SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-482337

DATE: 20130731

RE: GHOLAM HOSSEIN MAHMUODI and 2282390 ONTARIO INC.

Plaintiffs

AND:

SEYED JAMAL HEDAYATI also known as JAMAL HEDAYATI also known as JAMAL S. HEDAYATI and KAKO KABAB HOUSE LTD.

Defendants

BEFORE: JUSTICE CHAPNIK

COUNSEL:
Sean N. Zeitz
Steven A. Morris

for the Plaintiffs for the Defendants

HEARD: JULY 30, 2013

ENDORSEMENT

[1] This motion by the plaintiff for injunctive relief comes before the court by special appointment, on grounds of urgency. The plaintiff seeks, among other things, an interim order compelling the defendants to forthwith deliver possession of the premises municipally known as Unit 16, 9184 Yonge Street, Richmond Hill, Ontario to the plaintiff. The rented premises are utilized as a small take-out restaurant which was allegedly sold to the plaintiff by share purchase agreement executed on January 17, 2013.

[2] For the reasons below, I am satisfied that the motion should be granted:

1. Mr. Morris, counsel for the defendants, argued that the motion was essentially res judicata based on the endorsement of Chiappetta J. dated May 9, 2013. At that time, the motions judge found material facts in dispute with no evidence to establish irreparable harm and no evidence of injuries that could not be compensated by damages as well as credibility issues regarding the sale, assignment and transfer of funds.

That is far from the situation before me today. First, Justice Chiappetta by further endorsement dated May 22, 2013, added that the application was dismissed “without prejudice to the applicant moving for the same relief on the same or similar basis, by way of commencing an action”.

Second, since that time, an action has been commenced; and the plaintiff has gathered documentary evidence and conducted cross-examinations which are comprehensive and supportive of his claims in this motion. The main relevant documents prepared by legal counsel and executed by the parties on January 17, 2013, consist of a Share Purchase Agreement, a Non-Competition and Non-Solicitation Agreement and a Share Pledge Agreement; and the other materials filed include transcripts of the cross-examinations held July 18, 2013, of the parties and the lawyer, Ali Baniasadi, who prepared the above-mentioned documents.

Accordingly, the motion before me differs considerably from that brought before Chiappetta J.. This may have been contemplated by her “without prejudice” endorsement rendered on May 22, 2013. In the circumstances, the principle of res judicata has no application.

2. The defendant’s argument on this motion is basically one of “non est factum”, that is, that Mr. Hedayati, does not have permanent residency or legal status in Canada, speaks no English (only Farsi) and signed documents written in English without understanding the contents or being provided with independent legal advice.

However, the evidence of Mr. Baniasedi is very much to the contrary. According to him, he discussed the documents and reviewed their contents in Farsi with both the defendant and his partner, Mr. Zarei, at the relevant time. Moreover, he provided copies of the documents and a reporting letter to each of them separately. The documents confirm the sworn testimony of Mr. Baniasedi that Mr. Hedayati and Mr. Zarei, the other shareholder sold their shares in the business to the plaintiff on January 17, 2013, and that he explained each document carefully in Farsi to Mr. Hedayati before signing. At the same time, both shareholders tendered their resignation as directors of the defendant corporation. These matters were all properly documented in written legal form, witnessed and executed by the relevant parties. They form part of the Record in these proceedings.

Regarding the issue of independent legal advice, I note the waiver of independent legal advice, signed by Mr. Hedayati on February 17, 2012 in respect of the original transaction involving Mr. Hedayati and Mr. Zarei which is self-explanatory.

Although disputed by the defendant, for the purpose of this motion, I accept the evidence proferred by the plaintiff, as prima facie correct. In the circumstances, I am not persuaded by the defendant’s argument based on non est factum.

3. The defendant also asserts that the lease to the premises is in the names of the original lessees and any assignment of it would require two signatures, not only the signature of Mr. Hedayati. However, the documentary evidence includes an Assignment of Lease dated January 1, 2012 wherein the lease was formally and legally assigned to Mr. Hedayati.

Moreover, the landlord has given consent to the further assignment of the lease to the plaintiff.

It is true that the first lessee, Asghar Sadeghi, remains as covenantor on the assignments, but that is a matter involving third parties. It does not change Mr. Hedayati’s or the plaintiff’s rights pursuant to their agreement, for the purposes of this motion.

4. The evidence proferred by the plaintiff on the motion is compelling. The defendant remains in the premises, having incorporated a new company with a trade name substantially similar to the old company’s name, allegedly in breach of the non-competition agreement. The new company carries on the same business as the old one – it uses the same premises, menu and recipes, inventory and equipment and substantially the same customer base. The defendant asserts that he is “in the process” of terminating the new company. However, the plaintiff has been denied access to the premises since April 22, 2013.

[3] In my view, the three part test for interlocutory relief, established in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] S.C.J. No. 17 falls in the plaintiff’s favour.

[4] First, a preliminary assessment of the plaintiff’s claim demonstrates a serious issue to be tried on the merits. The motion is neither vexatious nor frivolous. Indeed, the plaintiff has provided persuasive evidence demonstrating likely success at trial. At the same time, I make no comment on the ultimate merits of the case nor have I discussed collateral issues that may complicate matters at trial.

[5] With respect to irreparable harm, as noted in J. Sharpe, Injunctions and Specific Performance (Canada Law Book: loose leaf ed.) November 2001 at 4.10 and 4.20, damages may be inadequate where property rights are infringed:

4.20 The reason for the primacy of injunctive relief is that an injunction more accurately reflects the substantive definition of property than does a damage award.

[6] Moreover, irreparable harm refers to the nature of the harm rather than its magnitude. In this case, it is alleged that the defendant refused to execute the lease assignment and incorporated the new company to defeat the plaintiff’s claim to the old one. Mr. Hedayati says he has no legal status in Canada nor any assets to potentially satisfy an award of damages.

[7] I find that a prima facie case has been established to support the plaintiff’s claim that he will sustain irreparable harm if the injunction is not granted.

[8] Finally, the balance of convenience substantially favours the plaintiff’s position. First, it is undisputed that the defendant acts as the sole cook, manager and operator of the business. However, as previously noted, the defendant has indicated he is in the process of terminating the new company and it is important that the assets and documentary evidence be preserved pending trial.

[9] Second, the urgency today relates to the promissory note given by the plaintiff to Reza Zarei as part of the share purchase agreement. It provides that monies are due on or before August 1, 2013. Mr. Zarei has agreed in writing to extend the date for payment to November 1, 2013 “on the condition that the Debtors are successful in obtaining possession of [the business] without Mr. Hedayati’s interference.”

[10] The plaintiff has given an undertaking as to damages.

[11] In conclusion, the plaintiff has satisfied its onus to prove that injunctive relief on an interim basis, is warranted in this case. The defendant has proferred no evidence in support of its “bald allegation” of fraud in this matter, and has not put its best foot forward. I make no comment nor should the foregoing be taken, as making any definitive finding on the merits of the case. An order shall issue pursuant to rule 40.01 of the Rules of Civil Procedure, in the form set out in the Notice of Motion paras. 1 to 9.

[12] The plaintiff has submitted a Costs Outline claiming costs in the amounts of $21,528.13 and $26,342.13 for partial and substantial indemnity costs respectively. I am not prepared to grant substantial indemnity costs.

[13] Both counsel agreed that a reasonable and fair assessment of costs on a partial indemnity scale would be the sum of $20,000. I agree. Given that, the factors in rule 57.01 and the applicable case law, costs are awarded to the plaintiff in the all-inclusive sum of $20,000.

CHAPNIK J.

Date: July 31, 2013