SUPERIOR COURT OF JUSTICE - ONTARIO

CITATION: Mielczarek and Hanna Eid et al., 2015 ONSC 2757

COURT FILE NO.: CV-15-0103-00 / CV-13-1432-00

DATE: 2015-05-01

RE:

RENATA MIELCZAREK and

HANNA EID, ISSA EID, LE ROYAL LUX INC., LE ROYAL RESTO & LOUNGE INC., OKO BLUE MEDITERRANEAN RESTAURANT AND LOUNGE INC., BARWA RASHID, AMEER SULAIMAN and DALIA SULAIMAN

BEFORE: FRAGOMENI, J.

COUNSEL: A. Mielczarek, for the Applicant

Joseph W. Irving, for the Respondents

E N D O R S E M E N T

[1] The Respondents, Hanna Eid, Issa Eid, Le Royal Lux Inc., Le Royal Resto & Lounge Inc., OKO Blue Mediterranean Restaurant and Lounge Inc., Barwa Rashid, Ameer Sulaiman and Dalia Sulaiman seek the following relief:

i. An Order staying the Application bearing Court File No. CV-15-0103-00;

ii. In the alternative, an Order converting the Application bearing Court File No. CV-15-0103-00 to an action;

iii. An Order awarding the Moving Parties costs as fixed by this Honourable Court for the hearing before Price J. and on the Motion for Leave to Appeal, to be payable forthwith;

iv. An Order requiring the Applicant to post security for costs in the amount of $80,000.00; and

v. An Order awarding the Moving Parties their costs on this Motion on a substantial indemnity scale.

[2] In order to understand how it comes about that the Respondents seek this relief it is necessary and informative to set out the chronology of this litigation to date.

[3] In their application bearing Court File No. CV-13-1432-00, the Applicant in that application, namely Renata Mielczarek (Renata) sought a declaration that she had been oppressed under section 248 of the Business Corporations Act. Renata also moved for an appointment of a receiver and the enforcement of the order of Miller, J. To understand how this matter proceeded as indicated it is important to set out portions of the order of Miller, J. of September 16, 2013 and the subsequent order of Price, J. dated December 4, 2014.

[4] The applicant Renata and her husband incorporated Oko which was a restaurant business.

[5] Renata held 50% of the shares in the business and Hanna Eid and Issa Eid held a total of 50% of the shares.

[6] A breakdown in the relationship between the shareholders occurred. Renata brought an oppression claim under s. 248 of the Business Corporations Act alleging that Hanna and Issa had oppressed her interest in the business. She appeared before Justice Miller who ordered on September 16, 2013 that a business valuator was to value the business. The Respondents, Hanna and Issa, were to pay the costs of the valuator. Upon receipt of the CBV’s opinion the respondents were to purchase Renata’s interest in the business and if such a purchase was not done the applicant could purchase their shares. The shareholder agreement was also ordered terminated.

At page 13 of her endorsement Justice Miller sets out the following:

There will be a declaration that,

i. Renata Mielczarek’s purported removal as a director and officer of the corporate Respondent is null and void;

ii. Renata Mielczarek’s purported transfer of shares to the individual Respondents subsequent to entering into the shareholder agreement is null and void;

iii. Any meetings of the shareholders and/or directors of the corporate Respondent and any resolutions passed at such meetings giving effect to the purported removal of the Applicant and purported transfer of her shares are null and void; and

iv. Renata Mielczarek has been oppressed by the Respondents.

[7] After the Order of Justice Miller, Hanna and Issa did not follow the Court order. They did not provide accounting information to the valuator and attempted to transfer Oko into a new corporation.

[8] On January 31, 2014 Dalia Sulaiman, the sister of the fiancée of Hanna incorporated a new corporation called Oko Blue Lounge Inc. The original restaurant business was transferred to this new corporation. That new Corporation then changed its name to Le Royal Lux Inc.

[9] On December 4, 2014 Renata recommenced proceedings under the first application and a motion was heard on December 4, 2014 before Justice Price.

[10] Justice Price adjourned the issue of oppression to a long motion date to be heard on April 23, 2015. Justice Price made a number of interlocutory Orders including the appointment of a receiver and that Paddon and Yorke Inc., be appointed as Supervisor of Le Royal Resto & Lounge Inc. He also added Dalia Sulaiman and Ameer Sulaiman and Le Royal Resto & Lounge Inc., as parties to the oppression Motion.

