Travelers Guarantee Company of Canada v. Farajollahi

2012 BCSC 1283 Travelers Guarantee Company of Canada v. Farajollahi IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Travelers Guarantee Company of Canada v. Farajollahi, 2012 BCSC 1283 Date: 20120831 Docket: S100122 Registry: Vancouver Between: Travelers Guarantee Company of Canada Plaintiff And Reza Farajollahi, Gholamreza Saray Sorour aka Gholamreza Saraysorour and Soudabeh Mortezaei Semnani aka Soudabeh Mortezaei Defendants Before: The Honourable Madam Justice Gray Reasons for Judgment Counsel for the Plaintiff: M.G. Swanson B. Hillis (Articling Student) Counsel for the Defendant, Soudabeh Mortezaei Semnani: W.J. McMillan The Defendant, Reza Farajollahi: In Person The Defendant, Gholamreza Saraysorour: In Person Place and Date of Trial: Vancouver, B.C. September 6-9, November 1-2, 2011; and February 9, 2012 Written Submissions Received: December 2, 2011; January 9, January 25, February 17, February 24, and March 1, 2012 Place and Date of Judgment: Vancouver, B.C. August 31, 2012 INTRODUCTION [1] Travelers Guarantee Company of Canada ("Travelers") claims judgment for about $32,000 plus full legal costs and disbursements from the first two defendants, Messrs. Farajollahi and Saraysorour, on the basis of an Indemnity Agreement dated June 3, 2007. Mr. Farajollahi and Mr. Saraysorour deny signing the Indemnity Agreement. Travelers' claim against the third defendant, Ms. Mortezaei, is for the same amount, but on the basis of alleged misrepresentation, or alternatively, breach of warranty of authority. [2] Ms. Mortezaei is the estranged wife of Mr. Farajollahi. Mr. Farajollahi and Mr. Saraysorour are brothers-in-law, because Mr. Saraysorour is married to Mr. Farajollahi's sister. [3] Travelers received the Indemnity Agreement in connection with providing a new home deposit bond ("Bond") regarding the purchase of a suite in the "Pure" development on Hornby St. in Vancouver, B.C. [4] Travelers' claims proceeded to a seven-day trial, with written submissions following the hearing. Travelers and Ms. Mortezaei were represented by counsel. Mr. Farajollahi and Mr. Saraysorour represented themselves. Mr. Saraysorour advised that he had difficulty in the English language, and his evidence was translated from Farsi at trial. At Mr. Saraysorour's request, Mr. Farajollahi acted on behalf of Mr. Saraysorour as well as on his own behalf. [5] The primary issue at trial was whether Messrs. Farajollahi and Saraysorour signed the Indemnity Agreement; in the case of Mr. Saraysorour, personally, and in the case of Mr. Farajollahi, by one of his daughters signing for him as his agent. The evidence of Messrs. Farajollahi and Saraysorour conflicted with the evidence of Ms. Mortezaei on a number of matters, including the execution of the Indemnity Agreement. Ms. Mortezaei testified as an adverse party witness called by Travelers. FACTS AND EVIDENCE [6] In early 2007, Mr. Farajollahi and Ms. Mortezaei were husband and wife. The parties have three daughters. Ms. Mortezaei and the daughters lived full time at a home on Edgemont Boulevard in North Vancouver, B.C. ("Edgemont Home"). Mr. Farajollahi worked in the United States, returning periodically to the Vancouver area and staying with his family at the Edgemont Home. Ms. Mortezaei has not worked since 2004 owing to a disability. Mr. Farajollahi worked as a contractor for Eximfor, a company then owned 75% by him and 25% by his wife. Ms. Mortezaei looked after banking and tax matters for Eximfor and Mr. Farajollahi. [7] In early 2007, the market for residential condominiums was rising. Mr. Farajollahi and Ms. Mortezaei wanted to purchase condominiums in the hope of selling them at a profit. They wanted to purchase "pre-sale" condominiums, meaning condominiums which were not yet built, and to transfer them for a profit prior to the completion date of the purchases. In this way, they could make a profit without the need to pay the full purchase price. [8] Before the end of May 2007, Mr. Farajollahi and Ms. Mortezaei agreed to purchase two pre-sale condominiums, one in the "Dawson" development in Burnaby and the other in the "Capital" development in downtown Vancouver. It is contentious what involvement the two of them had in the Pure purchase. [9] Ms. Mortezaei signed a Contract of Purchase and Sale dated May 27, 2007 ("Pure Purchase Agreement") with Pure Developments Ltd. ("Pure Developments"), for the purchase of unit 1403 in the Pure development. The purchase price was $642,400, payable with an initial deposit of $1,000, a second deposit of $31,120 payable within seven days of acceptance of the offer by the vendor, and a final deposit of $32,120 payable the later of ten days following receipt of a disclosure statement or within 60 days of the vendor's acceptance of the offer. [10] The Pure Purchase Agreement provided that all the deposits were payable to the vendor's solicitors, McQuarrie Hunter, in trust. Ms. Mortezaei's sister, Ms. Balai, was the purchaser's realtor in the transaction. [11] The Pure Purchase Agreement set out a method for determining the completion date which related to the period following the issuance of an occupancy permit by the City of Vancouver. It described November 30, 2009 as the "Outside Completion Date", stating that the agreement would be terminated if completion had not occurred by that date, unless the date were extended under the terms set out or the parties otherwise agreed. [12] The Pure Purchase Agreement provided that the final deposit could be secured by a Bond from St. Paul Guarantee Company, which company is now Travelers. The advantage to a purchaser of obtaining a Bond was that the purchaser was not required to pay the full amount of the final deposit until the