CITATION: 316697 Ontario Inc. v. Sharma, 2012 ONSC 4193

COURT FILE NO.: DC-11-0087-00 ML

DATE: 2012 07 13

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

316697 ONTARIO INC. operating as HINDU SABHA

M. Klaiman, for the Plaintiff

Plaintiff

• and -

JATINDER SHARMA, ANIL BHALLA,

SATISH SHARMA and RAJESHWAR SHARMA

B. Nagra, for the Defendants

Defendants

• and -

MAHENDRA GUPTA

HEARD: June 27, 2012

ENDORSEMENT

K. van Rensburg J.

1This is a motion by the defendants for leave to appeal the decision of Lemon J. dated September 6, 2011, and his costs decision of November 7, 2011.

2Justice Lemon dismissed the defendants’ motion seeking the appointment of a monitor with respect to the plaintiff’s financial dealings and he awarded costs of $25,000 against the defendants.

3In order to grant leave to appeal, the court must be satisfied that one of the two grounds in Rule 62.02(4) has been made out. The court shall not grant leave unless (a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted, or (b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

4With respect to part (a), the defendants rely on two cases that they say are conflicting decisions of this court. The first is OSPCA v. Toronto Humane Society, [2010] ONSC 608 (S.C.J.). In that case, Brown J. appointed an interim monitor as a remedy under the Charities Accounting Act, R.S.O. 1990, c. C.10, in circumstances where there were significant concerns about the defendant charity’s financial affairs. The motion was supported by the Public Guardian and Trustee (the “PGT”). Brown J. concluded that the evidence raised serious questions as to whether the defendant was managing its financial resources in a manner appropriate to pursuing its charitable purposes. The interim relief granted with respect to the defendants’ financial affairs had not been specifically requested; nevertheless the court appointed as monitor a person who had been proposed in the originating application as a receiver-manager, while scheduling an early date for the hearing of the main application.

5The second case relied on as a conflicting decision is Pathak v. Hindu Sabha, [2004] O.J. No. 1981 (S.C.J.). In that case, Justice Fragomeni granted standing to the PGT to intervene respecting membership and governance issues of Hindu Sabha (which is the plaintiff in the present case). The PGT wanted to participate to protect the interests of the charity, out of concern that its assets were being wasted on the ongoing litigation and battle for control.

6While both these cases involve alleged improprieties in a charitable organization and relief under the Charities Accounting Act (although the Pathak case dealt only with a preliminary issue), neither is a conflicting authority. I agree with plaintiff’s counsel, that these are cases where there was a conflicting result and not a conflicting decision.

7In order for there to be a conflicting decision within the meaning of Rule 62.02(4)(a), it is necessary to demonstrate a difference in principle. As the court noted in Comtrade Petroleum Inc. v. 490300 Ontario Ltd., 1992 7405 (ON SC), [1992] O.J. No. 652 (Div. Ct.):

An exercise of discretion which has led to a different result because of different circumstances does not meet the requirements for a ‘conflicting decision’. It is necessary to demonstrate a difference in the principles chosen as a guide to the exercise of such a discretion.

8Counsel submitted that the OSPCA case emphasized that directors of charitable organizations have enhanced duties toward the charity and the court has enhanced power to monitor and regulate charities where funds are mismanaged. With respect to the Pathak case, counsel submitted that the case stands for the proposition that the public has an interest in seeing that charitable property is applied for the intended charitable purposes of the charity.

9There is nothing in the decision of Lemon J. that is inconsistent with, or ignores these principles. He considered all of the voluminous materials that alleged irregularities and responded to such allegations. He commented on the relative strengths and weaknesses of the evidence that was available, including the transcripts of the cross-examinations which he had reviewed. He concluded:

Whatever my authority may be to make such an Order under the Charities Accounting Act or my inherent jurisdiction, I am not persuaded that the evidentiary basis has been set out to grant this Order.

10Justice Lemon also noted that, from the time that the motion was first brought in July 2010, it was adjourned and the parties agreed that a weekly accounting would be provided by the plaintiff of all income and expenses. He agreed with the submission of the plaintiff’s counsel that, had there been concerns about any reported income or expense, there would have been a request for further information. There was no such complaint or request, and accordingly, Lemon J. concluded that he could assume that the financial management of the temple had been satisfactory to the defendants for just over a year. He also noted that, although the defendants cross-examined the plaintiff’s representatives on the supporting affidavits, no significant inconsistency or inaccuracy was pointed out in argument and he found none in his reading of the transcripts.

11There is no question that Lemon J.’s decision was based on his assessment of the evidence. He did not conclude that he lacked jurisdiction to make the order requested; rather, assuming that he had such jurisdiction, he refused to make the order on the evidence that was before him.

12With respect to the second branch of the test for leave to appeal, I am not satisfied that the defendants have established that there is good reason to doubt the correctness of Lemon J.’s decision and that the proposed appeal involves matters of such importance that leave to appeal should be granted.

13The errors alleged by the defendants are the following:

1. Lemon J. assumed that the defendants were seeking a monitor of the flow of income and expenses, while defendants’ counsel was seeking a monitor for the day-to-day operations of the temple based on the allegations of mismanagement of temple funds;

2. The judge erred in dismissing the motion on the basis that the defendants did not name a specific monitor; and

3. In characterizing the complaints as unsworn letters and hearsay, the court ignored the fact that there was clear affidavit evidence to support the allegations of improprieties.

