Court File and Parties

COURT FILE NO.: CV-22-677978

DATE: 20230309

ONTARIO SUPERIOR COURT OF JUSTICE

RE: 180 UNIVERSITY MANAGEMENT INC., WESTBANK PROJECTS CORP., WESTBANK HOLDINGS LTD., 180 UNIVERSITY HOLDINGS INC., 180 UNIVERSITY HOTEL LP and 500 BLOOR STREET COMMERCIAL PARTNERSHIP, Plaintiffs

-and-

KASHIF KHAN, PADC INC., MARYNA POSTNIKOVA, STARLIT LTD., NATALIA YURIEVA, MILA KORNILOV, ICM CONSTRUCTION AND MAINTENANCE LIMITED, PATRICIA DAVID, MASKHARA CONSTRUCTION & REMODELING INC., ATTANULLAH KHAN ABIDHUSEN PATHAN, TECHNICAL MAINTENANCE SERVICES CANADA LTD., ORLANDO G. SIA and KPS CONSTRUCTION GROUP INC., Defendants

BEFORE: FL Myers J

COUNSEL: Darryl Mann and Kanwar Dhaliwal, for the plaintiffs

Chris Stienburg, for the defendant

HEARD: March 9, 2023

ENDORSEMENT

The Motion

[1] The plaintiffs moved to hold the defendant Khan in contempt of court for refusing to attend examinations for discovery in Toronto in breach of an order requiring him to do so made by Jolley AJ. Mr. Khan consented to Justice Jolley’s order.

[2] In an unreported endorsement dated January 27, 2023, I found the elements of contempt of court proven beyond a reasonable doubt. I also struck out Mr. Khan’s pleadings. Mr. Khan did not oppose those findings strenuously. Rather, Mr. Stienburg argued that I should exercise the discretion to refrain from holding Mr. Khan in contempt that day.

[3] I accepted Mr. Stienburg’s submission. I ordered Mr. Khan to attend for examination for discovery as he had previously agreed and been ordered. I required the examination to be held before the end of February, 2023 and I imposed a process for counsel to establish dates for the examination. I explained:

I am not prepared to hold the defendant Khan in contempt of court today. Mr. Stienberg says that any penalty imposed for contempt will be a disincentive to Mr. Khan to comply with the court’s order particularly because the examination for discovery to which he agreed is to occur in Toronto. Why would he come back only to be arrested or served with some other process?

At its core, the issue in this motion is one of civil procedure and the claims between the parties. I accept that there is a rule of law component every time an order is violated. I accept as well that given the terms of my two prior endorsements, it could be argued that giving Mr. Khan more time is just inviting more non-compliance. But, civil contempt is not the first rung on the enforcement ladder. The principal purpose of a contempt order is to compel compliance with the court’s order.

Before I consider Mr. Mann’s arguments that Mr. Khan is thumbing his nose at the court and the rule of law in Ontario, I prefer to put his counsel to the test. I will not take a step to disincent compliance. But, if there is no compliance, then the remaining purpose of a contempt proceeding – ie to punish disobedience – will be firmly in play.

Mr. Stienburg confirmed that he did not take issue with the plaintiff’s submissions that the three-part test for contempt of court has been proven. I find that it is proven beyond a reasonable doubt. Mr. Khan had no burden to adduce any evidence on the motion. On the evidence adduced. I find that the orders made by Jolley AJ and me are clear. Mr. Khan plainly knew of them and intentionally disobeyed. No other outcome is submitted by Mr. Stienburg or is possible.

What is left therefore, is a decision of whether the discretion to continue to withhold a contempt finding will still appertain on the next hearing and, if not, what punishment is to be assessed. The facts will not relate to prior steps but to future compliance up to the date of the next hearing. Accordingly there will be only one further hearing at which all remaining issues are to be resolved.

I remind Mr. Khan that compliance will greatly alleviate the need for vindication of the court’s order. Moreover, I am exercising a discretion sought by Mr. Khan’s counsel to incentivize compliance. He should think hard about undermining submissions made on his behalf.

Subsequent Facts

[4] Within a few days of this decision, Mr. Stienburg advised the plaintiffs’ counsel that Mr. Khan would not be attending for examination for discovery as ordered. The plaintiffs therefore brought their contempt motion back before me for consideration of whether the discretion to withhold a contempt finding still applies and, if not, for sentencing.

