Appellant I-Trade-Finance-Inc

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Court File No. 33394
. IN THE SUPREME COURT of CANADA
(ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO)
BETWEEN:
I TRADE FINANCE INC.
Appellant
(Respondent)
and
BANK OF MONTREAL
Respondent
(Appellant)
APPELLANT'S FACTUM
Pursuant to Rule 42(1) of the Rules of th.e Supreme Court of Canada
SEON GUTSTADT LASH LLP
Barristers and Solicitors
1800-4950 Yonge Street
North York, ON M2N 6Kl
Benjamin Salsberg
.Tel: (416) 224-0224
Fax: (416) 224-0758
. E-mail: [email protected]
Counsel for tlie Appellant
. RUBENSTEIN SIEGEL
Barristers and Solicitors
402-1200 Sheppard Avenue East
North York, ON M2K2S5
Joshua J. Siegel
Tel: (416) 499-5252
Fax: (416) 499:-2290
E-mail: [email protected]
COlU1sel for the. Respondent
MACLAREN CORLETT LLP
Barristers and S,olicitors
1625-50 O'Connor Street
Ottawa, ON KIP 61:2
Stephen J. Grace
Tel: (613}233-1146
Fax: (613) 233-7190
E-mail: sgra<[email protected]
. Ottawa Agent for Counsel for the Appellant
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TABLE OF CONTENTS
Page
PART 1-
OVERVIEW AND STATEMENTS OF FACTS ................. :........ ~ ..... 1
Overview .....~ ................................................ :.............................. 1
Overview of Questions .....'..................................'........... : ............. 2
Background Facts ......................................................................... 2
PART II -
QUESTIONS IN ISSUE ........................................................................ 10
PART III -
STATEMENT OF ARGUl\1ENT .........................................'................ 11
SilTIlTIS Test - Step 1 ........................ ~ ........... '......'......... :................ 12
Simms Test-'Step,2 ~ ............ ;.................... :........ ·............. ;............ 12
PART IV -
COSTS ............................ :................ ;................................... ~ ................... 16
PART V -
ORDER SOUGHT ................................................................................. 16
PART VI -
TABLE OF AUTHORITIES ................................................................ 17
PART VII - STATUTES .. .'......................................................................... ,'................ 18
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Court File No. 33394
IN THE SUPREME COURT OF CANADA
(ON APPEAL FROM THE COURT OF APfEALFOR ONTARIO)
BETWEEN:
I TRADE FINANCE INC.
Appellant
(Respondent)
and
BANK OF MONTREAL
Respondent
. (Appellant)
FACTUM
PART I - OVERVIEW AND STATEMENTS OF FACTS
Overview
1.
The Ontario Court of Appeal says that even though iTrade Finance Holdings mc.
("iTrade") was Oliginally defrauded of about $5.25 million (the "Purloined Funds") by
. Webworx: mc. ("Webworx")~ still iTrade is not entitled to follow the proceeds of the
fraud thereafter into the hands ofthe principal shareholder ofWebworx:, Rohit (Roy)
Ablacksingh, and into his brokerage account (the "mvestmentAccount") at BMO Nesbitt
Bums ("Nesbitt Bill11s") because the Bank ,of Montreal ("BMO") had a security
agreement with Ablacksingh and his spouse Cindy Ramsackal ("Ramsackal") securing
their personal line of credit.
2.
Further, the Ontario Court of Appeal says the distinction between the Corporation
Webworx and its Plincipal Ablacksinghis "immaterial" and therefore Ablacksingh had
sufficient interest in the Purloined Funds to pennit the security claim of BMO to attach
and defeat the tracing order in favour of iTrade.
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3.
There are no material facts in dispute. There was a fraudulent scheme by which
Webworx and its principals defrauded iTrade. Ablacksingh and the other conspira~ors
have been convicted of criminal fraud in relation to the scheme.
Overview of Questions
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4.
/.
The questions to be resolved on this appeal are as follows:
4.1
Who is entitled to the sumof$130,117.11 plus interest (the" Disputed Funds")
now held in trust by the solicitors for BMO and traceable directly to the Purloined
Flmds? Are the monies rightfully the property of iTrade, the financing company
originally victimized by the fraud when it advanced some $5 million to
Webworx?
4.2
Or do the disputed funds belong to BMO, which took the moneys from
Ablacksingh personally, without notice bfthe fraud, to secure a $75,000 line of
credit subsequently advanced by BMO to him and his spouse Ramsackal?
.Background Facts
5.
iTrade Finance Inc. carries on business in Toronto, Ontario. It provides short tenn
financial assistance to its customers many of which are Canadian exporters of goods and
. services. The financing allows the exporters to bridge the sometimes significant period
of time between the date that the work they perfonn is completed and the date when their
entitlement to payment arises under the tenns of their contract with their own customers.
Reference: Appellant's Record, Vol. I, Stat€ment of Claim, paras. 7 & 8
6.
Webworx has its head office in Toronto, Ontario.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 9
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7.
Rohit Ablacksingh, a.k.a. Roy Ablacksingh, was at all material times the President and
CEO ofWebworx and held a 72% equity interest in Webworx.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 10
In October, 2001 representatives ofiTrade met for the first time with ~blacksingh
8.
representing Webworx. Ablacksingh advised that he was rapidly.building Webworx into
a competitive e-business company which assisted its customers' with the development of
integrated web sites capable of interacting with inventory and accounting systems and the
extensive dealer networks that are common among large companies.
