ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-437470
DATE: 20151216
B E T W E E N:
URS FEDERAL SUPPORT SERVICES
Raj Datt and Dana Doidge, for the Plaintiff
INC. (formerly known as LEAR
SIEGLER SERVICES, INC.
Plaintiff
- and -
FARSAD KIANI, JOAN BUSH-KIANI
Lou Brzezinski and Catherine McInnis,
(a.k.a. “JOAN BUSH” and “JOAN
For the Defendants
ELAINE BUSH”), VALERIE KENT
(a.k.a. “VALENE KENT”), SUZANNE
KIANI, ENSIL INTERNATIONAL
CORP. (formerly “ONE STOP
ELECTRONICS SERVICE CENTER
INC.”), ENSIL CANADA LTD., ENSIL
TECHNICAL SERVICES INC. (formerly
“ONE STOP ELECTRONICS SERVICE
CENTER INC.”), EXCELTION
MEDICAL INNOVATIONS INC.,
1429512 ONTARIO LTD., 1482065
ONTARIO LIMITED, 1505137
ONTARIO LIMITED, JOINTVENTURE
FINANCE INC. and ELECTRICAL
NORTH INC.
Defendants
DECISION
D.L. Corbett J.:
[1] This is a motion for summary judgment brought by the defendants Joan Bush-Kiani, Suzanne Kiani and Valerie Kent.
[2] The motion is devoid of merit and is dismissed for the reasons that follow.
Background
[3] The plaintiff, URS, obtained a judgment against the defendant Ensil International Inc. (“Ensil”) in 2009 for US $698,948.11.[^1]
[4] Ensil did not pay the judgment.
[5] In September 2011 the plaintiff commenced these proceedings in Ontario to try to enforce the judgment.[^2]
[6] The claim against Ensil is on the Texas judgment. The claim against the other defendants is based on alleged transfers and dissipation of Ensil’s assets with the intent to defeat, hinder or delay Ensil’s creditors.
[7] The corporate defendants are affiliates.[^3] The defendants refer to themselves as the “Ensil Group of Companies”.[^4]
[8] The defendant Farsad Kiani is a directing mind of the corporate defendants.[^5] URS alleges that Farsad Kiani conspired with the moving defendants, and others, to defraud URS by transferring and otherwise dissipating Ensil’s assets.
[9] The defendant Joan Bush-Kiani is Farsad Kiani’s spouse. At material times she was the sole shareholder and director of two of the corporate defendants: Jointventure Enterprises Ltd. (“Jointventure”) and 1425912 Ontario Ltd.[^6]
[10] The defendant Valerie Kent is Farsad Kiani’s former spouse. At material times she was the sole shareholder and director of the defendant Electrical North Inc. (“Electrical”).[^7]
[11] The defendant Suzanne Kiani is Farsad Kiani’s daughter. She succeeded Valerie Kent as the sole shareholder and director of Electrical.[^8]
[12] URS alleges that the moving defendants caused corporate defendants to receive cheques from Ensil when those companies were not owed money by Ensil.
[13] On the record on this motion, the impugned cheques were issued.
[14] On the record on this motion, there is good reason to doubt any bona fide business basis for the cheques.
[15] On the record on this motion, the cheques are consistent with the alleged fraudulent purpose of defeating Ensil’s creditors.
[16] The moving defendants’ primary basis for seeking summary judgment is that they were unaware of any fraudulent intent on the part of Farsad Kiani – that they just did what he asked them to do – or they were unaware of what was being done – and so did not know that there was anything wrong. The defendants put it as follows in their factum:
The Moving Defendants had no knowledge of the financial affairs of their respective corporations. They especially had no knowledge of the receipt of funds or transfer of funds, as those were wholly handled by Jessie Kwok, Farsad`s assistant.[^9]
[17] That is the Moving Defendants’ first position: they were unaware of the transfer of money into the companies.
[18] The moving defendants say that none of the documents were prepared by them:
All financial arrangements were made, and all financial documents were produced, by Murray Goldmacher, who performs accounting work for the Ensil Group of Companies. All legal documents were prepared by Jane Martin and were provided for signature to the Moving Defendants.
[19] That is the Moving Defendants’ second position: to the extent that they signed documents respecting impugned transactions, those documents were arrangements made by others and documents created by others.
