Valayati v Cheema, 2018 ABQB 1014

Court of Queen’s Bench of Alberta Citation: Valayati v Cheema, 2018 ABQB 1014 Date: 20181212 Docket: 1701 03016 Registry: Calgary Between: Fatima Valayati Plaintiff/Appellant - and - Kabir Cheema, Muhammad Abdul Rehman, Khadija Shahzad Defendants/Respondents _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice J.T. McCarthy _______________________________________________________

Appeal from the Oral Decision by J.L. Mason, Master in Chambers Dated the 1 st day of May, 2018 I. Introduction and Procedural History [ 1 ] In January 2017, Fatima Valayati sold her property, located at 17 Panamount Street in Calgary (the “Property” ), to Kabir Cheema, who was then a licenced realtor. The closing price of $450,000 was approximately $75,000 below fair market value and $65,000 below the City of Calgary’s assessment value: Valayati Affidavit dated February 27, 2018, Exhibits I and J. [ 2 ] Subsequently, Ms. Valayati commenced an action against Mr.

Cheema, along with two other defendants, Muhammad Abdul Rehman and Khadija Shahzad, who had initially placed an offer on the Property for $450,000. The claim includes allegations of breach of fiduciary obligations, fraudulent misrepresentation, and conspiracy. Ms. Valayati later amended her claim to include Nelson Osamudiamen, the lawyer who represented her in the transaction. In conjunction with the lawsuit, Ms. Valayati also filed a Certificate of Lis Pendens on the Property dated March 14, 2017. [ 3 ] Three of the defendants, Mr. Cheema, Mr. Rehman, and Ms. Shahzad, brought an application for

summary dismissal pursuant to rule 7.3 of the Alberta Rules of Court , Alta Reg 124/2010. Mr. Osamudiamen is not a party to this application. [ 4 ] The application was first heard and decided by Master Mason on May 1, 2018. Master Mason dismissed the claims against Mr. Rehman and Ms. Shahzad, but determined there was a genuine issue for trial with respect to the claims against Mr. Cheema. Ms. Valayati appeals the dismissal of the claims against Mr. Rehman and Ms. Shahzad, while Mr. Cheema cross-appeals the decision allowing the claims against him to proceed to trial. II.

Summary of the Facts [ 5 ] Ms. Valayati first met Mr. Cheema in November 2016 when she sought his services to sell the Property. On November 22, 2016 [1] , Mr. Cheema and Ms. Valayati conducted a walk-through of the Property and identified several of deficiencies requiring repairs. However, Ms. Valayati told Mr. Cheema that she did not have the money to complete repairs. She also disclosed that she was in financial hardship, which affected her ability to make mortgage payments on the Property. [ 6 ] Following the walkthrough, Mr. Cheema and Ms. Valayati discussed the ideal price for the Property by text message.

Mr. Cheema estimated that, given the market in late 2016, Ms. Valayati could obtain $500,000 for the Property if it was sold unlisted: Cheema Affidavit dated March 24, 2017, Exhibit A, page 4. On December 8, 2016, Ms. Valayati instructed Mr. Cheema to try for an offer of $480,000: Cheema Affidavit dated March 24, 2017, Exhibit A, page 7. [ 7 ] On December 8, 2016, Mr. Cheema presented two offers to Ms. Valayati by text message: one for $445,000 with a closing date of January 9, 2017, and one for $450,000 with a closing date of January 5, 2017: Cheema Affidavit dated March 24, 2017, Exhibit A, page 8. Mr.

Cheema recommended that Ms. Valayati take the offer for $450,000. He also indicated that he was willing to reduce his usual commission for a $450,000 sale from $17,500 plus GST to $7,500 with GST. Ms. Valayati claims that she understood this as a goodwill gesture in light of the sensitive information she disclosed about her financial situation. [ 8 ] Unbeknownst to Ms. Valayati, the offer for $450,000 was made by Mr. Rehman and Ms. Shahzad, who had an Exclusive Buyer Representation Agreement (the “ Agreement ”) with Mr. Cheema: Cheema Affidavit dated October 20, 2017, Exhibit E.

