SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Syed Shahpur Agha, Plaintiff AND: Shazia Khan et al., Defendants
BEFORE: S. Vella J.
COUNSEL: Geoff Keeble, Counsel for the Plaintiff Vanessa Ibe, Counsel for the Defendants, Shazia Khan and Haroon Khan Rahul Gandotra, Counsel for the Defendants, Asim Khan and 2571518 Ontario Inc.
HEARD: March 29, 2022
Reasons for Decision
[1] This motion is brought by the plaintiff, Syed Agha (“Agha”) for an order striking the statement of defence of Shazia Khan (“Shazia”), seeking an order scheduling and timetabling a motion for default judgment against Shazia and a summary judgment against Haroon Khan (“Haroon”), production of documents from two non-parties, National Bank of Canada (“NBC”) and Bank of Nova Scotia (“BNS”), and costs.
[2] The non-parties were duly served, and the court was advised that they are not opposing the relief sought as against them.
[3] The remaining defendants are not engaged by this motion.
[4] At the outset of the motion, Ms. Ibe requested an adjournment on the grounds that this matter was allegedly settled on or about March 27, 2022. Mr. Gandotra, counsel for the defendants, Asim Khan and 2571518 Ontario Inc., supported Ms. Ibe’s position that there has been a recently concluded settlement.
[5] No material was filed by the defendants, Shazia and Haroon, in support of their request for an adjournment, even though they knew it is opposed and that the plaintiff, Agha, denies there has been any concluded settlement.
[6] Ms. Ibe and Mr. Gandotra jointly submitted that the plaintiff’s co-counsel, Mr. Groot, advised that the plaintiff would upload the emails allegedly comprising the settlement while denying that the settlement took place. That did not occur. However, I am not prepared to weigh in on the merits of the alleged settlement nor is that necessary in order to determine whether an adjournment ought to be granted.
[7] Ms. Ibe confirmed that the time for her clients to have filed a responding record as set out by the timetable established by Vermette J. on December 7, 2021, requiring the responding motion records to be delivered by January 28, 2022, had long expired prior to the alleged settlement. Accordingly, there was no intention to file any responding record. Similarly, the time for filing a responding factum expired prior to the alleged settlement. Accordingly, there was no intention to file a factum either. Indeed no prejudice was established in the event that I denied an adjournment.
[8] Rather, the adjournment was sought in order to permit these defendants to bring a motion to enforce the disputed settlement.
[9] Ms. Ibe, supported by Mr. Gandotra, urged that to proceed with today’s motion in the face of an intended motion to enforce the alleged settlement would be a waste of judicial resources. Mr. Keeble countered that the motion to strike has been scheduled for some time and that the plaintiff deserves to finally have it heard. He reiterated that the plaintiff denies that any settlement has been concluded as there are apparently material terms that have not yet been resolved.
[10] In this case, there is a potential tension between the goals of judicial efficiency and timely access to justice.
[11] In light of the history of this proceeding, including the uncontested evidence that clearly demonstrates that both Shazia and Haroon have a history of non-compliance with court orders, and the lack of any delivery of a Notice of Motion to enforce the alleged settlement, I denied the adjournment. Whether or not there has been a settlement, the issue of Shazia’s non-compliance with court orders, and the consequences, are still live issues and should be adjudicated in a timely manner.
[12] The interests of justice require that this motion proceed today, as scheduled. The motion to enforce the alleged settlement can still be filed and proceed. However, in my view, given that this motion to strike has been fully prepared, and in light of the plaintiff’s denial of any such settlement, timely access to justice must prevail.
[13] Mr. Gandotra was excused.
Background
[14] The action arises out of an allegedly fraudulent scheme that Agha claims was perpetrated by the defendants, Shazia, Asim Khan (“Asim”) and their company, 2571518 Ontario Inc. (“257”). Agha claims to have provided $872,000 to these defendants to finance a real estate development property (the “Haig Property”). As security for this investment, Agha was given a mortgage secured against the property intended to be developed (the “Haig Mortgage”). Shazia’s husband, Haroon Khan (“Haroon”), guaranteed repayment of the Haig Mortgage.
[15] It is further alleged that Shazia induced Agha to subordinate the Haig Mortgage to a mortgage in the sum of $625,000 in favour of another numbered company so that those funds would be made available to Shazia, Asim, and 257 to use to develop the Haig Property.
[16] It is further alleged that instead of using the $625,000 to develop the Haig Property, Shazia and Asim transferred those funds to other associates thus dissipating them.
[17] This action is, in part, an effort to locate the missing funds in the sum of $625,000 and retrieve them, or otherwise secure appropriate relief against the defendants.
[18] The motion is granted in part. The statement of defence of Shazia is struck and the requested orders for production of documents from the non-parties, NBC and BNS, are granted. The parties are directed to request a case conference to determine how best to proceed with respect to Agha’s motions for default and summary judgment, and Shazia, Asim and 257’s intended motion to enforce the alleged settlement.
