Reasons for Judgment

Court File and Parties

COURT FILE NO.: C-16-12 DATE: 2016-05-18 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Annette Nicholson, Plaintiff – and – Roger Gemnay, Defendant

COUNSEL: Dennis G. Crawford & Jared M. Gillespie (Student at Law) - Counsel for the Plaintiff David M. Steele & Jeramie Gallichan - Counsel for the Defendant

HEARD: May 10, 11 & 12, 2016

The Honourable Mr. Justice James W. Sloan

[1] The plaintiff’s husband Richard Nicholson died of cancer on December 24, 2009.

[2] At the time of his death she had two young boys living at home and Custom Fireplaces, a business that she and her husband ran, was no longer in existence as he had been unable to work for many months prior to his death.

[3] The deceased however, had a life insurance policy with a face amount of $2,000,000 which was ultimately paid to the plaintiff.

[4] The plaintiff has a grade 8 education and while she assisted her husband in their business, there is no doubt it was financially successful almost exclusively because of his abilities and efforts.

[5] In 2005 the defendant hired Custom Fireplaces to do work at his home and later also hired the deceased who appears to have been a talented general building person, to do other jobs at his house.

[6] The evidence is that the deceased and the defendant became friends, and when he was in the hospital, he was not only visited by the defendant, but the defendant also took charge of some issues and had him moved to a private room at his own expense.

Annette Nicholson

[7] Ms. Nicholson testified to the following:

a) the defendant told her her deceased husband asked him to make sure that she and the kids were okay & he promised he would; b) she was devastated, weak and confused by her husband’s illness, numerous surgeries and finally his death; c) the friendship between her and the defendant got closer after her husband’s death and she felt that he cared about her and her boys and she trusted him; d) he was kind to her children, advised her who she could get to do certain jobs around the house, helped her to purchase a BMW automobile and said he would help her invest the money she got from the life insurance; e) they talked about many things including investing. The defendant stated that he made money from investing and that he would teach her how to invest. To this end, he loaded a software program put out by TD Waterhouse on her computer known as “thinkorswim”; f) the defendant told her he couldn’t get her a “thinkorswim” account, because they weren’t offering it to Canadians anymore, but that she could use his account and he would teach her how to invest and he would monitor the trades; g) the defendant opened a practice trading account for her, but it was always the defendant who operated a computer; h) the defendant told her, that to use certain accounts he had to have a minimum balance of $100,000 US in each of them and he asked her for the money. She gave him $100,000 US on May 3 and another $100,000 US in May 22, 2010. It was her understanding that this money was not to be used for trading, but was simply there because the accounts needed a minimum balance. It was her understanding that she could get her money including the $200,000 US back at any time. It was further her understanding that the $200,000 US was simply sitting in two different bank accounts; i) the defendant promised he would not do anything to jeopardize her money; j) she gave him a further $50,000 in June 16, 2010 which was to be used for trading. It was her understanding that the defendant would initially be taking baby steps in whatever trades he made on her behalf; k) she did nothing with the money after she gave it to the defendant. She never accessed any of his accounts and never made any trades within his accounts. In fact she never had the password to the account; l) in July 2010, she was informed by the defendant that all of her $250,000 US had been lost; m) although she was shocked, devastated and confused, the initial answer she got from the defendant when she asked what happened to her money, she was told that trading was a risk; n) when she kept asking for her money back the defendant said he would try to get a loan and/or he would try to get her money, but could not promise a certain amount per month and that he would not put anything in writing; o) she did however receive approximately $7000 in cash from the defendant which she categorized as partial payment for the US $250,000; p) there was no written agreement between them because she trusted him, he had made a promise to her husband during her husband’s illness and after his death he helped her and said he would never hurt her; q) she essentially had no investing experience whatsoever and very little computer knowledge; r) with respect to her lack of investing experience she denied knowing what even rudimentary investing terms meant; s) all demands for the repayment of her US$250,000 were verbal.

