SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-14-511026
DATE: 20140911
RE: Michael S. Myers and Papazian Heisey Myers, Applicants
AND:
Gail Marie Blackman, Larry Curtis Blackman and 8750432 Canada Inc., Respondents
BEFORE: Mr. Justice Graeme Mew
COUNSEL:
James S. Quigley and Michael Hackl, for the applicants
Gail Blackman, in person
HEARD: 8 September 2014 at Toronto
ENDORSEMENT
1The applicants claim that on 11 June 2014 the respondents, without any legal right to do so, registered a financing statement under the Personal Property Security Act asserting a security interest in the applicants’ personal property. They now move for an order under section 56(5) of the PPSA directing the registrar to discharge the financing statement, seeking the sum of $500 as provided for by section 56(4) of the PPSA as well as amounts for damages for injurious falsehood and punitive damages, and costs on a full indemnity basis.
2The corporate respondent claims that it is owed $2,755,000 by the applicants as a result of the non-payment by the applicants of an invoice in that amount rendered for “Threats and Attempted Intimidation”, “Unsolicited Correspondence” and “Unauthorized Use of Name”.
3Although the respondents have not produced any evidence of the existence of security agreement between the corporate respondent and either of the applicants, they rely on equity as the source of the corporate respondent’s authority to encumber the applicants’ property with a financing statement.
4The applicant law firm (“PHM”) and Mr. Myers, one of its senior partners, were retained by National Bank of Canada to recover from the respondents Gail Blackman and Larry Blackman the unpaid balance of a line of credit provided by the Bank to the individual respondents.
5A demand letter was sent by the applicants to the individual respondents on 24 October 2013. The letter advised that the PHM were the solicitors for the Bank. The amount demanded was $21,076.50, upon which interest continued to accrue.
6Gail Blackman responded on 30 October 2014. Her letter is reproduced in full:
THIS IS A PRIVATE COMMUNICATION BETWEEN THE PARTIES
NOTICE TO AGENT IS NOTICE TO PRINCIPAL- NOTICE TO PRINCIPAL IS NOTICE TO AGENT
Applicable to all successors and assigns
Silence is acquiescence/Agreement/Dishonour
COUNTER OFFER
October 30, 2013
[Address]
Dear Mr Myers,
I hope you are having a wonderful day. In follow up to your letter to Gail Blackman dated October 24,2013, I find this a serious issue and would like to resolve it but before I am able to engage in any kind of business with you, I would require verification of the following from you;
Proof of standing, and/or
A lawful contract between yourself and Gail Blackman, and/or
A contract between you and the bank to deal with this specific matter, and/or
A notarized copy of your power of attorney from the bank to verify your standing.
Your failure to provide the requested verification of your claim by registered post within five (5) business days constitutes agreement of the following terms;
You are a third party interloper
You have no legal standing
You have no first hand knowledge of this matter
Your claim is fraudulent
Any damages I may suffer, you will be held culpable, including any negative marks made to credit reference agencies, of which you will, at your own cost have removed.
The apparent account in question is settled and closed, that you will no longer pursue this matter any further
You agree to pay for my time and effort in this matter.
Further communication from you, either by phone or mail or registered mail will confirm that you are personally now assuming full commercial LIABILITY for the unlawful and fraudulent claims of the National Bank, OR, you are confirming that you are an equal respondent on the commercial lien and affidavit of obligation that may be created should the harassment continue.
Should you provide the requested evidence that I owe your organization or your client any outstanding amount and that you can provide proof that they have assigned your agency, I will be happy to pay any verified claim in full.
Please provide the requested verification, in writing, by registered post within 5 business days of the date of this letter. No response from you will be deemed as your acceptance of the terms of this NOTICE.
Sincerely,
Gail Blackman
All Rights Reserved
No assured value. No liability. Errors & Omissions Excepted
WITHOUT PREJUDICE. WITHOUT RECOURSE. WITHOUT ASSUMPSIT
7PHM responded on 6 November, rejecting Ms. Blackman’s unilateral imposition of obligations and advising that a court claim would be forthcoming.
