Court File and Parties
Court File No.: CV-17-00003509-0000 Date: 2023 10 24 Ontario Superior Court of Justice
Between: TAJAMMUL HUSSAIN RANA and PREMIER TECHNICAL CONSULTANT LTD., Plaintiffs
And: MOHAMMAD ZAKIR RAMZAN, 2182224 ONTARIO INC. operating as FHS ZOOM and MOHAMMAD YOUSUF, Defendants
Counsel: Ranbir S. Mann, for the Plaintiffs Tanya Walker and Jordan Koenig, for the Defendants Mohammad Zakir Ramzan and 2182224 Ontario Inc. operating as FHS Zoom
Heard: January 12, 13, 14, 18, 19, 27, April 12, June 6, September 21, 26, 27, 28, November 2, 3, 4, 2022, January 27, June 13 and 23, 2023
Reasons for Judgment
DALEY J.
Introduction
1The plaintiffs asserted sweeping and multifaceted claims against the defendants in their statement of claim. This included allegations that the defendants were liable to them based on breach of contract, negligence, agency, breach of trust, conspiracy, conversion, and fraud.
2At the conclusion of the evidence portion of this trial and in his closing submissions, counsel for the plaintiffs stated that the plaintiffs were abandoning all causes of action asserted other than for the intentional torts of fraud and deceit.
3The plaintiff Tajammul Hussain Rana (“Rana”) and the plaintiff Premier Technical Consultant Ltd. (“PTCL”), of which he is a director and officer, carried on business in Ontario.
4The defendant Mohammad Zakir Ramzan (“Ramzan”) carried on business through the defendant 2182224 Ontario Inc., operating as FHS Zoom (“FHS Zoom”).
5The defendant Mohammad Yousuf (“Yousuf”) was an officer and director of a non-party corporation, namely ET Zone Supplies Inc. (“ET Zone”).
6The defendant Yousuf’s son Noman Yousuf (“Noman”), a non-party to this action, was an owner of ET Zone.
7The action as against the defendant Yousuf was discontinued by the plaintiffs in 2018.
8As a result of the evolution of the plaintiffs’ theory of their case, the court must determine whether the defendants, as third parties to a commercial relationship between the plaintiffs and ET zone, are liable to them for fraud and deceit and for any resulting damages.
9The plaintiff Rana, on behalf of his corporation PTCL, paid over to the non-party ET Zone the sum of $500,000 either as a loan or investment during the period 2014 – 2015 pursuant to two contracts between these parties.
10As is discussed in more detail below, the plaintiffs received all payments under the terms of the First Contract that was entered into with ET Zone, which contract was secured by a bank guarantee. The payments made to the plaintiffs under the First Contract with the ET Zone were made by that company without recourse to the guarantee.
11The plaintiffs did not call for the return of the principal loan or investment amount of $250,000 under the terms of the First Contract, as they were entitled to, but rather left the principal sum amount with ET Zone under the terms of the Second Contract.
12Following the execution of the Second Contract between the plaintiffs and ET zone and the payment by the plaintiffs of the additional sum of $250,000, without a bank guarantee, ET Zone went into default on its payments owing to the plaintiffs and ultimately ET Zone was placed under court ordered receivership in December 2015. Thereafter, it filed a proposal under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.
13Several other investors or lenders, who provided funds to ET Zone, lost substantial sums of money, including the defendant Ramzan who lost $1.426 million following ET Zone’s insolvency.
14It was asserted on behalf of the plaintiffs that the defendant Ramzan had made certain representations to Rana that he knew were false and which induced the plaintiffs to enter into the contracts with ET Zone.
15For the reasons set out below, I have concluded that the plaintiffs have failed to establish on a balance of probabilities that the defendants are liable to them in fraud or deceit and as a result this action must be dismissed.
Legal Framework
16A third-party to a contractual relationship may be liable in fraud or deceit for a loss sustained by one of the contracting parties if that non-party knowingly made false statements that induced the representee to enter into the contract: Pasley v. Freeman (1789) 100 E. R. 450; Toronto-Dominion Bank v. Mapleleaf Furniture Manufacturing Ltd..
17As noted by Perrell J., “at the fundamental core of fraud, deceit, or fraudulent misrepresentation is the moral turpitude of the defendant.”: Holley v. The Northern Trust Company, Canada, 2014 ONSC 889, 10 C.B.R. (6th) 1, at para. 113.
18Civil fraud or deceit must be proved on the balance of probabilities. However, the more serious the allegations, the more clear, cogent, and convincing the evidence must be to establish liability for these intentional torts: Anker v. Sattaur, [2007] O.J. No. 5257, at para. 117.
19The defendant’s knowledge and state of mind are important considerations in cases involving alleged fraud and deceit: Cannon v. Funds for Canada Foundation, 2012 ONSC 339, 13 C.P.C. (7th) 250, at para. 478.
20The defendant’s intent to deceive or their reckless disregard for the truth are also important considerations to be examined in cases involving alleged fraud and deceit: Gebre-Hiwet et al v. McPherson, 2022 ONSC 1421, at para. 74.
21The defendant’s motive to deceive is irrelevant to the assessment of the evidence of the defendant’s potential liability for fraud or deceit: Fiorillo v. Krispy Kreme Doughnuts Inc. (2009), 98 O.R. (3d) 103, at paras. 75 – 77.
22Contributory negligence arguably connected with the plaintiff’s failure to investigate representations which would have disclosed the fraud, is not available as a defence to a party who may otherwise be liable for fraudulent statements or representations that induced the plaintiff to enter into a commercial arrangement or contract: Vidcom Communications Ltd. v Rattan, 2022 BCSC 522, at para. 54; Wen v. Gu, 2021 ONCA 259.