Deborah Lynn Porter

[8] Ms. Porter is the plaintiff’s first cousin and has known the plaintiff very well all of her life. She stated that she has never seen the plaintiff operate a computer and that the plaintiff calls her for easy computer tasks like looking up a phone number or looking for rental housing. She is the one who set up the plaintiff’s most recent email, keeps track of her passwords, and set her up for online banking on their joint account so she can assist her.

[9] She stated the plaintiff does not have much financial acumen.

[10] She testified that the plaintiff has never really had to look after much of anything in her life, since that was done both by her first husband and the deceased. It was her testimony that the deceased looked after and controlled everything and that she was dependent on him for everything and when he became ill the money simply stopped flowing into the household.

[11] She testified that the plaintiff is really not qualified to do much of anything.

[12] She testified, she first met the defendant at the hospital after the deceased’s operation and that he came across as caring and stayed very close to the plaintiff which she described as hovering. She assumed that the defendant was a close, long-time friend of the deceased’s.

[13] She did not recall being told that the plaintiff was investing any money through the defendant.

Tina Violet McDonald

[14] She is the sister of the plaintiff and works as a paramedic in Halton Region.

[15] She stated that she and the plaintiff are very close and that the plaintiff is very trusting to the point of being gullible.

[16] She testified that while she has seen the plaintiff at a computer she has never seen her operating it. She stated the plaintiff gets frustrated trying to do a Google search and she simply takes over and recently had to fill in an online form for the plaintiff’s son.

[17] She testified that she initially met the defendant when the deceased was in the hospital. When she arrived she was told the defendant was in the room speaking to the Plaintiff’s husband and she was told not to go in the room.

[18] She testified that she has seen the defendant on numerous occasions being at the hospital, the funeral, the internment and at the plaintiff’s old and new house. On all occasions the defendant always hung around where the plaintiff was.

[19] She recalls conversations she was party to with the defendant, where he said the plaintiff had a lot of money and he promised to help her safely invest and protect it. The defendant stated in general that the plaintiff needed guidance to help her protect the money.

[20] She also recalls a conversation at the plaintiff’s new home where the defendant was talking about the plaintiff investing her money and living off the proceeds. She testified that the defendant said you have to watch out for charges and also for people who might try to take the money from her.

[21] She testified that she heard the defendant talk about his promise to the deceased and that the plaintiff needed guidance and investing, on up to five different occasions.

The Defence Position

[22] The defence submits that to a great extent this case boils down to one of credibility.

[23] In their opening statement they raised seven areas for the court to review and they are as follows:

1. did the plaintiff use alcohol while with the defendant;
2. whose idea was it that the plaintiff should trade in options;
3. what degree of trading knowledge was shown by the defendant to the plaintiff;
4. did the defendant tell the plaintiff that he needed a minimum balance in his bank account;
5. did the plaintiff participate in any of the trades;
6. did the plaintiff and defendant use screen sharing software while the trades for being made; and
7. did the defendant verbally agree to compensate the plaintiff for her losses.

[24] The defence argues that the plaintiff’s case is internally inconsistent and put forward the following inconsistencies;

1. the plaintiff knew what a minimum balance in a bank account meant and therefore she would know that you can’t have two minimum balances in the same account;
2. the plaintiff did not press the defendant for information with respect to the first $100,000 US when approximately three weeks later she was asked for another $100,000 US;
3. she did not press the defendant to show her to do, what he said he would, which was to teach her how to use the trading software “sinkorswim”;
4. after being advised of her losses, the plaintiff took a trip with the defendant and lent him money to buy a car;
5. the plaintiff allowed the defendant to travel to Halifax to pick up her new car.

Roger Gemnay

[25] Mr. Gemnay is 55 years of age and received a computer science degree from the University of Waterloo in 1988.

[26] He has worked as a program analyst and in the computer consulting capacity for life insurance companies, investment houses and banks among others.

[27] Since at least 2009, it appears that he commutes to work in New York City from Monday to Friday and returns to Waterloo where his family resides on weekends.

