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  1. CRIMINALS ANWAR HEIDARY JAMES E SYLVESTER ALLAN EIZENGA DARRIN MILLER DOUGLAS BOWDEN ELAINE MARIE CARTER LYLE ROSS SYLVESTER GIORGIO HEIDARY
  2. https://www.canlii.org/en/on/onscsm/doc/2014/2014canlii23276/2014canlii23276.html?searchUrlHash=AAAAAQANYW53YXIgaGVpZGFyeQAAAAAB&resultIndex=1
  3.  
  4. Jim v Miller, 2014 CanLII 23276 (ON SCSM)
  5. Date: 2014-05-11
  6. Docket: 1595/13
  7. Citation: Jim v Miller, 2014 CanLII 23276 (ON SCSM), <http://canlii.ca/t/g6tq0> retrieved on 2015-06-18
  8.  
  9. Cited by ? documents
  10.  
  11. Court File No. 1595/13 (Kitchener)
  12.  
  13. ONTARIO
  14.  
  15. SUPERIOR COURT OF JUSTICE
  16.  
  17. (SMALL CLAIMS COURT)
  18.  
  19.  
  20.  
  21. B E T W E E N: )
  22.  
  23. )
  24.  
  25. TONY JIM and ANITA JIM ) Ms. Khiam Nong
  26.  
  27. ) Counsel for the Plaintiffs
  28.  
  29. Plaintiffs )
  30.  
  31. -and- )
  32.  
  33. )
  34.  
  35. )
  36.  
  37. DARRIN MILLER, DOUGLAS BOWDEN, ) Mr. Darrin Miller
  38.  
  39. TOTALLY DIVERSIFIED FINANCIAL ) Self-Represented
  40.  
  41. SERVICES INC. a.k.a. TOTALLY DIVERSIFIED )
  42.  
  43. FINANCIAL SERVICES 2011 INC., ELAINE )
  44.  
  45. MARIE CARTER, LYLE ROSS SYLVESTER )
  46.  
  47. and ANWAR HEIDARY a.k.a. GIORGIO A.M. )
  48.  
  49. HEIDARY )
  50.  
  51. )
  52.  
  53. Defendants )
  54.  
  55. )
  56.  
  57. ) Heard: May 7, 2014
  58.  
  59.  
  60.  
  61.  
  62.  
  63. REASONS FOR JUDGMENT
  64.  
  65.  
  66.  
  67. 1. This trial resulted in a judgment for the plaintiffs against Totally Diversified Financial Services Inc. (“TDFS”), Totally Diversified Financial Services 2011 Inc. (“TDFS 2011”) and Darrin Miller (“Miller”), jointly and severally, for $25,000 plus interest and costs, for reasons to follow which are provided below.
  68.  
  69.  
  70.  
  71. Nature of the Dispute
  72.  
  73.  
  74.  
  75. 2. This is a story about an investment scheme which resulted in the immediate disappearance of the plaintiffs’ investment. In the result the plaintiffs were left with increased debt and incurred transaction costs exceeding the immediate nominal benefit they supposedly gained from the transaction.
  76.  
  77.  
  78.  
  79. 3. Tony and Anita Jim allege a variety of causes of action: breach of contract, breach of fiduciary duty, negligent misrepresentation, breach of trust and unjust enrichment. They seek personal liability against Miller who was associated with both TDFS and TDFS 2011 and was directly involved in the events.
  80.  
  81.  
  82.  
  83. 4. The claim was automatically stayed as against the defendants Carter and Bowden by reason of their bankruptcies. It was settled as against Sylvester and Heidary.1 TDFS filed a defence but after the settlement conference judge effectively added TDFS 2011 by directing that the two corporations would be treated as one and the same, its defence was withdrawn by Ms. Bowden and the trial proceeded on an undefended basis as to the corporations.
  84.  
  85.  
  86.  
  87. 5. The only defendant who participated at trial was Miller. Although his defence had been struck at the settlement conference due to his failure to attend, he brought a motion returnable on the day of trial to restore his defence and the plaintiffs graciously consented to that relief. Apart from denial, his defence pleads that the plaintiffs’ money was re-loaned to other clients. He also pleads that they received some value for their money because their residential mortgage was successfully re-financed.
  88.  
  89.  
  90.  
  91. Review of Evidence and Findings of Fact
  92.  
  93.  
  94.  
  95. 6. Based on the corporation profile report filed by the plaintiffs (Exhibits 7), I find that TDFS is an Ontario corporation which was incorporated on April 20, 2000, and Miller was, as he conceded at trial, a director of that entity. There being no suggestion it is bankrupt or dissolved, I find that it continues to exist as a legal entity2 but I accept Miller’s evidence that it is no longer operating. He also appeared to say it continues to be the owner of one or more assets, but whether it currently has any assets makes no difference to the case.
  96.  
  97.  
  98.  
  99. 7. Based on the corporation profile report for TDFS 2011 (Exhibit 8), I find that it is an Ontario corporation incorporated on April 28, 2011. Miller is not currently registered as a director and at trial he said he never was a director of TDFS 2011 and he never had signing authority for that entity. As with TDFS, whether it is operating or currently possesses any assets makes no difference to the case. I find it is an existing entity.
  100.  
  101.  
  102.  
  103. 8. Miller testified that the assets and operations of TDFS were transferred into TDFS 2011 and that “everything” was done through TDFS 2011 from January 2011 forward. That cannot be accurate because TDFS 2011 was not incorporated until the end of April 2011. In any event, there is no evidence of any specific and legitimate transaction by which “everything” came to be done through TDFS 2011 - which leaves the true nature of any such transaction something of a mystery.
