Court File and Parties

COURT FILE NO.: C-435-13 DATE: 2018/07/05 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

IRIS POWELL and THE CLASSIC PLUS WOMAN INC. Plaintiffs – and – SEAN SILVA, MOHAMED AFZAL SAHADAT, ISHAN DHANAPALA, DHANA CORPORATION and FIRST FINANCIAL CONSULTING SERVICES (FFCS) LTD. Defendants

Counsel: Richard Campbell, for the Plaintiffs Osborne G. Barnwell, for the Defendants, Mohamed Afzal Sahadat, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. Defendant Sean Silva – Self-represented

HEARD: September 26, 30, December 8, 9, 2016, January 26 and November 27, 2017. Written submissions completed January 4, 2018.

D.A. Broad, J.

Reasons for Judgment

Background

[1] It is fair to say that the transactions and interactions between the parties in this action were unusual and to a large extent inexplicable. Mr. Campbell’s characterization of the story as “convoluted” in his opening statement proved to be an understatement. Nevertheless, the essential facts that bear on the resolution of the dispute between the parties may be summarized as follows.

[2] The plaintiff Iris Powell (“Powell”) made an advance of money on November 25, 2011 to one or more of the defendants. She characterized the advance as a loan to the defendant Mohamed Afzal Sahadat (“Sahadat). The total amount of the advance is in dispute. The total was either $20,000 or $25,000.

[3] Sahadat directed Powell to pay $15,000 of the advance to First Financial Consulting Services (FFCS) Ltd. (“FFCS”) and $5,000 to Dhana Corporation (“Dhana Corp.”). FFCS and Dhana Corp were corporations controlled by the defendant Ishan Dhanapala (“Dhanapala”). Dhanapala was a friend and business associate of Sahadat and was in the business of financial consulting, including the referral of clients to various business opportunities. He maintained an investment club called “Dhana Private Investment Club” or “DPIC.” Individuals who were referred to Dhanapala could pay a fee of either $20,000 or $25,000 to FFCS or Dhana Corp. to become members of DPIC. Dhanapala stated that membership in DPIC would give them the exclusive opportunity for a three year period to participate in investment opportunities to which Dhanapala had access. In November 2011 one of those investment opportunities was a condominium building in Welland, Ontario in which 19 units were being offered for sale.

[4] Dhanapala stated that, if they qualified for a mortgage, members of DPIC would be able to purchase one or more condominium units in the Welland project for 70% of their appraised value of $129,000 by taking on a mortgage equal to the purchase price of approximately $90,300.00. No payment of any amount in excess of the mortgage to be registered on closing was required. How this was made possible was not adequately explained, however, an explanation is not required in order to resolve the issues in the action.

[5] Instead of making the advance of $15,000 to FFCS, as directed by Sahadat, Powell made her bank draft payable to the defendant Sean Silva (“Silva”). Silva was a friend and business associate of Dhanapala and acted as a “mortgage agent” in connection with the mortgage to be registered on the purchase by Powell of a unit in the Welland condominium project.

[6] Making the bank draft payable to Silva appears to have been a mistake by Powell. Upon receipt of the bank draft, on instructions from Sahadat and Dhanapala, Silva paid over the $15,000 to FFCS, being Powell’s intended recipient of this part of the advance. In the result Dhanapala’s two corporations received $20,000 in the aggregate, being all or part of Powell’s total advance to Sahadat.

[7] Powell says that, in addition to the sum of $20,000 advanced to Dhanapala’s corporations, she also advanced $5,000 in cash to Sahadat. Sahadat denies that he received any cash advance from Powell. Powell produced no proof of a cash payment of $5,000 to Sahadat, other than her bank statement showing two cash withdrawals of $2,500 each.

[8] Powell obtained the funds to advance to Sahadat by selling future credit card receipts of her retail business Classic Plus Woman in the aggregate amount of $41,850 in exchange for an immediate payment of $30,000. The purchaser of the credit card receipts was Principis Capital LLC (“Principis”). Principis was somehow associated with Sahadat’s employer Merchant Services Inc. (“Merchant Services”). The precise nature of the relationship between Principis and Merchant Services was not explained in the evidence. Merchant Services was in the business of selling point of sale systems, being credit and debit card terminals. Sahadat and Powell had initially met in September 2011 when Sahadat made a sales call on Powell and ultimately arranged a lease of a point of sale system to her for use in her business.

[9] Under the agreement with Principis future credit card receipts of Classic Plus Woman totalling $41,850 were to be paid to Principis over time by the deduction of 25% of all of its credit card sales until payment in full.

[10] The transaction between Powell and Principis was essentially a factoring arrangement whereby she sold 25% of her future credit card sales up to $41,850 for an immediate discounted amount of $30,000.

[11] The transaction between Powell and Principis closed on November 25, 2011 by the deposit by Principis of $30,000 into Powell’s business account. Payment by Powell to Principis of $41,850 was completed by January 2014, by the deduction at source of 25% of Classic Plus Woman’s credit card sales over that period.

[12] Powell testified that she did not know the purpose for which Sahadat borrowed the funds from her. She says that she did not enquire of Sahadat what he proposed to do with the money as she felt that this was his own business.

[13] Sahadat, for his part, testified that, to Powell’s knowledge and agreement, she advanced the funds to him to allow him to become a member of DPIC, which, in turn, permitted him and Powell to each purchase a unit or units in the Welland condominium project. He stated that under his arrangement with Dhanapala his membership in DPIC would also allow Powell to participate in the Welland condominium purchase opportunity.

[14] Sahadat testified that, prior to receipt of the funds from Principis, Powell decided, in consultation with him, to use a portion of the funds to facilitate the purchase of a condominium unit and “flip” it to make a quick profit, rather than invest the entire amount of $30,000 in her business to pay suppliers and to purchase inventory.

