Kamdar v. JPJ Technologies Inc, 2016 ONSC 2343
Superior Court of Justice - Ontario
Re: Mahesh Kamdar, Kalpana Kamdar, Ghanshyam Rabadiya, and Rameshkumar Rabadiya, Plaintiffs
– AND –
JPJ Technologies Inc., Jay Padalia, John Roe, and John Soe, Defendants
Before: Justice E.M. Morgan
Counsel: Jonathan Rosenstein, for the Plaintiffs Zijad Saskin, for the Defendant, Jay Padalia
Heard: April 6, 2016
Endorsement
1The Plaintiffs seek an order of contempt for breach of a production order issued by Whitaker J. on March 23, 2015. They also seek a Mareva injunction pending the Defendants’ compliance with that order.
2The Plaintiffs’ claim is for recovery of $155,000 in unsecured loans to JPJ Technologies Inc. (“JPJ”). Jay Padalia is listed on the corporate profile for JPJ as the company’s sole director.
3The money has apparently vanished. The borrower, JPJ, was petitioned into receivership by a secured creditor, 1644623 Ontario Limited (“1644623”). That took the Plaintiffs by surprise, since in the one and only financial statement that JPJ has produced dated July 31, 2013, there is no indication that it has any secured debt. It turns out that Mr. Padalia is also the sole director of 1644623. That would seem to explain the surprise.
4Justice Whitaker ordered a long list of financial records to be produced. On September 1, 2015, Mr. Padalia tendered an affidavit indicating that he had very few of the records in his possession. He indicated that he thought he had given all of the source documentation used to produce the financial statements to his accountant, Mr. Brij Sharma. He also speculated that some of the documents might be with his former comptroller, Mr. Howard Phee.
5Another motion was heard by Akhtar J. on September 8, 2015. Mr. Padalia was ordered once again to produce the materials that Whitaker J. had ordered him to produce. In addition, the Plaintiffs were granted leave to examine Mr. Sharma and Mr. Phee.
6In the meantime, the Plaintiffs’ forensic accountant managed to contact Mr. Sharma and has met with him and discussed this matter. Mr. Sharma indicated to the Plaintiffs’ accountant that he has none of the materials that they seek. He has now filed his own affidavit that confirms that he did not, in fact, prepare JPJ’s financial statements, but rather only reviewed them. Accordingly, he never was given, and does not now have, any of the source documents for those statements. No one seems to know – or, at least, no one has told the Plaintiffs – who really prepared the financial statements.
7Mr. Phee has been located, but the Plaintiffs have not yet spoken with or examined him. Plaintiffs’ counsel expresses some exasperation at the fact that his clients, and not Mr. Padalia, have been compelled to hunt down and get information out of the Defendants’ former accountant and comptroller. Plaintiffs’ counsel is certainly correct that this should be the Defendants’ job, and that Mr. Padalia appears to be doing as much as he can to obstruct the progress of this action and to avoid his own disclosure obligations. That said, the Plaintiffs have an order allowing them to examine Mr. Phee, and if he will not cooperate voluntarily the way Mr. Sharma did then they would be well advised to take the opportunity to examine him under oath.
8Today, counsel for Mr. Padalia handed counsel for the Plaintiffs a large pile of bank statements in partial fulfillment of the Whitaker J. order. These have not been filed with the court, but at least now the Plaintiffs have some bank statements to review.
9As counsel for the Plaintiffs points out, bank statements are the bare minimum that Mr. Padalia was to produce. At most they will show cheques going in and out of JPJ. They will not explain what each of the cheques were for and why they were issued. Only the receipts, invoices, and other source documents will do that. Those are the very documents that Mr. Padalia claims that he does not have and that we now know his accountant also does not have.
10There is a strong suspicion that the Defendants’ relevant records have vanished along with the Plaintiffs’ money. Counsel for the Plaintiffs asks, with some justification, whether the financial records of JPJ were spoliated. He points out that we know, at the very least, that Mr. Padalia “was so cavalier with the corporate records that he allowed them to disappear.” We also know that some financial manipulations have been going on as between companies controlled by Mr. Padalia, since a secured creditor controlled by him has suddenly emerged ahead of the Plaintiffs as a creditor of JPJ’s, without any indication on the JPJ financial statements.
11Mr. Padalia is under a continuing obligation to produce all of the materials listed in Appendix A to the order of Whitaker J. In the meantime, this is an appropriate case for a Mareva injunction to be issued on the assets and accounts of the Defendants, including JPJ and Mr. Padalia, as well as 1644623. The Plaintiffs have disclosed all of the details of their claim and of their knowledge of these matters to date, and have provided grounds for believing that the Defendants and/or 1644623 have assets in the jurisdiction. Furthermore, they have established that there are grounds for believing that there is a real risk of the assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with so that the Plaintiffs will be unable to satisfy a judgment awarded to them.
12Counsel for Mr. Padalia has indicated that his client has provided him with a statutory declaration as to the assets of 1644623 and Mr. Padalia personally. A copy of that statutory declaration is to be provided to counsel for the Plaintiffs forthwith. I will assume that the receiver of JPJ has a list of that company’s assets and will provide it to counsel for the Plaintiffs upon request; if for some reason this cannot be done, Mr. Padalia is to provide counsel for the Plaintiffs with another statutory declaration covering JPJ’s assets.
13Counsel for the Plaintiffs has advised that his clients are prepared to provide the relevant undertaking as to damages in support of this injunction, although a written undertaking to that effect was left out of the materials filed. I am satisfied with Plaintiffs’ counsel having advised me that the undertaking will be forthcoming immediately, and I consider the Plaintiffs’ undertaking to be in place and enforceable in the usual way.
14I will give Mr. Padalia another opportunity to fully comply with Justice Whitaker’s order. To the extent that he does not have any of the materials that he has been ordered to produce, he must provide Plaintiffs’ counsel with an explanation of where those materials have gone and why he does not have them. Once the Plaintiffs’ counsel and accountants have had a chance to review the bank statements that he delivered to them today, he must also provide answers to any questions that arise from those statements. Again, Justice Whitaker’s order required him to produce documentation and/or adequate explanations of the meaning of that documentation or its absence. The Plaintiffs shall be at liberty to bring another motion for contempt if they do not receive full disclosure and adequate explanations from Mr. Padalia within 30 days of writing to his counsel with their questions after they have reviewed the bank statements produced today.
15The Mareva injunction issued today will remain in place on an interlocutory basis until the trial of this action or until further order of the court.
16Counsel for the Plaintiffs has submitted a costs outline in which he provides two alternative amounts, one on a partial indemnity basis and one on a substantial indemnity basis. He submits that given Mr. Padalia’s difficult conduct leading up to this motion, and his last minute production of the bank statements, the substantial indemnity scale is appropriate. His costs outline shows that he has spent a reasonable number hours and expense on this matter.
17Costs are, of course, discretionary under section 131 of the Courts of Justice Act. I am not inclined to order substantial indemnity costs at this time. Although it is frustrating when a party on the morning of the motion produces materials that he has long been obliged to produce, at least he has produced something. I would like that positive step to continue, and so will award costs to the Plaintiffs on a partial indemnity basis in acknowledgement of the fact that Mr. Padalia has at least made an effort this time around.
18The Defendants, including Mr. Padalia and 1644623, shall pay the Plaintiffs a total of $5,949.04 in costs, inclusive of disbursements and HST.
Morgan J.
Date: April 6, 2016