CITATION: Equirex Vehicle Leasing (2004) Inc. v. Ingoglia, 2015 ONSC 1011

COURT FILE NO.: CV-07-325366-0000

DATE: 20150526

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

EQUIREX VEHICLE LEASING (2004) INC.

Plaintiff

– and –

KRISTOPHER INGOGLIA

and KRISTOPHER INGOGLIA

OPERATING as “TRUX 2 U”

Defendant

Brian Somer, for the Plaintiff

Jonathan Marler, for the Defendant

HEARD: February 2, 3, 4, 5, 2015

DOW, j

REASONS FOR JUDGMENT

[1] The plaintiff, Equirex Vehicle Leasing (2004) Inc., brings this action for recovery of the funds not paid to it arising from a vehicle lease agreement dated November 30, 2005 regarding a used 1999 yellow Western Star 4964-FXT tractor purportedly signed by the defendant, Kristopher Ingoglia. The defendant Ingoglia resists the action on two alternative grounds: first, that it is not his signature on the lease agreement and he is therefore not bound by that agreement; and second, in the alternative, if he is bound by the agreement, his liability was nevertheless extinguished by his assignment into and subsequent discharge from bankruptcy.

Background/Evidence

[2] The nature of the relationship between a Gary Ferguson and the defendant Ingoglia is relevant to the plaintiffs’ allegations. The evidence clearly shows the defendant’s involvement with Gary Ferguson (whose son, Khristopher Ferguson, testified his father passed away August 13, 2010) going back to May 2005, when the defendant entered into a sale of a property known as 1105 Shore Acres Drive, Innisfil, that was transferred to Gary Ferguson from Kevin Ingoglia for $249,900.00 (Exhibit 3 – Ontario Land Registry printout). Khristopher Ferguson, a now 34-year-old Government of Alberta Sherriff’s Officer testified having known the defendant for 18 years. They met while he was resident in Gilford, Ontario.

[3] Khristopher Ferguson agreed the defendant travelled to British Columbia to visit him in November 2005. The records from WestJet produced by the defendant (Exhibit 8, page 15) show the outbound ticket to Vancouver was purchased on November 19 at a Sears Travel Agency in Chilliwack, B.C. with the inference by plaintiff’s counsel in his cross examination of the defendant that the same was arranged by Gary Ferguson as part of their “business” association. The return flight was booked on November 25, 2005 at a Sears Travel Agency in Vancouver for departure November 26, 2005, at 2:00 p.m. It is also clear that while in British Columbia, the defendant attended at the offices of Elmer Yusep, a solicitor, on November 25, 2005, for the purpose of completing another real estate transaction, this one being the defendant’s purchase from Gary Ferguson, August 3, 2005, of a residence known as 63650 Flood Hope Road in Hope, B.C., for $441,000.00 (Exhibit 8, page 94). Khristopher Ferguson testified that Hope is about a two-hour drive from Vancouver and that the route to Hope from Vancouver passes through Abbotsford, which is about 45 minutes from Vancouver. The document confirming completion of the transaction is a Land Titles Act Form B mortgage application signed by the defendant on November 25 as well as a Power of Attorney in favour of Gary Ferguson signed the same day (Exhibit 8 at pages 100 and 101). These documents are important as they contain the defendant’s (admitted) actual signature.

[4] It is clear at the beginning of November 2005 (on the basis the defendant was in Ontario at that time) someone purporting to be Kristopher Ingoglia arranged for the purchase of the 1999 Western Star from Stafford Truck Centre (Exhibit 4, Tab 12) in the amount of $62,247.25. The agreement uses the 63650 Flood Hope Road address and a 604 area code phone number, which suggests Gary Ferguson was involved. The signature of “K. Ingoglia” clearly does not appear to be his actual signature, or at least does not match Ingoglia’s admitted signature on the documents referred to above.

[5] The Court heard evidence that the Stafford Truck Centre declined to finance the deal and passed it onto a broker, Lease Link Canada Corp. Lease Link is provided certain criteria by lenders such as the plaintiff and evidence was tendered by the plaintiff’s president, Larry Mlynowski, in this regard.