Justice Price’s order sets out the following, in part:

This Court orders and declares that the issue as whether Hanna Eid and Issa Eid shall jointly, pay to the Applicant, the sum of $1,045,908.20 for damages for oppression is adjourned to be returned on 5 days’ notice or at the resumption of the hearing on April 23, 2015;

This court orders that Dalia Sauliman, Ameer Sauliman and Le Royal Resto & Lounge Inc. be added as Respondents;

This court orders that pursuant to Rule 41 of the Rules of Civil Procedure and section 101 of the Courts of Justice Act R.S.O. 1990, c. C.43, Paddon + Yorke Inc. is hereby appointed supervisor (the “Supervisor”) of Le Royal Resto & Lounge Inc. (“Le Royal”), effective forthwith, pending further order of this Court, subject to, and under the terms which follow, without security, including all of Le Royal’s current and future assets, undertakings and properties of every nature and kind whatsoever, and wherever situate, including all proceeds thereof (the “Property”).

Justice Price also states the following at page 1 of his endorsement:

The apparent non-compliance with Miller, J’s order, which directed Hanna and Issa Eid to provide full disclosure to the Chartered Business Valuator is troubling and supports an inference, in the absence of evidence to the contrary, that the respondents do not come to court with clean hands.

[11] The Respondents then sought to appeal the Order of Justice Price. Leave to appeal to the Divisional Court was granted and a stay of Price, J.’s order was made. The Respondents contended that when the application was heard by Justice Price they were seeking an adjournment from December 4, 2014 to a later date and were not prepared to argue the merits of Dalia and Ameer Sulaiman, Le Royal Resto and Lounge Inc. being added as parties or that a receiver be appointed.

[12] Justice Price’s order demonstrates that he was concerned about the respondent’s prior conduct and that as the parties were served with the application they should have been prepared.

[13] On December 12, 2014 leave to appeal was granted and the order of Justice Price was stayed.

[14] Renata did not oppose the appeal to the divisional court. She has sought to quell the demands of the respondents by bringing this second application to add the additional parties as opposed to relying on Price J’s order and to seek the appointment of a receiver over the new business.

[15] Renata and her husband have assigned this application to their daughter, Aleksandra Mielczarek, who is the named applicant in the second application.

[16] The Respondents take the position that the second application must be stayed pending the appeal of Price, J.’s order with respect to the first application. To do otherwise, they submit, is simply circumventing the stay order of Andre, J. and having an adjudication of the issues by the Divisional Court.

[17] The Applicant, Aleksandra, in her Factum, sets out a useful chart summarizing the chronology of transfer. It is helpful to reproduce this chart:

CHRONOLOGY OF TRANSFER

Date Oko Blu Le Royal Resto & Lounge Inc.

and Le Royal Lux Inc.

September 16, 2013

Order of Madame Justice Miller

October 29, 2013

Letter from CBV requesting Information

November & December, 2013

Expansion and renovation of Oko Blu restaurant

January, 2014

Grand Opening of expanded and renovated Oko Blu restaurant

January 31, 2014

Dalia Sulaiman incorporates Oko Blu Lounge Inc.

February 19, 2014

Trust Agreement for Oko Blu Lounge Inc. with Dalia S 50%, Issa Eid 25%, Hanna Eid 25%

February 26, 2014

Bailiffs issue “Notice to Tenant” to Oko Blu Mediterranean Restaurant and Lounge Inc.

March & April 2014

Assets of Oko Blu Mediterranean Restaurant and Lounge Inc. sold, by bailiff, to Oko Blu Lounge Inc.

March & April 2014

Ameer Sulaiman pays $5,000 to Bailiff and 15,000 to agent for Landlord for lease and assets.

April 24, 2014

Dalia Sulaiman and Barwa Rashid incorporate Le Royal Lux Inc.

May 2, 2014

Name change of Oko Blu Lounge Inc. to Le Royal Resto & Lounge Inc.

[18] The second Application record, Court File No. CV-15-0103-00 is dated January 12, 2015. This Application Record contains Affidavits from Renata Mielczarek, Walter Mielczarek, Aleksandra Mielczarek, and Issa Eid. The allegations contained in those affidavits are troubling and raise serious concerns about the conduct of the Respondents. The Respondents, however, have not had an opportunity to file responding material. They deny the allegations. The affidavits they intend to file will respond to those allegations. Cross-examinations are necessary on the Affidavits as the credibility of all parties is of critical importance.