Reference: Appellant'sRecord, Vol. I, Statement of Claim, para. 19
9.
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' .Webworx provided a business plan indicating it already had contracts totaling $10
million.
. Reference: Appellant's Record, Vol. I, Statement of Claim, para. 20
10:
Webworx purported to have secured a significant contract with Weyerhauser, a large
multi-national forest products company with head quarters in Washington State, U.S.A.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 21
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11.
One Peter Boulter ("Boulter") later acted as agent for 'Webworx and sought financing
from iTrade. iTrade was asked to advance funds to Webworx against receiveab1<3s which
Webworx was entitled to collect from Weyerhauser for'work performed. A copy of a
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contract between Webworx aild Weyerhauser was provIded dated November, 2000, by
which Webworx was to provide Weyerhauser with design, development, and other
services in cOlmection 'o/ith the e-business strategy of Weyerhauser. '
Reference: Appellant's Record, Vol. I, Statement of Claim, paras. 23, 24, 25
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12.
Ablacksingh claimed to have a long term relationship with a "Ken Hogan" at
Weyerhauser as a result of working together at a previous company.
Reference: Appellant's Record, Vol. I, Statement ofClaim;para. 26
13.
Webworx also provided iTrade with cash flow and income statement documentation that
had been prepared by one Alan E.Partridge ("Partridge"). These statements showed that:
(a) Weyerhauser was the largest customer ofWebworx; and (b) the November, 2000
agreement was lucrative for Webworx.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 28.
14.
Boulter proposed that iTrade advance to Webworx amounts owed to
Webwo~
by
Weyerhauser for services that Webworx had already rendered to Weyerhauser. iTrade
would deducj a fee from the amount advanced to Webworx, and would have the riglit to
collect the actual receivable that would otherwise l~ad been owed by Weyerhauser to
Webworx.
Reference:' Appellant's Record, Vol. I, Statement of Claim, para. 29
15.
In January 2002, agreements were drawn up between iTrade and WebworX -setting out
detailed financial alTangements whereby iTrade would pay to Webworx amounts
invoiced to Weyerhauser 60 days in advance of payments due from Weyerhauser; and
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Weyerhauser would confinll the work refelTed to in the invoices was completed, and
approve the invoice for payment.. Webworx would assign the invoice to iTrade.
Weyerhauser would also sign and accept a bill of exchange prepared by iTrade to be
drawn on Weyerhauser for the amount of the approved invoice ..
Reference: Appellant's Record, Vol. I, Statement of Claim, para.
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16.
iTrade would only advance funds to Webworx upon receipt of an approved invoice and.
an accepted bill of exchange from Weyerhauser.
Reference: Appellant's Record, Vol i I, Statement of Claim, para. 33(d)
17.
The maximum to be advanced by iTrade to Webworx by the January 2002 agreement was
US$I.2 million.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 34
,.18.
Webworx advisediTrade that the person at Weyerhauser who approved invoices and
accepted bills of exchange was "Ken Hogan".
Reference: Appellant's Record, Vol. I, Statement of Claim, 'para. 35
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19.
.
In January 2002 all the necessary documents required by iTrade were delivered to it by
Boulter on behalf ofWebworx. iTrade then paid Webworx the total ofUS$650,000.00 .
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. Reference:' Appellant's Record, Vol. I,
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20.
Statem~nt
of Claim, paras. 40-44
iTrade made 10 additional similar payments to Webworx between February and October,
2002, always after receipt ofthe required documents; and on each such occasion a
deposit for the full amount owing was made to iTrade's bank account in a timely manner.'
Reference: Appellant's Record, Vol. I, Statement of Claim, paras. 45-50
21.
\ In May 2002 Boulter provided iTrade with a copy of a new contract that Webworx had
entered with Weyerhauser wOlih US$4.1million. Webworx requested an increase of the.
credit facility to $4.1 million and an extension of repayment terms to 360 days from 60
days.
'Reference: Appellant's Record, Vbl. 'I, Statement of Claim, paras. 54 &55
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22.
iTrade requested and received additional financial and corporate docUlp.ents from
Webworx through Partridge. These additional documents indicated, inter alia, tliat
Webworx had an equity base in excess of $1 million.
Reference: Appellant's Record, Vol. I, Statement of Claim, paras. 55-60
23.
In JlU1e 2002 iTrade and Webworx executed agreements increasing the credit facility to
Webworx to a new limit ofUS$4.8 million. This was later increased by further
agreement to $5.1 million.
Reference: Appellant's Record, Vol. I, Statement ofClail~, paras. 61, 62 and 72
24.
Between June 2002 and March 2003 iTrade made 6 advances under the June 2002
agreement in accordance with the same procedure as had been followed with the January
2002 agreement. Some of the amoUllts advanced were as high as $1 million. The first·
payment backto iTrade was due June 5, 2003. As of December 2002 iTrade had
advanced to Webworx moneys to cover invoices totaling US$5,247,952.00.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 73
25.
In March 2003, iTrade discovered that there was no "Ken Hogan" listed as an employee
of Weyerhauser. iTtade shortly thereafter leamed that Weyerhauser had no record of any
contracts with Webworx and that all docUlnents iTrade had received from Webworx were
forged and the representations from Webworx on which iTrade had relied were false .