[15] Sahadat stated that, under his arrangement with Dhanapala, in order for both Powell and him to obtain the right to purchase condominium units, it was necessary for him to become a member of DPIC. The $20,000 needed for his membership in DPIC was advanced to Sahadat by Powell out of the proceeds of her transaction with Principis. Sahadat says that Powell used the remaining $10,000 she received from Principis to pay arrears of property taxes and other personal or business obligations.

[16] Sahadat had introduced Powell to Dhanapala at a party in Toronto at the end of October 2011. Dhanapala met with Powell shortly thereafter at her store in Kitchener. Dhanapala testified that he reviewed the “pros and cons” of the condominium purchase with Powell at this meeting.

[17] Powell testified that Sahadat orally agreed to pay her $42,000 in quarterly instalments over one year as repayment on what she says was a loan to him in the sum of $30,000, less a “front-end fee” to her of $5,000.00, for a net advance of $25,000. According to Powell, if these payments were made by Sahadat on a timely basis her obligation to Principis on the sale of her future credit card receipts would be covered and she would have enjoyed a profit on the contemplated “flip” of her Welland condominium.

[18] Sahadat denied that he agreed to pay the sum of $42,000 to Powell in quarterly instalments, but rather the understanding between them was that repayment to Powell of the $20,000 advance would depend upon on how his investment in his Welland condominium unit performed. If he was able to “flip” the unit quickly at a profit he would pay her more than $20,000. If not, he would pay her less.

[19] Powell did purchase a condominium unit in the Welland project. She paid no money down but took out a mortgage for the full purchase price. Powell subsequently sold the unit. No details were given in evidence on when the unit was sold or at what price. Powell has made no claim in the action against the defendants in relation to her investment in the Welland condominium unit.

[20] Powell says that no amount of the $25,000 which she says was advanced by her to Sahadat has been repaid, save for $1,100 paid to her by Dhanapala in February 2012. Sahadat and Danapala, in their Statement of Defence, stated that they paid $6,800 to Powell. At trial Sahadat testified that he paid Powell an additional $13,500 in various instalments by May 2012. He stated that he had “forgotten” that he had made these payments until shortly before trial. He says he forgot about the payments because at the time he was under a lot of stress due to his divorce from his ex-wife and the death of his brother. Sahadat said that the total amount paid to Powell, between himself and Dhanapala, was $20,300.

The Pleadings

(a) Statement of Claim

[21] In her Statement of Claim (prepared by the plaintiffs’ previous counsel, not Mr. Campbell) Powell alleged that Sahadat, Dhnapala and Silva “encouraged” her to enter into the transaction with Principis and “suggested” to her that doing so would provide her with additional funds to grow the business of Classic Plus Woman. She also alleged that it was expressly agreed that repayment to her of the $25,000 would be made by “any or all of the defendants jointly and severally” in the amount of $10,500 quarterly over the following 12 months for a total repayment of $42,000 “or a greater amount depending on the return on investment enjoyed by the defendants through Dhana Corp. and FFCS.” Powell also alleged that Sahadat agreed that she would keep $5,000 from the amount received from Principis “as consideration for the transaction.”

[22] Powell and The Classic Plus Woman Inc. alleged in the Statement of Claim that “as a result of the failure of the defendants to repay” them, they have been required to pay on the Principis transaction a monthly payment of 10% of the sale of Classic Plus Woman Inc. (not 25% of its credit card sales as provided in the agreement between Powell and Principis) and “have been unable to purchase necessary inventory, or to grow their business given the lack of cash flow resulting from the failure of the defendants to make payments to Powell.” The Plaintiffs alleged that they incurred substantial business losses as a result of the conduct of the defendants.

[23] The plaintiffs allege in the Statement of Claim that the defendants were unjustly enriched, that their conduct constituted breach of contract, negligence, breach of duty, breach of fiduciary duty, and breach of trust. They claimed:

(a) the sum of $100,000 jointly and severally as against the defendants [not specified to be repayment of a loan or damages];

(b) alternatively, damages for $100,000 for breach of trust;

(c) a declaration that the benefits which accrued to the defendants as a result of their conduct unjustly enriched the defendants;

(d) a declaration that the defendants hold in trust for the plaintiffs the amount of $42,000 jointly and severally;

(e) punitive damages in an amount to be determined by the court;

(f) disgorgement and an accounting of the benefits accruing to the defendants as result of their conduct.

(b) Statement of Defence

[24] The Statement of Defence (prepared by previous counsel then acting for all of the defendants, not Mr. Barnwell) was formatted in an unusual fashion. There are three separate “Defences” set out in one pleading, one for Silva, one for Sahadat, and one for Dhanapala, Dhana Corp and FFCS. In addition there was a Counterclaim on behalf of Sahadat and a separate Counterclaim on behalf of Dhanapala, Dhana Corporation and FFCS. During the trial Mr. Barnwell advised that the Counterclaims were not being pursued.

(i) Defence of Silva

[25] In his Defence Silva denies having any involvement in the transactions alleged in the Statement of Claim and that his entire involvement with the plaintiffs was limited to arranging a mortgage on Powell’s behalf with respect of a condominium which she purchased, and receiving from Sahadat a $15,000 bank draft from Powell which he then passed on, with Powell’s full knowledge, to Dhanapala. He says that although he received $15,000 of Powell’s money from Sahadat he did so on the understanding of all parties that he was receiving the monies on behalf of Dhanapala and that he was under no obligation to pay any monies to the plaintiffs.

(ii) Defence of Sahadat

[26] In his Defence Sahadat denied that “anyone promised to make Powell whole” and stated that Powell was fully aware that she would have to use her own funds to repay the cash advance from Principis and all charges thereon.

[27] Sahadat further alleged in his Defence that, after Powell received the advance from Principis, she asked him how she could make some money. Sahadat responded that he knew someone but there were risks involved. After Powell advised that she was willing to take the risks, Sahadat introduced Powell to Dhanapala.

