Court File and Parties
COURT FILE NO.: CV-19-71409 DATE: 2024/12/17
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
JAKIR AHMED, SABIR AHMED, ABDULLAH AL MAMUN, SAMUN AHMED and MASUMUR RAHMAN Applicants
Counsel: Roy Wise for the Applicants and for the Respondent, Zinnatus Salam
- and -
QUDDUS ABDUL, ZINNATUS SALAM, ABIDA S QUDDUS, SURMA UNITED INC., REPRESENTED BY ITS PRESIDENT, QUDDUS ABDUL and CANADIAN IMPERIAL BANK OF COMMERCE Respondents
Counsel: Douglas F. Best for the Respondent, Canadian Imperial Bank of Commerce Michael Stanton, for the Respondents, Quddus Abdul, Abida A. Quddus and Surma United Inc., represented by its President, Quddus Abdul
HEARD: December 2, 2024
Reasons for Decision
JUSTICE L. SHEARD
Overview
[1] This litigation was commenced by way of application.
[2] The Applicants now seek to convert the application to an action, and move for the following relief:
leave to amend the notice of application;
leave to amend the title of proceedings to add Zinnatus Salam as an applicant (plaintiff) and to remove her as a respondent, nunc pro tunc, to March 11, 2022;
leave to convert the application to an action;
leave to issue a statement of claim in the form attached as Exhibit “B” to the affidavit of Teresa Pasquini sworn June 29, 2023;
an interim order enjoining the respondents, Quddus Abdul, Abida A. Quddus (the “Quddus Respondents”) and Surma United Inc., represented by its President, Quddus Abdul, from alienating or encumbering 140 Brantdale Avenue Hamilton, Ontario (the “Property”); and
costs.
[3] At the outset of this hearing, the court was advised that the parties agree that an order should be granted converting the application to an action. Where the parties disagree is what pleadings should be included in the amended application or new statement of claim.
[4] This dispute is among persons who, it is alleged, had jointly invested in the purchase of the Property in the expectation that a corporation would be incorporated and that they would be issued shares reflecting their respective financial contributions to the purchase. The Applicants assert that one or both of the Respondents, Quddus Abdul and Abida S. Quddus, arranged to have title to the Property registered in their names, using funds belonging to the group. Thereafter, the Property was mortgaged, and the net mortgage proceeds were allegedly then “plundered” by those respondents.
[5] The Applicants also assert that the mortgage given by the Quddus Respondents to the Canadian Imperial Bank of Commerce (“CIBC”) is null and void and ought to be discharged from the Property. The Applicants allege that the Quddus Respondents did not have the legal authority to place the title of the Property in their names, nor, thereafter, to mortgage the Property. The CIBC defends this allegation.
[6] The Respondents submit, and the Applicants agree that given the passage of time, amendments cannot be made if to do so would add a new cause of action that would have been statute-barred as of June 29, 2023 - the date on which this motion was originally brought.
Amendment of the Notice of Application
[7] The hearing was set for a full day. The Applicants proposed a two-step process – asking first for an order amending the notice of application after which, the amended application would be converted to an action, as per a proposed statement of claim. On that basis, the hearing began with the Applicants’ submissions on proposed amendments to the notice of application.
[8] In the initial submissions, it became clear that the proposed statement of claim was not intended to mirror the proposed amendments to the notice of application: the real issue was not whether the application should be converted to an action, with which all parties agreed, but what claims ought to be included in the proposed statement of claim.
[9] Given that the objective was to determine what claims would be permitted to be made in the proposed statement of claim, the two-step procedure proposed by the applicants appeared unnecessary and I directed the parties to focus their submissions on the end goal: the statement of claim.
Proposed Statement of Claim: Amendments related to Ms. Salam’s claims
[10] The Applicants sought an order amending the notice of application to remove Zinnatus Salam as a respondent and to add her as an applicant, nunc pro tunc. However, in the course of submissions, counsel disclosed that Ms. Salam had commenced a separate proceeding in which she seeks the same relief that was set out in the amended notice of application and the draft proposed statement of claim. On that basis, without my hearing submissions from the responding parties, I concluded I could not, and would not, grant an order the effect of which would be to create duplicative pleadings.
Disposition: Zinnatus Salam: not be added as a plaintiff, removed as a respondent
[11] As the parties agree that the application will be superseded by a statement of claim, it may not be necessary to make an order amending the notice of application to remove Ms. Salam as a respondent. However, as that narrow relief was not opposed, I order that Ms. Salam be removed as a respondent on the application. This order is not made nunc pro tunc.
