



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Manning v. Dhalla,









2020 BCCA 35




Date: 20200117

Docket: CA46272

Between:

Andreas Eric
Manning, A.E. Manning M.D. Inc., and 0712199 B.C. Ltd.

Respondents

(Plaintiffs)

And

Naguib Dhalla

Appellant

(Defendant)




Before:



The Honourable Madam Justice DeWitt-Van Oosten

(In Chambers)




On appeal from:  An
order of the Supreme Court of British Columbia, dated
July 2, 2019 (
Manning v. Dhalla
, 2019 BCSC 1067, Vancouver Docket
S133517).

Oral Reasons for Judgment




Counsel for the Appellant:



T.A. Hakemi





Counsel for the Respondents:



S. Kamboj





Place and Date of Hearing:



Vancouver, British
  Columbia

January 17, 2020





Place and Date of Judgment:



Vancouver, British
  Columbia

January 17, 2020








Summary:

The respondents sought $350,000
in security for costs of the appeal and costs of the trial.  Held: Application
allowed in part.  Security for costs of the appeal is granted in the amount of
$35,000.  It must be posted within 30 days.  The application for security for
costs of the trial is adjourned, generally.  The respondents did not provide
sufficient information to substantiate the amount sought.

[1]

DEWITT-VAN OOSTEN J.A.
: The respondents seek the following orders:
(1) $350,000 as security for costs of the appeal and costs of the trial;
(2) a stay of the appeal pending the posting of security; (3) leave to apply to
dismiss the appeal if security is not posted within 30 days; and (4) costs on
the application.

[2]

The appellant is opposed to all four orders.

Background

[3]

From 2008 to 2011, the appellant, Naguib Dhalla, was retained to assist
the respondent, Andreas Eric Manning (a physician), and his two companies with
bookkeeping and other financial tasks. Dr. Manning is the sole officer,
director, and shareholder of the companies.  In this role, Mr. Dhalla
engaged in discussions with Dr. Manning about investment opportunities.  Among
other things, he is said to have encouraged Dr. Manning to invest over $12
million in a Ponzi scheme orchestrated by Rashida Samji, a notary public. Dr. Manning
alleges that, unbeknownst to him, Mr. Dhalla received a commission from Ms. Samji
for securing that investment.

[4]

In 2012, the Ponzi scheme collapsed and the respondents lost over $8 million.
 In a related class action, Ms. Samji was found to have committed fraud,
misrepresentation, breach of trust, and conversion:
Jer v. Samji
, 2014
BCSC 1629; affd 2015 BCCA 257, leave to appeal refd [2015] S.C.C.A. No. 345
(S.C.C.).  She was also found guilty of fraud and theft under the
Criminal
Code
, R.S.C. 1985, c. C‑46,

and sentenced to six years
imprisonment:
R. v. Samji
, 2016 BCPC 301.  Finally, the BC
Securities Commission imposed penalties against Ms. Samji that include a
disgorgement order of more than $10 million and an administrative penalty of
$33 million:
Samji (Re)
, 2015 BCSECCOM 29.  The Commission found
that Ms. Samji perpetrated a fraud by trading securities to at least 200
investors for proceeds of at least $100 million:
Samji (Re)
, 2014
BCSECCOM 286.

[5]

I understand that since the collapse of the Ponzi scheme, the
respondents have recovered about $3 million of their losses.  They continue to
seek remedies in respect of the remaining $5 million.

[6]

This appeal arises from an action in fraudulent misrepresentation that
was brought against Mr. Dhalla by the respondents in May 2013.  Mr. Dhalla
is alleged to have concealed the commission he received from Ms. Samji in
exchange for the respondents investment.

[7]

On December 5, 2018, Justice Branch dismissed the respondents action:
Manning
v. Dhalla
, 2018 BCSC 2148.  The primary basis for the dismissal was that
the respondents failed to prove that Mr. Dhalla received a commission.  There
is an outstanding appeal from that dismissal, although presently in abeyance.

[8]

Approximately two weeks after the dismissal, the respondents received
documents from legal counsel in the class action that appear to substantiate
their claim of a commission.  Mr. Dhalla did not produce the documents in
the court below; however, he has acknowledged that they likely originated with
him.

