Court File and Parties

Court File No.: CV-14-1314SR Date: 2020 04 30 Superior Court of Justice – Ontario

Between: GHULAM MUJTABA, Plaintiff

And: MOHAMMAD YASIN and FEHRA YASIN, Defendants

Counsel: Lata Menon and Darrell Paul, for the Plaintiff Alnaz I. Jiwa, for the Defendants

Heard: November 19, 20, 21, 22 and December 19, 2019 at Brampton

Reasons for Judgment

Emery J.

[1] At the trial of this action, there was no dispute that Ghulam Mujtaba advanced $50,733.47 to the defendants Mohammad Yasin and Fehra Yasin. He claims they borrowed these funds from him in 2011, and promised to repay him when they sold their home on Stonebriar Crescent in Mississauga.

[2] The Yasins sold their home in August 2013 and purchased another house in Milton without paying him back.

[3] The Yasins have defended the claim on the basis that the funds advanced were not a loan. Rather than a loan, they argue the funds advanced were payments towards various amounts Mr. Mujtaba owed to them under an overarching agreement.

Background narrative

[4] Mr. Mujtaba immigrated to Canada in 2009. He was living in Etobicoke, Ontario, at the time his brother, Ali Murtaza and Mr. Murtaza’s wife, Nazma, were arrested and charged with importing a large quantity of drugs into Canada.

[5] The Murtaza’s were held in custody upon their arrest in July 2009. They had two children who were taken into care at the time by the Children’s Aid Society of Peel. Nazma was pregnant and gave birth to a third child while she in jail awaiting bail.

[6] Mohammad Yasin and Fehra Yasin are a married couple. They were introduced by Mr. Yasin’s friend, Anis Chowdhury, to Ali and Nazma Murtaza to be sureties to secure Nazma’s interim release. Mr. and Mrs. Yasin did not know Mr. Chowdhury before this introduction. The Yasins did not know Nazma before she was granted bail in late 2009. Mr. Chowdhury was essentially a bail broker between the Murtaza’s and the Yasins, and the Yasins were essentially offered up as sureties for hire.

[7] Nazma was granted bail in or around November 2009 with both Mr. and Mrs. Yasin as her sureties. The Yasins pledged $95,000 as sureties, with no cash deposit.

[8] Mr. Mujtaba considered it his duty to look after the wife and children of his brother while he was held in custody pending trial. There is no dispute that Mr. Mujtaba agreed to pay $3,000 a month to the Yasins to stand as sureties for Nazma. This payment was intended to cover the expenses while Nazma and her children resided with the Yasin’s at their home, and to compensate them for ensuring Nazma’s compliance with her bail conditions.

[9] Mr. Mujtaba testified that he held up his side of the bargain. He described how he would make payments on outstanding credit card balances owed by the Yasins each month, and then top up what he owed for that month in cash.

[10] Mr. Mujtaba gave evidence that he also repaid the Yasins in the amount of $1,000 for a loan they had made to his brother, Ali Murtaza. The Yasins had advanced this amount to Mr. Murtaza for expense money while he was in the remand centre awaiting trial.

[11] Later, Mr. Mujtaba would pay the Yasins another $20,000 to secure their agreement to remain as sureties for Nazma. There is also evidence he may have paid them a further $10,000. These payments do not form a part of Mr. Mujtaba’s claim, and the Yasins have agreed that receipt of these amounts is not relevant to their defence.

[12] The Yasins claim that the total amount Mr. Mujtaba would come to owe them under this arrangement would be approximately $138,000. They gave evidence at trial that Mr. Mujtaba only paid amounts to them, or on their behalf, that add up to $94,513. This amount includes the $50,733.47 he now claims was a loan.

[13] The Yasins argue that the $50,733.47 was part payment of Mr. Mujtaba’s obligation to them, or that they should be entitled to set-off that amount against arrears he owed to them. They take the position that Mr. Mujtaba must not only prove his case, but that he must also prove that he paid to them all amounts they allege he was obliged to pay for Nazma’s care in order to succeed.

[14] The defendants have not brought a counterclaim for any amounts allegedly not paid by Mr. Mujtaba.

Analysis

[15] The essence of the Yasins’ defence is that the $50,733.47 Mr. Mujtaba now claims was never a loan. This defence turns on the central question whether Mr. Mujtaba has proven on the balance of probabilities that the $50,733.47 he advanced to the Yasins was, in its entirety or in part, separate from his agreement to pay them to house and supervise Nazma during bail.