The Agreement, signed on November 15, 2016, provided that Mr. Cheema would act as the exclusive agent for Mr. Rehman and Ms. Shahzad. Clause 3.2(

c) of the Agreement stipulated that Mr. Cheema had to inform the seller of a property that he was an agent for Mr. Rehman and Ms. Shahzad. Based on the evidence of Ms. Valayati, Mr. Cheema never informed her about the existence of the Agreement, his agency relationship with Mr. Rehman and Ms. Shahzad, or any potential conflict of interest this could create. [ 9 ] On December 14, 2016, Mr. Cheema provided Ms. Valayati with the preliminary documents for the sale of the Property to Mr. Rehman and Ms. Shahzad. Ms.

Valayati executed a Residential Purchase Agreement that was subject to a financing condition: Cheema Affidavit dated October 20, 2017, Exhibit D. [ 10 ] At the same time, Ms. Valayati also signed a Seller Customer Acknowledgement and Fee Agreement (the “ Acknowledgement ”): Cheema Affidavit dated October 20, 2017, Exhibit C. The Acknowledgement stated that Mr. Cheema was not acting as an agent for Ms. Valayati and owed her no fiduciary obligations. The parties dispute the circumstances in which Ms. Valayati signed the Acknowledgement. Ms. Valayati maintains that Mr.

Cheema never explained the document to her: Valayati Affidavit dated August 30, 2017 at para 11. [ 11 ] Mr. Rehman and Ms. Shahzad applied for a mortgage with CIBC, but did not secure financing to purchase the Property. Thus, they were unable to waive the financing condition in the Residential Purchase Agreement. Here the parties differ on the facts once more. Mr. Cheema claims that he advised Ms. Valayati immediately that Mr. Rehman and Ms. Shahzad did not obtain financing: Cheema Affidavit dated October 20, 2017 at para 17. Meanwhile, Ms. Valayati claims that Mr. Cheema never informed her that Mr. Rehman and

Ms. Shahzad were not approved for a mortgage: Valayati Affidavit dated August 30, 2017 at paras 12-13. Ms. Valayati maintains that she took all further steps in the sale of the Property under the impression that a third party would purchase it. [ 12 ] On January 8, 2017, Ms. Valayati signed an Amendment to the Residential Purchase Agreement (the “ Amendment ”) that named Mr. Cheema as the buyer: Cheema Affidavit dated October 20, 2017, Exhibit G. Mr. Cheema claims that on this date he told Ms.

Valayati he wanted to purchase the Property for himself and that she agreed to his offer of $450,000: Cheema Affidavit dated October 20, 2017 at para 20. Ms. Valayati indicates that Mr. Cheema did not explain the Amendment to her, but rather told her it was “a document that needed to be signed in order to make sure that everything was done in a timely manner”: Valayati Affidavit dated August 30, 2017 at para 14. [ 13 ] On January 12, 2017, Mr. Cheema waived the financing condition in the Amendment: Cheema Affidavit dated October 20, 2017, Exhibit I. He then referred Ms. Valayati to a lawyer, Mr.

Osamudiamen, to complete the purchase. [ 14 ] On January 17, 2017, Ms. Valayati met with Mr. Osamudiamen. Mr. Osamudiamen states that he informed Ms. Valayati at that meeting that Mr. Cheema, not a third party, was the buyer: Osamudiamen Affidavit at para 8. He also indicates that he reviewed the transaction documents with Ms. Valayati. At the same meeting, Ms. Valayati also signed another document (the “ Release of Liability ”) that Mr. Osamudiamen had prepared at the request of Mr.

Cheema’s lawyer, which read: “I, Fatima Valayati, acknowledges [ sic ] that the named purchaser, Kabir Cheema, (“Purchaser”), in the Residential Purchase Contract dated December 14 th , 2016, and amended January 8, 2017 (“Agreement”), is a licenced real estate agent. I further understand after an independent evaluation and due diligence that the Purchase Price (as defined in the Agreement) represents the fair market value of the subject property.

