SC-12-0692-00

SUPERIOR COURT OF JUSTICE

THUNDER BAY SMALL CLAIMS COURT

BILL WITILUK,

Plaintiff

-and-

CHANTAL GOSSELIN, also known as CHANTAL SANTIN,

Defendant

REASONS FOR JUDGMENT

of Deputy Judge K. Cleghorn, delivered

July 22, 2013 at Thunder Bay, Ontario

APPEARANCES

Bill Witiluk For himself.

Olga Koubrak For the Defendant.

R E A S O N S F O R J U D G M E N T

CLEGHORN (Dep. Judge-SCC)

This trial was conducted on March 27 and July 4, 2013. The decision was reserved at the conclusion of trial on July 4, 2013.

The plaintiff, Bill Witiluk (hereinafter referred to as “Witiluk” or as the “plaintiff”), is employed in the sewer and water department of the Corporation of the City of Thunder Bay. He resides in the City of Thunder Bay, in the Province of Ontario.

The defendant, Chantal Santin (hereinafter referred to as “Santin” or as the “defendant”), is employed as an early childhood educator by the Corporation of the City of Thunder Bay. She resides in the City of Thunder Bay, in the Province of Ontario.

At the outset of the trial, the parties consented to an Order amending the title of proceeding to:

“Bill Witiluk

Plaintiff

-and-

Chantal Gosselin, also known as Chantal Santin

Defendant”.

THE ISSUE

The Issue

The issue in this case is whether or not the plaintiff can recover money from the defendant after her discharge from bankruptcy.

The plaintiff claims the sum of $25,000.00 (although in the body of the Claim he states that $19,000.00 is “the maximum to be asked for”), pre-judgment interest on that amount from August 20, 2010 at an unspecified interest rate plus costs. The plaintiff maintains that the defendant perpetrated fraud and that he is therefore entitled to recovery of money owed to him notwithstanding her assignment in bankruptcy, and subsequent discharge.

The defendant states that the plaintiff gave money to her, or paid bills on her behalf, but as a gift, or series of gifts, and not as a loan, or series of loans. She maintains that if there was a loan, or a series of them, that any such debt or debts are extinguished as a consequence of her discharge from bankruptcy. She denies that there was any fraud at any time and that these matters are res judicata in any event as there was full argument of same before Pierce, J. in the Superior Court of Justice at a contested bankruptcy discharge hearing conducted on August 20, 2010.

THE EVIDENCE

The Evidence

I find as follows in relation to the evidence offered:

(1) the parties met in 2007 and had a brief intimate relationship;

(2) the defendant was having serious financial difficulties in or around the time that she met the plaintiff and, at least, into 2010;

(3) the plaintiff lent the defendant significant amounts of money over a period of approximately two years- he maintains it was in excess of $153,000.00. The loans took the form of direct payments to the defendant and various payments to third parties on her behalf;

(4) the defendant made an assignment in bankruptcy on July 10, 2009. Russ Leroux of Grant Thornton Limited was appointed trustee of the defendant’s estate in bankruptcy;

(5) after the contested discharge hearing on August 20, 2010, the plaintiff’s claim in the defendant’s bankrupt estate was amended to, and accepted as:

Secured-$53,322.82

Unsecured-$57,236.13.

Pierce, J. held that the defendant had committed four infractions under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 as amended, and suspended the defendant’s discharge from bankruptcy for twelve months;

(6) the plaintiff did not recover his monies from the defendant’s bankrupt estate nor has she ever re-paid any amounts owed to him following her discharge. It is unclear what portion, if any, of the $153,000.00 was ever recovered from the defendant by the plaintiff;

(7) the fraud alleged by the plaintiff relates to the four infractions committed by the defendant under the Bankruptcy and Insolvency Act primarily but also on a general course of conduct that is disreputable, according to him;

(8) there is no evidence of any kind, however, that the monies loaned to the defendant by the plaintiff, directly or indirectly, were procured by false pretences or fraudulent means at the time of such loans, although it appears that some monies that the plaintiff thought would be used for the home on 165 Loxley Bay, in the City of Thunder Bay, were, in fact used for other purposes;

(9) the defendant was in such dire financial circumstances from 2007 to 2010 that she likely used money provided by the plaintiff directly to her for anything and everything, including basic necessities. It is undeniable that without the plaintiff’s financial assistance the defendant could not have afforded to buy and, at times, maintain her home at 165 Loxley Bay; and

(10) the plaintiff suggests that the actions of the defendant in the aftermath of their relationship are suggestive that a fraud was perpetrated in this matter. The plaintiff, by necessity, had to register a Certificate of Pending Litigation on her home on Loxley Bay. She removed chattels from the home after sale that should have remained with the house, resulting in a $15,000.00 abatement on the sale price. The abatement on the sale price reduced the amount of money in her bankrupt estate that would have otherwise been distributed to her creditors. She apparently sold a hot tub improperly. Extra fees were charged by the trustee as a consequence of some of the defendant’s actions.