[28] Sahadat alleged that, following a meeting between Powell and Dhanapala, Powell agreed to pay $5,000 to Dhana Corp. and $15,000 to FFCS and in return Dhanapala and Sahadat agreed that they would pay Powell $10,000 within a year and that Dhanapala would “obtain approval, and a good discount” with respect to the purchase of two condominium properties at a project in Welland. Sahadat stated that, due to Dhanapala being unavailable “at the time of Ms. Powell’s investment” Powell gave his share to Sahadat, who gave it to Silva, who paid it to Dhanapala shortly thereafter.

[29] Sahadat alleged that, aside from his and Dhanapala’s promise to pay Powell $10,000, none of the defendants made any promise to pay monies to the plaintiffs.

[30] Sahadat, in his Defence, admitted that Powell paid $15,000 to him, which he paid to Dhanapala via Silva, and that she paid a further sum of $5,000 to Dhana Corp. He denied having received an additional $5,000 from Powell. He said that the remaining $10,000 of the advance from Pricipis was retained by Powell to pay her personal and business expenses.

[31] Sahadat alleged in his Defence that he and Dhanapala paid $6,800 to Powell and denied that he owes any further monies to her.

[32] Sahadat alleged in his Defence that, although Powell has only been paid $6,800 of the $10,000 that he and Dhanapala promised to pay her, he claimed a “right of set-off” with respect to the remaining $3,200 on the basis of the facts set out in his Counterclaim. Sahadat’s Counterclaim was not pursued at trial.

(iii) Defence of the “Dhanapala Defendants”

[33] In their Defence, Dhanapala, Dhana Corporation and FFCS (defined in the Defence as the “Dhanapala defendants”) admitted that they owed certain duties to Powell “as a result of receiving investment funds from her” but denied that they breached any of their duties to her. They denied that they ever encouraged the plaintiffs to “take out a loan” or offered Powell any advice on how to grow her business. They further denied that they ever warranted to Powell that she would “be made whole.”

[34] In their Defence the Dhanapala defendants adopted the version of the transactions with Powell as alleged by Sahadat in his Defence and in particular that Powell agreed to pay $5,000 to Dhana Corp. and $15,000 to Dhanapala and in return Dhanapala and Sahadat agreed to pay Powell $10,000 within a year and Dhanapala would “obtain approval and a good discount” with respect to the purchase by Powell of condominium units in the Welland project.

[35] The Dhanapala defendants pleaded that the $20,000 they received from Powell “was invested in mortgages on her behalf” and that “the entire return from those investments were paid by them to Sahadat and FFCS, who in turn paid it to Powell.” No particulars were given in the Defence of the “mortgages” which the $20,000 received from Powell were invested in, nor of the “return” on those mortgage investments.

[36] The Dhanapala defendants alleged in their Defence that $6,800 was paid to Powell.

[37] The Dhanapala defendants denied liability with respect to the remaining $3,200 of the $10,000 that Dhanapala and Sahadat promised to pay Powell based on their “right of set-off” on the basis of the facts set out in their counterclaim. The Dhanapala defendants’ Counterclaim was not pursued at trial.

[38] All of the defendants, in their respective Defences, denied that the plaintiff The Classic Plus Woman Inc. had any standing to bring the action as the alleged loan transaction took place in 2011, prior to the incorporation of The Classic Plus Woman Inc..

Issues

[39] Based upon the foregoing, the issues raised in this action are as follows:

(a) To whom did Powell make the advance out of the funds she received from Principis?

(b) What was the total amount that Powell advanced?

(c) How should the advance be characterized – as a loan, or as an investment, or otherwise?

(d) What were the terms under which the monies were advanced by Powell – in particular, was the recipient or recipients of the advance under an obligation to make any payment to Powell and, if so, when and how much?

(e) Were there moneys paid to Powell by one or more of the defendants and, if so, when and how much?

(f) Did one or more of the defendants breach an obligation to make any payment to Powell?

(g) If there was a breach on the part of one or more of the defendants of an obligation to make payment to Powell, are the plaintiffs entitled to claim business losses as consequential damages as a result of such non-payment?

(h) Did The Classic Plus Woman Inc. have standing to bring the action?

Motions to Amend the Statement of Claim

[40] The plaintiffs brought a Motion at the commencement of trial to amend the Statement of Claim to correct the spelling of the name of the defendant “Mouhamed Afzal Sahadat” to “Mohamed Afzal Sahadat.” I signed an order to that effect, on consent of the defendants.

[41] At the conclusion of the evidence the plaintiffs brought a motion to further amend the Statement of Claim to increase the claim for damages in the prayer for relief at subparagraphs 1(a) and 1(b) of the Amended Statement of Claim from $100,000 to $200,000. Following argument I reserved my decision with respect to this motion to amend.

[42] The affidavit of Angela Elrick, a legal assistant in Mr. Campbell’s office, deposed that the Statement of Claim was prepared by the plaintiffs’ previous counsel Madorin Snyder LLP and that the plaintiffs subsequently retained an expert Harry Figov to calculate their damages based upon past loss of income suffered by them. Mr. Figov, in his report, calculated the plaintiffs’ damages at $174,000. Mr. Figov’s report was served on the defendants’ previous counsel Mr. Gold, on October 14, 2015. Ms. Elrick deposes that she was been advised by counsel, not named in her affidavit, that no party would suffer any prejudice as a result of the amendments sought in the motion.

[43] Rule 26.01 of the Rules of Civil Procedure provides as follows:

On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[44] Mr. Barnwell argued that his clients would suffer prejudice from the amendment on the basis that, had the claim for damages been $200,000 rather than $100,000 at the time that he cross-examined the plaintiffs’ expert Mr. Figov, his cross-examination would have been different. He was unable to explain how his cross-examination of Mr. Figov would have differed if the claim for damages was $200,000 rather than $100,000. Mr. Barnwell did not seek to have Mr. Figov recalled for further cross-examination following the proposed amendment. Nor did he seek an adjournment of the trial.