[9]

The respondents applied for a mistrial based on Mr. Dhallas
failure to disclose the documents.  The order dismissing the respondents claim
had not been entered when the application was filed; accordingly, they took the
position that Justice Branch was not
functus.
The trial judge granted
the application for a mistrial on grounds that not doing so would result in a
miscarriage of justice.  He found that the entire trial was tainted by the
absence of this information .  The documents are so important that they are
likely to change the complexion of everything heard at the trial:
Manning
v. Dhalla
, 2019 BCSC 1067 at para. 52.  Justice Branch subsequently
awarded special costs to the respondents:
Manning v. Dhalla
, 2019 BCSC
1514.  Those costs have not been assessed.  Dr. Manning says that to
complete the assessment would require that he waive privilege over his legal
files on the misrepresentation action.  He is not prepared to do so until the
action has completed.

[10]

Mr. Dhalla appeals from the order for a mistrial, as well as the
award of special costs.  He contends that the trial judge erred in granting a
mistrial, at least in part, on grounds that the faster and less expensive
option of an appeal would result in an injustice.  Mr. Dhalla says the
judge wrongly thought that a fresh evidence application on the appeal would not
adequately address the situation, and a mistrial was therefore a more effective
remedy to address any injustices that would otherwise result if the respondents
were not able to have their civil claim reconsidered.  Mr. Dhalla also
says it was reasonably open to the judge to re‑open the trial, allow the
documents in as evidence, and give the parties an opportunity to address them,
recalling witnesses if necessary.  From Mr. Dhallas perspective, it was
not required that the trial begin afresh.

Discussion

A.

Security for Costs of the Appeal

[11]

The jurisdiction to order security for costs of an appeal is found in
s. 24(1) of the
Court of Appeal Act
, R.S.B.C. 1996, c. 77.  The
appellant bears the onus of showing that an order is not warranted:
Creative
Salmon Company Ltd. v. Staniford
, 2007 BCCA 285 at para. 9 (Chambers).
 The primary question for me to answer is whether an order for security would be
in the interests of justice:
Lu v. Mao
, 2006 BCCA 560 at para. 6
(Chambers).  The relevant factors were summarized in
Gardezi v. Positive
Living Society of British Columbia
, 2018 BCCA 84 (Chambers):

[29]      This Court generally considers five factors in
determining whether to make an order for security for costs of the appeal.  The
first factor is the appellants financial means.  If ordering security for
costs would prevent the appellant from pursuing a meritorious appeal, it may
not be in the interests of justice to make the order:
Zen v. M.R.S. Trust
Company
(1997), 88 B.C.A.C. 198 (Chambers).  However, the Court may require
the appellant to post security for costs of the appeal even if obtaining the
funds would be difficult:
D. Bacon Holdings Ltd. v. Naramata Vines Inc.
,
2010 BCCA 427 at para. 21 (Chambers).

[30]      The second factor is whether the costs of the
appeal will be readily recoverable if the respondent succeeds.  If the
applicant shows there is a serious question that recovery may be difficult, a
presumption in favour of granting security for costs arises, unless the
appellant can demonstrate the appeal has obvious merit:
Edwards v. Moran
,
2003 BCCA 443 at para. 14 (Chambers);
Sangha v. Azevedo
, 2005 BCCA
125 at para. 6 (Chambers).

[31]      The third factor is the timing of the application
for security.  Because the appeal is usually stayed until security is posted,
injustice would result if the respondent applied for security for costs on the
eve of the appeal:
M.(M.) v. F.(R.)
(1997), 43 B.C.L.R. (3d) 98
at 101 (C.A. in Chambers).

[32]      The fourth factor is the merits of the appeal.  If
the appeal is virtually hopeless or bound to fail, security for costs may
be ordered even if the order prevents the appellant from pursuing the appeal:
Jenkins
v. Swallow Frames & Cycles Ltd.
(1997), 97 B.C.A.C. 81 at paras. 5, 7
(Chambers);
Freshway Specialty Foods Inc. v. Map Produce LLC
,

2006 BCCA 592 at para. 14 (Chambers).  On the other hand, the Court
will not order security for costs if it would prevent the appellant from
pursuing a meritorious appeal:
Creative Salmon Company Ltd.
at para. 12.