closing date of the property purchase, instead paying only the cost of the Bond. [13] Ms. Mortezaei signed a written acknowledgement dated May 27, 2007 confirming receipt of the disclosure statement for the Pure development. As a result, the final deposit was payable within 60 days of the vendor's acceptance of the offer. Because the vendor accepted the offer on May 28, 2007, the final deposit was payable by July 27, 2007. [14] Ms. Mortezaei's offer included addendum C. This provided that she agreed to forthwith apply to Travelers (then still named St. Paul Guarantee) for issuance of a Bond for $32,120, and Pure Developments agreed to accept the Bond in place of the final deposit. [15] Ms. Mortezaei signed a cheque dated May 27, 2007 payable to Pure Developments' lawyers in the sum of $1,000. This cheque was drawn on her joint account with Mr. Farajollahi, and represented the initial deposit. Ms. Mortezaei testified that Mr. Farajollahi agreed to this payment. The funds were not withdrawn from the joint bank account until June 11, 2007. [16] Ms. Mortezaei's evidence was that she discussed the opportunity to purchase a unit in the Pure development during a telephone call with Mr. Farajollahi when he was in the United States, and the two of them agreed to pursue the opportunity. She testified that she signed the Pure Purchase Agreement with the intention of transferring it later into the names of herself and Mr. Farajollahi jointly. Her evidence was that Mr. Farajollahi was in the United States on May 27, 2007, and because of that, she signed the Pure Purchase Agreement alone in order to secure the opportunity to purchase the unit. Because she was not working, she intended to rely on Mr. Farajollahi's income to raise the purchase money. [17] Mr. Farajollahi's evidence at examination for discovery was that he agreed to the purchase of a unit in the Pure development before the purchase was made, and that he was in the United States at the time the Pure Purchase Agreement was signed. However, he testified at trial that he was in Canada at the time his wife signed the Pure Purchase Agreement, and could easily have signed the document, and that therefore it did not make any sense for Ms. Mortezaei to sign the Pure Purchase Agreement in her name alone if he were involved. [18] Mr. Farajollahi explained this change in his evidence by saying that, subsequent to testifying at examination for discovery, he reviewed credit card statements and a paycheque which established that he was working in the Vancouver area from sometime in mid-May 2007 until about mid-September 2007. [19] The evidence showed that Mr. Farajollahi could not recall where he was in mid-May 2007. He remembered that he was in the Vancouver area for the summer period, but he did not have a specific recollection of the dates. While he purported to recall his whereabouts, he was simply detailing what he guessed on the basis of the documents that he reviewed. The documents he referred to included a Visa statement which listed transactions with Vancouver area businesses on May 24, 26, and 30 and June 1 and 9. He also referred to pay stubs for payment by a Vancouver importing business for the period May 15, 2007 to August 15, 2007. [20] Pure Developments provided a written acceptance of Ms. Mortezaei's purchase offer and a written receipt for the initial $1,000 deposit, both dated May 28, 2007. [21] Ms. Mortezaei testified that in the days following her execution of the Pure Purchase Contract, she became concerned that she and her husband would not be able to obtain the necessary financing to complete the purchase, because one of the other pre-sale condominiums they had agreed to purchase was scheduled to complete around the same time. She testified that she wanted to rescind the Pure Purchase Contract. The Real Estate Development Marketing Act, S.B.C. 2004, c. 41, at s. 21, provides that a person is entitled in certain circumstances to rescind an otherwise binding contract to purchase a pre-sale condominium within seven days of the date the purchase agreement was made, or in some circumstances, later. [22] Ms. Mortezaei testified that she told Mr. Farajollahi that she did not want to proceed with the purchase of the Pure unit, that she knew that the Pure Purchase Agreement could be rescinded, and that she thought she could rescind within 10 days without penalty. She testified that she still thought the Pure unit was a good investment, but was concerned about having two purchases scheduled to close around the same time. She testified that Mr. Farajollahi was in Vancouver at this time and remained interested, and suggested substituting his brother-in-law, Mr. Saraysorour, as a purchaser. [23] Ms. Mortezaei testified that she spoke to Messrs. Farajollahi and Saraysorour about the key terms of the Pure Purchase Agreement, including the need to apply for a Bond to satisfy the requirement to pay the third deposit and the fact that only 5% of the purchase price had to be paid at that time. She testified that the plan was that Mr. Saraysorour's family would move in and pay half rent to Mr. Farajollahi as half owner, and Messrs. Farajollahi and Saraysorour would each pay half the mortgage payments. [24] Ms. Mortezaei testified that Mr. Farajollahi returned to the Vancouver area between May 27 and 31, 2007. [25] Instead of rescinding the Pure Purchase Agreement, Ms. Mortezaei assigned it to Messrs. Farajollahi and Saraysorour. [26] A document entitled "Contract of Purchase and Sale Addendum" ("Assignment Addendum") is dated May 31, 2007 and was executed by Ms. Mortezaei, Messrs. Farajollahi and Saraysorour, and a representative from Pure Developments. All parties were in Vancouver and it was signed at the Pure sales office. The Assignment Addendum