[45] Mr. Silva also opposed the amendment on the same basis advanced by Mr. Barnwell.

[46] I am unable to find that the defendants would suffer any prejudice as a result of the amendment to increase the claim for damages to $200,000. Mr. Figov’s report was served on previous counsel for the defendants well in advance of trial. Given the mandatory nature of Rule 26.01 I find that the plaintiffs are entitled to leave to amend the Statement of Claim as requested. It is ordered that sub-paragraphs 1(a) and 1(b) of the Statement of Claim shall be amended to read $200,000 in place of $100,000 in each instance.

Credibility

[47] I find that with the exception of Silva, the non-expert witnesses in this case all lacked credibility to an equivalent degree. Each of Powell, Sahadat and Dhanapala were prone to tailoring and shaping their evidence to fit their own particular positions in the action. The arrangements and interactions between the parties prior to the advance by Powell were largely, although not exclusively, conducted orally. The terms under which the advance was made by Powell, to the extent they were expressed at all, were expressed orally, although Powell seeks to rely on a handwritten document made by Sahadat, which was marked as exhibit 15, as reflecting or explaining the terms. I am unable to find that, in the event of conflict between their evidence, one witness’ version of events is to be preferred over that of the others.

[48] I am therefore left to resolve the conflicts between the parties’ evidence and their positions on the basis of whatever objective evidence was presented and on the consistency or harmony of the conflicting stories with the surrounding circumstances.

[49] In the case of Faryna v. Chorny, [1952] 2 D.L.R. 354 at 356-7 (B.C.C.A.) O’Halloran J.A. recommended an approach on how best to resolve issues of credibility involving an inquiry into consistency with surrounding circumstances, as follows:

The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would recognize as reasonable in that place and in those conditions.

[50] In contrast with Powell, Sahadat and Dhanapala, Silva’s evidence was simple and straightforward. He received, unsolicited, a bank draft from Powell, who he had not met to that point, for $15,000. On instructions from Sahadat and Dhanapala he was directed to pay the funds over to FFCS, Powell’s intended recipient for the funds. Sahadat advised him that Powell had made a mistake in making the draft payable to him and that he should cash the bank draft and pay the funds to FFCS because Powell did not want to incur the bank fee of $7.50 to replace the bank draft. He did as he had been instructed.

Analysis

(a) To whom did Powell make the advance out of the funds she received from Principis?

[51] Powell testified that in October 2011 Sahadat requested that she borrow funds from Principis Capital and loan the proceeds to him.

[52] Powell stated that she was not interested in the $30,000 loan from Principis herself. She also stated that she had no discussion with Sahadat about what he wanted the money for, stating that it was simply a loan from her to him and that what he did with his money was his own affair and had nothing to do with her.

[53] For his part Sahadat did not deny that he borrowed money from Powell. However he maintained that only $20,000 was advanced to him, comprised of the $15,000 bank draft made payable to Sean Silva, which was in turn paid over by him to FFCS, and $5,000 transferred to Dhana Corporation.

[54] Sahadat stated that, prior to receipt of the monies from Principis, Powell expressed an interest in exploring opportunities for putting the monies “to work” in a way that would generate a greater return, rather than putting all of the proceeds of the Principis advance into her business. It was at this point that Sahadat suggested to Powell that she loan him $20,000 to allow him to purchase a “membership” in DPIC by which both of them would be afforded the opportunity to purchase a unit or units in the condominium project in Welland.

[55] Dhanapala testified that, when he met with Powell in Kitchener regarding her proposed purchase of a condominium in the Welland project, he explained to her that, as she was obtaining the condo through Sahadat’s membership in DPIC, she would be given a 30% discount on the property. He also testified that he advised Sahadat that in order for him to participate in the condominium project, he needed to be a member of DPIC. Sahadat indicated to Dhanapala that he did not have the funds personally to obtain a membership but he would obtain the funds from Powell.

[56] It is evident from this that the funds were advanced by Powell to FFCS (via Silva) and Dhana to permit Sahadat to obtain a membership in DPIC. There was no intention on the part of any of the parties that Powell herself would become a member of DPIC.

[57] I find on this basis that, contrary to the allegation in the Defence of the Dhanapala defendants that the sum of $20,000 was advanced by Powell to FFCS and Dhana Corp. to invest in mortgages, the advance by Powell from the proceeds of the Principis transaction was made to Sahadat and was directed by him to FFCS and Dhana Corp..

(b) What was the total amount that Powell advanced?

[58] Sahadat acknowledged in his evidence that Powell advanced $20,000 to him.

[59] Powell testified that Principis deposited $30,000 to her bank account on November 25, 2011. From this advance she made out a bank draft in the sum of $15,000 payable to Silva, transferred $5,000 electronically to Dhana Corp., paid $5,000 in cash to Sahadat and retained $5,000 for herself.

[60] The only evidence that Powell relies upon for the alleged cash payment to Sahadat is her bank statement at TD Canada Trust showing two cash withdrawals of $2,500 each on November 25, 2011. She provided no explanation as to why the payment to Sahadat was in cash while the advances to Silva and Dhana Corp. were by bank draft and electronic transfer respectively. Powell produced no written receipt from Sahadat for any cash payment and no other independent corroboration for any cash advance to him. Dhanapala testified that the cost to Sahadat for his membership in DPIC was $20,000. Powell could point to no other purpose for which Sahadat was borrowing money from her other than to purchase a membership in DPIC.

[61] Powell bears the onus of proof on a balance of probabilities that she made a cash advance in the sum of $5,000 to Sahadat. I find that Powell has failed to discharge this onus and that the total amount advanced to Sahadat was $20,000.

