Court File and Parties

COURT FILE NO.: CV-12-470117 DATE: 20161025

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

NATIONAL MONEY MART COMPANY, carrying on business under the firm name and style of MONEY MART Plaintiff – and – STATE FARM FIRE AND CASUALTY COMPANY Defendant

COUNSEL: Marvin J. Huberman, for the Plaintiff Daniel I. Reisler, for the Defendant

HEARD: September 19, 2016

BEFORE: M. D. FAIETA j.

Reasons for Decision

Introduction

[1] The Defendant State Farm Fire and Casualty Company (“State Farm”) insured a property, which was owned by Soud Alfedany (“Alfedany”) and damaged by fire. State Farm settled Alfedany’s property damage claim and issued him a cheque amount of $120,104.73 dated June 19, 2012 (the “Cheque”).

[2] A person who purported to be Alfedany (the “Customer”) presented the Cheque at a store in Toronto operated by the Plaintiff, National Money Mart Company (“Money Mart”), on June 21, 2012. Money Mart paid the full amount of the Cheque, less a commission of about three percent, in two instalments to the Customer on June 22, 2012 and June 25, 2012. On June 29, 2012, Alfedany advised State Farm that he had not received the Cheque. On November 14, 2012, Alfedany provided a statement to State Farm indicating that he disputed the endorsement on the Cheque on the grounds that it was “forged or unauthorized.” Both Money Mart and State Farm hold banking accounts with the Bank of Montreal. On December 3, 2012, the Bank of Montreal credited State Farm’s account in the amount of $120,104.73. The Cheque was dishonoured and returned to Money Mart on December 4, 2012. On December 18, 2012, State Farm issued a second cheque to Alfedany in the amount of $120,104.73.

[3] Money Mart submits that it is a “holder in due course” of the Cheque pursuant to the Bills of Exchange Act, R.S.C. 1985, c. B-4 (the “Act”), and is entitled to payment of $120,104.73, plus interest and costs, from State Farm.

[4] State Farm brings this motion for summary judgment to dismiss Money Mart’s action. The parties have exchanged affidavits and conducted cross-examinations of the affiants. Money Mart submits the motion for summary judgment should be dismissed and that judgment should be granted in its favour.

[5] For the reasons described below, I have granted State Farm’s motion for summary judgment and have dismissed Money Mart’s claim.

Analysis

[6] The following principles apply on a motion for summary judgment:

• A defendant may, after delivering a statement of defence, move with supporting affidavit material or other evidence for summary judgment dismissing all of part of the claim in the statement of claim: see Rule 20.01(3), Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
• An affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit: see Rule 39.01(4).
• An affidavit for use on a motion for summary judgment may be made on information and belief as provided in subrule 39.01(4), but, on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts: see Rule 20.02(1).
• Each side must "put its best foot forward" with respect to the existence or non-existence of material issues to be tried: see Papaschase Indian Band No. 136 v. Canada (Attorney General), 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11.
• In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial: see Rule 20.02(2).
• The court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: see Aronowicz v. EMTWO Properties Inc., 2010 ONCA 96, 98 O.R. (3d) 641, at paras. 17-19.
• A court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence: see Rule 20.04(2).
• The onus is on the moving party to show that there is no genuine issue requiring a trial: see 1061590 Ontario Ltd. v. Ontario Jockey Club (1995), 21 O.R. (3d) 547 (C.A.), at para. 36, and Hi-Tech Group Inc. v. Sears Canada Inc. (2001), 52 O.R. (3d) 97 (C.A.) at para. 31.
• Under Rules 20.04(2.1) and 20.04(2.2), a court may exercise any of the following powers for the purpose of determining whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers to be exercised only at a trial:
  • Weigh the evidence.
  • Evaluate the credibility of a deponent.
  • Draw any reasonable inference from the evidence.
  • Order that oral evidence be presented by one or more parties for the purposes of exercising the above powers.
• If the court cannot grant judgment on the motion, the court should:
  • Decide those issues that can be decided in accordance with the principles described above;
  • Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;
  • In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.
• Where summary judgment is refused or is granted only in part, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to trial expeditiously: see Rule 20.05(1).

