Dhadda et al. v. Dhaliwal et al.

[Indexed as: Dhadda v. Dhaliwal]

Ontario Reports

Ontario Superior Court of Justice,

LeMay J.

June 25, 2015

126 O.R. (3d) 459 | 2015 ONSC 4139

Case Summary

Corporations — Directors — Members of religious community establishing corporation under Corporations Act to administer temple — Dispute over management of temple leading to consent order for appointment of new three-person board of directors — Applicants applying for recognition of two additional directors allegedly appointed by spiritual leader of community and for confirmation that all steps taken by directors appointed under consent order were invalid — Application dismissed — Evidence not establishing that spiritual leader actually appointed additional directors — Any authority that spiritual leader might have to appoint additional directors circumscribed by consent order in any event.

Members of a religious community established a corporation under the Corporations Act, R.S.O. 1990, c. C.38 to administer the temple that the community used for its devotions. A dispute over the management of the temple led to a consent order for the appointment of a new three-person board of directors. The applicants subsequently brought an application for recognition of two additional directors allegedly appointed by the community's spiritual leader and for confirmation that all steps taken by the directors appointed under the consent order were invalid. [page460]

Held, the application should be dismissed.

The admissible evidence did not establish that the spiritual leader in fact appointed additional directors. In any event, any authority that the spiritual leader had to appoint additional directors was circumscribed by the consent order.

Cases referred to

Nanaksar Satsingh Sabah of Ontario, [2014] O.J. No. 6176, 2014 ONSC 7377 (S.C.J.); Noori v. Abdin Mosque, [2011] O.J. No. 4172, 2011 ONSC 5452, 92 B.L.R. (4th) 145, 207 A.C.W.S. (3d) 194 (S.C.J.)

Statutes referred to

Corporations Act, R.S.O. 1990, c. C.38 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 37.15

APPLICATION for the recognition of additional directors of a corporation.

J. Irving, for applicants.

R. Filkini and P. Malysheuski, for respondents.

[1] LEMAY J.: — This is a case that is closely related to Court File No. CV-14-2724-00. Much of the history in this case flows from that file. I will now set out the relevant history.

[2] Before doing so, I note that the parties in the two proceedings are different, but that the underlying issues all relate to the governance of the same Corporation. I also note that the applicants in this case are not precisely the same parties as the respondents in Court File No. CV-14-2724-00, but they represent the same group of people, and the same interests. Similarly, the respondents in this case are not precisely the same parties as the applicants in Court File No. CV-14-2724-00, but they also represent the same group of people and the same interests. I have simplified the reasons below to refer to applicants and respondents, but I acknowledge this distinction, and it applies throughout this decision.

Background and History

(a) The history of File CV-14-2724-00

[3] In 1994, five members of the Nanaksar Satsang Sabha religious community established an Ontario Corporation called Nanaksar Satasang Sabha (the "Corporation") under the Corporations Act, R.S.O. 1990, c. C.38. As Sproat J. noted, by incorporating they chose to have the governance structure of the Corporations Act. The purpose of this Corporation was, [page461] inter alia, to administer the Temple that the religious community uses for its devotions. The Temples, or Gurdwaras, are worldwide.

[4] All of these Gurdwaras follow the spiritual leadership of His Holiness Baba Gurdev Singh Ji ("His Holiness"), who lives in India.

[5] In 2013, a dispute arose between the members of the community over the management of the Gurdwara in Brampton, which is managed by the Corporation. This dispute proceeded to court, and resulted in a series of motions before various Superior Court Judges in Brampton and Toronto. As a result of those motions, an Annual General Meeting was originally scheduled for July of 2014. However, it was not held, and various motions took place. Those motions were not dispositive, and the underlying litigation in Court File No. CV-14-2724-00 continues to exist.

[6] In an effort to resolve portions of that litigation, O'Connor J. met with the parties over six days in October and November of 2014. Ultimately, O'Connor J. achieved an agreement in which each side in the dispute was to pick a director, and then O'Connor J. would choose the third director of the Corporation randomly from four names, two selected by each side.

[7] As described by Sproat J. in his decision in Nanaksar Satsingh Sabah of Ontario, [2014] O.J. No. 6176, 2014 ONSC 7377 (S.C.J.), this process was agreed to by the parties. I have no jurisdiction to change the outcome of this process, as it was adopted by O'Connor J.

