Koszil v. Bank Canadian National

2000 BCCA 74 Citation: Koszil v. Bank Canadian National Date: 20000128 2000 BCCA 74 Docket: CA026547 Registry: Vancouver COURT OF APPEAL FOR BRITISH COLUMBIA BETWEEN: WALTER KOSZIL PLAINTIFF (APPELLANT) AND: BANK CANADIAN NATIONAL DEFENDANT (RESPONDENT) Before: The Honourable Madam Justice Southin (In Chambers) Edward E. Bowes Counsel for the Appellant Richard R. E. DeFilippi Counsel for the Respondent Place and Date of Hearing: Vancouver, British Columbia 14th January, 2000 Place and Date of Judgment: Vancouver, British Columbia 28th January, 2000 Reasons for Judgment of the Honourable Madam Justice Southin: [1] The appellant applies for a stay of execution pending his appeal from an order of the Honourable Mr. Justice Melvin dismissing his action on the footing that, in the words of Rule 19(24)(d), "it is ... an abuse of the process of the court". [2] The appellant's application is misconceived. What he needs is an order under s. 10 of the Court of Appeal Act, R.S.B.C. 1996, c. 77, restraining the respondent from enforcing the security which it has for the respondent's indebtedness to it upon which it obtained a judgment in 1994 in the sum of $132,241.47, which remains unsatisfied. [3] Mr. DeFilippi does not argue that I should refuse relief because the application is misconceived. His point is that this appeal is wholly without merit and, under the authorities of the court dealing with stays of execution and interim relief generally, no order should be made in favour of the appellant. [4] This action is to set aside the judgment which the respondent obtained in December 1994 after a trial which commenced on the 30th May, 1994, and continued on the 1st, 2nd and 3rd June, and 3rd, 4th and 5th October of that year before the Honourable Mr. Justice Bouck. [5] This Court (Donald, Newbury and myself, JJ.A.) dismissed the appellant's appeal from that judgment on the 5th November, 1996. [6] Subsequently, we were asked to rehear the appeal. That application was refused on the 20th December, 1996, and an application for leave to appeal to the Supreme Court of Canada was dismissed. [7] That an action to set aside a judgment can be brought was determined by the Supreme Court of Canada in Royal Trust Co. v. Jones, [1962] S.C.R. 132, which was followed in this Court in D.K. Investments Ltd. v. S.W.S. Investments Ltd. (1990), 44 B.C.L.R. (2d) 1. [8] There are various grounds upon which such an action can be brought, one of which is fresh evidence discovered after judgment which is material and which the person seeking the new trial could not with due diligence have adduced at the original trial. [9] I do not find it necessary to analyze the concept of materiality in this context. Suffice it to say that, in my opinion, the evidence must go to the very root of the impugned judgment. [10] I do not propose to recount the evidence at the trial before Mr. Justice Bouck or the content of the reasons for judgment which this Court has earlier delivered. [11] Then and now the case turns on the financing of the purchase of Taxicab Number 64 ("car 64"), a Yellow Cab, in late 1979. [12] The respondent testified at his trial that the purchase price of $68,000.00 was made up as follows: Cash (non-BCN) $14,000.00 $17,800 BCN Note $17,800.00 $ 8,000 BCN Note $ 8,000.00 $27,000 BCN loan - replaced by $27,000.00 $25,000 Note Cash from Koszil's BCN account $ 1,200.00 Total $68,000.00 [13] The Bank's position was that the monies came from three loans of $50,000.00, $8,000.00, and $10,172.01, for a total of $68,172.01. [14] Thus, the Bank maintained that the $27,000.00 BCN loan, which the appellant acknowledged, and perhaps the $17,800.00 loan, which the appellant also acknowledged, were in addition to the loan of $50,000.00. One of the unfortunate aspects of this case has always been that the respondent was unable to either show a deposit into the appellant's account of $50,000.00 or to produce, as would be usual, a cheque or bank draft showing the payment of the purchase price to the vendor or the vendor's solicitors, nor did it, if I recall the evidence at trial, call evidence to show why it had no cheque or bank draft or ledger entry to support