23In order to make out an actionable claim in fraud or deceit it is not sufficient that the defendant was aware of the false representations or that he or she benefited as a result of the fraud. It must be established that the defendant actually committed the fraudulent conduct by inducing the plaintiff to act in a way resulting in a loss to him or her: Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 19.
24The plaintiff must establish on the balance of probabilities that the fraudulent misrepresentation was a material inducement but not necessarily the sole inducement that caused them to act resulting in their loss: Caroti v. Vuletic, 2022 ONSC 4695, at para. 545.
25The pleading of a case in fraud calls for precision and particularity, as is required by rule 25.06 (8) of the Rules of Civil Procedure. This rule provides that any pleading of fraud or misrepresentation must contain full particulars where fraud, misrepresentation, breach of trust, malice or intent is alleged: Midland Resources Holding Limited et al v. Shtaif, 2017 ONCA 320, 135 O.R. (3d) 481, at para. 198.
26In the Court of Appeal decision in Hamilton v. 1214125 Ontario Ltd., 2009 ONCA 684, at para 35, the court set out the necessary requirements of a plea of fraud or deceit and the precision and particularity that are necessary where it stated:
In Lana International Ltd. v. Menasco Aerospace Ltd. (1996), 28 O.R. (3d) 343, at 350, Greer J. interpreted Rule 25.06(8) and adopted the following requirements from Rahn v. McNeill (1987), 19 B.C.L.R. (2d) 384 at 392 (S.C.), for pleading either innocent misrepresentation or deceit: The pleading, even of innocent misrepresentation, must set out with careful particularity the elements of the misrepresentation relied upon, that is:
- the alleged misrepresentation itself,
- when, where, how, by whom and to whom it was made,
- its falsity,
- the inducement,
- the intention that the plaintiff should rely upon it,
- the alteration by the plaintiff of his or her position relying on the misrepresentation,
- the resulting loss or damage to the plaintiff.
Of course, if deceit is alleged, then there must also be an allegation that the defendant knew of the falsity of his statement…. Each of the defendants must know the case that it has to meet.
27The required elements of the intentional torts of civil fraud and deceit were outlined by the Supreme Court of Canada in Hryniak as: (1) a false representation made by the defendant; (2) some level of knowledge of the falsehood by the defendant or recklessness in making the representation; (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss: Hryniak, at para. 21.
28Although the plaintiffs assert two distinct causes of action namely under the intentional torts of fraud and deceit, the academic literature and jurisprudence after Hryniak demonstrates that deceit, fraud, and fraudulent misrepresentation are used interchangeably and that the constituent elements of these intentional torts are the same as set out in that decision: Peek v. Derry (1889), L. R. 14 App. Cas. 337 (U.K. H.L.); Paulus v. Fleury, 2018 ONCA 1072, 144 O.R. (3d) 791, at para. 8; Soil Engineers Ltd v. Anthony Upper, 2020 ONSC 7495, at para. 8; Battrum v. MacKenzie Estate, 2010 BCSC 1285, at para. 33.
29Post-Hryniak, there has been some controversy as to whether proof of intent on the part of the defendant is a necessary requirement in order to make out a case in civil fraud: see Precision Drilling Canada Limited Partnership v. Yangarra Resources Ltd., 2017 ABCA 378, 60 Alta. L.R. (6th) 57, at paras. 29 – 30.
30In Paulus, the trial judge had used the four-part list of constituent elements of the intentional tort of fraud from Hryniak. However Pardu J.A., for the court, adopted the test established by Brown J.A. in Midland Resources and stated the following at paras. 8 and 9 of the decision:
8 As the defendant's allegation of civil fraud was central to the motion judge's decision, I begin by noting that courts have used the same test for civil fraud as they have for the torts of deceit and fraudulent misrepresentation: see e.g. Deposit Insurance Corp. of Ontario v. Malette, 2014 ONSC 2845 (Ont. S.C.J.), at para. 19; Amertek Inc. v. Canadian Commercial Corp. (2005), 76 O.R. (3d) 241 (Ont. C.A.), at para. 63, leave to appeal refused, [2005] S.C.C.A. No. 439 (S.C.C.); and Midland Resources Holding Ltd. v. Shtaif, 2017 ONCA 320, 135 O.R. (3d) 481 (Ont. C.A.), at para. 162, leave to appeal refused, [2017] S.C.C.A. No. 246 (S.C.C.).
9 For the purposes of this appeal, I adopt Brown J.A.'s articulation of this test in Midland Resources Holding Ltd., at para. 162. The five elements of the test are as follows:
(i) a false representation of fact by the defendant to the plaintiff; (ii) knowledge the representation was false, absence of belief in its truth, or recklessness as to its truth; (iii) an intention the plaintiff act in reliance on the representation; (iv) the plaintiff acts on the representation; and (v) the plaintiff suffers a loss in doing so. [Citations omitted.]
31Pardu J.A. expressly concluded that intent was a required element of the tort of civil fraud although this was not expressly stated in Hryniak. Leave to appeal to the Supreme Court of Canada in Paulus was denied.
32Therefore, the test established in Hryniak implicitly includes a requirement that the plaintiff prove intent on the part of the defendant making the false statement or representation, as was accepted by the Court of Appeal in Midland Resources at para. 162. See also: NEP Canada ULC v. MEC OP LLC, 2021 ABQB 180, at para. 783.
