



COURT OF APPEAL FOR ONTARIO

CITATION: Mughal v. Bama Inc., 2020 ONCA 704

DATE: 20201104

DOCKET: C67351

Roberts, Trotter and Thorburn
    JJ.A.

BETWEEN

Nadeem Ahmed Mughal also known
    as Nadeem Mughal

Plaintiff (Respondent)

and

Bama Inc., Abdul Raheem Qureshi, ET Zone Supplies Inc., Zainab
    Sayeed

Noman, Badar Sohail Khan,
Mansoor Ahmed Khan
and

Muhammad
    Noman Yusuf also known as Muhammad Yusuf

Defendants (
Appellant
)

Jonathan Shulman, for the appellant,
    Mansoor Ahmed Khan

John S. Contini, for the respondent,
    Nadeem Ahmed Mughal

Heard: October 28, 2020 by
    video conference

On appeal from
    the order of Justice Lucy K. McSweeney of the Superior Court of Justice, dated
    July 26, 2019, with reasons reported at 2019 ONSC 4504 and from the costs
    order, dated February 24, 2020.

REASONS FOR DECISION

[1]

The appellant, Mansoor Ahmed Khan (MA Khan),
    appeals from the judgment against him for civil conspiracy to cause economic
    injury to the respondent and the award of substantial indemnity costs. He asks
    that the respondents action be dismissed. In the alternative, he asks that the
    matter be remitted to the Superior Court for a retrial.

[2]

At the conclusion of the hearing, we advised
    that the appeal was dismissed with reasons to follow. These are those reasons.

Preliminary Motion to Adjourn

[3]

At the outset of this appeal hearing, counsel
    for MA Khan sought to adjourn the appeal. He claimed that approximately one
    month ago, he discovered that one of the co-defendants, Abdul Raheem Qureshi
    who has also appealed this judgment, will bring a motion to admit fresh
    evidence on his appeal.

[4]

Although the relationship between Mr. Qureshis
    application for fresh evidence and the present appeal was not made exactly
    clear, counsel argued the fresh evidence pertains to the domain name for Bama
    Inc. He also suggested that his client might seek to raise an allegation of
    ineffective assistance of counsel.

[5]

Counsel for MA Khan advised the court that he
    was in possession of a copy of what we understood to be the proposed notice of
    motion and affidavit of Mr. Qureshi, but did not provide any of the
    documents to which he made reference nor did he advise that he would be seeking
    an adjournment until the commencement of the hearing.

[6]

Counsel provided no explanation for the failure
    to address these issues before the commencement of the appeal hearing, why the
    evidence could not have been adduced earlier, or why he had never sought to
    join this appeal with Mr. Qureshis appeal. In the absence of any
    particulars or fresh evidence of the new allegations, we are unable to discern
    how MA Khans appeal could be affected.

[7]

Moreover, we agree the respondent would suffer
    non-compensable prejudice because of the requested adjournment. He used his
    life savings and borrowed money to invest in Bama Inc. because of Mr. Qureshis
    fraudulent misrepresentations and the fraudulent conspiracy carried out by Mr.
    Qureshi, MA Khan and Bama Inc., all of which he lost. He is paying interest on
    the money he borrowed. There was no offer to pay the costs thrown away.

[8]

For these reasons, the adjournment was refused,
    and the appeal was argued on its merits.

Brief Factual Background

[9]

The respondent renewed his friendship with Mr.
    Qureshi, his old friend from Pakistan. Mr. Qureshi offered the respondent an opportunity
    to invest his retirement savings and funds from a line of credit in a business
    venture.

[10]

The respondent thought he was investing in Bama
    Inc., which Mr. Qureshi told him was an active and successful electrical supply
    company. Bama Inc. had three directors: Mr. Qureshi, MA Khan and Badar Sohail
    Khan
[1]
.
    In fact, Bama Inc. was a shell company.

[11]

On November 28, 2014, the respondent transferred
    $60,000 into the business account of Bama Inc. On December 1, 2014, Mr. Qureshi
    transferred this amount into the ET Zone account.

[12]

On June 4, 2015, the respondent transferred
    $50,000 from his line of credit at CIBC to Mr. Qureshi personally.

[13]

On June 10, 2015, upon request made by Mr.
    Qureshi, the respondent transferred a further $100,000 payable to Bama Inc.,
    after Mr. Qureshi falsely promised the respondent a bank guarantee to secure
    the funds. This amount was then transferred to the ET Zone account.