its case. While I can understand that pieces of paper such as cheques may go astray, even in a bank, I would be surprised if the bank's ledgers go astray. [15] The matter of the purchase of car 64 is made more complicated by the fact that, according to the records of Yellow Cab Company and other documents, the cab was being purchased jointly by the appellant and a Mr. Gerry Jensen. The appellant has always asserted that although Mr. Jensen applied to the respondent to borrow his half of the purchase price, the respondent refused to give him credit, and all the money came from the appellant. [16] At the time in question, the assistant manager of the Bank's branch in Vancouver was Mr. Frank Mackleston, but he left the Bank at the end of October 1979. The evidence which the appellant says is fresh evidence which he could not have obtained at the time of the trial is that of Mr. Mackleston who supplied an affidavit in support of the application below and was subsequently cross-examined upon it by Mr. DeFilippi. [17] In his affidavit, Mr. Mackleston says this: 5. In March, 1979, Koszil told me he intended to bid for the purchase of Yellow Cab Car 32 for $63,000. He said he had paid a deposit of $1,200 to Yellow Cab and had access to a further $14,000 leaving him looking for a loan of $47,800. The limit on my discretionary lending powers for an individual like Koszil was $50,000. Since he already had a loan of $5,000, I could not lend him more than $45,000 for Car 32 but I was prepared to make a loan up to that amount. 6. Koszil reported to me that Yellow Cab had decided not to award the bid for Car 32 to any of the bidders but that Car 64, a better vehicle, was expected to be offered soon for $68,000 and we discussed financing for it. Koszil still had the $1,200 deposit with Yellow Cab and access to $14,000 more but the balance of $52,800 (together with his outstanding loan of $5,000) exceeded my lending powers. I spoke to Mr. Scarr the manager of Yellow Cab who suggested that Koszil consider a 50/50 partnership for the purchase of Car 64 with Yellow Cab's supervisor, Gerry Jensen ("Jensen"). Koszil told me he knew and respected Jensen and agreed to the partnership. 7. Koszil and I worked out an arrangement for financing his half of the Car 64 purchase in the amount of $34,000 as follows: Deposit $ 1,200 Other funds 14,000 BCN loan 17,800 Cash 1,000 plus legal and other expenses Total $ 34,000 8. On March 12, 1979, Koszil signed a Promissory Note in favour of BCN for $17,800 which amount was deposited in his BCN account. I then had BCN Official Cheques for $7,800 and $10,000 respectively made out to Yellow Cab's solicitors in trust and had Koszil deliver them to Yellow Cab. 9. During this period I also interviewed Jensen with regard to financing his half of the purchase price of Car 64, namely $34,000. At one point I had thought Koszil and Jensen might together borrow $50,000 for Car 64 and I had Jensen sign a Promissory Note dated April 6, 1979, for that amount. After a quick investigation of Jensen's credit I determined he was not financially sound enough for any loan from BCN and I informed him and Koszil that the $50,000 loan to Jensen was declined. From then until I left BCN at the end of October, 1979, no funds were advanced by BCN under the $50,000 Note to or on behalf of Jensen or Koszil and that proposed transaction was over. 10. Koszil and Jensen had signed an Agreement to purchase Car 64 and Koszil feared he would lose the money he had invested if the sale was not completed. He and I discussed how financing could be done for him in respect of the whole $68,000. He had the deposit of $1,200, the other $14,000, and the $17,800 from BCN, totalling $33,000 but needed $35,000 more. Koszil was confident his wife could help and, in anticipation that she would do so, I approved another loan to Koszil in the amount of $8,000 secured by a Note dated April 6, 1979. That sum was deposited in his account and withdrawn the same day as the result of an Official Cheque payable to Yellow Cab's solicitors. 