(c) How should the advance be characterized – as a loan, or as an investment, or otherwise?

[62] As indicated above the $20,000 advanced by Powell to Sahadat was a loan, based upon Powell’s evidence and Sahadat’s acknowledgement. The advance was not made to Dhanapala or one or other of his companies to invest in mortgages or otherwise.

(d) What were the terms under which the monies were advanced by Powell – in particular, was the recipient or recipients of the advance under an obligation to make any payment to Powell and, if so, when and how much?

[63] The principles relating to the formation of contracts and certainty of contractual terms were useful summarized by Rice, J. of the British Columbia Supreme Court in the case of Richter v. McKeachnie, 2009 BCSC 288 as follows, at para. 30:

An offer is a complete statement of the terms on which one party is prepared to deal, made with the intention that it be open for acceptance by the person to whom it is addressed: John Swan, Canadian Contract Law, 1st ed., LexisNexis 2006 at 184. The offeror's intention is not assessed with reference to the subjective intention of the offeror but to the reasonable understanding of the offeree. "The court's task is to decide what each party to an alleged contract would reasonably conclude from the utterances, writings or conduct of the other": Henry Kendall & Sons v. William Lillico & Sons Ltd. (1968), [1969] 2 A.C. 31 (U.K. H.L.), at 113, (1968), 2 All E.R. 444 (U.K. H.L.), at 481, per Lord Pearce. A contract will be held to have been made when the offeree accepts an offer that can reasonably and objectively be said to constitute an offer. Mutual assent, in the sense that both parties subjectively intended to enter into a contract, is not required for the formation of a contract; it is only necessary that there be an objective manifestation of mutual assent: see e.g. Walton v. Landstock Investments Ltd. (1976), 13 O.R. (2d) 693 (Ont. C.A.), at 696, (1976), 72 D.L.R. (3d) 195 (Ont. C.A.), leave to appeal refused [(1976), 13 O.R. (2d) 693n (S.C.C.)] [1976] 2 S.C.R. ix. Thus although it is often said that there must be a "meeting of minds" or consensus ad idem, "what is important is not what either party actually thought but what each reasonably understood the other to mean": Swan, Canadian Contract Law, at 195.

[64] At para. 40 Rice, J. continued as follows:

If the terms of the agreement are so vague and indefinite that the intent of the parties cannot be ascertained with reasonable certainty, then the so-called agreement is not enforceable at law: Arnold Nemetz Engineering Ltd. v. Tobien, [1971] 4 W.W.R. 373 (B.C. C.A.), at 383. However, the courts will be hesitant to find uncertainty and will search out the facts that support the making of a bargain: Gaspari v. Creighton Holdings Ltd. (1984), 52 B.C.L.R. 30 (B.C. S.C.), at 45. In Marquest Industries Ltd. v. Willows Poultry Farms Ltd. (1968), 66 W.W.R. 477 (B.C. C.A.), at 482, (1968), 1 D.L.R. (3d) 513 (B.C. C.A.), Bull J.A. stated:

... [E]very effort should be made by a court to find a meaning, looking at substance and not mere form ... difficulties in interpretation do not make a clause bad as not being capable of interpretation, so long as a definite meaning can properly be extracted ... if the real intentions of the parties can be collected from the language within the four corners of the instrument, the court must give effect to such intentions by supplying anything necessarily to be inferred and rejecting whatever is repugnant to such real intentions so ascertained.

[65] Powell testified that Sahadat requested her to loan him the money she obtained from Principis on the understanding that it would be paid back to her in quarterly instalments together with any fees that were associated with the transaction with Principis. She testified that Sahadat told her that the loan would not affect her business and “would be money that went out but also came back so there would be…a zero balance difference.” She stated that in her discussion with Sahadat it was agreed that she would take out the loan from Principis for $30,000 for Sahadat’s benefit and “he and FFCS would pay back the loan quarterly along with fees.” She also stated that Sahadat agreed that she would be entitled to retain $5,000 from the Principis advance as a “front-end fee.”

[66] As indicated above, the plaintiffs pleaded in their Statement of Claim, that it was expressly agreed (without identifying the parties to the agreement) that repayment to Powell “would be made by any or all of the Defendants jointly and severally.”

[67] It is difficult to discern what is meant by this pleading.

[68] The pleading goes on to say that repayment would be made in quarterly payments of $10,500 each over the course of the following 12 months for a total repayment of $42,000 “or a greater amount depending on the return on investment enjoyed by the defendants through Dhana Corp. and FFCS Ltd.” The plaintiffs’ pleading seems to suggest that it was agreed by certain unidentified parties that the obligation of “any or all of the Defendants” would not be limited to $42,000 but would also include an additional amount to be agreed upon, based upon the defendants’ return on investment of the funds. It was not indicated how this extra payment would be determined or calculated or by whom.

[69] Powell pointed, in her testimony, to a four-page document, marked as exhibit 15, containing words and figures in Sahadat’s handwriting, as reflecting or representing the agreed terms of the loan.

[70] It is fair to say that the document is very informal. The second and third pages are undated and set forth mainly cryptic jottings. The first and fourth pages are not relevant to the issue of the terms of the loan agreement. The first page is dated November 28, 2011, being three days after the advances to FFCS, via Silva, and to Dhana Corp. On cross-examination Powell stated that the second page was written by Sahadat a couple of days prior to receipt of the advance from Principis.

[71] The second page of exhibit 15, indicates “$30K” followed by an arrow and “10% fee = $3,000.00 + $2,000 = $5,000.00” An arrow connects the initials “AJ” to the $2,000 figure. Powell indicated that she called Sahadat “AJ”.

[72] The document goes on to indicate “$25K to FFCS” followed by an arrow and “Return: $42,000.00 in twelve months.”