[6] With Lease Link acting as an intermediary between Equirex as commercial leasing company and the defendant as lessor, the process of approving the proposed financing began. The plaintiff appeared to receive an application for credit (Exhibit 4, Tab 10) dated November 2, 2005. That application sets out the buyer as the defendant (or his operating business, “Trux 2 U”), the Flood Hope address, 604 area code home and cell numbers, the amount being requested to finance ($58,175.00 or the purchase price less GST), the defendant’s (correct) date of birth and Social Insurance Number. These last two pieces of information suggest the defendant was complicit in the scheme; however, he was not cross examined on same.

[7] The plaintiff produced its computer file (Exhibit 4, Tab 6) beginning November 3, 2005, and noting the existence of credit reports from Equifax (Exhibit 4, Tab 11) and TransUnion (Exhibit 4, Tab 13) dated November 2 and November 3, 2005, respectively.

[8] The plaintiff’s own credit assessor (identified as Brian F.) notes the preliminary information raised “lots of questions” for the lessor to address.

[9] The Court is mindful of the evidence of the plaintiff’s Director of Account Solutions and Asset Recovery, Patricia Williamson, that the plaintiff’s primary consideration was the value of the “asset” itself. The initial assessment by Brian F. noted “a fully independent appraisal” would be required for approval. However, no evidence was placed before the Court that this was ever completed.

[10] The computer file is lacking for entries between November 7 and 28. However, during this time the employee of Lease Link, John Carter, had started the process of attempting to verify the lessee’s income and employment. In his evidence, he claims he called Gary Ferguson for this. That phone call resulted in Ferguson’s production of 2003 and 2004 Canada Revenue Agency Notices of Assessment purportedly in the name of Kevin Ingoglia (Exhibit 4 – Tab 17) under cover of email dated November 22 but with fax banners indicating November 7, 10, or 12. The Notices of Assessment show the defendant’s income to be $98,500.00 in 2003 and $101,080.00 in 2004, both as a total income and as a net income. No evidence was tendered about how or why such an income would have the defendant using a “sub-prime” lending facility, which is what the plaintiff describes itself as. There is also an employment letter from Star Holding (1983) Ltd. using a Caledon address describing the defendant as an employee since August 2001, with an average gross income of $16,000.00 per month as a truck owner/operator and with a 416 phone number. There was evidence John Carter spoke to the defendant on one occasion but this may have occurred as a result leaving a telephone message and receiving a return call. (In other words, it is not clear that John Carter actually spoke directly to anyone at the number listed.) The defendant was not cross-examined on this point by plaintiff’s counsel.

[11] Nevertheless, the information satisfied the plaintiff, who decided to proceed without making any apparent effort to directly contact the defendant’s purported employer, Star Holding (1983) Ltd.

[12] The transaction then proceeded. The paperwork was prepared, and Mr. Carter testified that on November 24 he drove to Abbotsford, where, in a mall parking lot, after business hours, he had the following documents signed:

• Vehicle Lease Agreement (Exhibit 4, Tab 23)

• Delivery and Acceptance – Schedule D (Exhibit 4, Tab 25)

• A Business Purpose Certificate (Exhibit 4, Tab 26)

• Option to Purchase (Exhibit 4, Tab 27)

[13] His evidence noted meeting with three individuals, one of whom he recognized as Gary Ferguson. The other two were introduced to him as Gary Ferguson’s sons, Kristopher Ingoglia and Khristopher Ferguson. While he asked for photo identification of Ingoglia, same was not provided, on the basis his Ontario licence had been turned in to obtain the interim B.C. driver’s licence. A copy of the interim B.C. licence is located at Tab 8 of Exhibit 4 and shows a signature very similar to that on the Stafford Truck Centre invoice and very different than the defendant’s actual signature.