Motion to Strike the Statement of Defence of Shazia
[19] Rule 30.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the court may strike out the statement of defence of a party who fails to produce a document for inspection or who fails to comply with an order of the court made under rules 30.02 and 30.08(2)(b). Further, under rule 34.15(1), the court may strike out the statement of defence of a party for failing to attend at an examination for discovery, answer proper questions, failing to produce a document for inspection, or failing to comply with an order under rule 34.14. The court may also strike a party’s defence under rule 3.04 for non-compliance with a timetable.
[20] It is uncontested that Shazia is in non-compliance with various orders made against her; namely, the Order of Master McGraw (as he was then known) dated October 4, 2019 (the “McGraw Order”), the Order of Associate Justice Jolley dated June 15, 2021 (the “Jolley Order”) and the most recent Order of Associate Justice Ilchenko dated September 15, 2021 (the “Illchenko Order”). Also, as indicated above, Shazia did not comply with the timetable established by Vermette J. on December 7, 2021.
[21] In brief, the McGraw Order and Jolley Order together required Shazia to produce various documents, provide an accounting, answer undertakings and overturned advisements and refusals, and re-attend at an examination for discovery to answer follow up questions. The Ilchenko Order required Shazia to comply with the prior orders by a certain date, peremptory to her, failing which a motion to strike her defence could ensue.
[22] More particularly, paragraph 1 of the McGraw Order required Shazia to account for the $99,500 that was transferred out of her BNS account on or about June 2, 2018 and to produce a copy of the bank draft. This sum was part of an installment of $108,720.77 provided by Agha to Shazia under the $625,000 principal sum secured under the new first mortgage that was ostensibly to be used to finance the development of the Haig Property.
[23] Shazia’s response in her examination for discovery was that the $99,500 provided by Agha was simply transferred from her BNS account and deposited into her personal account at NBC. However, contrary to the McGraw Order, she has not produced any documentation to identify the specific NBC account into which the money was deposited. Notably in the excerpt of the one-page bank record produced, there is no mention of the account number or the account holder. Accordingly, Agha cannot establish whether the NBC account is Shazia’s account or someone else’s.
[24] Paragraph 2 and 5 of the Jolley Order required Shazia to produce an accounting for the $99,500 that was allegedly transferred into her NBC account by July 20, 2021. Under that order she was also to account for the further sum of $327,000 (from the $625,000 principal sum) which she testified was deposited into her NBC account sometime between November 5 and 7, 2018. This has not been done.
[25] Paragraph 6 of the Jolley Order required Shazia and Haroon to attend to an examination for discovery with respect to their undertakings, refusals and the accounting by August 13, 2021. Neither of Shazia nor Haroon attended and a certificate of non-attendance was obtained.
[26] As a result of this persistent non-compliance with the court orders, the plaintiff has been deprived of learning who ultimately received these funds from Shazia totalling $427,500 and cannot trace them.
[27] Finally, the plaintiff obtained the Ilchenko Order dated September 15, 2021. By that order, Ilchenko A.J. directed that Shazia immediately comply with paragraphs 1(a) and 1(b) of the McGraw Order and paragraphs 2(a), 2(c), 2(d), 2(h), 2(i), 2(j), 5 and 6 of the Jolley Order which Ilchenko A.J. concluded had not been complied with by Shazia. Furthermore, the Ilchenko Order was made peremptory upon Shazia.
[28] Shazia remains in non-compliance of the Ilchenko Order.
[29] In light of the ongoing non-compliance by Shazia and Haroon with the above orders, the parties appeared before Justice Vermette at a case conference on December 7, 2021. Her Honour scheduled the plaintiff’s motion to strike Shazia’s statement of defence returnable March 29, 2022 and imposed a timetable. Shazia did not comply with the timetable. In Her Honour’s endorsement, Vermette J. noted, in part, that Shazia has failed to comply with a number of court orders, including the Ilchenko Order which made certain orders peremptory upon Shazia. Notably, the Ilchenko Order provided that in the event Shazia failed to comply with the terms of his order by September 24, 2021, the plaintiff may move to strike her statement of defence.
[30] Shazia has had ample notice of the outstanding court orders, and ample opportunity to bring herself into compliance with them. She has been represented by a lawyer throughout.
[31] The evidence is clear, unequivocal, and unchallenged. Shazia has been, and remains, in breach of court orders since 2019 regarding discovery, documentary and accounting obligations that are material to this action.
[32] No explanation whatsoever has been provided by Shazia as to why she has not complied with the court’s orders, nor has she provided any plan to cure these breaches.
[33] The only prejudices alleged by Shazia in the event that her statement of defence is struck is that (a) she will obtain a bad outcome including possible findings of fraud against her, and (b) if this matter has been settled as she alleges, the judgment will be inconsistent with the terms of the alleged settlement.