[33]      The fifth and ultimate
factor is whether the order for security for costs would be in the interests of
justice:
Lu v. Mao
, 2006 BCCA 560 at para. 6 (Chambers).

Appellants Financial Means

[12]

Applying this framework to the case before me, Mr. Dhalla has not
filed an affidavit setting out his current financial circumstances.  He has not
shown that he has sufficient assets to cover the costs of an appeal.

[13]

Nor has he shown that he could not prosecute his appeal if ordered to secure
the respondents costs:
Zen v. M.R.S. Trust Company
(1997), 69 A.C.W.S.
(3d) 608 (B.C. C.A.) at para. 18 (Chambers).  His counsel takes the position
that affidavit evidence to this effect was not necessary.  Instead, the Court
should simply infer, from the trial record and the evidence put forward by the
respondents, that Mr. Dhalla is not someone with the means to post a large
amount of security.  He says he could afford $5,000 in security, but anything
above that is likely problematic.

Difficulty of Recovery

[14]

The respondents contend that Mr. Dhalla does not have sufficient
exigible assets to satisfy the order for special costs made below; any award
for damages that might emerge from completion of the trial; costs on the trial
if the respondents are successful in their claim for misrepresentation; or,
costs on the appeal should Mr. Dhalla fail in his challenge to the order
for a mistrial.  As noted, there is no evidence to the contrary.

[15]

According to the respondents, Mr. Dhalla holds a 1/7 interest as a
registered owner of lands valued at $684,600.  However, there is a $500,000
mortgage against that property.

[16]

The respondents also contend that Mr. Dhalla has taken steps to
place assets beyond the reach of creditors, which does not bode well for their
ability to recover against him.  On May 30, 2019 (after the respondents filed
their mistrial application), he is said to have transferred title of a residential
property owned by him to his spouse for the sum of $1.00.  The assessed value
of the transferred property is $1.31 million.  As I understand it, there are
two mortgages registered against title, with a cumulative value of $1.56
million.  The second of these mortgages, which secures a loan of $1 million,
was registered after Mr. Dhalla transferred the property to his spouse.  The
respondents have filed an action in fraudulent conveyance in respect of that
transfer.

Timing of the Application

[17]

Mr. Dhalla commenced his appeal on August 1, 2019.  He filed the
appeal record on September 30, 2019, and his appeal book on October 30, 2019.  He
has not filed a factum. In accordance with Rule 21(1) of the
Court of Appeal
Rules
, the factum was due October 30, 2019.  He requires an order to extend
time for filing his factum.  Filing the factum is a necessary pre‑requisite
to setting a date for hearing on the merits of the appeal.

[18]

The respondents motion for security of costs was filed on December 5,
2019.  However, on November 14, 2019, they advised Mr. Dhalla that they
required security for costs (either by consent or pursuant to an order from
this Court).  As such, he has had notice of a pending application since then.

[19]

While there has been delay in bringing this application (three and one
half months), I see no real prejudice in granting security at this point.  The
factums have not been prepared and a hearing date has not been secured.  Mr. Dhalla
accepts, for todays purposes, that the application for security is timely.

Merits of the Appeal

[20]

Mr. Dhalla contends that his appeal has merit.  As noted, he says
the trial judge wrongly thought that a mistrial was the only effective remedy.  The
appellant does not contend that a mistrial was not jurisdictionally open to the
trial judge; rather, it is the basis on which the order was granted that is
contested by Mr. Dhalla.  He also points out that although the
respondents claim was dismissed on the ground that there was no proof of a
commission, the judge went on to make other findings that would have defeated
the claim in any event (such as no reliance placed by Dr. Manning on Mr. Dhallas
financial advice).  In deciding whether the judge committed reviewable error
in granting a mistrial, these additional findings will need to be considered.  It
is likely to be argued on the appeal that even if the late‑in‑the‑day
documents established proof of a commission, it mattered not, because there was
no reliance on anything said about the Ponzi scheme by Mr. Dhalla.