33Although due diligence is not required of a plaintiff and contributory negligence is not an available defence in a fraud action, once a plaintiff knows of a fraud, they must mitigate their loss: Performance Industries Ltd. v. Silvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at para. 70.
Positions of the Parties
Position of the Plaintiffs
34The plaintiffs asserted multiple causes of action against the defendants in their statement of claim and during the presentation of their evidence at trial. This included assertions that the defendants’ liability arose from contractual and agency relationships involving the plaintiffs, the defendants and ET Zone.
35Additionally, the plaintiffs had asserted that the defendants were liable to them based on conspiracy, conversion, unjust enrichment, and as a result of fraud and deceit.
36The plaintiffs seek damages in the amount of $500,000, general and aggravated damages of $200,000, as well as a tracing order and accounting by the defendants with respect to monies received by them.
37Despite the wide-ranging causes of action and allegations made by the plaintiffs in their pleading and in the evidence adduced at trial, at the conclusion of the trial all causes of action asserted, other than the intentional torts of fraud and deceit were abandoned.
38Furthermore, the plaintiffs’ counsel acknowledged that the plaintiffs were no longer asserting that any contractual relationship ever existed between the plaintiffs and the defendants and further that it was no longer being asserted that the defendants stood in any agency relationship with either the plaintiffs or ET Zone.
39Thus, the plaintiffs’ remaining core position was that the defendants were liable to them for their financial losses arising from their contracts with ET Zone based on the intentional torts of fraud and deceit and specifically the alleged fraudulent statements made by the defendant Ramzan as to ET Zone’s financial wherewithal, which they allege induced them to enter into the contracts with it.
Position of the Defendants
40The defendants have disputed all the plaintiffs’ claims and have denied making any fraudulent statements or representations to the plaintiffs that induced them to enter into contracts with ET Zone.
41The defendants further asserted that they were in the same position as the plaintiffs, namely they were also investors in the business operated by ET Zone.
42As considered below, the defendants also suffered financial losses related to their investments in ET Zone in the sum of approximately $1.426 million.
43It is the defendants’ position that the plaintiff Rana was an educated and sophisticated businessperson who invested in ET Zone without any reliance whatsoever on any representations made by the defendant Ramzan. Further, the defendants assert that if Rana relied on any representations made to him as to the financial status of ET Zone, those representations were only made by representatives of ET Zone.
44The defendants also assert that the plaintiffs failed to mitigate their losses after learning of the true financial circumstances of ET Zone and its inability to provide a bank guarantee, and as such on assessing any damages sustained by them, their failure to mitigate their losses must be taken into account.
Evidentiary Overview
45Prior to any contact between the plaintiff Rana and ET Zone, the defendant Ramzan, whose business FHS Zoom was located immediately next-door to ET Zone’s offices, became acquainted with representatives of ET Zone, including Noman.
46ET Zone was in the business of funding purchase orders in respect of industrial equipment and machinery on behalf of overseas customers including the Saudi Arabian telephone system.
47In the spring of 2013 Ramzan engaged in discussions with Noman as to investment opportunities he and his company might have with ET Zone.
48In April 2013 Ramzan began investigating the possible business opportunity of investing in ET Zone, which included reviewing purchase orders received by ET Zone from its overseas customers and as well traveling to New York state in order to visit one of ET Zone’s supplier companies. Based on his review of purchase orders and his visit to the supplier company’s plant facilities, he determined that it would be worthwhile for his company, FHS Zoom, to make an investment in ET Zone.
49Between May of 2013 and January 2014, FHS Zoom invested approximately $500,000 in ET Zone. Its investments were made by way of funding of purchase orders on behalf of ET Zone’s customers in respect of machinery and equipment to be delivered to them. In its first investment, FHS Zoom paid $134,000 (US) to Gas Turbine Parts & Services, a supplier in New York state. FHS Zoom agreed with ET Zone to receive back its principal investment amount plus a profit of 8% within 60 – 90 days. In respect of this particular contract, FHS Zoom chose to reinvest the profits and principal amount with ET Zone that would otherwise have been repaid to it.
50In order to formalize FHS Zoom’s investment in ET Zone the parties entered into a contract that was drafted by Noman. Under the terms of this agreement FHS Zoom was to be paid $15,000 profit each month by way of postdated cheques from ET Zone. Rather than receive the repayment of the principal and profit, otherwise payable from time to time, Ramzan decided to leave these monies with ET Zone to fund further purchase orders, thereby increasing his company’s investment in ET Zone.
51In August 2014 Ramzan met the plaintiff Rana at a wedding banquet in London, Ontario. Although Ramzan denies ever meeting Rana prior to this occasion, Rana testified that he had known the defendant for approximately two years before this meeting.
52During their meeting at this wedding, Ramzan gave to Rana an ET Zone business card that identified him as being the “Head of Investment Division”. As considered in more detail below, Ramzan testified that he advised Rana that he did not actually hold that position. He also provided to Rana his FHS Zoom business card, however Rana stated that this business card was provided to him later.
53In their discussions at the wedding, including about their respective employment, Ramzan advised Rana that he owned FHS Zoom and that he earned additional income from investments he and his company had made in ET Zone.
54During their initial discussions Rana testified that told Ramzan that he had sold his home and had approximately $500,000 of profit from the sale. Ramzan denied Rana’s evidence and no other evidence was adduced during the trial as to this.
55Rana and Ramzan met at the offices of FHS Zoom in September of 2014 to discuss the possibility that Rana might become an investor in ET Zone. Ramzan testified that he presented Rana with documents and purchase orders relating to investments made in ET Zone by his company and his relatives. Rana acknowledged in his evidence that Ramzan showed him these records and he did not dispute their authenticity or the fact that the investments in ET Zone had been made.