[7] A “full appreciation” of the evidence is no longer required to rule on the merits of an action without a trial. In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada stated, at para. 49:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[8] The parties agree that if Money Mart is the holder in due course of the Cheque, then it is entitled to payment from State Farm unless s. 48(1) of the Act applies. Accordingly, the issues raised by this motion for summary judgment are as follows:

• Issue #1: Is Money Mart deemed to be a “holder in due course” of the Cheque pursuant to s. 57(2) of the Act?
• Issue #2: Is Money Mart a “holder in due course” of the Cheque pursuant to s. 55(1) of the Act?
• Issue #3: Is Money Mart barred from seeking to enforce payment of the Cheque by s. 48(1) of the Act?

Issue #1: Is Money Mart deemed to be a “holder in due course” of the Cheque under subsection 57(2) of the Act?

[9] Section 2 of the Act defines a “holder” as “the payee or endorsee of a bill or note who is in possession of it, or the bearer thereof.” There is no dispute that the Cheque issued by the Defendant is a “bill” given s. 165 of the Act, which states that a “cheque is a bill drawn on a bank, payable on demand.”

[10] Subsection 57(2) of the Act provides that:

Every holder of a bill, is in the absence of evidence to the contrary, deemed to be a holder in due course, but if, in an action on a bill, it is admitted or proved that the acceptance, issue or subsequent negotiation of the bill is affected with fraud, duress or force and fear, or illegality, the burden of proof that he is the holder in due course is on him, unless and until he proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill by some other holder in due course. [Emphasis added.]

[11] Accordingly, Money Mart is presumed to be a holder in due course of the Cheque unless State Farm proves that Money Mart’s acceptance, issue or subsequent negotiation was affected with fraud or illegality.

[12] State Farm submits that the negotiation of the bill is affected with fraud or illegality in that:

1. The person who presented the Cheque to Money Mart was not the payee, Alfedany; and
2. Alfedany’s signature on the Cheque was forged.

Did Alfedany present the Cheque?

[13] The Cheque was endorsed and given to Money Mart by a man who presented himself as Alfedany on June 21, 2012. This individual provided Money Mart with a driver’s licence and a Social Insurance Number card bearing Alfedany’s name. He also provided Money Mart with a letter dated June 19, 2012, from State Farm that accompanied the Cheque that had been sent to Alfedany. Alfedany’s home had been rendered uninhabitable following a fire on December 11, 2011. The letter, and its attachment, explained that the Cheque had been issued to indemnify Alfedany for property damage as a result of the fire. Staff at Money Mart took a photo of the individual who presented the Cheque. The photo shows a man wearing dark sunglasses.

[14] David Hladysh is a claims representative for State Farm. His affidavit evidence, at paras. 21-23, is as follows:

I have personally met Mr. Alfedany on many occasions in 2012 and 2013. Specifically, I met with Mr. Alfedany on January 26, 2012, March 2, 2012, March 13, 2012, May 16, 2012, and July 30, 2013.

Money Mart has produced a photocopy it made of the driver’s licence presented by the man who negotiated the cheque to Money Mart. A true copy of the photocopied driver’s licence is attached hereto… Having personally met Mr. Alfedany on several occasions, I am able to say that the man pictured in the driver’s licence … does not look like Mr. Alfedany. I do not believe that the man pictured in the driver’s licence … is Mr. Alfedany.

Money Mart has produced a second photograph of the individual who presented the cheque to it. … Having met Mr. Alfedany on several occasions, I am able to say that the man pictured in the photograph does not look like Mr. Alfedany. I do not believe that the man pictured in the photograph … is Mr. Alfedany.

[15] On cross-examination, the above evidence of Hladysh was unchallenged. However, Hladysh stated that he did not know the identity of the person who cashed the Cheque at Money Mart: see Question 100.

[16] State Farm submits that the person who presented the Cheque to Money Mart was Mohammed Husari. It relies on the evidence of Detective Amber Jackson of the Brantford Police Service, who stated that driver’s licence presented to Money Mart was invalid because the algorithm shown on the licence was incorrect given the displayed name. She further stated that the police investigation identified the Customer as Mohammed Husari: see Affidavit of Detective Jackson, at para. 4.

[17] On cross-examination, Detective Jackson explained that once Husari was identified as the person who had cashed the Cheque, the police investigation was passed to the Toronto Police Service in December 2012 because Husari lives in Toronto: see Questions 43-48.

[18] Based on the above evidence, I am satisfied that Alfedany was not the Customer and did not present the Cheque at Money Mart for payment.

Was Alfedany’s signature on the Cheque forged?

