Jazette Enterprises Ltd. v. Gould

2022 BCSC 2206 Jazette Enterprises Ltd. v. Gould

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Jazette Enterprises Ltd. v. Gould, 2022 BCSC 2206 Date: 20221219 Docket: S195403 Registry: Vancouver Between: JAZETTE ENTERPRISES LTD. and GO FORWARD SOLUTIONS LIMITED Plaintiffs And AARON MICHAEL GOULD, ALON AMIT, BEADLE RAVEN, LLP, R. JAMES BEADLE, JOSEPH THOMAS LACASCIA, CHEN, SHENG CHANG TEK FU, SANDEEP PRABHAKAR KHURSUDE, MEGA GENERAL TRADING (FZE), ASAN GLOBAL(FZE), GLOBE GENERAL TRADING (FZE), 1106449 B.C. LTD., GORDON REYES BUTED VIADO & BLANCO, PACIFICA SOFTWARE GROUP, INC., GLOBAL COMPLIANCE ASSOCIATES INC. FELIXES G. BANTING, OLIVIA CHIA, EVERS POINT HOLDINGS INC., TRILOOP OVERSEAS INC., PACIFICA VENTURES INC. AND BARLAKE INTERNATIONAL PTE LTD. Defendants Before: Master Hughes Reasons for Judgment Counsel for Plaintiffs: H. Shapray, K.C. Counsel for Defendants Beadle Raven, LLP and R. James Beadle: C.P. Dennis, K.C. and R. Power Place and Date of Trial/Hearing: Vancouver, B.C. November 3, 2022 Place and Date of Judgment: Vancouver, B.C. December 19, 2022 [1] The defendants Beadle Raven, LLP and R. James Beadle (the "Beadle Defendants") apply pursuant to Rule 6-1 of the Supreme Court Civil Rules to amend their response to civil claim filed on July 19, 2019. The proposed amendments plead a new defence, and respond to matters that have arisen since the filing of the original response, including causes of action newly

pleaded against the Beadle Defendants. The plaintiffs oppose many of the proposed amendments outright, but do not oppose certain others on the condition that they are permitted to conduct a further examination for discovery of Mr. Beadle. Background [2] The plaintiffs are two foreign corporations that operate a worldwide online gaming business under the domain name Sportsbook.ag (the "Website"). The Website accepts credit card transactions in various local currencies. [3] In this action, the plaintiffs seek to recover over $18 million that they say was stolen from them by the defendant Aaron Gould ("Gould") and others. The plaintiffs allege that Gould was employed by a subsidiary of Jazette Enterprises Ltd. ("Jazette"), and that he brokered an agreement by which the defendants Mega General Trading (FZE) ("Mega") and Globe General Trading (FZE) ("Globe") would hold Jazette's funds and perform various services at the direction of Go Forward Solutions Limited ("Go Forward"). They further allege that Gould and others, acting through Mega and Globe, stole the disputed funds which were then transmitted by clients of the Beadle Defendants to the Beadle Defendants' trust account. [4] There are two primary reasons for the amendments sought. First, the plaintiffs have amended their notice of civil claim four times since the Beadle Defendants filed their response to civil claim. The

amended pleadings add new claims against the Beadle Defendants including conspiracy, knowing assistance in the breach of fiduciary duty and/or breach of duty of confidence, breach of trust, and unjust enrichment. [5] Second, in December 2021, the Beadle Defendants learned that an action was commenced in 2018 in Qatar (the "Qatar Action") by the spouses of two of the principals and ultimate beneficial owners of Jazette (the "Spouses"), relating to funds misappropriated by Gould. The pleadings in the Qatar action refer to a settlement agreement by which Gould repaid the sum of €17 million to the Spouses and a third ultimate beneficial owner of Jazette, Ms. Payne. [6] On learning of the Qatar action, the Beadle Defendants brought on an application to dismiss this action as an abuse of process. Such an application can be brought "at any stage of the proceeding" (Rule 9-5(1)) and need not be pleaded. That application was dismissed by Justice Fleming on July 18, 2022. Counsel advised that a transcript of Fleming J.'s oral reasons is unavailable due to an audio system malfunction. Without those reasons, I am unable to resolve counsel's disagreement as to whether any findings of fact were made. [7] The Beadle Defendants now seek leave of the court to make the following amendments to their response to civil claim: a) Add allegations that the plaintiffs' pleadings in this action are an

