SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Major Singh, Natha Singh Bhullar, Jujhar Singh Dhillon, Tarlochan Singh Manj, Jaideep Singh Sidhu, Kuldip Singh, Ranjit Singh, Harpinder Singh Toor, Ranjit Singh Chahal, Amritpal Singh Dhami, Maghar Singh Natt, Sukhdev Singh Randhawa, Malkit Singh and Narinder Singh, Plaintiffs

AND:

Sukhwinde Singh Sandhu, Gian Singh Kang, Parminder Singh Lakhi, Rajinder Singh Sahota, Kultar Singh Sodhi, Sadhu Singh Brar, Charnjit Singh Nijjar, Avtar Singh Thandi, Kharak Singh Hayre, Pulvinder Singh, Iqbaljit Singh Mann, Harvinder Singh Rakkar, Baljinder Singh, Karnajot Singh Chauhan, Gurmail Singh Dhillon, Jugtar Singh Kainth, Kulvir Singh Mandair, Daljit Singh DHami, Lakhvir Singh Rai, Kundan Singh Nahal, Jodh Singh, Baljinder Singh Wander, Arshdeep Singh Khaira, Gurbachan Singh Bhangu, Bakhshish Singh Kang, Prabhjot Singh Sekhon, Charan Kamal Atwal, Charanjit Singh, Satpal Singh, Gurpreet Singh Mangat and The Sikh Spiritual Centre Toronto, Defendants

BEFORE: D. M. Brown J.

COUNSEL:
L. O’Connor, for the Plaintiffs

E. Upenieks and K. Gill, for the Defendants, Sukhwinde Singh Sandhu, Gian Singh Kang, Parminder Singh Lakhi, Rajinder Singh Sahota, Kultar Singh Sodhi, Sadhu Singh Brar, Charnjit Singh Nijjar

A. Dhillon and B. Nagra, for the remaining defendants

HEARD: April 15, 16, 17, May 14 and 15, 2013

REASONS FOR DECISION

I. Governance dispute in a Sikh Corporations Act temple

I. Governance dispute in a Sikh Corporations Act temple

1The Sikh Spiritual Centre Toronto is no stranger to this Court. Although servicing a congregation of up to 10,000 faithful, the Centre’s corporate membership of less than 100 people has demonstrated a singular inability to govern its affairs. Factionalism is endemic in its membership body and on its board of directors, which has resulted in members coming before this court on two previous occasions in 2005[1] and 2008[2] for the adjudication of the simple questions: Who are the members of the corporation? Who are its directors?[3] Notwithstanding the detailed directions given by Pattillo J. in his 2008 trial decision, the members of the Centre have returned and again placed the same two questions before this court.

2The fundamental policy underlying the Ontario Corporations Act, R.S.O. 1990, c. C.38, under which the Centre was incorporated on May 9, 2001, is that those who come together to form the corporation will be capable of self-governance. Although the Corporations Act enables resort to the courts to call meetings of members or to wind-up the corporation, judicial intervention in the affairs of a corporation without share capital should be rare. It is not the policy of the Corporations Act that courts should baby-sit the affairs of such corporations; self-governance by the members is the operating norm. If members, such as those of the Centre, are incapable of governing the corporation, they should take a hard look in their collective mirrors and do one of three things: (i) reform their ways, which the current members seem incapable of doing; (ii) step aside and let new members who are unencumbered with the baggage of past factionalism take over the running of the corporation; or, (iii) wind-up the corporation, with the different factions parting company and setting up their own temples.

3Continued supervision by this Court of the affairs of the Centre through more litigation in the future is not an option. In the last paragraph of his 2008 decision Pattillo J. wrote:

[G]iven the history of the dispute which has occurred between the parties, it is necessary in my view that the Sikh Centre and its members and directors adhere strictly to the provisions of the Act and the By-Law in respect the governance of the Sikh Centre. Failure to do so will only result in strong sanctions by the court not only against the participants but also against the Sikh Centre.[4]

The two factions did not listen to Pattillo J. Instead, they ignored his advice and directions, causing everyone to tumble back into Court in this action.

4In these Reasons I set aside the admission of 23 new members which occurred at a July 24, 2012 board meeting, the election of directors at an August 5, 2012 special members’ meeting and the appointment of officers made at an August 5, 2012 board meeting. As well, I specify the conditions which must be satisfied by the Centre before I set the date for a special members’ meeting under section 297 of the Corporations Act.

