CITATION: R. v. Gibb, 2015 ONSC 4868

COURT FILE NO.: 201/11

DATE: 2015-08-04

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN

– and –

JAMES JONATHON GIBB

Harutyun Apel, for the Crown

D. Sahulka, for Mr. Gibb

HEARD: May 12, 13 & 14, 2015

REASONS FOR JUDGMENT

gray j.

[1] James Gibb was tried before me without a jury on one count of defrauding Daniel Avon of a sum of money exceeding five thousand dollars, contrary to Section 380(1)(a) of the Criminal Code.

Background

[2] In 2007, Daniel Avon was an insurance broker with a brokerage called Dalton Timmis in Burlington. The owners of the brokerage had offered to let him purchase an interest in the brokerage for the amount of $3.2 million. Mr. Avon did not have that kind of cash, so he went to the Royal Bank for a loan. However, any shares he might purchase in Dalton Timmis could not be pledged as collateral, so he could not obtain a loan from the bank.

[3] Mr. Avon was introduced to Mark Hooper sometime in May or June, 2007. Mr. Hooper told him he knew people who might help get money for him. Subsequently, Mr. Avon met Mr. Hooper and Mr. Gibb at Starbucks.

[4] Mr. Avon advised them as to his potential deal to buy an interest in Dalton Timmis. They asked him for further information, and agreed to have a further meeting.

[5] At a subsequent meeting on August 10, 2007, Mr. Hooper and Mr. Gibb asked for a good faith deposit in the amount of $20,000. Mr. Avon provided the money, and made it payable to Micropayments Inc., a company owned by Mr. Gibb. Unknown to Mr. Avon at the time, Mr. Gibb gave $5,000 of that amount to Mr. Hooper as a finder’s fee.

[6] At a subsequent meeting, Mr. Avon’s father joined them. Mr. Avon Senior appeared to be the owner of significant assets, including a mall in Cookstown. There was exploration as to whether those assets might be pledged as security for a loan.

[7] Dan Avon needed financing by August 31, 2007. Dan Avon testified that Mr. Hooper and Mr. Gibb proposed terms for a loan that, in his view, were unconscionable. He declined the offer, and asked for his deposit back.

[8] Dan Avon testified that Mr. Hooper and Mr. Gibb asked him to propose his own terms for a loan. After some discussion, they agreed on terms for a loan to be provided by Micropayments Inc. As part of the deal, Mr. Gibb wanted another $20,000 plus a “brokerage fee” of $160,000. Dan Avon provided the funds, which he made payable to Micropayments Inc. On August 29, 2007, he and Mr. Gibb signed a loan agreement. Because that document is particularly significant, I have taken the liberty of reproducing a copy of it as an appendix to these reasons.

[9] The agreement is on the letterhead of Micropayments Inc. It states “further to our review and as a result of our meetings, we are pleased to offer a loan based on the following terms and conditions. Please be advised that this is a firm commitment.”

[10] The agreement describes the borrower as Dan R. Avon. A guarantor is described as “N/A”. The purpose of the loan is described as “purchase 16% of the shares of the Dalton Timmis Group.” The loan amount is described as $3,300,000 cnd.

[11] The closing date in the agreement is described as “August 31, 2007. (due to time constraints an extension to Tuesday September 4th may be required.)” The interest rate is described as 10% per annum. The term is said to be open. Amortization is described as interest only, quarterly payments first payment due December 30, 2007. Security is described as “N/A”. Insurance is described as “N/A”.

[12] Fees and costs are described as “5% of $3,200,000 up front cost payable to Micropayments Inc. August 29, 2007. Upon closing Micropayments Inc. will cover a closing costs and broker fees. Some fees and costs will be rebated back to Dan R. Avon.”

[13] The loan repayment terms are described as “the quarterly payments a due and payable to Micropayments Inc. First payment due December 31, 2007.”

[14] The agreement concludes “I trust this meets with your satisfaction. I’m looking forward to an expedient close to this transaction.” It is signed “J.J. (Jim) Gibb, Managing Partner.” It is signed as agreed and accepted by both Mr. Gibb and by Mr. Avon.

[15] Mr. Avon testified that he provided $20,000 in cash to Mr. Gibb on August 29, 2007, and provided a bank draft payable to Micropayments Inc. in the amount of $160,000. He testified that he obtained that amount from Dalton Timmis.

[16] Mr. Avon testified that he never received any money from Mr. Gibb or Micropayments Inc. He received none of the promised $3,200,000, and did not receive the return of any of the money that he had given to Mr. Gibb or Micropayments Inc.

[17] On cross-examination, Mr. Avon testified that Mr. Gibb had been told that Mr. Avon’s father owned approximately $40 million worth of property. He testified that his stepmother owned the house that he lived in. He did not want his stepmother to know that his father’s properties might be used as collateral for a loan. He testified that his stepmother did not want to help him.