Reference: Appellant's Record, Vol. T, Statement of Claim, paras. 76 & 77
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26.
It ultimately became clear that the amOlmts iTrade had received by way of repayment for
its early advances to Webworx actually came from Webworx using money earlier
advanced by iTrade.
Reference: Appellant's Record, Vol. I, Statement of Claim, para. 77
27.
All individuals named herein and acting on behalf ofWebworx have been convicted of
,criminal conspiracy in relation to tIns fraud. It was a deceitful, extensive, complicated
and sophisticated scheme that resulted in dramatic financial losses for iTrade.
28.
h1 its Statelnent of Claim, iTrade claimed inter alia to be entitled to follow and trace the
funds advanced to Webworx in to the hands of any person who'received such ftmds.
Reference: Appellant's Record, Vol.. I, Statement of Claim, paras. 99 & 100
29.
iTrade launched civil proceedings. On February 23 rd , 2004, The Honourable Justice JOh11
Macdonald ordered that the funds at issue in the appeal be held in trust pending a
detennination as to who was entitled to them, iTrade orBMO. b~ September 5th , 2006,
The Honorable Justice Belobaba granted judgment in favour of iTrade as against
Ablacksingh; Webworx and others for the amount of the Purloined Funds. The judgment
also granted a tracing order in favour of iTrade as against Ablacksingh to assist it in
"[detennining] whether any of the funds that originated with iTrade remain in the hands
of, or can be traced into assets in the hands of, persons other than bona fide purchasers
for value without notice". The Disputed Funds represent the proceeds of the sale of
shares that were·held in the joint names of Ablacksingh and Ramsackal in the Investmynt
Atcolmt. There is no disagreement that the investments
in the Investment Account were
,
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purchased by Ablacksingh personally, using monies traceable to the Purloined Funds
advanced by iTtade. Ramsackal gave no consideration for the purchases.
Reference: Appelhint's Record, Court of Appeal Reasons, Tab 4, para. 6
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30.
On a motion to detennine these issues, Kite1ey J. ruled in favour ofiTrade on October
14th , 2008.
Reference: Appellant's Record, Reasons of Kite1ey l, Tab 2
31.
Ab1acksingh and Ramsacka1 were j oint cardholders of a BMO MasterCard account. It
had a credit limit of$10,000. In August, 2002, they-pledged the property in the
Investment Account to BMO in support of their request for an increase of the credit limit
to $75,000. BMO accepted the pledge and agreed to provide the increased credit limit.
All parties agree that BMO accepted the pledge and advanced the increased credit
without any knowledge ofthe fraudulent scheme or that the funds used tp purchase the
shares in the Investment Account had originated from that fraudulent scheme.
Reference: Appellaht's Record, Court of Appeal Reasons, Tab 4, para.·7
32.
Some documentation was executed in connection with the pledge and increased credit
limit. However, no written security agreement was ever signed by Ab1acksingh and
Ramsacka1 in respect of the loan, and\ no security agreement
was ever registered by BMO
under the Personal Property Security Act R.S.O. 1990, c.P.10 (the"PPSA") to protect its
interests.
Reference: Appellant's Record, ,Court of Appeal Reasons, Tab 4,. para. 8
33'.
.A collateral Agency Agreement was executed by BMO, Nesbitt BUrlls, and by. Ab1acksingh and Ramsacka1 on August 14th , 2002.
Reference: Appellant's Record, COUli of Appeal Reasons, Tab 4, para. 9
34.
Part of the pledge arrangement was that in exchange for the increased credit, the value of
the shares in the Investment Account would be maintained at a level sufficient to cover
the credit line, together with interest and costs. Accordingly, BMO was entitled to
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r.eceive monthly statements on the Investment Accolmt. At a point in time, BMO
discovered it was 110t receiving such statements and took steps to remedy the omission.
As a part ofthis process, BMO arranged for Nesbitt Burns and Ablacksingh and
Ramsackal to sign a "Notice and Direction". The Notice and Direction specifically
referred to the pledged Investment Accolmt and confinned that Ablacksingh and
Ramsackal had granted a security interest in the Investment Accolmt. It also provided
that Nesbitt Bums shall retain possession of and control over the property in the
Investment Account for the benefit of BMO and not as agent for Ablacksingh and
Ramsackal.
Reference: Appellant's Record, Court of Appeal Reasons, Tab 4, para. 10
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, 35.
Although the credit limit was $75,000, the outstanding balance on the BMO Master Card
account is $138,747.66.
Reference: Appellant's Record, Court of Appeal Reasons, Tab 4, para. 12
36.
The leamed motions judge ruled in favour of iTrade. She held:
36.1
that BMO did not have a security interest in the shares in the Investment Account;
362
that BMO was not a bona fide purchaser for value and therefore was not shielded
from the effect ofthe tracing order granted by BelobabaJ.; and
36.3
that iTrade was entitled to the funds on unjust enrichment and constructive trust
principles because the Pledge Agreement between BMO and Mr. Ablacksingh
and Ms. Ramsackal did not constitute a 'juristic reason" for the enrichnient of
Webworx Inc. at the expense of iTrade.
