Ontario
Superior Court of Justice
COURT FILE NO.: CV-11-432881
COURT FILE NO.: CV-10-412600
DATE: 20131223
ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-11-432881
BETWEEN:
Moshe Bunan
Plaintiff
– and –
The Toronto-Dominion Bank
Defendant
-and –
Dov Levy and Armand Levy
Third Parties
Jonathan L. Rosenstein, for the Plaintiff
Duncan A. Boswell, for the Defendant, The Toronto-Dominion Bank
Larry J. Levine, for the Third Parties
COURT FILE NO: CV-10-412600
AND BETWEEN:
Moshe Bunan a.k.a. Mosh Bunan
Jonathan L. Rosenstein, for the Plaintiff
Plaintiff
-and-
Dov Levy and Armand Levy
Larry J. Levine, for the third parties
Defendants
HEARD: October 1, 2, 3 and 4, 2013
Whitaker J.
REASONS FOR JUDGMENT
What is this Case About?
[1] These two actions were heard together.
[2] Both deal with loans made by the plaintiff Mr. Moshe Bunan (“Moshe”) to a partnership owned and controlled by his defendant cousins, Dov (“Dov”) and Armand (“Armand”) Levy. The partnership was engaged in land development in Wasaga Beach.
[3] The loans were secured by two promissory notes and personal guarantees signed by the two defendants jointly and severally in favour of the plaintiff.
[4] The first loan was for $290,000.00, earning ten percent interest, calculated monthly until repayment.
[5] The second loan was for $1,000,000.00, convertible to equity in the underlying venture or alternatively repayment at the option of Moshe.
[6] Both loans were secured by promissory notes and personal guarantees executed by Dov and Armand.
[7] Dov and Armand claim to have repaid the first loan in full over a series of six payments. With respect to the second loan, Dov and Armand rely on a purported written authorization from Moshe to convert the loan to equity.
[8] Moshe claims the purported authorization is forged and that no such authorization was executed by him.
[9] By Endorsement of May 28, 2013, Frank J. granted summary judgment to Moshe in accordance with the terms of the promissory note and personal guarantees for the $290,000.00 loan. Summary judgment with respect to the $100,000.00 loan was dismissed. This matter was set down for trial.
[10] The second action deals with funds belonging to Moshe, released to Dov and Armand by the TD Bank. Moshe claims these funds were released without authorization.
[11] The Bank argues that Moshe is bound by an executed and valid Financial Services Agreement containing verification provisions which save the Bank. It is undisputed that Moshe did not comply with the verification provisions of the Agreement.
[12] In the alternative, the Bank asserts a defence under the Statute of Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
[13] Moshe asserts that the Bank cannot prove that he signed a Financial Services Agreement and for this reason, he is not bound to the verification provisions in paragraph 12 of the agreement.
[14] The Bank has brought a third party claim against Dov and Armand in the event of liability on the Bank’s part.
[15] For reasons which follow, Moshe’s claim is allowed as against Dov and Armand and dismissed as against the Bank. I find the purported authorization to convert the loan to equity is a forgery. I also find the verification provisions of the Financial Services Agreement apply to protect the Bank regardless of whether funds were released without authorization.
The Loan for $1,000,000
[16] Although many of the facts are undisputed, credibility is an issue.
[17] Moshe lives in Israel. He has invested internationally before and holds bank accounts in a number of countries. Moshe does not speak English and has relied on family members to translate and interpret for him throughout this matter.
[18] In 2002, Moshe was in Canada for a family wedding. During the visit and for the first time, Moshe met his cousins Dov and Armand. They discussed potential investment opportunities. The three travelled to Wasaga Beach to view property that Dov and Armand wished to develop though their partnership.
[19] Moshe expressed interest in the project. The parties discussed Moshe’s potential participation in the venture.
[20] Moshe agreed to lend Dov and Armand’s partnership, the sum of $1,000,000.00 at 14% annually. Further, it was agreed as a term of the loan that Moshe would have an option to take 25% of the equity after seven years. The loan was secured by a promissory note and personal guarantee signed by Dov and Armand.
[21] Moshe testified that he was agreeable to these terms.
[22] As agreed, Moshe forwarded the one million dollars. He raised the funds from a Swiss bank where he held an account. The funds were placed in a TD Bank account to be drawn down as required and at his authorization.
[23] At some point after money was put in the account, Moshe’s son, Sharon, received a fax from Dov and Armand attaching share certificates in Moshe’s name and a list of shareholders in the partnership. The list of shareholders included Moshe. This was of concern to Moshe and his son Sharon as they understood that at that point, no election had occurred. They understood Moshe not as a shareholder or equity holder in any way, but rather an investor.
The Election
[24] During his testimony, Moshe was shown a copy of what was purported to be an election written in English and signed by him on May 10, 2004. As noted earlier, Moshe does not speak English.
[25] The signature on the document does not at all resemble Moshe’s signature. Moshe described it as a forgery. The words: “Hand Delivered” are written on the document. According to Dov, the document was sent by fax although it bears no fax header.
