COURT FILE NO.: CV-18-4291-00
DATE: 2019 10 21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FATIMA AMIN-HUSSAIN and ADAM MOHAMMED
Shahzad Siddiqui, for Fatima Amin-Hussain
Amar Mohammed, for Adam Mohammed
Applicants
- and -
AHMED RAZA YOUSUF and MUHAMMAD NINO also known as SHAYKH MUHAMMAD BIN YAHYA AL HUSAYNI AL NINOWY
Richard Quance, for the Respondents
Respondents
HEARD: July 22, 2019
REASONS FOR JUDGMENT
Fowler Byrne J.
[1] The Applicants and the Respondents are the directors of the Madina Seminary, a non-share corporation. The main asset of the Madina Seminary is a large building located at 2380 Speakman Drive, Mississauga (“the property”). The Applicants want to sell the property and pay off significant debts of the Madina Seminary. The by-law of the Madina Seminary requires a majority of the directors to agree to sell the property in order to pass a resolution. The Respondents will not consent, resulting in a tie.
[2] Accordingly, the Applicants have commenced this Application seeking an order compelling the Respondents to sell the property. They also seek orders restraining the Respondents from marketing or using the Madina Seminary for any purpose other than what it is zoned for.
Background
[3] The Madina Seminary was incorporated on August 6, 2013 as a corporation without share capital. It is identified as Ontario Corporation Number 1893227. On or about August 1, 2016, it obtained charitable status.
[4] Pursuant to the articles of incorporation, the objects of the Madina Seminary are as follows:
a) To preach and advance the teachings of the Muslim faith and the religious tenets, doctrines, observances and culture associated with that faith;
b) To establish, maintain and support a house of worship with services conducted in accordance with the tenets and doctrines of the Muslim faith;
c) To support and maintain missions and missionaries in order to propagate the Muslim faith; and
d) To establish and maintain a religious school of instruction for children, youths and adults.
[5] Upon incorporation, there were four directors. The Respondent Ahmed Raza Yousuf (“Yousuf”) was one of the original directors. By-Law No. 1 was passed by the original directors on February 28, 2016. The pertinent sections of By-Law No. 1 are as follows:
The affairs of the Corporation shall be managed by a board of 4 (four) directors, each of whom at the time of his or her election or within 10 days thereafter and throughout his or her term of office shall be an individual member of the Corporation. Each director shall be elected to hold office for a two (2) year term, until the second annual meeting after he or she shall have been elected or until his or her successor shall have been duly elected and qualified. Directors shall be elected to complete a term of office of less than two (2) years as a result of a vacancy on the Board of Directors, however caused. The election may be by a show of hands unless a ballot be demanded by any member. The members of the Corporation may, by resolution passed by at least two-third (2/3) of the votes cast at a general meeting of which notice specifying the intention to pass such resolution has been given, remove any director before the expiration of his or her term of office, and may, by a two-thirds (2/3) majority of votes cast at that meeting, elect any person in his or her stead for the remainder of his or her term.
Vacancies on the board of directors, however caused, may, so long as a quorum of directors remain in office, be filled by a two-thirds (2/3) majority vote of the remaining directors from among the qualified individual members of the Corporation, if they shall see fit to do so, otherwise such vacancy shall be filled at the next annual meeting of the members at which the directors are elected, but if there is not a quorum of directors, the remaining directors shall forthwith call a meeting of the members to fill the vacancy.
A majority of the directors shall form a quorum for the transaction of business. Except as otherwise required by law, the board of directors may hold its meeting at such place or places as it may from time to time determine. No formal notice of ant such meeting shall be necessary is all the directors are present, or if those absent have signified their consent to the meeting being held in their absence.
Questions arising at any meeting of directors shall be decided by a majority of votes. All votes at such meeting shall be taken by ballot if so demanded by any director present, but if no demand be made, the vote shall be taken in the usual way by assent or dissent.
