CITATION: Tran v. Chung, 2015 ONSC 3315

NEWMARKET COURT FILE NO.: CV-12-108451-00

DATE: 20150525

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

NIP Y TRAN

Plaintiff

– and –

PHU MAN CHUNG, MAJEKODUNMI ADEGA, also known as MAJEK ADEGA, TU HONG LUONG, TRADEWORLD REALTY INC., BANK OF MONTREAL and CYNTHIA DACOSTA, also known as CYNTHIA DaCOSTA, also known as CYNTHIA DA COSTA and KERRYON NUGENT

Defendants

James H. Chow, for the Plaintiff

Allyson Fox, for the Defendant Bank of Montreal

HEARD: May 1, 2015

VALLEE J.

[1] This matter concerns two motions. The plaintiff brings a motion for summary judgment against the Bank of Montreal (BMO) for $90,190. The defendant BMO brings a motion for summary judgment against the plaintiff for an order dismissing the action against it.

Issues

1. Did the BMO’s actions amount to a wrongful interference with respect to the plaintiff’s property (money) such that BMO is liable to plaintiff for conversion?

2. Is there a genuine issue that requires a trial?

Applicable Legal Principles

[2] In the context of banking, liability with respect to conversion requires that payment on a cheque was made to someone other than the rightful owner of the cheque and that the payment was not authorized by the rightful holder. See 373409 Alberta Limited (Receiver of) v. Bank of Montreal, 2002 SCC 81, 2002 S.C.C. 81 para. 10.

[3] The tort of conversion is one of strict liability. The fact that the wrongful act was committed in innocence is no defence. See Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce 2 S.C.R. 727.

[4] The test of unjust enrichment has three elements: 1) an enrichment of the defendant; 2) a corresponding deprivation of the plaintiff; and 3) an absence of juristic reason for the enrichment. See Garland v. Consumers’ Gas Co. 2004 SCC 25, 2004 S.C.C. 25, para. 30.

[5] A valid contract leading to a debtor/creditor relationship between the person enriched and another is sufficient to establish the existence of juristic reason for an enrichment that can be accounted for on the basis of the contractual relationship. See Bank of Montreal v. iTrade Finance Inc., 2009 ONCA 615 para. 39.

[6] In Hyrniak v. Mauldin, 2014 SCC 7, 2014 S.C.C. 7, the court provided guidance on the interpretation of Rule 20 of the Rules of Civil Procedure. The court noted in paragraph 49 that if the process allows a judge to make the necessary findings of fact, apply the law to the facts, is a proportionate, more expeditious and less expensive means to achieve a just result, and if the judge is able to reach a fair and just determination on the merits of the motion, there will be no genuine issue requiring a trial.

The Plaintiff’s Position

[7] The plaintiff owned a house which had a $225,000 mortgage registered against it in favour of BMO. In 2009, the mortgage went into default. The plaintiff’s husband lived with her in the home and it was their matrimonial home.

[8] The defendant Phu Man Chung was the plaintiff’s tenant. She told him that she was worried about losing the house. He advised her that he could arrange to have the house sold.

[9] Mr. Chung was friends with the defendant Tu Hong Luong who was a real estate agent. Mr. Luong apparently listed the property for sale although there was no listing agreement. Mr. Chung advised Mr. Luong that he owned the property.

[10] Mr. Zhou offered $420,000 to purchase the property. The plaintiff signed an agreement of purchase and sale prepared by Mr. Luong although the plaintiff’s husband did not sign the agreement. No deposit was provided. The transfer was registered on March 9, 2010. The defendant Mr. Adega was the plaintiff’s real estate solicitor. The plaintiff received $148,000 on closing which was deposited into an account opened in her name at the Royal Bank. Mr. Adega, Mr. Chung, and Ms. Nugent accompanied the plaintiff to the Royal Bank of Canada when she made the deposit. The plaintiff states that these individuals told her to obtain four bank drafts as follows: $90,190 payable to Bank of Montreal, $4,000 payable to Ms. Nugent, $40,000 payable to Mr. Chung and $11,000 payable to Ms. Le. Apparently, Ms. Tran gave these drafts to them.

