that he should be found guilty of fraud on the basis that the money paid by the Puglias was not invested as he represented. He also represented Grigorovsky as a partner and prepared the promissory note where he is identified as a representative of Micropayments.
B- The Accused:
105Counsel on behalf of Grigorovsky conceded that the promissory notes in regard to the second loan transaction at $50,000 dated March 31, 2004 and the promissory note of June 24, 2005 with respect to the loan amount of $100,000 were deceitful in that Grigorovsky is described as a "Director/Authorized Signatory" and "Managing Partner."
106While the accused Grigorovsky has acknowledged in the agreed statement of fact that the monies provided by the Puglias was not invested as they believed, it was submitted that there is no evidence as to where the money went.
107Counsel submitted on behalf of Grigorovsky that the banking records produced disclose that there are in the order of 25 payments from Micropayments' and Gibb's bank accounts to Grigorovsky, however, there is no evidence that Grigorovsky knew where the money he was receiving was coming from and as such, Grigorovsky should be acquitted as there is reasonable doubt that the payments received by Grigorovsky flowed from monies paid by the Puglias to Micropayments.
108It was further submitted that Grigorovsky was intoxicated at the time he executed the promissory note relating to the $100,000 loan and as such he has no responsibility for his signature on that note. Although it was not fully articulated as such, I took counsel's submissions regarding this to mean that Grigorovsky did not have the requisite intent due to his alleged intoxication.
109As to the position of the accused Gibb, he simply indicated that he was not party to any fraud involving the Puglias.
Analysis:
110The accused are both charged under s. 380 (1) (a) of the Criminal Code which reads as follows:
Fraud
- (1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,
(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; or …
111In R. v. Theroux, 1993 134 (SCC), [1993] 2 S.C.R. 5 McLachlan J. (as she then was) set out at para.16 the principles with respect to the actus reus of the offence of fraud as follows:
(i) the offence has two elements: dishonest act and deprivation;
(ii) the dishonest act is established by proof of deceit, falsehood or "other fraudulent means;" and
(iii) the element of deprivation is established by proof of detriment, prejudice or risk of prejudice to the economic interests of the victim, caused by the dishonest act.
112As to the proof of the mens rea of fraud, McLachlan J stated in Theroux at para. 27 that it is established by proof of:
(i) subjective knowledge of the prohibited act; and
(ii) subjective knowledge that the prohibitive act could have as a consequence the deprivation of another (which deprivation may consist in knowledge that the victim's pecuniary interests are put at risk).
113McLachlan J. further noted at para. 28 that where the conduct and knowledge required by these definitions are established, the accused is guilty, whether he actually intended the prohibited consequences or was reckless as to whether it would occur.
114The offence of fraud can be established by proof of the prohibited act in the form of deceit, falsehood or "other fraudulent means."
115The third category of "other fraudulent means" was considered by McLachlan J. in the decision of R. v. Zlatic 1993 135 (SCC), [1993] 2 S.C.R. 29 where at para. 31 she referred to Dickson J. (as he then was) in R. v. Olan as to his comments on the phrase "other fraudulent means" where he stated:
… proof of deceit is not essential to support a conviction [for fraud] … The words "other fraudulent means" in s. 338 (1) [now s. 380 (1)] include means which are not in the nature of a falsehood or deceit; they encompass all other means which can properly be stigmatized as dishonest.
116In determining the actus reus of fraud within the third category of the offence - "other fraudulent means" - McLachlan J stated that this involves a determination as to whether the means of the alleged fraud can properly be stigmatized as dishonest.
117At para. 32 of Zlatic McLachlan J. stated:
The dishonesty of "other fraudulent means" has, at its heart, the wrongful use of something in which another person has an interest, in such a manner that this other's interest is extinguished or put at risk. A use is "wrongful" in this context if it constitutes conduct which reasonable decent persons would consider dishonest and unscrupulous.
118Further, McLachlan J. in referring to two Ontario Court of Appeal decisions namely R. v. Currie and R. v. Bruce, noted that in circumstances where the accused were in the business of investing funds in a certain company but diverted the funds, without notice to the investors, to another company, the court found that the fact the accused used the funds in a manner which was not authorized was sufficient grounds for finding that the accused acted dishonestly.