simply provides that the Pure Purchase Agreement is assigned to Messrs. Farajollahi and Saraysorour. It describes the home address of both as being the Edgemont Home. [27] Ms. Mortezaei testified that at the time the Assignment Addendum was signed, the developer provided two copies of the Pure Purchase Agreement, one for Mr. Saraysorour, and the other for Ms. Mortezaei and Mr. Farajollahi. [28] Ms. Mortezaei testified that Messrs. Farajollahi and Saraysorour asked her to help them by filling out documents, because Mr. Farajollahi was out of town and Mr. Saraysorour spoke limited English. [29] Messrs. Farajollahi and Saraysorour denied authorizing her to apply for the Bond. Mr. Farajollahi admitted that he knew the purchase price and deposit amount, but testified that Ms. Mortezaei said Pure Developments might not accept them as purchasers. [30] Ms. Mortezaei completed a Travelers' "Application Form and Indemnity Agreement for Equity Edge New Home Deposit Bond" ("Bond Application"). It is undated, but bears Travelers' date stamp for May 31, 2007. [31] The Bond Application lists details such as the $32,120 bond amount, the anticipated closing date of November 2008 or early 2009, the purchase price of $642,400, and the Pure property address. The applicants are listed as Messrs. Farajollahi and Saraysorour, and their address is listed as the Edgemont Home. Ms. Mortezaei filled in the Edgemont Home's telephone number, her own cellular telephone number, and her own email address. Ms. Mortezaei testified that she used those numbers and that email address because Mr. Farajollahi was out of the country, and Mr. Saraysorour did not speak English well enough that his telephone number would be helpful. Ms. Mortezaei filled in social insurance numbers, and testified that Messrs. Farajollahi and Saraysorour provided their numbers to her. Ms. Mortezaei ticked the answers to a number of questions, such as whether the applicants had ever filed for bankruptcy. [32] The Bond Application asks for a personal net worth statement of the applicants. Ms. Mortezaei filled in figures for total assets of about $1.4 million, consisting primarily of the Edgemont Home. She listed liabilities of about $315,000, consisting primarily of a mortgage. She listed the applicants' combined annual income as $9,000. She wrote that the number of years of applicant 1 (apparently Mr. Farajollahi) with current employer was "new, self-employed" and for applicant 2 (apparently Mr. Saraysorour) was "2 years." [33] Ms. Mortezaei also testified that she reviewed the Bond Application with Messrs. Farajollahi and Saraysorour and obtained their authorization to submit it to Travelers. They deny that. [34] Travelers received the completed Bond Application by facsimile from the Pure sales office on May 31, 2007. The Bond Application was likely sent to Travelers by a sales representative at the Pure sales office. No one at Travelers spoke to Ms. Mortezaei about the Bond Application. [35] On June 1, 2007, Travelers received copies of pay stubs for Messrs. Farajollahi and Saraysorour. They were sent by facsimile from the Edgemont Home, probably by Ms. Mortezaei. [36] Travelers' employees reviewed the Bond Application, including the personal statement of net worth, and obtained a credit report. They completed an "underwriter worksheet" dated June 1, 2007. This calculated the Bond premium as $1,063.60. [37] Travelers' primary concern in considering the Bond Application was whether the applicants had the funds to complete the purchase and to pay under the Indemnity Agreement if required. Travelers requires proof that the purchaser has paid the deposits, because that suggests that the purchaser will likely complete the purchase. It appeared to Travelers that Messrs. Farajollahi and Saraysorour had the necessary funds, so Travelers was prepared to issue the Bond if its requirements were met. [38] Travelers prepared a letter dated June 1, 2007 entitled "Notice of Pre-Approval". It was addressed to Messrs. Farajollahi and Saraysorour at the Edgemont Home address. The Notice of Pre-Approval states that the Bond Application had been approved, subject to Travelers receiving four items. The four items were as follows: 1) "the properly executed and dated Indemnity Agreement (original signatures required - copy enclosed)"; 2) "verification of real estate equity holdings (copy of current tax assessment)"; 3) verification from Pure Developments or its agent that it has received the first and second deposits, totalling $32,120.00; and 4) payment of $1,063.60 for the Bond premium and application fee. [39] The Notice of Pre-Approval has a box at the bottom, which states on the left side, "Important - Please return one signed copy of this letter along with the documents mentioned above in acknowledgement of receipt of same", with a place for date and signature. The right side of this box has a place for setting out credit card details for payment. [40] Ms. Mortezaei testified that between June 1 and 3, 2007, she spoke to Messrs. Farajollahi and Saraysorour about the Notice of Pre-Approval and the need to provide the signed Indemnity Agreement to Travelers. She testified that she again sought direction and approval from Messrs. Farajollahi and Saraysorour to prepare what was required, but they deny that. [41] The execution of the Indemnity Agreement was contentious. It is dated June 3, 2007 and includes the following terms: 1. The undersigned ... undertake to indemnify the Surety [Travelers] in full for any loss or damages that it may suffer arising from the issuance of the Bond ... or arising from any default by the undersigned under the present agreement. The present undertaking includes, without limitation, the obligation of the undersigned to reimburse to the Surety all sums which it might be called upon to pay: c) in respect of any claim e) in satisfaction of judicial and extra-judicial fees and disbursements of the Surety's counsel on a solicitor and client basis and legal fees of claimant's counsel ... 