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; subsequent written cost submissions.

REASONS FOR DECISION - COSTS

I. Parties’ positions on costs

[1] Following a five-day hybrid trial, by reasons dated June 3, 2013 (2013 ONSC 3230), I set aside the admission of 23 new members which occurred at a July 24, 2012 board meeting of The Sikh Spiritual Centre Toronto (the “Centre”), 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 specified the conditions to be satisfied by the Centre before setting a date for a special members’ meeting under section 297 of the Corporations Act.

[2] The parties have filed their written cost submissions:

(i) The plaintiffs seek their costs of the action from the first seven defendants (the “Director Defendants”), and the 20 other defendants represented at trial by Mr. Dhillon and Ms. Nagra (the “New Member Defendants”) on a partial indemnity scale in the amount of $74,000.00. The plaintiffs argued that they were substantially successful in this proceeding in that I set aside the admission of 23 new members, the election of seven new directors and the appointment of officers, as they had requested. Alternatively, the plaintiffs seek the payment of their costs on the basis that the Director Defendants pay 75% of their partial indemnity costs and the New Member Defendants pay the remaining 25%;

(ii) The Director Defendants, arguing that success on all issues in dispute was divided, seek partial indemnity costs of $45,000.00 against the plaintiffs for legal time spent following the April 11, 2013 settlement conference before C. Campbell J. The Director Defendants contended that the plaintiffs conducted an improper second election on August 5, 2012 and thereafter took control of the operations of the Centre, refusing to produce the corporation’s books and records to the new Board. The Director Defendants acknowledged that no side “beat” their offers to settle, but submitted that offers made by them just before trial (April 9, 2013) and during the break in the trial (May 3, 2013) came close to the end result and should be taken into account. The plaintiffs disagreed, arguing that the April 9 offer would have seen the contested new members retain their membership - a result rejected by the court - and they submitted that an offer made in the middle of a trial should not be taken into account for the purpose of awarding costs;

(iii) The New Member Defendants submitted that no costs should be awarded against them because “they were included unnecessarily” and “all of the issues…raised by the plaintiffs could have been adjudicated without the involvement of the member defendants”.

II. Analysis

[3] In considering the issue of costs, a court must take into account the factors enumerated under Rule 57, including the time spent, the result achieved, and the complexity of the matter, as well as the application of the principle of proportionality: Rule 1.04(1). In addition, a court must consider the principles set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.) and Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

[4] I have not given weight to the April 9 and May 3 offers made by the Director Defendants. The former offer came nowhere near the final result of the proceeding; the latter offer was made after the trial had started.

[5] While the plaintiffs did obtain some of the relief which they sought, as the following excerpts from the June 3 Reasons demonstrate, the plaintiffs’ own conduct contributed to the corporate dysfunction characterizing the Centre which, in turn, led to this litigation and an unduly lengthy trial. Let me repeat several points made in the June 3 Reasons:

[25] This hybrid trial was scheduled to take three days; it ended up taking five. That resulted from the efforts of both factions to expose the warts and flaws of the other faction during the various cross-examinations which were witnessed by a number of members of both factions. Given that the purpose of the Centre is to provide a place for spiritual reflection, worship and fulfillment, the fight between the two factions in open court was most unseemly.

[49] I have strong reservations about the credibility of both Mr. Deol and Mr. Major Singh. Both were evasive during important portions of their cross-examinations…

[58] On July 17, 2012, Messrs. Deol, Brar, Hargan and Mann met with the Centre’s corporate counsel, Ms. Marni Whitaker. In her July 19 reporting letter of that meeting Ms. Whitaker stated that she had not been aware the Centre had held an AGM on June 24. Ms. Whitaker reported that she had met with Messrs. Major Singh, Randhawa and Bhullar on July 18. She then gave both sides some very wise advice…

[59] As matters transpired, both factions on the board – that led by Mr. Deol and the one led by Mr. Major Singh - ignored that wise advice…

[94] On August 5, 2012 competing members’ meetings were held. From a corporate governance perspective, chaos reigned…

[100] When Major Singh and other directors in his group learned that the Deol faction intended to allow the 23 New Members to vote at the August 5 members’ meeting, they proceeded to hold their own members’ meeting in another part of the temple. No separate notice of that members’ meeting had been given; the meeting therefore was not a valid meeting of members. At that meeting the members who attended purported to elect seven other persons as directors to replace those whose term was ending. Minutes of that meeting, if taken, were not filed in evidence. Following that members’ meeting, the Major Singh-group directors and the seven “new directors” (13 “directors” in total) held their own board meeting on August 10 at which they purported to appoint a set of officers. Since their August 5 members’ meeting was not valid, their August 10 directors’ meeting was not valid.

[101] And that is where matters remained at the time of trial – the Centre was purported to be run by contending boards of directors.

[119] …The membership and board of the Centre are poisoned by factionalism. The directors have demonstrated that they have no practical understanding of their over-riding fiduciary duty to act in the best interests of the corporation; their loyalties appear to lie with their faction. Notwithstanding two previous proceedings before this court on the same issue – who are the members and who are the directors – the members and directors of the Centre have not changed their ways. I have significant doubts whether proper corporate governance can ever take root in the Centre given the current composition of its membership and board.