[73] The document then indicates “Back end fee: $5,000” and “Front end fee $5,000” beside which are some illegible jottings. A total is set out of “$10K.”

[74] The document then says “FFCS pays back $ 42K = all monthly payment [illegible] for 1 yr. (4 [illegible])” followed by an arrow and “$18K.”

[75] The third page contains some further jottings and scribbles which are unintelligible. The phrase “carry the loan” is set out.

[76] When asked how exhibit 15 came to be written, Powell testified that “this was basically he [Sahadat] …explaining to me how the loan was going to be paid back and who was going to be paying back the loan and to whom.”

[77] Powell did not testify with respect to the circumstances by which exhibit 15 came into her possession. Nor did she testify that she and Sahadat expressly agreed that it was intended to reflect the terms of the loan agreement between them.

[78] Sahadat testified that the second page of exhibit 15 represented his handwritten notes regarding a scenario that he and Powell discussed, but the “scenario did not become a reality.”

[79] I am unable to find that exhibit 15 was intended by Powell and Sahadat to represent the terms for repayment by Sahadat of the loan of $20,000 by Powell. At para. 11 of Canadian Encyclopaedic Digest Contracts I.3 it is stated:

“the terms agreed upon must be clear and certain, in the sense that they must either be stated with reasonable specificity, or be reasonably ascertainable by application of an agreed formula, method, or principle of determination. Specificity is particularly important in regard to terms of payment.”

[80] The document refers to $30,000, with “$25K to FFCS”, whereas only $20,000 was advanced to Dhanapala’s companies ($15,000 to FFCS and $5,000 to Dhana Corp.). The document also refers to a “back end fee” of $5,000 and “front end fee” of $5,000. Importantly the document states “FFCS pays back $42K”. No specific reference is made in the document to an obligation on Sahadat to repay any money. There is no evidence that Dhanapala, on behalf of FFCS, participated in whatever discussions resulted in the preparation of exhibit 15.

[81] In addition, the content of exhibit 15 does not reflect the terms of the loan agreement alleged by the plaintiffs in the Statement of Claim, as discussed above.

[82] I am unable to find that there was a clear and certain agreement between Powell and Sahadat that Sahadat would be obliged to pay $42,000 over one year in four quarterly instalments in repayment of a loan of $20,000.

[83] However, I find that there was clearly a loan advance of $20,000 by Powell to Sahadat with a corresponding obligation on Sahadat to make repayment.

[84] At para 13 of Canadian Encyclopaedic Digest Contracts I.3

Where a completed contract exists, but ambiguity remains in what the parties have purportedly agreed upon, some lack of clarity will not necessarily render the "agreement" unenforceable. Courts will strive to give effect to the reasonable expectations of the parties, objectively determined, where it is apparent that they intended some legal relationship to exist between them. Some courts have asserted that a contract will be rendered unenforceable only where a missing term is so essential that the court cannot collect the real intentions of the parties from the language within the four corners of the instrument without it, and so give effect to such intentions by supplying anything necessarily to be inferred.

[85] Sahadat knew that the $20,000 to be loaned to him was being obtained by Powell from Principis on the terms that she would be obliged to pay $41,850 from her future sales in exchange for an immediate advance of $30,000, being a premium of 39.5%. It was within the reasonable contemplation of Sahadat and Powell, that Sahadat should be obliged to repay Powell the $20,000 advanced by her together with a proportional premium of 39.5% on the amount advanced, or $7,900, for a total of $27,900.

[86] $20,000 of the $30,000 advanced by Principis was obtained by Powell for Sahadat’s benefit. It may be reasonably inferred, so as to give effect to the intentions of the parties, that Sahadat agreed to pay the cost incurred by Powell to obtain the funds she loaned to him.

[87] In the absence of any express agreement on the time for payment, it is reasonable to find that the sum of $27,900 should be payable on demand (see Richter v. McKeachnie at paras. 40-45).

(e) Were there monies paid to Powell by one or more of the defendants and, if so, when and how much?

[88] Notwithstanding the allegation in his Defence, Dhanapala testified that the sum of $6,800 was not paid to Powell, but thought he had paid $1,000 at the request of Sahadat. He stated that the reference to a payment of $6,800 was an error made by his previous counsel in drafting the Statement of Defence.

[89] Sahadat testified that he repaid Powell $13,500 on the $20,000 loan by May 2012, in addition to $1,100 paid by Dhanapala. He stated that he obtained the funds to repay $13,500 to Powell from advances made from a line of credit of a personal friend.

[90] Sahadat testified that, in addition to the sum of $13,500 repaid by him personally by May 2012, a further sum of $6,800 was repaid by himself and Dhanapala (approximately one-half from each of them), for a total of $20,300.

[91] Sahadat acknowledged that the joint Statement of Defence filed on behalf of all of the defendants by their previous counsel on June 29, 2013 did not allege that $20,300 was repaid to Powell but alleged that only $6,800 was repaid to her. He maintained that he forgot about the payments made to Powell in early 2012 as a result of stress he was experiencing during that time from various factors, including his divorce from his ex-wife and the death of his brother, and he only discovered the payments in the course of reviewing personal documents prior to trial.

[92] Powell testified that no amounts were repaid to her by Sahadat, Dhanapala or Silva with the exception of one payment in the sum of $1,100 received from Dhanapala in February 2013.

[93] I am unable to accept the evidence of Sahadat that the sum of $20,300 was paid to Powell, including $13,500 which he personally borrowed from a friend but forgot about until the months leading up to trial. Given his lack of financial resources at the relevant time, the suggestion that Sahadat forgot that he made a series of payments to Powell totalling $13,500 is not believable. I find that Sahadat has not discharged the onus on him to prove that he made any payments to Powell, other than the sum of $1,100 paid by Dhanapala on his behalf.