[20] The defendants also swear that any money paid to their corporations was bona fide:
Each of the Moving Defendants swear that the corporations for which they are directors have provided good and valuable consideration for any funds received…. In addition, the Moving Defendants had no knowledge of these transfers of funds.[^10]
The moving defendants undermine their own credibility by asserting these inconsistent versions of the facts under oath. They swear that they know nothing of the impugned transactions. Then they swear the transactions were for good and valuable consideration. Then they repeat that they had no knowledge of the transactions. Alternative pleadings are one thing. Alternative inconsistent versions of sworn evidence, from the same witness, are quite another. I am not prepared to place any weight on their evidence in view of this glaring inconsistency in the central thrust of the evidence of the moving defendants.
The Impugned Transactions
[21] Farsad Kiani was Ensil`s sole director and shareholder. In the aftermath of the Texas judgment, Kiani caused about $1.8 million to be transferred from Ensil to the defendants Jointventure and Electrical: $1.37 million to Jointventure and $412,626.32 to Electrical.[^11]
[22] Farsad Kiani has been ordered by American courts to produce supporting documents with respect to these impugned transfers. He has failed to comply with these orders.[^12]
[23] On the record there does not appear to be a legitimate business basis for these transfers of the $1.8 million.
[24] The moving defendants have not filed an affidavit from Farsad Kiani on the motion for summary judgment. Nor did they obtain his evidence as a witness on a pending motion.
[25] The moving defendants place responsibility for the impugned transactions on their companies’ accountant and lawyer. However they refused to produce the files of these professionals and did not place the evidence of the lawyer and the accountant before the court on this motion.
[26] Joan Bush-Kiani and Valerie Kent acknowledge that they received money from their corporations. Suzanne Kiani is unable to confirm or deny that she received money from her corporation.
Money Received by Joan Bush-Kiani
[27] Joan Bush Kiani is sophisticated in business affairs. She worked for Shell between 1981 and 2005, holding various titles including “Global Business Manager”. Her work for Shell included reviewing financial analyses and approving budgets.[^13] She was also a member of the Board of Governors of Trent University, in which capacity she was involved in the financial oversight of a major university.
[28] Joan Bush-Kiani was the sole shareholder and sole director of Jointventure. That company entered into a “marketing agreement” with Ensil under which, for US$240,000 per annum, Jointventure was to provide marketing services to Ensil. Ms Bush-Kiani was the person who was to provide the services. Joan Bush-Kiani says that she did provide such services. However her evidence under cross examination was as follows:
Q: How many of these PowerPoint presentations were you involved in?
A: I don’t remember.
Q: So it could have been one?
A: I don’t remember.
Q: Could have been none?
A: I don’t remember.
Q: Do you know how often you [reviewed marketing material]?
A: I don`t remember.
Q: So you were providing consulting services to Ensil from 1995 to 2007… and you don’t remember who the sales people were at Ensil?
A: No.
Q: Was there more than one person?
A: Yes.
Q: How many?
A: I don’t remember.[^14]
[29] Joan Bush-Kiani does not know if the impugned payments by Ensil to Jointventure were ostensibly for her consulting work.[^15]
[30] On the record on this motion, Ms Bush-Kiani was responsible for a company that received substantial funds from Ensil and she likely personally received some, perhaps most, of those funds. She claims to have performed services for these payments but it is not clear on the record that she did anything, let alone work that would justify payment of in excess of $1 million.
Money Received by Valerie Kent
[31] The evidence of Valerie Kent is of a similar nature. She claims not to have known what was going on. She acknowledges receiving funds, but says that they were in payment for marketing services. These services were described generically, but no documentation was produced showing what she did, or why it was worth the money that was paid to her. On cross examination Valerie Kent gave evidence as follows:
A: Okay, I edited brochures. I may have done some writing. I drew, hand drew, logos, anything that I could have done…. But I don’t remember specific pieces.
Q: Okay, so you may have done some stuff, but you can`t tell me specifically today what that work was?
A: Exactly.[^16]
[32] Ms Kent did not record any work that she performed, created no invoices, and apparently has no records of what she did.
[33] Like Ms Bush-Kiani, Ms Kent was responsible for a company that received substantial money from Ensil. She received money from her company, ostensibly for “marketing services” that are undocumented, and which were likely not worth anything remotely close to the amounts she received.
Money May Have Been Received by Suzanne Kiani
[34] The evidence respecting Suzanne Kiani is more nebulous. She became a director of Electrical after funds had been paid to that company by Ensil, but before the funds were disbursed. She transferred $300,000 to Jointventure, but cannot explain why. She described this as “an investment” but did not know anything of Jointventure`s business or finances.[^17] She also signed an instrument acknowledging a substantial debt owed by Electrical to Ensil, but did not understand why there was a debt.
