COURT FILE NO.: CV-11-426996 DATE: 20170613 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JAMES S. CHONG Plaintiff – and – GLEN HUGH PETER ABRAHAMS Defendant
Counsel: Stephen M. Turk, for the Plaintiff Glen Hugh Peter Abrahams, on his own behalf
HEARD: September 16 & 19, 2016
BEFORE: M. D. FAIETA J.
Reasons for Decision
Introduction
[1] The defendant practices law in Jamaica and practiced law, as a general practitioner, in Toronto from 1984 until 2013. The plaintiff claims that in 2007 he lent US$720,000 to the defendant at an interest rate of 10% per month. There is no written loan agreement. The defendant has repaid very little of the monies. The defendant admits that he received money from the plaintiff on three occasions in 2007. He states that on two of these occasions, he received an unknown quantity of cash in a bag from the plaintiff’s son. He also admits that he received US$250,000 from the plaintiff on the third occasion. However, the defendant states that he merely acted as a conduit for the plaintiff in directing those funds to a broker named Errol Barnswell (“Barnswell”), who the defendant alleges invested those funds in gold.
[2] The plaintiff’s motion for summary judgment in the amount of US$2,116,110 was heard over two days. The parties provided written closing submissions, which ended with the receipt of the plaintiff’s reply submissions dated January 9, 2017.
[3] I have granted the plaintiff’s motion for summary judgment for the reasons, and on the terms, described below.
Background
[4] The motion for summary judgment was heard over two days. Three affidavits were filed. Given the differing recollection of events, I directed that the affiants be cross-examined at the hearing of the motion.
The Plaintiff’s Evidence
[5] The plaintiff is a Canadian citizen who resides in New Jersey. For about two decades, the plaintiff has distributed Jamaican agricultural products, such as ackee, for sale from facilities located in New Jersey and Toronto.
[6] In 2007, the plaintiff’s (now former) friend, Marvin Wong (“Wong”), told him that he had made investments with the defendant and that the defendant had an opportunity for the plaintiff to earn interest income of 10% on a monthly basis. Wong recommended the defendant to the plaintiff and told him that the defendant was a highly regarded and prominent lawyer in Canada. The plaintiff states that Wong told him that the defendant was looking for funds to be used to process gold ore owned by the defendant in Africa and that the defendant had a contract with the Royal Canadian Mint to buy the processed gold ore.
[7] The plaintiff denies the defendant’s assertion that the plaintiff sought out the defendant in order to facilitate the plaintiff’s investment in gold with Barnswell or his company that operates under the business name, Adamas International (“Adamas”). The plaintiff states that he had no knowledge of Barnswell or Adamas until this action was commenced.
[8] Wong arranged a meeting between the plaintiff, the plaintiff’s son Ryan Chong (“Ryan”), and the defendant at the defendant’s office in Toronto in July 2007. The defendant confirmed the terms of the loan. The defendant sought a loan of US$270,000. The defendant said he was willing to pay interest in the amount of 10% per month on the loan. The principal was to be repaid once the processed gold ore was sold to the Canadian Mint. The plaintiff agreed to these terms. The loan was intended to be a short-term loan; however, no specific due date for repayment was discussed.
[9] Later in July 2007, the plaintiff and Ryan went to the defendant’s office and gave the defendant the sum of US$270,000 in cash. The plaintiff verbally confirmed the terms of the loan again with the defendant. However, the terms of the loan were not reduced to writing nor was a receipt for the funds given; this was done at the defendant’s request because the borrowed funds were delivered in cash.
[10] The plaintiff stated that he received the first interest payment on August 1, 2007 from the defendant in the amount of C$27,000 by way of three bank drafts: (1) a bank draft in the amount of C$15,000 payable to the plaintiff (which the defendant states was provided by Adamas); (2) a bank draft in the amount of C$2,000 from the defendant payable to the plaintiff; and (3) a bank draft in the amount of C$10,000 from MLS Ltd. (which shows the same address as the defendant’s address and which the defendant acknowledges is his company) payable to the plaintiff.
[11] The plaintiff did not object to the interest payments being made by the defendant in Canadian funds as the exchange rate for USD-CAD, at that time, was almost at par.
[12] Shortly after their first meeting, the defendant called and stated that there had been a delay in the processing of the gold ore. The defendant asked the plaintiff for a further US$200,000. The terms of this loan were the same as the first loan. In September 2007, the plaintiff and his son Ryan gave the defendant cash in this amount. No documentation was provided in respect of these funds.
[13] On October 25, 2007, the plaintiff received two bank drafts issued by the defendant totalling C$47,000, representing 10% of the money that he had lent to the defendant up to that point. Ryan picked up the bank drafts from the defendant. The two bank drafts were as follows: (1) one dated October 25, 2007 payable to the plaintiff from the defendant in the amount of $27,000; and (2) another dated October 25, 2007 payable to the plaintiff in the amount of $20,000.
[14] In about 2007, businesses in Jamaica that had provided the plaintiff with canned agricultural goods for distribution no longer wished to do so. The plaintiff decided to buy land and build his own canning factory. To finance that work, the plaintiff wound up a family trust held in Toronto. The plaintiff was advised that the most efficient way to transfer the funds would be from lawyer to lawyer. As a result, the plaintiff asked the defendant to transfer C$1,059,000 and US$602,000 to Harold Brady, a lawyer, in Jamaica.