4. The undersigned acknowledge that the Surety will have the right, in its sole and entire discretion, to decide whether to pay, settle or contest any claim under the Bond without any obligation to consult or advise the undersigned in advance of so doing. The undersigned acknowledge their obligation to indemnify the Surety upon presentation by the Surety of a release or a copy of a cheque or any other proof of payment, which will be deemed to be complete proof of the amount paid and of the Surety's right to make such payment as a result of the issuance of the Bond and, consequently, its right to demand reimbursement from the undersigned under the terms of the present agreement. [42] The Indemnity Agreement form has a place for signature under the handwritten name of Mr. Farajollahi, and a place for signature under the handwritten name of Mr. Saraysorour. Ms. Mortezaei handwrote the two names on the form and wrote in the date of June 3, 2007. A signature appears under both names. The form also has a place for the name, address, and signature of a witness to each applicant's signature. That has not been filled out or signed. [43] Ms. Mortezaei testified that she saw Mr. Saraysorour sign the Indemnity Agreement. She also testified that Mr. Farajollahi was in the United States on June 3, 2007. She testified that she spoke to him by telephone and he asked her to sign the Indemnity Agreement on his behalf, and when she refused, asked her to ask one of their daughters, Sogol Farajollahi ("Sogol"), to sign, and Ms. Mortezaei again refused. Ms. Mortezaei testified that Mr. Farajollahi then asked her to pass the telephone to Sogol, which she did, and Sogol asked Ms. Mortezaei for the Indemnity Agreement and signed it. Ms. Mortezaei and Mr. Farajollahi were not separated at the time and had not discussed separation. [44] Sogol testified at trial. She was 19 years old in late September 2011, and therefore would have been about 14 years old in May 2007. Sogol testified that on one occasion, someone asked her to sign a document on behalf of her father, and she did so. She said that it would have been one of her parents who asked her to sign the document, but she did not remember which one. She testified that she could not recall many details, but she signed it a few years before the trial, which could have been in 2007, and she was living in the Edgemont Home at the time. She testified that her common sense told her that her father would have been in the United States at the time she signed the document, and that he was mostly in the United States in 2007. When shown the Indemnity Agreement, Sogol testified that it was possible that it was the document that she signed. She testified that it was likely that her mother was present when she signed the document, because she would have obtained the document from her. [45] Sogol sent her father an email prior to the trial in which she stated that she had signed his signature. She testified at trial that she exaggerated her recollection in that email, because she wanted her father to avoid further legal battles with her mother. [46] Mr. Farajollahi testified that he did not sign the Indemnity Agreement and that he did not ask Sogol to sign it, or any other document, for him. [47] Mr. Saraysorour testified that the applicable signature on the Indemnity Agreement was not his and looked significantly different from his signature. However, at his examination for discovery, he testified that it looked like his signature. At trial, he produced other documents, such as his drivers' license, which had a signature which had some differences from the one on the Indemnity Agreement. [48] By facsimile dated June 4, 2007, Travelers sent the Pure sales office a copy of the Notice of Pre-Approval. Travelers sent this copy so that the Pure sales office would know the status of the Bond Application. [49] Ms. Mortezaei signed a cheque dated June 4, 2007 payable to Pure Developments' lawyers in the sum of $31,120, drawn on her joint bank account with Mr. Farajollahi. This represented the second deposit. Ms. Mortezaei testified that Mr. Farajollahi agreed to this payment. The funds were not withdrawn from the joint bank account until June 11, 2007. [50] On June 6, 2007, Travelers received the executed Indemnity Agreement and the Notice of Pre-Approval with handwriting in the bottom box ("Endorsed Notice of Pre-Approval"). Travelers did not know who sent these items to it, but it was Ms. Mortezaei. On the left side of the lower box of the Endorsed Notice of Pre-Approval, the date of June 3, 2007 is written in handwriting, but the signature line is blank. The other side of the bottom box has the particulars for a Visa payment for $1,063.60, on the joint credit card of Mr. Farajollahi and Ms. Mortezaei. Travelers also received verification of the cash deposits in the form of copies of Ms. Mortezaei's cheques, probably from Ms. Mortezaei. [51] The Bond premium was paid by the joint credit card, pursuant to the information written onto the Endorsed Notice of Pre-Approval. As a result, three of the four items required by the Notice of Pre-Approval had been provided to Travelers, but the verification of real estate holding had not. [52] Travelers was not concerned by the absence of a signature in the left side of the box on the bottom of the Endorsed Notice of Pre-Approval, because the return of the necessary documents and the payment information indicated that Messrs. Farajollahi and Saraysorour had received the Notice of Pre-Approval. Travelers