[28] He is extremely computer literate, with a very good knowledge of investment terms and how investments work, particularly the investments involved in this case, that is, derivatives and trading in them using puts and calls.

[29] He also appears extremely knowledgeable in using software platforms that would allow an individual to do their own online investing through the Internet.

[30] Although he appears knowledgeable in all aspects of self-investing, on the evidence before this court he is not a successful investor. I make this finding because the evidence before me is that in 2009 the year before the facts involved in this case he lost $70,000.

[31] His evidence on virtually every fact testified to by the plaintiff is diametrically opposed to hers.

[32] His version of the events is essentially the following:

a) although he admits to meeting with the Plaintiff’s husband when he was dying in the hospital, he states the deceased did not ask him to do anything for him, that is, did not ask him to assist his wife and children; b) he did not tell anyone else anything and in particular did not tell anyone that the deceased had asked him to assist his wife and children; c) at the funeral and after words, he also did not say anything to anyone about whether or not the deceased had asked him to assist his wife and children and he had no plans for the plaintiff or her family; d) he did admit, as most people would, that at the funeral he asked the plaintiff to let him know if he could help in any way; e) although he understood she got some life insurance proceeds, he testified that the plaintiff did not tell him about her financial circumstances, or her educational or business background/employment background; f) notwithstanding his claim that he did not know anything about her financial circumstances he assisted her in buying two luxury automobiles being a Mercedes and BMW; g) he testified to having many telephone conversations with the plaintiff in February March and April 2010 and said they talked about the cars and trading. He said she had an interest in knowing more about trading because she had talked to others and thought the returns they were offering were too low; h) he said he explained to her the e-trading platforms that he was using at Charles Schwab and “sinkorswim”; i) he explained to her that using sinkorswim was higher risk but you could also make a high profit; j) he made it clear to her that he would only help her to use the trading software and that he would not assist her in any way whatsoever, by suggesting or telling her what to buy and when to buy it; k) he testified, that he discussed all the features of the software with her and that the software would guide a user through how to use it; l) he denied loading a practice version of sinkorswim on her computer and said that all he provided to her was the website address; m) he testified that he believed she opened a practice account which he referred to as a paper trade account, but did not acknowledge that he assisted her in any way, either in downloading the paper trade account from the Internet or setting up the account on her computer; n) he testified that he believed she had opened the paper trade account because later she was asking him what to do and how to do it; o) he later testified that he knew she had set up the paper trade account because the two of them shared a computer screen so that he could see what she was doing on her computer; p) he testified that this screen sharing continued so that he could see what she was doing and they could talk on the phone; q) in early May of 2010, the plaintiff had made a paper profit of approximately $3400 and told the plaintiff that she wanted to go live and use real money; r) he told her that as a Canadian she could no longer get a sinkorswim account but said she could use his account; s) he then received a $100,000 US bank draft from the plaintiff on May 4, 2010, deposited it in his RBC bank account and transferred it to his sinkorswim account. He said she picked the $100,000 US amount because it was the same that she had used in her paper trade account; t) on the same day he gave her his login information for his sinkorswim account and told her he would not be using the account; u) at this point in his testimony he reiterated “I would not help her to pick the stock, I would only show her how to do it or do it at her request”; v) he testified that sometime before May 22, 2010, she wanted to put another hundred thousand dollars into the sinkorswim account in an effort to recoup the first $100,000 that she had lost; w) he testified that he asked the plaintiff if she wanted to continue because of how quickly she had lost the first $100,000 and when she said she did, it was his opinion that she was “smarter now”; x) he testified that when she lost the second hundred thousand she wanted to keep going and deposited a further $50,000 US into his sinkorswim account; y) after all of the losses were incurred, he said he had a discussion with the plaintiff and suggested she talk with his accountant about what to do with the losses; z) he denies that he ever told the plaintiff that any of his accounts required a minimum balance to be able to use the sinkorswim trading platform; aa) he testified that he has never touched alcohol and was never with the plaintiff where alcohol was consumed by either of them; bb) he stated that after all the money had been lost she made no demands for the return of her money and that he was still doing things for her; cc) he testified that he was surprised when he received a lawsuit because after the loss of the money, she seemed to accept the losses, she loaned him money which he paid back to purchase a car and she travelled with him to the US to pick it up, he helped her purchase a BMW direct from the factory in Germany and he picked it up and drove it from Halifax to Kitchener for her.