[18] Mr. Avon testified that he was single and earned approximately $140,000 per year. He owned no property himself.

[19] Mr. Avon acknowledged that in the initial document he signed regarding the possibility of a loan, on August 10, 2007, it says his good faith deposit would be “funded” in full if the terms and conditions of a term sheet were not acceptable. He interpreted that to mean that the good faith deposit would be refunded, but acknowledged that it did not say that. He acknowledged that if a deal went through, the deposit would not be refundable. He also acknowledged that Mr. Hooper received $5,000 as a finder’s fee.

[20] Mr. Avon acknowledged that when he, Mr. Hooper and Mr. Gibb met with Mr. Avon’s father, Mr. Avon Senior handed Mr. Gibb a stack of papers, which may have included a statement of Mr. Avon Senior’s net worth. This was at a time when they were trying to use his father’s properties as collateral.

[21] Mr. Avon asserted on cross-examination that when it became clear that a deal could not be secured without either the shares or his father’s properties as security, he thought he could get a loan from Mr. Gibb for $3.2 million without any security. He did not agree that this was preposterous and unlikely. He insisted that he was told that if he provided $180,000 up front, he would get a loan from Mr. Gibb.

[22] Mr. Avon did not agree that the two-page document that he signed, that was called “Loan Agreement” was not, in fact, a loan agreement, but was simply an outline of some terms that Mr. Gibb would try to secure for a loan.

[23] Mr. Avon acknowledged that some time during the Fall, 2007, he signed a “non-circumvent” agreement with Mr. Gibb, the effect of which would prevent him from making a side deal with another lender. He also acknowledged that Mr. Gibb told him that he was working on a “certificate of deposit” deal.

[24] Mr. Avon testified that he went to the police in January, 2008, and he told Mr. Gibb that he might go to the police. He denied that Mr. Gibb told him that if Mr. Avon went to the police he, Mr. Gibb, would cease working on the case.

[25] Mark Hooper testified that while he was working for a mortgage broker he met Dan Avon in May or June, 2007. He testified that Mr. Avon wanted to borrow money in order to purchase shares in the insurance brokerage for which he worked. Mr. Hooper discussed the matter with Mr. Gibb, who said he might be able to assist. Mr. Gibb wanted an introduction to Mr. Avon, which Mr. Hooper arranged.

[26] Mr. Hooper testified that he had no say in any loan terms that might be negotiated, and he was not present when the loan agreement was signed. He acknowledged that he received $5,000 from Mr. Gibb as a finder’s fee.

[27] On cross-examination, Mr. Hooper acknowledged that he had discussed a possible loan for Mr. Avon with Jeremy Ross. Mr. Ross declined to be involved, because Mr. Avon had no collateral. Further, Mr. Ross was not interested because Mr. Avon’s father had apparently screwed him in a previous deal.

[28] Steven Martin, the investigating officer with the Halton Regional Police was made available for cross-examination by counsel for Mr. Gibb. He acknowledged that when he met with Mr. Gibb in the fall of 2009, Mr. Gibb made available to him a statement of net worth that was apparently for Mr. Avon Senior, and a copy of a non-circumvention agreement.

[29] Mr. Gibb testified. He said he met Dan Avon in 2007 through Mr. Hooper. He understood that Mr. Avon was looking for a loan of $3.2 million so that he could purchase shares in Dalton Timmis.

[30] Mr. Gibb testified that the first meeting was with Mr. Hooper and Mr. Avon. They discussed what Mr. Avon was trying to do, and Mr. Avon made it clear that the shares of Dalton Timmis could not be used as collateral. Mr. Gibb testified that he later advised Mr. Hooper that there had to be collateral for the loan.

[31] Mr. Gibb testified that sometime later he saw a copy of Dalton Timmis’ balance sheet and a package of financial documents. He concluded that there were some issues regarding the financial situation of Dalton Timmis, and the shares would not be any good as collateral in any event.

[32] Mr. Gibb testified that he obtained a good faith deposit from Mr. Avon in the amount of $20,000. He testified that the intention as to the good faith deposit was that if a deal did not get done because Mr. Avon had lied or misrepresented anything, Mr. Gibb would keep the deposit. If, however, Mr. Gibb could not put a deal together and Mr. Avon had not misrepresented anything, Mr. Avon would get the money back. It was for that reason that the word “funded” was used in the letter of August 10, 2007 rather than the word “refunded”.

[33] Mr. Gibb testified that he looked into the assets owned by Mr. Avon’s father. He became convinced that the properties owned by Mr. Avon senior did not have much equity in them, and they would not be satisfactory as collateral. He advised Dan Avon that his father’s assets could not be used as collateral.