Reference: Appellant's Record, Reasons of Kiteley J., Tab 2, para. 25-34.
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37.
iTrade's claim to recover-the funds
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after tracing" them "to the illvestment Account - is
"based on an equitable concept of unjust enrichment, which impresses the Disputed Funds
with a constructive trust in its favour. hI addition, iTrade submits that this type of claim
gives it an equitable lien on the propeliy which prevails over the unregistered secllrity
interest ofBMO if, indeed, BMO has a security interest, which iTrade does not concede.
Finally, iTrade contends that Ablacksingh and Ramsackal did not have a sufficient
proprietary right (or other interest) in the hlVestment Account to support either a security
interest ora valid pledge to BMO and that BMO cmmot be a "purchaser" in such
circlUllstances because the fraudster Ablacksingh and his spouse Ramsackal had no
property (or other rights) in the shm'es to transfer: nemo dat quad non habet (a party
cannot give what it does not have to give).
Reference: Appellant's Record, Court 6f Appeal Reasons, Tab 4, para. 15 .
PART II - QUESTIONS IN ISSUE
38.
Did the Ontario Court of Appeal fall into error as to the circumstances in which:
38.1 "an innocent person will be precluded from recovering money paid under a mistake
of fact, induced through fraudulent representations?
38.2
the veil of a corporation utilized by a fraudster will be lifted and the corporation
willilot be treated as distinct from its controlling fraudulent principal reSUlting in
.
"
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the ilmocent victim being bmTed from recovering his property?
39.
Did the Ontm'io Court of Appeal err in holding that:
39.1
the distinction drawn by the leamed motions court judge (i.e. "BMO [was] a
purchaser fi.-om Ablacksingh and Ramsackal, not a purchaser from Webworx")
was "immaterial"?
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39.2
BMO's purchase of the disputed ftmds directly from the fraudster Ablacksingh.
rather than from Wehworx, the corporate vehicle used by the fraudster to
perpetrate the fraud was of "no moment"? and
39.3
iTrade loses its right to trace the funds pursuant to thejudgment once they fall
into the hands ofBMO; a bona fide purchaser for value of the funds wrongly
appropriated by Ablacksingh?
Reference: Appellant's Record, Court of Appeal Reasons, Tab 4, paras. 24 and 29
PART III...,. STATEMENT OF ARGUMENT
40.
The nature ofBMO's claim is that of a securityinterest in the Disputed Funds. Such an
interest is a creature of statute (i.e. the PPSA) and is defined and governed by the said act.
BMO could only acquire the interested claims if Ablacksingh and Ramsackal actually
held any interest themselves in the Purloined Funds.
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41.
In B.MP. Globql Distribution Inc. v. Bank ofNova Scotia [2009J 1 SCR 504 this
Honourable Court re-iterated the prin~iple set forth in Bardays Bank Ltd.' v. WI Simms
..--.
Son Cook (Southern) Ltd., [1979] 3 ALL E.R. 522 (Q.B.) for recovering money paid
under the mistake of fact
41.1
(th(';t~'Silmns
Test"), namely:
If a person pays money to another under a mistake of act which causes him to
make the paYlnent he is prima facie entitled to recover it as money paid under a
mistake of fact.
41.2
His claim may however fall if: (i) the payor intends that the payee shall have the
money at all events, whether the fact be tme or false, or is deemed in law so to
intend; (ii) The paYITIent is made for good consideration, in particular ifthe
money is paid to discharge, and does
di~charge
a debt owed to the payee by the
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payer or by a third party by who he is authorized to discharge the debt; (iii) the
payee 4as changed his position in good faith, or is deemed in law to have done so.
Reference:
B.}V[P. Global Distribution Inc. v. Bank ofNova Scotia [2009] 1
SCR 504, Appellant's Book of Authorities, Tab 1
Simms Test - Step 1
42.
In so far as the first
~tep
ofthe Simms Test, in the case at bar there is no issue that iTrade
paid the Purloined Funds to Webworx under a mistake of fact, namely the fraudulent
misrepresentations of Ablacksingh which caused it to luake the said payment.
Accordingly, iTrade is prima facie entitled to recover the said monies as having been paid
lUlder a mistake of fact.
Simms Test - Step 2
43.
As to the second step of the Simms Test, it is'respectfully submitted that to the extent that
the cases of R v CIBC and Gray v Royal Bank (relied upon by the Ontario Court of
Appeal) may be said to have decided that the inn,? cent victim of a fraud who parted with
title to his property as a consequence of having be~n duped by the fraudster is deemed in
law to have intended the fraudster to receive the property, the same are now in doubt, at
least insofar as their applicability in the circumstances of the case at bar. Furthermore, it
goes without saying that as iTrade received no value for its delivery of the Purloined
FUIl-ds to Webworx, Webworx being a party to the fraud cannot complain as to any
chaIlge in its position by virtue of handing over the said funds to Ablacksingh.
Reference:
R. v. Canadian, Imperial Bank of Commerce (2000), 51 O.R. (3d)
257 (C.A.), AppellaIlt's Book of Authorities, Tab 2
.
"til
Gray v. Royal Bank of Canada (1997), 143 D.L.R. (4 ) 179
(B.C.S.C.), Appellant's Book of AuthQrities, Tab 3
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44.
