Court File and Parties

COURT FILE NO.: CV-21-659167

MOTION HEARD: 2021-12-09

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2654255 Ontario Inc., et al. Plaintiffs

-AND-

Zafar, et al. Defendants

BEFORE: Associate Justice Abrams

COUNSEL: T. Haque, for the plaintiffs G. Sidlofsky, for the defendants

REASONS FOR DECISION

[1] The defendants move for an Order striking out the statement of claim herein on the basis that it (a) creates a multiplicity of proceedings, (b) discloses no reasonable cause of action against Wardah Kamran (something which plaintiffs’ counsel acknowledged on the return of this motion), (c) fails to plead particulars of the fraud and breach of fiduciary duty alleged on the part of Kamran Zafar, (d) violates the rules of pleading by making allegations that are inconsistent with allegations made in a related action, involving the same parties—without pleading that the inconsistent allegations are made in the alternative, and (d) pleads evidence, inter alia.

The Context Within Which This Motion Was Brought

[2] Less than one year before this claim was commenced, the defendant Kamran Zafar sued the plaintiffs (and parties related to them, including his accountant and real estate agent, Sanjiv Kumaar Gupta and Mr. Gupta’s wife) for fraud and breach of fiduciary duty arising out of the sale of a gas station/restaurant/convenience store owned by Mr. Zafar (the “first action”). Mr. Zafar alleged that Mr. Gupta made fraudulent misrepresentations that induced him to sell his business to Mr. Gupta’s wife (through a company incorporated by her) at an amount that was below fair market value and in a manner that benefitted Mr. Gupta’s wife and left Mr. Zafar with an increased tax liability. It is this very same transaction that is now at issue in this action.

[3] The plaintiffs herein could have pursued, but did not pursue, the claims now made by them by way of counterclaim in the first action. Instead, they delivered a statement of defence and, two weeks later, commenced this action. This action alleges misrepresentation/fraud and breach of contract as against Mr. Zafar and Ms. Kamran in respect of the same sale of the gas station business. The plaintiffs herein plead having been induced, by fraud/misrepresentation, to purchase the business.

[4] The facts set out in this action are generally the same as those set out in the statement of defence in the first action, with one exception. Though in the first action no reference was made to Ms. Kamran, in this action it is alleged that she was a key player in the sale of the business. She is alleged to be liable for breach of contract, deceit, and fraudulent representation. The defendants herein posit that the pleas against her are made without particularization or foundation. I agree.

[5] There are other problems, too, with the fact and manner in which the allegations against Ms. Kamran have been pled. I will not now elaborate upon them, in that counsel for the plaintiffs acknowledges that there are problems. Those deficiencies that relate to Ms. Kamran are set out in detail in the factum filed by the defendants. Further, and in any event, the defendants point out that, in this action, there is an intermingling of pleas as against them—without explanation or any degree of specificity, in respect of what the Zafar/Kamran defendants are said to have done/not done. With this too, I agree.

[6] Further, and looking beyond the allegations made against Ms. Kamran, I note that there are inconsistencies between the first action and this action as to the facts pled. In the first action, the defence references at least two share purchase agreements; in this action, only one share purchase agreement is referenced. In the first action, Mr. Gupta’s wife is described as one of two guarantors for the purchase of the gas station business; in this action, only one guarantor is referenced—Mr. Gupta’s wife. There are also other inconsistencies (as relate to a January 2020 fuel supply agreement and the identity of the signatories to that agreement).

[7] As well, at paragraphs 17 and 18 of the statement of claim herein, a significant portion of the share purchase agreement is reproduced (with the plaintiffs pleading evidence improperly) and, though the plaintiffs claim that the defendants made negligent and/or fraudulent misrepresentations on all of the warranties referenced, particulars of the defendants’ alleged fraud/misrepresentation are not pled.

[8] The plaintiffs’ general response in respect of the issues raised by the defendants on this motion is that they ought to be permitted to amend their pleas as they relate to Ms. Kamran and that their action ought to be tried together with the first action. Further, and relying on R. 2.01(1), they say that the statement of claim should not be declared a nullity—any failure to comply with the Rules notwithstanding.