[34] Mr. Gibb testified that Mr. Avon was upset at hearing this. He said he might lose his job if he could not get the loan. Mr. Gibb advised him that there were two possible tracks that could be followed – they could approach a non-traditional lender, or Mr. Gibb could pursue a project through Bear Stearns, a large American brokerage. He said he told Mr. Avon that fees would have to be paid in order that Mr. Gibb could expend the necessary time on the project. He said he opened an account with Bear Stearns in order to pursue the issue.

[35] Mr. Gibb testified about the loan agreement which I have attached as an appendix to these reasons. Mr. Gibb testified that it was not intended to be a loan agreement, but rather a “term sheet”, which simply set out potential terms and conditions of a loan that might be obtained in due course. He said it was not close to being completed as of August 29, 2007, the date it was signed.

[36] Mr. Gibb testified that a potential investor for the loan contemplated in the term sheet was one Peter Grigorovsky, who was a person Mr. Gibb met through his son’s private school. He said that ultimately he was afraid of Mr. Grigorovsky, and approached the police about him.

[37] Mr. Gibb testified that he set up a meeting with Mr. Avon, Mr. Grigorovsky and Brian Timmis, but Messrs. Avon and Timmis did not show up.

[38] Mr. Gibb testified that he opened an account with Bear Stearns and was pursuing a deal to obtain the necessary cash through a transaction that he called “zero coupon bonds”. He said he signed a non-circumvention agreement with Mr. Avon, so that Mr. Avon could not simply make his own deal with Bear Stearns. Ultimately, Bear Stearns went bankrupt.

[39] Mr. Gibb testified that he stopped working on the deal once he was arrested by the police. Up until then, he worked diligently on the deal.

[40] On cross-examination, Mr. Gibb insisted that the agreement signed on August 10, 2007 did not reflect a refundable deposit of $20,000; rather, the words “funded in full” meant that Mr. Gibb could keep the deposit.

[41] He also insisted, on cross-examination, that the “loan agreement” was not, in fact, a loan agreement. He said it should have been labelled a “preliminary term sheet”. He said it was put together in a hurry, and he acknowledged that some of the wording of the agreement was unfortunate.

[42] Mr. Gibb insisted that the $160,000 he obtained from Mr. Avon was for services rendered by Mr. Gibb to obtain a loan. He insisted that he did not tell Mr. Avon that the loan agreement represented a firm deal.

[43] He said it would not be possible to get a $3.2 million loan with no collateral.

Submissions

[44] Mr. Sahulka, counsel for Mr. Gibb, submits that the Crown has not proven Mr. Gibb’s guilt beyond a reasonable doubt.

[45] Mr. Sahulka submits that there is no dispute that Mr. Avon requested Mr. Gibb to assist him in getting a loan. Mr. Gibb did so. After making inquiries and doing some investigation, Mr. Gibb became convinced that Mr. Avon’s father’s assets could not be used as collateral. Accordingly, some alternative had to be explored in order to get a loan.

[46] Mr. Sahulka submits that on any realistic view of the facts, the so-called loan agreement could not really be considered a loan agreement. It was preposterous to think that a loan of $3.2 million could be obtained with no collateral. He submits that Mr. Avon was a sophisticated person, an insurance broker, and would clearly understand that the proposed terms outlined in the document were not realistic. Accordingly, it could only have been understood to reflect terms of a loan that Mr. Gibb would pursue on his behalf. The fees payable to Mr. Gibb were obviously for work to be done in trying to line up the loan.

[47] Mr. Sahulka submits that Mr. Gibb’s evidence at the very least raises a reasonable doubt as to his guilt. Accordingly, the charge should be dismissed.

[48] Mr. Apel, counsel for the Crown, submits that the charge has been proved beyond a reasonable doubt.

[49] Mr. Apel submits that Mr. Avon was defrauded of at least $160,000, and actually $200,000, by deceit, falsehood or other fraudulent means. He submits that Mr. Gibb induced Mr. Avon to part with the money as a fee of some sort for a loan of $3.2 million that was promised by Mr. Gibb. It must be concluded, on the whole of the evidence, that Mr. Gibb never intended to provide a loan in that amount, or indeed any amount, to Mr. Avon, and simply used the so-called loan agreement as a device to extract at least $160,000 from Mr. Avon.

[50] Mr. Apel submits that Mr. Gibb’s attempts to explain the wording of the loan agreement as simply a product of haste is not convincing. The document says quite clearly that “We are pleased to offer a loan”, and “This is a firm commitment.” It was signed on August 29, 2007, and calls for a closing date of August 31, 2007, with a possible extension to September 4, 2007. The agreement concludes with the words “I am looking forward to an expedient close to this transaction.”