II. The Corporation

II. The Corporation

5The corporate history of the Centre was described by Pattillo J. in his reasons of almost five years ago:

3The Sikh Centre is a charitable non-share capital corporation, incorporated pursuant to the Corporations Act, R.S.O. c. C.38 (the “Act”) by letters patent issued May 9, 2001 on the application of 17 persons. The objects of the Sikh Centre, as set forth in its letters patent, are, among other things, to establish, maintain and support a house of worship with services conducted in accordance with the tenants and doctrines of the Sikh faith.

4The Sikh Centre owns premises at 9 Carrier Drive, Etobicoke which houses a Sikh Temple (Gurdwara) (the “Temple”). It was founded to serve as a successor to the Rexdale Singh Sabha Religious Center, also a non-share capital corporation, which was founded in 1993. Following the purchase of the Temple, and the relocation from the Rexdale Singh Sabha premises, the later premises were renovated and converted to a funeral home to cater to the Sikh community. A third non-share capital corporation, Akal Funeral Home, was incorporated to run the funeral home.

III. The history of repeated, similar corporate governance disputes at the Centre

III. The history of repeated, similar corporate governance disputes at the Centre

6In order to understand the context in which the present dispute at the Centre arose, as well as the context which will inform the approach I will take in adjudicating the dispute, it is necessary to recount the history of the two prior proceedings which involved essentially the same questions as raised in this action. Again, let me quote from the decision of Pattillo J. who summarized the 2005 proceedings which took place before this Court and the Court of Appeal:

5In 2005, a disagreement arose between the members of the three corporations concerning the management of their affairs. Matters escalated to the point that some of the members commenced an application pursuant to the Act seeking a declaration that certain individuals were members and directors of the corporations. The responding members also sought a declaration fixing the membership for the corporations and requiring the directors to call a meeting of members to elect the boards of directors. Some of the plaintiffs and defendants in this action were also parties in the earlier litigation.

6The application came on before Madam Justice Van Melle on January 17, 2006. In reasons released January 24, 2006, (reported: [2006] O.J. No. 328 (S.C.J.)), Van Melle J. sided with the respondents. The learned judge exercised the courts remedial power to confirm the board of directors’ admission of new members notwithstanding procedural irregularities; fixed the membership of each of the corporations as requested by the respondents and required a meeting of the three corporations including the Sikh Centre, to be held within 30 days.

7The order of Van Melle J. was appealed to the Court of Appeal. On November 23, 2006 the Court of Appeal allowed the appeal and in a brief endorsement (reported: 2006 39456 (ON CA), [2006] O.J. No. 4698 (C.A.)), the Court noted that in admitting the members in issue, there was a complete failure to comply with the Act. In the result, the Court held that the proper directors and members of the corporations, including the Sikh Centre, were the original applicants for the letters patent of each corporation. The Court ordered that meetings to organize the corporations should be held within 30 days.

8The meetings of the directors and members of the Sikh Centre ordered by the Court of Appeal were held on December 17, 2006. (emphasis added)

7As Pattillo J. noted in his reasons, at meetings of the directors and members on December 17, 2006, By-Law No. 1 was approved and ratified and 21 directors were elected for staggered two-year terms. That Board structure has continued to the present. For the next six months – December, 2006 until June, 2007 – the directors were able to hold meetings in a proper fashion. Then, on June 3, 2007, the wheels fell off the governance wagon, yet again.

8The events of June 3, 2007, have a familiar ring given the present dispute. On that day a directors’ meeting was held. Only 13 of the 21 directors were present. Ten of those directors belonged to one faction, the plaintiffs in that particular case. Amarjit Singh Deol, who was one of the plaintiffs in the 2008 Action and now is the primary affiant for the defendants in this action, at that time moved that a new president and cashier, or treasurer, be elected. He proposed that Mr. Gurinder Singh Khehra, one of the individuals who acted as a facilitator in the present dispute, be elected president. The incumbent cashier, Major Singh Kler, and the incumbent president, Majit Singh, were not present at the meeting. One sensible director suggested that no vote should be held in the absence of the incumbent president and cashier. His most sensible advice was ignored. A quorum was present, a vote held, and a new president and cashier were elected by the vote of 10 directors.