[19] The Act does not define “forgery.” However, the Criminal Code, R.S.C. 1985, c. C-46, s. 366(1), provides that “forgery” occurs when a person “makes a false document, knowing it to be false, with intent (a) that it should in any way be used or acted on as genuine, to the prejudice of any one whether within Canada or not; or (b) that a person should be induced, by the belief that it is genuine, to do or to refrain from doing anything, whether within Canada or not.”

[20] State Farm submits that the endorsement on the back of the Cheque was forged as it was not signed by Alfedany.

[21] State Farm’s claims representative, David Hladysh, states that the Customer’s signature on the documents provided by Money Mart (i.e. the endorsement on the back of the Cheque, the driver’s licence, the agreement of purchase and sale, and customer registration form) bears no resemblance to Alfedany’s signature on documents submitted to State Farm earlier in the history of this claim, such as a residential tenancy agreement Alfedany entered after the fire.

[22] Further, State Farm relies upon an “Affidavit of Forgery or Missing Endorsement” purportedly signed by Alfedany, which states:

The undersigned, residing at the address below, being duly sworn, deposes and says that the cheque(s)/draft(s), described below has/have been examined and the item(s) is/are disputed on the ground(s) of:

(X) Forged or Unauthorized Endorsement …

The undersigned denies having authorized any person to negotiate/transfer/cash/deposit said cheque(s)/draft(s) without all necessary endorsements; or authorized any person to endorse or alter said item(s). Any endorsement on the cheque(s)/draft(s) is not mine, nor was it authorized by the undersigned. It is further warranted that no proceeds or benefits from the unauthorized payment/negotiation of the item(s) was/were received directly or indirectly by the undersigned.…

[23] The “Affidavit of Forgery or Missing Endorsement” cannot be relied upon as it does not comply with the requirements of Rule 4.06(1) of the Rules of Civil Procedure. First, it is not in Form 4D. Second, it is not written in the first person and does not preface the statement made by the affiant with the phrase “I [insert name] … MAKE OATH AND SAY or AFFIRM.” Third, the “affidavit” simply contains the illegible signatures of the “affiant” and a “notary public,” and does not identify their names: see Vinski v. Lack (1987), 61 O.R. (2d) 379. Fourth, Hladysh states that he was told by a person named “Angel” that Alfedany signed the “Affidavit of Forgery and Missing Endorsement.” In my view, this hearsay evidence is unreliable. Had State Farm wished to rely upon Angel’s statement that Alfedany had signed the Affidavit, then it should have placed her affidavit evidence (or a proper affidavit from Alfedany) before this court.

[24] Notwithstanding the inadmissibility of the purported Alfedany affidavit, I find that the Cheque was forged given the unchallenged evidence of Hladysh that the signatures on the Cheque bears no resemblance to Alfedany’s signature found on documents in State Farm’s possession.

Conclusion

[25] Given that I have found that the negotiation of the Cheque was affected with fraud or illegality, Money Mart is not deemed to be a “holder in due course” under s. 57(2) of the Act. However, it is open to Money Mart to prove that it is a “holder in due course” within the meaning of s. 55(1) of the Act.

Issue #2: Is Money Mart a “holder in due course” of the Cheque under subsection 55(1) of the Act?

[26] Subsection 55(1) of the Act states:

A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions, namely,

(a) that he became the holder of it before it was overdue and without notice that it had been previously dishonoured, if such was the fact; and

(b) that he took the bill in good faith and for value, and that at the time the bill was negotiated to him he had no notice of any defect in the title of the person who negotiated it. [Emphasis added.]

[27] Section 3 of the Act states:

A thing is deemed to be done in good faith, within the meaning of this Act, where it is in fact done honestly, whether it is done negligently or not.

[28] State Farm argues that Money Mart has not satisfied s. 55(1)(b) of the Act.

[29] In Benjamin v. Weinberg, [1956] S.C.R. 553, the Supreme Court of Canada, in finding that the appellant was not a holder in due course, adopted the following tests to determine whether the appellant became the holder in due course of a cheque that had been signed in blank by the respondent:

If he was … honestly blundering and careless, and so took a bill of exchange or a bank-note when he ought not to have taken it, still he would be entitled to recover. But if the facts and circumstances are such that the jury, or whoever has to try the question, came to the conclusion that he was not honestly blundering and careless, but that he must have had a suspicion that there was something wrong, and that he refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind – I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover – I think that is dishonesty: see Jones v. Gordon, [1877] 2 A.C. 616 at 629 (Lord Blackburn)

If there be anything … wrong in the transaction, the taker of the instrument is not acting in good faith if he shuts his eyes to the facts presented to him and puts the suspicions aside without further inquiry: see London Joint Stock Bank v. Simmons, [1892] A.C. 201 at 221 (Lord Herschell) [Emphasis added.]