As a result of the foregoing and for a valuable consideration, the receipt and sufficiency of which is hereby acknowledged, I release and forever discharge the Purchaser, his agents, and solicitor (“Indemnitees”) from any and all liabilities and claims arising out of the foregoing in connection with the matters contemplated herein.” [ 15 ] While Ms. Valayati signed the transaction documents and the Acknowledgement, her evidence indicates Mr. Osamudiamen advised her that if she did not move forward with the sale, Mr.

Cheema could sue her: Valayati Affidavit dated February 27, 2018 at para 41. [ 16 ] Following the January 17, 2017 meeting, Ms. Valayati texted Mr. Osamudiamen to put the sale on hold because she had concerns about Mr. Cheema’s role as the buyer: Osamudiamen Affidavit, Exhibit B. However, she ultimately confirmed that Mr. Osamudiamen should proceed with the transaction and that she intended to sue Mr. Cheema after the sale was complete: Osamudiamen Affidavit, Exhibit B. [ 17 ] On January 20, 2017, Mr. Cheema obtained possession of the Property.

On February 20, 2017, he listed the Property on MLS for a price of $589,900. III. Positions of the Parties [ 18 ] Ms. Valayati alleges that Mr. Cheema deceived her in two ways. First, on December 14, 2017, he presented an offer far below market value from the two other defendants, Mr. Rehman and Ms. Shahzad. This offer amounted to a conspiracy to purchase Ms. Valayati’s property for a cheap price, immediately flip it, and then split the profits with Mr. Rehman and Ms. Shahzad. Second, Mr. Cheema breached his ongoing fiduciary duty to Ms.

Valayati by misleading her about the content of the paperwork she signed and concealing the fact that he intended to purchase the property for himself after Mr. Rehman and Ms. Shahzad were not approved for financing. As such, Ms. Valayati argues that Mr. Cheema cannot rely on the Acknowledgement signed December 14, 2016, or the Release of Liability signed on January 17, 2017. Ms. Valayati also maintains that there are genuine issues for trial because the record discloses disputed material facts where the credibility of the parties would be best assessed at a full trial with viva voce evidence. [ 19 ] Mr.

Cheema argues that Ms. Valayati is an experienced businesswoman who understood and willingly signed documents that have the collective effect of barring her claims. As a result, there is no genuine issue for trial because the merits of the claim may be summarily decided based on the contractual record before this Court. [ 20 ] Represented by the same counsel as Mr. Cheema, Mr. Rehman and Ms. Shahzad also argue that there is no evidence to support Ms. Valayati’s claim against them, and that her allegations rely on false speculation and irrelevant facts that are insufficient to defeat the application for

summary dismissal. IV. Standard of Review on Appeals from a Master [ 21 ] Rule 6.14 governs appeals from the decision of a Master. In Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at paragraph 30 , Côté JA writing for the Court determined that the standard of review on the appeal of a master’s decision under rule 6.14 is correctness and the hearing before this Court is conducted de novo . V. Test for

Summary Dismissal [ 22 ] Rule 7.3(1)(

b) provides that a party may apply for

summary dismissal on the grounds that “there is no merit to a claim or part of it”.

[23] The Court of Appeal in Stefanyk v Sobeys Capital Incorporated, 2018 ABCA 125, at paragraph 12 confirmed that

summarydismissal is appropriate where there is no genuine issue requiring a trial, and that there will be no genuine issue requiring a trial whenthe court is able to reach a fair and just determination on the merits on the motion record.