ISSUE – Signature on the Vehicle Lease Agreement

[14] The major issue is whether the defendant was actually one of the three individuals with whom John Carter met to sign the documents. The defendant denies he attended or signed the documents. Khristopher Ferguson also testified that:

a) he could not recall any such meeting;

b) he met John Carter for the first time on the morning of February 4, 2015, to give evidence;

c) the defendant has had facial hair, specifically a goatee, since he could grow same and that the goatee was visible when the defendant visited in November 2005. (John Carter gave evidence that the individual he met had no goatee but also that the defendant was the individual he met for the first and only time for under an hour November 24, 2005);

d) the defendant is actually two or three inches taller than himself (whereas John Carter described Ferguson as being the taller of the two).

[15] The defendant admits the signatures on the documents Carter arranged to have signed look like his signature. I was provided with the original documents in which the signatures are in blue ink beside red seals, which is not apparent in the photocopies marked as exhibits.

[16] The defendant also admits the accuracy of a variety of telephone discussions he had with Patricia Williamson that were recorded without his knowledge and admitted into evidence without objection (as Exhibit 2), with transcripts also provided. The conversations begin September 22, 2006, when a Bailiff was at the Floodgate property, and Gary Ferguson was there as well. The Bailiff is there to repossess the vehicle at the plaintiff’s request. Counsel for the plaintiff relies heavily on the following portions of these telephone discussions (which were played in court without objection) although counsel chose not to confront the defendant with these comments in cross examination:

1. On September 22, 2006, Patricia Williamson makes initial contact with the defendant Ingoglia, during which the defendant confirms he is in Ontario. In response to Patricia Williamson saying that she was “trying to establish what’s happening on this lease account,” the defendant asks, “On which lease account?” She responds, “The one that’s under Trux 2 U” and receives a response, “Let me give Gary a call”;

2. Near the end of that telephone discussion the defendant responds to the question, “Why is your name on the lease if you’re not using the truck?” by stating that he thought Gary was on the lease as the “primary holder.” He asks for time to make a phone call to “see what we can do”. He is also advised the outstanding debt (unpaid monthly lease payments) is over $14,000.00 (Exhibit 2A(ii)).

3. Later that day Patricia Williamson is advised by the defendant that he had “met some guy” to execute “kind of like a co-sign at the most.” The defendant agrees that person is John Carter when that name is suggested to him. (Exhibit 2A(v));

4. The defendant also responds to Patricia Williamson’s statement she has a lease signed by him, “That could be true”;

5. In response to being asked if the plaintiff should tell the Bailiff to seize the vehicle, the defendant responds with “I need to talk to Gary”;

6. On October 17 (Exhibit 2A(xi)), the defendant responds to the statement by Williamson “So you were part of the deal?” with “Yeah but it was all reversed and flip flopped.”

[17] While concerned about the less than diligent manner in which the plaintiff proceeded to extend the credit, in the absence of evidence about the nature and extent of the defendant’s dealings with Gary Ferguson, and any evidence that Ferguson forged the defendant’s signature, I am persuaded on a balance of probabilities that Kristopher Ingoglia signed the lease agreement and is thus liable to the defendant for the payments required. The most compelling reason for this conclusion is the signatures on the documents signed in Abbottsford on November 24, 2005 look like the defendants’ actual signature he admitted are on the mortgage and Power of Attorney signed at Elmer Yusep’s office on November 25, 2005. Further, the signatures are certainly not similar to that which appears on the interim B.C. licence, the Stafford Truck Centre invoice and the Lease Link application for credit.

[18] The Court was referred to cases where the defence was that the signature was a forgery and that the onus is on the party seeking to rely on the document to establish the signature is that of the other party. It is open to either party to call expert evidence on whether the signature is authentic or a forgery: see Bank of Montreal v. Karimian, 2003 40827 (ON SC), 2003 CanLII40827 (Ont. S.C.) at para. 62 and National Bank of Greece (Canada) v. Efstatheu, 2005 44407 (Ont. S.C.) at para. 21.

ISSUE – Bankruptcy of Defendant and s. 178(1) of the Bankruptcy and Insolvency Act

[19] Having found the defendant liable for the lease payments, I must now address the issue of Kristopher Ingoglia’s assignment into bankruptcy on May 15, 2007, which complicates the matter given it would have stayed this action, commenced January 7, 2007. The action was defended with a counterclaim February 14, 2007. (The counterclaim was abandoned at the opening of trial and is dismissed, without costs.)