[94] Moreover, Sahadat did not plead in his Defence that he made such payments. As observed by the Alberta Court of Appeal in Dow Agrosciences Canada Inc. v. Philom Bios Inc., 2007 ABCA 122 at para. 62:

Pleadings are not formalities; they embody the first rule of natural justice….There should not be relief based on unpleaded issues without a clear motion to amend the pleadings.

[95] Dhanapala testified that the reference to the payment of $6,800 to Powell in the Statement of Defence was an error.

[96] I find that the sum of $1,100 was paid to Powell by Dhanapala on behalf of Sahadat in February 2012, reducing Sahadat’s obligation to Powell to $26,800.

(f) Did one or more of the defendants breach an obligation to make any payment to Powell?

[97] I find that the obligation to make payment of the sum of $27,900 was on Sahadat. The evidence does not support an obligation on any of the other defendants to make any payment to Powell. The evidence does not support the claims in the Statement of Claim that all of the defendants warranted to Powell that she would be “made whole” in respect of all sum obtained through Principis or that repayment to Powell would be made “by any or all of the Defendants jointly and severally.” Powell did not testify that Dhanapala personally, or on behalf of either FFCS or Dhana Corp., made any oral or written promise to pay her any monies. She did not testify that Sahadat made any covenant to make payment to her on behalf of Dhanapala, FFCS or Dhana Corp..

[98] The unsigned document on the letterhead of FFCS dated October 1, 2011 addressed to Faraz Shariff & Hameda Shariff, made exhibit 10 at trial, does not assist Powell in conferring Sahadat authority to bind FFCS to an an obligation to pay her. There was no evidence that Sahadat expressly represented to Powell that he had authority to bind FFCS and neither was there any evidence that Dhanapala expressly made any representation to her that Sahadat had any such authority. The unsigned letter to Mr. and Mrs. Shariff was not given to Powell by Sahadat as a representation of any authority on his part to bind FFCS but was downloaded by Powell without Sahadat’s knowledge, from the computer in the backroom of her store. Sahadat earlier had access to the computer during the time he was assisting Powell.

[99] Mr. Campbell argued on behalf of the plaintiffs that Silva is liable for the tort of conversion for negotiating the bank draft in the sum of $15,000 which Powell made payable to him and paying the proceeds over to FFCS, without first contacting Powell to determine her intentions. Mr. Campbell acknowledged that Powell’s intended recipient for the funds was indeed FFCS. Mr. Campbell argues that by transferring the funds to Powell’s intended recipient FFCS without contacting her first, Silva became liable for “the global damages she suffered as a result of the defendants to abide by the terms that they agreed to and repay her the $42,000.”

[100] It is noted that no claim was made against Silva in the Statement of Claim for conversion of the bank draft. In any event, I am not satisfied that Silva committed any actionable wrong by paying over the monies paid to him by Powell to her intended recipient FFCS.

[101] As indicated previously, Sahadat was under an obligation to pay $27,900 (reduced to $26,700) to Powell on demand.

[102] Although the plaintiffs put into evidence an exchange of text messages between Powell and Dhanapala from June 1, 2012 and March 21, 2013 is which Powell made complaints about Sahadat’s failure to pay her and requested payment from Dhanapala, there is no evidence that Powell made a demand for payment on Sahadat until issuance of the Statement of Claim on May 22, 2013. It is not evident when the Statement of Claim was served on Sahadat, but the Statement of Defence was dated June 29, 2013. On this basis I find that Sahadat made default in payment to Powell of the sum of $26,700 on June 1, 2013.

[103] The claims against the defendants based on unjust enrichment, breach of fiduciary duty and breach of trust set forth in the Statement of Claim were not pursued at trial and I find that there was no evidence to support such claims.

(g) Is Powell entitled to claim business losses as consequential damages as a result of non-payment by Sahadat?

[104] Harry Jonathan Figov, a Chartered Professional Accountant and Chartered Business Valuator was called to give expert opinion evidence on behalf of the plaintiffs with respect to the calculation of their alleged damages consisting of past loss of income as at August 31, 2015 as a result of Powell entering into the transaction with Principis. Mr. Figov prepared an Expert Calculation Report dated October 3, 2015 which was served on previous counsel for the defendants.

[105] Mr. Figov testified that he had been asked by previous counsel for the plaintiffs to determine what Powell’s losses were as a result of taking out a loan for $30,000 which was, according to his understanding, supposed to have been used for working capital in her business Classic Plus Woman but was diverted to other purposes.

[106] Mr. Figov testified that, in carrying out his calculations, he assumed that Powell’s business would continue to operate. He examined two scenarios:

Scenario #1: the potential loss had Powell not entered into the transaction with Principis; and

Scenario # 2: the potential loss had Powell entered into the transaction with Principis but used the proceeds of the $30,000 advance from Principis to invest in working capital of the business Classic Woman Plus.

[107] Mr. Figov calculated the potential shortfall in income to Powell’s business in the two scenarios as follows:

Scenario #1 – No loan 2012 - $14,000 2013 - $35,000 2014 - $41,000 based on annualized income of $35,000.

The total loss of income under scenario #1 for the three years 2012 to 2014 was calculated by Mr. Figov at $90,000.

Scenario # 2 – Loan proceeds of $30,000 invested in Classic Plus Woman 2012 - $41,000 2013 - $63,000 2014 - $70,000 Based on annualized income of $63,000

The total loss of income under scenario #12 for the three years 2012 to 2014 was calculated by Mr. Figov at $174,000.

[108] It is noteworthy that Mr. Figov was not asked to calculate the business loss, if any, sustained by Classic Plus Woman on the basis alleged in the Statement of Claim, namely that the business was “unable to purchase necessary inventory, or to grow their business given the lack of cash flow resulting from the failure of the Defendants to make payments to Powell ” (underlining added).