Analysis

[9] The plaintiffs acknowledge their failings as relate to the pleas made in respect of Ms. Kamran and recognize that those pleas, as drafted, cannot stand. While it is not necessary, in the circumstances, for me to go through each plea seriatim as is made in respect of Ms. Kamran, I will say that those flaws raised by the defendants on this motion are entirely on point. I accept and adopt the defendants’ reasoning as set out in paragraphs 53-62 of their factum. Even on a generous reading of the statement of claim herein, no reasonable cause of action against Ms. Kamran is disclosed and by “lumping together” the two defendants, the plaintiffs have breached R. 25.06(1) in not “providing the necessary separate, differentiating material facts that could support a claim against each [of Mr. Zafar and Ms. Kamran]” (Burns v. RBC Life Insurance Company, 2020 ONCA 347).

[10] As for the pleas of fraud and misrepresentation, they need to be, but are not, fully particularized (R. 25.06(8)). At paragraphs 17 and 18 of the statement of claim herein, the plaintiffs reproduced sections of a share purchase agreement containing more than 20 warranties. At paragraph 19 of the statement of claim, the plaintiffs plead that the defendants “misrepresented on all of th[ose] [w]arranties…whether negligently or fraudulently”.

[11] Full particulars in a pleading, as are required, include reference to: the nature of each alleged intentional falsehood and negligent misrepresentation; when, where, how, by whom and to whom it was made; the fact and nature of the falsity; the fact and manner of the inducement of reliance; the intention that there be reliance by the plaintiffs; the alteration by the plaintiffs of their position by virtue of their reliance on the fraud or misrepresentation; and the resulting loss or damage to the plaintiffs (see: Ernst & Young Inc. v. Xinduo, 2017 ONSC 5911, at para. 21 and Lysko v. Braley, 2006 CanLII 9038 (ONCA), at para. 30).

[12] Then too, at para. 24 of the statement of claim, the pleas of breach of fiduciary duty on the part of Mr. Zafar are not accompanied by a recitation of the material facts on which the pleas are based (Admassu v. Macri, 2010 ONCA 99, at para. 37). And, the pleas as to failure to report the sale, remit proper taxes, pay employees proper wages and benefits and abide by the fuel supply agreement are wanting in particularity. By way of illustration: What sales? Sales during what period of time? What reporting obligation? What taxes? Taxes over what period of time? What employees? What wages and benefits? Over what period? In what amounts?

[13] On the issue of multiplicity of proceedings, the plaintiffs have failed to explain why, here, a multiplicity of proceedings could not be or ought not to be avoided (s. 138 of the Courts of Justice Act)--with there being two parallel actions, and/or why they have sought fit to make allegations inconsistent with those in the first action and to raise new grounds of action by way of a fresh statement of claim and not by way of amendment of their statement of defence/the assertion of a counterclaim (see: R. 25.06(5)). The statement of defence in the first action and the statement of claim herein contain inconsistent allegations and those allegations are not pled in the alternative (R. 25.06(4)). Indeed, the plaintiffs acknowledge that there are inconsistencies that need to be addressed.

[14] There are other drafting errors and issues in the statement of claim pointed out by the defendants including in paragraph 21 (see: paragraph 81 of the defendants’ factum), as well as pleas of evidence. In this latter regard, there is no reason that the text of the share purchase agreement needed to be reproduced as it was at paragraphs 17 and 18 of the statement of claim.

[15] While I accept that the court ought “…not to dictate to parties how they should frame their case…[I note that]…the rule is…subject to this modification and limitation, that the parties must not offend against the rules of pleading which have been laid down by the law; and if a party introduces a pleading…[that] tends to prejudice, embarrass and delay the trial of the action, it then becomes a pleading which is beyond his right” (Sheppard International Trading v. Baghai, 2008 CanLII 7745 (ONSC), at para. 13).

Disposition

[16] The problems with the statement of claim herein are manifold and fundamental, such that the claim must be and is struck in its entirety as being irregular. The statement of claim is “beyond the [plaintiffs’] right”. While, at first blush, I am inclined to agree with the defendants that the plaintiffs’ claims, if they are to be maintained, ought to be asserted by way of counterclaim in the first action, I am not prepared to make this a term of my ruling. I do say that the plaintiffs ought to tread carefully and be mindful of the rule against multiplicity of proceedings, as they move forward and consider whether and, if so, how their pleas might be recast—lest they be called upon to respond to another like motion with substantial or, even, full indemnity costs being sought for failure to plead in an effective and efficient manner.

[17] The parties have filed costs outlines herein. Unless counsel advise my assistant, Ms. Charlebois (teanna.charlebois@ontario.ca), that they wish to supplement their costs outlines with brief oral or written submissions or that the issue of costs has been settled—this by January 28/22, I will rule on the issue of costs having regard to the costs outlines, only.

December 30/21 “Original Signed By Associate Justice Abrams”