[5] Mr. Mann takes great exception to the continued manipulation of the proceedings by Mr. Khan. He does not just breach orders. He makes submissions, grants consent, and asks for indulgence, to suggest that he will comply. And only then does the other shoe drop.

[6] I disagree with Mr. Stienburg’s submission that Mr. Khan has been transparent throughout in his refusal to attend for examination. Mr. Khan and Mr. Stienburg could not have asked me to exercise discretion to incentivize compliance last time if they knew that Mr. Khan was going to refuse to comply. There is no incenting Mr. Khan to comply if he has resolutely determined in advance that he will not attend. The submission that Mr. Khan has been transparent in his position throughout is inconsistent with his consent to Justice Jolley’s order and his request for a discretionary indulgence from me.

[7] I agree with Mr. Mann that Mr. Khan has manipulated the process to delay, cause unnecessary costs to mount, and to avoid accountability.

[8] After the motion date was set for today, counsel advised my office that they had agreed to a schedule of steps for the hearing. The schedule as agreed included deadlines for the delivery of affidavits and for possible cross-examinations. I accepted the schedule although I did not make a formal order.

[9] On March 7, 2023, Mr. Khan delivered an affidavit for use on this motion. However, he then refused to be cross-examined on the affidavit. He refused to attend an examination even if held remotely by videoconference while he is in the US.

[10] Mr. Mann asks me to strike Mr. Khan’s affidavit. Mr. Stienburg submitted that if that was to be an issue, he should have had time to prepare for it expressly. I offered him an adjournment and he declined.

[11] Mr. Stienburg submits that all relevant evidence is admissible subject to weight. But he had no answer as to why a fair process for admitting relevant evidence should not include cross-examination of the deponent. In my view, the affidavit should not be admitted where the deponent refuses to be cross-examined on its contents. Merrill Lynch Canada Inc. v. Mineralogy Canada Acquisition Corp. Pty Ltd., 2011 CarswellOnt 3756 (Ont SCJ).

[12] This is yet another example of Mr. Khan making an agreement to suggest he was proceeding in the normal course and then ostensibly changing his mind. How many times does this have to happen before one can be excused for thinking that it is a deliberate, repetitive tactic?

[13] On January 27, 2023, I was concerned that Mr. Stienburg was being co-opted by Mr. Khan to advance an inappropriate manner of proceeding. I specifically warned Mr. Khan that he should think hard before undermining submissions made on his behalf. The result? Not only did he fail to comply after asking me to exercise discretion to refrain from disincenting compliance, but he did it again by agreeing to a schedule that included cross-examinations and then refusing to attend for cross-examination. Fool me once, shame on you; fool me twice, shame on me.

Contempt

[14] There is no basis remaining to defer a contempt order. I find Mr. Khan in contempt of the order of Jolley AJ dated October 26, 2022 as bolstered and reiterated by my Orders of December 7, 2022, and January 27, 2023.

[15] The contempt is in the nature of civil contempt. The failure to attend discovery is essentially an issue between the parties about how this lawsuit is to be managed. The natural consequence of Mr. Khan’s refusal to participate in the proceeding properly has already happened. His pleadings have been struck and he has been noted in default. He is deemed to admit the allegations against him. Default judgment may issue if and when the plaintiffs choose to seek it.

[16] However, there is also a public component to contempt of court proceedings. Mr. Khan has chosen to ignore and defy orders of this court. That behaviour strikes at the rule of law. It undermines the court’s authority and legitimacy. As I noted in my prior endorsement, while the principal purpose of civil contempt is to enforce court orders between the parties, there is also a punitive aspect. There must be denunciation of behaviour that violates court orders and punishment is required to promote the principles of specific and general deterrence.

Sentencing Principles

[17] In Duncan v. Buckles, 2021 ONSC 5567, Goldstein J. summarized the sentencing principles for contempt of court:

[44] The whole point of punishing a contemnor is to maintain the rule of law: United Nurses of Alberta v. Alberta, 1992 CanLII 99 (SCC), 1992 1 S.C.R. 901 at p. 931. As Justice Watt put it in College of Optometrists of Ontario v. SHS Optical, 2008 ONCA 685 at para. 106: “The underlying purpose of contempt orders is to compel obedience and punish disobedience.” In Astley v. Verdun, 2013 ONSC 6734 (affirmed 2014 ONCA 668) at para. 16 I attempted to summarize the principles of sentencing in contempt cases:

• A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender: Criminal Code, s. 718.1; Chiang, para. 86; Mercedes-Benz Financial v. Kovacevic, 2009 CanLII 9423 (ON SC), [2009] O.J. No. 888, 308 D.L.R. (4th) 562, 74 C.P.C. (6th) 326 (Ont. S.C.J.) at para. 12.