  104.  
  105.  
  106.  
  107. 9. To further muddy the waters of corporate identity, all of the documentation generated by the company in this matter, some 12 to 15 months after Miller claims everything was done through TDFS 2011, was in the name of TDFS.
  108.  
  109.  
  110.  
  111. 10. In January 2012, Tony and Anita Jim were assessing their finances, which needed improvement. Anita’s mother was acquainted with Douglas Bowden who worked for the subject company. She arranged a meeting with him and understood he was a financial planner. Based on the evidence I find that Bowden held himself out throughout these events in January to April 2012 as a representative of TDFS and he did so as an agent of Miller, its directing mind.
  112.  
  113.  
  114.  
  115. 11. There were several meetings before the Jims signed what purported to be a contract with TDFS, on March 29, 2012 (Exhibit 3).
  116.  
  117.  
  118.  
  119. 12. Initially, Bowden gave a general overview of the financial program he was marketing for Miller on behalf of TDFS. Basically it involved re-financing their mortgage, with a higher principal, and using the funds from part of the increased debt to invest. The interest on that investment was to generate monthly payments which would reduce the couple’s monthly debts while paying off the mortgage more quickly and saving interest on the mortgage.
  120.  
  121.  
  122.  
  123. 13. Bowden took some basic information from Anita Jim which was processed by the company’s mortgage broker to determine if the Jims qualified for a new mortgage. He then contacted Anita Jim again, told her the company could help them and met with her again to go through the numbers.
  124.  
  125.  
  126.  
  127. 14. What he produced at that meeting was a brochure (Exhibit 1) in the name of TDFS. It stated that it was prepared for Tony and Anita Jim, and it was prepared by Darrin Miller. It identified their current mortgage as a BMO mortgage at 5.93% with a principal of $210,000. It proposed a new mortgage with a principal amount of $244,374, but failed to identify any new interest rate. It concluded that if the new mortgage was paid off over a period of 30 years compared to 27 for the current mortgage, the Jims would save $203,504 based on a monthly saving of $628.10. In addition they would earn $48,600 through monthly interest payments of $150 based on 10% annually on an investment of $18,000 to be taken from the increased mortgage principal.
  128.  
  129.  
  130.  
  131. 15. Also at the second meeting, Anita Jim said a second brochure was provided by Bowden. It is entitled SmartEquity (Exhibit 2). It talks about a software product to help manage personal finances. The brochure specifically states it was prepared for the Jims by Darrin Miller. In this document both current and proposed new interest rates appear although they are identified as approximate rates (by the letters “APR”). Both rates are 3.2%. It states that the program will produce an average monthly interest reduction of $1,389.21.
  132.  
  133.  
  134.  
  135. 16. It is common ground that the proposal involved a fee payable by the Jims in the amount of $3,000 (HST is not mentioned anywhere in relation to that fee); and part of the additional funds obtained by increasing the mortgage principle would be used to pay off the Jims’ existing credit card debt of approximately $5,400.
  136.  
  137.  
  138.  
  139. 17. Anita Jim felt this proposal looked good. Tony Jim attended these meetings although he says he generally arrived late and his wife effectively took the lead in this matter.
  140.  
  141.  
  142.  
  143. 18. The plaintiffs signed a “Client Agreement” on March 29, 2012 (Exhibit 3). It purports to be a contract between the Jims and TDFS. It refers in passing to several “TDFS Affiliates” but there is no mention of TDFS 2011. It describes a program that is basically consistent with that described above based on the brochures, although there is no mention at all of interest rates or differentials and the only figure that appears is the $3,000 fee payable to TDFS.
  144.  
  145.  
  146.  
  147. 19. Bowden signed the Client Agreement as a witness.
  148.  
  149.  
  150.  
  151. 20. A lawyer’s trust statement dated April 30, 2012 (Exhibit 4), indicates and I find that the new mortgage was placed and the old mortgage was discharged on that date. The new principal amount was $239,306.07. Of that amount, $219,390.35 was used to pay off the old mortgage, $3,000 was paid to “Totally Diversified”, $808.23 to legal fees and $16,107.49 was paid to the Jims.
  152.  
  153.  
  154.  
  155. 21. A payout statement (Exhibit 4, page 2) indicates that an interest penalty was charged by the previous mortgagee, in the amount of $9,803.60. That mortgage would have matured just 13 months later, on July 1, 2013.
  156.  
  157.  
  158.  
  159. 22. The lawyer’s trust cheque for $16,107.49 was taken by Anita Jim, endorsed by her and handed over to either Bowden or Miller at a meeting they both attended. Consistent with the prior representations, she understood those funds would be used for investment and would generate monthly interest payments. At that meeting, Miller observed that the credit card debt ought to have been paid off by the lawyer but that had not been done. Miller told her he would arrange for that payment to be made from the funds in the amount of $16,107.49.
  160.  
  161.  
  162.  
  163. 23. Receipt of those funds by TDFS (not TDFS 2011) was confirmed in writing (Exhibit 5). The confirmation, dated May 2, 2012, also confirmed there would be 10% interest earned on the amount of $16,107.49, annually. I find that is inconsistent with Miller’s statement that first the credit card debt of approximately $5,400 would be paid off using those funds. The document specifically states that the $16,107.49 would go to TDFS which was founded in the year 2000.
  164.  
  165.  
  166.  