was not concerned that the Pure Purchase Agreement had been assigned by Ms. Mortezaei to Messrs. Farajollahi and Saraysorour, because it was quite common for purchase agreements to be assigned. Travelers was not concerned that Ms. Mortezaei authorized the credit card payment, because it was not unusual for someone other than the purchaser to make this payment. [53] The sum of $16,791 was deposited into the joint account of Mr. Farajollahi and Ms. Mortezaei on June 9, 2007. Ms. Mortezaei testified that this came from Mr. Saraysorour, and represented one-half of the initial deposit, second deposit, and Bond fee, plus $250 for something else which she could not recall. Mr. Saraysorour testified that he did not know why this money was transferred. [54] As stated above, the cheques for the initial and second deposits were withdrawn from the joint account on June 11, 2007. [55] By letter dated June 26, 2007 and addressed to Messrs. Farajollahi and Saraysorour at the Edgemont Home address, Travelers advised that it still required a copy of a current property tax assessment before it would process the $1,063.60 payment and issue the Bond. Travelers wanted the assessment to verify that Mr. Farajollahi was a registered owner of the Edgemont Home, and to obtain information about the property's likely market value. [56] On or about July 4, 2007, Ms. Mortezaei, on behalf of Messrs. Farajollahi and Saraysorour, sent Travelers a copy of a 2007 property tax notice, which provided that the owners of the Edgemont Home were Ms. Mortezaei and Mr. Farajollahi, and that the assessed value was $930,000. Although this is significantly less than the $1.4 million estimated in the Bond Application, it was not uncommon for Travelers to receive applications which estimated higher values than the assessed values, and at that time, Travelers employees found that the market values were usually higher than the assessed values. [57] Travelers issued the Bond. It is dated July 5, 2007. Both Messrs. Farajollahi and Saraysorour are listed as principals, the "Surety" is Travelers, the "Obligee" is Pure Developments, the amount of the Bond is $32,120, and it relates to the final deposit under the Pure Purchase Agreement. The issuance of the Bond satisfied the obligation of Messrs. Farajollahi and Saraysorour, as assignees of the Pure Purchase Agreement, to pay the third deposit by July 27, 2007. [58] Mr. Farajollahi and Ms. Mortezaei separated around March 2008, but both maintained the Edgemont Home as their residence. Mr. Farajollahi continued to spend most of his time in the United States. [59] Mr. Farajollahi and Ms. Mortezaei arranged financing sufficient to complete the Pure Purchase Agreement, but disagreed about whether to take funds personally from the financing, and did not proceed with it. Another financing application by Mr. Farajollahi was rejected in August 2008. [60] By letter dated December 16, 2008 addressed to Ms. Mortezaei, Pure Developments advised that the date for completion of the Pure Purchase Agreement was January 20, 2009. Ms. Mortezaei testified that she did not receive this letter. [61] Pure Development also sent a similar letter dated December 27, 2008 to Messrs. Farajollahi and Saraysorour at the Edgemont Home address. [62] Pure Developments wrote Messrs. Farajollahi and Saraysorour a letter dated January 20, 2009 advising that it was ready, willing, and able to complete the Pure Purchase Agreement. Neither Messrs. Farajollahi and Saraysorour nor Ms. Mortezaei tendered the purchase money. [63] Pure Developments' lawyers sent Travelers a letter dated February 18, 2009, stating that several purchasers, including Messrs. Farajollahi and Saraysorour, had failed to complete their agreements to purchase units in Pure. [64] On or about March 31, 2009, Travelers received a letter from McQuarrie Hunter LLP stating that it had commenced legal action against Messrs. Farajollahi and Saraysorour. Among the enclosures was a copy of a Writ of Summons issued February 25, 2009 in an action commenced by Pure Developments against Messrs. Farajollahi and Saraysorour seeking specific performance of the Pure Purchase Agreement, or alternatively, damages ("Specific Performance Lawsuit"). [65] On or about May 8, 2009, Travelers received a statutory declaration of Ms. Kuss, administrator for Pure Developments, stating among other things that Messrs. Farajollahi and Saraysorour were in default of the Pure Purchase Agreement. Pure Developments claimed payment under the Bond. The statutory declaration did not comply with all the terms of the Bond, and Travelers did not make payment pursuant to the Bond at this time. [66] On or about May 20, 2009, Mr. Jeletzky, legal counsel for Messrs. Farajollahi and Saraysorour, sent a letter to Travelers demanding that Travelers "stop payment" on the Bond. Mr. Jeletzky enclosed a copy of the statement of defence to the Specific Performance Lawsuit, which denied the allegations of Pure Developments, and in particular, that the Pure Purchase Agreement was properly assigned to Messrs. Farajollahi and Saraysorour. [67] On May 28, 2009, Mr. Schuld of Travelers wrote counsel for both Pure Developments and Messrs. Farajollahi and Saraysorour, saying he understood that they had a dispute about the validity of the Assignment Addendum. [68] On August 25, 2009, Travelers received a further statutory declaration of Ms. Kuss from Pure Developments. This declaration complied with the terms of the Bond. [69] On or about September 1, 2009, Mr. Farajollahi went to Travelers' offices and met with Mr. Schuld. Mr. Schuld explained that Travelers would be making demand for payment under the Indemnity Agreement, and suggested that quick payment would be beneficial for all concerned. Mr. Farajollahi