[15] In October 2007, while holding these funds in trust, the defendant asked the plaintiff for a further loan of US$250,000 given that he was having continued difficulty with processing the gold ore. The plaintiff agreed to loan these funds on the same terms as the previous loans. The defendant sent the balance of the proceeds of the family trust to Mr. Brady.
[16] No further loans were made by the plaintiff to the defendant. In total, the plaintiff lent US$720,000 to the defendant.
[17] In April 2008, the plaintiff received a further payment of C$47,000 in the form of a bank draft dated April 8, 2008 from the defendant.
[18] On or about June 5, 2009, the plaintiff received the fourth – and what would be the last – payment from the defendant in the sum of C$10,000 in the form of a bank draft dated June 5, 2009 from the defendant.
[19] The plaintiff made numerous calls to the defendant for payment of interest. None of the demands for payment were made in writing. The plaintiff states that the defendant promised to make some repayments but he did not do so.
[20] Joseph Giaimo (“Giaimo”) is the plaintiff’s attorney in New York. The plaintiff instructed Giaimo to send a demand letter, dated November 29, 2010, to the defendant. The letter states:
As you know from our conversation today, we represent James Chong from whom you personally borrowed $720,000 US. The fact is that you represented to Mr. Chong that you needed to borrow funds from him to purchase gold ore in Africa to process and sell to the Canadian Mint.
The first loan of $270,000 US was given to you in mid-2007; an additional loan of $200,000 US was made in September, 2007.
Thereafter, you legally advised Mr. Chong and made the legal arrangements for the transfer of $1,427,714 US from Mr. Chong’s bank account at the Royal Bank of Canada to your attorney’s trust account in Canada; and from your trust account to the trust account of an attorney associate of yours, Harold Brady, in Jamaica. However, in the process of your legal maneuvers you asked for and received from Mr. Chong’s bank account an additional loan of $250,000 US from Mr. Chong for the ostensible purchase of more gold ore.
We enclose copies of your bank check for $15,000; a $2,000 bank draft and a $10,000 bank draft all dated August 1, 2007, confirming the interest payments you made on the original $270,000 loan. In addition, we enclose two bank drafts dated October 25, 2007 totaling $47,000 for interest payments upon the total loans at that time of $470,000.
It is our client’s position that you have failed to repay any principal of his loan to you which totaled $720,000 at the time of the last transaction, and that you may have defrauded him in the process of obtaining the loans. Indeed, acting as his attorney upon the transfer of his bank funds to your trust account and deducting $250,000 to yourself in the form of a loan, even though approved by Mr. Chong, is highly questionable from an ethics standpoint.
We understand that you last met with Mr. Chong on November 6, 2010 after failing to meet your commitment to him to pay between $20,000 and $50,000 by October 23, 2010.
This letter will put you on notice that unless you present a workable plan within ten (10) days to repay the $720,000 principal plus accumulated interest, we shall have no alternative but to retain local counsel to assist our client in a lawsuit to recover his money and to take whatever additional legal steps that may be necessary to do so.
We expect to hear from you by return mail.
[21] The plaintiff, through Giaimo, filed a complaint, dated April 15, 2011, with the Law Society of Upper Canada regarding the defendant’s failure to repay the monies given to him by the plaintiff. It states:
The attorney asked the complainant to borrow money that he said he was using for investment purposes, specifically, the purchase of gold ore in Nigeria, Africa to be processed and sold to the Canadian Mint. He borrowed on three different occasions: $270,000 in July 2007; $200,000 in September, 2007. Thereafter, on October 1, 2007, in the process of arranging a transfer of funds from the Royal Bank of Canada to the claimant’s bank in Jamaica, West Indies, he transferred the funds into his trust account from the claimant’s bank and asked to borrow an additional $250,000 which he deducted from the balance of the funds in the trust account which were then transferred to an attorney in Jamaica. He has refused repeatedly to repay the loan except for payment of interest totaling $84,000. The last payment being in the sum of $10,000 on June 5, 2009.
[22] This action was commenced on May 20, 2011.
[23] The plaintiff states that the defendant wanted the Law Society complaint withdrawn. The defendant requested that they meet in Jamaica. The defendant sent the following email to Giaimo on June 20, 2011 following their meeting:
Dear Joe,
It was good to meet with you and James last Saturday morning. Further to our meeting, I wish to confirm our agreement to resolve these issues in the following manner:
You and James Chong will withdraw the complaint to the Law Society on the agreed basis that I was not Mr. Chong’s lawyer;
You will cause the existing lawsuit against me to be placed on a stand still basis, and in any event extending the time by which I am obliged to defend
I will pay to Mr. Chong an amount of $100,000 in or about September 1, 2011 and other amounts to be determined within a period of two years.
Please confirm acceptance of these terms via email by June 22, 2011.
[24] The plaintiff, through Giaimo, withdrew his complaint to the Law Society. Giaimo sent the following email to the defendant on June 24, 2011:
I’ve attached a letter of withdrawal which I mailed, faxed and emailed to the Law Society of Canada today.
[25] The defendant then sent the following email to Giaimo on June 27, 2011:
I acknowledge receipt of correspondence dated June 14, 2011 in this matter. I will be in contact with you if anything further develops and look forward to hearing from you.