• A sentence should be increased or reduced to account for aggravating or mitigating factors surrounding the contempt or the contemnor: Criminal Code, s. 718.2(a); Chiang, para. 24; Sussex Group Ltd. v. Fangeat, [2003] O.J. No. 3348, 42 C.P.C. (5th) 274 (Ont. S.C.J.) at para. 67.

• A sentence should be similar to sentences imposed on similar contemnors for similar contempts committed in similar circumstances: Criminal Code, s. 718.2(b); Chiang, para. 24.

• Sentences should denounce unlawful conduct, promote a sense of responsibility in the contemnor, and deter the contemnor and others from defying court orders: Criminal Code, s. 718; Sussex Group Ltd. at para. 67; Chiang at para. 24.

• The Court should consider sanctions other than jail: Criminal Code, s. 718(2) (d) and (e); Sussex Group Ltd. v. Sylvester, 2002 CanLII 27188 (ON SC), [2002] O.J. No. 4350, 62 O.R. (3d) 123 (Ont. S.C.J. [Commercial List]) at paras. 80-82.

[18] In IMAX Corporation v. Trotum Systems Inc., 2013 ONSC 743, the contemnor was alleged to have breached a non-competition injunction and a subsequent order requiring him to attend for examination. McEwen J found:

[11] As noted, Tsui and Trotum are in contempt of the aforementioned Orders. The contempt is serious. I agree with counsel for IMAX that there are no mitigating factors. The contempt is also deliberate and part of an ongoing pattern of defiance and disregard for the processes of this Court. This includes wilful attempts to avoid the consequences of the injunction, including the destruction of evidence. As a result, I agree with counsel for IMAX that a sanction on the high end of the spectrum is required to end or deter such behaviour, and to attempt to remedy the harm done to IMAX.

[12] In the circumstances of this case I agree that a fine in the high end of the range is reasonable and further that an Order for a Warrant of Committal is also appropriate if Tsui fails to comply with this order. In coming to these conclusions, I have extensively reviewed the case law provided by counsel for IMAX: Neighbourhoods of Windfields Limited Partnership v. Death, [2010] O.J. No. 1304 (Sup. Ct.); Chiang (Trustee of) v. Chiang, 2009 ONCA 3, [2009] O.J. No. 41 (C.A.); Sussex Group Ltd. v. 3933938 Canada Inc. (c.o.b. Global Export Consulting), 2003 CanLII 49334 (ON SC), [2003] O.J. No. 2952 (Sup. Ct.); iTrade Finances Inc. v. Webworx Inc., 2005 CanLII 24776 (ON SC), [2005] O.J. No. 3492 (Sup. Ct.); and Sweda Farms Ltd. (c.o.b.) Best Choice Eggs) v. Ontario Egg Producers, [2001] O.J. No. 3482 (Sup. Ct.).

[13] I therefore order as follows:

1. Tsui is in contempt of the Order of the Honourable Mr. Justice Belobaba, dated December 22, 2009;

2. Tsui and Trotum are in contempt of the Order of the Honourable Madam Justice Pollak, dated July 11, 2012;

3. Tsui shall forthwith comply with the terms of the Order of the Honourable Mr. Justice Belobaba dated December 22, 2009;

4. Tsui and Trotum shall attend for examination for discovery by the Plaintiff within 90 days of the date hereof;

5. The Statement of Defence of Tsui shall be and is hereby struck;

6. Tsui shall pay a fine of $50,000 within 30 days of the date hereof;

7. If Tsui fails to comply with this Order within 60 days a Warrant of Committal shall be issued for a period of incarceration of 60 days; and

8. Tsui and Trotum shall, within 30 days, pay to IMAX its costs of the motion on a full indemnity basis in the amount of $35,063.21 inclusive.

[19] Mr. Mann asks for an order for incarceration of Mr. Khan for three months (90 days) and a fine of $75,000. With the striking of pleadings, that would exceed the “high end” sentence in Imax.