If R v CIBC and Gray v Royal Bank were correctly decided and iTrade is therefore
deemed in law to have intended that the payee, Webworx shall have the money at all
evellts, whether the facts represented to iTrade were true or false, it is respectfully
submitted that such a principle does not justify the lifting of the Webworx corporate veil
so as to treat it and Ablacksingh as a single entity. Doing so only serves to advance the
interests of Ablacksingh, a fraudster, (and Ramsackal, an entirely gratuitous recipient) at
the expense of the i11l1ocent victim iTrade. In this regard it is respectfully submitted that
the subsequent effect upon BMO also ought to be subordinate to the interests ofiTrade
;
and that the Ontario Court of Appeal erred in deciding that the distinction b,etween BMO
as a purchaser from Ablacksingh and Ramsackal, rather than a purchaser from Webworx
was "immaterial" or "of no moment".
45.
Section 354(1) of the Criminal Code of Canada (the "Code") provides:.
"Everyone commits an offense who has in his possession any property or
.thing or any proceeds of any property or thing knowing that all or part of .'
the property or thing or of the proceeds was obtained by or derived
_ directly or indirectly from (a) the commission in Canada of an offense
punishable by indictment;"
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46.
Reference: Criminal Code of Canada, R.S.c. 1985, c. C-46, Section 354(1)
Section 358 ofthe Code provides:
"For the purposes ofsection 342 and 354 ... , the offense' of having in
possession is complete when a person has, alone or jointly with another
, person, possession of or control over anything-mentioned in those sections
or when he aids in concealing or disposing of it, as the case may be."
Reference: Criminal Code of Canada, R.S.C. 1985, c. C-46, Section 35.8
47.
It is respectfully submitted that the only means by which Ablacksingh and Ramsackal
could have acquired an "interest" in the Purloined Funds (and accordingly the Disputed,
Funds) required by. Section 11 ofthe PPSA in order for them to have granted
the security
.
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interest claimed by BMO, was through Ablacksingh's commission ofthe criminal
offence described in Section 354 of the Code. It is therefore further respectfully
submitted that to recognize BMO's claim is to sanction Ablacksingh'scriminal conduct.
48.
iTrade respectfully submits that such a result is an affront to justic~ which camlot be
justified by aIiy legal or equitable principle, including the rationale expressed in Bump on .
Fraudulent Conveyance, 4th ed. (1896) and the dicta of Lord Denning in Central Newbury
Car Auctions Ltd. v. Unity Finance Ltd., [1957] 1 Q.B. 371 (C.A.), Cited in the judgment
of the Ontario Court of Appeal, is of little or n~ application to the facts at bar. The
provisions of Section 11 ofthe PPSA are explicit and specific. In requiring that the
.. grantor have ·''all interest" in the collateral the prescribed focus is on what the grantor
must possess as opposed to the protection ofthegraIltee.
Reference: Appellant's Record, Court of Appeal Reasons, Tab 4
49.
The availability of the "nemo dat quad" principle is expressly recognized and sanctioned
by Section 72 of the PPSA which provides:
"Except in so far as they are inconsistent with the express provisions of
this Act, the principles oflaw and equity, including thehw merchant, the
law relating to capacity to contract, principal and agent, estoppel; fraud,
misrepresentation; duress, coercion; mistake and other validating or
invalidating rules·oflaw shall supplement this act and shall continue to
apply."
Reference:· Personal Property Security Act, R.S.O. 1990, c. P.10, Section 72
50.
The logic relied upon by the Ontario Court of Appeal in ruling in favour ofBMO is
dependent upon a finding that Ablacksingh actually acquired "an interest" in the
Purloined Funds, even if it was only a voidable one. It is respectfully submitted that it
would be mmiifestly unjust to apply the equitable remedy of disregarding the corporate
veil of Web works if the result were to thereby sanction the conveyance of an interest in
the Purloined Funds ·to Ablacksingh personaliy. It is further respectfully submitted that
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this is not what was intended by the Honourable Justice Wilson when she observed in
Kosmopoulos v Constitution Insurance Co. o/Canada, [1987] 1 SCR 2 at p.10 that the
"separate entities" principle of corporate law (as recognized in Salomon v. Salomon &
Co ..[1887] AC 22) is not enforced v.:henit would yield a result "too flagrantly opposed to
justice".
Reference:
51.
Kosm6poulos v Constitution Insurance Co. o/Canada, [1987] 1
SCR 2, Appellant's Book of Authorities, Tab 4
It is therefore respectfully submitted that Ablacksingh never acquired or held any interest
in the Purloined Funds because of his' direct involvement in the perpetration of the fi.:aud
against iTrade. Ablacksingh was never a bona fide purchaser of the Purloined FlUlds .
.
.
'
without notice of the fraud. It must therefore follow that he never acquired any interest
whatsoeverin the Purloined Funds.
52.
As Ramsackalnever paid any consideration for the Purloined Funds, she was never a
purchaser thereof for value without notice. Accordingly, she also received no interest in
the Purloined Funds.
53.
. It is respectfully submitted that because BMO's claims are entirely dependent upon
Ablacksingh and Ramsackal having acquired and held an interest in the Purloined Funds
at the time BMO's security interest in their personal property was perfected, BMO never
did receive
a: security interest in respect ofthe Purloined Funds .