[21]

I have reviewed the reasons for judgment in the court below.  It is
ultimately for a division to assess the merits of the appeal and determine
whether the appellant is able to establish reversible error.  However, I note
that in granting a mistrial, Justice Branch was alive to the fact that a
mistrial is a last resort and will occur only where the court concludes that
no other curative measure will suffice (at para. 33).

[22]

He also found that the entire trial was tainted by the absence of [the
discovered information] (at para. 52).  As I read his reasons, based on
his familiarity with the evidence, he concluded that even if the respondents
could meet the test for fresh evidence on an appeal, that application and
possibly the outcome of the appeal would be assessed within the context of a
record that lacked integrity because of the appellants non‑disclosure
of the relevant documents.  From the trial judges perspective, the
availability of the documents would have changed everything at the trial, and
the respondents were entitled to an opportunity to reframe their case, from
their pleadings and opening submissions, through to the evidence of their own
witnesses (at para. 52).  If they remained unsuccessful in proving their
case against Mr. Dhalla, any subsequent appeal of the dismissal would at
least be informed by a more complete (and accurate) evidentiary foundation.

[23]

I cannot say that the appeal is without merit.  However, on the face of
it, I do not see obvious error in the reasoning brought to bear by the trial
judge.  The granting of a mistrial is discretionary and not something interfered
with lightly by this Court:
Cleeve v. Gregerson,
2009 BCCA 2 at para. 33.

[24]

After weighing the relevant factors, as a whole, I am satisfied it is in
the interests of justice to order that Mr. Dhalla post security for costs
of the appeal.  The respondents contend that the appeal will cost approximately
$50,000.  However, they have not provided a draft bill of costs supporting that
estimate, or any other breakdown of the anticipated costs.  The appellant says
the estimate is excessive.  The mistrial application took one day before
Justice Branch and the appellant estimates a half day for the appeal.  In my
view, posting $35,000 in security as costs of the appeal is reasonable in the
circumstances of this case.  Although the mistrial application consumed only
one day of court time, it may be that large portions of the trial record need
to be available for the appeal to properly assess the judges determination
that the entirety of the evidence was tainted by the non‑disclosure.

B.

Security for Costs of the Trial

[25]

The jurisdiction to order security for costs of the trial is found in
s. 10(2)(b) of the
Court of Appeal Act
, which authorizes a justice
to make an interim order to prevent prejudice.  This form of security is
ordered less readily than costs of an appeal:
Siekham

v. Hiebert
,
2008 BCCA 299

at para. 13 (Chambers).  The governing principles are
set out in
Aikenhead v. Jenkins
, 2002 BCCA 234 at para. 30
(Chambers):

1.

The onus
is on the applicant to show that it is in the interest of justice to order
posting for security of a trial judgment and/or of trial costs.

2.

The
applicant must show prejudice if the order is not made.

3.

In
determining the interests of justice the chambers judge should consider the
merits of the appeal and the effect of such an order on the ability of the
appellant to continue the appeal.

[26]

Applying these principles, I note that prejudice in an application for
security of trial costs generally arises where pursuit of the appeal
negatively alters the respondents ability to recover sums found by the trial
court to be owing to it:
Agent E v. Canada (Attorney General)
, 2018
BCCA 492 at para. 17 (Chambers).  For example, prejudice can arise where
an appellant obtains a stay of execution in respect of a trial judgment or
trial costs, incidental to the appeal.  If a respondents ability to collect
its trial costs is made no worse by the fact of an appeal, the threshold has
likely not been met:
Chan
v
.
Vancouver
Trade Mart Inc.

(1997),
29 B.C.L.R. (3d) 264 (C.A.);
D. Bacon Holdings Ltd.
v. Naramata Vines Inc.
, 2010 BCCA 427 at para. 25 (Chambers).

[27]

Here, as noted, the respondents submit that Mr. Dhalla does not
have sufficient exigible assets to satisfy the special costs award.  Moreover,
by transferring real property to his spouse, Mr. Dhalla has made it more
difficult (and less likely) that the respondents will be able to recover on
that judgment, or any other monetary amounts that may be awarded in their
favour.  The respondents say that Mr. Dhallas conduct in the court below
shows he is willing to mislead the court and disobey the rules; as such, they
have little faith he will voluntarily pay amounts ordered against him.  They
now find themselves having to expend further costs to defend what they believe
is a meritless appeal.