[20] However, as I understand it, the defendant was discharged from bankruptcy by Order of Registrar Nettie October 29, 2009, and the plaintiff advances its claim based on Section 178(1)(d) and (e) of the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B.3 which provides for the debt to survive the order of discharge if it arose, under subparagraph (d), out of fraud while acting in a fiduciary capacity or, under subparagraph (e), by false pretenses or fraudulent misrepresentation.

[21] I reject the application of subparagraph (d) given, while the Lease Agreement contains, in clause 7, that the lessee acknowledges a fiduciary obligation to the lessor, it also repeatedly maintains no title in the property passing to the lessee. This is addressed as a requirement in the decision of Simone v. Daley, 1999 3208 (ON CA), [1999] O.J. No. 571, 43 O.R. (3d) 511 (C.A.) at paragraphs 10 and 11 which notes a general characteristic attributed to the fiduciary obligation includes a unilateral exercise of power that affects the beneficiary’s legal or practical interests. The plaintiff retaining title and characterizing the payments as rent is inconsistent with this characteristic thus I give no effect to clause 7 of the Lease Agreement or the plaintiff’s claim under Section 178(1)(d) of the Bankruptcy and Insolvency Act.

[22] The plaintiff’s remaining argument is fraudulent misrepresentation or false pretences, and this requires review of the documents in conjunction with the test described in the trial decision of Canada Mortgage and Housing Corp. v. Gray, 2013 ONSC 1986 (aff’d on appeal, 2014 ONCA 236) in which Justice Wilton-Siegel, at paragraph 37 sets out the requirements of false misrepresentation as including,

(i) the existence of a representation;

(ii) that the representation was false;

(iii) that the bankrupt knew the representation was false and intended the creditor act upon it so as to enable the bankrupt to obtain the credit sought, and;

(iv) that the creditor did rely upon the false representation and extend credit.

[23] There is also an alternative, wilful blindness, which can amount to fraudulent misrepresentation, described in paragraph 38 of this decision as when one “sees the need for further inquiries, but deliberately chooses not to make those inquiries”.

[24] The test for fraudulent misrepresentation requires evaluation of the documentation submitted by and on behalf of the defendant to the plaintiff to secure the lease agreement. Those documents include the Canada Revenue Agency 2003 and 2004 Notices of Assessment reporting income of $98,500 and $101,080, respectively, and the letter from the employer as well as the interim British Columbia driver’s licence (with no photo). As the plaintiff’s credit representative, Brian F., noted in response to the Lease Link request for credit, “lots of questions on this one”.

[25] The lack of evidence and cross examination of witnesses is problematic. It is clear to me that with due diligence, the fraud that I find was being perpetrated by Gary Ferguson would have been discovered. I highlight the following:

1. the lack of an independent appraisal of the asset, which Brian F. had said “will be necessary”(Tab 6 of Exhibit 4);

2. the lack of financial records or tax returns for Trux 2 U for the five years the defendant said it was in existence, or documentation as to why there was none;

3. the existence in the plaintiff’s file of the defendant’s purported interim driver’s licence with a signature for the defendant clearly different than that of his actual signature (Tab 8 of Exhibit 4) as appears on the Lease Agreement; a similar but also clearly not the defendant’s signature which appears on the Lease Link application (Tab 9 of Exhibit 4);

4. the failure to contact the purported previous employer, Star Holdings (1983) Ltd. describing itself as situate in Caledon but utilizing a 416 telephone number. I note the plaintiff’s business is in Oakville and impute an awareness to them that the 416 area code is for Metropolitan Toronto only;

5. the lack of any analysis as to the meaning of the Canada Revenue Agency 2003 and 2004 Notices of Assessment with income that is the same for total income and net income, despite the indication the defendant was a truck owner/operator and likely to have deductible expenses.

