COURT FILE NO.: CV-16-347-00 DATE: 2016 08 18

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

SAHARA LAWYER PROFESSIONAL CORPORATION

Gregory Sidlofsky, for the Applicant

Applicant

• and -

LATA MENON

Darrell Paul, for the Respondent

Respondent

Dr. Ajit Saroha, for Subhash Sharma Emil D. Gordon, for Amandeep Kapila

HEARD: In Writing

REASONS FOR DECISION

Justice M.G. Emery

[1] The respondent Lata Menon acted as outside counsel to various litigation clients that Sahara Lawyer Professional Corporation (“Sahara”) referred to her under a referral arrangement during the time Virender Sharma, Subhash Chander Sharma and Amandeep Kapila practiced law together under the Sahara banner. Those three lawyers are no longer practicing together. Virender Sharma has been the sole practitioner at Sahara since Mr. Subhash Sharma and Mr. Kapila left the firm to practice elsewhere in 2013.

[2] The three lawyers are currently immersed in litigation with each other over Sahara and its operations. That litigation includes an action commenced by Virender Sharma in Toronto on January 6, 2016 that was ultimately transferred to Brampton and given court file number CV-16-2310.

[3] Ms. Menon commenced an application under court file no. CV-15-5890 in Brampton against Sahara, Virender Sharma, Subhash Sharma and Amandeep Kapila for an order that she be permitted to pay all referral fees she has collected and holds in trust into court. She seeks this order in the nature of an interpleader order, no doubt to avoid becoming ensnared in the internal litigation between the three lawyers.

[4] Sahara subsequently commenced this application against Ms. Menon for an accounting of all files Sahara had referred to her, an accounting of all referral fees she owes to Sahara pursuant to the referral arrangement, and an order that she pay those funds to Sahara.

[5] Lata Menon swore an affidavit in support of her application, and an affidavit in response to the application commenced by Sahara against her. Mr. Sidlofsky, who is currently counsel of record for Sahara, has corresponded with Mr. Paul, counsel for Ms. Menon to arrange a date to cross-examine her on those affidavits. No date for that cross-examination could be arranged. Mr. Sidlofsky takes the position that Ms. Menon has refused to attend and be cross-examined.

[6] This motion was initially returnable on June 30, 2016 and was converted into a motion in writing on the consent of counsel. The motion seeks an order to compel Lata Menon to attend and be cross-examined on her affidavits.

[7] On August 5, 2016, I released an endorsement granting the motion to compel Ms. Menon to attend and be cross-examined on her affidavits upon being served properly with a notice of examination under Rule 34.04 of the Rules of Civil Procedure. That motion was granted for reasons to follow. These are those reasons.

Brief Background

[8] There is no dispute that an affiant may be compelled upon service of a notice of examination under Rule 34.04 to attend and be cross-examined on an affidavit in a motion or application under Rule 39.02. The dispute on this motion arises from the endorsements of two judges made earlier in these applications and the related litigation between the three lawyers.

[9] The first endorsement was made by Justice LeMay on February 5, 2016 in the two applications to which Ms. Menon is a party. It is important to note that the order made by Justice LeMay on February 5, 2016 was made on consent of all parties, including Ms. Menon.

[10] Justice LeMay’s order was based on the terms of a consent filed by the parties. That consent referred to those terms as the “terms of order in court file no. CV-16-0347-00 and CV-15-5890-00,” and ordered that the applications in the above court file numbers be heard together or one after the other, in the discretion of the applications judge. The consent further provided that the applications were adjourned to September 21, 2016 for two hours to be heard at the same time before the same judge. The terms then set a timetable for productions and examinations on the applications. Of significance, term number seven provides that examinations were to be completed by the end of June.

[11] On May 27, 2016, the application brought by Mr. Kapila against Virender Sharma and Subhash Sharma in court file no. CV-16-1908 and a motion brought by Virender Sharma in the action now in Brampton Court File No. CV-16-2310 came before Justice André. In his application, Mr. Kapila was seeking a declaration that he continues to own 100 shares in Sahara. In his motion, Mr. Virender Sharma was seeking an interim and interlocutory injunction prohibiting Mr. Kapila and Mr. Subhash Sharma from interfering with the operations and management of Sahara.