. 54. '. In smnmary:
. 54.1.
neither Ablacksingh nor Ramsackal ever obtained any title or even an interest in
the Purloined Funds;
54.2.
as such they had no title or interest to .convey to BMO;
54.3.
therefore BIMO never acquired any title or interest;
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. 54.4.
there is no juristic reason in the circumstances for any court to exercise its
equitable juri1?diction to lift Web Worx corporate veil at the expense of iTrade, an
ilIDocent victim of Ablacksingh's fraud, thereby preferring the interests of BMO
to those of iTrade.
PART IV - COSTS
55.
The Appellant seeks its costs on this appeal.
PART V ~ ORDER SOUGHT
"'56.
The Appellant asks that this appeal be granted and that this Court order that BMO pay
over the Disputed Foods to the Appellant with costs to the Appellant throughout the .
proceeding.
ALL OF WHICH IS RESPECTFULLY SUBMITTED
.
.tt
Dated at Toronto, Ontario on this,At' day of July 2010.
SIGNED BY:
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MACLARE~COETTLLP
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Barristers and Solicitors
1800-4950 Yonge Street
North York, ON M2N 6K.l
Barristers and Solicitors
1625-50 O'Coilllor Street
Ottawa,-ON K.IP 6L2
Benjamin Salsberg
Tel: (416) 224-0224
Fax: (416) 224-0758
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E-mail: [email protected]
Stephen J. Grace
Tel: (613) 233-1146
Fax: (613) 233-7190
E-mail: [email protected]
COlll1s.el for the Appellant
Ottawa Agent for Counsel for the Appellant
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PART VI - TABLE OF AUTHORITIES
CASE
PARA
B.MP Global Distribution Inc. v Bank ofNova Scotia
[2009] 1 SCR 504 .
41
R. v. Canadian Imperial Bank of Commerce (2000), 51 O.R.
(3d) 257 (C.A.)
43,44
.
tl
Grayv. Royal Bank of Canada (1997),143 D.L.R. (4 1)179
(B.C.S.C.)
43,44
Kosmopoulos Co. v. Constitution Insurance Co. of Canada
[1987] 1SCR 2 .
50
18
PART VII - STATUTES
PersonalPr~perty
Security Act, R.S.O. 199,0, c. P.10, Sections 11
11. ,(1) A secmity interest is not enforceable against a third party unless it has attached. 2006, '
c. 8, s. 129.
When security interest attaches to collateral
(2) Subj ect to section 11.1, a security interest, including a secmity interest in the natme of a
floating charge, attaches to collateral only when value is given, the debtor has rights in the
collateral or the power to transfer rights in the collateral to a secmed party and,
, (a) the debtor has signed a secmity agreement that contains,
(i) a description of the collateral sufficient to enable it to be identified, or
(ii) a description of collateral that is a secmity entitlement, secmities account or
futmes accolmt, if it describes the collateral by any of those tenns or as
investment property or if it describes the underlying financial asset or futures
contract;
(b) the collatebl is not a certificated secmity and is in the possession of the secmed party
or a person on behalfofthe secmed party other than the debtor or the debtor's agent
pmsuant to the debtor's secmity agreement; ,
(c) the collateral is a certificated secmity in registered fonn~nd the security certificate
has been delivered to the secmed party under section 68 ofthe Securities Transfer
Act, 2006 pursuant to the debtor's secmity agreement; or
(d) the collateral is investment property and the secmed party has control ,under
subsection 1 (2) pmsuant to the debtor's secmity agreement. 2006, c. 8, s. 129.
Same
(3) lfthe parties have agreed to postpone the time for attachment, the security interest attaches at'
the agreed time instead of at the time dete1mined under subsection (2).2006, c. 8, s. 129.
Attachment in securities account
(4) The attachment of a secmity interest in a secmities account is alsoattaclnnent of a secmity
interest in the secmity entitlements can-ied in: the secmities account. 2006, c. 8, s. 129.
Attachment in futures account
(5) The ,attaclnnentof a secmity interest in a futures account is also attachment of a security
interest in the futmes contracts can-ied in the futures account 2006, c. 8, s. 129.
Attachment of security interesfto security entitlement
11.1 (1) A secmity interest in favom of a secmities intelmediary attaches to a person' s secmity
entitlement if,
(a) the person buys a financial asset through the secmities intermediary in a transaction in
which the person is obligated to pay the pmchase price to the securities iutennediary
at the time <;lfthe pmchase; and
19
(b) the securities intennediary credits the financial asset to the buyer's securities account
before the buyer pays the securities intennediary. 2006, c. 8, s. 129 .
.- Attachment of security interest to security or other financial asset
(2) A security interest in favour of a person that delivers a certificated security or other financial
asset represented by a writing attaches to the security or other financial asset if,
(a) the security or other financial asset is,
(i) in the ordinary course of business transferred by delivery with any necessary
endorsement or assigmnent, and
(ii) delivered under an agreement between persons in the business. of dealing with
such securities or financial assets; and
(b) the agreement calls for delivery against payment. 2006, c. 8, s. 129.
Agreement
(3) If the patiies have agreed to postpone the time for attachment, the security interest attaches at
the agreed time instead of at the time dete1111ined under subsection (1) or (2).2006, c. 8, s. 129.