Cross Examination of the Defendant

[33] Although the defendant suggested the plaintiff made a paper profit by May 4, 2010, he admitted the documentary evidence did not show that, and suggested that you would have to look at the computer screen to see the profit.

[34] He admits that he received the first $100,000 bank draft from the plaintiff on May 3, 2010, and that it was deposited into his RBC bank account and not to the sinkorswim account. He then transferred it into his sinkorswim account.

[35] The same procedure was followed for the second $100,000 which was deposited into the defendant’s RBC bank account on May 25, 2010 and from there the defendant transferred the money into his sinkorswim account.

[36] In mid June 2010, it was the plaintiff who deposited $50,000 directly into the sinkorswim account.

[37] The defendant’s explanation was that it was not until June 2010, that he realized the plaintiff would be able to deposit money directly into his sinkorswim account.

[38] He conceded there were two accounts, one being the sinkorswim trading account and the other being his RBC bank account, because as he testified the sinkorswim account had to be linked to a bank account.

[39] Although as the defendant testified, the sinkorswim account was losing money hand over fist, yet no emails were ever exchanged between the parties. His explanation for this was that the plaintiff had access to the account and would know what was going on and in addition he told her the account was losing money.

[40] After initially stating there was no money in his sinkorswim account, when he told the plaintiff she could use his account, on cross examination he admitted that he had approximately $18,000 worth of options in the account at the beginning of May 2010.

[41] He confirmed he lost money in 2009 and also lost approximately $72,000 in 2010 in the sinkorswim account. He also testified that he had told the plaintiff about all his losses in 2009 and up to the end of April 2010 before she invested.

[42] He denied that he told the plaintiff he paid for his house from trading options or that she could pay for cars and a pool from trading options.

[43] He testified that if he pressed the button to make any of the trades with the plaintiff’s money it was under her direction and not of his own volition.

[44] He testified that while he used his account between January 1 and May 1 and from July 2 to the end of December 2010, he gave up using his account for May and June so that the plaintiff could use it, essentially out of the goodness of his heart.

[45] He confirmed that he knew his sinkorswim account was a margin account and that he would be liable for any losses in the account, but still insisted that he gave the password and therefore complete control to his account, to the plaintiff.

John Conway

[46] Essentially on the consent of the parties John Conway testified as an expert witness in investments and banking. He has both an impressive academic and thirty-year work-related curriculum vitae which for the purposes of this case I need not go into.

[47] He said there are essentially two main types of investors, the professionals who are employed in the industry, they are highly qualified and make their living doing real-time trading and what he termed speculators, who look at the Globe and Mail and trade on their own, but are essentially 20 minutes behind the real-time traders.

[48] He testified that to open an online trading account a person has to be prescreened to weed out, for example minors and this can be either a one or two day process.

[49] Since the plaintiff used the defendant’s account this step was avoided.

[50] He explained as well as he could in laymen’s terms, the technicalities of derivatives and the terms, options, covered call options, puts, calls, vertical spreads, calendar spreads, strikes, and weekly and monthly expiry times among others. This would be only some of the knowledge a person using an account like sinkorswim would need.

[51] He told the court that no securities are actually purchased in options trading and that while there can be a magnification of profit there can also be a magnification of losses.

[52] He said trading in options is more risky than anything else a trader can do.

[53] He was shown the trading record for the defendants sinkorswim account for the year 2010, including the time period for May June and July of that year.

[54] His expert opinion was, that the account showed reckless trading using what he called naked options.

[55] He stated that he would never recommend this type of investing which he stated required volatility in a security before money could be made.

