Court File and Parties
COURT FILE NO.: 58943/19 DATE: 2020-08-07 SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN:
VIJAY BHASKAR, Plaintiff
and
EVGUENI POLTAVETS and SVETLANA POLTAVETS, Defendants
AND BETWEEN:
EVGUENI POLTAVETS and SVETLANA POLTAVETS, Plaintiffs by Counterclaim
and
VIJAY BHASKAR and TAHIR MAJEED and NAVDEEP BOPARAI and SHINDER KELLEY and MONU BANSAL and JITESH BHALLA and BALJINDER SINGH SANDHU and HARINDERPAL SINGH CHEEMA, Defendants by Counterclaim
BEFORE: Justice Robert B. Reid
COUNSEL: G. Bhachu, Counsel, for the Plaintiff and Defendant by Counterclaim V. Bhaskar Defendants and Plaintiffs by Counterclaim self-represented S. Beattie, Counsel, for the Defendant by Counterclaim S. Kelley A. Duggal, Counsel, for the Defendant by Counterclaim N. Boparai S. Gfeller, Counsel, for the Defendant by Counterclaim M. Bansal C. Sinclair, Counsel, for the Defendants by Counterclaim B. Singh Sandhu and H. Singh Cheema S. Hodge, Counsel, for the Defendant by Counterclaim J. Bhalla T. Majeed, Defendant by Counterclaim, self-represented
HEARD: July 24, 2020 (by Zoom)
Decision on Motion
[1] The defendant by counterclaim, Jitesh Bhalla (“Mr. Bhalla”) moves to strike the Amended Amended Statement of Defence and Counterclaim dated January 15, 2020 as against him without leave to amend. He brings the motion pursuant to rules 21.01(1)(b) and 25.11(b) of the Rules of Civil Procedure.
[2] The plaintiffs by counterclaim, Evgueni Poltavets and Svetlana Poltavets (“the Poltavets”) oppose the motion. The other parties take no position and did not participate in the hearing.
Background
[3] The main action is a claim to enforce a mortgage by Vijay Bhaskar (“Mr. Baskar”) as mortgagee against the Poltavets as mortgagors involving property municipally known as 617 Lock Street West, Dunnville Ontario.
[4] The Poltavets have defended the action and made a counterclaim against Mr. Bhalla, amongst others.
[5] In the amended counterclaim dated August 21, 2019, the Poltavets named as defendants the lawyers involved on both sides of three mortgage transactions registered on title to their Dunnville property as well as some of the mortgagees. They claimed that the lawyer defendants by counterclaim including Mr. Bhalla had committed intentional and/or negligent infliction of emotional suffering and professional dishonesty.
[6] Two of the defendants by counterclaim, Baljinder Singh Sandhu (“Mr. Sandhu”) and Harinderpal Singh Cheema (“Mr. Cheema”) brought a motion to strike the counterclaim against them on the basis that it failed to disclose a reasonable cause of action. Both Mr. Sandhu and Mr. Cheema were involved as lawyers for the mortgagees who advanced mortgage loans to the Poltavets. By my decision of November 21, 2019, I granted the order striking the Statement of Defence and Counterclaim as against those two lawyers with leave to amend.
[7] The Poltavets filed an amended amended statement of defence and counterclaim dated January 12, 2020 which included claims against Mr. Bhalla seeking damages for negligence and professional malpractice, and for conspiracy to commit mortgage fraud as well as for other relief, pursuant to the common law and the provisions of the Negligence Act.
[8] The amended amended counterclaim alleges that Svetlana Poltavets worked with Navdeep Boparai (“Mr. Boparai”), and that they referred real estate clients to each other and shared the commissions received.
[9] The Poltavets allege that Mr. Boparai was the principal and “mastermind” behind a mortgage fraud involving several mortgages and loans through his company, BLM Canada Corporation (“BLM”).
[10] Mr. Bhalla, who is a lawyer, is alleged to have represented BLM. He registered a mortgage between the Poltavets and BLM on October 16, 2017, and then registered a transfer of that mortgage from BLM to Mr. Boparai on August 21, 2018.
[11] The amended amended counterclaim alleges that Mr. Bhalla was a “knowing and willing participant in a conspiracy to commit mortgage fraud” and that he breached the duty of care that he owed to the Poltavets as a lawyer, making him liable in negligence “and malpractice”. The amended amended counterclaim alleges that through his involvement in the registration of fraudulent mortgages, Mr. Bhalla was willfully blind and reckless as to the dishonest activity of Mr. Boparai.
[12] Mr. Bhalla filed a Notice of Intent to Defend but, except in bringing this motion, has not taken further steps in the action.
The Issues
[13] The key question for consideration in this motion is whether there is any tenable legal basis on which Mr. Bhalla, acting as a lawyer for BLM, could have been liable to the Poltavets.