Obligation to pay for financial asset secured
(4) The security interest described in subsection (1) secures the person's obligation to pay for.
the financial asset. 200Q, c. 8, s. 129.
Obligation to pay for delivery secured
. (5) The security interest described in subsection (2) secures the obligation to make payment for.
the delivery. 2006, c. 8, s. 129.
'
11 .. (1) La sfuete n'est opposable aux tiers que sl elle greve Ie bien. 2006, chap. 8, art. 129.
Moment on Ie bien devient greve
(2) Sous reserve de 1'atiic1e 11.1, la surete, y compris celle qui tient de la charge flottante, greve
Ie bien uniquement lorsqu'une contrepartie est fOirrnie, que Ie debiteur a des droits sur Ie bien
greve ou Ie pouvoir de transferer ces droits a un creancier.garanti' et qu'il est satisfaita l'lme ou
l' autre des conditions suivantes :
a) Ie debiteur a signe un contrat de sfuete qui contient :
(i) soit une description du bien greve suffisante pour en pennettreJ'identification,
(ii) soit une description du bien greve qui est un droit intennedie, un compte de
titres ou un compte de contrats a tenne s'il decrit Ie bien par ces tennes ou
COlmne bien de placement ou qu'il decrit l'actiffinancier ou Ie conu'at a tenne
sous-j acent;
b) Ie bie!l greve n' est pas une valeur mobiliere avec certificat et est el1la possession du
Cl'eancier garanti ou, pour son compte, d'une personne autre que Ie d6biteur ou son
mandataire confonnement au contrat de sfuete du debiteur;
I
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c) Ie bien greve est une valeur mobiliere avec certificat nominative et Ie certificat a ete
livre au creancier garanti selon l'artic1e 68 de la Loi de 2006 sur Ie transfert des
valeurs mobilieres, conformement au contrat de surete du debiteur;
d) Ie bien greve est un bien de placement dont Ie creancier garanti a la maltrise seIon Ie
paragraphe 1 (2), conformement au contrat de sfuete du debiteur. 2006, chap. 8, art.
129 .. '
Idem
(3) Si les parties ont convenu qu'elle ne grevera Ie bien que plus tard, la surete ne greve celui-ci
qu'au moment convenu plut6t qu'au moment etabli en vertu du paragraphe (2).2006, chap. 8,
art. 129.
Sftrete qui greve un compte de titres
(4) La surete qui greve un compte de titres greve aussi les dioits intermedies qui sont partes sur
Ie compte. 2006, chap. 8, art. 129.
.
Sftrete qui greve un compte .de contrats it terme
(5) La sllrete qui greve un compte de contrats atenne greve aussi les contrats
pC-Hies surle compte. 2006, chap. 8, art. 129.
atenne qui sont
Sftrete qui greve un droit inter me die
11.1 (D La surete constituee au profit d'un intermediaire en valeurs mobilieres greve Ie droit
intermedie qu'a une perSOIDle si les conditions suivante$ sont reunies :
a) la personne achete un actiffinancier par l'entremise de l'intennediaire dans Ie cadre
d'une operation dans laquelleelle est obligee de lui payer Ie prix d'.acquisition au
moment de l' acquisition;
b) l'intennediaire porte l'actiffinancier au credit du compte de titres de l'acheteur avant..
que ce demier ne Ie paie. 2006, chap. 8, art. 129.
Sftrete qui greve une valeur mobiliere ou un autre actif financier
(2) La surete constituee au profit d?une personne qui livre une vale\IT mobiliere avec certificat au
1Ul autre actif financier atteste par un ecrit greve la valeur mobiliere ou l' autre. actif financier si
les conditions suivantes sont reunies :
a) la valeur mobiliere ou l' autre actif financier:
(i) est transfere, dans Ie cours normal des affaires, par la livraison accompagnee des
.
endossemeilts ou des cessions necessaires,
(ii) est livre aux termes d'une entente conc1ue entre des personnes qui font dans Ie
courtage des valeurs mbbilieres ou des actifs financiers de ce genre;
b) l' entente prevoit la livraisoncontre paiement. 2006, chap. 8, art. 129.
Convention
(3) Si les pmiies ont convenu qU'elle n~ grevera Ie bien que plus tard, la surete ne greve celul-ci
qu'au moment convenu plut6t qu'au moment etabli en vertu duparagraphe (1) au (2).2006,
.
chap. 8,mi. 129.
21
Garantie de l'obligation de payer l'actif financier
(4) La surete visee au paragraphe (1) garantit l'obligation qu'a la personne de payer l'actif
financier. 2006, chap. 8, ali. 129.
Garantie de l'obligation de payer la livraison
(5) La surete visee au paragraphe (2) garantit l'obligation d'effectuer Ie paiement en raison de la
.
livraison. 2006, chap. 8, ali . 129. .
Personal Property Security Act, R.S.O. 1990, c. P.10~ Sections 72
72. Except in so far as the)' are inconsistent with the express provisions of this Act, the
principles oflaw and equity, including the law merchant, the law relating to capacity to contract,
principal alld agent, estoppel, fraud, misrepresentation, duress, coercion, mistake and other
validating or invalidating mles of law~ shall supplement this Act and shall continue to apply.
R.S.O. 1990, c. P.10, s. 72.