said that the signatures might not be valid, talked about the validity of the Assignment, and made reference to having marital issues. [70] By cheque dated October 27, 2009, Travelers paid Pure Developments $32,120.00 pursuant to the Bond. [71] On November 12, 2009, Borden Ladner Gervais LLP, as legal counsel for Travelers, sent letters to Messrs. Farajollahi and Saraysorour demanding payment of $32,120.00 pursuant to the Indemnity Agreement. The letter stated that in default of payment by November 20, 2009, Travelers would commence legal action and would seek to recover the outstanding amount plus interest and costs on a solicitor/client basis. [72] On November 17, 2009, Mr. Farajollahi went again to the offices of Travelers and asked what it would do. Mr. Schuld told Mr. Farajollahi that Travelers was seeking payment from Messrs. Farajollahi and Saraysorour, and if payment were not received, that Travelers would commence legal action against them and would claim expenses. Mr. Farajollahi again raised an issue about the validity of the signatures. [73] On January 8, 2010, Travelers commenced this lawsuit against Messrs. Farajollahi and Saraysorour. [74] In April 2010, Mr. Farajollahi stopped living in the Edgemont Home. [75] On March 28, 2011, Travelers amended the claim to include Ms. Mortezaei as a defendant. [76] Ms. Mortezaei and Mr. Farajollahi made a profit on the Capital pre-sale, but there was a shortfall on the Dawson pre-sale. During divorce proceedings between Ms. Mortezaei and Mr. Farajollahi, Ms. Mortezaei agreed to take responsibility for the Dawson shortfall and Mr. Farajollahi agreed to take responsibility for the Pure matter. Ms. Mortezaei paid the Dawson shortfall of about $17,000. [77] As of August 31, 2011, Travelers had incurred $44,677.27 in legal fees in respect of this matter. [78] Messrs. Farajollahi and Saraysorour have not made any payment to Travelers. [79] Following the trial, the parties provided written submissions on the issue of whether Sogol could bind her father in contract by signing his name when she was a minor. [80] Travelers' counsel argued that Mr. Saraysorour admitted at examination for discovery that he was required to pay Travelers. I do not accept this construction of his evidence. Mr. Saraysorour essentially explained that there was a claim that he should pay a fine or indemnity, but he did not know how serious was the claim. CREDIBILITY AND CONCLUSIONS ON FACTS [81] The evidence of Ms. Mortezaei is essentially that she filled out the Bond Application to assist Mr. Farajollahi, who was out of town, and Mr. Saraysorour, who did not read or write English; she told Messrs. Farajollahi and Saraysorour the terms of the Pure Purchase Agreement, and they wanted to proceed as purchasers; she paid the first two deposits with the knowledge and approval of Messrs. Farajollahi and Saraysorour; Mr. Saraysorour paid his half of the deposits and Bond fee to the joint account of Mr. Farajollahi and Ms. Mortezaei; she saw Sogol sign Mr. Farajollahi's name on the Indemnity Agreement; and she saw Mr. Saraysorour sign the Indemnity Agreement. [82] Essentially, Mr. Farajollahi's evidence is that he signed the Assignment Addendum, but thought it was an offer; he did not hear whether or not Pure Developments accepted the assignment to Messrs. Farajollahi and Saraysorour; he did not sign the Indemnity Agreement and did not authorize Sogol to sign his name to it; and he did not authorize Ms. Mortezaei to pay the initial two deposits. [83] Essentially, Mr. Saraysorour's evidence is that he signed the Assignment Addendum, but thought it was an offer; he did not hear whether or not Pure Developments accepted the assignment to Messrs. Farajollahi and Saraysorour; he did not sign the Indemnity Agreement and the signature does not look like his signature; and he does not know whether he paid half the deposits and Bond fee to the joint account of Mr. Farajollahi and Ms. Mortezaei. [84] On the balance of probabilities, I prefer the evidence of Ms. Mortezaei, for the following reasons: 1) Ms. Mortezaei's explanation is consistent with the contemporaneous documents and makes sense. In contrast, Messrs. Farajollahi and Saraysorour's explanation that the Assignment Addendum was an offer and they were not advised that it was accepted does not make sense. The words of the Assignment Addendum are that "The Buyer and the Seller agree that the Contract of Purchase and Sale is Assigned to" Messrs. Farajollahi and Saraysorour, and there is a copy in evidence which includes a signature on behalf of Pure Developments. Messrs. Farajollahi and Saraysorour did not provide any explanation about why they did not ask whether the "offer" had been accepted by the seller, and it does not make sense that they would simply assume that it had not been accepted. It is far more likely that, as Ms. Mortezaei testified, Messrs. Farajollahi and Saraysorour left it to Ms. Mortezaei to handle the details of the transaction for them, but understood that they were agreeing to purchase the unit; 2) The payment of about $16,000 to the joint account from Mr. Saraysorour is consistent with Ms. Mortezaei's evidence. Neither Mr. Saraysorour nor Mr. Farajollahi had any explanation for this payment; 3) Ms. Mortezaei's evidence was consistent with Sogol's, while Mr. Farajollahi's evidence conflicted with it on the question of whether he ever asked her to sign a document for him; 4) Mr. Farajollahi's evidence at trial conflicted with his evidence on examination for discovery about whether he was in the United States or the Vancouver area on the relevant dates in May and June 2007. Mr. Farajollahi argued that his paycheque from a Vancouver rug company for the period including May 15 to June 30, 2007 shows that he was