[20] I have reviewed all of the cases referenced in Footnote 77 of the plaintiffs’ factum. All involve failures to attend for examination. But some have other, more serious, findings of misconduct as well. The closest cases on the facts, involving civil contempt for failure to testify are:

a. Ontario Securities Commission v. Peter Robinson and George Schwartz, 2010 ONSC 225 in which Cameron J. sentenced the contemnor to incarceration for four months;

b. Doobay v. Diamond, 2010 ONSC 3554, in which Spence J. sentenced the contemnor to incarceration for 21 days.

[21] Mr. Khan is in Florida. He argues that a fine and incarceration are irrelevant and unenforceable against him. They will not deter him he argues. But Mr. Mann notes that there is no evidence before the court about Mr. Khan’s immigration status in the US or Canada. He submits that this court cannot just assume that a fine or warrant of committal will be ignored by the US Department of Homeland Security, U.S. Citizenship and Immigration Services, or the US courts.

[22] There are cases where courts have recognized that a fine serves no purpose if it is apparent that the defendant will not or cannot pay. That is not the case here. Mr. Khan is deemed to admit allegations that he stole several millions of dollars from the plaintiffs. He has not adduced evidenced of his financial state beyond bald statements in his affidavit that I already struck out.

[23] In this case, the behaviour of Mr. Khan is an aggravating factor. His continued abuse of the process wasted time and money. It also gave an appearance of someone intent on making a mockery of the court’s process.

[24] Mitigating factors are few. It is Mr. Khan’s first offence. He has made an apology in his affidavit that I struck out. In any event, an apology without compliance is hollow. Mr. Khan tried to raise health and financial issues. But in the absence of cross-examinations, his bald statements, even if admissible, would carry no weight.

[25] In my view, this is a case at the lower end of moral turpitude. The principal punishment for failing to abide by the court’s process has already been meted out by striking Mr. Khan’s pleadings. I agree that a custodial term at the lower end of the precedents is appropriate as is a small fine. Both penalties are required and apt given enforceability issues because Mr. Khan is abroad.

[26] The plaintiffs ask me to declare that a fine and any costs that may be ordered survive any future bankruptcy of Mr. Khan under s. 178 (1)(a) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3. As Mr. Khan is not bankrupt, in my view, this matter is not ripe for determination. Such an order is better made by the Bankruptcy Court in a proceeding in which the issue is raised. There is no question that s. 178 (1)(a) says what it says. I do not question the submission that the fine meted out in this decision is a “fine” under BIA. But the court does not resolve hypotheticals about future proceedings that may never arise. I see no prejudice to the plaintiffs in deferring the issue. My refusal to decide the issue today does not reflect at all on the merits of the question if and when it arises in a dispute that is ripe for consideration.

Sentence

[27] I sentence Mr. Khan to an initial period of incarceration in a provincial reformatory of 60 days. He shall also pay a fine of $10,000.

[28] If Mr. Khan attends for examination for discovery in the manner ordered by Jolley AJ. before he has served his sentence or paid his fine, he may apply for a reduction in his sentence.

[29] When Mr. Khan is jailed, I require that he return to court on the 59th day of his sentence for the purpose of allowing the court to consider varying the sentence based on his acts to purge his contempt by then.

[30] The final stage of sentencing will be held then. If Mr. Khan has not yet complied with the order of Jolley AJ by the time his sentence is reconsidered on the 59th day of his initial term of incarceration the court will impose a further, final sentence at that time.

[31] Section 6 (1) of the Prisons and Reformatories Act, RSC 1985, c P-20 as incorporated into s. 28 of the Ministry of Correctional Services Act, R.S.O. 1990, c M.22 apply. That is, there shall be no remission on the sentence unless or until ordered by the court upon Mr. Khan purging his contempt satisfactorily or the full sentence being served.

[32] I have signed a warrant of committal incorporating these terms.

Costs

[33] The plaintiffs seek costs on a substantial indemnity basis. In view of my findings that Mr. Khan’s misconduct caused wasted time and costs and that he repeatedly abused the court’s process with disingenuous consents and pleas for indulgence, this is a case for costs to be fixed on a punitive basis. The plaintiffs’ have submitted bills of costs that appear reasonable on their faces. The rates claimed are well within market. The hours incurred are to be expected when one is chasing a non-compliant party. Mr. Stienburg submits that his time pales in comparison. Of course it does. All he had to so was sit back and watch the plaintiffs chase Mr. Khan over and over again.

[34] Mr. Khan shall pay the plaintiffs their costs of this contempt proceeding fixed on a substantial indemnity basis at $170,000 all-inclusive.

FL Myers J

Date: March 9, 2023