[11] BMO states that the plaintiff paid out the mortgage when the property was sold. BMO received $225,000 for this purpose from Mr. Adega. BMO states that the plaintiff did not owe $90,190 to the bank when the draft was issued.

[12] The plaintiff states that Cynthia DaCosta presented the $90,000 draft at BMO. It was deposited to her line of credit. The plaintiff states that she did not know Ms. DaCosta and did not give her the draft. She further states that Ms. DaCosta was a bank employee. BMO states that Ms. DaCosta was not a bank employee and had no special relationship with BMO.

[13] Ms. DaCosta states that Ms. Nugent contacted her and requested her assistance to deposit a cheque. Ms. Nugent went with Ms. DaCosta to BMO to deposit the draft into Ms. DaCosta’s line of credit account. Then, Ms. DaCosta withdrew $79,000 in a draft payable to Mr. Adega and $11,000 in cash. She gave both the cash and the draft to Ms. Nugent. Ms. Nugent was a real estate agent although she states that she was not involved in this transaction.

[14] Ms. Nugent was an agent for the purchaser Mr. Zhou (sp?) and a lender. She gave the $79,000 bank draft and the $11,000 in cash to Mr. Adega which she understood was money to pay off a private lender who provided funds on the sale.

[15] BMO has provided a copy of the $79,000 bank draft payable to Mr. Adega. Furthermore, Ms. Da Costa’s line of credit statement shows the $90,000 deposit and three withdrawals in the amounts of $11,000, $29,000 and $50,000 all made on the same date.

[16] Mr. Adega admits that the $79,000 bank draft was deposited to his account.

[17] The plaintiff states that BMO converted her $90,190 bank draft that she obtained from the Royal Bank, which was payable to BMO, on the direction of Ms. DaCosta who was not authorized by the plaintiff to possess the draft. Accordingly, the plaintiff states that BMO committed the tort of conversion and is liable to her for $90,190 BMO may not have known that Ms. DaCosta was not authorized by the plaintiff to deposit the draft; however, according to Boma, innocence is no defence to the tort of conversion.

[18] The plaintiff states that BMO has wrongfully interfered with her money and is therefore liable to her for conversion.

Analysis

[19] This is a sad situation. Apparently, the plaintiff had $148,000 in equity in her home after the sale and the fraud which appears to have been perpetrated on her, she has none of that money.

[20] The authorities relied upon by the parties with respect to conversion deal with cheques payable to one person but deposited into the account of another person without the authority of the drawer of the cheque. The situation here is quite different. Firstly, it involves a bank draft not a cheque. The draft was payable to BMO. The plaintiff was not an endorsee. The draft was deposited into a BMO customer’s line of credit account. The line of credit was a debt secured against the customer’s property. Accordingly, the customer was indebted to the bank.

[21] In 373409 Alberta Limited, the court stated that,

a lending institution’s liability in conversion is predicated upon finding both that the payment upon the cheque was made to someone other than the rightful holder of the cheque, and that such payment was not authorized by the rightful holder. If either of these criteria is not satisfied, there is no tort. (see para. 10)

[22] There are three questions to be answered:

1. who was the rightful holder of the bank draft?

2. was the payment made to someone other than the rightful holder of the draft?

3. was the payment not authorized by the rightful holder?

[23] In 373409 Alberta Limited, the court also stated,

An owner’s right of possession includes the right to authorize others to deal with his or her chattel in any manner specified. As a result, dealing with another’s chattel in a manner authorized by the rightful owner is consistent with the owner’s right of possession and does not qualify as a wrongful interference. The principle is aptly stated in R.D. Bowers, A Treatise on the Law of Conversion (1917) at s. 10:

It will be noted that the deprivation must be wrongful for without the element of wrong no tort can be committed and conversion cannot occur; and to be wrongful, it must be wholly without the owner’s sanction or assent, either express or implied. So, where the owner has given to another, or permitted him to have control of the property, no one can be held responsible in tort for its conversion who merely makes such use of the property or exercises such dominion over it as is warranted by the authority less given. Otherwise expressed, it has been said that a rightful interference with chattels of another cannot constitute of conversion.

