Court File and Parties

COURT FILE NO.: CV-24-00719081-0000 DATE: 20241112 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

JOHANN INGARRA, ANTHONY INGARRA, JOHN PAUL INGARRA, PAUL EVANS and SHAUN HENDERSON Plaintiffs – and – CARTEL & BUI LLP, NICHOLAS CARTEL and SINGA BUI Defendants

Self-represented

HEARD: In Writing

REASONS FOR JUDGMENT

Chalmers, j.

OVERVIEW

[1] The plaintiffs Johann Ingarra, Anthony Ingarra, John Paul Ingarra, Paul Evans and Shaun Henderson bring this motion for default judgment in the amount of $410,714.14, plus $25,000 in punitive damages, prejudgment interest and costs. The plaintiffs also seek an order that pursuant to s. 178(1)(d) and (e) of the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3, (the Act) the judgment arises out of fraud, embezzlement, misappropriation or defalcation while the defendants were acting as a fiduciary and therefore the judgment survives any past, present or future assignment in bankruptcy.

[2] For the reasons set out below, I am satisfied that the plaintiffs are entitled to the relief sought. I grant judgment in favour of the plaintiffs. I order that the judgment survives bankruptcy.

FACTUAL BACKGROUND

[3] The plaintiff Anthony Ingarra has known Nicholas Cartel and Singa Bui since 2015. He is a registered mortgage agent with Pineapple Financial. He has referred numerous clients to Mr. Cartel and Ms. Bui over the years in his capacity as mortgage agent. The plaintiff John Paul Ingarra is a realtor and has known Mr. Cartel and Ms. Bui since 2013. He has also referred numerous clients to the defendants.

[4] The subject matter of this action relates to two loans. The first loan was for $308,000 Anthony, John Paul and Johann Ingarra funded 35.1% or $108,000, and Paul Evans funded 64.9% of $200,000. The loan was to be secured by a mortgage over the property owned by the borrowers Waller Holding Inc. located at 75 Fire Route 300, McKellar Ontario.

[5] The second loan was for $97,593.88. The funds were provided by Shaun Henderson. The loan was to be secured by a mortgage over the property owner by the borrower Toronto Church on the Rock Ministries located at 800 Simcoe E. St. S., Oshawa, Ontario.

[6] The first and second loans were to mature on December 1, 2023. On December 1, 2023, deposits were made into the defendants’ trust account in the amount of $97,593.88 and $313,150.28. The funds were not paid to the plaintiffs. Anthony Ingarra states in his affidavit that he learned on December 4, 2023 that there were withdrawals made from the trust account on December 4, 2023 which had the effect of lowering the balance from $957,779.84 to $356,110.29.

[7] On December 4, 2023, Anthony Ingarra sent an email to the mortgage broker asking whether the first and second loans had been paid to the defendants on December 1, 2023. Mr. Ingarra was advised that the transaction closed and the funds had been paid into the Cartel & Bui trust account. Mr. Ingarra contacted Mr. Cartel with respect to the payment of the funds. No payments were made to the plaintiffs.

[8] The plaintiffs caused the statement of claim to be issued on April 12, 2024. On April 28, 2024, Michael Kestenberg wrote to Johann Ingarra and stated that Mr. Cartel had authorized him to accept service on behalf of both Mr. Cartel and the firm. Mr. Kestenberg also advised that Mr. Cartel had authorized him to consent to judgment with respect to the Ingarra claims.

[9] The claim was served on Ms. Bui on May 1, 2024. Ms. Bui did not deliver a defence. The plaintiffs requisitioned that Ms. Bui be noted in default. I am satisfied that Ms. Bui was properly served with the claim. She did not defend in the time permitted under the Rules. I exercise my discretion under Rule 2.01(1)(a) and 2.03 and note Ms. Bui in default.

DISCUSSION

[10] The plaintiffs bring this motion for default judgment under R. 19.02(1)(a). On a motion for default judgment, the court must undertake the following inquiry:

i. what deemed admissions of fact flow from the facts pleaded in the statement of claim;

ii. do those deemed admissions of fact entitle the plaintiff, as a matter of law to judgment on the statement of claim; and

iii. if they do not, has the plaintiff adduced admissible evidence which, when combined with the deemed admissions, entitle it to judgment on the pleaded claim: Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at para. 14.

[11] Ms. Bui was noted in default and is deemed to admit the following allegations of fact in the statement of claim:

• the plaintiffs retained Ms. Bui and Cartel & Bui to advise and represent them and to complete all legal matters pertaining to the first and second loans;
• the borrowers paid the principal amounts of the first and second loans in the amount of $97,593.88 and $313,150.28 to the defendants in the form of a wire transfer on December 1, 2023. The amounts were deposited into the defendants’ trust account
• the defendants made payments or withdrew funds from the trust account such that there were insufficient funds to pay the principal amounts to the plaintiffs;
• the defendants were in a fiduciary relationship with the plaintiffs and owed the plaintiffs a duty of the highest loyalty and food faith;
• the plaintiffs requested that the defendants pay to them the principal amounts of the first and second loans. No payments were made;
• The defendants breached their fiduciary duty to the plaintiffs.

[12] The deemed admissions establish that Ms. Bui failed to pay the first and second loans to the plaintiffs in accordance with her retainer. I am satisfied that the deemed admissions establish the claim of breach of contract, fraud and misappropriation as against Ms. Bui.