[26] However, the defendant did not make any payment to the plaintiff further to the defendant’s email dated June 20, 2011. By email dated September 6, 2011 to Giaimo, the defendant stated:
Hello Joe: I wish to confirm our telephone conversation of today’s date wherein I confirmed our agreement reached in Jamaica. I have asked for and you have agreed to, an extension of 45 days for my initial payment.
[27] Giaimo sent the following email to the defendant on October 18, 2011:
Peter, please note that the initial payment of $100,000 is due on October 27th. If not paid, you will have to submit an answer to the complaint.
[28] The defendant sent an email to Giaimo on November 4, 2011, attaching two cheques from Vivienne Morris payable to the defendant. The first cheque is dated November 16, 2011 in the amount of $10,000. The second cheque is dated November 30, 2011 in the amount of $22,000. The email states:
Hi Joe:
Kindly find attached post-dated cheques payable to me – as we discussed.
If there are any questions, you could call me on my cell since I will be out of the office until late afternoon.
[29] The plaintiff states that Vivienne Morris is the defendant’s employee. The plaintiff states that her post-dated cheques were never “made good” and that her cheques were “simply a hoax put in place to delay this matter”.
[30] The plaintiff subsequently instructed his counsel in this action to make a further complaint to the Law Society of Upper Canada. The letter, dated September 21, 2012, states:
Despite the fact that the litigation herein was commenced back in May of 2011, over 15 months ago, Mr. Abrahams has refused or neglected to provide an Affidavit of Documents. I have written to him on numerous occasions seeking an Affidavit of Documens and yet as of this writing he has yet to provide one. Further, he has only provided a handful of documents which he brought with him to the discovery that took place on the 2nd of May, 2012. Two documents are Deposit Slips that evidence that Mr. Abrahams received $1,000,000.00 from Mr. Chong and that he deposited said funds. The Deposit Slips do not indicate that the funds were deposited into Mr. Abraham’s Trust Account although Mr. Abrahams at discovery indicated that said amounts did go into his Trust Account.…
I can advise that 16 undertakings were provided at Mr. Abraham’s examination for discovery which took place on the 2nd of May, 2012, over four months ago and yet despite repeated requests for the answers to the undertakings, and the related productions, nothing has been forthcoming from Mr. Abrahams. Mr. Chong requires answers to the undertakings and the related productions so that a continuation of the long outstanding discovery can take place.…
I can appreciate that this normally this [sic] is a matter that such runs its course within the litigation; however, given the nature of the allegations, and given Mr. Abrahams’ refusal thus far to produce any trust records, records which I have sought for months on behalf of Mr. Chong, and records that would substantiate the amount of funds received by Mr. Abrahams, I am now seeking the Law Society’s intervention in this matter. From the records that I have, (bank drafts provided to Mr. Abrahams in trust) and given the pleading received from Mr. Abrahams, there appears to be a significant amount of money that has gone missing while with Mr. Abrahams or is unaccounted for. That reality is part and parcel with the allegation of the unpaid loan to Mr. Abrahams who at all material times was a member of the Law Society of Upper Canada and who has confirmed that he billed Mr. Chong in the neighbourhood of $70,000 for alleged services rendered.…
[31] The plaintiff had received no further payments from the defendant.
The Defendant’s Evidence
[32] The defendant acknowledged the history of disciplinary action taken by the Law Society of Upper Canada. On April 25, 2008, a hearing panel found that the defendant engaged in professional misconduct for, amongst other things, misleading a lender client by informing them they had a good and valid first mortgage on a property when the defendant knew a mortgage still existed and had not yet been discharged.
[33] The defendant also acknowledged the Law Society proceedings arising from the complaint made on behalf of the plaintiff in September 2012. A forensic auditor for the Law Society sent a letter dated January 22, 2013 to the defendant notifying him that certain regulatory issues were being investigated. These included issues such as the following: “you may have borrowed money from your client and/or may have invested money on your client’s behalf without requiring that your client receive independent legal advice or independent representation”; and “you may have behaved dishonourably by agreeing to settle the litigation on the condition that [the plaintiff] withdraw his Law Society complaint.” The Law Society requested that certain information be delivered by February 25, 2013 and, to this effect, sent two further letters to the defendant. One was dated March 14, 2013 from the Law Society’s forensic auditor and stated that the defendant had not responded to letters dated January 22, 2013 and February 26, 2013. The letter also explained that this matter would be referred to the Law Society Benchers for authorization to commence disciplinary proceedings if a full response was not received by March 25, 2013.
[34] On December 13, 2013, a hearing panel found that the defendant engaged in professional misconduct for failing to co-operate with a Law Society investigation into his conduct arising from a complaint, including failing to produce a complete response to requests made by the letter dated January 22, 2013. The defendant was suspended for one month, continuing indefinitely until he provided a satisfactory response.
[35] On December 14, 2015, the Law Society Tribunal – Hearing Division found that the defendant engaged in professional misconduct and that he was ungovernable for, since March 2013, failing to promptly and completely produce documents and written representations as requested by the Law Society during its investigation of a complaint from the plaintiff and, thereby, failing to cooperate fully with the investigation. The Tribunal ordered, amongst other things, that the defendant’s license to practise law be revoked, effective January 4, 2016.