DISCUSSION

Discussion

This is a relatively straightforward case in terms of the basic facts. It is apparent that this matter has been a source of considerable grief and frustration for both parties. It is clear that but for a personal relationship existing between the parties that money would not have been advanced to the extent that it was. The end result is that the plaintiff did not protect himself adequately and obtain sufficient security for the various and sundry loans which he made to the defendant.

As such, this is a particularly unfortunate set of circumstances for the plaintiff. He claims to have provided a significant portion of his retirement savings to assist the defendant in her time of financial need. He is required, however, to prove his case on the balance of probabilities and to provide evidence to establish his damages. The plaintiff has failed to do both.

The relevant sections of the Bankruptcy and Insolvency Act to be considered are as follows:

“168.1 (6) Without delay after a bankrupt has been automatically discharged, the trustee shall issue a certificate to the discharged bankrupt, in the prescribed form, declaring that the bankrupt is discharged and is released from all debts except those matters referred to in subsection 178(1). The trustee shall send a copy of the certificate to the Superintendent.

178. (1) An order of discharge does not release the bankrupt from

o (d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;

o (e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim;”

The plaintiff needed to establish through appropriate testimony that the defendant perpetrated a fraud upon him that resulted in her obtaining money from him through improper means. Although he relies upon a claim of “fraud”, he has failed to clearly outline the facts in support of such a claim. To be fair to him, and recognizing his lack of legal sophistication, the issue will be canvassed from more than one perspective. Neither party argued that the “debt or liability … arises from an equity claim.”

Merriam-Webster defines fraud as trickery, deceit, intentional misrepresentation, concealment, or nondisclosure for the purpose of inducing another to part with something of value. It also includes false representation of a matter of fact by words or conduct or by the concealment of what should have been disclosed that deceives or is intended to deceive another so he/she shall act upon it to his legal injury. H.J. Holmes, J. notes in Toronto Dominion Bank v. Merenick [2007] B.C.J. No. 1864 (B.C.S.C.) that “false pretence” and “fraudulent misrepresentation” are virtually interchangeable and that each rests, ultimately, on deceit (at paragraph 29). She further states that:

“A ‘fraudulent misrepresentation’, for the purposes of s. 178(1)(e), requires proof of four elements:

1. the bankrupt made a representation;

2. the representation was false;

3. the representation was made knowingly, without belief in its truth, or recklessly indifferent to whether it was true or false; and

4. the creditor relied upon the representation in turning over the property.”(at paragraph 30)

No facts have been introduced into evidence that even remotely suggest that any type of fraudulent misrepresentation was made at the relevant time. The infractions committed under the Bankruptcy and Insolvency Act as found by Pierce, J. do not amount to fraud per se. Even if they did, it would be irrelevant to the issue before this Court for the reasons outlined below.

As mentioned, the plaintiff did not make it clear what he is relying upon in support of his allegations of fraud. It is trite to suggest that in the ordinary course all debts of a bankrupt are extinguished upon discharge (see s. 168.1(6) set out above), save and except if the matter falls within one of the exceptions outlined in s. 178(1) of the Bankruptcy and Insolvency Act. Since there is no claim, nor any evidence, of any type of fiduciary relationship as between the plaintiff and defendant, the plaintiff would appear to have to rely on s. 178(1)(e). That sub-section is quite clear that the debt or liability must result from obtaining property or services by false pretences or fraudulent misrepresentation. In other words, the “fraud” alleged by the plaintiff must have been perpetrated at the time the money was loaned to the defendant, not after the fact or subsequent to her assignment in bankruptcy.(my emphasis) The fact that he thought that he was loaning her money “for the house” and she used it for other purposes does not render it a fraudulent transaction. There was insufficient evidence of the nature of the dealings between the plaintiff and the defendant for me to draw any conclusions about what money was being lent by the plaintiff to the defendant and for what purposes.

The plaintiff had issued an Amended Statement of Claim in Superior Court of Justice file CV-09-0289 (filed as Exhibit Six) claiming $160,000.00 from the defendant prior to her assignment in bankruptcy. It is telling that there is no reference in that document to “fraud”, “deceit” or “fraudulent misrepresentation”. He did not rely upon that ground at all in the original law suit. It has only been referred to in this proceeding. It can be reasonably assumed that he became aware that in the absence of any type of fraud on the part of the defendant that he could not recover any of his debt following her discharge. While the plaintiff has made general allegations of “fraud” perpetrated by the defendant in the aftermath of her assignment in bankruptcy, he does not provide evidence of facts pertaining to the relevant time period of when the actual loans/payments were made. That is fatal to his case.