[6] Further, I declined to grant the plaintiffs’ request for a prompt special meeting of members to elect a new Board of Directors because neither faction had demonstrated any understanding of basic corporate governance principles. Specifically, I wrote:

[122] However, I see absolutely no point in directing a members’ meeting to deal with the election of replacement directors given the Centre’s present state of corporate governance chaos. No productive purpose would be served. In order for a court-ordered members’ meeting to achieve the goal of regularizing the corporate governance of the Centre and maximizing the chance (as slim as it might be) of the Centre managing its affairs in accordance with the principles of Ontario corporate law, in my view it is necessary that certain threshold conditions be met. Specifically, the following four threshold conditions must be satisfied before I will set a date for a court-ordered general members’ meeting:

(i) The accounting practices of the Centre must be regularized. The working arrangement put in place over the past 9 months or so under which members of each faction co-signed cheques has not worked and, more importantly, represents an departure from the principles of proper corporate governance. The financial administration of a corporation should not be the product of co-operative factionalism; it must be the product of an independent allegiance only to the best interests of the corporation. Proper books and records must be put in place. As well, a proper system for accounting for all receipts and disbursements, especially cash receipts, must be implemented. To that end, I shall appoint a monitor over some of the affairs of the Centre, with powers similar to those which I ordered in paragraph 52(i) and Schedule “A” to my Reasons in Ontario Korean Businessmen’s Assoc. v. Seung Jin Oh, 2011 ONSC 6991, 2011 ONSC 6991, and which I have reproduced as Schedule “A” to these reasons. Schedule “A” shall be modified to reflect the appointment of the monitor pursuant to section 297 of the Corporations Act in preparation for the court-ordered members’ meeting, as well as the actual fees required by the monitor following discussions with the candidates for the position. The monitor must be a licensed trustee under the Bankruptcy and Insolvency Act and must be independent of the Centre – i.e. must not be a congregant at the Centre or related to any person who is a congregant or member of the Centre. Within 90 days of the date of this order the monitor shall report to me whether, with the assistance of the monitor, the Centre has put in place proper accounting books, records and procedures;

(ii) Within 90 days of the date of this order an auditor must prepare the reports described in section 96(2) of the Act for the 2012 financial year and the first six months of the 2013 financial year. The auditor must be independent of the Centre – i.e. must not be a congregant at the Centre or related to any person who is a congregant or member of the Centre;

(iii) Within 90 days of the date of this order all current members of the Board must attend, together, at the same time and in the same room, a one-day training session on basic corporate governance conducted by a recognized corporate governance organization. If this order interferes with the travel plans of any director, he must change his travel plans; and,

(iv) Within 90 days of the date of this order the board of directors must develop an amendment to the By-Law, for consideration by the members at the special meeting, which details the process the directors are to follow when considering applications for new membership. The amendment must address the following matters: (i) the circulation to all directors, in advance of the board meeting, of the applications for new membership, including details describing how the applicant “has worked as a volunteer or associated with the” Centre over the preceding two years; and (ii) the discussion and consideration by the board of each individual application on its merits. The Centre’s board did not listen to the directions given by Pattillo J. in his 2008 Reasons; the board must now redress its failure on this most important matter.

[123] Once the Centre and monitor report to me that all four conditions have been satisfied, I will then direct the holding of a special meeting of members within 60 days. The preparation for and holding of such a meeting shall be supervised and chaired by an independent person, experienced in organizing and chairing corporate meetings, who is acceptable to 17 (80%) of the current directors and approved by this Court. In the absence of such agreement by the board, I shall appoint the chairperson. The chairperson shall arrange for a further independent person to take the minutes of the meeting. The business for that meeting shall be three-fold: (i) to receive the reports of the auditor prepared pursuant to section 96(2) of the Act; (ii) to elect directors to replace those whose terms have expired; and, (iii) to consider the amendment to the By-Law developed in accordance with paragraph 122(iv) of these Reasons. I have not included as an agenda item the consideration of the By-Law amendments discussed at the June 24, 2012 AGM. Those draft amendments were not filed in evidence, and I do not know whether their inclusion in the agenda simply would inflame the present dispute.

[7] In sum, those findings which I made in the June 3 Reasons lead me to conclude that neither the plaintiffs’ faction nor that of the Director Defendants should receive any award of costs. Both factions ignored their fiduciary duties as directors of a corporation, resulting in a course of conduct by both factions which brought the Centre back into this Court for the third time in less than a decade. There was no winner in this litigation. However, there was a loser – the Centre, because its directors were not prepared to put the corporation’s best interests before their own factional purposes.

[8] Although I find quite astonishing the submission made by the New Member Defendants that they were not necessary parties to this action – had they lost their memberships without being named parties, I have no doubt they would have complained vociferously about a lack of opportunity to be heard – they did not seek costs and, in any event, I revoked their admissions as members.

[9] In conclusion, I make no order as to the costs of this proceeding.

(original signed by)___

D. M. Brown J.

Date: October 11, 2013