  167. 24. At that point the plaintiffs had completed the transaction which had been sold to them by Bowden and Miller. I find that at that point they had been led to believe and expected that (1) their credit card debt of $5,400 would be paid by TDFS from the funds of $16,107.49; (2) the balance of those funds would be invested and would generate monthly interest payments based on 10% annually; (3) the new mortgage would generate monthly interest savings of $1,389; and (4) TDFS would supply and install the SmartEquity software to help them manage their ongoing finances.
  168.  
  169.  
  170.  
  171. 25. It is common ground and I find that their credit card debt was never paid, despite Miller’s specific representation on May 2, 2012 that he would take care of that. Instead the Jims’ credit card account was in default for two or more months before they borrowed the money from another source and paid off the account. That was after they had contacted Miller and received further empty excuses and promises on that subject.
  172.  
  173.  
  174.  
  175. 26. It is common ground that no monthly interest payments were ever made to the Jims.
  176.  
  177.  
  178.  
  179. 27. It is common ground that no part of the $16,107 which was paid over to TDFS is available to be refunded to the Jims. Their money is gone and the court has no specific evidence of where it went. Miller says it was re-loaned out to other clients, who in turn have failed to pay it back. He says there are ongoing attempts to secure repayment. It is difficult to accept that this program could accurately be described as an investment program when quite frankly it looks more akin to Ponzi scheme. There is some evidence that in late October 2014 he was in a dispute with Carter for control of the assets of TDFS 2011 (Exhibit 9), but any such dispute is irrelevant for present purposes.
  180.  
  181.  
  182.  
  183. 28. It is common ground that the SmartEquity software was never provided to the Jims. Miller testified that the SmartEquity product was an entirely different financial program which had not been sold to the Jims. I reject that evidence, which is inconsistent with that of the Jims, whose credibility I prefer. Their evidence on this point is more consistent with the content of the two brochures they were given (Exhibits 1 & 2) than Miller’s explanation which is notably lacking in cogency and consistency with the rest of the evidence.
  184.  
  185.  
  186.  
  187. 29. It is common ground that the Jims did receive a new mortgage. The new principal amount is approximately $29,000 more than the prior principal. For the privilege of increasing that debt, they incurred over $9,000 in interest penalties to discharge the existing mortgage, $3,000 paid to TDFS and $800 in legal fees. There is no evidence as to the interest rate of the new mortgage. Exhibit 2 contains estimates of 3.2% for both the existing and proposed new mortgages. Exhibit 1 contains a more specific reference to the rate of the existing BMO mortgage as 5.93% and I find that specific piece of evidence the most reliable on this issue.
  188.  
  189.  
  190.  
  191. 30. Therefore based on Exhibit 1, I find that their existing mortgage rate was 5.93%. Based on Exhibit 2, I find that the proposed new mortgage would involve no change to the interest rate. Therefore on a balance of probabilities I find as a fact that the new mortgage is at the same rate as the old mortgage. The interest savings which had been pitched to the Jims was based on factors other than a favourable interest differential.
  192.  
  193.  
  194.  
  195. 31. I conclude that the only item actually delivered to the Jims - being the new mortgage - was a detriment and not a benefit. The reality is that not only did they get nothing for their money, they are worse off in the result than if they had never dealt with the defendants.
  196.  
  197.  
  198.  
  199. Legal Findings
  200.  
  201.  
  202.  
  203. 32. I find the plaintiffs are entitled to a judgment based on breach of contract. The measure of damages is the amount required to place them in the position they would have been in but for the breach.
  204.  
  205.  
  206.  
  207. 33. Anita Jim fairly acknowledged that she was aware there would be a $3,000 fee and that there would be a mortgage penalty when she agreed to this transaction. In my view, damages for breach of contract in this case must be measured by assuming the contract had been performed. In that event, the Jims would have saved $1,389 per month for 30 years. In addition they would have received 10% interest annually on their investment of approximately $11,000 (after payment of their credit card debt), and I assume that would be for the same 30-year period, for an amount of $33,000. They would also be entitled to the return of their $11,000, and they would not have incurred credit card charges for several additional months after closing, and they have not received the value of the SmartEquity software.
  208.  
  209.  
  210.  
  211. 34. The plaintiffs are entitled to the full amount claimed, being $25,000, for breach of contract. The question then becomes: against whom?
  212.  
  213.  
  214.  
  215. 35. On its face the Client Agreement and the other documentation suggests a contract with TDFS. But Miller says all this business was done by TDFS 2011 despite what the documentation says. He claims the documentation is in error and Bowden is responsible for using the wrong paperwork. But Miller was present for at least some of the meetings and there is no evidence he raised any such issue at the time.
  216.  
  217.  
  218.  
  219. 36. Based on the evidence, I find that Miller was at all material times a controlling mind of both TDFS and TDFS 2011. The possibility that he may, for reasons of his own, have ceased to be a director and signing officer of TDFS 2011 at some point in time, does not prevent that finding of fact. Based on the evidence, he trained and directed Bowden in making the representations that were made to the Jims. He personally prepared the two brochures that were used in support of the sales pitch. He attended some of the meetings including the meeting at which the net proceeds were delivered to TDFS by Anita Jim.
  220.  
  221.  
  222.  
  223. 37. In an email to Ms. Jim dated August 9, 2012, Miller specifically admitted that he personally was the one who “invested” the money and he admitted fault in the disappearance of that money (see Exhibit 6). The day before as part of the same email string he proposed to personally pay some interest to her (email dated August 8, 2012 at 9:11 a.m.).
  224.  
  225.  
  226.  
  227. 38. At some point he slightly changed his email address, from darrinmiller@rogers.com to darrinmiller.tdfs@rogers.com (see Ms. Jim’s email dated August 8, 2012, Exhibit 6). Although perhaps a small point, that is consistent with slightly changing his company’s corporate identity. Both steps tend to frustrate his pursuit by bilked clients.