[56] He also testified that if the underlying stocks (not options) had initially been purchased by the $250,000 and had simply been held, they would be worth approximately $550,000 today, which he said, is a return of approximately 11% compounded. He confirmed that part of the reason for the rise in value of the stocks was the rise in value of the US dollar.

[57] It was his expert opinion that the investments throughout 2010 were made by the same person. He based this opinion on the facts that all investments were naked puts and call options, all use vertical and or calendar spreads, all investments confine themselves to approximately 10 different stocks and that all investments were made within days of money being deposited into the investment account. In essence he testified, the investment strategy was the same throughout the 2010 calendar year.

[58] He testified that in broad terms, the investment strategy was bad because it was speculative and reckless, with a complete lack of attention to preserving capital.

[59] He said that the investing displayed a certain amount of desperation where after losing money, instead of stopping the investor continued on the same course until there was nothing left.

[60] He stated the investor was trying to use highly sophisticated investing techniques but the investor was not a successful/profitable investor.

David Bell

[61] David Bell is the defendant’s accountant who he recommended the plaintiff use.

[62] His evidence essentially was that he did some accounting/bookkeeping services for the defendant including completing her 2010 tax return where she claimed the losses that she suffered from her online trading.

[63] His evidence had no bearing on the issues in this case.

Findings

[64] All parties agree that the facts of this case are extremely unfortunate for the plaintiff, when her husband had the foresight to purchase a significant amount of life insurance in the event of his untimely demise.

[65] There is no doubt that the plaintiff has extremely limited education and employment skills and knew absolutely nothing about investing prior to her husband’s death.

Who Picked the Trades?

[66] For the defendant with his computer and business skills, along with his international experience, to suggest that in a few hours he was going to teach her how to invest in the stock market is simply not believable. To suggest that he was going to teach her how to trade, on her own, online, in the derivatives market, which he was very familiar with, is ludicrous.

[67] The evidence before me with respect to her computer skills is that they were rudimentary at best.

[68] For her to attempt trading in the environment described to the court would be like leading a lamb to the slaughter.

[69] No friend or caring human being would allow this to happen, if they could stop it. They certainly would not knowingly assist a friend to commit such certain economic suicide.

[70] In this case, I find the defendant knew absolutely nothing about investing and would have been virtually incapable of picking the stocks and carrying out the trades that the defendant wants the court believe, she did totally on her own.

[71] It is clear that the modus operandi of the defendant’s sinkorswim account operated in exactly the same fashion before the defendant alleges the plaintiff took control of the account and also after the defendant alleges, the plaintiff took control of the account.

[72] In particular, all of the stocks which were picked to trade in, were the identical stocks that the defendant favoured. For the plaintiff to have picked these stocks on her own without assistance from the defendant is simply not believable.

[73] In fact, on her cross examination when defence counsel suggested to her that she picked the “underlying securities”, she clearly did not understand what the phrase “underlying securities” meant.

[74] It also makes no sense that the defendant would allow the naïve plaintiff, unfettered access to his account on which she could knowingly or unknowingly, trade on margin & for which he would be responsible to the underlying bank.

[75] I therefore find that it was the defendant’s idea to use the plaintiff’s money to trade in options, that the plaintiff had, and has virtually no knowledge about trading in any segment of the stock market and that she would have been incapable of participating in any meaningful way in any of the trades made.

[76] Therefore whether or not the plaintiff and defendant used screen sharing software is simply a red herring and I find that even if screen sharing software was used it was the defendant making the decisions of what to buy and when.

The Issues of Whether there were Two Bank Accounts

[77] With respect to whether or not there were two or bank accounts and therefore whether or not the plaintiff could have possibly understood that two minimum balances of $100,000 US each were necessary, I have no difficulty on the evidence finding that there were in fact two accounts, the defendants RBC account and the defendant’s sinkorswim account.

[78] Therefore it is entirely plausible that this naïve and gullible plaintiff would accede to the defendant’s request for the $100,000 US deposits in each account especially when that request was coming from her trusted friend cloaked in all the investing and business acumen that I have previously described.

