TORONTO – A businessman who bought a downtown Toronto property in a bankruptcy sale but secretly flipped it for almost $3 million more before the deal went through is liable for fraudulent misrepresentation, Ontario’s top court ruled Thursday.
In upholding a lower court decision, the Court of Appeal found Ahmed Baig had deliberately misled the company handling the bankruptcy by failing to alert them to the resale.
“In certain circumstances, silence and half-truths can amount to a misrepresentation,” the Appeal Court ruled.
Baig bought the property at 984 Bay Street from the bankruptcy receiver with court approval for $6.2 million in August 2006. The receiver, however, had no idea Baig had already agreed to resell the property to another company, Yellowstone Property Consultants, for $9 million.
On the advice of Baig’s lawyer, Peter Kiborn, the deal was structured so that the property would go directly to Yellowstone to avoid transfer taxes, court documents show.
“Both the appellant and his counsel wanted to prevent the receiver from discovering the sale to Yellowstone, because the $2.8 million differential in the price would jeopardize court approval,” the Appeal Court said.
As a result, the receiver assumed Yellowstone was Baig’s company and neither he nor his lawyer corrected that misunderstanding, according to court documents.
“Both the appellant and his counsel actively hid the agreement,” the Appeal Court found.
Meridian Credit Union, which was the top creditor at the time of the sale to Yellowstone, discovered the resale in 2009 and sued Baig for the difference. The receiver, obliged to maximize the return on assets of any sales, argued it would never have recommended court approval had it known about the flip.
In 2014, Superior Court Justice Frederick Myers found Baig liable for fraudulent misrepresentation.
Myers concluded Baig was responsible for the misrepresentations made by Kiborn, who knew documents given to the receiver were false. While Baig had no obligation to disclose the resale agreement, Myers decided, his failure to correct the misunderstanding that Yellowstone was his company amounted to fraudulent misrepresentation.
The Appeal Court also dismissed a claim by Kiborn and his firm, Miller Thomson, that they were denied natural justice when Myers made findings about them that could damage their reputations in their absence.
“Non-parties should not be able to lurk in the shadows and then spring up to challenge a decision whenever the outcome — or findings of fact — may affect them in some manner they do not like,” the Appeal Court said.
It found Myers’ findings reasonable and “amply supported by the evidence.”
Baig launched a suit against Kiborn and Miller Thomson in 2012 in hopes of being shielded from having to pay Meridian any money.