  228.  
  229.  
  230.  
  231. 39. The corporate veil may be pierced, and the normal rule of separate corporate personality set aside, where the corporation is incorporated for a fraudulent, improper or illegal purpose or when it is completely dominated and controlled by those using it as a shield for fraudulent or improper conduct: 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 (C.A.), at para. 68. In my view these facts qualify for personal liability on Miller. This situation is analogous to that described in Shoppers Drug Mart Inc. v. 6470360 Canada Inc. (2014), 314 O.A.C. 341 (C.A.), at para. 45.
  232.  
  233.  
  234.  
  235. 40. Miller’s evidence was that he had no signing authority for TDFS 2011. But he also said that everything was done through TDFS 2011 starting in January 2011 and in his email of August 9, 2012 he admitted that he personally have invested the plaintiffs’ money. In these circumstances I am unable to accept that he lacked signing authority for TDFS 2011 at the relevant time. In any event I find as a fact that he was a controlling mind of TDFS 2011 and that he personally directed the wrongful acts in this case.
  236.  
  237.  
  238.  
  239. 41. I find that Miller used the corporate identities of TDFS and TDFS 2011 as a shield to protect himself against potential liability for the solicitation of so-called investment funds which then disappeared through his actions. Miller used documentation to create the impression the plaintiffs were dealing with TDFS. Once they came looking for answers he claimed they had dealt with TDFS 2011 all along and incidentally that it was not really his company after all and therefore not his responsibility. In my view that sort of amateurish corporate shell-game presents a textbook example of when justice requires the corporate veil to be pierced.
  240.  
  241.  
  242.  
  243. 42. I granted a judgment against TDFS, TDFS 2011 and Miller, jointly and severally, for breach of contract.
  244.  
  245.  
  246.  
  247. 43. In addition or alternatively, I reached the same result based on negligent misrepresentation. Even without expert evidence dealing with the standard of care, I found for the plaintiffs on their allegation of negligent misrepresentation. The negligence here was so obvious that expert evidence was unnecessary: see Krawchuk v. Scherbak (2011), 2011 ONCA 352 (CanLII), 106 O.R. (3d) 598 (C.A.), at para. 135, leave to appeal denied [2011] S.C.C.A. No. 319.
  248.  
  249.  
  250.  
  251. 44. This financial transaction involved re-financing the Jims’ mortgage in a way that increased their principal by about $29,000 of which about $13,000 would go to transaction costs and another $5,400 to pay the credit card debt. They would not be gaining any advantage in the mortgage interest rate and the representations made to them failed to include any analysis of the actual rate compared to the attainable new rate. The proposal to do this on the basis presented was so obviously flawed and financially counter-productive that I granted judgment on this alternative basis, even without expert evidence.
  252.  
  253.  
  254.  
  255. 45. Miller personally drafted both brochures which were used to solicit the Jims’ agreement, and Miller personally trained and directed Bowden with respect to the form and substance of the sales pitch he made and which I find he made as Miller’s agent. Miller made some of the oral misrepresentations himself including the misrepresentation that he would pay off the credit card account. The first brochure contained no interest rate comparisons. The second contained a comparison based on a materially understated current rate and a proposed new rate that was identical to that rate.
  256.  
  257.  
  258.  
  259. 46. The plaintiffs elected not to plead fraud so I do not address the case on that footing. At a conservative minimum the representations made to the Jims in this case were the height of amateurishness and sail swiftly by the lighthouse of negligent misrepresentation.
  260.  
  261.  
  262.  
  263. 47. As a participant whose conduct was in itself tortious, Miller is liable for negligent misrepresentation even without piercing the corporate veil: ScotiaMcLeod Inc. v. People Jewellers Ltd. (1995), 1995 CanLII 1301 (ON CA), 26 O.R. (3d) 481 (C.A.), leave to appeal denied [1996] S.C.C.A. No. 40, and ADGA Systems International Ltd. v. Valcom Ltd. (1999), 1999 CanLII 1527 (ON CA), 43 O.R. (3d) 101 (C.A.), leave to appeal denied [1999] S.C.C.A. No. 124.
  264.  
  265.  
  266.  
  267. 48. I found it unnecessary to decide the other causes of action alleged by the plaintiffs.
  268.  
  269.  
  270.  
  271. Conclusion
  272.  
  273.  
  274.  
  275. 49. Judgment was granted against TDFS, TDFS 2011 and Miller, jointly and severally, for $25,000.
  276.  
  277.  
  278.  
  279. 50. Prejudgment interest was awarded at the contractual rate of 10% from May 2, 2012, with postjudgment interest at 5% representing a blend of contractual and statutory interest rates since some of the damages awarded were non-contractual in nature.
  280.  
  281.  
  282.  
  283. 51. Costs to the plaintiffs were fixed at $3,000 all-inclusive. On April 1, 2014, the plaintiffs made an offer to settle for $19,107.49 all-inclusive which would have qualified for rule 14.07(1) cost consequences except that it was an offer made to all the defendants collectively. As I understand the relevant law, such an offer does not qualify: see Wilson v. Quinn, [2002] O.J. No. 120 (S.C.J.). In any event, based on a counsel fee for counsel called to the bar in 2010, a full-day trial including a motion, I found the appropriate award given the issues and result in this case was a representation fee of $2,600, plus $100 for preparation of pleadings and $300 for disbursements.
  284.  
  285.  
  286.  
  287. 52. The costs orders against Miller dated January 28, 2014 and April 8, 2014, are unaffected by this judgment and remain payable by him.