This will be the case if the process: (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, more expeditious and less expensive means to achieve a just result: Stefanyk at para 12, citing Hryniak vMauldin, 2014 SCC 7 at para 49 and Windsor v Canadian Pacific Railway, 2014 ABCA 108 at para 13. [24] The Court of Appeal in Stefanyk at paragraph 15 also affirmed that a trial may be the preferred and proportional procedurewhere there is a reasonable expectation that a trial will create a better evidentiary record to resolve issues that cannot be resolvedsummarily, such as disputed issues of material fact or issues of credibility: see also Angus Partnership Inc v Salvation Army (GoverningCouncil), 2018 ABCA 206 at para 44. [25] Where a party seeks

summary dismissal, that party bears the burden of proving there is no genuine issue requiring trial:Windsor at paras 13-14. In responding, the plaintiff cannot resist

summary dismissal merely by raising a doubt, although the plaintiff isnot required at that stage to prove its case on the balance of probabilities: Stefanyk at para 16; McDonald v Brookfield AssetManagement Inc, 2016 ABCA 375 at para 13. However, a plaintiff can resist

summary dismissal by showing that: (1) the applicant defendant has not met its burden on the

summary dismissal application; (2) the record or the issues mean that

summary dismissal is not a fair and just procedure; or (3) the material facts cannot be resolved on the existing record, or fairly and reasonably call for a trial: Stefanyk at para 16; AbbeyLane Homes v Cheema, 2015 ABCA 173. [26] The Court of Appeal has articulated the moving party’s burden differently in recent years: see Access Mortgage Corp (2004)Ltd v Arres Capital Inc, 2014 ABCA 280 , Stefanyk at paras 13-15, and Whissell Contracting Ltd v Calgary (City), 2018 ABCA 204leave to appeal to SCC requested (21 August 2018). [27] In Access Mortgage at paragraph 45, the Court of Appeal found that a party’s position will be without merit if the facts andlaw make the moving party’s position “unassailable”.

The moving party’s position will be unassailable if it is so compelling that “thelikelihood of success is very high”: Access Mortgage at para 45.

This position was articulated again in the more recent decision inWhissell. [28] In contrast, in Stefanyk at paragraph 14, the Court of Appeal found that the moving party must prove its case on a balance ofprobabilities, commenting that “"[u]nassailable" and "very high likelihood" are not recognized standards of proof”. [29] The Court of Appeal recently convened a five-person panel for the purpose of definitively resolving the issue of the standardof proof to be met by the moving party in a

summary judgment motion: Weir-Jones Technical Services Incorporated v PurolatorCourier Ltd, 2017 ABQB 491, appeal to CA pending, 1703-0218AC (8 September 2018). To date, the Court of Appeal has not yetreleased its decision in this matter. VI. Issues [30] To determine the merits of this application, this Court must decide whether there is no genuine issue for trial with respect toMs. Valayati’s following claims: (1) that Mr. Cheema owed her a fiduciary obligation that was not abrogated by the Acknowledgement; (2) that the Release of Liability is vitiated by Mr.

Cheema’s fraudulent misrepresentation about the identity of the purchaser; and (3) that Mr. Rehman and Ms. Shahzad conspired with Mr. Cheema to deprive her of a higher selling price for the Property. VII. Decision [31] For the reasons that follow, Master Mason was correct in her conclusions. The claims against Mr. Cheema present a genuineissue for trial and are not the proper subject matter of a

summary proceeding. However, the Court may reach a fair and justdetermination of the claim against Mr. Rehman and Ms. Shahzad on the record and grant

summary dismissal of Ms. Valayati’s actionagainst them. VIII. Analysis Issue 1: Existence of a Fiduciary Relationship between Mr. Cheema and Ms. Valayati [32] The Supreme Court of Canada articulated the test for whether a fiduciary relationship exists between two parties inHodgkinson v Simms, (SCC), [1994] 3 SCR 377 at 409:

In these cases, the question to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that theother party would act in the former's best interests with respect to the subject matter at issue.

Discretion, influence, vulnerability and trustwere mentioned as non-exhaustive examples of evidential factors to be considered in making this determination. [emphasis added] [33] Generally, the relationship between a real estate agent and a client is a fiduciary and confidential one: Polaris Realty (1995)Ltd v Minchau, 2010 ABQB 116 at para 31 citing D'Atri v Chilcott, (ON SC), [1975] 7 OR (2d) 249 (HC).Nevertheless, an agency relationship between a realtor and a client may end if the fiduciary understands that the agency relationship isover: see Hilman v MacKenzie, 2011 ABPC 393 at para 133.