[36] The defendant’s evidence is that he traded in gold in 2006 and 2007. He stated that the plaintiff was anxious to invest in gold when he met with the plaintiff in July 2007 at the defendant’s office in Toronto. In cross-examination, the defendant stated:
A: … He wanted to invest in gold, because he said he heard from Marvin that, um, he has a broker here, Errol Barnswell, who works with me, and we do gold transaction, and we do well, and he wants to do it because he has monies to invest.
Q: Okay. And so, why didn’t Mr. Chong just pick up the phone to Mr. Barnswell?
A: You’d have to ask him that. But, I don’t …
Q: I’m asking you.
A: I don’t know.
[37] The defendant states that Adamas is Barnswell’s company. In 2007, this company was based in Brampton, Ontario.
[38] In cross-examination, the defendant confirmed that he gave the following evidence during his examination for discovery on November 13, 2013, which suggested that he had some experience, if not expertise, in trading gold and indicated that he traded gold using Barnswell’s services and did not have any documents that reflect that trading activity:
Q: Do you have documentation relating to your trading in gold?
A: No.
Q: How was it done?
A: At that point, there were people who knew their way around gold, not only me, but lots of people who believed that gold was, you know, the safest currency to deal with to secure your money. It was going up, up, up, so you – you deposit the money with – with – either you could do it with Scotia Bank, uh, system, or you could – in my case, I gave the money to Barnswell.
[39] The defendant, in his affidavit on this motion, stated that he “introduced [the plaintiff] to the broker who did the actual trading on my behalf.” On cross-examination, the defendant stated that this introduction occurred by telephone in the defendant’s office. He explained:
A: I called Barnswell and I had - - I believe I had Mr. Chong speak to Barnswell on the phone in my office.…
Q: So, while you were present, you picked up the phone to Barnswell and there was a conversation that took place between Mr. Chong and Mr. Barnswell?
A: That is my recollection. I - - Mr. Chong was in my office, and I said I could get Barnswell on the phone.
Q: Okay. What happened next?
A: Well, Mr. Chong was agreeable to make the investment with him.
[40] In an examination for discovery held on May 2, 2012, the defendant denied receiving cash from the plaintiff. During cross-examination, the defendant attempted to clarify that answer:
Q: … Do you recall me asking you:
Did you, at any point in time, receive cash from Mr. Chong? …
A: Yes. And I took it that you mean, did he give me cash for my - - as he’s alleging. As he’s alleging.…
A: It wasn’t the right answer, but I’m - - but I’m telling you why I gave that answer. … What I meant was that he had not given me cash as was alleged by him in his pleadings. … I should have said, “Yes” and explained that it wasn’t for me to receive. It was for me to convey. That’s what was meant, and that’s what - - that’s what I meant.…
[41] The defendant stated in his affidavit that “[t]he plaintiff did make monetary investments by himself. The funds were not given to me, and I am unsure as to the amounts he invested.” However, on cross-examination, the defendant acknowledged that he received funds the plaintiff. He stated:
Q: … Did you, or did you not, receive cash funds from Mr. Chong?
A: I have never - - I did receive it, but I’ve never handled it and counted it, or anything like that. I took it and gave it to Barnswell.
Q: So, you receive cash from Mr. Chong?
A: I receive what purports to be cash from Mr. Chong?
Q: And how much cash did you get from Mr. Chong?
A: Never counted it.
Q: How much were you told was there?
A: It is when this - - um, when this litigation started that I was told about 270,000. It was never that amount. I don’t think Barnswell will say that was the amount that he got. …
Q: Did you …
A: Mr. Chong brought in a bag of money.
Q: Did you give Mr. Chong a receipt?
A: No.
Q: Did you get Mr. Chong to sign a statement or acknowledgement that this was money going to Mr. Barnswell and that you had nothing to do with it?
A: I didn’t – I didn’t do anything like that, because Mr. Chong - - it’s his money, and he brought it to my office to give it to the broker who’s selling him gold.
[42] However, the defendant, in cross-examination admitted that he received two bags containing cash from the plaintiff, of an unknown amount, from the plaintiff as well as US $250,000.00 as described by the plaintiff.
[43] The defendant stated that he gave the cash that he received from the plaintiff to Barnswell but that he did not obtain a receipt from Barnswell. One bag of cash was delivered by the defendant to Barnswell and the other bag was picked up by Barnswell from the defendant’s house.
[44] The defendant stated in his affidavit that “due to the fact that the plaintiff resided and still resides in Jamaica, I went on the plaintiff’s direction to make some investments on his behalf and receive any payments to him.” In cross-examination, the defendant stated:
Q: What investments did you make, sir?
A: Well, how it works was that Barnswell was - - as you can - - I’m happy that you - - you found it is true. I’m talking that many is a broker in these things and he’s who was handling the investments for Mr. Chong, and on some occasions for myself, and if would, um say to me, “Peter, there is …” - - um, he comes up with these things that there is a certain cut of diamond and a certain shipment of gold that he can - - he want to invest in, and so forth, how it’s - - sometimes doing it for myself, give him some money and I would give him - - I would also make some for Mr. Chong.