[12] After hearing submissions, Justice André ordered that both matters should be heard together on February 8, 2017 for three hours. Justice André then imposed the following terms as part of that order:

a.) Mr. Kapila and Mr. Subhash Chander Sharma shall not take any steps to disrupt or interrupt the operations and management of Sahara, pending a court order;

b.) Mr. Virender Sharma shall not take any steps to prevent Mr. Kapila and Mr. Subhash Chander Sharma from practicing law within the Region of Peel, pending further court order;

c.) Virender Sharma shall take no further action in the ongoing litigation between himself, Sahara, Subhash Chander Sharma and Amandeep Kapila, pending the court’s decision on those two motions.

[13] Counsel for Virender Sharma and Sahara take the position that Lata Menon has refused to attend and be cross-examined on her affidavits in the two applications to which she is a party prior to the end of June 2016 order made by Justice LeMay. They argue that this refusal to attend and be cross-examined amounts to a breach of Justice LeMay’s order.

[14] Lata Menon takes the position that she has never been served with a notice of examination. Ms. Menon takes the position that her counsel has never unequivocally refused to produce her for cross-examination, and that she has never refused to comply with Justice LeMay’s order.

[15] Ms. Menon also takes the position that any cross-examination on those affidavits is premature given the contest as to the ownership of shares in Sahara. In view of that dispute, she argues that it is unknown if Virender Sharma has the authority to provide instructions to counsel to conduct those cross-examinations.

[16] Ms. Menon also submits that Mr. Sidlofsky does not have authority to act on behalf of Sahara under Rule 15.02. In the event a motion is brought by another shareholder to determine that authority, all parties should await the outcome of that motion before she is cross-examined.

[17] Mr. Subhash Sharma opposes the motion on the basis that Mr. Sidlofsky has a conflict of interest by acting for both Sahara and Virender Sharma. Mr. Sharma takes the position that Mr. Sidlofsky may cause irreparable harm to Sahara if he is permitted to cross-examine Ms. Menon on Sahara’s behalf.

[18] Mr. Kapila objects to the motion on a preliminary basis that Mr. Sidlofsky only takes instructions from Mr. Virender Sharma, and that he does not have authority to instruct Mr. Sidlofsky on behalf of Sahara. Mr. Kapila has given evidence that he requisitioned Mr. Virender Sharma to call a shareholders meeting under Section 105 of the Ontario Business Corporations Act, and that Mr. Virender Sharma has refused to do so. Mr. Virender Sharma has further resisted Mr. Kapila’s application for a determination of what parties continue to hold shares in Sahara, and has instead moved for an interlocutory injunction. Mr. Kapila is of the view that the application against Ms. Menon should be stayed under Rule 15.02(4) until the shareholders meeting has been called and held.

Analysis

[19] On this motion, I have considered only the following evidence:

1. The affidavit of Maria Eloisa de las Alas, sworn on June 21, 2016 in support of the motion;
2. The responding affidavit of Lata Menon, sworn on June 29, 2016 in response to the motion, together with exhibits “A” to “N”.

[20] I have also taken into consideration the following submissions in writing:

a.) The submission of Sahara Lawyer Professional Corporation filed by Mr. Sidlofsky;

b.) The submissions of Lata Menon filed by Mr. Paul;

c.) The written submissions of Subhash Sharma filed by Dr. Saroha; and

d.) The written submissions of Amandeep Kapila filed by Mr. Gordon.

[21] I have not taken into consideration Appendix “A” and “B” filed by Mr. Paul on behalf of Ms. Menon on the motion. That material was not attached to an affidavit and consequently that material was not proper material before the court pursuant to Rule 4.06 or Rule 39.01(1) and (4). If Ms. Menon seeks to provide a full accounting of the files that Sahara referred to her by filing this material, that material should be marked as exhibits to an affidavit filed on the applications or produced at a cross-examination to form part of the evidentiary record.

[22] Any and all letters, emails and other material provided to the court by various counsel after July 29, 2016 have not been considered. In my view, correspondence to a judicial assistant of a judge hearing a motion, application or trial without the consent of other counsel or at the invitation of the judge offends Rule 1.09 as much as if those letters were written directly to the judge.

[23] I make the following determinations based on the evidence received on this motion.