[25] With regard to the legal test for fraudulent misrepresentation, the onus is on the plaintiff to show, on a balance of probabilities, that the defendant participated in the scheme by making representations that he knew were false and upon which the plaintiff would rely. While I have concluded it is the defendant’s signature on the lease (and thus he was one of the three persons in Abbotsford at the November 24 meeting with John Carter), there is insufficient other evidence that the defendant was also aware of the other documents created (or falsified), such as the employment letter of Star Holding (1983) Ltd. and the Canada Revenue Agency Notices of Assessment upon which the plaintiff relied to extend the credit.

[26] Similarly, with regard to wilful blindness and whether Ingoglia’s suspicion was raised to the point where he needed to make further inquiries, the onus is on the plaintiff to show Ingoglia had actual knowledge of any aspect of the scheme to obtain credit and that his suspicion was accordingly aroused to the point that he knew he should make further inquiries, but he deliberately chose not to. The fact remains that Ingoglia signed the lease with no apparent intention of making the requisite payments. From his comments to Ms. Williamson one can infer that he at least understood he was “part of the deal”. Nevertheless, while I have no doubt the defendant has considerably more knowledge of what and why the lease was entered into than he let on at trial (and to have done so would have undermined his position at trial he did not sign the lease agreement), the plaintiff has failed to adequately link him to the other key documents upon which it relied to enter into the lease agreement. There is simply no evidence that Ingoglia knew or should have known about these documents or that lease payments would not be made.

[27] For the same reasons, I find that the plaintiff has failed to prove on a balance of probabilities that the defendant made false pretences.

[28] Therefore, with some reluctance, I conclude the evidence presented does not sufficiently support a finding of fraudulent misrepresentation, false pretences, or wilful blindness and the claim under s. 178(1)(e) of the Bankruptcy and Insolvency Act also fails. The debt was thus extinguished by the defendant’s bankruptcy in 2007.

Damages

[29] Had I found that the plaintiff’s claim was not extinguished by the defendant’s discharge from bankruptcy, I would have calculated damages as follows. Plaintiff’s counsel provided calculations (Exhibits 5 and 9) which dealt with the result of non-payment of the $19,097.07 monthly lease amounts over the 42-month term. At the time of repossession of the vehicle, I understand 10 months had passed and the remaining 32 months were owed. The amount owed was reduced by a 6.0 percent present value calculation. The lease provided for a 15 percent administration fee to be added with a credit for the proceeds of sale of the vehicle when this occurred. The security payment was also taken into account and reduced the total amount being claimed to $86,423.96 plus interest.

[30] Plaintiff’s counsel submitted a claim for interest based on the lease rate of 26.8 percent per annum which added $190,570.59 to the claim but also provided an alternative calculation using the Courts of Justice Act rate based on the date the action was commenced of 4.5 percent per annum. This reduces the claim for interest to $22,842.53 to the date of trial (February 2, 2015). Had the plaintiff been successful, I would have exercised my discretion to award the lower amount.

Costs

[31] Counsel for the parties failed to provide me with a costs outline, as required, at the end of trial. In my view, costs should be awarded to the defendant subject to unusual circumstances or Rule 49 offers to settle. If the parties cannot agree to an amount in the next 30 days, I will fix same after receipt of no more than three double-spaced pages in a 12-point font of submissions from the defendant detailing the amount sought and the basis for same. Plaintiff’s counsel shall then have 15 days to respond as to why the amount sought is excessive and its proposed figure is more appropriate. Again, such submissions are to be limited to not more than three double-spaced typed pages in a 12-point font.

Mr. Justice G. Dow

Released: May 26, 2015

CITATION: Equirex Vehicle Leasing (2004) Inc. v. Ingoglia, 2015 ONSC 1011

COURT FILE NO.: CV-07-325366-0000

DATE: 20150526

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

EQUIREX VEHICLE LEASING (2004) INC.

Plaintiff

– and –

KRISTOPHER INGOGLIA

and KRISTOPHER INGOGLIA

OPERATING as “TRUX 2 U”

Defendant

REASONS FOR JUDGMENT

Mr. Justice G. Dow

Released: May 26, 2015