I would - - on some occasions when I did have money in my trust for Mr. Chong, I would say “Go ahead and do that for him. I’ll give it back to you.”
Q: So, you took money out of trust …
A: No, no.
Q: … to do this?
A: No, I said whenever I have monies in trust, then I know that I’m safe, meaning that I would talk to Mr. Chong about it. I would say to him, “Go on, do it, it is safe.” I’ll speak to Mr. Chong about it.
I never did. And my trust account is - - is there for you to look at. I have given excerpts of it. I have never taken any monies given to Barnswell out of trust, but if I was satisfied that there was a good deal to be had, I would on occasions tell Barnswell to go ahead, make - - make one for me and make - - also make one for Mr. Chong.
There were many occasions when he called and said that there is this type of diamond, it has this type of clarity, this type of cut, and it’s coming in at this price, and I’ll say - - you know, it is a - - it is a brokering situation.…
Q: And these investments, I believe you told me a few minutes ago that if Mr. Barnswell called you with a good investment, you told him to put some of Mr. Chong’s money into it?
A: Mm-mm, I didn’t say that. I said on occasion to Barnswell, more than once, um, if, when he calls, he says, “Peter – there is …” – he’s always talking about diamond and clarity and cut, which I don’t get too much involved in, because I don’t – it doesn’t matter. I trust Barnswell. I say, “Well, and you can put me for three thousand and you should do something for Mr. Chong as well. And he sometimes says to me that he’s - - um, on one occasion for sure, he indicated to me that, um, Chong- - with Chong’s money, he’s not doing that type of a spot, that’s spot buying, as he did with me, because Mr. Chong, he was more - - Mr. Chong, he was bigger than me and he was a different type of investor from me.
[45] The defendant stated that he received account statements from Barnswell but did not produce them in evidence. In his cross-examination, the defendant stated:
Q: Did you ever receive any statements from Mr. Barnswell on your trades, or anyone else’s trades?
A: I have received statements from him.
Q: And you’ve produced none of those statements in this litigation, correct?
A: I didn’t know it would be going in this direction, to be frank with you. I thought we were going to find out if I borrowed any money from Mr. Chong …
Q: And you’ve produced nothing as far as statements from Mr. Barnswell?
A: I have - - he has never given me a statement about Mr. Chong, but I’ve gotten statements from him about myself. …
Q: … and was it typical for Mr. Barnswell to produce a statement?
A: No.
[46] The defendant testified that he provided the plaintiff with three bank drafts in the total amount of C$27,000, including a bank draft in the amount of $15,000 from Barnswell. On cross-examination, the defendant explained that Barnswell had asked the defendant to pay part of the $27,000 to the plaintiff:
Q: … What caused you to give these bank drafts to Mr. Chong?
A: One came from Barnswell directly …
Q: Yes?
A: … and the other two, he - - he asked me to make them from my company.
Q: And why?
A: … because I had …
Q: Help me here. Why did he ask them to make you - - make them from your company?
A: Because I had monies for him, and he said, “Make the - - make the - - the payment to your client, and I’ll …” - - that is how we - - we operated, myself and Mr. Barnswell. …
Q: Ten percent interest comes in at the beginning of August. … On what basis are you giving Mr. Chong 27,000 at the beginning of August? Why are you doing this, sir?
A: I’ve gotten it from the broker to give him. I get a draft from Barnswell directly for $15,000.
[47] The defendant stated that the amount claimed in this action is an amount larger than he could “muster up” and that this action was an “important matter.” Nevertheless, the defendant testified that he did not obtain Barnswell’s evidence to confirm that the plaintiff had made an investment in gold. In cross-examination, the defendant stated:
Q: Okay. And you’ve made no efforts until this point in time to get Mr. Barnswell’s evidence?
A: Well …
Q: Yes or no? Did you make any efforts, sir?
A: I made tentative efforts, but I - - I didn’t follow through.
[48] The defendant was particularly evasive in explaining the two cheques that he received from Vivienne Morris as referenced in the defendant’s email to Giaimo on November 4, 2011. On cross-examination the following exchange occurred:
Q: And who’s Vivian Morris?
A: Vivian Morris was my office manager.
Q: And why is she giving you cheques for 22 thousand and 10 thousand?
A: Oh, she owed me money.
Q; For what?
A: I don’t want - - that’s not your business.
THE COURT: Answer the question, sir.
THE WITNESS: Well, I - - I don’t think that’s his affair, Your Honour, if I - - if Vivian Morris owed me 22 thousand. Should I tell him what it’s about?
THE COURT: I’m asking you to.
THE WITNESS: Oh. You want – you’re asking me …
THE COURT: Yes.
THE WITNESS: … that I should answer you, Your Honour?
THE COURT: Answer the question.
THE WITNESS: Oh, to answer the question, I forgot what it was about.
THE COURT: How do you know it’s none of his business if you forgot?
THE WITNESS: Huh?
THE COURT: How do you know it’s none of his business if you forgot?
THE WITNESS: Because I don’t think knowing that area of my life is any of his business.
THE COURT: No, those …
THE WITNESS: If Vivian Morris owes me money, I don’t think it’s his affair, but if you - - you say I must answer him, so I answer him. I really can’t remember.
THE COURT: Carry on.
MR. TURK: Q: And what happened to those cheques?