[14]

Throughout this time, the respondent received
    two profit payments from his own funds: one of $4,000 on March 16, 2015 and
    another of $3,500 on July 2, 2015.

[15]

Unknown to the respondent until after the
    transfers, most of his money was transferred into a struggling company called
    ET Zone Supply Inc. Mr. Qureshi was ET Zones Business Development Manager.

[16]

The respondent lost his $210,000 investment.

[17]

After a three-day trial, the trial judge found
    MA Khan was liable (along with Mr. Qureshi and Bama Inc.) for conspiracy to
    cause economic injury to the respondent.

Issues

[18]

MA Khans grounds of appeal can be fairly summarized
    as follows:

1.

The trial judge applied the wrong legal test for
    and misapprehended the evidence to find he committed the tort of conspiracy to
    injure the respondent;

2.

The trial judge erred in awarding substantial
    indemnity costs against him because of her inconsistent findings concerning
    civil fraud.

[19]

At the hearing of the appeal, counsel for MA
    Khan attempted to argue the new ground of ineffective assistance of counsel. We
    did not permit him to do so. The respondent understandably objected. MA Khan
    had not raised this issue in his notice or supplementary notice of appeal nor
    was there any evidentiary foundation for it in the appeal record.


Analysis

(1)

The trial judge made no error in finding that MA
    Khan conspired to cause economic injury to the respondent

[20]

The trial judge applied the correct test for
    establishing civil conspiracy to injure. The test, as set out in
Canada
    Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate Ltd.
, [1983]
    1 S.C.R. 452, 145 D.L.R. (3d) 385, was cited by this court in
Agribrands
    Purina Canada Inc. v. Kasamekas
, 2011 ONCA 460, 106 O.R. (3d) 427, to
    which the trial judge referred.

[21]

The tort of conspiracy to injure is recognized
    where:

(1)

Whether
    the means used by the defendants are lawful or unlawful, the predominant
    purpose of the defendants' conduct is to cause injury to the plaintiff; or,

(2)

Where the
    conduct of the defendants is unlawful, the conduct is directed towards the plaintiff
    (alone or together with others), and the defendants should know in the
    circumstances that injury to the respondent is likely to and does result in
    loss to the plaintiff.

[22]

With respect to the second factor, it is not
    necessary that the predominant purpose of the defendants' conduct be to cause
    injury to the plaintiff but there must be a constructive intent derived from
    the fact that the defendants should have known that injury to the respondent
    would ensue and damage would be suffered by the plaintiff:
Agribrands
,
    at para. 24.

[23]

Applying these factors, the trial judge made the
    following findings in support of her conclusion that MA Khan conspired with Mr.
    Qureshi and Bama Inc. to cause economic injury to the respondent:

a.

MA Khan knew of ET Zone, he and Mr. Qureshi had
    both invested in ET Zone, and Mr. Qureshi was working for ET Zone an electric
    supply company.

b.

MA Khan engaged Mr. Qureshi to join Bama Inc.
    because we [ET Zone] may be able to do some business with Bama Inc.,
    although there was no legitimate reason to do so because Bama Inc. was a shell
    corporation whose stated purpose was to provide IT and human resources, not
    electrical supply.

c.

MA Khan arranged for Mr. Qureshi to become the
    third director of Bama Inc. in June 2014 to create a vehicle for indirect
    investment into ET Zone.

d.

Bama Inc. was a shell company with no operations
    so there was no reason to create a new corporate account for dispersal of
    profit.

e.

MA Khan and Mr. Qureshi are two of only three
    directors of Bama Inc.

f.

MA Khan was the director of Bama Inc. with IT
    experience. His former address and his wifes phone number were on the Bama Inc.
    websites main pages and he did not deny the existence of a website for the
    shell company that purported to be a thriving electrical company.

g.

Since he was the Bama Inc. director with IT
    experience, the trial judge was satisfied on a balance of probabilities that MA
    Khan was involved in creating the fake website showing that Bama Inc. was a
    thriving electrical supply company when it was not.

h.

Mr. Qureshi and MA Khan opened a Bama Inc.
    account on November 21, 2014 by depositing $222. Thereafter, that account was
    used to deposit monies received from the respondent.

i.