[8] At the end of the process, O'Connor J. read the three names of the Directors to His Holiness, who acceded to the three Directors. Two of them are from the group of individuals who are responding to this Application and the third is one of the applicants. As a result of the process before O'Connor J., the respondents in this Application were among the group that gained control of the Corporation, pending the scheduling of an Annual Members Meeting. O'Connor J. made a consent Order at the conclusion of the process before him.

[9] As Sproat J. noted in a subsequent decision, both sides consented to the process that was adopted to arrive at the names of the three directors. At the time that the process was adopted, both sides consented to it. No one suggested the Order was illegal, contrary to public policy or could not be made.

(b) The events leading to the current application

[10] The litigation, however, was not resolved by the process before O'Connor J. Instead, very shortly after this Order was [page462] made, the applicants in this process allegedly contacted His Holiness and prevailed upon him to change his mind. Additional court proceedings then ensued.

[11] One of these proceedings was a motion to set aside the consent Order of O'Connor J. This motion proceeded before Sproat J. on December 19, 2014, leading to the decision cited above. In that decision, Sproat J. addressed a series of issues, including the question of whether the Consent Order of November 25, 2014 should be set aside. He dismissed that portion of the motion, observing in part (at paras. 20 and 24) that the law does not permit any judge to make a final decision one day and change it the day after.

[12] Subsequently, it was determined that significant amounts of money had been withdrawn from the Corporate bank accounts by the Directors who had been removed from office by the consent Order of O'Connor J. A contempt hearing remains to be held before Sproat J. on this issue.

[13] Finally, in Court File No. CV-14-2774-00, there was an attendance in court before Edwards J. on April 8, 2015 in order to obtain his blessing for a revised by-law that was to be voted on by the Directors. Edwards J. provided his blessing, subject to some suggestions that were incorporated into the amended by-law. This by-law was passed at a Directors meeting held on April 20, 2015 by a majority of the directors appointed pursuant to the Order of O'Connor J.

The Current Application

[14] The applicants in this case were part of the group that had lost in the selection of Directors by O'Connor J., and had lost in the motion before Sproat J.

[15] One or more of their number travelled to India in April of 2015. At that time, they allegedly asked His Holiness to appoint two additional directors to the Board of Directors. They then returned and sought recognition of these two additional directors from the Board of Directors. This recognition was refused.

[16] As a result, they brought this Application, seeking recognition of the two additional directors that His Holiness had allegedly appointed, and confirmation that all of the steps taken by the Directors appointed by O'Connor J. were invalid. In particular, they are challenging the April 20, 2015 meeting described above.

[17] This Application was scheduled to be heard on June 12, 2015. This was a date chosen by the applicants. They had the opportunity to submit whatever materials they wished for this [page463] Application, and could ensure that it took place on short notice to the respondents, and that the applicants had a complete record. It certainly took place on short notice to the respondents, as it was scheduled ten days after it was filed, which is the minimum time allowed in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[18] Curiously, the Corporation itself was not named as a respondent in this case. There is an interesting legal question, raised by the respondents in this case, about whether the failure to name the Corporation should result in the dismissal of this Application. Given my disposition of the Application, I do not have to resolve that issue.

[19] It is worth noting that the Corporation is a separate entity that exists under, and is governed by, the Corporations Act.

The Issues

[20] At the initial hearing of this Application on June 12, 2015, it became clear that there were a number of legal issues that could be considered without reviewing the entire factual matrix underlying this proceeding and without the necessity of cross-examination on Affidavits. I identified the following issues in my June 12, 2015 endorsement for the parties:

(a) Whether the decisions made by the courts in this matter have circumscribed His Holiness's authority to appoint additional directors, even assuming he has that authority.

(b) Whether the evidence before the court is sufficient to establish that His Holiness has appointed additional directors.

(c) Whether the by-law gives His Holiness the authority to appoint additional directors.

(d) Whether the by-law under which His Holiness allegedly exercised his authority is, on its face, valid from a corporate law perspective.

[21] These issues are not set out in the same order that I set them out in my original endorsement. However, in reviewing these issues it is clear to me that resolving any of these issues in the respondent's favour will dispose of this entire application.

Resolution of the Legal Issues

[22] This court has jurisdiction to provide directions in governance cases under the Corporations Act. The purpose of these directions is, inter alia, to protect the membership and ensure [page464] good governance. See, for example, Noori v. Abdin Mosque, [2011] O.J. No. 4172, 2011 ONSC 5452 (S.C.J.).

[23] If the respondents are successful on any of the legal issues that they have raised, then this application should be dismissed. I am of the view that the respondents should succeed on at least two of the issues that they have raised.