in Vancouver that entire period. He did not describe his duties, or call any coworkers. The fact of being paid for that period does not demonstrate he was in Vancouver the entire time. For example, he could have travelled to the U.S. to buy or sell rugs; 5) Mr. Farajollahi's manner of testifying suggested that he was tailoring his evidence to fit with the available documents, and limiting his testimony rather than making an honest and forthright recitation of his recollection of the pertinent events; 6) Mr. Saraysorour's evidence at trial conflicted with his evidence at examination for discovery about whether the signature below his name on the Indemnity Agreement could be his signature; and 7) There would not be any reason for Ms. Mortezaei to have pursued the Bond Application without the authority of Messrs. Farajollahi and Saraysorour. In May and June 2007, she and Mr. Farajollahi had not discussed separating, so their financial interests were similar. Mr. Farajollahi suggested that Ms. Mortezaei pursued the Bond Application and Indemnity Agreement so that her sister could earn commission. However, the commission was not payable if the purchase did not complete. In light of that, and the fact that Ms. Mortezaei had the right to rescind the Pure Purchase Agreement and knew that she had such a right, there is no reasonable motive for Ms. Mortezaei to have concocted the Bond Application and Indemnity Agreement at the time those documents were provided to Travelers. [85] Mr. Farajollahi argued that the Assignment Addendum was ineffective because on May 31, 2007, Pure Developments had not yet received payment on the cheques for the initial and second deposit. The timing of the cashing of the cheques is immaterial. Ms. Mortezaei provided the cheques as required by the Pure Purchase Agreement. Pure Developments was at liberty to delay cashing the cheques until it was confident that the transaction would proceed, but Ms. Mortezaei's provision of the cheques satisfied the purchaser's obligations, and Pure Developments could not deny that the assignment was valid because it chose to delay cashing those cheques. [86] Mr. Farajollahi also argued that the fact that Pure Developments initially wrote Ms. Mortezaei to advise of the closing date demonstrates that it had not agreed to the assignment. The fact that Pure Developments sent that letter suggests that its records were not correct at the time of that letter, but within weeks, Pure Developments sent another letter to the same effect to Messrs. Farajollahi and Mortezaei. The fact that Pure Developments may have erred in sending the first letter is immaterial. [87] In any event, the question at this trial is not whether the Assignment Addendum is binding, but whether Messrs. Farajollahi and Saraysorour signed the Indemnity Agreement. There is nothing in the Indemnity Agreement which would make it void if the Pure Purchase Agreement had not been validly assigned to the principals. Mr. Farajollahi also argued that the Assignment Addendum was not binding because Ms. Mortezaei did not prove that she paid the assignment fee set out in the Pure Purchase Agreement. Again, the validity of the Assignment Agreement is not the issue at this trial. ANALYSIS a) Indemnity Agreement [88] I have concluded that Mr. Saraysorour signed the Indemnity Agreement, and that Mr. Farajollahi authorized his daughter to sign on his behalf, and she did so. [89] The Indemnity Agreement is binding on Mr. Saraysorour because he signed it. [90] The question of whether the Indemnity Agreement is binding on Mr. Farajollahi raises the question of whether Sogol could bind her father in contract by signing his name when she was a minor. [91] A party who is unable to enter into a contract on his or her own by reason of a lack of capacity may act for or enter into a contract as agent for another. This principle is explained in Halsbury's Laws of England, 5th ed., vol. 1 (London: LexisNexis, 2008) at para. 9, as follows: ...An agent's competency to act or contract for his principal is not limited to his competency to contract for himself. Thus a minor may be an agent, and act and contract so as to bind the principal, although not personally liable on the contract of agency or on contracts with third parties... [92] The principle is also stated in Peter Watts and F.M.B. Reynolds, Bowstead and Reynolds on Agency, 19th ed. (London: Sweet & Maxwell, 2010) at paras. 2-011 and 2-012, as follows: All persons of sound mind, including minors and other persons with limited or no capacity to contract on their own behalf, are competent to act or contract as agents. ...Thus a minor may act as an agent provided that he has sufficient understanding to consent to the agency and to do the act required. [93] This principle has been followed in British Columbia in Commonwealth Trust Co. v. Dewitt (1973), 40 D.L.R. (3d) 113 at 124-125. In that case, a company without capacity to acquire the shares in question itself was able to act as agent for its principal in their acquisition. [94] The fact that Sogol was a minor at the time that she signed her father's name to the Indemnity Contract is immaterial. Mr. Farajollahi asked Sogol to put his signature on the Indemnity Contract, and she did so. A person sufficiently signs a document if it is signed in his name and with his authority by somebody else: London County Council v. Vitamins Ltd., [1955] 2 All E.R. 229 (C.A.) at 231-232; R. v. Foley (1994), Nfld. & P.E.I.R. 24 (Nfld. C.A.) at para. 30. As a result, the Indemnity Contract is binding on Mr. Farajollahi as well. [95] As set out above, para. 4 of the Indemnity Agreement provided that Travelers (the "Surety" in the Indemnity Agreement) had the right to decide whether to pay any claim under the Bond without the obligation to consult or advise Messrs. Farajollahi and Saraysorour. Arguably, this may create an absolute liability upon presentation of proof of payment. Even if it only raises a rebuttable presumption of liability, so long as Travelers had an honest belief that Pure Developments' claim existed under the Bond, Travelers was entitled to make the payment and obtain recovery under the Indemnity Agreement: Travelers Guarantee Company of Canada v. Barbero-Montagna, 2010 BCSC 19; Zurich Insurance Co. v. Modern Marine Industries Ltd., (1996), 146 Nfld. & P.E.I.R. 91, 40 C.L.R. (2d) 1 at paras. 