[13] Ms. Bui is also deemed to admit the allegation that she received funds from the first and second loans in accordance with her fiduciary duty, and that she owed the plaintiffs a duty to act with honesty and in good faith. I am satisfied that the deemed admissions establish that she breached her fiduciary duty to the plaintiffs.

[14] Section 178(1) of the Act provides as follows:

An order of discharge does not release the bankrupt from, [….]

d. any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity [….]

[15] I am satisfied that the deemed admission that she fraudulently misappropriated funds while acting in a fiduciary capacity justifies an order under s. 178(1) of the Act that the judgment survives any past, present or future assignment in bankruptcy and that Ms. Bui shall not be released by any discharge from bankruptcy. I am satisfied that this order is appropriate in the circumstances of this case even though Ms. Bui has not yet declared bankruptcy: University Plumbing v. Solstice Two Limited, 2019 ONSC 2242, at para. 23.

[16] The plaintiffs seek judgment in the amount of $410,744.16. This was the amount that was paid into the defendants’ trust account in payment of the first and second loans. The money was not paid and was instead misappropriated by the defendants

The first and second loans were paid into the defendants’ trust account on December 1, 2023. I am satisfied that the plaintiffs are entitled to prejudgment interest on the amount of $410,744.16 from December 1, 2023 to the date of judgment. The statement of claim was issued in the second quarter of 2024. The applicable interest rate is 5.3 % per annum. The per diem interest rate is 0.01452%. The number of days from December 1, 2023 to November 12, 2024 is 346. The total prejudgment interest rate is 5.024%.

The plaintiffs also seek an award of punitive damages. The Court has jurisdiction to make an award of punitive damages on a motion for default judgment: Barrick Gold Corp. v. Lopehandia, [2004] O.J. No. 2329, at paras. 54-65. Punitive damages may be awarded in exceptional cases for “malicious, oppressive and high-handed” misconduct. The objective is to punish the defendant rather than compensate the plaintiff: Whiten v. Pilot Insurance Co., 2002 SCC 18, at para. 36.

[17] The first loan was funded 35.1% by Anthony John Paul and Johann Ingarra and 64.9% was funded by Paul Evans. A total of $313,150.46 was paid to the defendants’ trust account on December 1, 2023 with respect to the first loan. Anthony, John Paul, and Johann are entitled to 35.1% or $109,915.74. Paul Evans is entitled to 64.9% or $203,234.52. The second loan was in the amount of $97,563.88. The funds for the second loan were funded by Shaun Henderson.

[18] I am satisfied that the plaintiffs have proved their damages.

[19] Based on the deemed admissions I find that Ms. Bui breached her fiduciary duty to the plaintiffs. Instead of paying the funds to the plaintiffs in accordance with her retainer, she misappropriated the funds for her own use. I am satisfied that Ms. Bui acted in a manner that was callous, high-handed and reprehensible. Her conduct is particularly egregious because at the time, she was a licenced lawyer and officer of the court.

[20] I award punitive damages to the plaintiffs in the amount of $25,000. I allocated the punitive damages award as follows: $6,250 to the plaintiffs Anthony, John Paul and Johann; $12,500 to Paul Evans and $6,250 to Shaun Henderson. I am satisfied that an award of punitive damages in this amount is appropriate to punish Ms. Bui for her reprehensible conduct and to send the message that lawyers who defalcate trust funds have more to lose than simply paying back their ill-gotten gains: IBEW, Local 353 Trust Funds (Trustees of) v. Shojaei, 2014 ONSC 3656, at para. 16.

[21] The plaintiffs are successful on this motion and are entitled to their costs. The plaintiffs seek their costs of the motion for default judgment on a partial indemnity rate in the all inclusive amount of $2,500. I am satisfied that the amount claimed by the plaintiffs is reasonable and fair. I award costs to the plaintiffs fixed in the amount of $2,500.

DISPOSITION

[22] For the reasons set out above, I make the following order:

A. I grant default judgment against Ms. Bui in favour of the plaintiffs,

B. I award damages to Anthony, John Paul and Johann Ingarra in the amount of $109,915.74, plus prejudgment interest in the amount of $5,522.17, plus punitive damages in the amount of $6,250;

C. I award damages to Paul Evans in the amount of $203,234.52, plus prejudgment interest in the amount of $10,210.50, plus punitive damages in the amount of $12,500;

D. I award damages to Shaun Henderson in the amount of $97,593.88, plus prejudgment interest in the amount of $4,903.10, plus punitive damages of $6,250;

E. I award costs to the plaintiffs fixed in the all-inclusive amount of $2,500;

F. I order that the judgment obtained against Ms. Bui is a debt or liability arising out of fraud while acting in a fiduciary capacity and therefore survives any past, present or future assignment in bankruptcy.

[23] I signed the draft order.

Date: November 12, 2024

Chalmers J.

COURT FILE NO.: CV-24-00719081-0000 DATE: 20241112 B E T W E E N: JOHANN INGARRA, ANTHONY INGARRA, JOHN PAUL INGARRA, PAUL EVANS and SHAUN HENDERSON Plaintiffs – and – CARTEL & BUI LLP, NICHOLAS CARTEL and SINGA BUI Defendants REASONS FOR JUDGMENT Chalmers J. Released: November 12, 2024