[19] For example, in his Affidavit sworn January 10, 2015, Issa Eid sets out the following, see paragraphs 8, 9, 10 & 11:

8. My brother and I did not want to comply with the Court Order and did not want to pay Renata any money for her investment in Oko Blu. My brother, Hanna (Jon) Eid, was engaged to Diana Sulaiman, who he has since married. My brother and I approached Ameer Sulaiman, Diana Sulaimna’s father and Dalia Sulaiman, Diana Sulaiman’s sister, to see if Ameer Sulaiman and Dalia Sulaiman would be interested in becoming part owners of Oko Blu as Hanna (Jon) Eid and I could not appear to be owners of Oko Blu.

9. I explained to Ameer Sulaiman and Dalis Sulaiman about the Judgment and how we needed to get the assets out of Oko Blu and into a different corporation and how Hanna (Jon) Eid and I could not appear to be the owners of Oko Blu.

10. Our thinking was to fabricate a bankruptcy of Oko Blu, start a new corporation to carry on the business of Oko Blu and have the lease, leasehold improvements and other assets of Oko Blu transferred to the new corporation.

11. The accountant that my brother and I used for Oko Blu was Ylli Beqiri. On January 30, 2014, Ylli Beqiri requested and received a Nuans Report (Corporate name search) for the name Oko Blue Lounge Inc., the name of the new corporation. On January 31, 2014, Ylli Beqiri incorporated a new corporation, called Oko Blue Lounge Inc., on behalf of Dalia Sulaiman, in preparation for the new corporation to become the new owner of the Oko Blu restaurant in a few months. Attached hereto as Exhibit “E”, is a copy of the original incorporating documents for Oko Blue Lounge Inc., showing Ylli Beqiri as the contact person for the corporation (at the top of page 8).

[20] And paragraphs 15 to 17; and 22, 26, 27 & 28 he states:

15. In February and March 2014, preparation was taking place in order to fabricate a bankruptcy of Oko Blu and a transfer of the Oko Blu assets to the new corporation. Those involved included myself, my brother Hanna (Jon) Eid, Gordon Katz, the leasing agent for the landlord, Peter Balsdon, the bailiff, Dalia Sulaiman and her father Ameer Sulaiman.

16. Oko Blu did not go bankrupt; however, the situation was made to look as if the landlord exercised his right to take over the least for non-payment. Gordon Katz, of Skymark Commercial Real Estate Holdings Inc. was paid Fifteen Thousand ($15,000.00) Dollars to take back the lease and sign Dalia Sulaiman’s new corporation, Oko Blu Lounge Inc., as a brand new lessee. Peter Balsdon, bailiff for Kennedy & Associates, Bailiffs Inc., was paid the sum of Five Thousand ($5,000.00) Dollars, to assist with the fraud. The two payments, totalling Twenty Thousand ($20,000.00) came from Ameer Sulaiman.

17. On March 17, 2014 I sent a text message to Walter Mielczarek stating: “Please tell your lawyer to stop calling. Oko Blu we got kicked out landlord and bank took property for 3 month rent late we are filing bankruptcy. Bailiff took place last month. Thank you.” This text message was a fabrication and nowhere near the truth. We were waiting for everything to line up for the staging of a bankruptcy while also preparing all paperwork necessary for Dalia Sulaiman to take over and become the new owner of the Oko Blu restaurant.

18. Once everything was finalized between Dalia Sulaiman, Hanna (Jon) Eid and I, Oko Blu/Le Royal went through a name change and Dalia Sulaiman and her organization took over all control of Oko Blu/Le Royal. Even though I am still a 25% owner, I have no say or control. I have been completely forced out of the company. This caused me to contact Walter Mielczarek and reveal the truth about the entire situation. I was forced by my brother Hanna (Jon) Eid and Ameer Sulaiman to do things that I did not agree with, including but not limited to, signing bank document kicking Renata out of the business accounts, the takeover of the business from Renata, flipping over the lease, and staging and signing documents in order to showcase Dalia Sulaiman as the new owner after a staged bankruptcy.

19. There was a master plan to kick Renata out of the company, right from the beginning. All efforts were done in order to conceal the real value of Oko Blu. There has never been a true representation of the money Oko Blu/Le Royal generates. This was always done intentionally in order to avoid payment owed to Renata.

20. I believe Renata should get her rightful 100% share of the company that is currently generating Three Million ($3,000,000.00) Dollars yearly. Renata was the original owner of Oko Blu prior to my brother and I becoming shareholders in the business. We stole Oko Blu from Renata through the fabrication of fraudulent and illegitimate paperwork that removed her as an owner. After Renata fought for her ownership through the court and received an order in her favour, we continued the fraud and illegitimate paperwork that continued to keep her away from the business.