[35] Suzanne was unable to say whether she received payment personally from her company, as salary, bonus or dividend.
Summary of Money Received by the Moving Defendants
[36] At the end of all this evidence what emerges is a picture that implicates, and certainly does not exonerate, the moving defendants. Whether they were “sham” directors or had some understanding of what they were doing, they signed documents to transfer funds among members of the Ensil Group of Companies. They likely benefitted from these transfers in the form of payments made to them.
[37] The issue on this motion is whether the moving defendants have established that the claims against them ought to be dismissed summarily.
[38] On the evidence on this motion, it seems there is a good case that the plaintiff`s claims have merit and that the moving defendants have some liability for money funneled to them from Ensil through the shell companies that they controlled. There are gaps in the evidence. It is a matter of judgment whether to draw inferences, on the basis of the available evidence, and the responsibility for the gaps that remain.
[39] The plaintiff has not brought a cross-motion for summary judgment. Instead, it argues that all issues ought to proceed to trial. Then, on a complete record, the trial court can determine the true nature of the impugned transactions and assign legal responsibility for them.
[40] I agree with the plaintiff. This is not a case where it is appropriate to parse the responsibility of the moving defendants in the absence of a complete record in respect to all defendants. The moving defendants are closely related to the other defendants, and in particular to Mr Kiani. One view of the evidence is that Mr Kiani has been responsible for arranging all of the impugned transactions with a view to defeating URS's claims against Ensil. The extent to which the moving defendants were aware of what Mr Kiani was doing, assisted him in his plans, and benefitted personally from these efforts, are matters for the trial judge to assess on the totality of the evidence as against all defendants.
[41] My observations and conclusions are based on the record before me and in no way bind the trial judge.
[42] The moving defendants raise several technical arguments about the applicability of the oppression remedy in the Ontario Business Corporations Act and the Fraudulent Conveyances Act. No benefit will be gained by engaging in a minute analysis of these arguments now. This motion, at its heart, is brought on the basis that the moving defendants did not know what was going on and have not benefitted personally from whatever may have been done in their name. They have failed to establish those facts on the record before me. Their defence survives and will be considered again at trial. The legal issues will be addressed then, on a complete record, on the basis of the trial judge`s authoritative findings of fact. I am satisfied that if the facts turn out as the plaintiff alleges them to be, theories of liability may be available under all of the legal theories advanced in this case. All should be available for argument before the trial judge. I decline to say anything further about them at this stage.
This Motion
[43] The Moving Defendants are closely involved in the events at issue in this proceeding. The shell companies that they controlled were vehicles for many of the impugned transactions. They appear to have benefitted personally from what has been done. They do not appear to have been innocent bystanders. The allegations against all defendants should be decided at the same time – where definitive findings of credibility may be made, on the basis of all of the evidence. This is not, and never was, an appropriate case for summary judgment.
[44] The motion is dismissed.
[45] I have already seized myself of managing this case up to trial. Counsel should arrange a conference call with my assistant if there are any matters that require my involvement.
[46] If the parties cannot agree upon costs then the plaintiff shall provide its brief costs submissions and bill of costs by January 15, 2016; the defendants shall provide their responding submissions and, if they wish, their own bill of costs for purposes of comparison, by January 25, 2016. Counsel may, by agreement between them, vary these deadlines so long as all costs submissions reach me by February 29, 2016.
D.L. Corbett J.
[^1]: Defendants’ Factum, para. 3.
[^2]: Defendants’ Factum, para. 3.
[^3]: Defendants’ Factum, para. 2.
[^4]: Defendants’ Factum, para. 2.
[^5]: Defendants’ Factum, para. 2.
[^6]: Defendants’ Factum, para. 2.
[^7]: Defendants’ Factum, para. 2.
[^8]: Defendants Factum, para. 2. [^9]: Defendants Factum, para. 5. [^10]: Defendants Factum, para. 7. [^11]: Raymie Affidavit, Exhibits 98, 100, 101 and 108. [^12]: Raymie Affidavit, paras. 61-82. [^13]: Joan Bush-Kiani cross-examination, pp. 8-10. [^14]: Cross examination of Joan Bush-Kiani, pp. 21-26. [^15]: Cross-examination of Joan Bush-Kiana, pp. 33-34, 43. [^16]: Valerie Kents Discovery Transcript, pp. 478-480.
[^17]: Suzanne Kiani Discovery, pp. 513-518.