[28]

I appreciate the respondents concerns; however, in my view, the
prejudice alleged in support of their application for costs of the trial does
not arise from the fact of an appeal.  Rather, it is predominantly grounded in
circumstances that existed prior to the appeal having been filed, and would
have existed in any event.

[29]

The respondents have not submitted a certificate of costs relating to
the trial (the costs have not been assessed), or even a draft bill of costs.  The
affidavits depose that the actual costs incurred at trial were in excess of
$380,000. However, there is no particularization.

[30]

There are cases in which this Court has declined to rule on an
application for security for trial costs where costs have yet to be assessed.  See,
for example,
Buchy v. Villars
, 2008 BCCA 237 at para. 3 (Chambers);
Friends of Davie Bay v. British Columbia
, 2011 BCCA 491 at para. 14
(Chambers).  At the same time, I appreciate there are decisions in which
security has been granted, even without that evidence.  See, for example,
Lombardo
v. Lombardo,
2008 BCCA 21. It is a case‑by‑case determination.

[31]

The respondents are seeking $300,000 in security for costs of the trial.
 That is a considerable amount.  The information before me is insufficient to
decide whether the whole of that amount, or only a portion of it, will be
included in the assessment of special costs.  To come up with a figure at this
time would be speculative.  I note that the order granting special costs is
itself under appeal.

[32]

As stated, although I cannot say the appeal lacks merit, I do not find
it to be a strong challenge, as currently framed.  Mr. Dhalla has not
tendered financial information indicating that an order for security of costs
of the trial will present an undue hardship to him, or preclude him from
pursuing his appeal.  However, given the primary genesis of the prejudice
alleged by the respondents; the lack of particularization provided in support
of the estimate of $300,000; and the fact that an assessment of costs will not
occur for some time, in part because of the position taken by the respondents
on production of their legal files, I consider it in the interests of justice
to adjourn this aspect of the respondents motion generally.  They have leave
to re‑apply should greater particularization become available, there is a
material change in circumstance, or additional information comes to light that
necessitates reconsideration.

C.

Stay of Appeal Pending Posting of Security

[33]

Where the Court orders security for costs, it will usually stay the
appeal until security is posted:
Pitt Polder Preservation Society v. Pitt
Meadows (District)
, 1999 BCCA 593 at para. 5 (Chambers);
Austin v.
Goerz
, 2007 BCCA 151 at para. 6.

D.

Leave to Appeal to Dismiss as Abandoned

[34]

The respondents seek an order for leave to apply to dismiss the appeal
as abandoned if security is not posted within 30 days.  That order is
unnecessary as s. 24(2) of the
Court of Appeal Act
gives a justice
the power to dismiss the appeal of an appellant who fails to comply with an
order to post security for costs of the appeal:
Sutherland v. Reeves
,
2013 BCCA 495 at paras. 2223 (Chambers);
The Owners, Strata Plan
LMS3259 v. Sze Hang Holding Inc.
, 2010 BCCA 80 at para. 9
(Chambers).

E.

Costs of the Application

[35]

Usually, costs on this type of application will be costs in the appeal:
Lee
v. Lee
, 2014 BCCA 155 at para. 62 (Chambers);
Pearlman v. Insurance
Corporation of British Columbia
, 2009 BCCA 237 at para. 35 (Chambers).  However,
the application in this case was necessitated, in large part, because of Mr. Dhallas
conduct in the court below.  In those circumstances, I consider it appropriate
to order that the respondents receive their costs on the application, in any
event of the appeal.

Disposition

[36]

For the reasons provided, I order that Mr. Dhalla post security for
costs of the appeal in the amount of $35,000.  The appeal is stayed until the
security is posted.  The appellant has 30 days in which to do so.  I grant the respondents
costs on this application, in any event of the appeal.

[37]

The application for security for costs of the trial is adjourned
generally.

[38]

Finally, the application for leave to apply to dismiss the appeal if
security for costs of the appeal is not posted within 30 days is dismissed on
the basis that it is not necessary.

The Honourable Madam Justice DeWitt‑Van Oosten