72. Les principes de common law et d'equity, y compris ceux du droit commercial, du droit
reJatif a la capacite de contracter, du droit du mandat ou du droit relatif a la preclusion, a la
fraude, aux fausses declarations, ala contrainte, ala coercition ou a l'erreur, ainsi que les autres
regles de droit portant validite ou nullite, s'ajoutent a la presenie loi et continuent de s'appliquer,
sauf dans la mesure ou ils sont incompatibles avec les dispositions expresses de la presente loi.
L.RO. 1990, chap. P.10, art. 72.
Criminal Code of Canada, R.S.C. 1985, c. C-46, Section 354(1)
354. (1) Everyone commits an offence who has in his possession any property or thing or any
proceeds of ailY propeliy or thing knowing that all or part of the property or thing or. of the
proceeds was obtained by or derived directly or indirectly from
(a) the commission in Canada of an offence punishable by indictment; or
,
.
(b) an act or omission anywhere that, if it had occurred in Can(J.da, would have constituted an
offence punishable by indictment.
Obliterated vehiclejdentification number
(2) In proceedings in respect of an offence tmder subsection (1), evidence that a person has in
his possession a motor vehicle the vehicle identification mill1ber of which has been wholly or
paliially removed or obliterated or a part of a motor vehicle being a part bearing vehicle
identification number that has been wholly or partiallyremoved cir obliterated is, in the absence
a
22
of any evidence to the contrary, proof that the motor vehicle or part, as the case may be, was
obtained, and that such person had the motor vehicle or part, as the case may be, in his
possession knowing that it was obtained,
(a) by the commission in Canada of an offence punishable by indictment; or
(b) by an act or omission anywhere that, if it had occurred in Canada, would have constituted
an offence punishable by indictment.
Definition of "vehicle identification number"
(3) For the purposes of subsection (2), "vehicle identification number" means any n'umber or
otlwr mark placed on'a motor vehicle for the purpose of distinguishing the motor vehicle fl.·om
other similar motor vehicles.'
Exception
(4) A peace officer or a person acting under the direction of a peace officer is not guilty of an .
offence under this section by reason only that the peace officer or person possesses propetiy or a
thing or the proceeds of property or a thing mentioned in: subsection (1) for the purposes of an
investigation or otherwise in the execution of the peace officer's duties.
R.S., 1985, c. C-46, s. 354; 1997, c. 18, s. 23.
---~-------------------------------------------------------------------
354. (1) COlmnet lUle infraction quiconque a en sa possession un bien, une chose ou leur produit
sachal1t que tout ou partie d'entre eux ont ete obtemis ou provie11l1ent directement ou
indirectement :
a) soit de la perpetration, au Canada, d'UIie infraction punissable sur acte d'accusation;
b) sOlt d'un acte ou d'uneomission en quelque endroit que ce soit, qui aurait constitue, s'il
avait eu lieu au Canada, une infraction punissable sur acte d' accusation.
,
.
Possession d'un vehicule amoteur dont Ie numero d'identification a ete oblitere
(2) Dans des poursuites engagees en vertu du paragraphe (1), la preuve qu'une perso11l1e a en
sa possession un vehicule a moteur, ou toute piece d'un tel vehicule, dont Ie 11lunero
d'identification a ete totalement ou partieIlement enleve ou oblitere fait preuve, enl'absence de
toute preuve contraire, du fait qu'ils ont ete obtenus et de ceque cette persOlme sait qu'ils ont ete
obtenus:
.
a) soitpar la perpetration, au Canada, d'une infraction punissable sur acte d'accusation;
b)"soit par un acte ou une omission, en quelque endroit que ce soit, qui aurait constitue, s'il
avait eu lieu au Canada, une infraction punissable suracte d'accusation.
Definition de « numero d'identification »
(3) Pour l'application du paragraphe (2), «numero d'identificatioil» designe toute marque,
liotmmnent llnnumero, apposee sur un vehicule a moteur dans Ie dessein de Ie distinguer des
vehicules semblables.
.
Exception
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(4) N'est pas coupable de l'infraction prevue au present article l'agent de 1'J. paix ou la
personne qui agit sous la direction d'un agent de 18. paix qui a en sa possession Ie bien ou la
chose, ou leur produit, dans Ie cadre d'une enquete.ou dans l'accol11plissement de ses autres·
fonctions.
L.R. (1985), ch. C-46, art. 354; 1997, ch. 18, art. 23.
Criminal Code of Canada, RS.C. 1985, c. C-46, Section 358
358. For the purposes of sections 342 and 354 and paragraph 356(1)(b), the offence of having in
possession is complete when a person has, alone or jointly with another person; possession of or
control over anything mentioned in those sections or when he aids in concealing or disposing of
'it, as the case may be.
RS., 1985, c. C-46, s. 358; RS., 1985, c. 27 (1st Supp.), s. 5.0.
;.
358. Pour l'application des articles 342 et 354 et de l'alinea 356(1)b), l'infraction consistant a
. avoir en sa possession est consommee lorsqu'une personne a, seule ou coiljointement avec une
alltre, la possession ou Ie contrale d'une chose mentionnee dans ces articles ou lorsqu'elle aide a .
la cacherbu a en disposer, selon Ie cas.
L.R (1985), ch. C-46, art. 358; L.R. (1985), ch. 27 (1 er suppl.), art. 50.
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