[12] Respecting the proposed statement of claim, as Ms. Salam has commenced a separate action against some or all of the respondents/proposed defendants, in which she seeks the same relief that is sought on this motion, I do not permit her to be added as a plaintiff in the proposed statement of claim.
[13] As she will not be as a plaintiff in the proposed statement of claim, the motion to include the following paragraphs related to her claim is also dismissed: paragraphs 1(g), 1(t), 1(u), and paragraph 41 (Caselines A32-A48).
[14] This determination is not intended to prevent Ms. Salam from seeking an order consolidating her (existing) claim with the proposed claim or an order that the claims be tried together.
[15] I do note that the Quddus Respondents had prepared responding materials and their counsel was prepared to make submissions in opposition to the proposed amendments that related to the claims to be advanced on behalf of Ms. Salam. For reasons already given, I did not need to hear those submissions.
Proposed Statement of Claim
[16] The Applicants also sought to amend the notice of application and/or include in the proposed statement of claim the following claims:
i. Claim for a Certificate of Pending Litigation
[17] Paragraph 1(f) of the proposed statement of claim includes a request that a Certificate of Pending Litigation (“CPL”) be issued as against the Property. The Respondents do not oppose an order permitting a claim for a CPL to be included in the proposed statement of claim.
[18] However, the Quddus Respondents opposed the Applicants’ request that this court issue a CPL on the basis that: there was no motion before me seeking a CPL; that relief is not available unless pleaded in a statement of claim, which claim has not yet been finalized or approved; and the applicants had not given the usual undertaking respecting damages.
[19] I accept and agree with those submissions. For the reasons set out, the motion for a CPL is dismissed. This order is not intended to preclude the applicants (plaintiffs) from moving at a later date for a CPL.
ii. Claim for misappropriation of funds and tracing order
[20] The Applicants seek to include the following paragraphs in the proposed statement of claim:
i) 1(b) Judgment for misappropriation of funds in the sum of $500,000; and
ii) 1(c) A tracing order for all funds misappropriated by the Respondents, Quddus Abdul and Abida S. Quddus, and vesting title of all assets purchased with such misappropriated funds in the Applicants or in Surma United Inc..
[21] The parties agree on the law: if a claim in the proposed statement of claim arises out of facts already pleaded, then the proposed pleading would not include a “new” cause of action and r. 26.01 would apply to require the court to grant leave to amend the pleading on such terms as are just.
[22] The Applicants submit that the two proposed paragraphs are not “new” causes of action as the pleadings, as drafted, contain allegations of misappropriation: at paragraph 15 of the notice of application, the applicants assert that the Quddus Respondents “plundered” the loan of $347,200.00 that they had raised by placing a charge on the Property in favour of the CIBC.
[23] I accept that submission. It is a central focus of the application that the Quddus Respondents “plundered” the assets of Surma United Inc., which then deprived the Applicants and other shareholders of their legitimate interests in the assets of Surma United Inc.
[24] Counsel for the Quddus Respondents argue that the word “plunder” is not equivalent to an allegation of misappropriation and, as such, the existing application does contain the factual matrix that would support the proposed claim set out in paragraph 1(b) of the proposed statement of claim.
[25] I do not agree.
[26] Viewed as a whole, I find that the application as drafted contains facts or a “factual matrix” that clearly identifies a claim that the Quddus Respondents misappropriated the funds contributed by the Applicants and other shareholders, who had anticipated receiving shares in return for their respective financial contributions towards the purchase of the Property.
[27] For these reasons, I conclude that what is set out in paragraph 1(b) is not a “new” cause of action and that it may be included in the proposed statement of claim.
[28] Counsel for the Quddus Respondents acknowledged that if the court were to allow the proposed statement of claim to include paragraph 1(b), then the relief found in paragraph 1(c) – a tracing order for the funds misappropriated by the Quddus Respondents and an order vesting title of assets purchased with the misappropriated funds – would naturally follow, and their objection to that proposed amendment would be withdrawn.
[29] As I have allowed the proposed statement of claim to include paragraph 1(b), I also allow it to include paragraph 1(c).
iii. Claim for punitive and exemplary damages
[30] The Applicants also ask for leave to include a claim for punitive and exemplary damages as against the Quddus Respondents in the amount of $158,000. Those claims are set out in paragraph 1(w) of the proposed statement of claim.
[31] The allegations in the notice of application included that the Quddus Respondents acted improperly with an intention to defraud the shareholders and in contravention of their obligations as directors and officers, and abused their power to deprive the Applicants and other shareholders of their legitimate interests in the assets of Surma United Inc.