[30] This subjective approach rewards negligent business practices and at least one commentator has suggested that it may be time to reconsider the test for “good faith” to include the observance of reasonable commercial standards: see Bradley Crawford, Q.C., The Law of Banking and Payment in Canada (Aurora: Canada Law Book, 2008) (loose-leaf, November 2008 and October 2012 supplements), at pp. 21-37 to 21-39.

[31] The evidence shows that when the Cheque was presented, staff at Money Mart followed its standard procedure to ensure that it was cashing the Cheque for the right person. Given that he was a new customer, this required completing a Customer Registration Form and a “Working the Cheque Form,” and getting the customer’s driver’s licence, a second piece of identification, and a “guesstimate” of his height, weight, eye colour and hair colour: see the Affidavit of Carrie Crowe, sworn April 9, 2015, at para. 5 and Appendix “A”; excerpts from the Examination of Leon Broomes, August 2, 2013.

[32] Staff found that the Customer’s explanation for the amount of the Cheque made sense because the Customer provided a letter from State Farm, which described that the payment represented reimbursement for a fire damage claim. On the following day, Money Mart sought confirmation from the Bank of Montreal that sufficient funds were available in State Farm’s bank account to cover the amount of the Cheque. Such confirmation was received by fax. Another section of the form asks “Does this make sense?” The answer written on the form was “Yes, maker approved. Cheque is remaining settlement payment for claim. Structural Damage Claim Policy included”: see “Working the Cheque Form” dated June 21, 2012, Affidavit of David Hladysh, Tab P; excerpts from the Examination of Leon Broomes, August 2, 2013.

[33] State Farm submits that Money Mart, for the following reasons, should have suspected that something was wrong with the transaction and should have made further inquiries rather than close their eyes to the situation.

Discrepancy between the Customer’s and Alfedany’s Date of Birth

[34] The date of birth on the driver’s licence presented by the Customer to Money Mart was April 30, 1968. A credit check performed by Money Mart on June 22, 2012, provided a date of birth of July 1, 1956, and stated “input DOB does not match DOB on file.”

[35] Money Mart claims that that the 1968 date of birth was confirmed by telephone call with State Farm. The basis for this assertion is the affidavit of Carrie Crowe, a North American Fraud Manager for Money Mart. The affidavit is not based on her investigation and does not state the source of her information and belief for her synopsis of the events that occurred on June 21, 2012 to June 25, 2012: see Affidavit of Carrie Crowe, sworn April 9, 2015, at para. 5. Once again, this affidavit fails to comply with Rule 4.06(1) and (2). It is not confined to facts within her personal knowledge. There is no indication that she took any part in the events. Further, the affidavit does not state the source of her information and belief for the many statements regarding the events. For these reasons, I strike paragraph 5 of Crowe’s affidavit.

[36] Paragraph 9 of the affidavit evidence of David Hladysh relies on a file log note written by Kelly Tuplin of State Farm which shows that Money Mart called State Farm on June 22, 2012, at 12:59 p.m. to inquire about the date of birth and was told that the date on the driver’s licence presented to Money Mart did not match State Farm’s records. The log note states:

Phone Call from Pat Tran from Dollar Financial Money Mart (Money Mart).

Call was originally transferred through Lisa Campbell. Lisa advised the birthday they had with his driver’s license was incorrect to the birthday we had on file. Money Mart was saying the birthday was in April and the years was in the 60’s. Our file shows birthday 07/01/1956.

Spoke with Pat – He was trying to confirm details regarding the cheque and our insured. For security reasons, obtained his phone number…called back...

Pat asked if Soud picked up the cheque yesterday. As per task, it was mailed out. He then asked for a description of Soud – Provided description based on my memory and Michael’s memory from meeting him. Approx 200 pounds, 5”11 [sic], short dark hair / grey on the sides, very soft spoken. Pat agreed with the description and thanked me for the time. See Page 14 of Exhibit D to the Affidavit of David Hladysh

[37] I find that Money Mart staff was told by State Farm staff that Alfedany’s date of birth was July 1, 1956, and not the date of birth on the driver’s licence presented by the Customer.

Discrepancy in Appearance of the Customer and Alfedany

[38] The Registration Form completed by Money Mart staff states that the Customer was five feet, seven inches, and 170 pounds. It states that his hair and eyes are brown: see Affidavit of David Hladysh, Exhibit “O.”