119In considering the testimony of Grigorovsky and the evidence offered on behalf of Gibb, although he did not testify himself, the principles established in W. (D.) v. The Queen (1991) 1991 93 (SCC), 63 C.C.C. (3d) 397 (S.C.C.) must be considered: R. v. B.D., 2011 ONCA 51 at para. 105.
120The accused Grigorovsky has asserted that he has no criminal liability with respect to the execution of the promissory note on June 24, 2005 as he was intoxicated.
121The offence of fraud is a specific intent offence. The law with respect to the defence of voluntary intoxication was clearly stated in the Supreme Court of Canada decision in R. v. Daley, 2007 SCC 53, [2007] S.C. J. No. 53, where the Court in referring to the House of Lords decision in D.P.P. v. Beard, [1920] A.C. 479 listed the foundational principles with respect to the modern defence of intoxication as follows:
(1) that intoxication could be a ground for an insanity defence, if it produced a disease of the mind;
(2) that evidence of drunkenness which renders the accused incapable of forming the specific intent essential to constitute the crime should be taken into consideration with other facts proved in order to determine whether or not he had this intent; and
(3) that evidence of drunkenness falling short of a proved incapacity in the accused to form the intent necessary to constitute the crime, and merely establishing that his mind was affected by drink so that he more readily gave way to some violent passion, does not rebut the presumption that a man intends the natural consequences of his acts.
122As to the evidence of the Puglias, while they quite reasonably offered some evidence which was vague as to details, given the passage of time, since 2005, their evidence on matters that were material was consistent.
123I found both Theresa and Dino Puglias to be credible and reliable witnesses and they gave their evidence in a forthright manner.
124I accept their evidence and I find as a fact that they both viewed Grigorovsky as a friend and that they trusted him.
125I further find that they reasonably believed that Grigorovsky and Gibb were owners of Micropayments and that the loan they were making in June 2005 was to Micropayments, or to Gibb and Grigorovsky as partners in the company.
126I make this finding based on the clear representation made in the promissory note that both of the accused were managing partners and the Puglias relied on this. I also make this finding based on the Puglias' evidence, as well as Grigorovsky's evidence that, at the time of the execution of the promissory note for the $100,000 loan, Grigorovsky and Gibb discussed with the Puglias their trips to Florida and New Jersey, which he agreed may have left the impression with the Puglias that these were business trips connected with the New Jersey project that they had discussed with the Puglias and the investment of the loan monies.
127It was also Grigorovsky's evidence that, prior to the execution of the promissory note and the loan by the Puglias in June 2005, he had advised them that he had invested in Micropayments in an amount greater than the loan requested of them.
128I find as a fact that the Puglias turned over the money to Gibb in the form of a cheque with the payee's name left blank. This was entirely consistent with their evidence that they understood from the representations made by the accused that they were both partners in the company.
129I further find as a fact that the Puglias loaned the money based on the representations made by both Gibb and Grigorovsky that the money was to be invested in a land subdivision project in New Jersey. I also find that it was not so invested.
130Counsel for Grigorovsky acknowledged in his submissions that the use of the term "Managing Partner" in respect of Grigorovsky was likely deceitful, however, based on his intoxication and trust placed by him and Gibb, he should not be found guilty of fraud.
131As to Grigorovsky's evidence, I found it to be entirely without any ring of truth on the material issues to be determined.
132There were significant conflicts and inconsistencies in Grigorovsky's evidence both internally and as compared to statements made by him under oath in affidavits filed in the civil action.
133Although in his trial evidence he acknowledged advising the Puglias that Gibb worked in the stock exchange, prior to the first loan to Gibb, he gave contrary evidence in the affidavit filed by him in the civil action brought against him where he stated he had no knowledge of Gibb working in the stock exchange. He refused to acknowledge that his affidavit evidence was inaccurate, although his trial testimony clearly contradicted it.
134Similarly, while acknowledging that he had invested money in Micropayments he initially denied having invested $500,000 with Gibb in the past. Again he was confronted with an affidavit, which he had filed in the civil action, where he stated under oath that he had invested $500,000 with Gibb. He explained this by stating that some of the money was his and some was from his investor friends.