56In September 2014, Rana was introduced to Noman at the offices of ET Zone. Noman testified that he had several meetings with Rana before the plaintiff invested in ET Zone and Rana acknowledged in his evidence that he knew that Noman was the owner of ET Zone.
57In the discussions regarding the plaintiffs’ possible investment in ET Zone, Rana consistently took the position that he would require a bank guarantee to secure any investment.
58Rana, through his company PTCL, entered into a contract with ET Zone on September 29, 2014, which called for the plaintiffs to invest $250,000 with ET Zone. Rana required that this contract be in writing.
59This First Contract between the plaintiffs and ET Zone was signed at the offices of ET Zone by Rana and Noman, with Noman’s father Yousuf and Ramzan both signing as witnesses.
60This contract provided that in exchange for PTCL’s investment of $250,000 it would receive monthly profit payments of $5000, with the principal amount being returned to PTCL at the end of the contract term on April 10, 2015. The contract was secured by a bank guarantee from the Royal Bank of Canada and the contract provided that if ET Zone defaulted on any of its obligations under the contract PTCL would be entitled to call upon the bank guarantee and withdraw its investment amount of $250,000. Noman applied for the bank guarantee and provided it to Rana.
61Over the term of this First Contract, ET Zone made each of the monthly profit payments of $5000 to PTCL.
62In February 2015, before the expiry of the First Contract, discussions took place involving Rana and Ramzan to the effect that the plaintiffs wished to invest another $250,000 into ET Zone for a total investment of $500,000.
63In contemplation of this additional investment, Noman prepared a draft addendum to this First Contract, which was forwarded by Noman to Ramzan, who in turn provided it to Rana. The addendum was never signed, and the parties ultimately entered into the Second Contract.
64On February 15, 2015, prior to the signing of the Second Contract and before the end of the First Contract, Rana signed a letter on PTCL letterhead addressed to the Royal Bank of Canada wherein he stated: “This is to confirm that we are returning the subject original letter of Guarantee issued on 21st of October 2014 as all obligations under the LG have been duly met by ET Zone Supplies Inc.”
65Rana had directed all his communication and emails to Noman regarding the guarantee letter securing the investment under the First Contract.
66The Second Contract between ET Zone and PTCL was executed on April 1, 2015. This contract provided that PTCL’s total investment with ET Zone would be $500,000. The contract confirmed that $250,000 was provided to PTCL on September 30, 2014, and the additional investment of $250,000 was paid to that company on April 1, 2015. The contract had an expiry date of May 1, 2017.
67This Second Contract was signed by Rana on behalf of his company described as the “lender” and by Noman on behalf of ET Zone, as the “borrower.” Ramzan signed the contract as a “witness” and he was referred to as the “Head of Investment Division, ET Zone Supplies Inc.”.
68This contract called for ET Zone to pay to the plaintiffs $10,000 per month on the first business day of each month.
69On the same date as the execution of the Second Contract, a further agreement was entered into by the parties. This was referred to as the “Provision of Bank Guarantee”, which required that ET Zone obtain a bank guarantee in the amount of $500,000 within the month of April 2015, failing which the plaintiffs could withdraw the total investment at any time.
70Both Ramzan and Noman testified that Ramzan had no legal authority or responsibility for obtaining a new bank guarantee for the plaintiffs in respect of this Second Contract.
71ET Zone was unable to secure a bank guarantee for the total amount of $500,000 as was required by the Second Contract. Noman testified that it was proposed to Rana that a bank guarantee in the amount of $300,000 could be requested, however Rana insisted that ET Zone continue to pursue a bank guarantee in the full amount of $500,000. Between May and September 2015, Rana and Noman exchanged a series of emails regarding the requirement of the guarantee.
72Rana acknowledged that all his correspondence regarding the required bank guarantee was with Noman, as he knew that he was the one responsible for obtaining the bank guarantee on behalf of ET Zone.
73Between May and September 2015, PTCL received the monthly profit payments of $10,000. FHS Zoom made one of the monthly profit payments of $10,000 to PTCL on September 2, 2015. Both Noman and Ramzan testified that this was in the form of a loan by FHS Zoom to ET Zone. The final payment made to PTCL was made in October 2015 in the sum of $5000.
74On October 15, 2015, a meeting was held at ET Zone’s offices with Rana, Noman, Ramzan, and Rana’s son Usman in attendance, for the purpose of discussing the return of PTCL’s investment in ET Zone. Shahid Ahmed, an apparent principal of ET Zone, was also in attendance. It was during this meeting that Noman advised that he was still unable to obtain a bank guarantee in favour of PTCL in the sum of $500,000.
75An email dated October 15, 2015, which was referred to as a “Reference Agreement” in draft, which had been prepared by Rana, was in turn sent by his son Usman to Noman. This document purported to represent the minutes of the meeting held on October 15, 2015. This draft document called for the repayment to PTCL of its $500,000 investment in three installments to be completed by April 1, 2016, and in the event the repayment was not made, it called for Noman to agree that he would be liable for the return of the plaintiffs’ investment.
76This Reference Agreement was not signed by the parties, nor was this document produced in the plaintiff’s affidavit of documents. In cross-examination Rana acknowledged that this document had not been produced by the plaintiffs in their affidavit of documents. He offered the explanation that he did not do so as he did not think it was relevant as it was not signed by the parties.