[16] The Yasins served a request to admit dated October 28, 2019 filed as Exhibit 9 at trial. Counsel for Mr. Mujtaba served a reply to the request to admit on November 17, 2019. That reply was marked as Exhibit 10. In the facts admitted as true, Mr. Mujtaba paid $21,533.47 to the Yasin’s real estate lawyer, Rajeed Walia, when refinancing their home in July 2011 would not raise enough money to consolidate their debts. The Yasins also admit as a fact that Mr. Mujtaba paid a further $29,200 in three tranches to pay off their credit cards in December 2011. The sum of these two amounts is the $50,733.47 for which Mr. Mujtaba now seeks judgment.

Funds required to refinance Stonebriar Crescent

[17] The Yasins took steps in July 2011 to refinance the existing mortgage against Stonebriar Crescent through the Equitable Trust Company. At the time, they also had an outstanding balance on a line of credit with CIBC in the amount of $76,533. Their plan was to pay off the line of credit with funds raised through this refinancing. After receiving those funds, they directed Mr. Walia to pay the surplus of $55,000 towards the CIBC line of credit, leaving a balance of $21,533 to find elsewhere.

[18] Mr. Mujtaba testified that he had $35,602.59 on deposit in his own bank account on July 1, 2011. He testified that the Yasins required $21,533.40 to make up the balance necessary to retire their indebtedness to CIBC. They asked him to lend them the money that would enable them to do this.

[19] Mr. Mujtaba agreed to this request. According to his evidence, Mr. Mujtaba provided a bank draft drawn on his account at Bank of Montreal in the amount of $21,533.47 on July 13, 2011. This bank draft was provided to Mr. Walia, in trust for his clients, the Yasins. A copy of this bank draft was marked as Exhibit 4 at trial.

[20] Mohammad Yasin and Fehra Yasin each testified that they provided $14,000 in cash directly to Mr. Mujtaba, to which they say Mr. Mujtaba just added another $7,533.47. The funds from these two sources made up the sum payable under the bank draft issued by Mr. Mujtaba’s bank. The Yasins defence in this respect is two-fold: first, that Mr. Mujtaba provided only $7,533.47 that was bundled with $14,000 they provided to him towards the bank draft, and second, the $7,533.47 was a payment towards amounts that Mr. Mujtaba already owed to them.

[21] It is not in dispute that Mr. Mujtaba delivered a bank draft to Mr. Walia in the required amount. The question in this respect is whether he paid all of it as he claims, or only funded $7,533 from his own money. The answer to this question is relevant not only to the loan issue, but also because it will be a bellwether finding when assessing the credibility of the parties on all parts of Mr. Mujtaba’s claim.

Repayment of credit card debt

[22] Mr. Mujtaba also claims that he loaned $29,200 to the Yasins when he made large payments on their credit cards balances outside of his monthly obligation regarding Nazma and the children. These payments were made by Mr. Mujtaba when he paid $14,950, $9,550, and $4,700 from his bank account in December 2011. These payments are evident from Mr. Mujtaba’s bank statement for that month entered into evidence.

[23] The Yasins do not deny that Mr. Mujtaba made these payments toward their credit card debt on their behalf. However, they refute Mr. Mujtaba’s claim that he made these payments as a loan. Like the amount of Mr. Mujtaba’s contribution towards the CIBC line of credit, they say that he was only paying money he already owed to them. This discrepancy between accounts requires the court to assess the credibility of the parties.

Credibility and the Burden of Proof

[24] The Yasins stated in their statement of defence, and it was the evidence of both of them at trial, that they made no promise and had no legal obligation to repay all or part of the amount claimed by Mr. Mujtaba upon the sale of Stonebriar Crescent. To the contrary, they allege that Mr. Mujtaba owed them far more than the amounts he paid for housing and supervising his sister-in-law Nazma as sureties. The Yasins include the payments he made on their behalf in July and December 2011 when asking the court to draw this conclusion.

[25] In Ezzati v. Bae, 2019 ONSC 5292, Diamond J., made the following observations on the process a trial judge should follow when assessing the credibility of witnesses, keeping in mind the onus of proof necessary to satisfy the evidentiary burden in the case, and the interrelated factors to consider as part of that process:

[13] The assessment of the credibility of witnesses is especially important when bearing in mind the onus of proof. As the trial judge, I must decide whether a specific proposition of fact has or has not been established on a balance of probabilities by the party having the onus of proof. For a party to seek to discharge its legal onus of proof, I must first be satisfied with the credibility and reliability of the evidence in order to be in a position to make the relevant findings of fact.