Did the Defendant Disclose His Prior Trading Losses?

[79] With respect to whether or not the defendant disclosed the fact that he lost approximately $70,000 trading in options in 2009 and also lost more money in 2010, it is far more likely than not, that this fact was not told to the plaintiff. It simply defies logic, even for someone with the plaintiff’s skill sets or lack of skill sets, if the defendant had told her of his dismal attempts to make money, that all resulted in significant losses over the preceding 15 or 16 months, that she would believe he would suddenly start making money in the options market.

Use of Alcohol

[80] Whether or not the plaintiff used alcohol is an extremely small issue with respect to the credibility of the parties. The plaintiff said that on one occasion the defendant had a drink and the plaintiff said she used alcohol on at least one occasion when the two met. The defendant testified that he has never used alcohol which would include any time that he spent with the plaintiff. Nothing turns on this.

Did the Defendant Agree to Compensate the Plaintiff for Her Losses?

[81] With respect to the issue of whether or not the defendant verbally agreed to compensate the plaintiff for her losses the court again has diametrically opposed positions from the parties.

[82] The defendant of course says he never did agree to compensate her and the plaintiff says he did.

[83] The plaintiff says that the defendant gave her $8000 as partial payment and the defendant counters with his position saying that at the time she had over $150,000 in the sinkorswim account and it was her money, she requested it and he gave it to her.

[84] What is of interest however, is that after the plaintiff found out about the loss of her US$250,000 the parties remained friends.

[85] I find it far more likely that she remained friends because the plaintiff promised to pay her back for the losses and as I have already concluded, he was the one responsible for the losses.

Did the Deceased Ask the Defendant to Help His Family?

[86] On the issue of whether or not the deceased asked the defendant to help look after his family and whether the defendant said that he would, I find on a balance of probabilities that he did. Both the plaintiff and Ms. McDonald testified that the defendant admitted this fact. In addition the defendant met privately with the deceased in his hospital room at the time he was dying and both the request from the deceased and the positive response from the defendant make perfect sense.

[87] The defendant did not testify as to what he and the deceased did discuss if they did not discuss the deceased’s request for the defendant’s assistance for his family after his death.

[88] Although there is no legal obligation for the defendant to do so, there is no evidence that the defendant as a trusted friend of the plaintiff, ever discussed a financial plan for her, nor is there any suggestion that the defendant advised her that she should obtain financial planning advice to help her look after the $2,000,000.

[89] On the facts of this case I find that the defendant was aware that the plaintiff received $2,000,000 of life insurance proceeds, however based on his evidence, he then did not advise her about anything other than buying cars.

[90] He would have known that the family company was not and would not earn any money, he would have known from the time he spent with her and the numerous telephone discussions that they had, that she had no money coming in and was not employed in a money earning capacity.

[91] Therefore on the facts that he knew, he would have known that the $2,000,000 nest egg was not a significant amount of money to look after the plaintiff and her two minor children.

[92] However, rather than offer her even rudimentary advice, such as getting herself a financial planner, he somehow prides himself in assisting her to purchase two luxury automobiles, which of course she did not need, although she may have wanted them, and on the facts of this case she certainly couldn’t afford them.

[93] Therefore, although I find that the defendant promised the deceased to look after and assist the plaintiff and her children, other than being a social friend and donating some used clothing, he stood by, offered no financial or budgeting advice and assisted her in the purchase of luxury automobiles she couldn’t afford.

[94] For the reasons given above, where the evidence differs between the plaintiff and the defendant, I prefer the evidence of the plaintiff.

[95] While some of the foregoing paragraphs paint a bleak picture of the relationship between the parties, one of the issues I have to decide is whether or not the defendant took advantage of the plaintiff essentially to get at her money so that he could trade it in his online options account.

[96] On the facts of this case and for the reasons set out above I can come to no other conclusion.

Law

[97] The plaintiff relies on the case of Bruno Appliance and Furniture v Hyrniak [2014] S.C.R. 126.