77It was the evidence of Rana, Ramzan and Noman that Shahid Ahmed, who was also in attendance at this meeting, stated that he would take personal responsibility for repaying PTCL’s investment. No mention of this is set out in the Reference Agreement as drafted by Rana. Further, there is no statement or suggestion that the defendant Ramzan agreed to accept any responsibility for the repayment of PTCL’s investment. Although Rana and his son both testified that Ramzan’s responsibility to repay PTCL’s investment was discussed at this meeting, both Ramzan and Noman denied this. Given the conflicting evidence offered by the plaintiffs and the lack of any record in the Reference Agreement as to any agreement or discussion regarding Ramzan being obligated to repay the plaintiffs’ investment, I have concluded that no such discussions took place in this meeting.
78A receiver was appointed to manage the assets of ET Zone in approximately December 2015 and an order was granted discharging the receiver in May 2016.
79On May 28, 2016, Ramzan, Rana and several other investors in ET Zone met with legal counsel to discuss suing Noman and his wife for the purpose of seeking the return of their investments. Ramzan testified that it was never suggested by Rana during this meeting that he or his company were responsible for the repayment of the plaintiffs’ investment.
80On July 30, 2016, a meeting of ET Zone’s investors, including Ramzan, was convened at Noman’s home to address how they may recover their investments. Rana was out of town at this time and his son Usman attended this meeting on his behalf. Noman testified that this meeting was arranged at Rana’s request.
81During this meeting of investors, a handwritten memorandum was prepared listing each investor in attendance and their respective principal amount of investment in ET Zone. This memorandum showed that the plaintiffs’ principal investment was in the amount of $500,000 and the defendant Ramzan’s in the amount of $1.426 million, which amount was reduced, on his agreement, to $1.2 million, as noted in the amendment on the memorandum. This memorandum was signed by all investors including Usman, on behalf of the plaintiffs.
82Further, the memorandum noted that Ramzan’s total investment in ET Zone represented 40.88% of the company’s total indebtedness, while the plaintiffs’ accounted for 17.03%.
83Ramzan and Noman both testified that during this meeting Noman stated to those present that he had accepted responsibility to repay each investor in the amounts stated in the memorandum. Although not in attendance at this meeting, Rana acknowledged in his evidence that Noman had made this representation at the meeting. Rana’s son testified that he signed the memorandum along with the other investors only for the purpose of confirming his attendance at the meeting, however Ramzan and Noman both testified that he never indicated he was signing the memorandum simply for confirmation that he was in attendance. Regardless, Rana acknowledged that he agreed with the arrangement set out in the memorandum.
84On the same day, following this meeting, Usman emailed all those in attendance a copy of the memorandum which he referred to as the “Disbursement Agreement with Noman Yusuf”, which further confirmed that the first payment under the terms of the memorandum was to be made on July 30, 2016, by Noman to the investor signatories. Usman received the sum of $1700 from Noman on that date, representing the plaintiffs ratable share at approximately 17% of the total outstanding indebtedness owing by ET Zone.
Analysis
85At the outset I must address two issues as to the conduct of the trial and the scope of the action as framed by the statement of claim.
86At the conclusion of the evidence, counsel for the plaintiffs submitted that an adverse inference should be drawn against the defendant Ramzan and further that his testimony must be viewed with caution due to his lack of credibility. This assertion arises from the defendants’ decision to have Noman testify as the first witness in the defendants’ case.
87Counsel for the plaintiffs made submissions at the opening of the defence’s case when advised that Noman would be the first defence witness while the defendant Ramzan was present in the courtroom. Counsel indicated that at the end of the trial he would be making submissions to the effect that less or no weight should be given to Ramzan’s testimony given his opportunity to tailor his evidence to that of Noman.
88Counsel ultimately made those submissions in his closing address.
89Rule 52.06 (1) and (2) of the Rules of Civil Procedure provide the following as to an order for the exclusion of witnesses to be called at trial:
Exclusion of Witnesses
Order for Exclusion
52.06 (1) The trial judge may, at the request of any party, order that a witness be excluded from the courtroom until called to give evidence, subject to subrule (2). R.R.O. 1990, Reg. 194, r. 52.06 (1).
Order not to Apply to Party or Witness Instructing Lawyer
(2) An order under subrule (1) may not be made in respect of a party to the action or a witness whose presence is essential to instruct the lawyer for the party calling the witness, but the trial judge may require any such party or witness to give evidence before any other witnesses are called to give evidence on behalf of that party. R.R.O. 1990, Reg. 194, r. 52.06 (2); O. Reg. 575/07, s. 3; O. Reg. 248/21, s. 7.
90Apart from stating at the opening of the defendants’ case that at the end of the trial he would be raising issues as to the credibility of the defendant Ramzan as noted, and although that defendant, as a party, cannot be properly excluded from the courtroom, he did not seek an order of the court requiring that witnesses testify in a particular order.
91Furthermore, in his closing submissions counsel did not identify any evidence that demonstrated that Ramzan had tailored his evidence on any material fact or issue to match or coincide with the testimony offered by the witness Noman.
92As already noted at para. [26] above, a pleading of fraud requires fulsome particulars of the alleged fraudulent statements or misrepresentations.
93In paragraphs 12 – 14, 16 – 17, 28, 30 – 32, 34, 39 – 40, 50 and 53 and the subparagraphs in those paragraphs, it is alleged that Ramzan made approximately 40 statements or representations which the plaintiffs claimed that they relied upon, and which were false.
94However, the statement of claim is lacking in any particularity as to the alleged false statements or representations. This includes when, where, and in what circumstances the statements were made, as well as any details regarding to whom and in whose presence they were made.