[24] Before I conduct my analysis of the two issues that I am resolving, it is vital to note that there are significant legal issues that exist about the by-law, its legal enforceability and whether His Holiness can, as a matter of law, have the discretion under the by-law that he is claimed to have by the applicants in this case. Given my disposition of this matter, I do not have to resolve these issues. I now turn to my analysis of the two issues that I will resolve.

[25] First, there is the issue of whether there is sufficient evidence before the court to establish that His Holiness has appointed additional directors. My analysis on this point starts with a consideration of Sproat J.'s decision of December 22, 2014 [2014 ONSC 7377, [2014] O.J. No. 6176 (S.C.J.)]. In para. 13 he states:

In seeking to be added as a friend of the court, His Holiness made it a condition that he "shall not be directed to appear before any court of law. I respect that request. The reality is, however, that if his views are not presented in person there will continue to be doubt and uncertainty about whether individuals claiming to speak for His Holiness are authorized to do so. That will be counter-productive.

[26] I share these concerns. The evidence of His Holiness's viewpoints that the applicants advance includes, inter alia, a letter from someone purporting to be His Holiness's secretary, along with Affidavits from people who met with His Holiness. These are advanced by the applicants in an effort to justify the appointment of two additional directors so that they can regain the control of the Corporation that they lost as a result of the consent Order of O'Connor J. This evidence is hearsay or, in the case of the letter from His Holiness's secretary, double hearsay.

[27] The letter is also similar to a letter that was relied upon by the respondents in Court File No. 14-2724-00 in their motion before Sproat J.

[28] In considering whether to admit hearsay, I am guided by the twin principles of necessity and reliability. I start with reliability. I find the evidence offered by the applicants to be wholly unreliable in this case. It is their second attempt to set aside a consent Order. They are wholly interested in achieving this outcome and it is clear that they will go to significant lengths to achieve it. As a result, I can have no faith that His Holiness [page465] actually said what any of the applicants claim that he has said. I must reject the evidence on this basis alone.

[29] The evidence is also not necessary. Given that His Holiness was prepared to speak directly with O'Connor J. in resolving the original dispute, I see no reason why he cannot make himself available to the court again to explain his change of heart. It is, therefore, not necessary to have hearsay replace his direct representations to the court. I would also note that there is a serious issue as to whether, as a matter of law, His Holiness has this authority. I am not resolving that question.

[30] Counsel for the applicant argued that a recording that was entered into evidence late, and contrary to my directions, was sufficient to confirm what His Holiness said. Putting aside the question of whether this recording is even admissible into evidence at this late stage, there are significant concerns with it that would preclude its admissibility even if it had been provided in a timely way. Mr. Irving stated that the recording had essentially the same evidentiary value as His Holiness's statements to O'Connor J.

[31] I disagree. First, there is no independent proof that the voice on the recording is actually His Holiness. Second, when His Holiness was speaking to O'Connor J., the interpretation was done by an accredited, independent and sworn interpreter provided by the court. In this case, it is not clear to me who did the interpretation. As a result, even if this material had been filed in a timely way (an issue I will return to below), it does not meet the twin requirements of necessity and reliability.

[32] In the result, the evidence before the court is not sufficient to establish that His Holiness has in fact appointed two new Directors, even assuming he has the legal authority to do so, and the Application must be dismissed.

[33] Disposing of this issue would have been sufficient to dispose of the Application. However, I have also chosen to resolve the issue of the scope of O'Connor J.'s Order, as it is clear to me that the parties that lost control of the Corporation as a result of that decision are bound and determined to challenge it, by any way possible.

[34] If I do not resolve the issue of the scope of O'Connor J.'s Order at this point, then the applicants in this case would undoubtedly be tempted to re-file this application with better evidence from His Holiness. Allowing that to happen when the scope of O'Connor J.'s Order has been fully argued before me does not use either judicial resources or the resources of the parties effectively. [page466]

[35] The Order of O'Connor J. states:

ON CONSENT OF THE PARTIES and on hearing the submissions of counsel for Applicants and Respondents,

1. THIS COURT ORDERS AND ADJUGES THAT the Board of Directors of Nanaksar Satsang Sabha of Ontario shall be comprised of three directors and that Dedar Singh, Lakhvir Dhaliwal and Rajinder Singh Sahota are the Directors of Nanaksar Satsang Sabha of Ontario.

[36] This Order was developed on consent between the parties, and with the blessing of His Holiness. It makes it clear that there will be three directors of the Corporation. It does not have any specific allowances for His Holiness to change directors or to add directors.