[32] In my view, those allegations fall short of providing the factual matrix to support the proposed claim for punitive and exemplary damages found in paragraph 1(w). I find such a claim would constitute a new cause of action and I do not allow it.
iv. Other claims
[33] The Quddus Respondents object also to the inclusion of paragraphs 22-29, 30, 31 and 37 of the proposed statement of claim. Having considered the parties’ submissions, I have determined as follows:
a) Paragraphs 22 and 23: these paragraphs do not create new causes of action but are simply additional facts. They may be included in the proposed statement of claim;
b) Paragraphs 24 and 25: these paragraphs address the relief sought by Ms. Salam and, given my ruling that her claims ought not to be added, these paragraphs may not be included;
c) Paragraphs 26 and 27: these paragraphs contain facts that support the allegations of “plundering”, found in the original notice of application. As I have allowed paragraph 1(b) to be included in the proposed statement of claim, I also allow paragraphs 26 and 27;
d) Paragraphs 28, 29, 30 and 31: these paragraphs relate to claims advanced by Ms. Salam and, for that reason, are not to be included;
e) Paragraph 37: this paragraph contains an allegation that the egregious conduct of the Quddus Respondents warrants an award of punitive and exemplary damages and substantial indemnity costs. As I have not allowed new paragraph 1(w), this paragraph has no place in the proposed statement of claim and shall not be included.
[34] I wish to make clear, however, that while I do not grant leave to include paragraph 1(w) in the proposed statement of claim, that paragraph refers only to a claim for punitive and exemplary damages and is silent as to costs. As such, no inference is to be drawn that my refusal to allow paragraphs 1(w) and 37 to be included in the proposed claim, should preclude the plaintiffs from seeking substantial indemnity costs of the (proposed) action.
v. New Claims Relating to the CIBC Mortgage
[35] The CIBC objects to the inclusion of the allegations set out in paragraphs 38, 39 and 40 of the proposed statement of claim. In oral submissions, counsel for the CIBC acknowledged that paragraph 38 of the claim simply includes factual background. At the heart of the CIBC’s objection is that paragraphs 39 and 40 of the proposed claim allege that the CIBC’s lawyer was negligent and that the CIBC is liable for the negligence of their lawyer.
[36] The Applicants say that these claims are not new in that by correspondence dated 12 August 2019, sent by the Applicants’ prior counsel to counsel acting for the Quddus Respondents, counsel advised that his clients were considering suing the lawyer and his firm who had acted for the Quddus Respondents and also for the CIBC and encouraged that lawyer to report the matter to LawPro.
[37] However, the Applicants did not, in fact, sue the lawyer who had acted for the CIBC. Until the proposed statement of claim was presented in the context of this motion, no claim or allegation of negligence had been pursued as against the CIBC’s lawyer, and, therefore, any such claim is now statute-barred: it has been well over two years since the August 12, 2019 letter, in which the Applicants identified a potential claim related to the alleged negligence of the lawyer.
[38] The CIBC submits that it would be prejudiced if the proposed statement claim were to include allegations of negligence against the former lawyer who acted on the registration of the CIBC mortgage (who did not have notice of this motion). In addition, the allegation in paragraph 40 of the proposed statement of claim that the CIBC was responsible in law for the negligence of its lawyer pursuant to the principle of “respondeat superior” is entirely new.
[39] The CIBC also submits that, not only is this claim apparently statute-barred, but to allow it would give rise to prejudice that could not be compensated for by costs, in that the CIBC would have to defend an allegation that arose some five years ago, and that this claim ought not to be allowed.
[40] I accept those submissions and deny the Applicants leave to include paragraphs 39 and 40 in the proposed statement of claim.
Costs
[41] The Applicants have had limited success on this motion: the request to include claims for misappropriation and tracing in their proposed statement of claim was granted. However, the request to add Ms. Salam as a plaintiff in the proposed statement of claim was denied, as were the paragraphs related to that claim; and the request to include claims as against the CIBC (i.e. paras 38 and 39) was also denied.
[42] I would urge the parties to attempt to agree on costs. However, if they are unable to do so, then the parties may make costs submissions that address these issues:
a) Entitlement to and liability for costs; and
b) The amount of costs to be awarded.
[43] Written costs submissions, not to exceed three typed pages, together with a Bill of Costs, are to be exchanged and submitted to me, via email through the Trial Coordinator as follows:
By the Applicants within 21 days of the release of these reasons;
By the Quddus Respondents and the CIBC within 7 days of service upon them of the Applicants’ costs submissions.
If no submissions are received by January 14, 2025, the parties will be deemed to have settled the issue of costs as between themselves and there will be no order as to costs.
L. Sheard J. Released: December 17, 2024