8There were further letters from Ms. Blackman. It is unnecessary for their contents to be recited in full in this endorsement. Suffice it to note that in a letter dated 28 November 2013, Ms. Blackman described herself as, inter alia, the “Secured Party Creditor”.
9On 9 December 2013 PHM commenced a Small Claims Court proceeding against Mr. and Ms. Blackman. The Plaintiff’s Claim was served on 10 January 2014.
10Ms. Blackman wrote to Mr. Myers on 15 January 2014. That letter included the same notices at the top and bottom of the letter as the 30 October correspondence. The body of the letter stated:
Who are you? As you have failed to provide any proof of standing, as there is no lawful contract between you and GAIL BLACKMAN, and/or GAIL MARIE BLACKMAN and/or LARRY BLACKMAN and/or LARRY CURTIS BLACKMAN. Any debts owed by GAIL BLACKMAN, and/or GAIL MARIE BLACKMAN and/or LARRY BLACKMAN and/or LARRY CURTIS BLACKMAN are paid.
As you have failed to provide any proof of standing, nothing is owed to you. Continued communication attempts, without proof of standing, are attempts to defraud, deceive, manipulate and/or waste valuable time and will result in the attached fee schedule, in effective immediately.
CEASE and DESIST all harassment, communication and communication attempts with GAIL BLACKMAN, and/or GAIL MARIE BLACKMAN and/or LARRY BLACKMAN and/or LARRY CURTIS BLACKMAN immediately.
By: Gail Blackman
11The attached fee schedule is reproduced in Appendix “A” to this endorsement.
12Neither of the individual respondents defended the Small Claims Court action. They did, however, write to the clerk of the court stating that they refused to be bound by the jurisdiction of the court. They subsequently produced a copy of the Plaintiff’s Claim document over which the words “NEW ORIGINAL” had been written in red pen and stamped “VOID” over the signatures of the plaintiff’s representative and the clerk who issued the claim.
13Mr. and Ms. Blackman were noted in default on 19 February 2014 and a default judgment for $20,536.99 was obtained the same day. PHM sent a copy of the default judgment to the individual respondents on 27 March 2014.
14This appears to have generated a response on 4 April 2014, the tone and content of which are consistent with the earlier letters from Ms. Blackman, save that the letter purports to be from the corporate respondent. It make reference is made to a “public notice” which had supposedly advised that the unauthorised use of Ms. Blackman’s name would incur a penalty of $250,000 per day. The same “public notice” also made reference to the “vessel” known as Gail Marie Blackman now being the lawful property of a private trust, that trust apparently being the corporate respondent.
15The 4 April 2014 letter encloses an invoice from the corporate respondent for $15,000,000.
16A corporate records search discloses that the corporate respondent was incorporated on 8 January 2014. Ms. Blackman is the only named director.
17After further, unproductive, correspondence, which included another fee schedule, similar to the one attached to the “public notice” of 4 February 2014, but this time purporting to be from the corporate respondent (and adding a charge for “Fraud” of $2,000,000 per instance), a letter from the corporate respondent was sent to the applicants on 10 June 2014, enclosing an invoice for $2,755,000 and a copy of a PPSA Registration verification obtained by the corporate respondent against the applicants.
18On 1 August 2014 Ms. Blackman attempted to commence a private criminal prosecution against Mr. Myers alleging fraud, trespass and breach of trust in relation to his “alleged claim and default judgment”. The information was declined by a Justice of the Peace in Oshawa with an indication that the matter should be dealt with in Toronto.
19On 13 August 2014 the applicants sent the respondents a demand under section 56(2) of the PPSA to register a financing change statement discharging the financing statement within 10 days. The applicants' letter points out that in the absence of a signed security agreement between either of the applicants and any of the respondents, there is no valid security interest and, hence, no right to register a financing statement.
