COURT FILE NO.: CV-11-9417-00CL
DATE: 20121128
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BETWEEN:
FARZANEH ABRAVANI ALSO KNOWN AS FARZANEH ABRAVANI-ILKHCHI, RAHELEH ABRAVANI ILKHCHI, AGHDAS NASSERI AND 7538715 CANADA LTD.
Applicants
– and –
MOHAMMAD PETGAR, MOHAMMAD MAHMOUDZADEH, MOHAMMAD JAVAD DERAKHISHAN, 2087392 ONTARIO LTD., 2087398 ONTARIO LTD., MOHAMMAD AMIN TAVAKOLI, NISSAN REYHANIAN, VAHID DERAKHSHAN AND 222 FINCH AVENUE WEST INC.
Respondents
Philip Healey and Atoosa Mahdavian, for the Applicants
Stephen Turk, for the Respondents
HEARD: October 9, 10 and 25, 2012
L. A. PATTILLO J.:
Introduction
[1] This is a trial of an issue in the Application to determine who are the shareholders of the Applicant 7538715 Canada Ltd. (“753”). The individual Applicants raise a further question as to whether the respondent Mohamed Petgar (“Petgar”) is an authorized director of 753.
[2] The issues raised by the parties involve questions of fact alone.
[3] For the reasons that follow, based on the affidavit evidence and cross-examinations thereon as well as the documentary evidence and the viva voce evidence presented during the trial, I have concluded that the shareholders of 753 are Abravani and Petgar, each as to 50%. I also conclude that notwithstanding Petgar was never formally appointed a director or officer of 753, it was always understood and agreed by he and Abravani that he was a director of 753 and authorized to act on its behalf.
The Parties
[4] 753 is a 25% shareholder in the Respondent 222 Finch Avenue West Inc. (“222”). It was incorporated by Petgar on April 10, 2010 for that purpose. 753 has no minute book, has never issued any share certificates and has never held a shareholders or directors meeting.
[5] 222 is constructing a condominium development at 222 Finch Avenue West comprised of 17 commercial units and 27 residential units which is expected to be completed by late 2012 or early 2013 (the “Project”).
[6] The Applicants Farzaneh Abravani (“Abravani”) and Raheleh Abravani Ilkhchi (“Raheleh”) are sisters. Aghidas Nasseri (“Nasseri”) is their mother. They assert that together, they own 100% of the shares of 753. They submit that they provided all of the money to 753 which it, in turn, invested in 222.
[7] Petgar is married to Abravani but they have been separated since May/June 2010. They have been engaged in divorce proceedings for some time. Petgar denies that the individual Applicants are the shareholders of 753. He asserts that he and Abravani each own 50% of the shares in 753. He submits that all of the money invested by 753 in 222 came from the immigration business that he and Abravani own equally.
[8] The Respondents 2087392 Ontario Ltd., 2087398 Ontario Ltd., Mohammad Amin Tavakoli and Nissan Reyhanian are the remaining shareholders of 222. The Respondents Mohammad Mahmoudzadeh (“Mahmoudzadeh”) and Mohammad Javad Derakhishan (“Derakhishan”) are the respective principals of the two Respondent companies. Mahmoudzadeh is also a director of 222. The Respondent Vahid Derakhishan (“Vahid”) is the son of Derakhishan and an officer and director of 222.
Background
[9] The following are my findings based on all of the evidence on the Application, including the trial.
[10] The individual Applicants and Respondents are originally from Iran. All are currently resident in Canada except Raheleh who has always resided in Iran.
[11] Abravani came to Canada in 1997. She worked as a paralegal and got involved in immigration consulting in Toronto. In 2000 she started her own business, Farzaneh Abravani Immigration and Paralegal Services Inc. (“Abravani Immigration”). It focused on Iranians wishing to come to Canada and was very successful.
[12] Petgar and Abravani met on line in the fall of 2005. Abravani had been married twice before and has one grown daughter from her first marriage. Petgar was in his late 40’s and had never been married. He was living in Ottawa and working as a consultant for Revenue Canada. They began seeing each other. Abravani became pregnant. They talked about marriage. Petgar was well established in Ottawa and wanted Abravani to move to Ottawa. Abravani was well established in Toronto and wanted Petgar to move there. In the end, after much discussion, she agreed to give him 50% of Abravani Immigration and he agreed to move to Toronto. They were married in November 2005.