[6] Over time, some of the directors changed. As indicated on the latest Corporation Profile Report, the Applicant Fatima Amin-Hussain (“Amin-Hussain), who is also the president, became a director on September 11, 2013. The Applicant Adam Mohammed (“Mohammed”), who is also the secretary, became a director on March 9, 2015. The Respondent Muhammad Nino (“Nino”), who is also the religious leader of the Madina Seminary, became a director on March 9, 2013. As indicated, Yousuf, who is also the treasurer, has been a director from the beginning.
[7] In 2015, the Madina Seminary purchased a 32,000 square foot building on a five-acre lot, located at 2380 Speakman Drive East, Mississauga, for $3,950,000. To finance the purchase of this property, a mortgage was given to HMT Holdings Inc. for the sum of $2,200,000. Amin-Hussain, Mohammed and Yousuf are guarantors of the mortgage to HMT Holdings Inc. Further funds in excess of $1,000,000 had to be raised in order to close the transaction.
[8] The Applicants maintain that from the beginning, the Madina Seminary experienced financial difficulties in keeping up with its regular operating costs, maintaining the interest payments on the mortgage, and paying back the short-term loans it received. In particular:
a) The mortgage given to HMT Holdings Inc. costs the Madina Seminary $165,000 per year in payments, the vast majority of which is interest. The mortgage was originally due in November 2016. It has been extended a number of times, but only after a large extension fee was paid each time;
b) In order to maintain the Madina Seminary, various interest-free loans have been procured from the directors. Amin-Hussain has loaned $665,000, Mohammed has loaned $577,000, and Yousuf has loaned at least $225,000. The loans provided by Yousuf were secured by way of a mortgage through his company Bay International Inc. The loans provided by Amin-Hussain and Mohammed were secured in part by financing their family home and have resulted in them being behind in their personal taxes. The loans from directors alone exceed $1,400,000;
c) Various interest-free loans have been procured from sympathetic members of the community, on the understanding that they would be repaid. These loans exceed $450,000, and include:
Sameer Akhtar: $45,000 outstanding since December 31, 2016;
Mumtaz Amin: $10,000 outstanding since October 29, 2017;
Shaykh Imtiaz Hussain: $45,000 outstanding since December 7, 2017;
Meraj Amin: $10,000 outstanding since October 29, 2017;
Hafiz Adnan Ahmed Amin: $20,400 outstanding since July 20, 2016;
Thomas Randal Shaw: $225,000 plus costs of $4,325 pursuant to a judgment dated October 2, 2018; and
Munir Subhani: $100,000 outstanding.
[9] At times, Mohammed has had to mortgage his own personal property to assist the Madina Seminary with its loans.
[10] In the past, the Madina Seminary had trouble paying for its utilities, and at times there were threats to turn them off. The mortgage to HMT Holdings Inc. is now in default and a claim was commenced on July 2, 2019, seeking judgment and a writ of possession.
[11] The Applicants believe that the Madina Seminary is not financially viable. It is surviving on interest-free loans that are overdue, and there are no plans to pay back these loans. Various communications show that the directors are dealing with the most urgent demands for payment on an ad hoc basis, whether from the mortgagee, utility company, or private lenders. Any solutions usually involve the borrowing of more money.
[12] Yousuf has stated in his Affidavit, “In fact, I am continuing to cope with the financial issues with respect to Madina and have no doubt that Madina will be able to continue in accordance with its mission and vision.”
[13] Contrary to this statement, the Respondents have provided no evidence to show that the Madina Seminary has sufficient income to cover its operating expenses and its minimum mortgage payments of over $165,000 per year. It maintains that it is seeking to rent out further space at the property. No evidence of any other tenants has been provided.
[14] A directors meeting was held on July 30, 2018, wherein a resolution to list the property was discussed. The by-laws state that business can only be conducted with the support of a majority of directors. Given that there are only four directors, at least three members must agree. Due to the deadlock amongst the directors of the Madina Seminary, the property cannot be sold. It is for this reason that the Applicants are asking that this court order the property be sold.
[15] The Respondents’ refusal to sell the property appears to be based only on their reluctance to walk away. They blame the Applicants for being selfish, which is an unusual way to describe someone who has provided a significantly large sum of money, interest free, at great personal sacrifice.