14With respect to the first alleged error, while the motion originally requested relief that was more extensive, at the time the motion was heard, the defendants were seeking a monitor to oversee the plaintiff’s financial affairs, in particular its flow of income and expenses. As Lemon J. observed, there were no submissions that the plaintiff should be replaced as management or any suggestion that the monitor should take over management of the temple. There was no misapprehension by the court as to the scope and nature of the relief sought by the defendants. In fact, if the defendants were seeking a monitor with the more expansive powers they now contend were required, which would have meant a greater intrusion into the affairs of the plaintiff, it would have been even more difficult to satisfy the court that such relief was warranted.

15With respect to the question of not identifying a specific monitor, the usual and preferable practice is for a party seeking the appointment of a receiver-manager or a monitor to provide the name of the person together with his or her consent to act as well as some idea of the fees and the scope of the proposed appointment. Defendants’ counsel submitted that, if a monitor had been warranted, Lemon J. could have adjourned the motion to permit the parties to identify someone who would be appropriate for the task. This was not however the reason he dismissed the motion. While Lemon J. commented on the defendants’ failure to name a proposed monitor, he did not conclude that this was fatal to an otherwise meritorious application.

16With respect to the evidence, Justice Lemon was clearly alive to the fact that there was a variety of evidence before him, which included unsworn letters and hearsay. He did not disregard the evidence that had been filed; rather, after considering all such evidence, including the transcripts of cross-examinations, he was not persuaded that a monitor was warranted.

17The plaintiff’s counsel reviewed the various allegations and complaints that were made and the evidence that was before the court that responded to each of these concerns. I agree with Mr. Klaiman’s submission that the relief sought by the defendants could not be based on conjecture or speculation, but required clear evidence of improprieties. The defendants’ counsel did not point to any evidence that the court may have overlooked or that was so compelling as to have justified a different result. There is, accordingly, no good reason to doubt the correctness of Lemon J.’s decision.

18Even if there were reason to doubt the correctness of the decision, the matters involved must be of such importance that leave should be granted. As the court stated in Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.):

Those words refer to matters of general importance, not matters of particular importance relevant only to the litigants. General importance relates to matters of public importance and matters relevant to the development of the law and the administration of justice.

The issues in this case do not raise questions of general importance. While the proper financial management of charities is without doubt in the public interest, there is no question of law or principle concerning the administration of charities that would invite appellate review in this case.

19Turning to the request for leave to appeal the costs award, again the defendants do not meet the test under Rule 62.02(4). Generally costs awards, which are discretionary, are entitled to deference by an appellate court. Leave to appeal a costs order is granted only sparingly, and there must be some indication of a complete failure to exercise discretion or an exercise of discretion based on an erroneous principle: McNaughton Automotive Ltd. v. Co-operators General Insurance Co, 2008 ONCA 597 (C.A.), at paras. 23 to 27, and Children’s Aid Society of Niagara Region v. D.W., 2005 11187 (ON SCDC), [2005] O.J. No. 1373 (Div. Ct.), at para. 12.

20In this case, the plaintiff brought motions for four orders. Three of the motions were withdrawn at or during the hearing. The plaintiff was permitted to amend its pleading to assert certain claims against a new defendant, while other claims were not permitted to be added because the limitation period had run. The defendants’ motion for the appointment of a monitor was dismissed.

21The defendants assert that Lemon J. erred in awarding no costs in their favour, on the basis that rule 37.09 mandates costs against a party who abandons a motion, unless the court orders otherwise. The defendants also assert that the costs award of $25,000 in favour of the plaintiff for its successful defence of the motion to appoint a monitor was excessive.

22There is no indication of any error in principle in Lemon J.’s costs order. With respect to the plaintiff’s motions, Lemon J. noted that while the plaintiff was granted some relief, it was only partially successful. He took into consideration the fact that certain motions had been withdrawn, so that the defendants should not have to incur those costs, but also noted that the motions were rather straightforward steps in an ongoing piece of litigation that would not have added a great deal to the work already required. As the case management judge in this matter, Lemon J. was well-positioned to make this observation. Lemon J. did not ignore rule 37.09; he “ordered otherwise’ and gave clear reasons for doing so.

23With respect to the order of costs against the defendants, Lemon J. considered and rejected the defendants’ contention that they should pay costs of only $15,000. He considered the relevant factors, including the complexity and importance of the proceeding, the fact that the plaintiff was entirely successful, and the history of the costs awards in the proceedings which meant that the defendants were aware of the likely expense if they were unsuccessful. He considered the costs sought by the plaintiff to be on the high side, and awarded $25,000 on a partial indemnity basis.

24There is no indication that Lemon J. failed to exercise his discretion or that he applied any erroneous principle in his costs award in this matter.

25For all of these reasons, the defendants’ motion for leave to appeal Lemon J.’s order of September 6, 2011 and his costs order of November 7, 2011, is dismissed, with costs to the plaintiff payable forthwith.

If the parties are unable to agree on the amount of costs, I will receive brief written submissions as follows: the plaintiff’s submissions within 15 days, the defendants’ submissions within ten days of receipt of the plaintiff’s submissions and reply submissions, if any, within five days of receipt of the responding submissions.

K. van Rensburg J.

Released: July 13, 2012

CITATION: 316697 Ontario Inc. v. Sharma, 2012 ONSC 4193

COURT FILE NO.: DC-11-0087-00 ML

DATE: 2012 07 13

Ontario

SUPERIOR COURT OF JUSTICE

Divisional Court

B E T W E E N:

316697 ONTARIO INC. operating as HINDU SABHA

Plaintiff

and