20By letter dated 26 August 2014, written in the name of the corporate respondent, Mr. Myers was informed that the PPSA registration against him personally would only be withdrawn upon payment of $10,255,000. While the respondents apparently attempted to amend their financing statement to remove PHM, the document was filed after the expiry of the 10 day window prescribed by the PPSA.
The PPSA Registration Should Be Discharged
21It is clear on the facts that the PPSA registration against the applicants was filed without colour of right and should be discharged forthwith.
Other Remedies
22However, the applicants seek more. They say that the respondents are “Organized Pseudolegal Commercial Argument” (or “OPCA”) litigants, as described by Rooke A.C.J.C.Q.B.A. in Meads v Meads, 2012 ABQB 571.
23Specifically, they assert that the registration of a bogus financing statement against them, the continued abuse of the PPSA registration system by maintaining a false and voidable registration and the continuation of a harassing and abusive campaign by seeking a “ridiculous” amount of money from Mr. Myers in return for a discharge merit awards of damages and costs against all defendants.
24Thus they request, in addition to the discharge order:
a. The sum of $500 as provided by section 56(4) of the PPSA;
b. An award of punitive damages and damages for injurious falsehood of $75,000 in favour of PHM;
c. An award of punitive damages and damages for injurious falsehood of $25,000 in favour of Mr. Myers;
d. That the individual respondents should be held liable for the actions of the corporate respondent; and
e. Costs of the application on a full indemnity basis.
25Whether or not the respondents are OPCA litigants (Ms. Blackman says they are not and claims to have been unfamiliar with the term), a number of the characteristics of such litigants, as described by Rooke A.C.J.C.Q.B.A. in Meads, are present in this case.
26An often employed tactic of OPCA litigants is said to be the use of “foisted” obligations in various forms – with the recipient being given a limited amount of time to respond and disagree, failing which they are held to have agreed to the terms of a unilateral agreement.
27The fee schedules sent to the applicants are typical of foisted agreements and are wholly invalid and devoid of merit (see Meads at para 470).
Statutory Damages under Section 56 (4) of the PPSA
28The absence of any legitimate basis to assert a PPSA registration merits a statutory award under section 56, the relevant subsections of which provide:
(2) Where a financing statement or notice of security interest is registered under this Act and the person named in the financing statement or notice as the secured party has not acquired a security interest in the property to which the financing statement or notice relates, any person having an interest in the property may deliver a written notice to the person named as the secured party demanding registration of a financing change statement referred to in section 55 or a certificate of discharge referred to in subsection 54 (4), or both, and the person named as the secured party shall register the financing change statement or the certificate of discharge, or both, as the case may be.
(4) Where the secured party, without reasonable excuse, fails to register the financing change statement, or certificate of discharge or partial discharge, or all of them, as the case may be, required under subsection (1), (2), (2.1), (2.2) or (2.3) within 10 days after receiving a demand for it, the secured party shall pay $500 to the person making the demand and any damages resulting from the failure; the sum and damages are recoverable in any court of competent jurisdiction.
29Given the finding that none of the respondents have a security interest and the respondents having failed within 10 days to respond to the applicants’ demands that an effective financing change statement be filed, subsection (4) is engaged and the amount of $500 is payable by way of damages.
Punitive Damages
30In Meads, the court said that punitive damages are warranted when a person files a spurious personal property claim on the basis of a foisted unilateral agreement (Meads at para 525). In MBNA Canada Bank v Luciani, 2011 ONSC 6347, D.M. Brown J. found that the conduct of the respondent in that case in registering a false financing statement constituted an abuse of the PPSA registration system and that the respondent’s attempted “shake down” of MBNA Canada Bank by demanding a line of credit in return for a discharge amounted to “reprehensible conduct” (see MBNA Bank at paras 14-17).