[14] To answer that question requires consideration of the following:
a. are ethical breaches by a lawyer actionable apart from negligence or fraud? b. does a lawyer owe a duty of care to a non-client? c. do the pleadings support a claim for conspiracy?
[15] A subsidiary question is whether, if no cause of action is established, leave to amend should be granted.
[16] Depending on the answers to the foregoing questions, it may also be necessary to determine whether the claim is frivolous or an abuse of process.
The Relevant Rules
[17] Rule 21.01(1)(b) permits a judge to strike out a pleading on the ground that it discloses no reasonable cause of action. No evidence is admissible on such a motion according to rule 21.01(2)(b), meaning that, in this case, I can only look at the Poltavets’ pleadings to make a decision. In doing so, I assume the facts contained in the pleadings to be true.
[18] Rule 25.06(1) provides that every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence but not the evidence by which those facts are to be proved. Rule 25.06(8) requires that where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred.
[19] Rule 25.11 permits the court to strike out or expunge all or part of a pleading with or without leave to amend on the ground that the pleading is scandalous, frivolous or vexatious or is an abuse of the process of the court.
[20] The prohibition against bringing evidence on the motion only applies to rule 21.01(1)(b) and therefore I permitted the filing of affidavits by the Poltavets in response to the motions to be used as regards the rule 25.11 aspect of the motion.
[21] The Rules of Professional Conduct of the Law Society of Ontario in rule 3.2-7 prohibit a lawyer from knowingly assisting in or encouraging any dishonesty, fraud, crime or illegal conduct. Similarly, a lawyer shall not do or omit to do anything that the lawyer ought to know assists in, encourages or facilitates any dishonesty, fraud, crime or illegal conduct by a client or any other person.
Analysis
[22] The crux of the Poltavets’ case against Mr. Bhalla is that, by acting as solicitor for BML and/or Mr. Boparai and registering documents on their behalf, he was a participant in a fraud or conspiracy against the Poltavets.
[23] The counterclaim should only be struck out if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action. Facts must be provided with reasonable specificity as opposed to bald allegations. The court should be generous and allow an arguable case to proceed to trial on the merits. On the other hand, the power to strike out claims that have no reasonable prospect of success has been described as a valuable housekeeping measure essential to effective and fair litigation ensuring an efficient use of judicial resources.
Does a lawyer owe a duty of care to a non-client?
[24] One of the essential elements to a claim for negligence is that a duty of care is owed by one party to the other who suffered harm.
[25] There is no dispute that Mr. Bhalla was never engaged to act on behalf of the Poltavets. The amended amended counterclaim alleges that his involvement was as counsel for BLM and Mr. Boparai.
[26] The law is clear that a lawyer generally does not owe a duty to a non-client, and particularly the opposing side in a dispute. A duty of care may extend to a non-client in limited circumstances where the non-client relies on the lawyer, the reliance is reasonable, and the lawyer is aware that the non-client is relying on him or her. There is no hint in the pleadings that this exception to the general rule is applicable here, either from the specifics pleaded or by implication.
[27] I therefore conclude that the allegations of negligence do not disclose a reasonable cause of action against Mr. Bhalla. Despite the fact that the Poltavets are self represented, they have provided a detailed narrative of the circumstances that they say gave rise to their claim. If it was a fact, they would certainly have alleged that they reasonably relied on Mr. Bhalla and that he was aware of their reliance on him. There is no reason to permit a further amendment of the twice amended counterclaim.
Are ethical breaches by a lawyer actionable apart from negligence?
[28] Lawyers, as members of the bar in Ontario, are required to adhere to certain ethical standards. Those standards are described in the Rules of Professional Conduct.
[29] The amended amended counterclaim presumes that the breach of an ethical standard by Mr. Bhalla gives the Poltavets a claim against him in damages. That is an incorrect assumption.
[30] The duty owed by lawyers is not owed to the opposite party in litigation but to the court and to the Law Society of Ontario which governs the conduct of lawyers in the Province. Someone who is not a client may make a complaint against a lawyer. There is a complaint process available through the Law Society where professional misconduct is alleged.
[31] I express no opinion on whether the facts, if proven by the Poltavets, could form the basis of a successful complaint to the Law Society. However, it cannot be a cause of action available to the Poltavets in this civil litigation.
[32] I therefore conclude that the allegations of ethical breaches do not disclose a reasonable cause of action against Mr. Bhalla. No option to further amend the counterclaim as regards the alleged ethical breaches is appropriate or necessary.
Do the pleadings support a claim for conspiracy?
[33] The counterclaim alleges that Mr. Bhalla was party to a conspiracy to commit mortgage fraud against the Poltavets. The alleged fraud is detailed in the pleading relating to the actions of Mr. Boparai. There is no detail of how Mr. Bhalla is said to have conspired with Mr. Boparai against the Poltavets. Although the various registrations signed by Mr. Bhalla indicate that he has the authority to sign and register the documents on behalf of his client, I do not find that certification to be indicative of anything more than the standard procedure required of the solicitor registering a document on behalf of a client.
