COURT FILE NO.: CV-22-0176-00
DATE: 2022-09-26
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Brenden Mawakeesick
Applicant
- and -
Lazarus Kaoma, Peritus Consulting and Thunder Bay Ventures
Respondents
D. Judson, for the Applicant
A. Kraljevic, for Kaoma N. Wainwright, for Thunder Bay Ventures
HEARD: September 8, 2022 at Thunder Bay, Ontario
Mr. Justice W.D. Newton
Reasons on Application
Overview
[1] This is an application for remedies under the Business Corporations Act[^1] ("OBCA"). The remedies sought include an order that the respondent Mr. Kaoma pay to the applicant sums to resolve debts created by Mr. Kaoma, an order setting aside a loan agreement and personal guarantee with Thunder Bay Ventures, punitive damages, and substantial indemnity costs.
[2] When this matter was first before Nieckarz J. on July 28, 2022, Ms. Kraljevic, on behalf of Mr. Kaoma, sought an adjournment to file responding materials. Responding materials were to be delivered by August 19, 2022. Further, on consent, it was ordered that Mr. Kaoma pay all outstanding amounts under the agreement with Thunder Bay Ventures.
[3] On the hearing of this motion Ms. Kraljevic appeared. Although no responding material was delivered as ordered she made submissions on behalf of Mr. Kaoma. A response to a Request to Admit was delivered.
The Facts
[4] The key facts are not in dispute and are as set out in the applicant’s factum:
The Applicant, Lazarus[^2], and Chisonga Muchima ["Chisonga"] were the sole directors and putative shareholders of Peritus. Peritus was incorporated on October 7, 2019 to serve as the corporate vehicle for their consulting business start-up. There were no imminent plans to start operating the business.[^3] The only thing Peritus did to formalize its operations was to open a bank account ["Account"] at the Royal Bank of Canada ["RBC"].
In March 2022, the Applicant and Chisonga were notified by RBC of a fraudulent cheque that had been deposited into the Account. The proceeds of the cheque had been transferred to various third parties, leaving a $43,000 overdraft for Peritus to pay.
The Applicant and Chisonga immediately began investigating the activities of the Account, discovering that Lazarus had been conducting transactions in it since June 2020, none of which they knew anything about or had been discussed or approved by the directors. There is no known documentation or accounting for these transactions, and no record of work being performed for clients or of goods and services being acquired.
Through their investigations, the Applicant and Chisonga also discovered that Lazarus had perpetrated two significant frauds through Peritus, resulting in large cash injections to the Account from TBV and RBC. Lazarus subsequently spent or transferred these funds to third parties and himself.
First, on July 6, 2020, and August 18, 2020, Lazarus forged the signatures of the Applicant and Chisonga on various loan agreements with TBV to access federal pandemic relief funding. Lazarus has admitted to these forgeries. The loan documents include a personal guarantee which purports to make the Applicant personally liable for the loan balance if Peritus defaults.
Lazarus took out a total of $40,000 in loans for Peritus through this federal program. The loan proceeds were deposited in the Account, and by February 2, 2022, they were entirely spent. The transaction history shows numerous transfers to and from various unknown parties, as well as to Lazarus and his girlfriend. Neither the Applicant nor Chisonga have any information about how these loan funds were used or what these transactions were for.
Second, mere days after exhausting the loan funds from TBV and putting the Account into overdraft, on February 17, 2022, Lazarus attended an RBC branch in Thunder Bay to deposit a fraudulent cheque in the amount of $43,825.38 into the Account. The next day, Lazarus attended an RBC branch in Whitby and transferred $43,307.94 to third parties and himself.
The cheque in question had been altered to appear payable to Peritus. On February 22, 2022, it was returned unpaid by RBC, resulting in an overdraft of $43,332.13 owing from Peritus. In March 2022, RBC’s collection agency began efforts recover this amount from the Peritus principals. As a result of threats to the Applicant’s credit rating, on April 5, 2022, he paid $35,000 from his personal funds to settle the outstanding Peritus debt that Lazarus created.
[5] Notably, the respondent admitted in his response to Request to Admit that he forged the applicant’s signature to the loan agreement and guarantee to Thunder Bay Ventures.
Positions of the Parties
[6] The applicant seeks judgment against the respondent Mr. Kaoma for the amounts paid to RBC, $35,000, and setting aside the loan agreement and guarantee with Thunder Bay Ventures. The applicant also seeks punitive damages and his substantial indemnity costs of $10,170.46.
[7] Thunder Bay Ventures submit that I should not set aside the loan agreement and guarantee but that I should order that the loan is to be paid by Mr. Kaoma.
Disposition
[8] The applicant will have judgment against the respondent Mr. Kaoma in the amount of $35,000 which is the amount paid to RBC. If further funds are paid to RBC by the applicant, than this judgment can be varied upon submitting affidavit evidence regarding further payments to me.
[9] The admitted forgery of the loan agreement and the personal guarantee justifies an award for punitive damages. The applicant is entitled to an award of punitive damages in the amount of $25,000 against the respondent Mr. Kaoma.
[10] Given the admitted forgery, it is appropriate to set aside the loan agreement and the personal guarantee of the applicant. Those agreements are set aside and I further order that the loan obligation to Thunder Bay Ventures is to be satisfied by the respondent Mr. Kaoma solely.
[11] This is a proper case for substantial indemnity costs and the applicant shall have his costs of this application fixed in the amount of $10,170.46.
"Original signed by"
The Hon. Mr. Justice W.D. Newton
Released: September 26, 2022
COURT FILE NO.: CV-22-0176-00
DATE: 2022-09-26
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Brenden Mawakeesick
Applicant
- and -
Lazarus Kaoma, Peritus Consulting and Thunder Bay Ventures
Respondents
REASONS ON APPLICATION
Newton J.
Released: September 26, 2022
[^1]: R.S.O. 1990. c. B.16. [^2]: "Lazarus" is the respondent Lazarus Kaoma. [^3]: [Footnote missing in original document]