[16] The reason that the Respondents refuse to agree to the sale of the property is stated very clearly in Yousuf’s Affidavit:
“It is the desire of Nino and myself to continue with the mission and vision of Madina and to work diligently to do so to continue to meet Madina’s financial obligations and continue with the community classes, prayers and other activities of the Seminary.”
“I believe that Madina ought to continue and be provided with the time and opportunity to fulfill its mission and vision notwithstanding the improper and unlawful motives and actions of Fatima, Adam and Ibrahim.”
[17] Simply put, the Respondents do not want to give up. Unfortunately, due to poor business planning, their inability to meet obligations, the judgment by Shaw, and the commencement of an action by HMT Holdings Inc., it is no longer within the control of the Respondents to carry on. Their poor judgment in managing the affairs of the Madina Seminary has placed the Seminary in a precarious financial state. Their time to fix it has expired. The creditors will now take over.
[18] Much time has been dedicated in the materials to whether Ibrahim Hussain was properly added as a member or director, and whether the resolution to list the Madina Seminary for sale in 2018 was properly constituted. This is now moot given that the listing was terminated, and Ibrahim Hussain has resigned as a member. There are only the four directors at this time.
[19] There has also been a great deal of focus on the ongoing conflict between Nino and Ibrahim Hussain regarding issues of religious leadership and the direction that the Madina Seminary should take. I am in no position to determine who is more credible in this debate, nor is it the role of the court to make this determination. This has no bearing on the outcome of this Application.
[20] There are also issues with the zoning of the Madina Seminary property. It is zoned as an educational and training facility. It is not zoned as a place of worship. Mohammed states that Nino wishes to use the property as a place of worship in order to raise funds. This is not a proper use of the property. Nino has also sublet parts of the building without the consent of the directors of the Madina Seminary. He has also started renovations on the property without proper permits or the approval of the directors. While this is but another example of the Respondents’ poor judgment, it has no bearing on the outcome of this matter.
[21] The parties were before Price J. on November 1, 2018. A timetable was set for this motion. In the meantime, it was anticipated that an offer to purchase would be received from the Muslim Association of Canada (“MAC”) for $4,750,000. The Respondents agreed to be presented with any such offer, for the purchaser to perform their due diligence, and that acceptance of the offer would be subject to approval by the board or a further court order. The MAC has offered to purchase the building for $4,750,000, but it is not a firm offer at this time. If the offer was accepted and was completed, it would enable the Madina Seminary to pay off all its debts and restart in a more suitable location, which would appear to be a reasonable and prudent course of action.
Law
[22] The court has inherent jurisdiction in law and equity to make whatever order it feels is appropriate to do justice to the parties: s. 11(2) of the Courts of Justice Act, R.S.O. 1990 c. C.43. The Applicants ask this court to exercise this inherent jurisdiction and order that the Madina Seminary property be sold. Unfortunately, I do not find that this is the appropriate situation in which to exercise this power.
[23] The recent Supreme Court of Canada decision of Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall, 2018 SCC 26, [2018] 1 S.C.R. 750, made it clear that as a general rule, religious organizations cannot seek judicial review to solve disputes that may arise between them where there are concerns of procedural fairness. Rather, their claims must be founded in a valid cause of action, such as tort, contract or restitution: Highwood, at para. 13.
[24] As stated in Highwood, there are three instances where the court may consider intervening. First, the court may interfere when it is asked to review a state action: Highwood, at para. 12. Second, the court may interfere to address procedural fairness related to the decisions of religious or voluntary organizations if legal rights are at stake. Jurisdiction cannot be established on the sole basis that there is an alleged breach of natural justice or that the complainant has exhausted the organization’s internal process: Highwood, at para. 24. Jurisdiction depends on the presence of a legal right which a party seeks to have vindicated: Highwood, at para. 24. Only where this is so can the courts consider an association’s adherence to its own procedures and (in certain circumstances) the fairness of those procedures. Third, the court could only intervene on a justiciable issue. In other words, it would only intervene if it involves an issue that should be decided by the court: Highwood, at para. 32.
Analysis
[25] As indicated, this is not a situation in which the court should use its inherent jurisdiction over the court to order the sale of the Madina Seminary property.