95Furthermore, the statement of claim provides no material facts as to how and why the alleged statements were false and fraudulent nor whether the defendant intended to deceive the plaintiffs.
96While it is fundamental to the purpose of pleadings that they set out in particularity the case being asserted so the defendants have a full understanding of the issues in dispute and the case to be met, it is also fundamental to litigation that lawsuits be decided within the boundaries of the pleadings.
97Although it appears that no demand for particulars was served by the defendants, nor was a motion for particulars brought, the statement of claim, is in my view, seriously lacking in particulars as to the alleged fraudulent misrepresentations contrary to rule 25.06 (8). Therefore, in considering the evidence at trial I must be mindful of the lack of linkage between the pleading in the statement of claim and the evidence adduced by the plaintiffs in their case, especially as to the alleged fraud and deceit: Rodaro v. Royal Bank (2002), 59 O.R. (3d) 74 (C.A.).
98While the documentary evidence and the timeline of the events as to the plaintiffs’ commercial relationship with ET Zone, and the defendants’ involvement generally accord with their respective positions, the evidence as to the alleged statements, misrepresentations and the recount of discussions which the parties and witnesses were involved in does not.
99No written record of statements or representations allegedly made by the defendant Ramzan was introduced into evidence. The evidentiary record is barren with respect to any form of written record such as by email or other written notation that would corroborate or support the positions advanced in the plaintiffs’ case on the critical assertions made by Rana. Similarly, there is no corroborative viva voce evidence in support of the plaintiffs’ case.
100As noted above, the statement of claim contains numerous allegations that may suggest fraud or deceit, however the evidentiary record adduced by the plaintiffs has failed to present any direct or circumstantial evidence that could reasonably support even the inference of fraud or deceit on the part of the defendant Ramzan. None of the required elements of the torts of fraud or deceit were established.
101In the written submissions filed on behalf of the plaintiffs, addressing the question as to whether the fraud or deceit alleged was causally connected with the plaintiffs’ financial losses, counsel stated at para 55 (e) of his submissions: “The representation by Mr. Ramzan that he was the Head of the Investment Division of ET Zone is the root cause (sic) of this action.” Thus, this alleged fraudulent or deceitful representation appears to be the core basis upon which the plaintiffs assert that the defendants are liable to them.
102As already noted above, the only cause of action left for consideration by the court was that of civil fraud, which is also referred to as deceit. The elements of the torts are one and the same. In counsel’s written submissions dated January 18, 2023, which were filed prior to the oral closing submissions, numerous other causes of action were still being advanced relating to agency, contract, the duty good faith in contract, and negligence.
103In his closing oral submissions, counsel was clear and unequivocal in abandoning all causes of action other than with respect to civil fraud or deceit.
104Although the nature of the commercial relationship between the plaintiffs and ET Zone is not entirely determinative of the outcome of this action, the parties have put forward different positions with respect to this.
105In their submissions, it appears to be urged on behalf of the plaintiffs that the commercial relationship between the plaintiffs and ET Zone was a loan as opposed to one involving an investment. It is submitted on behalf of the defendants that, on all the evidence adduced, the relationship was an investment.
106Despite the plaintiffs and ET Zone being referred to as the “lender” and “borrower” respectively in the contractual documents prepared, the court must interpret the contractual documents having regard to the intention of the parties. Both Noman and Ramzan testified that the intended relationship was that of an investment. Notably, in their statement of claim the plaintiffs refer to the commercial relationship as an investment (para 24 (a)). Furthermore, in summarizing representations made by both Ramzan and Noman, which were allegedly false and induced the plaintiffs to pay money over to ET Zone, as the payment of the monies is described as an investment, and not a loan.
107I therefore find that the relationship between the plaintiffs and ET Zone was one involving an investment whereby the plaintiffs and Ramzan committed their capital as an investment in ET Zone to earn income in the form of monthly payments.
108In order to properly consider the timing of the alleged fraudulent misrepresentations by the defendants, the duration of the two contracts must be considered.
109The plaintiffs submitted that as the initial investment paid at the time of the First Contract in the sum of $250,000, was not repaid to the plaintiffs, prior to the Second Contract, the First Contract continued in force including all terms and conditions.
110It was the position of the defendants that the First Contract terminated prior to the plaintiffs and ET Zone entering into the Second Contract, although the defendants were parties to neither agreement. It was Ramzan’s position that he was simply a witness to the contractual documents between the plaintiffs and ET Zone.
111I find and conclude that the First Contract was terminated by agreement between the plaintiffs and ET Zone in accordance with paragraph 6 of the first contract which provided as follows: “Under no circumstances, shall this contract agreement NO. THR – 786 be revocable by any party involved unless and until mutually agreed by and between ET Zone Supplies Inc. (Borrower) and Premier Technical Consultant Limited (Lender).”
112In reaching this conclusion, I considered that the parties expressed intention to terminate the First Contract is evidenced by the plaintiffs’ conduct in returning the first bank guarantee. Furthermore, in his letter dated February 15, 2015, returning the bank guarantee, Rana stated in part: “…all obligations against the LG have been duly met by ET Zone Supplies Inc.”
113Thus, in examining any of the fraudulent misrepresentations allegedly made by Ramzan it is necessary that the court consider when the so-called misrepresentations were made, namely prior to the First Contract or after its termination and the commencement of the Second Contract.
114As to the allegations in the plaintiffs’ statement of claim, in addition to making sweeping bald allegations without any supporting material facts as to alleged statements made by the defendant Ramzan, the plaintiffs further as a general statement have asserted that all representations made by the defendant were false.