[13] Petgar gave up his job in Ottawa, sold his house and moved to Toronto in May 2006. Abravani transferred 50% of Abravani Immigration to him as agreed. He got his license as an Immigration Consultant in June 2006 (his application was supported by Abravani) and began working at Abravani Immigration. On June 9, 2006, Abravani gave birth to their son, Shaya.
[14] In 2006, Abravani and Petgar invested in a small retirement home which they bought through a company they called Abravani & Petgar Seniors Home Inc. They each put up half of the purchase price and are each 50% shareholders of the company.
[15] In 2007, as the Law Society began regulating paralegals, Abravani wound down the paralegal part of Abravani Immigration’s business and concentrated on immigration. She moved the business into their home in order that she could look after their son. Petgar continued to be involved in the business as required. In addition, he looked after the retirement home and took care of their house. In late 2006, early 2007, he got his real estate license. He intended to use it to buy and sell houses and avoid the agent’s fee.
[16] From the outset, Abravani and Petgar’s relationship was not without its difficulties. As Petgar said, they are each very strong willed. As time progressed, their relationship deteriorated.
[17] In early 2009, Abravani incorporated a new company; Abravani Professional Immigration Services Inc. that she said involved her daughter, her sister in Iran and herself. She did not tell Petgar about it. She then began conducting all of her immigration business through the new company. It is also clear from the evidence that prior to them separating in May/June 2010, Petgar moved out of the matrimonial home from time to time, but he always returned.
The Investment in 222
[18] In February/March 2010, Abravani and Petgar were introduced to the Project and 222 by Mahmoudzadeh. Mahmoudzadeh and Derakhishan are the principals behind 222 and the Project.
[19] The first money invested in 222 by Abravani and Petgar was on April 5, 2010, when Petgar wrote a cheque on his personal account to 222 for $75,000.
[20] On April 29, 2010, Petgar and Abravani opened a bank account for 753 at the Royal Bank of Canada (“RBC”). They each had signing authority on the account. Beginning on April 29, 2010, various sums of money were deposited into 753’s account.
[21] On May 3, 2010, 753 wrote a cheque to 222 in the amount of $1,050,000. Subsequently, 753 advanced further monies to 222. In total, 753 has invested approximately $1.7 million in 222.
[22] On February 25, 2011, 222 received a commitment letter from the RBC to provide credit facilities to 222 in the amount of approximately $15 million to enable it to construct the Project. Part of the security requested by RBC was guarantees and postponements of claim from the shareholders and principals of the corporate shareholders of 222. In that regard, paragraph (g) on page 8 required a guarantee and postponement of claim in the amount of $3,500,000 signed jointly and severally by Petgar and Abravani. The terms and conditions in the commitment letter were acknowledged and agreed to by 222 on March 4, 2011. The terms and conditions were also acknowledged and accepted by the guarantors set out in the commitment letter, including Petgar and Abravani, each of whom signed the commitment letter on March 4, 2011.
[23] Pursuant to RBC’s financing of 222 and as provided in the commitment letter, Petgar and Abravani, along with the principals of the other corporate shareholders of 222 also each signed a number of documents dated April 7, 2011 which were directed to the RBC and/or its counsel. These documents include RBC postponement and assignment of claim forms, a Guarantee and Postponement of Claim, an authorization to complete, a construction lien and environmental indemnity and an undertaking re cost overruns.
[24] On or about May 3, 2010, the shareholders of 222 executed a shareholders agreement (the “Shareholders Agreement”). Abravani and Petgar executed the Shareholders Agreement as “authorized officers” of 753. Article 3.06 of the Shareholders Agreement states that Abravani and Petgar are the shareholders of 753.
[25] In its legal opinion to the RBC and its solicitors in respect of the financing dated June 6, 2011, 222’s solicitors identified each of the shareholders of 222 as individuals or where the shareholder was a company, the shareholders of such company. At paragraph 10 on page 3, the letter states that Petgar and Abravani are shareholders of 753, which in turn is a shareholder of 222.