[14] Put another way, a moving party has the onus of factual proof of the evidence necessary to satisfy its legal burden …..

[15] In evaluating the credibility or reliability of evidence, I look to a number of interrelated factors such as its probability, logical connection with other findings and support from independent facts or documents. As held by Justice Brown (as he then was) in Atlantic Financial Corp. v. Henderson et al, [2007] 15230 (S.C.J.):

“In deciding between these two diametrically opposed positions, I am guided by the observations made about assessing the credibility of witnesses by O’Halloran, J.A. in Faryna v. Chorny, 1951 252 (BC CA), [1952] 2 D.L.R. 354 (B.C.C.A.) where he stated, at page 357:

‘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 readily recognize as reasonable in that place and in those conditions.’”

[26] Mr. Mujtaba has testified that the entire $21,533.47 was drawn on his bank account at Bank of Montreal on July 13, 2011. Mr. Yasin admitted under cross-examination that the draft for $21,533.47 was drawn from the funds on deposit in Mr. Mujtaba’s own account.

[27] Ms. Yasin was confronted with Mr. Mujtaba’s bank statement for July 2011 and admitted that the bank statement showed that Mr. Mujtaba has an opening balance of $35,602.59 on account as of July 1, 2011. She conceded that no deposit of $14,000 into Mr. Mujtaba’s account was shown on the bank statement. These facts lead to the inescapable conclusion that the draft for $21,533.47 was taken from Mr. Mujtaba’s own funds.

[28] Neither Mr. Yasin or Mrs. Yasin gave any evidence to prove that they had given $14,000 to Mr. Mujtaba towards the bank draft. They did not call Mr. Walia as a witness, if he knew about the original source of those funds to begin with. There is also the explanation provided by Ms. Yasin that she gave $14,000 to Mr. Mujtaba first because it was in cash, instead of depositing those funds directly with Mr. Walia in trust. This explanation does not make sense as Mr. Walia was her own lawyer. Or, why not use those funds to pay down the line of credit at CIBC directly?

[29] Ms. Yasins’ evidence also makes no sense that she would give $14,000 in cash to Mr. Mujtaba to put through his bank account when she professed an aversion to taking large amounts in cash herself. She testified that she would not accept a similar amount in cash from Mr. Mujtaba towards the funds she was assembling because she was concerned it could be seen as money from the drug trade. Ms. Yasin did not reconcile that conflict in her evidence for the court.

[30] The Yasins did not have the funds to come up with $14,000 in any event. They explained in testimony that they had to borrow those funds from their friend and former tenant, Hadayad Masih.

[31] Mr. Masih was called as a witness by the Yasins. Mr. Masih testified that he gathered those funds to loan to the Yasins by borrowing $12,000 from his employer, Bital Siddiqui, who owned the Village Restaurant where Mr. Masih worked as a cook. The other $2,000 came from his own savings.

[32] Mr. Siddiqui was also called as a witness. He testified that he gave Mr. Masih two payments of $5,000 in June, and $7,000 in July.

[33] I find that the Yasins did not contribute $14,000 or any amount toward the bank draft drawn on Mr. Mujtaba’s bank account, for reasons that start with the alleged source of the funds. Mr. Siddiqui was called by Mr. Mujtaba to testify under a summons to a witness that required him to bring all relevant documents with him to court. He did not bring any bank statements that showed withdrawals from his own account or the account of his business to provide either payment to Mr. Masih.

[34] Mr. Siddiqui explained that he gave this money to Mr. Masih from the business, but he could not find any records to show where it came from. He stated that he made the loan to Mr. Masih in cash, and not through his company bank accounts in any event. He testified that he did not obtain a receipt from Mr. Masih when he provided him with either cash advance, and that he has no records at all to support this loan.

[35] Mr. Siddiqui states that he relies on entries made in his diary and on his personal recollection about the loan to Mr. Masih. However, he provided no page from his diary to collaborate this evidence. He concluded his evidence in chief by describing how he recouped this indebtedness from Mr. Masih by deducting various amounts from Mr. Masih’s pay over a period of some eighteen months, and ultimately forgave $2,000 of that debt.