A. I think they bounced.
Analysis
[49] Rule 20.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states that 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.
[50] The defendant did not object to the summary judgment process at the outset of the hearing of this motion. In his closing submissions, the defendant stated:
In this case it is noteworthy that a number of important sources of evidence are missing. The court did not hear from Marvin Wong, Errol Barnswell, Harold Brady and Joseph Giaimo. These sources of evidence would have provided the body and the information needed to satisfy the full appreciation test. The court has to bear in mind the circumstances surrounding the so-called loan. I repeat for emphasis that we have nothing in writing, no terms even from the plaintiff when he gave testimony in this court, no receipt and no end date to the loan.
I respectfully submit that there should be a sense that the court is without key pieces of information. It is true that the defendant should put his best foot forward but so does the plaintiff. In fact, the plaintiff has the burden to satisfy the court that there are no serious issues requiring a trial in this case. The sources of evidence discussed above are all known to the plaintiff. Two of them, Mr. Giaimo and Mr. Brady, are his lawyers, and Marvin Wong is a close friend. It should not be that someone like the plaintiff can come to this court and ask you to find judgment for him on these facts.…
[51] The “full appreciation” test advocated by the defendant no longer governs whether a motion for summary judgment is appropriate.
[52] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada stated at paras. 4 and 49:
In interpreting these provisions, the Ontario Court of Appeal placed too high a premium on the “full appreciation” of evidence that can be gained at a conventional trial, given that such a trial is not a realistic alternative for most litigants. In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.…
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.
[53] In determining whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and the judge may weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence, unless it is in the interest of justice for such powers to be exercised only at trial. In addition, a judge may order that oral evidence be presented by one or more parties: see Rules 20.04(2.1), (2.2).
[54] 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). 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. A 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.
[55] I agree with the plaintiff’s submission that the defendant failed to put his “best foot forward”:
Given his position that he was simply a “conduit” for funds it was incumbent on Mr. Abrahams to bring forward evidence to establish his position, namely the evidence of Mr. Errol Barnswell. Mr. Abrahams admitted in cross-examination (page 26) that Mr. Barnswell’s evidence was important to his position. It is respectfully submitted that a negative inference should be drawn from the reality that Mr. Abrahams utterly failed to provide any evidence from Mr. Barnswell.
[56] I am not satisfied that the evidence of Messrs. Giaimo, Brady and Wong was necessary in order to reach a fair and just determination on the merits of this motion. Had their testimony been as important as submitted by the defendant, I would have expected that the defendant would have provided this court with some evidence of his attempts to obtain evidence from these individuals to put before this court on this motion.
[57] In the circumstances, I find that I am able to make a “fair and just” determination of the merits of the plaintiff’s motion for summary judgment. Given the lack of a written loan agreement and the conflicting evidence of the parties, I ordered that the affiants (the plaintiff, the defendant and Ryan) be cross-examined on their affidavits at the hearing of this motion.
Issue #1: Did the Plaintiff Give the Defendant the Sum of US$720,000 Pursuant to an Oral Loan Agreement?
[58] The plaintiff carries both the legal and evidentiary burden of proving, on a balance of probabilities, that the alleged oral loan agreement was made: see Clifford v. Flores, 2004 BCSC 358.
[59] The applicable contractual principles are summarized in Fridman, The Law of Contract in Canada (6th ed.), at pp. 14-16, as follows:
An alleged agreement, however reached, orally, in a document purporting to be a contract or in a letter of intent, must be clearly manifested, expressly or by implication.… “The law judges of the intention of a person … by his outward expression only and it judges of an agreement between two persons exclusively from those expressions of their intentions, which are communicated between them”. Hence the requisite agreement may be established by the conduct of the parties subsequent to the alleged contract.
Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law is concerned not with the parties’ intentions but with their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other parties said or did that is the criterion of agreement; it is whether a reasonable man in the situation of that party would have believed and understood that the other party was consenting to the identical terms.…
Sometimes it is a simple matter to decide what the parties have manifested to each other, and consequently, whether they have agreed, and if so, upon what. This is especially true where a document containing their agreement has been prepared and signed by the parties.…
If there is no single document to which reference can be made in order to decide if a contract exists between the parties, but a series of negotiations, then everything that occurs between the parties relevant to the alleged contract must be considered by the court which is faced with the problem of deciding the issue. From what they have said, done or written, in combination if necessary, there must be established a bargain or agreement.
[60] I also adopt the following principles described in Re Novak Estate, 2008 NSSC 399, at paras. 36 and 37:
There are many tools for assessing credibility:
a) The ability to consider inconsistencies and weaknesses in the witness's evidence, which includes internal inconsistencies, prior inconsistent statements, inconsistencies between the witness' testimony and the testimony of other witnesses.
b) The ability to review independent evidence that confirms or contradicts the witness' testimony.
c) The ability to assess whether the witness' testimony is plausible or, as stated by the British Columbia Court of Appeal in Faryna v. Chorny, [1951] B.C.J. No. 152, 1951 CarswellBC 133, it is ‘in harmony with the preponderance of probabilities which a practical [and] informed person would readily recognize as reasonable in that place and in those conditions’, but in doing so I am required not to rely on false or frail assumptions about human behavior.
d) It is possible to rely upon the demeanor of the witness, including their sincerity and use of language, but it should be done with caution (R. v. Mah, 2002 NSCA 99, paras. 70-75).
e) Special consideration must be given to the testimony of witnesses who are parties to proceedings; it is important to consider the motive that witnesses may have to fabricate evidence. R. v. J.H., [2005] O.J. No. 39 (Ont. C.A.), paras. 51-56).
