Court File and Parties

COURT FILE NO.: CV-23-705174-0000 DATE: 20231127 ONTARIO SUPERIOR COURT OF JUSTICE

RE: PARAMJIT CHEEMA, also known as Paramjeet Cheema, HARCHAND DHALIWAL and SWARANJIT JHAJJ Applicants

-and-

SUKHDEV DHALIWAL and WORLDWIDE CARRIERS LTD. Respondents

BEFORE: Shin Doi J.

COUNSEL: Sanj Sood, Max Munoz, and Josh Suttner, for the Applicants Shaun Laubman, Philip Underwood, Annecy Pang, and Rahool P. Agarwal, for the Respondents

HEARD: September 25, 2023

Endorsement

I. Introduction

[1] The Applicants bring a motion for an interim and/or interlocutory order:

a. restraining the respondent Sukhdev Dhaliwal (“Sukhdev”) from exercising his powers as a director of the respondent World Wide Carriers Ltd. (the “Corporation”) including taking any measures with respect to the ownership, management, business, or operation of the Corporation, that are prejudicial to the rights and interests of the Applicants;

b. restraining and/or enjoining the Corporation, or anyone acting on its behalf, from acting and/or conducting its business and affairs in a manner that is prejudicial to the rights and interests of the Applicants;

c. that all corporate governance actions or measures taken on August 18, 2023 are of no force or effect;

d. prohibiting Sukhdev from exercising his powers as a director in any manner outside of the ordinary course of business, or which is not in the Corporation’s best interests;

e. prohibiting the Corporation from conducting its business and affairs in any manner outside the ordinary course of business, or which is not in the Corporation’s best interest;

until the Application is determined.

[2] The parties are engaged in a highly successful family business involving commercial trucking and logistics. The parties dispute the ownership and leadership of the Corporation that operates the profitable commercial trucking arm.

[3] As indicated in my decision released on October 3, 2023, I grant the motion in part. I grant an interim interlocutory order restraining the Respondents, Sukhdev and the Corporation from exercising their powers, or acting or conducting business, in a manner that is prejudicial to the rights and interests of the Applicants or not in the best interests of the Corporation, until the Application is determined. I grant that injunction because there is a serious question to be tried, the Applicants would suffer irreparable harm if the injunction is not granted, and the balance of convenience favours granting the injunction to the Applicants.

[4] I deny the Applicants an interlocutory order nullifying the corporate governance or measures taken in August 2023 because the strong prima facie case test is not met, the Applicants would not suffer irreparable harm, and the balance of convenience does not weigh in favour of granting the injunction. Accordingly, Sukhdev shall be the sole shareholder, director, and officer of the Corporation until the Application is determined, but Sukhdev and the Corporation must carry on business in the best interests of the Corporation and not act in a manner that is prejudicial to the Applicants.

II. Facts

[5] This is essentially a dispute about a family business, known as the World Wide Group of Companies, that has been highly successful. The family built a trucking and logistics business over the past 18 years. There are a number of companies (at least 16) that are owned and operated by some or all of the family members which add to the complexity. The Applicant Harchand and Sukhdev are brothers. The other two Applicants Swaranjit Jhajj and Paramjit Cheema are Sukhdev’s brothers-in-law.

[6] This Application concerns the Corporation, World Wide Carriers Ltd., which operates the profitable commercial trucking business. The trucking business was formerly operated by ASG Carriers Ltd. which was incorporated by Sukhdev in 2002. The Corporation was incorporated by Sukhdev and Harchand in 2005.

[7] Sukhdev is the Corporation’s President. The Applicant Paramjit is the Corporation’s Treasurer, the Applicant Swaranjit is the Corporation’s Secretary, and the Applicant Harchand is the Corporation’s General Manager.

[8] In June 2023, some of Sukhdev’s financial decisions, including the purchase of a luxury sports car, caused the Applicants to question the way the family business, including the Corporation, was being fiscally managed. Sukhdev also alleged the Applicants of financial impropriety. The Applicants and Sukhdev are all creditors of the Corporation.

[9] The Applicants state that in June 2023, they learned that the Corporation’s corporate records were inaccurate in that they did not reflect that the Applicants and Sukhdev were equal shareholders of the Corporation. The Applicants, therefore, demanded that the corporate records be rectified to reflect accurately the proper allocation of the shares. The Applicants submit that Sukhdev acknowledged that each of them owned 25% of the shares of the Corporation but he wanted to review the Corporation’s financial records before effecting the amendments. The Applicants further submit that shortly thereafter, Sukhdev began to claim falsely that he was the Corporation’s sole shareholder.

[10] On August 18, 2023, Sukhdev sent the Applicants a notice of a Special Meeting to restructure the Corporation removing Harchand, Paramjit, and Swaranjit from their offices and as directors of the Corporation, leaving Sukhdev as the Corporation’s sole director and officer. The Applicants were all directors and officers of the Corporation from 2015 until August 2023. On August 29, 2023, Sukhdev as the sole shareholder, removed the directors and officers. Sukhdev now remains the sole shareholder, director, and officer of the Corporation.