[51] Mr. Apel submits that after August 31, 2007, the emails between Mr. Gibb and Mr. Avon are clear. Mr. Avon demands on numerous occasions that Mr. Gibb come through with the loan or return the money Mr. Avon paid to him. Neither occurred.

[52] Accordingly, Mr. Apel submits that Mr. Gibb should be found guilty as charged.

Analysis

[53] Section 380(1) of the Criminal Code provides as follows:

380. (1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,

(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; or

(b) is guilty

i. (i) of an indictable offence and is liable to imprisonment for a term not exceeding two years, or

ii. (ii) of an offence punishable on summary conviction,

where the value of the subject-matter of the offence does not exceed five thousand dollars.

[54] Pursuant to this provision, the Crown must establish, beyond a reasonable doubt, the following:

a) Mr. Gibb defrauded Mr. Avon of property or money having a value exceeding $5,000; and

b) Mr. Gibb did so by deceit, falsehood or other fraudulent means.

[55] There is no doubt that Mr. Gibb obtained money from Mr. Avon that exceeded the amount of $5,000. What the Crown must establish is that Mr. Avon was defrauded of that amount by deceit, falsehood or other fraudulent means.

[56] In substance, what the Crown must establish is that Mr. Gibb deprived Mr. Avon of the money dishonestly, by falsely representing to him that he would lend $3.2 million to him if Mr. Avon provided $160,000. The Crown must establish that Mr. Gibb did this without any intention of lending Mr. Avon the money or obtaining a loan for him.

[57] Since Mr. Gibb has given evidence, I must apply the principles set out in R. v. W.(D.), 1991 CanLII 93 (SCC), [1991] 1 S.C.R. 742. Those principles require the following:

a) If I accept Mr. Gibb’s evidence, I must acquit him;

b) Even if I do not accept his evidence, if it raises a reasonable doubt I must acquit him;

c) Even if that evidence does not raise a reasonable doubt, I can only convict him if the evidence that I do accept convinces me of his guilt beyond a reasonable doubt.

[58] I do not accept Mr. Gibb’s evidence. In my view, the language used in the loan agreement dated August 29, 2007 is fundamentally at odds with Mr. Gibb’s evidence. Mr. Gibb drafted that document, and I do not accept that it does not mean exactly what it says. On Mr. Gibb’s own evidence, he is a sophisticated business man with experience in financial matters.

[59] The document is headed “Loan Agreement”. If it was intended to mean something else, it could easily have said so. It states “We are pleased to offer a loan”. It says “This is a firm commitment.”

[60] The document clearly states that Micropayments Inc. and/or Mr. Gibb are offering a loan, and that it is a firm commitment.

[61] The agreement provides for a closing date of August 31, 2007, with a possible extension to September 4, 2007. This is fundamentally inconsistent with Mr. Gibb’s evidence that the deal was not close to being finalized as of August 29, 2007. How he could have been working on a deal sometime late in 2007, when the deal had a closing of August 31, 2007, is difficult, if not impossible, to understand.

[62] Mr. Gibb testified that he opened an account with Bear Stearns in order to facilitate the potential loan reflected in what he called the term sheet. The emails he produced between himself and someone at Bear Stearns were exchanged in June and July, 2008. Putting aside the fact that they make no reference to a possible loan, it is difficult, if not impossible, to accept that they had anything to do with a transaction that was supposed to close on August 31, 2007.

[63] While no non-circumvention agreement or non-disclosure agreement, said to have been signed between Mr. Gibb and Mr. Avon, were produced, I accept that they were likely signed at the insistence of Mr. Gibb sometime in the fall of 2007. This was at a time when Mr. Gibb was either ignoring Mr. Avon’s emails, or making vague assurances that he was working on something. Undoubtedly, this was part of a stratagem to make Mr. Avon think Mr. Gibb was actually working on something. I am persuaded, beyond a reasonable doubt, that Mr. Gibb had no intention of working on anything, just as he had never intended to provide a loan in the first place.

[64] As noted, I do not accept Mr. Gibb’s evidence. Further, it does not raise a reasonable doubt. On the totality of the evidence including that of Mr. Gibb, I am convinced of his guilt beyond a reasonable doubt.

[65] For these reasons, I am satisfied beyond a reasonable doubt that Mr. Gibb defrauded Mr. Avon of at least $160,000 by deceit, falsehood or other fraudulent means. Accordingly, Mr. Gibb is guilty as charged.

Gray J.

Released: August 4, 2015

CITATION: R. v. Gibb, 2015 ONSC 4868

COURT FILE NO.: 201/11

DATE: 2015-08-04

ONTARIO SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN – and – JAMES JONATHON GIBB

REASONS FOR JUDGMENT

GRAY J.

Released: August 4, 2015