[39] As noted above, State Farm provided Money Mart with a physical description for Alfedany that was clearly different – 5’11”, 200 pounds, short dark hair, grey on the sides.

Discrepancy in Name and Telephone Number Associated with Address Given by Customer

[40] Money Mart conducted a Google search of the address that the Customer provided. The Google search came back with the address, phone number and name “A. Moussa.” The name and phone number were different than the name and phone number given by the Customer: see Affidavit of Carrie Crowe, Tab 1.

Conclusion

[41] Given the above discrepancies, there is no explanation for why Money Mart did not make further inquiries to confirm that the Customer was Alfedany. There are many steps it could have easily taken, such as asking State Farm for a sample of Alfedany’s signature.

[42] In my view, using the words of the Supreme Court of Canada in Benjamin, Money Mart’s failure to make further inquiries following up on the three areas of discrepancy described above, “showed a wilful disregard of the facts and must have had a suspicion that there was something wrong and refrained from asking questions or making further enquiries.”

[43] Accordingly, I find that that Money Mart is not a “holder in due course.”

[44] For completeness, I will address the fact that Money Mart would have been barred from enforcing payment by s. 48(1) of the Act had I found that it was a holder in due course of the Cheque.

Issue #3: Is Money Mart barred from enforcing payment of the Cheque by subsection 48(1) of the Act?

[45] Section 48(1) of the Act states:

Subject to this Act, where a signature on a bill is forged, or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorized signature is wholly inoperative, and no right to retain the bill or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up the forgery or want of authority. [Emphasis added.]

[46] As noted above, I have found that the signature on the Cheque was forged.

[47] Accordingly, the issue is whether State Farm is precluded from setting up forgery as a defence to Money Mart’s enforcement of the Cheque. In this context, “precluded” means “estopped.” “Setting up” means pleading and establishing by evidence. The question is whether State Farm is estopped from denying Money Mart’s claim on the basis that the signature on the Cheque is forged by its own “…words and conduct or silence and inactivity...”: see Crawford, The Law of Banking and Payment in Canada, at pp. 23-54 ff.

[48] Money Mart relies the following statement from para. 10 of the affidavit of Carrie Crowe, Money Mart’s National Fraud Investigator, as the basis for the estoppel:

After my investigation, I concluded that Money Mart’s employees properly followed all procedures and conducted appropriate due diligence. These employees had no reason to believe or suspect that the item presented was counterfeit. The only discrepancy was the DOB [date of birth], and when that was discovered Money Mart was prepared to turn the cheque away. It was only because a State Farm representative confirmed the DOB on the [Driver’s] Licence, not the credit check, and provided a physical description of the person standing in our lobby that a decision was made to negotiate the subject cheque. [Emphasis added.]

[49] However, there is no evidence that Crowe has any personal knowledge of the above facts, particularly those underlined above, as her affidavit does not state that she took part in the events that occurred on June 21, 22, or 25, 2012. Crowe’s affidavit does not describe the source of her information and belief for the various assertions that she has made. Further, Money Mart has not provided this court with evidence of the persons who took part in those events, including discussions with representatives of State Farm and the decision to negotiate the Cheque. Once again, Crowe’s affidavit evidence does not comply with Rules 4.06(1), (2) and 39.01(4) of the Rules of Civil Procedure. For these reasons, I find that the above statement should be struck.

[50] In any event, I reject the submission that State Farm confirmed the information Money Mart provided about Alfedany. I have already found above that State Farm provided Money Mart with a date of birth and description of Alfedany that did not match those provided by the Customer.

[51] Accordingly, the defence provided by s. 48(1) of the Act applies.

Conclusion

[52] For the above reasons, I have granted State Farm’s motion for summary judgment.

[53] The parties have agreed on costs and, accordingly, I award the sum of $7,500, inclusive of fees, disbursements and taxes, to State Farm.

Mr. Justice M. D. Faieta Released: October 25, 2016

Court File and Parties (Third Party)

COURT FILE NO.: CV-12-470117 DATE: 20161025

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

NATIONAL MONEY MART COMPANY, carrying on business under the firm name and style of MONEY MART Plaintiff – and – STATE FARM FIRE AND CASUALTY COMPANY Defendant – and – MOHAMMED HUSARI Third Party

**REASONS FOR DECISION** Mr. Justice M. D. Faieta Released: October 25, 2016