abuse of process in light of the pleadings in the Qatar Action (i.e. formally pleading the basis of the application before Fleming J.); and b) limited amendments to address matters which have arisen since the filing of the Beadle Defendants' response to civil claim - principally, responding to causes of action newly alleged against the Beadle Defendants via the several amendments to the plaintiffs' notice of civil claim. The second set of amendments was not opposed. Legal Test [8] Rule 6-1 permits a party to amend pleadings at any time with leave of the court. The general rule is that amendments should be permitted as necessary in order to determine the real question in issue between the parties. The threshold at the pretrial stage is low, and amendments are generally permitted if the proposed pleading discloses a reasonable cause of action or defence that will not prejudice the opposing party and which discloses a claim or defence that has a reasonable prospect of success. (Argo Ventures Inc. v. Choi, 2019 BCSC 86 at para. 7, affirmed 2020 BCCA 17.) [9] The general principles arising on an application to amend pleadings are summarized as follows: a) Amendment to pleadings ought to be allowed unless pleadings fail to disclose a cause of action or defence; b) Amendments are usually permitted to determine the issues between the parties and ought to be allowed unless it would

cause prejudice to party's ability to defend an action; c) The party resisting an amendment must prove prejudice to preclude an amendment, and mere, potential prejudice is insufficient to preclude an amendment; d) Costs are the general means of protecting against prejudice unless it would be a wholly inadequate remedy; and e) Courts should only disallow an amendment as a last resort. (Peterson v. 446690 B.C. Ltd., 2014 BCSC 1531 at para. 37.) [10] The proposed amendments are to be considered on their face. No evidence in support of the amendment needs to be filed by the party seeking the amendment, nor is it appropriate for a court to weigh the evidence that relates to the intended amendment in deciding whether to grant the application. (Hu v. Li, 2015 BCSC 1347 at para. 13; McNaughton v. Baker, (1988) 25 B.C.L.R. (2d) 17 at paras. 23-24). As Master Scarth said in Levy v. Petaquilla Minerals Ltd., 2012 BCSC 776 at para. 10, "A party seeking an amendment need only plead sufficient facts that, if proved at trial would support a reasonable cause of action." [11] Despite a liberal approach to allowing amendments, the court will not permit "useless amendments" that are bound to fail (Berthin v. Berthin, 2019 BCCA 157). [12] The court will not sanction amendments which violate the rules governing pleadings. The same considerations apply whether the court is being asked to strike out

claims already pleaded, or to allow an amendment. This includes the prohibition against pleadings which disclose no reasonable claim or are otherwise scandalous, frivolous or vexatious. It is only in the clearest cases that a pleading will be struck out as disclosing no reasonable claim; where there is doubt on either the facts or the law, the matter should be allowed to proceed for determination at trial (Victoria Grey Metro Trust Co. v. Fort Gary Trust Co., (1982), 30 B.C.L.R. (2d) 45)). [13] The Beadle Defendants seek to add abuse of process as a defence, based on alleged inconsistent pleadings. The plaintiffs submit that abuse of process is not a bona fide defence in this case, and that the addition of such a defence should be disallowed as being scandalous, frivolous or vexatious. Although the case against the Beadle defendants is fundamentally a conversion claim, which is a strict liability tort, no authority was provided for the plaintiffs' proposition that abuse of process is not a defence to a conversion claim. [14] Inconsistent pleadings can give rise to a defence of abuse of process. It is an abuse of process for a litigant to pursue inconsistent rights in different proceedings. (Este v. Esteghamat-Ardakani, 2017 BCSC 878 at paras. 31-33, affirmed at 2018 BCCA 290). [15] The same test that is used for striking a pleading for the failure to show a reasonable cause of

action, i.e. the "plain and obvious" test, is used to determine whether a pleading is scandalous, frivolous or an abuse of process of the court. A claim may be found to be frivolous, vexatious or an abuse of process when it asserts untenable pleas, is argumentative, contains insufficient material facts to support the allegations made, or is made for an extraneous or collateral purpose. A pleading that raises an issue that cannot influence the outcome of the action is scandalous. (Stedfasts Inc. v. Dynacare Gamma Laboratory Partnership, 2020 ONSC 8008 at para.

