COURT OF APPEAL SUMMARIES (November 2 – November 6, 2020)Mughal v. Bama Inc., 2020 ONCA 704 (CanLII)
[Roberts, Trotter and Thorburn JJ.A.]
J. Shulman, for the appellant, M.A.K.
J.S. Contini, for the respondent, N.A.M.
Keywords: Tort, Conspiracy to Commit Injury, Request to Adjourn, Ineffective Counsel, Canada Cement Lafarge v. British Columbia Lightweight Aggregate Ltd.,  1 SCR 452, Agribands Purina Canada Inc. v. Kasameka, 2011 ONCA 0460
The appellant was a business partner with Mr. Q, a friend of the respondent. The respondent and Mr. Q renewed their acquaintance and Mr. Q convinced the respondent to invest the whole of his life savings into Bama Inc. Mr. Q said that Bama Inc. was a very successful electrical supply company, but in reality, it was nothing more than a shell company. Mr. Q and the appellant were directors of Bama Inc.
Over the next year or so, the respondent invested over $200,000 of his savings and some borrowed money as well into Bama Inc. on the basis of Mr. Q’s fraudulent representations, as well as fraudulent claims on Bama Inc.’s website. The appellant was heavily involved in setting up and running the website.
The vast majority of the respondent’s funds that were invested in Bama Inc. were in fact transferred into ET Zone Supply Inc., a struggling business in which Mr. Q was heavily involved.
Mr. Q, Bama Inc. and the appellant were all found liable at trial for conspiracy to cause economic injury to the respondent. The appellant appeals this decision.
1. Did the trial judge err in finding the appellant committed the tort of conspiracy to injure by applying the wrong test and misapprehending the evidence?
2. Did the trial judge err in awarding substantial indemnity costs against the appellant?
Before addressing the issues on appeal, the Court of Appeal considered the appellant’s request to adjourn the appeal. Mr. Q was also appealing the judgment against him and the appellant submitted that a matter in that appeal could be relevant to his appeal. He also submitted that he was considered raising an ineffective counsel argument on appeal. The Court of Appeal was given no particulars of what this matter in Mr. Q’s appeal was, and was not given a reason for why it was never raised earlier. There was no mention of the ineffective counsel argument in any appeal notices nor any evidentiary background to support it. Further, the Court found the respondent would suffer non-compensable prejudice if the adjournment was granted and so it refused the adjournment.
The trial judge cited the appropriate test for conspiracy to injure from Canada Cement. The tort of conspiracy to injure is made out where:
(1) Whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants' conduct is to cause injury to the plaintiff; or
(2) Where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result in loss to the plaintiff.
For the second factor, a judge need not establish predominant purpose, but rather, constructive intent can be derived from what the defendants should have known would ensue and that damage would be suffered.
While the appellant did not personally make any specific fraudulent representations to the appellant, nor was he present for any of the misrepresentations, the trial judge found that he was nevertheless a party to the conspiracy. By creating the website and bank accounts for Bama Inc., the appellant created the necessary corporate presence to further the fraud and to create the false impression that Bama was a real, successful company.
The Court of Appeal found that the evidentiary record amply supported the trial judge’s conclusions on the appellant’s involvement in the conspiracy and dismissed the appeal.
The appellant submitted that the trial judge erred in awarding substantial indemnity costs against him based on civil fraud, when the trial judge found that he had not committed fraud. While the appellant was not found liable for civil fraud, deceit or conversion, he was found liable for his fraudulent behaviour in committing the conspiracy to cause the respondent economic injury, and this is what the trial judge was referring to.
Costs decisions are to be accorded deference, and in light of the egregious conduct of the appellant and Mr. Q, there was no basis on which to overturn the costs award.
The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.