135While maintaining in his testimony that he had no connection with Micropayments, Grigorovsky acknowledged that the evidence, contained in the banking records produced, shows that in the period between March 2004 in December 2008 he received $393,200 from the Micropayments' bank account as well as additional sums from Gibb's personal account, all payments totalling approximately $440,000.
136As to the second loan in March 2004 in the discussions that Gibb and Grigorovsky had with the Puglias, while denying that he knew what the money was to be invested in, and denying any recollection of a conversation about investing the money in a cell phone company in Europe, he did not disagree with the evidence offered by the Puglias on this point. I found his evidence in regard to this to be evasive and equivocal.
137Grigorovsky offered entirely unbelievable and unreliable evidence with respect to his signature on the promissory note of March 31, 2004. While this promissory note and its execution may not form part of the actus reus of the offence in question, the representations made by the accused as to their involvement with Micropayments form part of the historical background in the relationship between them and the Puglias.
138In his evidence at trial he initially stated that he had not noticed the title "Director/Authorized Signatory" on the March 31, 2004 promissory note. However, contrary to that evidence, he stated in the affidavit filed in the civil proceeding, dated October 27, 2009, that he understood he was signing the promissory note as a person authorized to witness a signature. In his trial testimony he offered the extraordinary evidence that he only noticed the title "authorized signatory" and not the title "director" below his name on the March 31, 2004 promissory note.
139As to the promissory note of June 24, 2005, and the title "Managing Partner" below his name, Grigorovsky simply testified that he did not realize this title appeared next to his name until the civil action was commenced.
140Grigorovsky's evidence must be considered in the context of all of the evidence in determining whether or not he had the intent required for the offence of fraud. As a result of consuming alcohol a person may not have the required intent. However, the mere fact that a person's mind was affected by alcohol, so that they lose inhibitions or act in a way which they would not have done had they been sober, is no excuse if the required intent is proved.
141It must be determined whether the evidence of intoxication, along with all the other evidence leaves the court with a reasonable doubt as to whether Grigorovsky had the intent required for the offence of fraud. He is not required to prove that he lacked the required intent. The burden remains upon the Crown to prove beyond reasonable doubt that Grigorovsky had the required intent despite evidence of his consumption of alcohol.
142It was Grigorovsky's evidence that he, Gibb and Dino Puglias had "a few drinks" of wine and cognac and that were intoxicated by the end of the meeting when the promissory note was signed on June 24, 2005.
143Notably, however, Grigorovsky acknowledged that all the parties knew they were signing a promissory note and he stated he did not read the note before signing it because of his level of comfort and trust for Gibb.
144Theresa Puglias testified that the parties were not intoxicated at the time the promissory note of June 24, 2005 was signed and that the note was signed before any drinking occurred. Dino Padilla had a somewhat vague recollection as to what drinking occurred and testified that alcohol may have been served at the end of the meeting after the promissory note was signed.
145Having considered the evidence of intoxication with all of the other evidence, I am not left with any reasonable doubt as to whether either Grigorovsky or Gibb had the specific intent to commit the offence of fraud.
146With respect to the consent to judgment allegedly signed by Gibb in his personal capacity and on behalf of Micropayments, as submitted in evidence by counsel for Grigorovsky, this documentary evidence is at its highest hearsay evidence and of little or no evidentiary value in considering the guilt or innocence of either of the accused. No evidence is available with respect to the circumstances surrounding the execution of this document and further neither of the Puglias were aware of the existence of any consent to judgment by Gibb or Micropayments.
147I am satisfied beyond a reasonable doubt that the Puglias have suffered a deprivation in respect of a sum in excess of $5,000 namely their payment of $100,000 plus the investment value to be repaid to them in accordance with the terms of the promissory note of June 24, 2005.
148As to the accused Grigorovsky, I am satisfied that the Crown has proven beyond a reasonable doubt the actus reus of the offence of fraud, namely a prohibited act in an act of deceit, falsehood or other fraudulent means and that the resulting deprivation was caused by the prohibited act and consists in the actual pecuniary loss suffered by the Puglias.