Discussion
[26] In my view, all of the above documentary evidence concerning the investment in and the financing of 222, particularly the Shareholders Agreement confirms that the shareholders of 753 are Abravani and Petgar. None of the documentation confirms the individual Applicants’ position that the three individual Applicants are the shareholders of 753 and Petgar is not.
[27] Abravani testified that she did not read the Shareholders Agreement and trusted Petgar totally as to its contents. She said she trusted him to deal with all matters relating to 753 on her and her mother and sister’s behalf. It was her evidence that he did not tell her about Article 3.06 in the Shareholders Agreement. I am unable to accept her evidence in that regard. She was trained and worked as a paralegal and is an immigration consultant. From her training and her business, she is aware of the importance of reviewing legal documents before signing them. Given her background and her success in a legal environment, I do not consider she is the type of person who would not carefully read and understand any legal document she signed.
[28] Petgar’s evidence, which I accept, is that he kept Abravani informed throughout on what was happening in respect of 222 and she was not shy about asking questions about the Project when they arose. Abravani insisted that 753 retain a lawyer to review the Shareholders Agreement and advise them on it. They met with the lawyer and discussed the Shareholders Agreement in detail. In the circumstances, I have no doubt that Abravani knew exactly what the contents of the Shareholders Agreement were.
[29] I also have difficulty with Abravani’s statement that she trusted Petgar to act on behalf of she and her family given the state of their personal relationship at the time. In the circumstances and given the size of the investment, I have no doubt that she was completely aware of every detail of the investment in 222, including the contents of the Shareholders Agreement and Article 3.06. In my view, it was only after her relationship with Petgar finally ended that Abravani decided to take the position that Petgar was not a shareholder of 753.
[30] I also consider the fact that Abravani and Petgar signed significant personal guarantees with the RBC concerning 222’s construction financing to be further confirmation that they are the shareholders of 753, not Abravani, Nasseri and Raheleh. I cannot accept the Applicants’ submission that Petgar signed such guarantees in order to strengthen his position as manager of 753 and receive a bigger share of the profits. As will be seen, I do not accept that there was any agreement that Petgar’s only interest in 753 was a share of its profits.
[31] In addition to the documents, and as noted, I also do not accept any of the Applicants’ evidence of what the arrangement was concerning the shareholders of 222. I say this for a number of reasons.
[32] The evidence of both Abravani and Nasseri as to what the agreement with Petgar was concerning 753 is inconsistent. In her affidavits and again at the trial, Abravani said that her agreement with Petgar was that all of the money that was advanced to 753 by her mother and sister would first be repaid plus 20% interest. 753 would then repay all of the money she borrowed and invested in 753 plus interest. The remaining profit, if any, would be split 50/50 between she and Petgar as payment for his services to 753 as an officer and director.
[33] During her cross-examination on her affidavits, Abravani described the deal differently. She said that everyone would get their money back and then the profit would be split 25% to her, 25% to Petgar (as a director), 35% to her mother and 15% to her sister.
[34] Nasseri testified that she invested in the Project in order to try and improve the relationship between her daughter and Petgar for the sake of her grandson’s health. In her affidavit, she deposed she made it clear to Petgar that as they were putting up the money, they would be the shareholders. She said that she told him that in the end and after the shareholders were repaid with interest, he could have a share of the profits. At trial, she testified that the agreement was that she, Abravani and Raheleh would invest the money and after repayment of the amounts paid to 753 plus interest, they would receive a share of the profits in proportion to their investment. Petgar was to receive a salary from 753. Any profit he received would be at Abravani’s discretion from her share.
[35] Petgar’s evidence, which I accept, is that all of his discussions concerning 222 were with Abravani. In that regard he denied that there was ever any discussion with her concerning repayment of monies lent to 753 or him receiving a share of the profits. He also said that he never had a discussion with Nasseri about 753 or the investment in 222 and no family meeting as described by Nasseri ever took place. In my view, given Abravani and Petgar’s prior 50/50 relationship in both the immigration business and the retirement home investment along with the documents relating to 222 and its financing, Petgar’s evidence of the agreement concerning the shareholdings of 753 is more credible than that of Abravani and Nasseri.