  288.  
  289.  
  290.  
  291.  
  292.  
  293.  
  294.  
  295.  
  296.  
  297. May 11, 2014
  298.  
  299. Deputy Judge J. Sebastian Winny
  300.  
  301.  
  302.  
  303. Jim v Miller, 2014 CanLII 23276 (ON SCSM)
  304. Date: 2014-05-11
  305. Docket: 1595/13
  306. Citation: Jim v Miller, 2014 CanLII 23276 (ON SCSM), <http://canlii.ca/t/g6tq0> retrieved on 2015-06-18
  307.  
  308. Cited by ? documents
  309.  
  310. Court File No. 1595/13 (Kitchener)
  311.  
  312. ONTARIO
  313.  
  314. SUPERIOR COURT OF JUSTICE
  315.  
  316. (SMALL CLAIMS COURT)
  317.  
  318.  
  319.  
  320. B E T W E E N: )
  321.  
  322. )
  323.  
  324. TONY JIM and ANITA JIM ) Ms. Khiam Nong
  325.  
  326. ) Counsel for the Plaintiffs
  327.  
  328. Plaintiffs )
  329.  
  330. -and- )
  331.  
  332. )
  333.  
  334. )
  335.  
  336. DARRIN MILLER, DOUGLAS BOWDEN, ) Mr. Darrin Miller
  337.  
  338. TOTALLY DIVERSIFIED FINANCIAL ) Self-Represented
  339.  
  340. SERVICES INC. a.k.a. TOTALLY DIVERSIFIED )
  341.  
  342. FINANCIAL SERVICES 2011 INC., ELAINE )
  343.  
  344. MARIE CARTER, LYLE ROSS SYLVESTER )
  345.  
  346. and ANWAR HEIDARY a.k.a. GIORGIO A.M. )
  347.  
  348. HEIDARY )
  349.  
  350. )
  351.  
  352. Defendants )
  353.  
  354. )
  355.  
  356. ) Heard: May 7, 2014
  357.  
  358.  
  359.  
  360.  
  361.  
  362. REASONS FOR JUDGMENT
  363.  
  364.  
  365.  
  366. 1. This trial resulted in a judgment for the plaintiffs against Totally Diversified Financial Services Inc. (“TDFS”), Totally Diversified Financial Services 2011 Inc. (“TDFS 2011”) and Darrin Miller (“Miller”), jointly and severally, for $25,000 plus interest and costs, for reasons to follow which are provided below.
  367.  
  368.  
  369.  
  370. Nature of the Dispute
  371.  
  372.  
  373.  
  374. 2. This is a story about an investment scheme which resulted in the immediate disappearance of the plaintiffs’ investment. In the result the plaintiffs were left with increased debt and incurred transaction costs exceeding the immediate nominal benefit they supposedly gained from the transaction.
  375.  
  376.  
  377.  
  378. 3. Tony and Anita Jim allege a variety of causes of action: breach of contract, breach of fiduciary duty, negligent misrepresentation, breach of trust and unjust enrichment. They seek personal liability against Miller who was associated with both TDFS and TDFS 2011 and was directly involved in the events.
  379.  
  380.  
  381.  
  382. 4. The claim was automatically stayed as against the defendants Carter and Bowden by reason of their bankruptcies. It was settled as against Sylvester and Heidary.1 TDFS filed a defence but after the settlement conference judge effectively added TDFS 2011 by directing that the two corporations would be treated as one and the same, its defence was withdrawn by Ms. Bowden and the trial proceeded on an undefended basis as to the corporations.
  383.  
  384.  
  385.  
  386. 5. The only defendant who participated at trial was Miller. Although his defence had been struck at the settlement conference due to his failure to attend, he brought a motion returnable on the day of trial to restore his defence and the plaintiffs graciously consented to that relief. Apart from denial, his defence pleads that the plaintiffs’ money was re-loaned to other clients. He also pleads that they received some value for their money because their residential mortgage was successfully re-financed.
  387.  
  388.  
  389.  
  390. Review of Evidence and Findings of Fact
  391.  
  392.  
  393.  
  394. 6. Based on the corporation profile report filed by the plaintiffs (Exhibits 7), I find that TDFS is an Ontario corporation which was incorporated on April 20, 2000, and Miller was, as he conceded at trial, a director of that entity. There being no suggestion it is bankrupt or dissolved, I find that it continues to exist as a legal entity2 but I accept Miller’s evidence that it is no longer operating. He also appeared to say it continues to be the owner of one or more assets, but whether it currently has any assets makes no difference to the case.
  395.  
  396.  
  397.  
  398. 7. Based on the corporation profile report for TDFS 2011 (Exhibit 8), I find that it is an Ontario corporation incorporated on April 28, 2011. Miller is not currently registered as a director and at trial he said he never was a director of TDFS 2011 and he never had signing authority for that entity. As with TDFS, whether it is operating or currently possesses any assets makes no difference to the case. I find it is an existing entity.
  399.  
  400.  
  401.  
  402. 8. Miller testified that the assets and operations of TDFS were transferred into TDFS 2011 and that “everything” was done through TDFS 2011 from January 2011 forward. That cannot be accurate because TDFS 2011 was not incorporated until the end of April 2011. In any event, there is no evidence of any specific and legitimate transaction by which “everything” came to be done through TDFS 2011 - which leaves the true nature of any such transaction something of a mystery.
  403.  
  404.  
  405.  
  406. 9. To further muddy the waters of corporate identity, all of the documentation generated by the company in this matter, some 12 to 15 months after Miller claims everything was done through TDFS 2011, was in the name of TDFS.