There is no principle of law that requires a trier of fact to believe or disbelieve a witness's testimony in its entirety. On the contrary, a trier may believe none, part or all of a witness's evidence, and may attach different weight to different parts of a witness's evidence. (See R. v. D.R., [1996] 2 S.C.R. 291 at para. 93 and R. v. J.H., supra).
[61] I found that there were no inconsistencies in the plaintiff’s evidence or that of his son, Ryan. On the other hand, there were instances where the defendant’s evidence was inconsistent, including the following points:
- At his examination for discovery, and in his affidavit, the defendant denied receiving cash from the plaintiff. On cross-examination, he admitted that he had received two bags of cash and US$250,000 from the plaintiff.
- On cross-examination, the defendant stated that he did direct trades (both on his own and at the direction of the plaintiff) with Barnswell; however, in his pleading, the defendant denied doing so.
- Given the large amount claimed, this action was an “important matter” for the defendant. The defendant appreciated that Barnswell could corroborate his allegation, if true, that the plaintiff invested in gold through Barnswell. However, without explanation, the defendant “didn’t follow through” in obtaining Barnswell’s evidence.
[62] The plaintiff and Ryan answered questions in a straightforward manner. On the other hand, many of the defendant’s answers were an exercise in avoidance and obfuscation.
[63] Both parties have weaknesses in their cases in terms of the plausibility of their versions of events.
[64] It is remarkable, especially given his many years in business and the large amounts of money involved, that the plaintiff (1) did not insist that his loan to the defendant be reduced to writing; and (2) delivered US$470,000 in cash and did not insist on receiving a receipt upon delivery. The plaintiff’s behaviour may, at least in part, be explained the fact that the defendant had been recommended by the plaintiff’s friend, Mr. Wong, and that the plaintiff had been told that the defendant was a prominent lawyer.
[65] I find the defendant’s evidence that he was merely a conduit for investments made by the plaintiff with Barnswell to be improbable for the following reasons:
- The defendant was unable to explain why he was a necessary conduit (whether for the delivery of funds or instructions) for the plaintiff’s alleged investment with Barnswell. The defendant could not provide any reason why the plaintiff could not have delivered funds or provided direction directly to Barnswell;
- The defendant could not explain what value (other than arranging for the delivery of the plaintiff’s funds to Barnswell) he provided to the plaintiff in respect of the monies given to him;
- The defendant did not produce any statements in respect of these investments made by Barnswell for the plaintiff or the defendant;
- The defendant did not provide this court with the evidence of Barnswell to support the defendant’s assertion that Barnswell had received the plaintiff’s money for investment and failed to return it to either the defendant or the plaintiff;
- If the defendant had given the plaintiff’s funds to Barnswell on behalf of the plaintiff, then I would have expected that the defendant would have brought Barnswell into this action as a third party to have Barnswell account for the funds allegedly invested with him by the plaintiff;
- The defendant made a repayment of C$27,000 to the plaintiff on August 1, 2017, which appears to be 10% of the amount given to the defendant to that date. About one-half of this payment was made by the defendant’s corporation. Had this repayment been the result of a gain in an investment made by the plaintiff and administered by Barnswell, then it is reasonable to expect that there would have been some documentation to reflect the particulars of that gain. However, it appears to have given the plaintiff the confidence to deliver a further US$200,000 to the defendant in September or October 2007; and
- The defendant made a further repayment of C$47,000 to the plaintiff by bank draft in October 2007 (being 10% of the amount given to the defendant to that date), which appears to have led the plaintiff to deliver a further US$250,000 held in trust by the defendant.
[66] From the perspective of the objective reasonable bystander, I am satisfied that the plaintiff agreed to lend the defendant the sum of US$720,000 at the interest rate of 10% per month. Interest payments were to be made on a monthly basis. I find that such interest accrued from the time that each of the three loan amounts were advanced. The loan was to be a short-term loan, although there was no set date for repayment. Based on the evidence and the law, I find that the loans made to the defendant were demand loans that were repayable within a reasonable period of time after a demand for payment was made: see Animal House Investments Inc. v. Lisgar Development Ltd., 2009 ONSC 2600, at paras. 39-40, aff’d, 2010 ONCA 320. I accept the evidence of the plaintiff and his son that numerous requests for repayment of these loans were made in 2010. These loans became repayable long ago.
Issue #2: Is the Loan Agreement Legally Enforceable?
[67] The defendant submits that if I find that the plaintiff lent US$720,000 to the defendant at an interest rate of 10% per month, then I should find that the loan agreement is void ab initio since the interest rate charged by the plaintiff is illegal under s. 347 of the Criminal Code, R.S.C. 1985, c. C-46.
