Lawyer says remarks were damaging and could have had a substantial impact if it were junior counsel
The Ontario Court of Appeal has ruled that a superior court judge’s decision was tarnished by procedural unfairness by failing to follow the Rules of Civil Procedure mandatory process of a personal costs order and refusing defense counsel’s submissions. In addition, the court noted that the factual findings governing the order resulted from palpable and overridden errors in the lower court’s verdict.
“This case is an object lesson in why the procedural dictates of r. 57.07(2) must be followed. The Personal Costs Order has damaged Mr. Farooq’s most important qualifications: his character and his professionalism. The dictates of r. 57.07(2) must be heeded, not only to ensure procedural fairness but also to guard against unfairly tarnishing a lawyer’s reputation,” the court wrote.
Counsel for the appellant, Anser Farooq, says it was much relief to speak about that issue and appreciate the court allowing him to defend his reputation against the damaging accusations the motion judge levied against him.
“They gave me as much time as I wanted to vent the frustration that I had and it restored my confidence in the judiciary again.”
He says the motion judge’s remarks were damaging and could have had a more substantial effect if he was a junior lawyer. “If I was early in the years, it would have been a big issue for me because the wording in there was basically calling me and my clients liars.”
In Leaf Homes Limited v. Khan, the appellants, Farrukh Shahzad Khan and Nadia Parveen Khan agreed to a purchase and sale agreement with the respondent to buy a pre-construction in a new residential community for $1,518,888. The clients made a down payment of $180,000. However, they originally went for an information session and did not expect to make a down payment but were persuaded by the builders that they would have no problem getting a mortgage once they paid a specific portion of the property.
The deal was to close on Oct. 4, 2018, but the appellants could not go ahead with the transaction because the builder’s value for the property and the mortgage lender’s value differed.
When the appellants could not get a mortgage approval, they informed the respondent that they would be unable to close on the purchase and sale. As a result, the respondent kept the appellants’ $180,000 down payment, sold the property a few months after the closing date for less than two-thirds of the purchase price the appellants had agreed to pay, and obtained default judgment against the appellants for over $400,000.
The appellants retained Farooq as counsel on learning that their bank account had been “garnisheed” by the respondent. Farooq moved to set aside the default judgment and be permitted to enter a defence and counterclaim because the appellant did not receive the statement of claim.
The motion judge, Justice Jill Cameron, ordered that the default judgment be set aside but only to the extent that the appellants could litigate the quantum of damages.
Justice Cameron wrote that an employee of the defendant misrepresented to the appellants the willingness to help them obtain financing for the property if they could not do so. However, she refused to accept the appellant’s defence because they did not mention it in their email correspondence with the respondent. In addition, she said the appellants signed the agreement without taking the time to read and understand it, and there was no pressure on them to sign it.
Justice Cameron gave the appellants fifteen days from the reasons release date to provide their cost submissions and the respondent ten days to respond.
On her cost endorsement, she ordered the appellants to pay costs on a substantial indemnity basis and a personal cost order against Farooq, which required him to personally pay the respondent $1,575 within 30 days for costs incurred when his clients failed to appear for the scheduled cross-examinations. However, there was no oral hearing on the matter, and she did not give the appellants a right of reply to the respondent’s costs submissions.
Justice Cameron stated in her costs endorsement that Farooq knew that his clients would not attend the cross-examinations at least a week before they were to occur.
“She also said that the appellants had asked their counsel, via email, if they could leave the country and “he agreed” and relayed the information to the respondent’s counsel the night before the cross-examinations.
On the appeal, the appellants challenged the validity of the entire order and moved to introduce fresh evidence to address their non‑attendance at the cross-examinations.
The appellants argued that Justice Cameron erred by misapplying r. 19.08; validating the service of the statement of claim; making palpable and overriding errors of fact; demonstrating a reasonable apprehension of bias; making the personal costs order; and ordering costs of the motion against the appellants on a substantial indemnity basis.
The court allowed the appeal and set aside the motion judge’s ruling, the personal costs order, and the costs order and instructed the respondents to pay the appellants $28,000 for the costs of the motion.
The fresh evidence showed that Mr. Khan left Canada for Pakistan on Feb. 12, 2020, for personal family reasons and could not be present for the scheduled cross-examinations on Feb. 25, 2020, and affidavits of Farooq and his employees revealed that they learned of Khan’s unavailability on Feb. 24, following a phone call to remind him of the upcoming cross-examination.
The appeal court also wrote that Justice Cameron fundamentally misunderstood the appellants’ defence, noting that the defence and counterclaim were intertwined, but she failed to consider the counterclaim.
“The appellants had no experience in buying a property from a developer. They went to the sales appointment to get information about the project, the various houses that could be built on lots in the development, and the costs of such houses. They had been sent copies of a draft agreement of purchase and sale before the sales appointment and, at the same time, been told to bring with them mortgage pre-approval and cheques. They did not attempt to read or understand the terms of the draft agreement; they did not attempt to get mortgage pre‑approval; nor did they take cheques with them to the sales appointment, all for the same reason: because they thought they were going to the sales appointment to get information about the project, not to enter into an agreement of purchase and sale…..In short, the appellants’ defence alleges pressure tactics and various misrepresentations that induced them to enter into the agreement and not, as the motion judge stated, simply an offer to help obtain financing.”
Read the rest of the court’s decision here.