The evidence from the plaintiff in regard to that relevant time period can only be characterized as vague and confusing, but over-all completely insufficient to meet the onus of proof upon him to satisfy me on the balance of probabilities that his case should succeed. The onus is on the plaintiff to establish liability and the plaintiff has clearly failed in his obligation to present adequate evidence in that regard.

The plaintiff has the onus to prove his damages as well as establishing liability of the defendant. He has clearly failed in that regard too. At best, the plaintiff was entitled to recover no more than what he may have lost. The decision of Pierce, J. (in relation to the extent of the plaintiff’s secured and unsecured claims) did not render this matter res judicata. In other words, it was not a final and definitive decision of a competent authority on the issue before this Court. A summary discharge hearing is not the appropriate forum for dealing with allegations of fraud against a bankrupt: see Wilson v. Wilson, 2001 CanLii 28111 (Ont.S.C.); Re Gregoris (1982), 45 C.B.R. (N.S.) 144 (Ont.S.C.); and Re Horowitz (1984), 52 C.B.R.(N.S.)102 (Ont.S.C.). Pierce, J. did not award the plaintiff a judgment in personam as against the defendant. I am required to decide an issue that is wholly distinct from the matter of the plaintiff’s total claim in the context of the bankruptcy process. The issue for me to decide is whether a claim of the plaintiff against the defendant can succeed following her discharge from bankruptcy, but which is dependent upon whether an element of “deceit” was involved in how the property (money in this instance) was procured at the time of the actual loaning of the money. I can draw no conclusions on the basis of general assertions of bad character made by the plaintiff, nor is there any factual foundation I can rely upon for any allegation of fraud at the time of the transaction, or series of transactions, in question. The complete absence of evidence about specific transactions makes it impossible to determine what, if any, damages might be awarded; evidence of that type might have allowed me to find some element of fraud or deceit in certain transactions which could have resulted in recovery by the plaintiff of some monies advanced through those transactions notwithstanding the discharge of the defendant.

The findings of Pierce, J., however, do amount to a form of issue estoppel i.e. I consider her findings definitive and conclusive in relation to certain factual matters. Specifically, she has found, and I accept as a matter of law, that monies were provided to the plaintiff by the defendant as loans, not gifts, and that there was inappropriate conduct by the defendant following her assignment in bankruptcy. That conduct was characterized by Pierce, J. as infractions under the Bankruptcy and Insolvency Act that resulted in a twelve month delay of her discharge.

It bears repeating that I cannot conclude, on the basis of the evidence as presented, whether fraud actually occurred at the time of the various transactions involving the provision of money to, or payment on behalf of, the defendant. As such, the plaintiff cannot recover damages from the defendant when he has failed to prove his case on the balance of probabilities. The reasons why the plaintiff loaned his life savings to the defendant are his own, but, as in any transaction of this type, it was incumbent upon him to take the necessary steps to protect himself legally to ensure he could eventually recover the monies loaned to her. The defendant may have taken advantage of the personal feelings that the plaintiff had for her. She may have been taking money from him knowing that she could never likely re-pay him. Notwithstanding that, her conduct and comments as related in evidence do not even approach the legal definition of “fraud” or “fraudulent misrepresentation”, as the case may be. The evidence provided in that regard was quite limited.

When all is said and done, the plaintiff can only offer his own speculation, or opinion, that the conduct of the defendant has been such that it leads one to the inescapable conclusion that her character is suspect and that a fraud must have been committed. That is not in any way conclusive or sufficiently probative to allow him to succeed in this matter.

DECISION

Decision

The plaintiff’s claim is hereby dismissed.

Any party who commences litigation must be aware of the law and be in a position to cite the relevant statutes and authorities in support of his claim. A coherent and legally sound case was not presented by the plaintiff in this instance. In the absence of that, and despite his frustration with the law and the unfortunate circumstances of a failed relationship, cost consequences will flow. In light of the circumstances involved, however, and when considering the significant financial impact experienced by the plaintiff over-all, I have exercised some discretion in terms of not permitting the defendant to recover the full extent of what might have been awarded i.e. 15% of the total amount claimed by the plaintiff.

In relation to court costs, as in most cases, the successful party shall be awarded her costs, payable forthwith. The defendant, in this instance is entitled to her costs of this proceeding, being a representation fee of $1,000.00 and disbursements, which include, but are not limited to, the court filing fees, costs of service, witness fees, etc.

I thank both parties and counsel for their courtesy throughout the trial.

Judgment accordingly.

K. CLEGHORN, Deputy Judge-SCC

DATED at Thunder Bay, Ontario this 22nd day of July, 2013.