  407.  
  408.  
  409.  
  410. 10. In January 2012, Tony and Anita Jim were assessing their finances, which needed improvement. Anita’s mother was acquainted with Douglas Bowden who worked for the subject company. She arranged a meeting with him and understood he was a financial planner. Based on the evidence I find that Bowden held himself out throughout these events in January to April 2012 as a representative of TDFS and he did so as an agent of Miller, its directing mind.
  411.  
  412.  
  413.  
  414. 11. There were several meetings before the Jims signed what purported to be a contract with TDFS, on March 29, 2012 (Exhibit 3).
  415.  
  416.  
  417.  
  418. 12. Initially, Bowden gave a general overview of the financial program he was marketing for Miller on behalf of TDFS. Basically it involved re-financing their mortgage, with a higher principal, and using the funds from part of the increased debt to invest. The interest on that investment was to generate monthly payments which would reduce the couple’s monthly debts while paying off the mortgage more quickly and saving interest on the mortgage.
  419.  
  420.  
  421.  
  422. 13. Bowden took some basic information from Anita Jim which was processed by the company’s mortgage broker to determine if the Jims qualified for a new mortgage. He then contacted Anita Jim again, told her the company could help them and met with her again to go through the numbers.
  423.  
  424.  
  425.  
  426. 14. What he produced at that meeting was a brochure (Exhibit 1) in the name of TDFS. It stated that it was prepared for Tony and Anita Jim, and it was prepared by Darrin Miller. It identified their current mortgage as a BMO mortgage at 5.93% with a principal of $210,000. It proposed a new mortgage with a principal amount of $244,374, but failed to identify any new interest rate. It concluded that if the new mortgage was paid off over a period of 30 years compared to 27 for the current mortgage, the Jims would save $203,504 based on a monthly saving of $628.10. In addition they would earn $48,600 through monthly interest payments of $150 based on 10% annually on an investment of $18,000 to be taken from the increased mortgage principal.
  427.  
  428.  
  429.  
  430. 15. Also at the second meeting, Anita Jim said a second brochure was provided by Bowden. It is entitled SmartEquity (Exhibit 2). It talks about a software product to help manage personal finances. The brochure specifically states it was prepared for the Jims by Darrin Miller. In this document both current and proposed new interest rates appear although they are identified as approximate rates (by the letters “APR”). Both rates are 3.2%. It states that the program will produce an average monthly interest reduction of $1,389.21.
  431.  
  432.  
  433.  
  434. 16. It is common ground that the proposal involved a fee payable by the Jims in the amount of $3,000 (HST is not mentioned anywhere in relation to that fee); and part of the additional funds obtained by increasing the mortgage principle would be used to pay off the Jims’ existing credit card debt of approximately $5,400.
  435.  
  436.  
  437.  
  438. 17. Anita Jim felt this proposal looked good. Tony Jim attended these meetings although he says he generally arrived late and his wife effectively took the lead in this matter.
  439.  
  440.  
  441.  
  442. 18. The plaintiffs signed a “Client Agreement” on March 29, 2012 (Exhibit 3). It purports to be a contract between the Jims and TDFS. It refers in passing to several “TDFS Affiliates” but there is no mention of TDFS 2011. It describes a program that is basically consistent with that described above based on the brochures, although there is no mention at all of interest rates or differentials and the only figure that appears is the $3,000 fee payable to TDFS.
  443.  
  444.  
  445.  
  446. 19. Bowden signed the Client Agreement as a witness.
  447.  
  448.  
  449.  
  450. 20. A lawyer’s trust statement dated April 30, 2012 (Exhibit 4), indicates and I find that the new mortgage was placed and the old mortgage was discharged on that date. The new principal amount was $239,306.07. Of that amount, $219,390.35 was used to pay off the old mortgage, $3,000 was paid to “Totally Diversified”, $808.23 to legal fees and $16,107.49 was paid to the Jims.
  451.  
  452.  
  453.  
  454. 21. A payout statement (Exhibit 4, page 2) indicates that an interest penalty was charged by the previous mortgagee, in the amount of $9,803.60. That mortgage would have matured just 13 months later, on July 1, 2013.
  455.  
  456.  
  457.  
  458. 22. The lawyer’s trust cheque for $16,107.49 was taken by Anita Jim, endorsed by her and handed over to either Bowden or Miller at a meeting they both attended. Consistent with the prior representations, she understood those funds would be used for investment and would generate monthly interest payments. At that meeting, Miller observed that the credit card debt ought to have been paid off by the lawyer but that had not been done. Miller told her he would arrange for that payment to be made from the funds in the amount of $16,107.49.
  459.  
  460.  
  461.  
  462. 23. Receipt of those funds by TDFS (not TDFS 2011) was confirmed in writing (Exhibit 5). The confirmation, dated May 2, 2012, also confirmed there would be 10% interest earned on the amount of $16,107.49, annually. I find that is inconsistent with Miller’s statement that first the credit card debt of approximately $5,400 would be paid off using those funds. The document specifically states that the $16,107.49 would go to TDFS which was founded in the year 2000.
  463.  
  464.  
  465.  
  466. 24. At that point the plaintiffs had completed the transaction which had been sold to them by Bowden and Miller. I find that at that point they had been led to believe and expected that (1) their credit card debt of $5,400 would be paid by TDFS from the funds of $16,107.49; (2) the balance of those funds would be invested and would generate monthly interest payments based on 10% annually; (3) the new mortgage would generate monthly interest savings of $1,389; and (4) TDFS would supply and install the SmartEquity software to help them manage their ongoing finances.