[109] There is no claim advanced in the Statement of Claim that that the plaintiffs suffered damages as a result of Powell being wrongfully induced by the defendants to enter into the transaction with Principis and that, absent that inducement, she would not have done so, or alternatively, that she was wrongfully induced to divert the proceeds of the Principis transaction from investment from the Classic Plus Woman business to some other purpose. The claim in the Statement of Claim is that Powell suffered damages as a result of the defendants not paying the amount they agreed to pay her.

[110] Accordingly, the court does not have the benefit of an expert calculation of business loss damages alleged to have been suffered on the basis claimed in the Statement of Claim.

[111] Mr. Campbell for the plaintiffs argued, in reliance on Bank of America Canada v. Montreal Trust Co., 2002 SCC 43, [2002] S.C.J. No. 44 (S.C.C.), citing Haack v. Martin, [1927] S.C.R. 413 at p. 416, at para. 25-26 that Powell should be placed, by an award of damages, in the same situation as if the contract had been performed. He argues that, had the defendants paid Powell what they agreed to pay her, she would not have suffered a 25% depletion in her cash flow until 2014 and would not have suffered a loss of profit as a result of her being unable to stock her store adequately.

[112] Professor S.M. Waddams in The Law of Damages, stated at p. 7-21 “it has often been said that no damages beyond interest are recoverable for failure to pay a debt…because, as a general rule, consequential damages (other than interest) are too remote.” However he did add that there is no absolute exclusion of claims for such damages.

[113] One of the cases cited by Professor Waddams for the proposition that no damages beyond interest are recoverable for failure to pay a debt is the case of Hamilton v. Johnstone (1956), 22 W.W.R. 686 (B.C.S.C.) aff’d (1957) 22 W.W.R. 686 in which Wilson, J. stated at para 10:

Another thing that must be remembered is that the damages here demanded are such as might be claimed to arise from an action of debt. It has always been held that in such an action the plaintiff can only as damages recover simple interest. If I were to hold with the plaintiff here I would, in effect, be holding that in an action of debt a creditor could, by telling his debtor that he had an opportunity and intended if the money were paid when due, to invest it in a certain way, fix the debtor with liability for any loss he might sustain because the money was not available when promised.

[114] To similar effect Cromwell, J.A., as he then was, in the case of D.W. Matheson & Sons Contracting Ltd. v. Canada (Attorney General), 2000 NSCA 44 (N.S. C.A.) observed at para. 74 that “absent special circumstances, one party to a commercial contract generally does not become the insurer of the other party’s financial health.”

[115] At para. 72 Cromwell, J.A. stated:

Matheson's claim for lost profit is, in effect, a claim for the loss of other business opportunities caused by financial stringency resulting from Public Works' breaches of contract. While such losses may be recoverable, they will generally be so only when the circumstances of the transaction and the dealings between the parties are such that the financial vulnerability of the plaintiff and the likely impact of breach may be said to be within their reasonable contemplation at the time of contracting. Simply put, the question is whether, in light of all the circumstances, the defendant, by entering into the contract, may justly be considered as having undertaken this risk of breach.

[116] In the case at bar, I find that in all the circumstances, Sahadat, by entering into the contract to pay Powell $27,900 on demand in exchange for an advance of $20,000, may not justly be considered to have undertaken the risk of Powell suffering consequential loss of profits as a result of a breach. That is to say, the circumstances were not sufficiently special so as to make Sahadat the insurer of Powell’s financial health. Although he had a general understanding that Powell was behind in payment of certain of her suppliers, I find that Sahadat did not have a sufficiently intimate knowledge of Powell’s business affairs or Powell’s intentions with respect to any receipt of payment from him so as to make the circumstances sufficiently special to depart from the general principle that no damages beyond interest are recoverable for failure to pay a debt.

(h) Did The Classic Plus Woman Inc. have standing to bring the action?

[117] No claim on behalf of the plaintiff The Classic Plus Woman Inc. was advanced at trial. The loan of $20,000 was advanced by Powell to Sahadat on November 25, 2011, prior to the incorporation of The Classic Plus Woman Inc. It is not evident that The Classic Plus Woman Inc. had any dealings with any of the defendants. I find that The Classic Plus Woman Inc. had no standing to bring the action against the defendants.

Disposition

[118] On the basis of the foregoing judgment shall issue as follows:

(a) the defendant Mohamed Afjal Sahadat shall pay to the plaintiff Iris R. Powell the sum of $26,700;

(b) the defendant Mohamed Afjal Sahadat shall pay to the plaintiff Iris R. Powell pre-judgment interest on the sum of $26,700 at the rate of 1.3% per annum pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43 calculated from June 1, 2013;

(c) the action of Iris R. Powell shall be dismissed as against the defendants Sean Silva, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd.;

(d) the action of The Classic Plus Woman Inc. against all of the defendants shall be dismissed;

(e) the counterclaim of Mohamed Afjal Sahadat shall be dismissed; and

(f) the counterclaim of Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. shall be dismissed.

Costs

[119] The parties are encouraged to agree upon costs.

[120] If the parties are unable to agree upon costs the defendants Sean Silva, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) may make written submissions as to costs within twenty-one (21) days of the release of these Reasons for Judgment.

[121] The plaintiff Iris R. Powell may make written submissions as to costs as against the defendant Mohamed Afjal Sahadat within twenty-one (21) days of the release of these Reasons for Judgment.

[122] Each party against whom costs are sought may have fourteen (14) days after receipt of the submissions of a party seeking costs against them to respond.

[123] A party seeking costs has ten (10) days thereafter to deliver any Reply submissions.

[124] All such written submissions (with the exception of Reply submissions) shall not exceed five (5) double-spaced pages, exclusive of Costs Outlines or Bills of Costs, Offers to Settle and Authorities, and are to be forwarded to me at my Chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. Reply submissions shall be limited to three (3) double-spaced pages. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

D.A. Broad, J.

Released: July 5, 2018