149I further find that the Crown has established, beyond a reasonable doubt, that Grigorovsky represented himself as a Managing Partner of Micropayments at the time of the execution of the promissory note of June 24, 2005 and I find that he did so knowing this to be false.
150As to the mens rea, I find that the Crown has established beyond reasonable doubt that Grigorovsky had the subjective awareness that the prohibited act could cause deprivation in the sense of depriving the Puglias of their money or putting their money at risk. As noted in the agreed statement of facts, both accused did not assert that the money payable under the promissory note of June 24, 2005 was invested in the manner as believed by the Puglias. I am satisfied beyond reasonable doubt that the money was not invested as was represented to the Puglias by the accused. I further find that the Puglias believed in and relied upon the representations made by both accused that the monies paid by them would be invested in a land subdivision project in New Jersey.
151I further find that Grigorovsky knew of the likelihood that the Puglias would suffer a deprivation and he acted recklessly as to the consequences in his representation as to his status as a managing partner with Micropayments and as such, this conduct also attracts criminal responsibility: Theroux, at para. 26.
152In the result, I find that Grigorovsky through an act of deceit and falsehood deprived the Puglias of their money and that he had the subjective knowledge of the prohibited act and knowledge that the act could and actually did have as a consequence the deprivation of the Puglias of their money. I further conclude that the Grigorovsky is guilty of the offence of fraud whether he actually intended the prohibited consequences or was reckless as to whether it would occur.
153As to Gibb's conduct, I am also satisfied that the Crown has established beyond a reasonable doubt that he is guilty of fraud.
154I find that he knowingly misrepresented to the Puglias that Grigorovsky was a partner and director in Micropayments both during their discussions with the Puglias at the time of the execution of the promissory notes in March 2004 and in June 2005, as well as in the promissory notes which were presented by him for signature by the parties on both occasions.
155I further find that in spite of the acknowledgment that the Puglias' money was not invested as was represented to them, Gibb lied to them when he advised them that their investment was delayed in being repaid to them due to bad weather conditions in the United States at the subdivision construction site and as well as a result of problems in having the monies transferred to Canada through U.S. customs.
156I further find that Gibb committed a fraud resulting in deprivation of the Puglias by "other fraudulent means" in that following the deposit of the sum of $99,000 from the cheque paid to Micropayments from Dino Puglia and deposited into the Micropayments’ bank account on June 27, 2005, the sum of $49,000 was paid from that account to Grigorovsky on July 6, 2005. I find that this constituted an unlawful and dishonest diversion of a portion of the monies paid to Micropayments by the Puglias, without their knowledge. I find that this constituted a dishonest act on the part of Gibb.
157I find that the Crown has established beyond a reasonable doubt that Gibb committed the actus reus, namely the prohibited act by an act of deceit and other fraudulent means which resulted in a deprivation of the Puglias of their monies.
158I further find that the Crown has established beyond reasonable doubt that Gibb had the requisite mens rea in that he lied and misrepresented to the Puglias about Grigorovsky's status with Micropayments both orally and in the promissory notes and as to where the monies would be invested, knowing that the Puglias would rely on these misrepresentations and that their money would be put at risk. As such, I find that it is reasonably inferred that Gibb had the requisite subjective knowledge and therefore, the mens rea for the offence of fraud.
159While it was not asserted by Gibb, in his submissions at the conclusion of the evidence, that intoxication was a defence he was raising, for the reasons expressed above with respect to intoxication defence raised by Grigorovsky, I am not left with any reasonable doubt with respect to Gibb's intent to commit the offence of fraud in the context of the evidence as a whole regarding the consumption of alcohol.
160In the result I find both accused guilty of the offence of defrauding Theresa and Dino Puglia of a sum of money exceeding $5,000 contrary to s. 380 (1) (a) of the Criminal Code.
Daley J.
Released: September 10, 2013
MILTON COURT FILE NO.: 161/12
DATE: 20130910
ONTARIO
SUPERIOR COURT OF JUSTICE
HER MAJESTY THE QUEEN
– and –
James J. Gibb and Petros Grigorovsky
REASONS FOR JUDGMENT
Daley J.
Released: September 10, 2013