[36] It was also Mr. Siddiqui’s evidence that he had recorded the loan in a book at one time, but that book went missing with his briefcase when the briefcase was stolen from his home in 2018. Mr. Siddiqui advised under cross-examination that he did not report the theft of his briefcase to the police and could not produce a police report for that reason.

[37] I did not believe Mr. Siddiqui’s story that he loaned $12,000 to Mr. Masih. He offered no proof the loan was ever made, despite what he was under a summons to witness to bring with him to court. And his description of events are not credible. He gave no rationale for advancing two large payments in cash to an individual who he had employed for less than one year. There was no record of the transaction available for trial, showing either funds coming from Mr. Siddiqui or being received by Mr. Masih. And why, in any event, would he advance $5,000 to Mr. Masih in June, when the money was not required until the Yasins refinanced their house halfway through the following month.

[38] I find as a fact that Mr. Siddiqui did not lend the funds in question to Mr. Masih. This leads me to find as a further fact that Mr. Masih did not lend those funds to the Yasins. The Yasins did not have the $14,000 they allegedly gave to Mr. Mujtaba to bundle with a lesser amount that would come from him. I also question the reliability of the evidence given by these witnesses in view of the lack of evidence that the Yasins repaid Mr. Masih at all. If the Yasins repaid Mr. Masih, presumably he would have repaid his boss so that Mr. Siddiqui would not deduct further amounts from Mr. Masih’s pay.

[39] I am mindful of the onus of proof on Mr. Mujtaba, as well as the interrelated facts that are not in dispute on this part of the claim. Mr. Mujtaba has proven on the balance of probabilities that the entire $21,533.47 came from his own funds. This finding carries with it a significant assessment against the overall credibility of the Yasins.

Availability of Set-off as a defence

[40] Although the statement of defence does not specifically mention set-off, the allegations of material facts the Yasin’s have pleaded essentially raises set-off as a defence. If accepted, any money that Mr. Mujtaba might be found to owe the them could be set off against the amounts he now claims.

[41] Set-off is available for a defendant to plead as a defence to an action under section 111 of the Courts of Justice Act. Section 111 states as follows:

Set off

111 (1) In an action for payment of a debt, the defendant may, by way of defence, claim the right to set off against the plaintiff’s claim a debt owed by the plaintiff to the defendant.

[42] There are two types of set-off, described as legal set-off and equitable set-off respectively. The distinction between these types of set-off was discussed in the seminal case of Holt v. Telford, 1987 18 (SCC), [1987] 2 S.C.R. 193. In that case, the Supreme Court of Canada identified that legal set-off requires the satisfaction of two conditions where parties to an action allege competing obligations against one another. The first condition is that both obligations must be debts, so that the claims were liquidated in nature. The second condition is that both debts must be mutual cross-obligations. Legal set-off is the type of set-off enabled by section 111 of the Courts of Justice Act.

[43] In contrast, equitable set-off is available where the claim for money is either liquidated or unliquidated. In equitable set-off, there is no requirement of mutuality. Parties in different capacities are able to claim set-off, and privity issues such as assignment, are not a bar. However, the party claiming set-off must show that the damages arose out of the same contract or a series of events that gave rise to the amount claimed or was closely connected with the contract or series of events in issue.

[44] Weiler J. A. in Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716 distilled the elements of equitable set-off as that concept was discussed in Holt v. Telford as follows:

[57] In that case, the Supreme Court held that, while legal set-off required mutual debts, equitable set-off could apply where the defendant claimed a money sum arising out of the same contract or series of events that gave rise to the plaintiff’s claim, or was closely connected with that contract or series of events. The Supreme Court noted the following five principles relevant to equitable set-off, at p. 212: (1) The party claiming set-off must show some equitable ground for being protected from his adversary’s demands; (2) that ground must go to the very root of the plaintiff’s claim; (3) the counterclaim must be so clearly connected with the plaintiff’s demand that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the counterclaim; (4) the claim and counterclaim need not arise out of the same contract; and (5) unliquidated claims are on the same footing as liquidated claims.

[45] For equitable set-off to succeed as the defence, the defendant must lead evidence that two obligations are so closely connected that it would be unconscionable if the court did not permit set-off to apply to non-debtor obligations, such as unliquidated claims, against amounts at issue in the action. See Agwad Metals Inc. v. Dufferin Roofing Ltd. (1991), 46 C.P.C. (2nd) 133 (Gen. Div.) and CIBC World Markets Inc. (CIBC Wood Gundy) v. Burgess, 2009 20342.

