Executive Summary: Key Legal and Evidentiary Issues

• Azar Gafarli and Can-Az Auto Sales Corp. brought a summary trial application against Daniel Kononenko for $126,331.40 in vehicle purchase funds, $690 in insurance costs, and $6,000 in misappropriated deposits.
   
• Central to the dispute was whether the plaintiffs had an agreement with Mr. Kononenko to purchase a 2022 Cadillac Escalade using funds provided by Can-Az, for resale to a third party buyer.
   
• Mr. Kononenko took possession of the Cadillac from Azar Gafarli's home on June 22, 2022, without authorization, claiming Sujaat Gafarzada owed him money on an unrelated debt.
   
• The court rejected Mr. Kononenko's defence that the funds and vehicle were applied toward a pre-existing debt owed by Sujaat Gafarzada, finding his evidence unsupported by independent documentation.
   
• Third party Sujaat Gafarzada's application to dismiss the claim against him was also before the court, alongside Mr. Kononenko's application for security for costs relating to a subsequently sold RAV-4.
   
• Suitability of the matter for summary trial under Rule 9-7 was also addressed, the court finding the application appropriate given the documentary record and the proportionality of the claims at stake.

Facts of the case

Azar Gafarli and Can-Az Auto Sales Corp. (Can-Az) are in the business of sourcing luxury vehicles for resale to overseas buyers. Under Can-Az's model, agents contract with associates who purchase vehicles on Can-Az's behalf using funds provided by Can-Az. The associates hold legal ownership of the vehicles temporarily, store them in secured locations, and transfer title as directed by Can-Az. Associates earn a commission on resale. Sujaat Gafarzada is the sole director of Can-Az; Azar Gafarli, his son, acted as Can-Az's agent in the transaction at issue.

In July 2021, Can-Az and Azar Gafarli entered into an agreement with Daniel Kononenko — who had acted as a Can-Az associate in prior transactions — for the purchase of a 2022 Cadillac Escalade from a dealership in Langley. Under the arrangement, Mr. Kononenko was entitled to be paid one-third of the profits made from the resale of the Cadillac to the third party buyer. On August 17, 2021, Can-Az transferred $6,000 to Mr. Kononenko: $1,000 was intended for the deposit on the Cadillac, with the remainder to be used for deposits on other vehicles. On August 18, 2021, Mr. Kononenko paid the $1,000 deposit to the dealership and entered into a deposit agreement for the purchase of the Cadillac.

On May 22, 2022, Mr. Kononenko advised Can-Az that the Cadillac was ready for purchase at the Langley dealership and that the balance of the purchase price — $126,331.14 — was to be paid by bank draft payable to the dealership. The third party purchaser, Najafov Oruj, transferred funds to Can-Az for the purchase price. Can-Az sent a wire transfer to Azar Gafarli in the amount of USD$100,600 (approximately CAD$126,000) to be transferred to Mr. Kononenko. On June 6, 2022, Azar Gafarli provided Mr. Kononenko with a personal bank draft in the amount of $126,331.40 made payable to the dealership. On June 7, 2022, Azar Gafarli accompanied Mr. Kononenko to the dealership, where Mr. Kononenko purchased the Cadillac using the bank draft and the vehicle was registered in Mr. Kononenko's name. After the purchase, Azar Gafarli drove the Cadillac to a garage in Burnaby for storage, before moving it to his own residence on June 9, 2022, where it was to remain until transfer to Mr. Oruj. Mr. Kononenko also paid $693 in insurance fees for the Cadillac on June 7, 2022, and Can-Az reimbursed him $690 on June 21, 2022.

On June 22, 2022, Mr. Kononenko came to Azar Gafarli's home and asked for the keys to the Cadillac. Azar Gafarli's brother gave him the keys, and Mr. Kononenko drove the car away. When Azar Gafarli attempted to contact Mr. Kononenko to recover the vehicle, Mr. Kononenko stated he had taken the car because he believed Sujaat Gafarzada owed him money on an unrelated matter. Mr. Kononenko refused to return the car or repay the purchase funds. Azar Gafarli stated that Sujaat Gafarzada did not consent to the transfer of possession of the Cadillac as repayment of any alleged debt. After September 2022, Mr. Kononenko also cancelled waitlist deposits at other dealerships that had been paid by Can-Az to secure future purchases for third party buyers. Mr. Kononenko subsequently sold the Cadillac to 715 Motor Haus Ltd. on January 9, 2023, making it unavailable for transfer to Mr. Oruj. Mr. Oruj has not released Can-Az from its obligation to repay the purchase funds.