For example, the Seller Customer Acknowledgement and Fee Agreementsigned by Ms. Valayati in this case is a standard form provided by the Real Estate Council of Alberta for when a realtor will not beacting as an agent for a client. [34] Despite this being a common practice, the record in this case raises issues with credibility and disputed material facts aboutthe circumstances in which Ms. Valayati signed the Acknowledgement. In both of her affidavits, Ms. Valayati maintains that Mr.Cheema never discussed the Acknowledgement with her, or otherwise discussed the nature of their business relationship.

Additionally,she also maintains that she never knew Mr. Cheema was acting exclusively for Mr. Rehman and Ms. Shahzad. [35] The evidence indicates that Ms. Valayati believed Mr. Cheema acted as her agent and in her best interests throughout, untilshe discovered that he was the buyer. For example, Ms. Valayati disclosed confidential information about her finances to Mr. Cheema,and she relied on his characterization of the documents she signed without reviewing them. Ms. Valayati’s emails to Mr. Osamudiamen,her lawyer for the transaction, also indicate that she expected Mr.

Cheema to have been acting in her best interest throughout thetransaction. [36] In contrast, Master Mason correctly notes that Mr. Cheema’s evidence about the Acknowledgement is sparse. While Mr.Cheema points to the existence of the Acknowledgement, he provides no evidence to contextualize its signing. This gap in the evidenceimpairs the Court’s ability to make a fair and just determination on the merits of Ms. Valayati’s claim. Thus, Mr. Cheema has not met hisburden under rule 7.3 to obtain

summary dismissal on this issue. Whether or not Mr. Cheema had a fiduciary obligation to Ms. Valayatiremains a live issue for trial. Issue 2: Effect of Fraudulent Misrepresentation on the Release of Liability [37] Courts will give effect to exclusion clauses, unless the party whose claim may be barred by the clause can show someparamount consideration of public policy sufficient to override public interest in freedom of contract: Tercon Contractors Ltd v BritishColumbia (Transportation and Highways), 2010 SCC 4 at para 82.

One potential path to engaging a court’s intervention through publicpolicy is by showing that the party relying on the clause engaged in fraudulent conduct: Precision Drilling Canada Limited Partnershipv Yangarra Resources Ltd, 2017 ABCA 378 at paras 40-45. [38] The Supreme Court of Canada summarized the tort of civil fraud, or fraudulent misrepresentation, in Bruno Appliance andFurniture Inc v Hryniak, 2014 SCC 8 at paragraph 21, which requires the plaintiff to prove: (1) a false representation made by the defendant; (2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge orrecklessness); (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss. [39] Again, the record with respect to this issue reveals significant issues of credibility and disputed material facts. [40] First, there is substantial dispute on the record about whether Mr.

Cheema informed Ms. Valayati that he intended to purchasethe Property for himself. Even if Mr. Cheema was not in a fiduciary relationship with Ms. Valayati, clause 3.1(

a) of theAcknowledgement obliges him to “act honestly” in his dealings with Ms. Valayati. While Mr. Cheema insists that he disclosed hisintention to buy the Property on January 8, the record suggests otherwise. Mr. Osamudiamen’s evidence corroborates Ms. Valayati’sclaim that she believed the buyer to be a third party until January 17. His affidavit states that on January 17, 2017, Ms. Valayati told himshe believed Mr. Cheema was purchasing the Property on behalf of a third party. This conflict in the evidence raises serious issues ofcredibility with respect to Mr. Cheema’s representations to Ms.

Valayati. [41] Second, there is conflicting evidence about the circumstances and understanding of Ms. Valayati when she signed the Releaseof Liability on January 17. Ms. Valayati deposes that, based on the advice of Mr. Osamudiamen, she believed she could no longerabandon the sale of the Property without risking a lawsuit. Mr. Osamudiamen’s evidence indicates that he does not remember having aconversation on this subject, but that he has provided this advice to clients in other cases. However, Mr.