[34] Striking the statement of defence of a party is a severe consequence that will not be entertained lightly much less imposed. However, I find that in this case it is an appropriate and just remedy.
[35] Shazia has engaged in a pattern of delay and defiance of court orders that has resulted in Agha having to bring numerous motions only to have the consequent orders breached. The administration of justice requires that parties comply with the court’s orders.
[36] As occurred in the recent case of Falcon Lumber Ltd. v. 2480375 Ontario Inc., 2020 ONCA 310, Shazia has repeatedly and persistently failed to comply with multiple court orders over an extended period of time. In Falcon, the court orders that were breached by the defendants included orders to disclose and produce relevant documents and to constructively engage in the litigation process.
[37] Shazia has frustrated Agha’s ability to have a meaningful documentary and oral examination for discovery on the critical issue of tracing the funds that he transferred to her (and Asim) but have now been seemingly dissipated without explanation. Shazia’s pattern of non-compliance with court orders has stalled Agha’s ability to advance this matter to trial against the remaining defendants. This pattern of persistent and deliberate behaviour warrants the extreme remedy of striking Shazia’s statement of defence; see Falcon at paras. 42-44; Chiaravalle v. Lloyds Non-Marine Underwriters (1994), 34 C.P.C. (3d) 183 (Ont. Gen. Div.); Assaly v. Assaly, 2019 ONSC 1953, 46 E.T.R. (4th) 101 at paras. 65-69; Herman’s Building Centres v. Belaoussoff, 2021 ONSC 413, 61 C.P.C. (8th) 119.
[38] I find that Shazia has engaged in delay tactics by failing to produce documents, answer proper questions (undertakings and overturned refusals), provide the requisite accounting of funds and attend at her continued examination for discovery in breach of both her obligations under the rules and consecutive court orders. Shazia has shown a blatant disregard for the rules of this court and its orders, including the most recent timetable imposed. Accordingly, Shazia has forfeited her right to have the claim against her decided on the merits. To permit this type of conduct to persist, particularly in the absence of any explanation or proposal to cure these breaches, works a profound unfairness on Agha who has abided by the rules of court and is frustrated from obtaining a timely and efficient resolution through the litigation process. As noted in the affidavits filed, Agha has also been put to needless expense in bringing motions to force Shazia to comply with her obligations under the rules.
[39] Accordingly, the statement of defence of Shazia Khan is struck.
Request to Schedule Motions for Default and Summary Judgment against Shazia and Haroon
[40] Agha has requested that I schedule the return of his motion for default judgment against Shazia and summary judgment against Haroon. However, I am concerned that the issue of whether or not a settlement has been reached must still be adjudicated. The alleged settlement impacts not only Shazia, but also the other defendants. In the event a court ultimately finds that a settlement was reached that was binding on the parties, a judgment against Shazia could be inconsistent with that result. Indeed, I am advised that it likely would be inconsistent with that result.
[41] In my view, it makes more sense to direct the parties to request and attend at a case conference for the purpose of scheduling the plaintiff’s motions for judgment, and the defendants’ pending motion to enforce an alleged settlement and associated timetables. The case conference judge can then decide what is the most efficient way of proceeding.
[42] The fact, however, that the defendants have not yet served a motion to enforce the alleged settlement is problematic. This must be done expeditiously so as not to further frustrate Agha’s ability to schedule his motions for judgment against Shazia and Haroon. Accordingly, in the event that the defendants intend to bring this motion, they must deliver, at minimum, a notice of motion within the next two weeks from the release of this decision. That way the case conference can be scheduled expeditiously, and the parties will know what is being contemplated. Shazia will have limited standing to make submission only for purposes of this motion to enforce an alleged settlement only. I am advised that the evidence that will be used is likely to consist primarily of the correspondence that passed between the lawyers for the various parties. Accordingly, the remaining defendants, including Haroon (who is also represented by Ms. Ibe), can adduce the requisite evidence.
Non-Party Production Orders
[43] Agha also seeks orders for production of the bank account statements from the non-party respondents, BNS and NBC, as detailed in the notice of motion. These relate to the accounting that Shazia was ordered to provide, including production of certain bank account statements, but failed to provide. The non-party banks do not oppose this request.
[44] I am satisfied that Agha has met the requirements for a non-party production order. Accordingly, I am granting the requested order pursuant to rule 30.10(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 as requested in the Notice of Motion. I also order that Shazia pay the reasonable costs charged by BNS and NBC to Agha for delivery of the ordered records forthwith upon receipt of the invoices from Agha.
Costs
[45] The parties are to exchange cost outlines if they have not already done so. Then the plaintiff will provide his cost outline and written submissions within 10 days from the release of this endorsement. Shazia is then to provide her cost outline and written submissions within 10 days thereafter. The written submissions are not to exceed three pages each and these documents will be provided to me in care of my judicial assistant.
Justice S. Vella Date: April 1, 2022