38 and 42. [96] Travelers paid $32,120 to Pure Developments. It had an honest belief that the sum was payable to Pure Developments under the Bond. As a result, pursuant to the terms of the Indemnity Agreement, Travelers is entitled to recover the $32,120 from Messrs. Farajollahi and Saraysorour. [97] The question of Travelers' ability to recover its actual legal fees in connection with an Indemnity Agreement was addressed in Travelers Guarantee Company of Canada v. Ryan, 2012 BCSC 43. In that case, Mr. Justice Butler held that an indemnitor was required to pay Travelers' reasonable legal costs related to pursuing payment under the applicable indemnity agreement, but the indemnitor had the right to review the bills, pursuant to s. 70 of the Legal Profession Act, S.B.C. 1998, c. 9 [LPA]. b) Misrepresentation [98] Travelers' claim against Ms. Mortezaei is that she misrepresented the state of affairs with respect to Mr. Farajollahi's signature, and thereby induced Travelers to enter into the Indemnity Agreement. Essentially, Travelers asserts that Ms. Mortezaei represented to it that the Indemnity Agreement bore Mr. Farajollahi's actual signature. [99] The four elements required to establish a fraudulent misrepresentation inducing a contract were summarized by Mr. Justice Bauman, now C.J.S.C., in Catalyst Pulp and Paper Sales Inc. v. Universal Paper Export Co., 2009 BCCA 307 at para. 55, adopting G.H.L. Fridman, Law of Contract in Canada, 4th ed. (Scarborough: Carswell, 1999) at 309-310, as follows: (a) the wrongdoer must make a representation of fact to the victim; (b) the representation must be false in fact; (c) the party making the representation must have either known it was false or made it recklessly without knowing whether it was true or false; and (d) the victim must have been induced by the representation to enter into the contract. [100] Travelers argued that by providing the Indemnity Agreement, Ms. Mortezaei made a representation of fact, that the signature appearing above Mr. Farajollahi's name was in fact his signature. [101] Ms. Mortezaei did not speak to anyone at Travelers. Travelers did not know who sent the Indemnity Agreement to it. Ms. Mortezaei did not tell anyone who had signed the Indemnity Agreement, and she was not asked who had signed it. She did not sign the Indemnity Agreement as witness, and the spaces for a signature by and the details of a witness have been left blank. [102] Travelers argued that a person "who delivers business documents impliedly represents that they are genuine", relying on Spencer Bower, Turner and Handley, Actionable Misrepresentation, 4th ed. (London: Butterworths, 2000) at para. 53. Travelers argued that, because it is unusual for a document to be signed by an agent on behalf of a principal, the provision of it by Ms. Mortezaei amounted to a representation that the signatures were placed by the people whose names appeared under the signatures. [103] Travelers simply looked at the document and made the assumption that the signature above Mr. Farajollahi's name was his signature. Travelers relied on the document, not on Ms. Mortezaei. [104] The Indemnity Agreement was genuine. Travelers argued that by providing the Indemnity Agreement, Ms. Mortezaei represented not only that it was genuine, but that the signatures appearing above the names were the actual signatures of the people named, rather than a signature on behalf of such people. In my view, it cannot be implied that Ms. Mortezaei represented not only that the document was genuine, but also something about the status of the signatories. [105] Travelers has failed to establish that Ms. Mortezaei made a representation of fact to it. It has also failed to establish that it was induced to enter into the Indemnity Agreement by anything Ms. Mortezaei said, rather than by its own review of the signed Indemnity Agreement. [106] Travelers' other claim against Ms. Mortezaei, for breach of warranty of authority, was an alternative claim, relevant only if the court held that Ms. Mortezaei was not authorized to complete the Bond Application or submit the Indemnity Agreement. As a result of the findings that Ms. Mortezaei was authorized to complete the Bond Application and submit the Indemnity Agreement, this alternative claim does not require consideration. [107] Travelers' claims against Ms. Mortezaei are dismissed. SUMMARY [108] Travelers is entitled to judgment against Messrs. Farajollahi and Saraysorour for $32,120, plus Travelers' reasonable legal costs relating to this claim, plus interest. Messrs. Farajollahi and Saraysorour have the right to seek a review of the legal costs pursuant to s. 70 of the LPA. Travelers' claims against Ms. Mortezaei are dismissed. Unless the parties have submissions on the issue of costs, Ms. Mortezaei is entitled to her costs on Scale B. If the parties wish to make submissions on costs, they should provide written submissions. I ask that all submissions be provided to the registry on or before October 15, 2012. If counsel cannot agree on a schedule for such submissions, they should write the registry and seek a hearing before me to determine the schedule. "Gray J."