31In Whiten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, the Supreme Court listed a number of criteria which should inform a determination of whether punitive damages are appropriate in a given case. Starting with the principle that punitive damages are very much the exception than the rule, the conduct of a party against whom an order for punitive damages is made must not only depart to a marked degree from ordinary standards of decent behaviour, but the circumstances must be such that, absent an award of punitive damages, the misconduct would go otherwise unpunished or other penalties would be inadequate to achieve the objectives of retribution, deterrence and denunciation.
32The applicants assert that punitive damages are both deserved and necessary in this case. They submit that the only reason that Mr. Justice Brown did not award punitive damages in the MBNA Bank case is that they were not requested.
33In my view any award of punitive damages in this case will not, as a practical matter, achieve the objectives canvassed in the Whiten case. In so concluding I should not be taken as condoning any aspect of the respondents’ actions. Their conduct is highly reprehensible. As will be seen, in addition to the statutory damage award of $500, there will be a significant award of costs made in this case. While the object of costs is compensatory, not punitive, the willingness of courts to make substantial costs awards may deter some parties who might otherwise be tempted to emulate the conduct of the respondents in the present case.
Damages for Injurious Falsehood
34I would not award damages for injurious falsehood either. While the financing statement filed by the corporate respondent was false and actuated by malice, there is no evidence of actual injury. Although it may be sufficient in some cases to prove that the words on which a defendant’s actions were founded were calculated to cause pecuniary damage, it seems to me that the respondents’ actions in this case were part of a broad “shake down” attempt, rather than calculated to induce persons not to deal with the applicants (see generally Lysko v Braley (2006), 2006 11846 (ON CA), 79 O.R. (3d) 721 (C.A.) at 133).
Costs
35In the MBNA Canada Bank case, Mr. Justice Brown awarded full indemnity costs against the respondent for filing a false PPSA registration and then attempting to “shake down” the bank for money. The conduct of the corporate respondent and Ms. Blackman in the present case is no less reprehensible. However I would limit costs to the substantial indemnity basis claimed in the notice of application (the claim for full indemnity costs not having been advanced until the factum and in oral argument).
36The applicants submitted a bill of costs for $25,462.11 on a full indemnity basis. I find the hours spent and the rates charged reasonable in all of the circumstances. I fix costs on a substantial indemnity scale at $22,500 inclusive of disbursements and HST.
Respondents’ Remedies
37If, as submitted by Ms. Blackman, she and Mr. Blackman were not indebted to the National Bank, then it was her right to defend the Small Claims Court action. They chose not to do that and have not, to date, sought to set aside the default judgment that National Bank obtained against them.
38And if Ms. Blackman truly believes that the defendants are indebted to her, then her remedy is to commence an action against them in a court of competent jurisdiction.
Personal Liability of Individual Defendants
39Where a corporation is used as a shield for fraudulent or improper conduct, it is appropriate to hold the responsible individuals personally accountable: 642947 Ontario Ltd. v Fleischer (2001), 2001 8623 (ON CA), 56 O.R. (3d) 417 (C.A.) at 68. In the present case, the corporate respondent appears to have been incorporated principally, if not exclusively, for the purpose of shielding Ms. Blackman, its principal and directing mind, from the consequences of her dealings with and concerning the applicants and their client.
40As early as 28 November 2013, Ms. Blackman was describing herself as a “Secured Party Creditor”. She should not be permitted to shield behind a corporate veil to avoid the consequences of her subsequent improper use of the PPSA scheme.
41Ms. Blackman should therefore be held severally and jointly liable for the obligations to pay damages and costs arising from this endorsement. There is, however, no evidence to attribute similar culpability to Mr. Blackman and I therefore make no order against him personally.
42Given the nature of this matter, the need for the respondents’ approval of a draft judgement on this application is dispensed with. Counsel may provide me (via my judicial assistant) with a draft judgment which, if satisfactory, I will sign and return to the applicants for entry and issuance.
Mew J
Date: 11 September 2014
Correction made:
22 September 2014:
In paragraph 21 the words “was filed” were inserted.
APPENDIX “A”