21. Presently, it appears as I no longer have anything to do with Oko Blu/Le Royal since the bankruptcy and lease takeover by the landlord who then auctioned it off to a third party. This is false. I continue to be the beneficial owner of 25 common shares of Oko Blu/LeRoyal, as Dalia Sulaiman holds my shares, in trust. Oko Blu never filed for bankruptcy. The lease was simply taken over by the landlord, a plan that the landlord, the bailiff, myself, Hanna (Jon) Eid, Dalis Sulaiman and Ameer Sulaiman were all involved in.

[21] Dalia Sulaiman and Ameer Sulaiman filed an Affidavit sworn April 11, 2015. At paragraph 20 they state:

20. We have both read the Affidavits of Issa Eid sworn April 13, 2013, August 27, 2015, November 7, 2014, and January 10, 2015. The events that are described by Issa Eid in his Affidavits of August 27, 2015, and November 7, 2014, are completely false. As no time did Dalia Sulaiman hold shares in trust for Hanna and Issa Eid. Neither Dalia Sulaimnan or Ameer Sulaiman were at any time in a conspiracy with the Bailiff, realtor and Landlord of the premises where the two establishments are located. A new lease was entered with the Landlord after the previous tenant (the corporation owned by Hann Eid, Issa Eid and Renata Mielczarek) was locked out by the Bailiff for non-payment of rent. The assets were purchased from the Bailiff with funds provided by Ameer Sulaiman. To be clear, Dalia Sulaiman and Ameer Sulaiman categorically deny all allegations raised in the Affidavits of Issa Eid regarding the manner in which he claims Dalia and Ameer obtained control of the premises and assets located at the premises where the restaurant and banquet hall are located.

[22] As I indicated these allegations are very troubling. I also indicated that the Respondents have not yet filed material and the Affidavits have not yet been the subject matter of cross-examinations. Finally, the appeal has yet to be heard by the Divisional Court and the order of Price, J. has now been stayed.

[23] The Respondents urge me not to make any order to protect the Applicant’s interests pending the decision of the Divisional Court on the appeal.

[24] With all due respect to the position advanced by the Respondents, in light of the serious and far reaching allegations contained in the Application record I cannot accede to the Respondents’ request.

[25] The Applicant’s interests have to be protected pending the determination of the appeal. In the event that Price, J.’s order is upheld then this matter may very well be converted into an action and cross-examinations can take place and constitute discoveries. A timeline can be set to move this matter forward to trial.

[26] In the event that Price, J.’s order is not upheld then the matter will come back to permit the Respondents an opportunity to file their material on the motion heard by Price, J. relating to appointing a receiver, adding parties and enforcing Miller, J.’s order.

[27] In all of these circumstances I am satisfied that the relief requested by the Respondents requires an adjournment to a date after the decision of the Divisional Court on appeal.

[28] I am also satisfied that on the evidentiary record before me that terms must be imposed to protect the Applicant’s interests while at the same time permitting the Respondent to carry on their business on a without prejudice basis.

[29] Order to issue as follows:

1. The motion brought by the Respondents is adjourned without a date to be brought back on five days written notice following the disposition of the appeal in the Divisional Court.

2. That all of the Respondents shall immediately put into place proper procedures and protocols so as to ensure the preservation of all financial records, documents, and data of all of the named individual respondents or corporate respondents or any successors thereto relating to the operation of the Business, from January 1, 2014 until further order of this court.

3. None of the Respondents shall sell, pledge, transfer, encumber or otherwise dispose of or deal with any of the assets of the corporate Respondents and the Business. The Respondents are entitled to carry on the Business in the normal course and the Respondents shall deal with all assets of the Business only in the ordinary and usual course of business. Any order to vary these terms shall be obtained by way of Notice of Motion served on the Applicant, Aleksandra.

4. Costs of this motion reserved to the Justice disposing of the Application or the trial judge in the event the matter is converted to an action.

FRAGOMENI J.

DATE: May 1, 2015

CITATION: Mielczarek and Hanna Eid et al., 2015 ONSC 2757

COURT FILE NO.: CV-15-0103-00 / CV-13-1432-00

DATE: 2015-05-01

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: RENATA MIELCZAREK and

HANNA EID, ISSA EID, LE ROYAL LUX INC., LE ROYAL RESTO & LOUNGE INC., OKO BLUE MEDITERRANEAN RESTAURANT AND LOUNGE INC., BARWA RASHID, AMEER SULAIMAN and DALIA SULAIMAN

COUNSEL: A. Mielczarek, for the Applicant

Joseph W. Irving, for the Respondents

ENDORSEMENT

FRAGOMENI J.

DATE: May 1, 2015