Osamudiamen is not a party tothis application and it is not clear that his conduct should be determinative of whether Mr. Cheema can rely on the exclusion clause.

Asthe Court of Appeal identified in Precision Drilling at paragraph 46 that “the discussion of public policy in Tercon tends to focus on theconduct of the party who seeks to rely on the exclusion clause” [emphasis added]: citing Niedermeyer v Charlton, 2014 BCCA 165. [42] In Precision Drilling at paragraph 46, the Court of Appeal also noted that the determination as to “whether public policyshould intervene to render the exclusion clauses unenforceable should take place after the factual record is established” [emphasis inoriginal].

Given the significant discrepancies between the parties’ evidence on the material facts in issue and the interwoven nature of theclaim against Mr. Cheema and Mr. Osamudiamen, this Court cannot make a fair and just determination on the merits in this case. Assuch, on this issue as well, Mr. Cheema has not met the burden under rule 7.3 for

summary dismissal on this issue. Thus, whether Mr.Cheema may rely on the Release of Liability signed by Ms. Valayati remains a live issue for trial.

Issue 3: Mr. Cheema’s Alleged Conspiracy with Mr. Rehman and Ms. Shahzad [43] The leading Canadian case on the tort of conspiracy is Canada Cement LaFarge Ltd v British Columbia LightweightAggregate Ltd, (SCC), [1983] 1 S.C.R. 452. There are two forms of the tort: first, where the predominant purpose of thedefendants’ lawful or unlawful conduct is to cause injury to the plaintiff; and second, where unlawful conduct is directed at the plaintiffwithout a predominant purpose.

In both circumstances, there must be actual damage suffered by the plaintiff and that damage must be caused by the defendants’ conduct: CED 4th (online), Conspiracy, “Nature and Elements: Definition and Nature of Conspiracy” (I.1) at§2. [44] Master Mason correctly concluded that Mr. Rehman and Ms. Shahzad met the burden for

summary dismissal. There is noevidence before the Court that Mr. Rehman and Ms. Shahzad were aware the offer was under value, or had any plans to sell the Propertyimmediately after the purchase. Ms. Valayati herself only asked Mr. Cheema to try for an offer of $480,000 on the Property, and theevidence of Mr. Rehman and Ms. Shahzad is that they intended to use the Property as a source of rental income. [45] Ms. Valayati anchors her argument that

summary dismissal is not appropriate on the fact that Mr. Rehman and Ms. Shahzadprovided conflicting evidence about their financing application with CIBC. However, on

summary dismissal applications, controversyover nonmaterial facts is irrelevant: Access Mortgage at para 45. In her decision, Master Mason identifies some indicia of mortgagefraud on the part of Mr. Rehman and Ms. Shahzad. These indicia do not assist Ms. Valayati in showing that there was a conspiracydirected at her. Rather, this conduct was aimed at CIBC and any remedy for this conduct would only be actionable on the part of thebank, not Ms. Valayati, making these disputed facts irrelevant. [46] Additionally, for the purpose of

summary dismissal, the Court must consider the evidence before it, not what the parties mayadduce later: Beier v Proper Cat Construction, 2013 ABQB 351 at para 70. As Master Mason stated, it is insufficient for Ms. Valayati tosuggest that further evidence may be available in the future to implicate Mr. Rehman and Ms. Shahzad. As such, they have met theburden under rule 7.3 and Ms. Valayati’s claim that they conspired with Mr. Cheema is dismissed. VIX. Result [47] The appeal and cross-appeal are dismissed. If the parties cannot agree on costs, they may make an appoint to speak to thesame.

Heard on the 7th day of September, 2018. Dated at the City of Calgary, Alberta this 12th day of December, 2018. J.T. McCarthy J.C.Q.B.A. Appearances: Jae H. Shim and Maria Habib for the Plaintiff/Appellant Charles Osuji and Richard van Dorp for the Defendants/Respondents