11. That left a balance of $27,000 to complete the purchase of Car 64. I knew that another loan to Koszil of that amount would exceed my discretionary $50,000 loan limit by $7,800 but I was prepared to do so. When I first considered a loan of $5,000 to Koszil in February, 1979, I checked his credit record thoroughly. I confirmed his operating and business practices with Yellow Cab who spoke highly of his reliability in all respects. I spoke to someone who handled Koszil's loan account at the Royal Bank of Canada and was told that he operated a very busy bank account with many transactions and that he was considered to be honest and reliable. I also respected Koszil's rise from virtually nothing as a veteran of the Soviet Army and an immigrant to Canada to the ownership and operation of a significant fleet of taxicabs. For these reasons, I felt justified, both in respect of Koszil and BCN, in exceeding my loan limit. 12. I authorized Koszil to overdraw his BCN account with cheques to Yellow Cab up to $27,000 and such cheques were drawn by Koszil and cashed by Yellow Cab as follows: May 18, 1979 $ 7,000 May 29, 1979 7,000 May 29, 1979 7,000 June 5, 1979 6,000 Total $27,000 13. I interviewed Koszil's wife and made out a Loan Information form in her name for the $27,000 but she declined to sign a Note. I have looked at a copy of a BCN Loan Card entered in evidence at the BCN v. Koszil trial containing the description "27000 Assist purchase of Yellow Cab" but it was not prepared by me or on my instructions and I do not recognize the handwriting on it. Since no loan in fact was made to Koszil's wife, no Loan Card should have been made up. On June 19, 1979, without my knowledge or approval, someone caused a credit of $27,000 to be entered in Koszil's BCN account thereby reducing his overdraft by that amount. Some time that summer, Ghislain Morin, who was in the credit department of BCN, came to work in the West Pender Street branch to assist in the operation of the branch's loan department. I do not know whether he had anything to do with the creation of this improper Loan Card but he had the authority and opportunity to cause Loan Cards to be made up. 14. As a result of these activities, Koszil paid for Car 64 the entire purchase price as follows: Deposit $ 1,200 Other funds 14,000 BCN Note 17,800 BCN Note 8,000 Banyacski loan 27,000 Total $ 68,000 15. No part of the purchase price for Car 64 was contributed by funds related to the Jensen Note for $50,000 which had been declined by BCN. [18] Car 64 was somehow sold, either in late 1979 or early 1980. At the time, it was in the names of both Jensen and the appellant. Jensen testified at the trial in 1994 that the Bank turned him down for a loan but that the proceeds of the sale of his half went to the respondent. [19] If Mr. Mackleston had given that evidence before Mr. Justice Bouck, and if Mr. Justice Bouck had accepted it, the respondent might well have failed. [20] But the very strange thing about all this is that at no time before the appellant filed his amended statement of defence and counterclaim on the 8th December, 1992, did he assert that there had never been a loan on the 6th April, 1979, of $50,000.00: Q All right. Okay. Mr. Koszil, we will get to that, okay. Just to finish off on the $50,000, if my friend could put forth the amended statement of defence and counterclaim at tab 5, Mr. Koszil, could you turn to page 7? And at the bottom of page 7 it says: "$50,182.19 which purports to represent a loan of $50,000 plus interest made jointly to the Defendant and Mr. Jensen in or about April 6, 1979 but which loan was never granted by the Plaintiff." Do you see that there, Mr. Koszil? A Yes. Q And you've read this document before your lawyer filed it? A Yes. Q On December 8, 1992? A Yes. Q You will agree with me, Mr. Koszil, that at no time prior to December of 1992 -- and I invite you to go through all of these documents, all of them -- have you ever, ever said that "I and Mr. Jensen did not get a loan from Bank Canadian National on April 6, 1979." That is the first time. A The lump sum of $50,000 on April the 6th, I did not get. It did not go in my account. [21] Indeed, in 1990, the appellant had retained a certified general accountant, among other things, to "verify and comment on transactions from documents provided on the financing of