[34] The provisions of rule 25.06 require the concise pleading of material facts. It is beyond dispute that the required elements for conspiracy have not been pleaded. If that was the end of the matter, it might well be a case for leave to be given to amend the pleading to add the necessary material facts. However, there are other deficiencies in the claim.
[35] It is alleged that Mr. Bhalla acted for BLM and perhaps Mr. Boparai in registering a mortgage and transfer of mortgage where the Poltavets were mortgagors. The counterclaim makes the simple allegation that in doing so, Mr. Bhalla was in “conspiracy” with BLM and Mr. Boparai.
[36] There are no allegations that Mr. Bhalla acted outside the scope of his authority as the lawyer for BLM and Mr. Boparai. A lawyer, acting within the scope of his retainer and following his client’s instructions, cannot be a party to a conspiracy with his own client.
[37] The apparent basis for the Poltavets claim is that Mr. Boparai induced them to sign a mortgage in which the principal amount was inflated beyond the amount that they actually borrowed. They agreed to sign it on the promise by Mr. Boparai that they would be paid the entire face amount. Mr. Boparai failed to make payment as promised and allegedly misappropriated the funds. There are no allegations of material facts that link Mr. Bhalla with that claim for what amounts to a breach of contract.
[38] Since I must accept the factual allegations in the pleadings as true for the purpose of this motion, I find that there is no link between Mr. Bhalla and the contractual breach alleged on the part of Mr. Boparai other than Mr. Bhalla’s involvement as solicitor.
[39] The Poltavets submitted that Mr. Bhalla is in breach of the Rules in that he has not filed a statement of defence or an affidavit of documents to date and is therefore outside the time frame for doing so provided in the Rules. Although that is true, it is neither uncommon nor inappropriate for parties to seek remedies under rule 21.01(1)(b) before taking other steps to defend.
[40] Implicit in the Poltavets’ objection is a sense that, if pleadings had been filed and documents disclosed, facts might have presented themselves that would be supportive of the Poltavets’ counterclaim. In other words, they might have had a better opportunity to buttress their claim beyond the current broad allegations if Mr. Bhalla had strictly complied with the time frames in the rules. The problem with that approach is that it is not appropriate for lawsuits, such as the counterclaim herein, to be commenced based on speculation with the hope of securing supporting evidence from the opposing party. This is particularly a concern where the allegations are of fraud, dishonesty or deceit which can affect a lawyer’s reputation.
[41] In summary as to the conspiracy claim, I conclude that it constitutes a bald allegation without the pleading of material facts. The elements of conspiracy have not been pleaded. There is no allegation supported by material facts that Mr. Bhalla acted outside the scope of his authority as solicitor for BLM and Mr. Boparai which is necessary before a lawyer can be part of a conspiracy with a client. Finally, since the Poltavets have admitted that they willingly signed the mortgage but that Mr. Boparai breached his agreement to pay them later at the inflated face amount, the claim does not indicate mortgage fraud, but rather breach of contract. If there is no mortgage fraud, Mr. Bhalla cannot be part of a conspiracy to commit fraud.
[42] Based on the foregoing, I therefore conclude that the allegations of conspiracy do not disclose a reasonable cause of action against Mr. Bhalla. No option to further amend the counterclaim as regards the alleged conspiracy is appropriate or necessary.
Is the counterclaim frivolous or an abuse of process?
[43] The court has the jurisdiction under rule 25.11 to strike out or expunge all or part of a pleading with or without leave to amend on the ground that it is scandalous, frivolous or vexatious or an abuse of the process of the court.
[44] Based on my conclusions as to the lack of a reasonable cause of action, it is unnecessary for me to make a ruling as to whether the counterclaim is frivolous, vexatious or an abuse of process. If I had been required to do so, I would have found that, despite the result being to deprive the Poltavets of a full trial on the merits, this is one of the clearest of cases where the court’s discretion should be exercised and the counterclaim struck out without leave to amend.
Costs
[45] As I indicated at the conclusion of submissions, I will allow the parties to make brief written submissions as to costs. I encourage the parties to resolve the issue of costs consensually. If they are unable to do so, I will receive submissions according to the following timetable:
- Mr. Bhalla is to serve the Poltavets with written costs submissions not exceeding five pages in length and his Bill of Costs on or before August 21, 2020.
- The Poltavets are to serve Mr. Bhalla with written costs submissions not exceeding five pages in length and their Bill of Costs on or before September 4, 2020.
- Mr. Bhalla is to serve the Poltavets with any responding submissions on or before September 11, 2020.
[46] All submissions are to be filed with the court no later than September 18, 2020. If submissions are not received by that date, or any agreed extension, the matter of costs will be deemed settled.
Reid J.