SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-11-2659-00
DATE: 2014-07-25

RE: Kulveet Singh Chahal v. Ravinder Chabrra, Savita Chhabra and 2245165 Ontario Inc.

BEFORE: Lemon, J.

COUNSEL: Harvey Dorsey, for the Plaintiff
Sukhjinder Bhangu, for the Respondent

HEARD: July 7, 2014

E N D O R S E M E N T

THE ISSUE

[1] The plaintiff, Mr. Chahal, moves for an order:

(a) permitting him to sell the business operations of 2245165 Ontario Inc.

(b) appointing a receiver to supervise the sale process and/or the day to day operations of the business until the sale of the business is completed;

(c) that a deposit in the amount of $25,000 held in the trust account of his lawyer be declared forfeited and paid to Mr. Chahal; and

(d) striking out the statement of defence and counterclaim of the defendant, Ravinder Chabrra.

BACKGROUND

[2] The plaintiff, Mr. Chahal and the defendant, Ravinder Chabrra, are each 50 percent shareholders of the defendant, 2245165 Ontario Inc. They are also directors of the corporation and, with each of their spouses, are guarantors of the company’s bank loan and indemnifiers of the lease of the premises from which the company operates. In short, they, through their company, operate a convenience store at the corner of Spadina Road and College Street in the City of Toronto. As one could imagine, the business operates almost entirely on a cash basis.

[3] The litigation commenced in 2011, and there have been a variety of interim orders since that time. It appears that the litigation primarily surrounds what amount Mr. Chahal should be paid for his interest in the company. For the purposes of my decision in this matter, much of the dispute has already been finalized by various interim orders.

[4] On August 19, 2013, Donohue J. ordered that a share purchase agreement for the sale of Mr. Chahal’s interest in the company should close October 21, 2013. In the event the transaction did not close, a $25,000 deposit held in the trust account of Mr. Chahal’s lawyer should be forfeited and paid to Mr. Chahal. Alternatively, if the share purchase agreement closed, the action was to be dismissed. Finally, Mr. Chabrra was to pay costs to Mr. Chahal in the amount of $20,000 within 90 days from August 19, 2013.

[5] It is agreed that the transaction did not close. Mr. Chabrra appealed Justice Donohue’s decision. The Court of Appeal quashed that appeal. No further appeal has been taken.

[6] On November 28, 2013, Donohue J. appointed SF Partners Inc. as a monitor on an interim basis. The monitor’s first report is dated March 27, 2014. The conclusion of the monitor is that a sale of the assets should be commenced as soon as possible. The monitor also seeks costs of $10,293.45 inclusive of sales taxes. The monitor consents to being appointed as a receiver and/or receiver manager of the company if so ordered.

[7] As a result of the various motions that have been unsuccessful for Mr. Chabrra, he owes Mr. Chahal costs in the amount of $35,522.45. He has not paid those costs to date.

[8] Finally, as a matter of background, Mr. Chabrra has been convicted in India of a fraud-related offence. He was sentenced to an imprisonment term of two years. Presently, he is appealing that disposition but remains in India.

ANALYSIS

Adjournment

[9] At the commencement of the motion, counsel for Mr. Chabrra sought an adjournment. After hearing submissions, I endorsed as follows:

Mr. Bhangu seeks an adjournment since he had hoped to transfer this matter to the Toronto Commercial Court and intends to file a Summary Judgment motion. He has completed neither. This date was fixed April 1, 2014, on consent. There are no new issues in the supplementary motion record to proceed today. I am advised that Mr. Chabrra is now not in jail in India and these issues were first raised in the November 2013, motion record. Adjournment request is denied.

Receiver

[10] It appears that Mr. Chabrra either cannot or will not properly respond to this proceeding. It is obvious that the business cannot continue to incur the legal and accounting expense of this proceeding. The sooner it is sold the better it will be for all parties.

[11] Mr. Bhangu, on behalf of Mr. Chabrra, submitted that the business should not be sold because it is the only source of income for Mr. Chabrra and Mrs. Chhabra. However, in my view, with the continuing cost of litigation, keeping the business will not generate any income; the sale might.

[12] Further, Mr. Bhangu explains that Mr. Chabrra has only failed to pay the outstanding costs orders because he is not able to pay. But he also submits that once Mr. Chabrra returns from India, he will be able to pay the costs. In these days of international business and electronic transfers, it was not explained as to why Mr. Chabrra would have to attend in Canada before such financing can be arranged.

[13] Accordingly, the receiver, SF Partners Inc. shall be appointed for the purpose of selling the business. In the meantime, Mr. Chahal shall have control of the day-to-day business operations so long as he cooperates in full with the receiver.

[14] Upon the sale of the company, the proceeds of sale shall be paid in the following priorities:

(a) commission payable to the listing broker;

(b) legal fees and disbursements payable to the lawyer appointed to act upon the sale for the vendor;

(c) payment to secured creditors;

(d) payment to unsecured creditors;

(e) any outstanding costs orders shall be paid out of Mr. Chabrra’s share of the proceeds of sale; and

(f) the balance of proceeds of sale shall be paid into court subject to any further order of this court.

[15] On rough calculations, it appears that Mr. Chahal will not get all of his costs out of the proceeds of sale, however, that can only be determined with the sale actually being completed.

[16] The monitor shall be paid pursuant to its report.

[17] If directions are required with respect to any issue with respect to the sale or the running of the business, a motion may be brought to the court before either me or Donohue J.

Forfeiture

[18] The order of Donohue J. is clear and is presently in full force and affect. There is no dispute that the transaction did not close as set out in her order of August 19, 2013. Accordingly, pursuant to that order, the deposit of $25,000 shall be forfeited to Mr. Chahal.

Strike Defence

[19] With respect to striking the defence, Mr. Chahal submits that Mr. Chabrra has failed to comply with Justice Donohue’s order, cooperate with the monitor or pay costs. It certainly appears that Mr. Chabrra has not been cooperating with the court process in a timely manner however by the above orders, most, if not all, of those deficiencies will be resolved. Given Mr. Chabrra’s present circumstances in India, I am reluctant to strike his pleadings. Between now and the time that the business is sold, he will have ample time to organize his affairs such that he will be able to participate in any motion as to how the money should be paid out of court. I therefore dismiss the motion to strike his pleadings.

COSTS

[20] If the parties cannot otherwise agree upon costs, written submissions may be made to me. Mr. Chahal shall make his costs submissions within the next 15 days and Mr. Chabrra shall have 15 days thereafter to respond to those submissions. Each submission shall be no more than three pages not including any bills of cost or offers to settle.

Lemon, J.

DATE: July 25, 2014

COURT FILE NO.: CV-11-2659-00

DATE: 2014-07-25

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Kulveet Singh Chahal v. Ravinder Chabrra, Savita Chhabra and 2245165 Ontario Inc.

BEFORE: Lemon, J.

COUNSEL: Harvey Dorsey, for the Plaintiff
Sukhjinder Bhangu, for the Respondent

ENDORSEMENT

Lemon, J.

DATE: July 25, 2014