[36] I am also cannot accept the evidence of Abravani and Nasseri that they learned about the opportunity to invest in the Project from Mahmoudzadeh in February/March 2010 when they went to his home to have dinner with he and his wife. Abravani knew Mahmoudzadeh who is also an immigration consultant. Abravani and Nasseri testified that when they went for dinner, Petgar was not present. Mahmoudzadeh discussed the Project with them and told them a 25% interest would cost $1,200,000. Mahmoudzadeh and his wife, Janet Yates, both of whose evidence I accept, each testified that they never came to their house for dinner. Ms. Yates was in fact out of the country at the time the dinner was alleged to have taken place.
[37] Petgar testified that he knew Mahmoudzadeh and the Derkhshan family were involved in real estate and houses. At some point Mahmoudzadeh mentioned the Project to him and indicated that if they had money, they should join them. He and Abravani subsequently attended a meeting at Mahmoudzadeh’s office on Yonge Street in early March, 2010. Nasseri was not present. They received a breakdown of the Project including financial information. They agreed between them that it was a good project to invest in.
[38] Vahid confirmed that the Project was first introduced to Abravani and Petgar at a meeting at 222’s office on Yonge Street in early March 2010 and that he subsequently forwarded the financial information concerning the investment to them. I accept Petgar and Vahid’s evidence as to how the project first came to Abravani and Petgar’s attention.
[39] Ms. Aawani Najureh testified on behalf of the individual Applicants. She is lawyer in Iran. She was also a judge, having retired in 1995. She is a close friend and advisor of Abravani and her family. With Abravani’s help she immigrated to Canada and currently lives in both Vancouver and Tehran. She testified that she was consulted by Abravani and Nasseri about the Project and their investment in it. While I was impressed with Ms. Najureh, given that all her information came from Abravani and Nasseri, whose evidence I do not accept, I am not prepared to give her evidence any weight.
[40] Petgar also relies on three letters written by Abravani’s counsel in July 2011, one in connection with her matrimonial proceedings and the other two to 222. The three letters were the subject of a motion by Petgar at the start of the trial for production of the lawyer’s file. I dismissed the motion and have released brief reasons for doing so.
[41] The letters each state that Abravani and Petgar both have an interest in 753. Abravani says in her affidavit that they were a mistake. Given the evidence which I have referred to which, in my view, establishes that they both had an interest in 753, I do not think the statement is wrong. I have not, however, relied on the letters in reaching my decision.
The Source of the Funds
[42] The Applicants have produced a great deal of evidence from the testimony of Abravani and Nasseri and from various documents, particularly bank statements, wire transfers and credit memos in an attempt to establish that Abravani, Nasseri and Raheleh provided all the monies 753 invested in 222 and are therefore the shareholders. Petgar submits that much of the documentation is false and that all the money came from the immigration business of which he is a half owner or the line of credit he and Abravani had on their joint bank account. He submits that to the extent any of the monies came from Iran they are directly or indirectly related to the immigration business.
[43] Given the evidence I have referred to, and accept, proof of who supplied the money that 753 invested in 222 is not relevant in determining who the shareholders are. Apart from her statements about being a shareholder, which I don’t accept, the substance of Nasseri’s evidence is that she viewed her investment as a loan, not as share capital. At one point towards the end of her evidence in chief, she even referred to the monies she put into 753 as “loans”. She expected to be repaid the loan at 20% interest that she said was the interest rate paid by banks in Iran. In my view the idea that Nasseri was a shareholder and entitled to a share of 753’s profits was something that arose between she and Abravani after the breakdown of Abravani’s marriage.
[44] While it is not necessary therefore to determine where the money came from to determine who the shareholders of 753 are, I want to make a few comments on the evidence in that regard given the issue was raised by the parties.
[45] The evidence, in my view, establishes that the monies came primarily from Abravani through the immigration business and from a line of credit Abravani and Petgar had on their joint account at the RBC.