[46] Even though either type of set-off is available as a defence, the defendant must plead set-off to make the defence of set-off relevant and applicable. This is particularly required in the case of legal set-off, as section 111 permits a defendant, by way of a defence, “to claim to right to set off…” It has stood the test of time that civil actions are to be decided within the framework of the allegations of material fact and issues found in the pleadings. Parties are entitled “to have resolution of their differences on the basis of the issues joined in the pleadings.”: Rodaro v. Royal Bank of Canada (2002), 2002 41834 (Ont. C.A.) at para. 60, at para 60 and 61, cited in Colautti Construction Ltd. v. Ashcroft Development Inc., 2011 ONCA 359.

[47] The Yasins did not plead a right to set off amounts allegedly owed to them in their defence of this action. Or if the claim made by Mr. Mujtaba is considered a debt or other obligation, they owe to him, that they have a right to set off that amount against the amounts that he owes to them. Instead, the they seek to extinguish the claim of Mr. Mujtaba entirely by arguing that any funds he advanced on their behalf was on account of his accumulating indebtedness to them.

[48] In my view, set-off is not available to the Yasins because they did not plead legal or equitable set-off in their statement of defence. Even if set-off had been pleaded expressly or by implication, I find that the Yasins have not proven that Mr. Mujtaba has not paid $3,000 a month for Nazma between November 2009 and August 2013. There was no ledger or other record to which either of the defendants referred in evidence to document amounts paid or not paid by Mr. Mujtaba as the months went by. There was no document mentioned or produced showing a resulting balance owing from time to time while Nazma remained under their roof. Nor was there evidence given about any demand made by the Yasins for the payment of outstanding arrears. As I understand the evidence, the Yasins made the allegations about any default in payments known for the first time when defending this action.

[49] The court heard evidence that Mr. Mujtaba would make payments toward credit card debt and other expenses for the Yasins from time to time that added up to $13,780. This evidence was uncontroverted. In their own words, the Yasins acknowledged that “we were spending it and he was paying in a different way” and “He was paying whatever we (spended)”.

[50] It is common ground Mr. Murtaza himself moved into Yasin home sometime between 2010 and 2012 where he lived for at least a year. There was no evidence given that he was charged additional rent. I infer as a fact that his own accommodation in the home was therefore covered by the credit and cash payments adding up to $3,000, he was making each month.

[51] I find on the evidence that the Yasins promised to repay Mr. Mujtaba the funds he advanced in July and December 2011. The $50,733.47 he advanced from his bank account on their behalf was a loan, payable when they sold Stonebriar Crescent. This indebtedness was separate and apart from any running account to house and supervise Nazma and her children. In my view, the funds Mr. Mujtaba advanced and any amounts owing over Nazma were not connected closely enough for equitable set-off to apply. The two agreements were different in nature: they came about for different reasons, on different terms, and involved different obligations.

Conclusion

[52] I find that Mr. Mujtaba has succeeded on proving his claim on the balance of probabilities that he loaned $21,533.47 when the Yasins refinanced their home in July 2011, and a further $29,200 to retire their accumulated credit card debt in December 2011, for a total of $50,733.47.

[53] On the other hand, the Yasins had the onus of proving the breach of contractual rights they assert as a defence to this action. Their evidence has not been accepted that the amounts Mr. Mujtaba advanced to them were simply payment towards arrears owed. It was not Mr. Mujtaba’s responsibility to disprove all claims made by Mr. and Mrs. Yasin to support their defences of payment on account or set-off.

Judgment

[54] Mr. Mujtaba is therefore granted judgment for $50,733.47. I also award Mr. Mujtaba pre-judgment interest on $21,533.47 since July 13, 2011 and $29,200 since December 2011 at the rates prescribed by the Courts of Justice Act.

[55] The parties are encouraged to explore a resolution of any claim to costs. If the parties cannot resolve costs, submissions in writing shall be made as follows:

a) From Mr. Mujtaba, by June 16, 2020; b) From the Yasins, by June 30, 2020; c) There shall be no submissions in reply without leave; and d) Written submissions shall consist of no more than two double spaced typewritten pages, not including any offer to settle or bill of costs.

[56] All written submissions may be made by email to my judicial assistant at melanie.powers@ontario.ca.

“Original signed by” ______

Emery J.

Released: April 30, 2020