[11] On August 31, 2023, the Applicants submit they informed Sukhdev that they had convened an urgent hearing to address the case. Sukhdev informed 180 employees of the Corporation that he had removed the Applicants from the Corporation, he was the sole director of the Corporation, and warned them from acting as witnesses for the Applicants.

III. Legal Test for an Injunction

[12] As held in R v. Canadian Broadcasting Corp., 2018 SCC 5, [2018] 1 SCR 196, there are three elements of a test to determine whether to grant an injunction. If a mandatory injunction is sought, then the first element of the test is whether there is a strong prima facie case rather than a serious question to be tried.

In Manitoba (Attorney General) v. Metropolitan Stores Ltd. and then again in RJR — MacDonald, this Court has said that applications for an interlocutory injunction must satisfy each of the three elements of a test which finds its origins in the judgment of the House of Lords in American Cyanamid Co. v. Ethicon Ltd. At the first stage, the application judge is to undertake a preliminary investigation of the merits to decide whether the applicant demonstrates a “serious question to be tried”, in the sense that the application is neither frivolous nor vexatious. The applicant must then, at the second stage, convince the court that it will suffer irreparable harm if an injunction is refused. Finally, the third stage of the test requires an assessment of the balance of convenience, in order to identify the party which would suffer greater harm from the granting or refusal of the interlocutory injunction, pending a decision on the merits.

This general framework is, however, just that — general. (Indeed, in RJR — MacDonald, the Court identified two exceptions which may call for “an extensive review of the merits” at the first stage of the analysis.) In this case, the parties have at every level of court agreed that, where a mandatory interlocutory injunction is sought, the appropriate inquiry at the first stage of the RJR — MacDonald test is into whether the applicants have shown a strong prima facie case. [Italics in original, emphasis added]

[13] The Applicants in this case are seeking an injunction to restrain the Respondents from acting in a manner that is prejudicial to the Applicants and not in the best interests of the Corporation. Therefore, the test of a serious question to be tried applies in the first stage. Then at the second stage, the Applicants must convince the court that they will suffer irreparable harm if the injunction is refused. Finally, the third stage of the test requires an assessment of the balance of convenience to identify which party would suffer greater harm from the granting or refusal of the interlocutory injunction, pending a decision on the merits.

[14] The Applicants also seek an injunction to nullify all corporate governance actions or measures taken in August 2023. I agree with the Respondents that nullifying the corporate governance actions or measures taken in August 2023, returning the Corporation to the status quo, and returning the Applicants to their roles as directors and officers of the Corporation require positive action which indicates that the injunction is a mandatory injunction. The Respondents refer to Modopoulos v. Hershberg, 2021 ONSC 2025, in which Cavanagh J. dealt with a similar situation where a director was excluded. Cavanagh J. held at para. 36 that the moving party was “seeking injunctive relief which would require the defendants to take steps to restore rights…which, the defendants contend, he no longer has, that is rights as a director…”. Even the Applicants concede that the injunctive relief sought contains mandatory elements that Sukhdev would have to undertake to comply. Accordingly, I disagree with the Applicants that the interlocutory order would at its core preserve the status quo and so, the test remains a serious issue to be tried. If there was an interlocutory order that nullifies the corporate governance actions or measures taken in August 2023, Sukhdev and the Corporation would have to take steps to reverse and unravel the corporate governance and leadership of the business. Accordingly, for this mandatory interlocutory injunction, the Applicants must satisfy the legal test of a strong prima facie case.

IV. Are the Applicants Shareholders of the Corporation?

[15] Whether the Applicants are shareholders of the Corporation is a serious issue to be tried. In corporate law, the shareholders are the owners of a corporation. Shareholders elect the directors who are responsible for governance and oversight, and the directors appoint the officers who are responsible for the day-to-day management of the corporation. The question as to whether the Applicants are shareholders determines the ownership of the Corporation and their right to elect the directors who, in turn, will appoint the officers. If the Applicants are shareholders of the Corporation, then Sukhdev was not within his rights to take the corporate governance steps or measures that he undertook as if he was the sole shareholder of the Corporation.

[16] The parties agree that the Minute Book of the Corporation states that Sukhdev is the only registered shareholder of the Corporation. The Respondents rely on Glass v. 618717 Ontario Inc., 2012 ONSC 535 at para. 111, that “the OBCA creates a very strong presumption that information recorded in a minute book is proof of the facts stated therein.” The Applicants argue that they were referred to as “shareholders” by the accountant and others. The Applicants further argue that they believed that they were always shareholders, and the evidence supports their reasonable expectations. There is supporting evidence that the Applicants were referred to as “shareholders” or “partners” by the outside accountant, the de facto CFO, and others involved in the business. I conclude that there is a serious question to be tried as to whether the Applicants are shareholders of the Corporation. Accordingly, the first stage of the test for granting an injunction is met.