After the respondent deposited money to the Bama
    Inc. account, the money was moved to the ET Zone without notice to the
    respondent.

j.

MA Khan knew or was willfully blind as to where
    the deposits into the Bama Inc. account came from, as they were not flowing in
    as profits to be dispersed from ET Zone.

k.

MA Khan withdrew thousands of dollars from the
    Bama Inc. account for his personal purposes.

l.

Despite MA Khans testimony at trial that we
    [the investors in ET Zone] all had individual agreements with ET Zone, he did
    not produce his own investment agreement to explain the amounts withdrawn for
    his personal purposes from the Bama Inc. account once the respondents money
    was put into it.

[24]

The trial judge concluded that although MA Khan
    did not personally make specific misrepresentations to the respondent nor was
    he present when the misrepresentations were made, he was nonetheless involved
    in the conspiracy to injure the respondent and that the Bama Inc. account was
    used to mislead the [respondent] into believing his funds were being invested
    in Bama Inc. At para. 62, the trial judge concluded:

I find on a balance of probabilities that MA
    Khan conspired with Qureshi to obtain money for ET Zone through Bama Inc. He
    did so by working with Qureshi to create a corporate presence (bank account and
    website) to support the false impression that Bama Inc. was an active electrical-supply
    business. This misrepresentation was central to the success of the fraud on the
    [Respondent]. It would not have succeeded if MA Khan had not taken steps to
    make Qureshi a director of Bama Inc. Qureshis experience as an engineer in the
    electrical-supply industry was necessary for him to credibly hold himself out
    to the [Respondent] as a director of Bama Inc. as an electrical-supply
    business. It was Qureshi who had that background, not MA Khan. MA Khans
    background is in IT.

[25]

MA Khan submits that the trial judge erred in failing to address
    the fact that there was another email address on Bama Inc.s website and to
    find that this email address proved someone else created the website. We do not
    accept this submission. It was open to the trial judge on the evidence before
    her to find that MA Khan was implicated in the creation of the website. That
    others may have been involved does not invalidate the trial judges finding of
    MA Khans involvement.

[26]

He also argues that the trial judge
    misapprehended the evidence and erred in failing to consider that an amount he
    paid in June 2014 to ET Zone was similar to an amount paid by the respondent to
    Bama Inc. in November 2014. We disagree. The trial judge was clear that MA Khan
    himself had invested money in ET Zone. There was no error; the two payments
    were unrelated.

[27]

The evidence amply supports the trial judges
    conclusion that both MA Khan and Mr. Qureshi were personally liable for
    tortious conduct in conspiring to defraud the respondent. All the elements of
    the tort of conspiracy were made out because:

a.

MA Khan and Mr. Qureshi created the false
    impression that Bama Inc. was an active, successful electrical supply company
    in order to obtain funds to give to ET Zone, where both had invested money;

b.

they obtained funds in the name of Bama Inc.,
    knowing or constructively knowing the respondent was likely to lose his money;

c.

they acted in furtherance of this plan; and

d.

the respondent suffered damages as a result.

[28]

We see no basis for appellate intervention.

(2)

The trial judge made no error in her costs award

[29]

MA Khan argues that the trial judge erred in
    awarding substantial indemnity costs against him in the amount of $133,501.61
    based on civil fraud when she expressly found in her trial judgment that he did
    not commit civil fraud.

[30]

We do not accept this submission.

[31]

While MA Khan was not found liable for civil
    fraud, deceit or conversion, he was found liable for his fraudulent behaviour
    in committing the conspiracy to cause the respondent economic injury. It is
    clearly on this latter basis that the trial judge determined that MA Khan
    should pay the respondents costs on a substantial indemnity basis.

[32]

Cost awards are accorded deference. The
    behaviour of MA Khan, Mr. Qureshi and Bama Inc., as found by the trial
    judge, was egregious and justified the exceptional substantial indemnity scale.
    There is no basis to overturn the costs award.

Disposition

[33]

For these reasons, the appeal is dismissed.

[34]

The respondent is awarded partial indemnity
    costs in the amount of $10,551.48 inclusive of taxes and disbursements.


L.B.
    Roberts J.A.

Gary
    Trotter J.A.

J.A.
    Thorburn J.A.





[1]

The trial judge dismissed the action
against

Badar Sohail Khan for lack of evidence of
    his involvement in the fraud.