[24] First, the motion to remove Mr. Sidlofsky from the record under Rule 15.02 had not been heard at the time my endorsement was released on August 5, 2016. That motion was made returnable on August 16, 2016. There is currently no finding by the court that Mr. Sidlofsky does not have the authority to seek an order on behalf of Sahara to compel Ms. Menon to attend and be cross-examined at this time.

[25] Second, the order made by Justice LeMay applies to all examinations that would have or could have been conducted under the Rules of Civil Procedure in each of the two applications in which Lata Menon is a party. That order operates with respect to those applications only, as no other application or motion was before Justice LeMay on February 5, 2016.

[26] Third, the two applications in which Ms. Menon is a party were not before Justice André on May 27, 2016. It is clear from Justice André’s endorsement and from reading the transcript of the proceedings before His Honour on May 27, 2016 that:

a.) The order that Mr. Kapila and Mr. Subhash Chander Sharma not take any steps to disrupt or interrupt the operations and management of Sahara pending a court order precludes them from attacking Sahara until the two motions were heard on February 8, 2017; and

b.) The order that Virender Sharma take no further action in the ongoing litigation was specifically described by Justice André as that litigation between Mr. Sharma, Sahara, Subhash Chander Sharma and Mr. Kapila, and was therefore confined to the litigation between those parties only. The reach of Justice André’s order did not extend to any proceeding against Lata Menon.

[27] Fourth and finally, the application commenced by Lata Menon against Sahara and the three lawyers does not establish a conflict position between those lawyers for the purposes of that application. The application commenced by Ms. Menon seeks only an order that all funds she holds for referral fees be paid into court. It is difficult to imagine why Ms. Menon or Mr. Subhash Sharma and Mr. Kapila would have any wish to delay the hearing of that application to interplead those funds. They would then be a pool of income paid into court for Sahara and its shareholders to litigate over in the context of another proceeding. In that respect, Sahara and its shareholders have a common interest to compel Lata Menon to provide a full and proper accounting of all client files and their resolution, and to ensure that all referral fees are properly calculated.

[28] Mr. Virender Sharma has filed evidence that Subhash Chander Sharma and Amandeep Kapila resigned as directors upon departing Sahara in March, 2015. Although Subhash Chander Sharma and Amandeep Kapila have deposed that they remain shareholders of Sahara, neither has filed any evidence disputing their resignation as directors of the corporation. It would therefore appear that Virender Sharma remains the sole director and officer of Sahara. As the sole director and officer, he is instructing Mr. Sidlofsky to act on the two applications with respect to Ms. Menon on Sahara’s behalf.

[29] Virender Sharma owes a duty to Sahara as an officer and director to act in its best interests at law and under Section 134 of the (Ontario) Business Corporations Act. Similarly, Mr. Sidlofsky owes a duty to Sahara as his client to act in its best interests. Each are duty bound to act honestly and in good faith.

[30] The applications against Lata Menon are proceedings with an external party to Sahara. As Virender Sharma as a director and Mr. Sidlofsky as the lawyer for Sahara cannot waiver from the respective duties they owe to the corporation, it is my view that each of them in their respective capacities must perform those duties with respect to the external litigation according to law. The performance of the duty each owes, and the standard of care they are expected to meet would apply to any other director of, or counsel to the corporation.

[31] I have heard no submission that the order made by Justice LeMay should be stayed, or that Justice André’s order has varied its terms or modified its effect. Justice LeMay’s order expressly provided for examinations on the application to take place by the end of June, 2016. The cross-examination of Ms. Menon on her affidavits would be one of those examinations.

[32] On the basis of the affidavit material and written submissions properly filed, I make the following rulings:

1. For the purpose of this motion, Mr. Virender Sharma has the authority to instruct Mr. Sidlofsky on behalf of Sahara;
2. Saharas motion is granted. Ms. Menon has not yet been served with a notice of examination and is therefore not in breach of Justice LeMay’s order. However, Ms. Menon is ordered to attend at an examiners place of business and be cross-examined on or before September 2, 2016 on her affidavits filed in this application and on the application in Court File No. CV-15-5890 pursuant to any notice of examination that is served properly under Rule 34.04; and
3. All other examinations shall be completed by September 2, 2016.

[33] The costs of this motion are reserved to September 21, 2016 when the two applications are argued.

Justice M.G. Emery

Released: August 18, 2016