Policy terms and contractual clauses at issue

The dispute centred on the terms of the arrangement between Can-Az and Mr. Kononenko as a vehicle-purchasing associate. Under Can-Az's standard arrangement, the associate acquires legal ownership of a vehicle purchased with funds provided by Can-Az and its agents, stores the vehicle in a secured location, and transfers title as directed by Can-Az upon resale to the ultimate buyer. The associate retains joint beneficial ownership until the vehicle is transferred and earns a commission on resale. The court found, on the balance of probabilities, that Mr. Kononenko agreed to use funds provided by Can-Az to place deposits on luxury vehicles, agreed to the registration of the 2022 Cadillac Escalade in his own name using funds provided by Can-Az and Azar Gafarli, and agreed to later transfer the Cadillac as instructed by Can-Az.

Mr. Kononenko also relied on an indemnity agreement between himself and the dealership, under which he agreed to indemnify the dealership for any losses or damages if the vehicle was registered outside Canada within six months and 12,000 km from the date of delivery. The court found this agreement irrelevant to the dispute, as it governed only obligations between Mr. Kononenko and the dealership, and there was no evidence of any losses or damages incurred by the dealership.

Reasoning and analysis

The court first confirmed the matter was suitable for summary trial under Rule 9-7, noting that discoveries had been completed, key transactions were supported by documentary evidence attached to affidavits, and the quantum of the claims was not large enough to warrant a full trial.

On the question of whether the plaintiffs were proper parties, the court rejected Mr. Kononenko's argument that Can-Az lacked standing because it never owned the Cadillac and the purchase funds originated with Mr. Oruj. The court found that the account held in Sujaat Gafarzada's name was an operating account for Can-Az, that the funds paid to Azar Gafarli for the Cadillac were funds held by Can-Az received from Mr. Oruj, and that Can-Az remained liable to Mr. Oruj for the loss of those funds. The court also distinguished the case from Meditrust Healthcare Inc. v Shoppers Drug Mart, 2002 CanLII 41710 (ONCA), which Mr. Kononenko relied upon, finding that unlike in Meditrust, Can-Az was not a shareholder asserting losses suffered by a subsidiary, but rather a party with a direct contractual obligation and resulting loss.

Mr. Kononenko's affidavit evidence was found to be implausible and unsupported by independent documentation. Several supporting affidavits filed on his behalf contained only conclusory statements or hearsay, and the court placed no weight on them. By contrast, the evidence of the plaintiffs and Sujaat Gafarzada was found to be plausible and fully corroborated by documentary evidence including bank records, wire transfer documents, and dealership records. On Mr. Kononenko's claim that Sujaat Gafarzada authorized him to take the Cadillac in satisfaction of a debt exceeding $130,000, the court found no documentary support and rejected the allegation entirely.

The court found three breaches of the agreement by Mr. Kononenko: withdrawing $5,000 of deposit funds provided by Can-Az and converting them to his own use; refusing to transfer the Cadillac as directed by Can-Az; and converting the Cadillac to his own use, selling it, and refusing to return the original purchase funds to Can-Az or Azar Gafarli. Mr. Kononenko's third party claim against Sujaat Gafarzada — alleging a debt of over $130,000 for payments relating to salvage vehicles, spare parts, towing costs, and other expenses — was dismissed for lack of sufficient evidence, with banking records produced by Sujaat Gafarzada directly contradicting many of the claimed amounts.

Ruling and overall outcome

Madam Justice W.A. Baker allowed the plaintiffs' summary trial application and dismissed Mr. Kononenko's summary trial application and third party claim against Sujaat Gafarzada. The court awarded the plaintiffs total damages of $133,021.40, comprising CAD$6,000 for misappropriated deposit funds (including $1,000 relating to the Cadillac and $5,000 relating to other deposits), CAD$126,331.40 for the funds transferred to purchase the Cadillac, and CAD$690 for the insurance reimbursement paid by Can-Az. The preservation order obtained by the plaintiffs on April 27, 2023 was ordered to remain in force until the parties agree to its release or a further court decision is made. The August 17, 2023 security for costs order and order #3 of the November 4, 2024 order were vacated. Costs were provisionally awarded in favour of the plaintiffs and Sujaat Gafarzada, with leave for the parties to make written submissions if they considered the ordinary rule inappropriate.