[17] While there is clearly a serious question to be tried, I am not satisfied that the Applicants have a strong prima facie case that the Applicants are indeed shareholders of the Corporation. Hence, I am not satisfied that the corporate governance or measures of August 2023 should be nullified through an interlocutory order.

[18] There is conflicting evidence as to the understanding of the parties. The Respondents submitted persuasive evidence that the Corporation’s in-house counsel met with both Sukhdev and the Applicant Harchand to explain the structuring of the Corporation and the reasons for the structuring. The Corporation’s in-house counsel testified that the Corporation’s records were kept up-to-date, and that he never received instructions to change them to reflect a transfer of shares from Sukhdev to the Applicants. There is also evidence that the Applicants relied on the expertise of Sukhdev and professional advisors about the ownership and structure of the Corporation and the business. The Applicants further produced bank and insurance documentation that describes them as shareholders. Given that there are more than 16 corporate entities in the family business, there may also be confusion amongst the parties as to the ownership and structure of the Corporation and the family business. Therefore, the Applicants have not met the strong prima facie case test for mandatory injunctive relief to nullify the corporate governance or measures taken.

V. Irreparable Harm

[19] The second stage of the analysis is whether the Applicants will suffer irreparable harm if Sukhdev and the Corporation are not restrained from exercising their powers, or acting or conducting business, in a manner that is prejudicial to the rights and interests of the Applicants or not in the best interests of the Corporation, until the Application is determined. As held in RJR-Macdonald, at para. 59, “‘Irreparable’ refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other.” In my view, the Applicants will suffer irreparable harm if Sukhdev and the Corporation are not restrained.

[20] The Applicants are concerned that Sukhdev will jeopardize the family business. The Applicants argue that Sukhdev’s actions unfairly disregarded the Applicants and that there is no amount of money that can compensate the Applicants for the loss of the company that they have spent 18+ years of their lives building. The Applicants argue that seizing shares and removing parties from their positions as directors constitute irreparable harm. The Applicants cite Ayotte v. Beauline, 2016 ONSC 4928 in which the court found applicants would suffer irreparable harm that cannot be adequately compensated by damages when shares were wrongly seized by secured creditors who voted to remove the applicants as directors. The Respondents respond that reinstatement as directors and officers of the Corporation does not give rise to irreparable harm. The Respondents reason that if the Applicants are successful on their application, they will control 75% of the shares of the Corporation and will be able to reinstate themselves as directors and officers.

[21] I agree with the Applicants that there is real risk of damage to the Corporation and its business if the Respondents are not restrained to act in the best interests of the Corporation and without prejudice to the Applicants. There would be no amount of money that could compensate the Applicants for loss of their ownership, control, and oversight of the family business. That said, Sukhdev’s role as president and officer of the Corporation has remained consistent since its incorporation in 2005. The Respondents have also agreed to give the Applicants access to the Corporation so the Applicants can continue to work and be engaged in the business.

[22] I conclude that the Applicants would suffer irreparable harm if the Respondents are not restrained from exercising their powers including taking any measures with respect to the ownership, management, business, or operation of the Corporation, that are prejudicial to the rights and interests of the Applicants. However, I do not find that the Applicants will suffer irreparable harm if Sukhdev remains the sole shareholder, officer, and director of the Corporation until the Application is determined provided that the actions of Sukhdev and the Corporation are restrained including that business continues in the ordinary course.

VI. Balance of Convenience

[23] The third stage of the test requires an assessment of the balance of convenience to identify the party which would suffer greater harm from the granting or refusal of the interlocutory injunction, pending a decision on the merits. The Applicants would suffer greater harm if the interlocutory injunction to restrain the Respondents is refused. However, I am not persuaded that the Applicants would suffer greater harm if an interlocutory order to nullify the corporate governance or measures taken is refused. I agree with the Respondents that granting such an order would effectively hand the Applicants majority control of the Corporation. Sukhdev’s rights as a shareholder would be restricted. The balance of convenience favours maintaining the steps Sukhdev took in August 2023 but imposing restraints on Sukhdev and the Corporation to act in the best interests of the Corporation and without prejudice to the Applicants.

[24] I disagree with the Respondents that the restraint is not specific and that it is highly unfair to impose such vague restrictions. Given that the parties have an 18-year track record of operating a successful family business that employs 180 people and the Corporation has professional advisors, the requirements imposed on the Respondents to act in the best interests of the Corporation and without prejudice to the Applicants as shareholders would not be vague. The interim interlocutory order requires the Respondents to act in the ordinary course of business. Further, as an officer and director, Sukhdev already has a fiduciary duty to act in the best interests of the Corporation.

VII. Disposition

[25] For those reasons, I grant the Applicants’ motion for injunctive relief in part. The parties may make written submissions on costs (not exceeding 5 pages in length, double-spaced) within 10 days.

JUSTICE SHIN DOI

Date: November 27, 2023