[98] At paragraph 21 the Supreme Court summarizes the four elements necessary to prove the tort of civil fraud:

(1) a false representation made by the defendant; (2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss.

[99] With respect to the plaintiff’s claim for punitive damages they rely on the case of Whitten v Pilot Insurance Co. 2002 SCC 18, [2002] 1 S.C.R. 595.

[100] At paragraph 94 the court stated:

[101] “…(1) punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from the ordinary standards of decent behaviour. (3) where they are awarded punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be in adequate to achieve the objectives of the retribution, deterrence and denunciation. (6) their purpose is not to compensate the plaintiff, but (7) to give the defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), to mark the community’s collective condemnation (denunciation) of what has happened. (8) punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) while normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages. (11) judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient.”

[102] With respect to the issue of civil fraud the defendant relies on the case of Lageveen vs. De Haas [2013] O.J. No. 3288.

[103] His submission is, that to prove civil fraud the plaintiff’s standard of proof is higher than a simple balance of probabilities.

[104] They quote in particular, paragraph 48 which states:

thus in cases where fraud or fraudulent misrepresentation is being alleged, courts have recognized the seriousness of such an allegation and the standard of probability is higher. The plaintiff bears the onus to prove that the elements of the action had been met.

[105] They also rely on the case of F.H. v McDougall 2008 SCC 53, [2008] 3 S.C.R. 41 which quotes a House of Lords decision at paragraph 35 as follows:

some confusion has however been caused by dicta which suggest that the standard of proof may vary with the gravity of the misconduct alleged or even the seriousness of the consequences for the person concerned. The cases in which such statements have been made fall into three categories. First, there are cases in which the court has for one purpose classified the proceedings as civil (for example, for the purpose of article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms) but nevertheless thought that, because of the serious consequences of the [page56] proceedings, the criminal standard of proof or something like it should be applied. Secondly, there are cases in which it has been observed that when some event is inherently improbable, strong evidence may be needed to persuade the tribunal that it more probably happened then not. Thirdly, there are cases in which judges are simply confused about whether they are talking about the standard of proof or about the role of inherent probabilities in deciding whether the burden of proving a factor to a given standard has been discharged.

The Defendant urges this court to adopt the second standard.

Burden of Proof

[106] I’m satisfied on either standard, for the reasons given above, that the defendant committed a civil fraud on the distraught and very trusting and very naïve widow plaintiff.

Compensatory Damages

[107] In their submissions both parties agreed that the plaintiff consented to allowing of the defendant to trade $50,000 US of her money and therefore if I found in favour of the plaintiff this $50,000 US should not be part of her damages.

[108] They also agree that she received somewhere between $7000 Canadian and $8000 US from the sinkorswim account.

[109] Since the money came from a US denominational account I find that she received $8000 in US funds.

[110] The plaintiff will therefore have judgment against the defendant on her compensatory claim in the amount of $192,000 in US funds. (250,000-50,000- 8,000).

Punitive Damages

[111] I find that the plaintiff has made out a case for punitive damages.

[112] While it may be that the defendant had a gambling habit which he denied, I have found that he essentially preyed on the distraught, very trusting, naïve and vulnerable widow.

[113] This is highly reprehensible misconduct and departs to a marked degree from the ordinary standards of decent behaviour.

[114] I acknowledge that there is no evidence that the defendant profited in a monetary sense from the trading he carried out.

[115] However from the objectives of deterrence and denunciation there must be some award of punitive damages.

[116] I acknowledge that the plaintiff has asked for $50,000 in punitive damages however I view that is too high.

[117] I award punitive damages in the amount of $25,000 Canadian.

[118] If the parties are unable to agree on costs, Mr. Crawford shall forward his brief submissions on costs to me by May 25, 2016. Mr. Steele shall forward his brief response to me by May 31, 2106. Mr. Crawford shall then forward his reply, if any, to me by June 3, 2016. Cost submissions may be sent to my attention by email, care of Kitchener.Superior.Court@ontario.ca.

J. W. Sloan J.

Released: May 18, 2016