  467.  
  468.  
  469.  
  470. 25. It is common ground and I find that their credit card debt was never paid, despite Miller’s specific representation on May 2, 2012 that he would take care of that. Instead the Jims’ credit card account was in default for two or more months before they borrowed the money from another source and paid off the account. That was after they had contacted Miller and received further empty excuses and promises on that subject.
  471.  
  472.  
  473.  
  474. 26. It is common ground that no monthly interest payments were ever made to the Jims.
  475.  
  476.  
  477.  
  478. 27. It is common ground that no part of the $16,107 which was paid over to TDFS is available to be refunded to the Jims. Their money is gone and the court has no specific evidence of where it went. Miller says it was re-loaned out to other clients, who in turn have failed to pay it back. He says there are ongoing attempts to secure repayment. It is difficult to accept that this program could accurately be described as an investment program when quite frankly it looks more akin to Ponzi scheme. There is some evidence that in late October 2014 he was in a dispute with Carter for control of the assets of TDFS 2011 (Exhibit 9), but any such dispute is irrelevant for present purposes.
  479.  
  480.  
  481.  
  482. 28. It is common ground that the SmartEquity software was never provided to the Jims. Miller testified that the SmartEquity product was an entirely different financial program which had not been sold to the Jims. I reject that evidence, which is inconsistent with that of the Jims, whose credibility I prefer. Their evidence on this point is more consistent with the content of the two brochures they were given (Exhibits 1 & 2) than Miller’s explanation which is notably lacking in cogency and consistency with the rest of the evidence.
  483.  
  484.  
  485.  
  486. 29. It is common ground that the Jims did receive a new mortgage. The new principal amount is approximately $29,000 more than the prior principal. For the privilege of increasing that debt, they incurred over $9,000 in interest penalties to discharge the existing mortgage, $3,000 paid to TDFS and $800 in legal fees. There is no evidence as to the interest rate of the new mortgage. Exhibit 2 contains estimates of 3.2% for both the existing and proposed new mortgages. Exhibit 1 contains a more specific reference to the rate of the existing BMO mortgage as 5.93% and I find that specific piece of evidence the most reliable on this issue.
  487.  
  488.  
  489.  
  490. 30. Therefore based on Exhibit 1, I find that their existing mortgage rate was 5.93%. Based on Exhibit 2, I find that the proposed new mortgage would involve no change to the interest rate. Therefore on a balance of probabilities I find as a fact that the new mortgage is at the same rate as the old mortgage. The interest savings which had been pitched to the Jims was based on factors other than a favourable interest differential.
  491.  
  492.  
  493.  
  494. 31. I conclude that the only item actually delivered to the Jims - being the new mortgage - was a detriment and not a benefit. The reality is that not only did they get nothing for their money, they are worse off in the result than if they had never dealt with the defendants.
  495.  
  496.  
  497.  
  498. Legal Findings
  499.  
  500.  
  501.  
  502. 32. I find the plaintiffs are entitled to a judgment based on breach of contract. The measure of damages is the amount required to place them in the position they would have been in but for the breach.
  503.  
  504.  
  505.  
  506. 33. Anita Jim fairly acknowledged that she was aware there would be a $3,000 fee and that there would be a mortgage penalty when she agreed to this transaction. In my view, damages for breach of contract in this case must be measured by assuming the contract had been performed. In that event, the Jims would have saved $1,389 per month for 30 years. In addition they would have received 10% interest annually on their investment of approximately $11,000 (after payment of their credit card debt), and I assume that would be for the same 30-year period, for an amount of $33,000. They would also be entitled to the return of their $11,000, and they would not have incurred credit card charges for several additional months after closing, and they have not received the value of the SmartEquity software.
  507.  
  508.  
  509.  
  510. 34. The plaintiffs are entitled to the full amount claimed, being $25,000, for breach of contract. The question then becomes: against whom?
  511.  
  512.  
  513.  
  514. 35. On its face the Client Agreement and the other documentation suggests a contract with TDFS. But Miller says all this business was done by TDFS 2011 despite what the documentation says. He claims the documentation is in error and Bowden is responsible for using the wrong paperwork. But Miller was present for at least some of the meetings and there is no evidence he raised any such issue at the time.
  515.  
  516.  
  517.  
  518. 36. Based on the evidence, I find that Miller was at all material times a controlling mind of both TDFS and TDFS 2011. The possibility that he may, for reasons of his own, have ceased to be a director and signing officer of TDFS 2011 at some point in time, does not prevent that finding of fact. Based on the evidence, he trained and directed Bowden in making the representations that were made to the Jims. He personally prepared the two brochures that were used in support of the sales pitch. He attended some of the meetings including the meeting at which the net proceeds were delivered to TDFS by Anita Jim.
  519.  
  520.  
  521.  
  522. 37. In an email to Ms. Jim dated August 9, 2012, Miller specifically admitted that he personally was the one who “invested” the money and he admitted fault in the disappearance of that money (see Exhibit 6). The day before as part of the same email string he proposed to personally pay some interest to her (email dated August 8, 2012 at 9:11 a.m.).
  523.  
  524.  
  525.  
  526. 38. At some point he slightly changed his email address, from darrinmiller@rogers.com to darrinmiller.tdfs@rogers.com (see Ms. Jim’s email dated August 8, 2012, Exhibit 6). Although perhaps a small point, that is consistent with slightly changing his company’s corporate identity. Both steps tend to frustrate his pursuit by bilked clients.
  527.  
  528.  
  529.  