[26] Dov admits to having prepared the document himself and agrees that he gave it to Moshe when Moshe was visiting Canada in April of 2004.
[27] Dov and Armand have no explanation as to the circumstances of the signing of the election.
[28] Concerned about his investment, Moshe telephoned Armand. Moshe was told not to worry, that his money was safe and the share certificates were being used to protect the funds.
The TD Account
[29] In 2002, and at the direction of Dov and Armand, Moshe opened an account at the TD Bank for purposes of managing the transfer of funds on Moshe’s authorization. The Manager of Customer Service at the branch who dealt with him at the time of opening the account testified. She recalls Moshe signing the then current Financial Services Agreement to open an account. A second branch employee vouched for the account application. The Bank also states that there would have had to be a third check according to the Bank’s standard practice, before the account could be opened.
[30] The Bank produced a copy of the Financial Services Agreement that would have been in place at the time. The Agreement includes verification provisions in paragraph 12. Generally, these provisions oblige the account holder to examine and verify the account every thirty days to identify administration errors and if found, to report them to the Bank - failing which the Bank bears no responsibility for the errors.
[31] Moshe maintains that he does not recall signing the Agreement. The Bank was not able to produce an Agreement signed by Moshe.
[32] There is no issue that the verification provisions apply if Moshe indeed signed the Financial Services Agreement. Further, if the verification provisions apply, Moshe did not comply with the provisions of the Agreement. In this event, there would be no liability on the part of the Bank.
[33] By 2010, Dov and Armand stopped talking to or returning calls from Moshe. This was quite out of character with the parties’ prior relationship. Moshe suspected from the lack of communication that something was wrong.
[34] Suspicions raised, Moshe went to the branch and discovered that all of his funds were disbursed by the Bank on the direction of Dov and/or Armand (who had no authority to withdraw funds on their own).
Discussion and Findings
[35] Most of the evidence is not in dispute. The critical questions are whether Moshe signed an election to take equity in the project and whether the verification provisions of the Financial Services Agreement apply.
[36] I had the opportunity of observing all three parties, Dov, Armand and Moshe over a number of days. I have reviewed the purported election document and the Financial Services Agreement. I conclude that Moshe is the most credible of the three witnesses. He measured and weighed his evidence carefully and did not overstate his case. His responses to questions were fair and proportional. For example, Moshe did not assert that he did not sign the Agreement but rather, that he could not recall signing it.
[37] On the other hand, I found both Dov and Armand to be incredible. Both were not easily forthcoming in their evidence and at times avoided questions.
[38] I find on a balance of probability that Moshe did not execute the election document purportedly signed by him.
[39] Dov has admitted to drafting the document. It is more likely than not that he forged Moshe’s signature.
[40] As Moshe did not make an election, he remains a lender and not a shareholder.
[41] Moshe is entitled to judgment in accordance with the terms of the promissory note and personal guarantee in the amount of $1,000,000 with interest.
[42] With respect to the Financial Services Agreement containing the verification clause at paragraph 12, Moshe has not suggested that he recalls that he did not sign it. Moshe carefully maintained only that he does not recall signing it. The then Manager of Customer Service actually recalls Moshe signing the Agreement. There is a second bank employee who did vouch for the execution of the document as is standard procedure. A third check would have occurred before the account could be opened (again according to standard practice).
[43] On a balance of probability, I find that Moshe signed the Financial Services Agreement.
[44] It is not seriously disputed that the verification provisions apply if the Agreement was signed. The law on this point is fairly settled. The use of verification provisions by banks has been upheld a number of times (see the comments by Mesbur J. at paragraph 36 in Manor Windsor Realty Ltd. v. Bank of Nova Scotia 2011 ONSC 4515).
[45] It is not contested that Moshe did not comply with the verification provisions. The result is that even if the Bank wrongfully released funds to Dov and Armand without the authorization of Moshe, the Bank is now relieved of any liability.
[46] It is not necessary to decide the issue under the Limitations Act.
Outcome
[47] The claim by Moshe as against Dov and Armand on the promissory note and personal guarantees for $1,000,000 is allowed. The claim by Moshe against the TD Bank is dismissed. The third party claim by TD Bank is dismissed.
[48] Moshe is entitled to damages of one million dollars with interest from Dov and Armand, jointly and severally.
[49] Costs submissions may be made within three weeks in writing.
[50] Order accordingly.
Whitaker J.
Released: December 23, 2013
COURT FILE NO.: CV-11-432881
COURT FILE NO.: CV-10-412600
DATE: 20131223
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Moshe Bunan
Plaintiff
– and –
The Toronto-Dominion Bank
Defendant
-and –
Dov Levy and Armand Levy
Third Parties
COURT FILE NO: CV-10-412600
AND BETWEEN:
Moshe Bunan a.k.a. Mosh Bunan
Plaintiff
-and-
Dov Levy and Armand Levy
Defendants
REASONS FOR JUDGMENT
Whitaker, J.
Released: December 23, 2013