115It is notable that in cross-examination Rana agreed that the purchase orders and other investment documents shown to him by Ramzan, relating to his family and friends’ investments in ET Zone were genuine and authentic and there is no evidence demonstrating otherwise. As such I have concluded that the records shownn to Rana were genuine and authentic.
116The evidence is clear that Ramzan provided Rana with an ET Zone business card with his name on it describing him as Head of Investment Division of ET Zone. Whether this representation was fraudulent and made with the intention that Rana rely upon it and be induced to invest with ET zone will be addressed below.
117Included in the many bald allegations contained in the statement of claim, and unsupported by cogent and reliable evidence, the plaintiffs asserted that Ramzan represented to Rana that FHS Zoom was an investment partner with ET Zone. This evidence offered by Rana is unsupported by any other evidence, including any testimony of those persons present when this statement was allegedly made.
118Similarly, as to the allegation that Ramzan stated he would be personally responsible for the plaintiffs’ investments in ET Zone, not only is there no evidence to support this, but all the evidence after ET Zone was unable to repay monies invested under the Second Contract is consistent with the plaintiffs’ intention to pursue ET Zone and Noman. The email correspondence, minutes or memos of meetings, and discussions regarding the plaintiffs’ steps to have their investment amount returned to them, contain no statement or even suggestion that Ramzan was liable to the plaintiffs based on an alleged representation that he would be personally responsible for their investment. I have therefore concluded that no representation or agreement to that effect was ever made by Ramzan.
119Given my finding that the First Contract was completed, prior to the plaintiffs making a further investment payment in the amount of $250,000, and after having returned the first bank guarantee, the circumstances surrounding the creation of the Second Contract must be considered, particularly as they relate to the plaintiffs’ requirement that their total investment of $500,000 had to be secured by a bank guarantee.
120At the time of the execution of the Second Contract on April 1, 2015, Noman, on behalf of ET Zone, advised Rana that the company had not yet secured a bank guarantee in the amount of $500,000 as required by the contract.
121The evidence offered by Rana as to why he would rely on representations allegedly made by Ramzan is highly questionable in that he claims to have known Ramzan for quite some time and knew him to have a good reputation in the community. Again, turning to the statement of claim, and the allegations made as to the circumstances under which Rana met Ramzan at the wedding in London, Ontario in August 2014 do not coincide with the evidence offered by this plaintiff. Specifically, at paragraph 12 of the statement of claim it is stated: “12. In or around August 2014 in a marriage party in London, Ontario, Ramzan introduced himself as Head of Investment Division of ET Zone to Rana and others present there.”
122On the basis of this pleading and Ramzan’s denial that he knew Rana, I cannot accept Rana’s evidence that he had known Ramzan for some time, when he says that the defendant “introduced himself” as connected with ET Zone.
123Furthermore, in the statement of claim it is asserted that the representation as to this introduction was made to “others present”, however no other corroborative evidence was called from any persons present, and no explanation has been offered as to why they were not brought to court to testify as to what they heard from the defendant. In the circumstances, I have concluded that I must draw an adverse inference against the plaintiffs and conclude that there is no corroborative evidence available as to the statements allegedly made by the defendant Ramzan.
124Shortly following the plaintiffs and ET Zone having executed the Second Contract in April 2015, and after Noman advised the plaintiffs that as of that time he was unable to deliver a $500,000 bank guarantee, Rana emailed Noman on May 19, 2015, with a copy of his email sent to Ramzan wherein he stated as follows, in part:
It is really surprising rather disappointing that the RBC Bank staff has mishandled the preparation/release of our bank guarantee of the value of CAD $$500,000 (Five Hundred Thousand $).
Although all of my business associates (including my family) have strictly advised me and offered their full resistance, not to release any single dollar for any investment without supporting bank guarantee, but based on your kind and nice earlier cooperation, I have trusted in you and have invested with ET Zone Supplies Inc. and amount of CAD $500,000, without having a proper bank guarantee in my hand.
I am sure you will exert all your efforts and upon your arrival in Canada you will turn every stone to make sure that Premier Technical Consultant Limited will receive this bank guarantee for the full amount of CAD $500,000 well before the end of June 2015. Of course, in the case of non availability of bank guarantee, we may look for other options.
125Given Rana’s statements in this email, I find as a fact that he looked to Noman for all disclosure and representations of material facts relating to his company’s intended further investment in ET Zone. Furthermore, there is no evidence that the plaintiffs’ further investment by way of the Second Contract was in any way connected with statements or representations made by the defendant Ramzan as to the security of the investment or with respect to the availability of a bank guarantee.
126I find as a fact, based on the clear and uncontradicted evidence from the email above, that Rana's decision to invest a further $250,000 was based on his trust and reliance on past representations made by Noman and not on any statements or representations made by Ramzan.
127Further, I find as a fact that even if the plaintiffs relied upon the business card provided by Ramzan to Rana to invest in ET Zone, the plaintiffs’ loss is not causally connected with any representation connected with the business card. I find that the force of any misrepresentation arising from the defendant handing Rana the business card was entirely spent before the plaintiffs entered into the First Contract. From all the evidence, Rana was fully aware that Noman was the principal owner and operator of ET Zone before the First Contract was executed and that any initial reliance placed on what was stated on the business card as to Ramzan’s position with ET Zone was no longer relevant nor could it be reasonably relied upon.