[37] It is also worth noting that the Order of O'Connor J. is different from a previous order made by Wilton-Seigel J. on February 14, 2014. That Order expressly reserved His Holiness's right to change and/or approve the Directors that were named.

[38] Indeed, the plain language of the Order of O'Connor J. is clear. It states that the Board of Directors "shall be comprised of three directors". This is mandatory language, and it does not allow for additional directors to be appointed. Therefore, on a clear reading of O'Connor J.'s Order, there can only be three directors. Any discretion that His Holiness may have had to appoint additional directors has been fettered, on consent of all of the parties (including His Holiness), at least until the Annual General Meeting is held. As noted above, there is a serious question of whether, at law, His Holiness has this discretion at all.

[39] Even if the language of the Order had not been clear, I would still have found that it circumscribed any discretion His Holiness may have had because of the context in which the Order was reached. The parties, including His Holiness, agreed to a process to select the directors, as well as the method by which the Directors would be selected. In light of those facts, to then say that His Holiness had reserved the discretion to appoint two additional directors, giving the losing side control, would be to make a mockery out of the agreement that the parties had reached. The only viable interpretation of this Order, even if it is ambiguous, is that it limits the number of directors to three, pending the Annual Members Meeting, or other Corporations Act proceedings.

[40] To be clear, until an Annual General Meeting (or Annual Members Meeting) is held, I do not see any way that the current composition of the Board can be changed outside of the authority in the Corporations Act. I further do not see any way that [page467] His Holiness can change the composition of the Board of Directors until after an Annual General Meeting is held. The Corporations Act and the other principles that I have outlined above clearly favour the position of the respondents. Again, I note that I have not resolved the question of whether His Holiness, as a matter of law, has the discretion to change or name directors at all.

[41] However, putting the legal interpretation issue aside, there is a more fundamental reason for resolving the scope of this Order in the manner that I have. The parties freely entered into an agreement on how the directors would be selected. His Holiness supported that agreement, and accepted the three directors that were selected by O'Connor J.

[42] Within days of this agreement, the losing side went to His Holiness to get him to change his mind, with the clear intent of overturning the agreement that everyone (including His Holiness) had reached after numerous days of settlement discussions with O'Connor J. The position of the applicants in this case can be described as "there will be no peace in the Gudhwara unless we win". This is not a position that the court is prepared to accept. When a party reaches a freely negotiated agreement, they are generally expected to be bound by that agreement.

[43] To put it another way, a party that wants to restore peace and trust to a relationship needs to provide the other party with a reason to trust them. Settlement agreements are generally strictly enforced in order to preserve peace and trust. This case is no different.

[44] In the circumstances, I find that the Order of O'Connor J. circumscribes any authority that His Holiness might have under the by-laws to appoint Directors, at least until the next Annual Members Meeting. I make no finding about whether he actually has this discretion.

[45] Given my decision on the first two issues, I do not intend to resolve the third and fourth issues that have been identified. The respondents are successful on both of these issues and, as a result, the Application is dismissed.

[46] The respondents have sought their own relief in response to this Application, in the form of a motion to have the Application struck out, and seeking other relief. It is not necessary for me to address the motion to strike the Application out, as I have dismissed it.

[47] However, one of the issues raised in the respondent's motion is whether the applicants in this case, and other interested parties, should have to obtain leave before commencing any further legal proceedings. This is a matter that is still a [page468] live issue, and will need further consideration by the parties and the court.

Disposition

[48] In the circumstances of this case, I suggested to Regional Senior Justice Daley that this matter be case managed under rule 37.15 in conjunction with Court File No. CV-14-2724-00. I can advise that R.S.J. Daley has acceded to this suggestion and has appointed me the Case Management Judge in this matter.

[49] To that end, and considering the facts that I have set out above, I am making the following Orders:

(a) The Application in the instant file is dismissed. Costs will be addressed as set out later in this decision.

(b) I understand that the Order flowing from Edwards J.'s endorsement of April 8, 2015 remains unresolved. A draft Order is attached at Tab K of the Responding Affidavit of Lakhvir Dhaliwal. Mr. Irving has five business days from today to provide Mr. Malysheuski with any concerns he has about that Order in writing, with a copy of his letter to me. If no concerns are provided, then Mr. Malysheuski may take out the Order without further consultation with Mr. Irving. [If] Mr. Irving raises concerns, then those will be addressed by Edwards J. The time limit for complying with this direction cannot be extended without my consent.