33) Proposed Amendments [16] The plaintiffs oppose the proposed amendments on the basis that they fail to disclose a defence. No argument was made regarding prejudice to the plaintiffs. [17] The contested amendments proposed by the Beadle Defendants are summarized as follows: a) The principals or ultimate beneficial owners of Jazette are Stephen Choi, Keith Helman and Charlotte Payne (the "UBOs"); b) The spouses of Stephen Choi and Keith Helman (the "Spouses") began the Qatar Action on August 26, 2018, seeking to recover funds which had been frozen by the Qatar Financial Centre Regulatory Authority (the "Regulatory Authority"); c) The Spouses' pleadings in the Qatar Action assert that, under a settlement agreement dated March 1, 2017 (the "Settlement Agreement"), Gould repaid €17 million by August 23, 2017 to the Spouses and Ms. Payne "in full and final settlement of all claims against (Mr. Gould)"; d) The dispute described in the Settlement Agreement refers to the same dispute pursued in this action; e) The Spouses filed the Qatar Action and relied on the Settlement Agreement in coordination with, or at the direction of, Jazette and the UBOs, or some of them; f) The plaintiffs herein have pleaded and advanced facts inconsistent with the allegations made and advanced in the Qatar Action: specifically, asserting in this court the loss of the same funds which are alleged in the

Qatar Action to have been recovered; and g) This action is therefore an abuse of this court's process. [18] The plaintiffs submit that it is plain and obvious that the abuse of process defence is bound to fail, and therefore the amendment should not be allowed. The basis of the plaintiff's argument is expressed in the Latin maxim res inter alios acta alteri nocere non debet, meaning that the rights of a party are not to be prejudiced by an act, declaration, or omission of another to which they were neither party nor privy. (Kuin v. 238682 Alberta Ltd., 1997 CanLII 14892 (ABKB) at para 48.) They assert that the Qatar Action involved entirely different, unrelated parties, and that the funds in issue in that action are unrelated to the funds in issue here. [19] The Beadle Defendants assert that the plaintiffs in the Qatar Action are privies to the plaintiffs in this action, and therefore the maxim does not apply. I am unable to resolve the issue of privity on the evidence before me. [20] The plaintiffs submit that Fleming J., in dismissing the application to strike the notice of civil claim as an abuse of process, made a finding of fact that the funds were not the same, and that I am bound by that finding of fact. The Beadle Defendants disagree. As noted earlier, Fleming J.'s reasons are not available, therefore that disagreement cannot be resolved. A party invoking the doctrine

of abuse of process bears a heavy onus and must show that the abuse is "plain and obvious". Justice Fleming found that the "plain and obvious" test was not met, and declined to dismiss the action. [21] However, it is equally possible for the court to find that it is not "plain and obvious" that the abuse of process defence is bound to fail. It is only in the clearest cases that a pleading should be struck or, in the case of a proposed amendment, disallowed. If there is doubt, the matter must be allowed to proceed for determination at trial. [22] Ultimately, the success of the abuse of process defence will turn on the ability of the Beadle Defendants to prove that the funds in issue here are the same funds that were recovered pursuant to the Settlement Agreement and which were in issue in the Qatar Action. That is not an issue that I am able to resolve, and must be determined by the trial judge. It is not plain and obvious to me that the defence is bound to fail and, accordingly, the proposed amendments are allowed. Additional discovery time [23] Given the new issues raised in the amendments, the plaintiffs seek leave to further examine Mr. Beadle for discovery on those new issues for up to 7 hours. The Beadle Defendants say that any further discovery should be limited to not more than 2 hours, and should occur after the discovery of the plaintiffs. The amendments should not

require an additional full day of discovery. An additional 2 hours is permitted. [24] Having not heard fulsome argument regarding the timing of the discoveries, there will be no order as to when the further discovery of Mr. Beadle is to occur. Counsel should be able to resolve that issue. Costs [25] As the successful parties, the Beadle Defendants shall have their costs of this application. "Master Hughes"