the purchase of Yellow Cab 64 and the refinancing on November 2, 1979". [22] That certified general accountant, in his report, said: TRANSACTION REGARDING PURCHASE AND FINANCE OF YELLOW CAB #64 Yellow Cab #64 was purchased in April 1979 jointly by Mr. Walter Koszil and Mr. Jerry Jensen for the sum of $68,000 (see JBK #10, page 4 of 9). I am given to understand that the financing for the purchase was obtained from the National Bank of Canada (or its predecessor Provincial Bank of Canada). A schedule dated October 19, 1979 (JBK #8) purports to set out the indebtedness of Mr. Koszil personally and of Messrs. Koszil and Jensen, jointly, as at that date, showing the various advances and identified on the left with numbers 1 through 17. Typewritten amounts identified with numbers 1 through 6 are identified as being those of Mr. Koszil, while items 11 and 12 are joint items. I was informed that the following advances were for the purpose of financing the cab purchase and approximate legal fees before disbursements (JBK #10, Page 1 of 9): Line 3, JBK #8 $ 8,000.00 Line 4 10,170.52 Line 11 50,000.00 $68,170.52 It is noted that line 3 and line 4 appear with Mr. Koszil's personal debts. A schedule dated November 2nd, 1979 appears prepared on a National Bank of Canada form and sets out (JBK #9) the various loans with the same principal balances, but line 3 of JBK #8 appears as line 8 of JBK #9 as part of the joint borrowing. Line 4 of JBK #8 is now line 3 of JBK #9. I am advised by Mr. Koszil that the loans (both identified as 'Personal Loan', on line 4 and line 12 of JBK #8 and line 3 and line 9 of JBK #9 are the same loan except that one is reduced by a payment in the amount of $240.00, possibly on September 5, 1979. If such is the case, this would be a duplication of loans. Without access to a record of the original disbursements and actual promissory notes, I am unable to verify this transaction. I do observe that, except for the possible discrepancy noted in the preceding paragraph, both JBK # 8 and JBK # 9 appear consistent in the principal of loans outstanding in the names of Mr. Koszil and the joint loans from Messrs. Koszil and Jensen. [23] It does seem to me that if there were no $50,000.00 loan, however it was disbursed, the accountant would never have written what he did on this page, which must be information he obtained from the appellant. But despite all this, I cannot say that the proposed evidence of Mr. Mackleston is immaterial. [24] I turn then to the issue of diligence. In his affidavit in support of this motion, the appellant swears: 9. That the new evidence which I have uncovered, could not have been discovered prior to trial by the exercise of reasonable diligence. 10. That the key to the new evidence which I have uncovered, was my finding of Mr. Mackleston, the Loan Manager of the Respondent Bank, during much of the relevant period of time. 11. That I searched diligently for Mr. Mackleston prior to trial, however, I was unable to track him down and furthermore, the Defendant Bank was also unable to locate its former employee prior to trial. [25] Thus, the appellant does not condescend to particulars of the searches which he says he made. [26] As to this point, I note first that Mackleston is an unusual surname. Mr. Mackleston appears, as is common ground, in the Metro Vancouver Telephone Directory in the years 1992, 1993, 1994, and 1995 with the address of 11491 - 4th Avenue, Richmond. That was his address when he was cross-examined by Mr. DeFilippi. [27] There is, therefore, it seems to me, no foundation at all for a finding that the appellant exercised all due diligence in an attempt to locate this witness. [28] In the end, on the issue of due diligence, I am not persuaded that there is sufficient merit in the appellant's appeal that I should grant the interim relief sought. [29] It does not follow, of course, that the appellant, on the hearing of his appeal, may not persuade a division of this Court to the contrary. That is not for me to say. [30] I expressly do not put my decision on the footing that the proposed evidence is not material within the authorities. [31] The application is refused. "THE HONOURABLE MADAM JUSTICE SOUTHIN"