[68] Section 347 of the Criminal Code states, in part, that:
Criminal interest rate
347 (1) Despite any other Act of Parliament, every one who enters into an agreement or arrangement to receive interest at a criminal rate, or receives a payment or partial payment of interest at a criminal rate, is
(a) guilty of an indictable offence and liable to imprisonment for a term not exceeding five years; or
(b) guilty of an offence punishable on summary conviction and liable to a fine not exceeding $25,000 or to imprisonment for a term not exceeding six months or to both.
Definitions
(2) In this section,
credit advanced means the aggregate of the money and the monetary value of any goods, services or benefits actually advanced or to be advanced under an agreement or arrangement minus the aggregate of any required deposit balance and any fee, fine, penalty, commission and other similar charge or expense directly or indirectly incurred under the original or any collateral agreement or arrangement;
criminal rate means an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds sixty per cent on the credit advanced under an agreement or arrangement…
interest means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable, but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes… [Underlined emphasis added.]
[69] Historically, at common law, contracts illegal under statute are void ab initio: see Neider v. Carda of Peace River District Ltd., [1972] S.C.R. 678.
[70] However, in Transport North American Express Inc. v. New Solutions Financial Corp., 2004 SCC 7, [2004] 1 S.C.R. 249, at paras. 41 and 42, the Supreme Court of Canada ruled that judges are permitted to enforce a contract that contravenes s. 347 of the Criminal Code by reading down the interest rate provision(s) to avoid what would otherwise be an illegal term. Whether such discretion should be exercised turns on the consideration of the following four factors:
- whether the purpose or policy of s. 347 would be subverted by severance;
- whether the parties entered into the agreement for an illegal purpose or with an evil intention;
- the relative bargaining position of the parties and their conduct in reaching the agreement;
- the potential for the debtor to enjoy an unjustified windfall.
[71] In my view, the plaintiff is not a loan shark, in light of the evidence. There is no evidence that he has exhibited all of the hallmarks of a loan shark in that there is no evidence that he engaged intimidation, threats or violence in an attempt to collect the unpaid principal and interest on the loans: see Roh v. Canada (Minister of Public Safety and Emergency Preparedness), 2011 FC 1309. Instead, he has engaged this court’s more to enforce the repayment of the loans.
[72] Further, I am not satisfied that the loans were made for “an illegal purpose or with an evil intention.” There is no evidence that the plaintiff knew that the interest rate charged was illegal or that he has been charged with violating s. 347 of the Criminal Code. In the absence of a criminal conviction, the plaintiff has the benefit of the presumption of innocence.
[73] I also find that the parties were experienced businessmen. The plaintiff had operated various businesses for several decades. The defendant had been a practicing lawyer for more than 20 years when these loans were made. In my view, each party understood the risks and benefits of the loans.
[74] Finally, the equites favour the plaintiff. Given that the defendant understood his obligations under the loan agreements, I find that it would be unjust for the defendant to not have to repay the loan with interest.
[75] Given the above considerations, I find that it is appropriate that the rate of interest provided for under the loan should be read down to the maximum legal rate of interest.
Issue #3: Is the Plaintiff Entitled to Judgment Based on Unjust Enrichment?
[76] In the event that there is a finding that there is no loan agreement between the parties, the plaintiff submits that the defendant is liable in unjust enrichment. The plaintiff claims US$2,160,110 on the basis of unjust enrichment.
[77] A claim for unjust enrichment requires proof that:
(1) The defendant has been enriched by the plaintiff; (2) The plaintiff has suffered a corresponding deprivation; and (3) There is no juristic reason for the enrichment: see Gustafson v. Johnson, 2016 ONSC 2804, at para. 60.
[78] The plaintiff submits:
It is respectfully submitted that the Record before the court clearly establishes that a benefit (funds advanced in the amount of $720,000.00 USD) has been provided to Abrahams by Chong along with a corresponding deprivation on the part of Chong. Further, no juristic reasons for the enrichment has been established on the Record before the court.
[79] The defendant submits:
The plaintiff did not develop this alternative claim other than saying that it is an alternative claim. Suffice it to say however, to make this claim the plaintiff would have to establish proof that I had been enriched by this alleged payment that he has made and proof that the plaintiff would have made this payment without any consideration and was correspondingly deprived and further that there was no juristic reason for the enrichment. I respectfully submit that there was no evidence received in this case touching upon proof of enrichment or proof of deprivation or the absence of a juristic reason. The mere allegation of the plaintiff would not amount to proof as required by the common law.
[80] In my view, the claim in unjust enrichment is not established as I have found that there is a juristic reason for the defendant’s enrichment – namely, the loan agreement. In the event that I found that the monies given to the defendant were not a loan, I would have awarded judgment to the plaintiff on the basis of unjust enrichment.
Conclusions
[81] I grant the plaintiff’s motion for summary judgment. The plaintiff is entitled to judgment in the amount of US$720,000, plus interest at 60% per annum (being the maximum legal rate of interest) running from: (1) July 31, 2007 in respect of the first loan of US$270,000; (2) September 30, 2007 in respect of the second loan of US$200,000; and (3) October 31, 2007 in respect of the third loan of US$250,000, less the payments made by the defendant to the plaintiff.
[82] The plaintiff shall deliver his costs submissions, maximum five pages, along with an Outline of Costs and any offers to settle by June 21, 2017. The defendant shall deliver his costs submissions on the same terms by June 28, 2017.
Mr. Justice M. D. Faieta Released: June 13, 2017