[26] The Supreme Court of Canada has already given guidance in Highwood that interference in religious organizations and their decision-making process should be avoided. While that decision related to applications for judicial review, which this is not, the principle is also applicable here. The Applicants are seeking indirectly from the court, through its inherent jurisdiction, a review of the decision-making process of the directors of the Madina Seminary. They are not alleging procedural unfairness per se, but asking the court to find the Respondents’ position to be so unreasonable, that the decision of the directors should be disregarded and overturned.
[27] The Applicants rely on Noori v. Abdin Mosque, 2011 ONSC 5452, at para. 6, as support for their position that this court can make any order it deems appropriate under its broad remedial discretionary powers. Leaving aside that this case may no longer be instructive following the decision in Highwood, this case refers to specific sections of the Corporations Act, R.S.O. 1990, c. C.38 that give the court power to give directions on how meetings are to be held (s. 297), the rectification of minutes or other documents (s. 309), or to require a director to perform a duty imposed by the Act (s. 332), such as requiring a director to call an annual general meeting, to provide proper notice of the meeting, or to make proper record of the meeting. The Applicants are not seeking such directions in the case before me.
[28] This is also not an appropriate situation in which to intervene, because there is a governance structure already in place to regulate how decisions are made. While the result may not be to the satisfaction of the Applicants, it exists nonetheless.
[29] When the by-laws of the Madina Seminary were drafted, perhaps it was not anticipated that the directors would ever disagree in the way they have. It is unfortunate that it was not thought prudent to allow for an uneven number of directors or set forth a procedure for when there is a tie vote. Perhaps there was a reason why the original directors structured the board in this way. Perhaps they wanted to make sure that no steps were ever taken unless at least three of the directors agreed. If that was the intention, then it was successful in this instance in blocking the sale.
[30] Here, there was no procedural unfairness. The Applicants are asking this court to use its ultimate jurisdiction as a way to force the Respondents to act in a way that the Applicants believe is appropriate, contrary to the corporation’s by-laws, which were properly instituted. Such an order in and of itself may result in procedural unfairness.
[31] Despite the desperate situation the Madina Seminary finds itself in, I also see no reason to intervene when other, clear and well-established options are open to the Applicants. They could have commenced an action with respect to the monies loaned to the Madina Seminary. They could have notified the mortgagee that they withdrew their personal guarantee on the mortgage. They could have campaigned for the election of directors or members that would be supportive of the sale, knowing that directors are up for re-election every two years. The Corporations Act, at s. 127.2, sets out the procedure to remove a director, by a majority vote, that is not acting in the best interests of the corporation. In the end, if a director cannot convince its members to vote in a way that he or she believes is in the best interests of the Madina Seminary, and he or she does not agree with the direction taken by the Madina Seminary, they are free to resign their membership.
[32] In any event, given the action commenced by HMT Holdings Inc. and the enforcement options available to Shaw, the Respondents must either agree to the sale, which will give them more control, or find another way to pay the two mortgages, the Shaw judgment, and other probable lawsuits from directors or creditors who want their loans to be repaid. It can be assumed that the Applicants will not be willing to personally guarantee any other mortgage.
Costs
[33] Despite my reasons, this is not an appropriate circumstance in which the Respondents should be awarded their costs. I accept that all the parties willingly entered into the purchase of this property, with high hopes and optimism, but it became clear within a few years that it could not be sustained much longer. Whether or not the Respondents were correct in their resistance to this Application, the failure of the Madina Seminary to remedy this dire financial situation in a timely way lay at the feet of the Respondents.
Conclusion
[34] Based on the reasons given, I make the following Orders:
a) This Application is dismissed; and
b) Each party shall bear their own costs.
Fowler Byrne J.
Released: October 21, 2019
COURT FILE NO.: CV-18-4291-00
DATE: 2019 10 21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FATIMA AMIN-HUSSAIN and ADAM MOHAMMED
Applicants
- and -
AHMED RAZA YOUSUF and MUHAMMAD NINO also known as SHAYKH MUHAMMAD BIN YAHYA AL HUSAYNI AL NINOWY
Respondents
REASONS FOR JUDGMENT
Fowler Byrne J.
Released: October 21, 2019