[46] A significant amount of the money invested in 753 came via wire transfer from Iran. The evidence indicates that at the time Iran had currency restrictions in place. What they were and how money in large amounts could be taken out of Iran is not clear. Given my views on the credibility of both Abravani and Nasseri, the source of those monies is of significant concern to me.
[47] The evidence establishes that the initial $75,000 Petgar paid to 222 came from a $100,000 amount he received in February 2010. Abravani testified that she gave the money to Petgar to enable him to set up a new business. The money was borrowed by Abravani from Desjardins against the security of the immigration business files.
[48] The evidence further establishes that in late January 2010, Nasseri received by wire transfer from Iran $179,985 which was deposited into her account at the RBC. On April 4 and 22, 2010, Nasseri received a further $102,115 and $53,966 respectively which she also deposited into her bank accounts (she had accounts at the RBC, TD Canada Trust and Scotiabank). Nasseri said that these monies came from the sale of properties in Iran and Dubai. On April 27 and 29, 2010, a total of $336,000, which is almost exactly the total of the above three amounts, was transferred to 753’s account from Nasseri’s accounts and formed part of 753’s May 3, 2010 payment to 222.
[49] Abravani and Nasseri submit that Nasseri provided a further $180,000 to 753 on April 29, 2010. The funds came from Abravani and Petgar’s joint account. No explanation has been provided as to why Nasseri’s money was put in that account when virtually at the same time she was transferring monies from her own accounts to 753’s account. I cannot accept that funds from the joint account of Abravani and Petgar belong to Nasseri.
[50] The amounts alleged to have come from Raheleh in Iran are also of concern to me. Abravani and Nasseri testified that the monies came from Raheleh. Abravani is in the immigration business with her sister. Raheleh is in the immigration business in Iran. The wire transfers refer to the immigration business. In my view, the documents do not establish that Raheleh invested any money in 753. The monies could just as easily been related to Abravani’s immigration business.
[51] One thing is clear from the evidence. Even accepting that Nasseri and Raheleh put money into 753, it was by way of a loan and not share capital. The evidence of both Abravani and Nasseri is clear that Nasseri and Raheleh both expected to be repaid those monies plus interest before any profits were distributed. The terms of such loan or loans are between Abravani and her mother and/or sister. Abravani and Nasseri testified to a 20% interest rate because that was what was paid in Iran. Petgar was not part of any such discussions and therefore 753 cannot be bound by any such agreements. In the event it is finally determined that Abravani and Nasseri invested any money in 753, the interest rate and repayment terms for such loan or loans, will, like the amount of the loan itself, have to be resolved.
Conclusion
[52] For the above reasons, therefore, as noted in the Introduction, I find on the evidence that the shareholders of 753 are Abravani and Petgar, each as to 50%. I also find notwithstanding Petgar was never formally appointed a director or officer of 753, it was always understood and agreed by he and Abravani that he was a director and authorized to act on behalf of 753.
[53] In the event the parties are unable to agree on costs within 14 days, Petgar shall submit brief written submission of no more than 3 pages plus a costs outline. The Applicants shall have 7 days to respond with submissions of the same length.
[54] The parties are directed to arrange a 9:30 appointment before C. Campbell J. sometime during the week of December 3, 2012 in order to schedule the balance of the Application.
L. A. Pattillo J.
Released: November 28, 2012
COURT FILE NO.: CV-11-9417-00CL
DATE: 20121128
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BETWEEN:
FARZANEH ABRAVANI ALSO KNOWN AS FARZANEH ABRAVANI-ILKHCHI, RAHELEH ABRAVANI ILKHCHI, AGHDAS NASSERI AND 7538715 CANADA LTD.
Applicants
– and –
MOHAMMAD PETGAR, MOHAMMAD MAHMOUDZADEH, MOHAMMAD JAVAD DERAKHISHAN, 2087392 ONTARIO LTD., 2087398 ONTARIO LTD., MOHAMMAD AMIN TAVAKOLI, NISSAN REYHANIAN, VAHID DERAKHSHAN AND 222 FINCH AVENUE WEST INC.
Respondents
REASONS FOR JUDGMENT
L. A. PATTILLO J.
Released: November 28, 2012