  530. 39. The corporate veil may be pierced, and the normal rule of separate corporate personality set aside, where the corporation is incorporated for a fraudulent, improper or illegal purpose or when it is completely dominated and controlled by those using it as a shield for fraudulent or improper conduct: 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 (C.A.), at para. 68. In my view these facts qualify for personal liability on Miller. This situation is analogous to that described in Shoppers Drug Mart Inc. v. 6470360 Canada Inc. (2014), 314 O.A.C. 341 (C.A.), at para. 45.
  531.  
  532.  
  533.  
  534. 40. Miller’s evidence was that he had no signing authority for TDFS 2011. But he also said that everything was done through TDFS 2011 starting in January 2011 and in his email of August 9, 2012 he admitted that he personally have invested the plaintiffs’ money. In these circumstances I am unable to accept that he lacked signing authority for TDFS 2011 at the relevant time. In any event I find as a fact that he was a controlling mind of TDFS 2011 and that he personally directed the wrongful acts in this case.
  535.  
  536.  
  537.  
  538. 41. I find that Miller used the corporate identities of TDFS and TDFS 2011 as a shield to protect himself against potential liability for the solicitation of so-called investment funds which then disappeared through his actions. Miller used documentation to create the impression the plaintiffs were dealing with TDFS. Once they came looking for answers he claimed they had dealt with TDFS 2011 all along and incidentally that it was not really his company after all and therefore not his responsibility. In my view that sort of amateurish corporate shell-game presents a textbook example of when justice requires the corporate veil to be pierced.
  539.  
  540.  
  541.  
  542. 42. I granted a judgment against TDFS, TDFS 2011 and Miller, jointly and severally, for breach of contract.
  543.  
  544.  
  545.  
  546. 43. In addition or alternatively, I reached the same result based on negligent misrepresentation. Even without expert evidence dealing with the standard of care, I found for the plaintiffs on their allegation of negligent misrepresentation. The negligence here was so obvious that expert evidence was unnecessary: see Krawchuk v. Scherbak (2011), 2011 ONCA 352 (CanLII), 106 O.R. (3d) 598 (C.A.), at para. 135, leave to appeal denied [2011] S.C.C.A. No. 319.
  547.  
  548.  
  549.  
  550. 44. This financial transaction involved re-financing the Jims’ mortgage in a way that increased their principal by about $29,000 of which about $13,000 would go to transaction costs and another $5,400 to pay the credit card debt. They would not be gaining any advantage in the mortgage interest rate and the representations made to them failed to include any analysis of the actual rate compared to the attainable new rate. The proposal to do this on the basis presented was so obviously flawed and financially counter-productive that I granted judgment on this alternative basis, even without expert evidence.
  551.  
  552.  
  553.  
  554. 45. Miller personally drafted both brochures which were used to solicit the Jims’ agreement, and Miller personally trained and directed Bowden with respect to the form and substance of the sales pitch he made and which I find he made as Miller’s agent. Miller made some of the oral misrepresentations himself including the misrepresentation that he would pay off the credit card account. The first brochure contained no interest rate comparisons. The second contained a comparison based on a materially understated current rate and a proposed new rate that was identical to that rate.
  555.  
  556.  
  557.  
  558. 46. The plaintiffs elected not to plead fraud so I do not address the case on that footing. At a conservative minimum the representations made to the Jims in this case were the height of amateurishness and sail swiftly by the lighthouse of negligent misrepresentation.
  559.  
  560.  
  561.  
  562. 47. As a participant whose conduct was in itself tortious, Miller is liable for negligent misrepresentation even without piercing the corporate veil: ScotiaMcLeod Inc. v. People Jewellers Ltd. (1995), 1995 CanLII 1301 (ON CA), 26 O.R. (3d) 481 (C.A.), leave to appeal denied [1996] S.C.C.A. No. 40, and ADGA Systems International Ltd. v. Valcom Ltd. (1999), 1999 CanLII 1527 (ON CA), 43 O.R. (3d) 101 (C.A.), leave to appeal denied [1999] S.C.C.A. No. 124.
  563.  
  564.  
  565.  
  566. 48. I found it unnecessary to decide the other causes of action alleged by the plaintiffs.
  567.  
  568.  
  569.  
  570. Conclusion
  571.  
  572.  
  573.  
  574. 49. Judgment was granted against TDFS, TDFS 2011 and Miller, jointly and severally, for $25,000.
  575.  
  576.  
  577.  
  578. 50. Prejudgment interest was awarded at the contractual rate of 10% from May 2, 2012, with postjudgment interest at 5% representing a blend of contractual and statutory interest rates since some of the damages awarded were non-contractual in nature.
  579.  
  580.  
  581.  
  582. 51. Costs to the plaintiffs were fixed at $3,000 all-inclusive. On April 1, 2014, the plaintiffs made an offer to settle for $19,107.49 all-inclusive which would have qualified for rule 14.07(1) cost consequences except that it was an offer made to all the defendants collectively. As I understand the relevant law, such an offer does not qualify: see Wilson v. Quinn, [2002] O.J. No. 120 (S.C.J.). In any event, based on a counsel fee for counsel called to the bar in 2010, a full-day trial including a motion, I found the appropriate award given the issues and result in this case was a representation fee of $2,600, plus $100 for preparation of pleadings and $300 for disbursements.
  583.  
  584.  
  585.  
  586. 52. The costs orders against Miller dated January 28, 2014 and April 8, 2014, are unaffected by this judgment and remain payable by him.
  587.  
  588.  
  589.  
  590.  
  591.  
  592.  
  593.  
  594.  
  595.  
  596. May 11, 2014
  597.  
  598. Deputy Judge J. Sebastian Winny
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