ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 09-CV-45893
DATE: 2015/10/19

BETWEEN:

GORDON BOYSE and LUDMILLA BOYSE
Plaintiffs

– and –

DAVID SAXE and CFO STRATEGIES INC.
Defendants

Ian B. McBride and Margot Pomerleau, for the Plaintiffs

Paull N. Leamen and Christine Powell, for the Defendants

HEARD: November 17-21, 24-28, 2014

REASONS FOR JUDGMENT

Kane J.

[1] The plaintiffs claim $357,088:

(a) in compensation for breach by the defendants of their fiduciary duty, or

(b) for damages in negligence.

[2] The plaintiffs’ claim is the loss of their investments in several corporations. The plaintiffs allege their investments in these corporations amounted to a Ponzi scheme, with the money of later investors used to repay earlier investors. The plaintiffs allege their investments were obtained through fraud, misrepresentations, breach of the fiduciary duty owed the plaintiffs and negligence by the defendants.

[3] The plaintiffs at trial did not proceed with their claim for breach of trust.

ALLEGATIONS

[4] The plaintiffs allege that:

(a) the defendants created a relationship of trust, presented themselves as and acted as financial investment advisor to the plaintiffs;

(b) the defendants advised and induced the plaintiffs to invest in these corporations and earned undisclosed commissions in consideration for doing so;

(c) the defendants courted and marketed to the plaintiffs a series of what were stated to be safe, high return, international financial investment opportunities involving little or no taxation liability available only through club membership;

(d) the defendants promoted their knowledge and reliability and knew the plaintiffs relied upon the defendants’ qualifications, knowledge and advice;

(e) the defendants knew or ought to have known that the investments they recommended and the marketing and sale thereof were in contravention of the Alberta Securities Act, RSA 2000, C S-4 (“Alberta Act”), contrary to prohibited trading orders of the Alberta Security Commission (“ASC”) and in contravention of Mr. Saxe’s professional obligations as a Chartered Accountant;

(f) the defendants knew or ought to have known that the financial investments they were marketing to the plaintiffs involved misrepresentation, lacked value, lacked promised security, were invalid and were inappropriate investments involving excessive risk; and

(g) the defendants failed to disclose material negative information within their knowledge about the investments they recommended to the plaintiffs.

[5] The defendants deny the above allegations and submit:

(a) they did not act as financial advisors to the plaintiffs;

(b) they provided no financial investment advice or investment recommendations to the plaintiffs;

(c) they only provided information to the plaintiffs as to forms of investment and strategies by which one might earn higher returns through foreign investment opportunities, but did not provide the plaintiffs with financial advice;

(d) their only role as to the plaintiffs was to introduce them to and make available for their consideration investment opportunities available through membership in an association, the processing of their application therein and the subsequent communication of specific investments opportunities available through that association;

(e) the plaintiffs as to their investments were not clients of the defendants;

(f) any investments made by the plaintiffs are their own investment decisions for which the defendants are not responsible;

(g) the plaintiffs selected and made financial investments that they knew and were declared to be high risk in nature;

(h) the defendants had no fiduciary relationship with the Boyses;

(i) if a fiduciary relationship existed, the defendants performed all reasonable fiduciary obligations they owed to the plaintiffs;

(j) the plaintiffs’ claim in negligence is statute barred pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B; (“the Limitations Act”);

(k) in the alternative, the defendants submit their actions as to the plaintiffs were appropriate, not negligent and any losses incurred by the plaintiffs were not caused or contributed to by the defendants;

(l) in the alternative, the defendants claim contributory negligence by the plaintiffs; and

(m) the defendants claim set-off against the plaintiffs in the amount of an unpaid invoice of $1,750.

[6] The defendants do not dispute that subsequent determinations by security regulators established that the principals of the corporations invested in by the plaintiffs breached numerous provisions of the Alberta Act and that such principals were subsequently convicted of criminal offences for fraud and misrepresentations in relation to these corporations and the investments therein by many people. The defendants stress however that regulatory and court determinations were made after and were not known by the defendants at the time of the plaintiffs’ investments in issue.

[7] The defendants deny they knew or should have known of any wrongdoing by the principals of these corporations, that the investment in these groups of corporations was contrary to security regulations or were part of a Ponzi scheme.

BACKGROUND

[8] Many people between 2002 and 2007 invested in a group of domestic and foreign corporations established and operated primarily by two people, Mr. M. Brost and Mr. G. Sorenson. These individuals and the corporations they operated have been the subject of numerous proceedings and determinations by the ASC and the Saskatchewan Security Commission (the “SSC”). Some of the investigations and determinations by the ASC and the SSC were before, during and after the plaintiffs’ investments in issue.

[9] The plaintiffs, as well as Mr. Saxe, his son and his two granddaughters, are among many who invested in and lost money in one or more of the corporations directed and promoted by Messrs. Brost and Sorenson. The defendants submit that the investment losses of Mr. Saxe and his family prove the defendants then belief in the validity of their investments, which involved some of the same investment corporations invested in by the plaintiffs.

[10] These same two promoters and their corporations were subject to investigations by the Canadian Revenue Agency (the “CRA”) and by police.

[11] Subsequent to the investments made by the plaintiffs, Messrs. Brost and Sorenson were charged with several criminal offences including fraud, theft and money laundering. The criminal trial commenced before and concluded after this trial and resulted in criminal convictions and sentences which are now under appeal.

[12] The following are the dates and amounts of the plaintiffs’ investments in issue:

(1) Strategic Metals Corp. (“SMC”)

April 4, 2005
Ludmilla Boyse
$50,000 CDN

May 30, 2005
Gordon Boyse
$50,000 CDN

(2) Merendon Mining (Nevada) Inc. (“Merendon Nevada”)

April 6, 2006
Gordon Boyse
$50,000 US ($55,580 CDN)

May 4, 2006
Gordon Boyse
$150,000 US ($166,740 CDN)

December 11, 2006
Ludmilla Boyse
$50,000 US ($55,580 CDN) at 1.1116% exchange)

(…continued verbatim exactly as in the source…)

Kane J.

Released: October 19, 2015

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

GORDON BOYSE and LUDMILLA BOYSE
Plaintiffs

– and –

DAVID SAXE and CFO STRATEGIES INC.
Defendants

REASONS FOR JUDGMENT

Kane J.

Released: October 19, 2015