128Further, I find as a fact that the plaintiffs had received the contracted payments under the First Contract. The plaintiffs received all the monthly investment amounts that they were entitled to under that contract at $5000 per month for a total of $30,000. The plaintiffs’ loss as claimed arose in the period following the return of the bank guarantee and following the execution of the Second Contract, without first having a bank guarantee in place for the full investment of $500,000 as was required under the terms of the contract.
129Quite apart from any other considerations including the requisite elements that must be proved in order to establish civil fraud, there is no causal connection between the plaintiffs’ ultimate loss and any representations made by the defendant Ramzan. Alternatively, the plaintiffs have no right of recovery given the remoteness of their loss relative to any conduct on the part of the defendants.
130Furthermore, there are no allegations advanced by the plaintiffs as to any fraudulent misrepresentations after the completion of the First Contract.
131As to the return of the bank guarantee in the sum of $250,000, in respect of the First Contract, in February 2015, this occurred after the parties had prepared the addendum to the First Contract to allow for an additional investment by the plaintiffs of $250,000 which was discussed by the parties in that month. Rana testified that his letter to the Royal Bank of Canada of February 15, 2015, was dictated word-for-word by Noman and Ramzan, however both denied this. I reject this evidence and have concluded that Rana determined that he would return the bank guarantee in anticipation of receiving a new one in respect of the total new investment. Notably, his letter was typed on PTCL letterhead. Contrary to Rana’s evidence I find that as he was pleased with the investment performance achieved under the First Contract and he was anxious to proceed and invested a further sum with ET Zone based on the expectation that he would receive a further bank guarantee for his increased investment.
132Overall, I found Rana to be a sophisticated and experienced businessman. However, he presented as having a selective memory of events and conversations with the parties involved. His statements that Ramzan agreed to protect and reimburse the plaintiffs for their investment must be rejected. Had this representation been made by the defendant, given the detailed emails exchanged between the parties, this would have certainly been recorded, however it was not. Further, he failed to disclose in the plaintiffs’ affidavit of documents the draft document referred to as the Reference Agreement, which he prepared and presented to Noman, and which would have required Noman to be personally responsible for repayment of the plaintiffs’ investment. I find this failure to disclose a material document significant, particularly given that it demonstrates that the plaintiffs were looking to Noman to reimburse the investment, and at no time prior to the commencement of this action was the defendant and his company looked to for the repayment nor is there any evidence apart from the bald statement made by Rana that Ramzan agreed to take responsibility for their investment. This failure to disclose a material document gives rise to serious concerns as to the credibility and reliability of the evidence offered by Rana.
133Further, at all times both under the First and Second Contract, Rana was fully aware that Ramzan had no authority or ability to obtain a bank guarantee on behalf of ET Zone and this is evidenced by his exchange of email correspondence with Noman about obtaining the first bank guarantee and the steps taken to obtain the new one under the Second Contract.
134This conclusion is further supported by the fact that PTCL and ET Zone entered into another written contract in April 2015, at the time the Second Contract was entered into which was entitled “Provision of Bank Guarantee”. In respect of this document, Noman testified that Ramzan had no responsibility or authority to obtain the new bank guarantee on behalf of ET Zone.
135Having regard to the principles established in Hryniak in summary I conclude as follows:
(1) the defendant Ramzan did not make a material false representation to the plaintiffs; (2) although the ET Zone business card provided by Ramzan to Rana did misrepresent his connection with ET Zone and he knew it to be false at the time it was provided, this misrepresentation did not cause the plaintiffs to act to their detriment as I have found above; (3) furthermore, there is no evidence that Ramzan's initial misrepresentation by way of the business card, which I find was clearly neutralized when Rana learned that Noman was the principal of ET Zone, prior to the First Contract, caused any loss or damage to the plaintiffs.
136Furthermore, I can find no evidence of moral turpitude with respect to the conduct of the defendant Ramzan in any of his involvement with Rana or the plaintiff company.
137While the evidence required to make out a case in civil fraud must be determined on a balance of probabilities, the evidence must be clear, cogent and convincing given the serious allegations being asserted: Anker v. Sattaur. No such evidence has been adduced in this case.
138Although proof of a motive to commit the civil tort of fraud need not be established, counsel for the plaintiff submitted that at the time Ramzan was involved as a go-between with the plaintiffs and ET Zone, prior to the First Contract, he had already invested in excess of $400,000 with that company and as such there was a motive on his part to bring in the plaintiffs as investors to enhance his chances of recovering his investment. I reject this submission. The uncontradicted evidence is that after the plaintiffs began investing in ET Zone, Ramzan continued to invest as well and by the time ET Zone encountered serious financial difficulties and ceased to carry on active business, he had a total investment in that company in the order of $1.426 million. This does not align with the theory of the plaintiffs that Ramzan purposely looked to them as additional and supportive investors.
139Further, I find no evidence of any reckless representations, knowing them to be possibly untrue, by the defendant Ramzan which were made to the plaintiffs, with the intention of deceiving Rana and which induced the plaintiffs to invest in ET Zone.
140In considering the whole of the evidentiary record and in respect of the time prior to and following through to the failure of the Second Contract, I can find no evidence of any intent on the part of Ramzan to knowingly or recklessly make a fraudulent material misrepresentation with the intention that the plaintiffs rely upon it and with the intention that they be induced to enter into the contracts with ET Zone.
Conclusion
141For the reasons set out above, I have concluded that this action must be dismissed.
142As to the costs of this action, counsel for the defendants shall serve and file submissions of no longer than five pages, along with a bill of costs within 20 days from the date of release of these reasons. This is to be followed by similar submissions on behalf of the plaintiffs within 20 days thereafter. No reply submissions are to be delivered.
Daley J.
Released: October 24, 2023