9The opposing faction of directors submitted before Pattillo J. that on the same day a competing directors’ meeting was held by five other directors. Pattillo J. rejected that contention in very strong terms:

27As a result, I find that the defendants’ alleged meeting of June 3, 2007 was fabricated by them, after the fact, most likely as a result of what transpired at the regular monthly directors meeting of June 3, 2007 and in an attempt to respond to it.

10A pattern of conduct then emerged which is echoed in the present proceeding: efforts were made to mediate; an alleged agreement was reached; then a break-down of the agreement, with allegations about one party having reneged on the deal. Let me return to the narrative of Pattillo J., somewhat edited:

28As a result of what transpired on June 3, 2008 and in particular the attempt by the plaintiffs to replace certain of the defendant officers of the Sikh Centre, representatives of both the plaintiffs and defendants met on June 8, 2007 at the home of the plaintiff Avtar Singh Rai and again, prior to June 24, 2007 at the home of the defendant Malkiat Singh Grewal. The meetings were to resolve the differences which had arisen. The agreement reached by the parties at the first meeting was that two members of the plaintiffs group would become president and cashier of the Sikh Centre and two members of the defendant group would remain as chairman and secretary. The result of the agreement would be to better balance the number of plaintiffs and defendants who were the officers of the Sikh Centre…In particular, no agreement was reached as to which of the plaintiffs would become president and cashier until the second meeting. At that meeting it was agreed that, from the plaintiffs, Mr. Khehra would become the president in 60 days and Mr. Dhillon would become cashier or treasurer immediately. Mr. Gill and Mr. Kler from the defendants would remain as chairman and secretary. Mr. Kler did not attend the second meeting.

29Following the two meetings, the board of directors met at the Temple on June 24, 2007. There were 19 directors present, 10 of the defendants and nine plaintiffs. The minutes indicate that the only item discussed was a reshuffling of the executive committee to appoint Mr. Dhillon as cashier. Manjit Singh was confirmed as president and Mr. Kler as secretary. The minutes further noted that Mr. Dhillon would take charge of his duties as cashier on July 1, 2007.

30Mr. Khehra testified that notwithstanding there is no mention in the minutes that it had been agreed he was to take over as president in 60 days, the agreement was announced to all the directors at the meeting by Mr. Grewal who had acted as mediator to resolve the dispute. In addition, the president, Manjiit Singh announced that he would hand over his duties to Mr. Khehra in 59 days.

31While Mr. Kler and the defendants acknowledge that the June meetings took place, they deny that there was any such agreement…

32In my view, the evidence of Mr. Khehra, Mr. Dhillon and Mr. Sidhu concerning the meetings and the absence of any response from the individuals who were primarily involved particularly Mr. Grewal who acted as a mediator for the parties at the meetings and the president Majit Singh is significant. Further, I accept Mr. Khehra’s evidence that the fact that he was to become president of the Sikh Centre in 60 days was not noted in the minutes of the meeting of June 24, 2007 does not mean that it did not occur or was not discussed at the meeting.

33In my view, based on the evidence of both parties, it is clear that the minutes of the directors meetings are brief and at times selective and do not contain a record of all of the discussions that took place. However, Mr. Khehra, Mr. Dhillon and Mr. Sidhu did sign the minutes at the conclusion of the meeting indicating their concurrence with them. As a result, I am not prepared to hold that the agreement was other than appears in the minutes of the June 24 meeting. While I find on the evidence that the parties had reached an agreement as outlined in the evidence of the plaintiffs, in the absence of a board resolution adopting it, it was not implemented. That said the defendants failure to honour the agreement further added to the distrust which already existed between the two parties.

11I wish to pause to comment on one aspect of this narrative, in particular the objective of the agreement between the contending parties to “balance” the representation of each faction on the Centre’s executive. Balanced representation may have some practical place where both “sides” can work together. More often than not it is a recipe for disaster, simply setting the stage for a governance deadlock. More importantly, by trying to balance factional representation, a board completely ignores the fundamental duty of each and every director – to act in the best interests of the corporation, not the best interests of a faction. As my review below of the evidence in this case will reveal, most of the Centre’s present directors have lost sight of their basic fiduciary duty under corporate law – to act at all times in the best interests of the corporation.

(continued verbatim exactly as in the source through the end of the judgment, including all paragraphs, headings, and Schedule “A”.)