[24] The plaintiff states that nobody was the rightful holder of the draft because the mortgage was already paid out. If anyone was the rightful holder, it was the plaintiff. The plaintiff relies on Jer v. Samji, 2014 BCCA 116, 2014 B.C.C.A. 116. In this case, the court commented on a situation where a drawer had been fraudulently induced to believe that there was a real transaction. The court stated,

The court held that the cheques negotiated by the employee were made payable to a real person in circumstances where the drawer had been fraudulently induced to believe that there was real transaction. The possessor was not entitled to the cheque which he delivered to his banker. The banker, however innocent and careful he might have been, would common law be liable to the true owner of the cheque for the amount which he receives, either as damages for conversion or for money had and received. The court referred to the adoption by the Supreme Court of Canada in Boma of the following passage from B. Crawford & J. D. Falconbridge, Banking and Bills of Exchange, 8th ed., vol. 2 (Toronto: Canada Law Book Inc., 1986), at section 5003.6:

Conversion is the remedy of the lawful possessor of chattels to have their value paid to him by a wrongful dispossessor….it has been repeatedly held that a bank converts an instrument by dealing with it under the direction of one not authorized, either by collecting it or semble (although this is not yet actually decided) by paying it and in either case, making the proceeds available to someone other than the person rightfully entitled to possession.

[25] In this matter, the plaintiff states that she gave the drafts to the defendants Adega, Chung and Nugent. Accordingly, they were the rightful holders; however, the draft was not payable to them. Nugent then gave the draft to DaCosta. According to the plaintiff, Nugent did not did use the cheque for the purpose she intended.

[26] Even though the plaintiff did not know the reason for it, by virtue of the fact that she requested and obtained a draft payable to BMO, she intended that the $90,190 be payable to BMO. It was deposited into a line of credit account in which the holder of the account was indebted to BMO. The deposit was a payment to the bank on account of a secured debt.

[27] The bank was entitled to accept a draft payable itself and to deposit it to an account in which the account holder was indebted to the bank. The fact that the plaintiff was fraudulently induced to obtain the draft may give her a cause of action against Adega, Chung and Nugent as well as the person who ultimately received the funds; however, the bank did not commit the tort of conversion.

Conclusion

[28] I am satisfied that there is no genuine issue that requires a trial. The plaintiff has no cause of action against the bank.

[29] The plaintiff’s motion is dismissed. The bank’s motion is allowed. The action is dismissed as against BMO.

Costs

[30] BMO has been successful on both motions. Both counsel submitted costs outlines. In its costs outline, BMO requests $16,077.91 on a partial indemnity basis. The plaintiff requested $12,860 on a partial indemnity basis in the event that she was successful.

[31] The plaintiff submits that she should pay to BMO costs in the amount of $6,000 to $7,000 for fees plus disbursements and tax as the unsuccessful party. Counsel suggested that BMO had less work to do on this motion. Both parties filed affidavits and factums. BMO provided a book of authorities. I conclude that each party had relatively the same amount of work to do as the other. Counsel for BMO stated that if successful, she agreed with the partial indemnity amount requested by the plaintiff, being $12,860.70 all inclusive. Considering the principles of fairness and reasonableness as expressed in Boucher v. Public Accountants 2004 14579 (ON CA), 71 O.R. (3d) 291, I conclude that a fair, reasonable and proportionate costs award for this motion is $12,860.70 all inclusive which the plaintiff shall pay to BMO within 30 days.

VALLEE J.

Released: May 25, 2015