(c) The timetables and directions made by Edwards J. are confirmed. The parties may raise issues with these timetables in accordance with the process described in para. 48, below if necessary.

(d) On a temporary basis, and pending the process described in para. 42, the applicants are barred from commencing any separate litigation in any separate court files relating to the Gudhwara without my leave.

(e) Again on a temporary basis, and pending the process described in para. 42, any interested party is barred from commencing any separate litigation in any separate court file relating to or touching upon any matter relating to the Gudhwara without my leave.

(f) Again on a temporary basis, and pending the process described in para. 42, any attempts to settle or otherwise dispose of the issues in Court File No. CV-14-2724-00 must be reviewed with me, and requires my leave. [page469]

(g) A copy of this decision is to be shared by both counsel as widely as possible within their respective groups. I am expecting that they, and their parties, will ensure that my directions come to the attention of as many people involved with the Gudhwara as possible.

(h) I do not have jurisdiction over the contempt proceedings before Sproat J. The parties are expected, however, to address those issues expeditiously. They are to advise me within 30 days as to the status of those proceedings.

[50] I have made a number of temporary Orders respecting the commencement of further litigation relating to the Gudhwara above. Those Orders are temporary in nature as I am of the view that the parties should be able to make submissions on how this litigation, and the dispute between them, is to be managed going forward. To that end, I am directing the following process:

(a) The parties will choose one of July 28, 29, 30, August 5, 6 or 7 for an 8:45 a.m. appointment before me to discuss the respondent's motion, and all other issues relating to the conduct of this matter going forward. This appointment will be 1 hour long, and submissions will be limited to half an hour from each group.

(b) If the parties are unable to agree on a date, they are to advise me by July 10, 2015, and I will fix a date. The parties are required to choose one of the dates that I have listed.

(c) The respondents in this file to serve and file its materials, including its issue agenda for this Conference by July 10, 2015.

(d) The applicants in this file, and any other interested parties that wish to be heard by the court, are to serve and file their materials (including their issue agenda) by July 24, 2015.

(e) In the intervening time, if there are any urgent matters that arise in respect of this case, the party who is raising the issue may, through counsel, write a letter outlining the nature of the issue. That letter is to be sent to the Judges Reception in Brampton by facsimile, and is to be served on the other side. I will then review that letter and provide directions. No response to such a letter is required or permitted until I provide directions otherwise.

[51] Finally, I am going to address a further matter that arose in the hearing of this application. I originally had this matter [page470] come before me on Friday, June 12, 2015. At that time, I provided a direction to both counsel that scheduled a hearing on the four legal questions before me at 8:45 a.m. on Tuesday, June 16, 2015. In that direction, I stated "any party who wishes to file additional materials must serve and file them by no later than 4:00 p.m on Monday, June 15, 2015. These materials are confined to legal cases and submissions."

[52] This direction was clear. However, both counsel filed additional factual submissions. When I raised my concerns about their additional submissions, both counsel sought to justify their additional submissions. These additional submissions were unjustifiable, because they were clearly contrary to my directions. I am disappointed both by the fact that counsel made their additional factual submissions and by the fact that they both sought to justify their conduct. I am particularly disappointed by the applicant's conduct in this regard, as they had control of when this Application was filed. Had they needed this additional material, it should have been filed with the initial application. I do not know whether counsel was simply following instructions in making these additional submissions; so I am not prepared to blame only the counsel for this failure to adhere to my directions.

[53] However, I will observe that this litigation is contentious enough without parties seeking to gain an advantage by flouting the instructions of the court. As my colleagues have said, in order to achieve peace in the Gudhwara, trust needs to be rebuilt. Attempting to go around the court's directions is no way to try and rebuild trust between the two warring sides. The goals of trust and peace are also not advanced when parties seek to set aside a clear agreement by commencing separate litigation. The parties need to spend some time in reflective contemplation about the effect that their actions are having on the community as a whole.

[54] To be clear, as the case management judge, I expect that all interested parties will strictly adhere to the directions that I have provided above. There is already one contempt hearing resulting from this case. It is in everyone's best interests to ensure that there is not a second. For further clarity, I note that I have the jurisdiction to initiate contempt proceedings on my own motion regardless of whether either of the parties raises an issue of contempt.

[55] I will address costs of this application in the context of the larger proceeding. My costs considerations of this Application will be the final matter that will be dealt with prior to a trial being scheduled, or a summary judgment motion being heard. [page471] The continuing conduct of the parties will be a significant factor in those costs considerations.

Application dismissed.

End of Document