COURT FILE NO.: CV-15-4731-00 DATE: 2016 09 27

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SUKHINDER SANDHU and 2207190 Inc. Plaintiffs

Doug LaFramboise, Counsel for the Plaintiffs, Sukhinder Sandu and 2207190 Ontario Inc.

• and -

SIKH LEHAR INTERNATIONAL ORGANIZATION and MANJIT MANGAT and HARKHANWAL SINGH Defendants

S. Schneiderman, Counsel for the Defendant Sikh Lehar International Organization

HEARD: August 24, 2016

REASONS FOR JUDGMENT

LEMAY J

[1] The parties in this case are involved in a complex dispute over who should be the owner of the property at 79 Bramsteele Road. It is the location of the Sikh Lehar International Organization (“Sikh Lehar”), one of the Defendants. The Plaintiff, Mr. Sukhinder Sandhu, claims that Sikh Lehar sold this property to him in 2015 and seeks specific performance. Sikh Lehar opposes this claim.

[2] As part of the litigation, Mr. Sandhu was successful in having a certificate of pending litigation (“CPL”) put on the property. On November 17th, 2015, Tzimas J. granted leave to register the CPL on the property. As of June 28th, 2015, the CPL had not actually been registered on the property, although I understand it has since been registered.

[3] A trial of an issue in this matter was originally scheduled for June 28th to 30th, 2016. The issue to be determined was whether Sikh Lehar had sold the Bramsteele Road property to Mr. Sandhu. That trial could not proceed because pleadings were not completely prepared. The Trial has been rescheduled for February of 2017, and I am the trial judge.

[4] Sikh Lehar has significant mortgages on this property. These mortgages come due at the beginning of November and the mortgagee is not prepared to renew the financing.

[5] As a result, Sikh Lehar has brought this motion for an Order setting aside the November 17th, 2015 Order of Tzimas J. In the alternative, Sikh Lehar seeks an Order either discharging the CPL or lifting it for the purposes of obtaining refinancing.

[6] For the reasons that follow, I am granting Sikh Lehar’s motion in part, and directing that the CPL will be varied to the extent that Sikh Lehar can refinance the property with an encumbrance that will, in total, not exceed $6,500,000.00. This total amount will include all fees, interest, payments and charges related to the refinancing, and proceeds from the refinancing must be used to pay off the mortgages registered against the property as well as all of the outstanding property taxes. This encumbrance will, regardless of when it is registered, have priority over the CPL as long as all of the current mortgages on the property are discharged.

Background Facts

[7] This is a complicated case involving a number of proceedings and contemplated proceedings before the Superior Court of Justice. It is helpful to set out both the history of the parties and the actions that are proceeding before the Court.

a) The Parties

[8] The Plaintiffs in this case are Mr. Sandhu and 2207190 Ontario Inc., which is a company that I understand is controlled by Mr. Sandhu.

[9] The Defendant Sikh Lehar is an organization that operates a Gurdwara at 79 Bramsteele Road in Brampton.

[10] The Defendants, Manjit Mangat (“Mr. Mangat”) and Harkhanwal Singh (“Mr. Singh”) are two of the trustees of Sikh Lehar.

b) The History

[11] When Sikh Lehar was established, it had nine trustees. As of late 2014, four of those trustees had resigned and are not involved in any of this litigation. In late 2014, there was a dispute between the remaining five trustees as to how to manage the affairs of the Gurdwara. In particular, there was a dispute over how, whether, and to whom, the property at 79 Bramsteele Road should be sold. Mr. Singh and Mr. Mangat were on one side of this dispute, and the other three trustees were on the other side of the dispute.

[12] The end result of this dispute is that three of the remaining five trustees resigned at some point in 2015. There are complexities flowing from the departure of these trustees that involve a control agreement and other agreements that are before the Courts. I expressly make no findings of fact in relation to the departure of the three trustees and the circumstances under which they departed.

[13] However, one fact appears to be clear from the record. Specifically, there was a deposit of approximately $1,730,000.00 to Mr. Laframboise’s trust account. This deposit flowed from the agreement that led to the resignation of the three trustees. This money is the subject of a proceeding in this Court before Ricchetti J. The three trustees who resigned are claiming this money on the basis that they incurred expenses on behalf of the Gurdwara. I understand that the money will either be paid out to the trustees who are claiming the money or be returned to other parties once the proceedings before Ricchetti J. are completed.

[14] It appears that the source of this money was Mr. Sandhu. He alleges that he had an agreement with Mr. Mangat and Mr. Singh that he would purchase the property at 79 Bramsteele Road for the sum of $9,800,000.00. He provided the sum of $1,915,000.00 to the Defendants. The monies in Mr. Laframboise’s trust account came from this amount.

[15] For clarity, I make no findings as to the nature of the transfer described in the previous paragraph or the reasons for it. It has been argued that it is a deposit, and it has been argued that it was a loan agreement. Any conclusions on these issues will flow from the various proceedings before this Court.

[16] The remaining two trustees are Mr. Mangat and Mr. Singh. The Plaintiffs claim that Mr. Mangat and Mr. Singh agreed to sell the property at 79 Bramsteele Road to them, and are seeking specific performance. Mr. Mangat and Mr. Singh resist these claims.

[17] There is also a lease on the property at 79 Bramsteele Road. A company called Canadian Convention Centre Inc. is a tenant at this property and pays a significant rent to Sikh Lehar. I was advised that the rent was in the range of $20,000.00 per month.

[18] Canadian Convention has brought a claim to have the parking lot repaved. This was in the form of an injunction application in mid-June, 2016. Canadian Convention has requested, and been given, permission to fix the parking lot. Canadian Convention may take the position that it is the landlord’s responsibility to repair and repave the parking lot. However, in the endorsement of Tzimas J. permitting Canada Convention to fix the parking lot, it was clear that they were doing so at their own risk.

[19] The Plaintiffs in this case claim that it is Sikh Lehar’s responsibility to fix the parking lot before the sale closes. The Defendants resist this claim. No one is clear as to how much it will cost to fix the parking lot, but the estimates are in the $500,000.00 to $1,000,000.00 range. I have no direct evidence on this point, and make no findings about either the cost to fix the parking lot, or who has the responsibility to fix it.

c) The Actions Before the Courts

[20] The factual matrix that I have outlined above shows that there are three separate actions (or potential actions) before the Court.

[21] First, there is an accounting being done before Ricchetti J. on the question of whether the three trustees who resigned have any claim over the $1,730,000.00 in Mr. Laframboise’s trust account. That matter is proceeding before Ricchetti J. this fall.

[22] Second, there is a trial of an issue proceeding before me in February of next year. This trial is to address the issue of whether there was an agreement of purchase and sale and on what terms does the owner of the property own it? On the second issue, I will determine issues relating to who owns the deposit and whether the Plaintiffs or Sikh Lehar was responsible for any potential obligations to Canada Convention. This trial will not determine whether or not there were any actual obligations owing to Canada Convention, as Canada Convention is not a participant in this trial.

[23] Finally, there is the issue of the parking lot, and who is responsible for paving and maintaining it. This is a separate set of issues that is being case managed by Tzimas J.

d) The CPL and the Mortgages

[24] As a result of the dispute over the ownership of 79 Bramsteele, the Plaintiffs sought to register a CPL against the property in November of 2015. This motion was heard before Tzimas J., who ultimately authorized the registration of a CPL against the property.

[25] In granting this motion, Tzimas J. noted, in part that “there is no evidence before this Court that the CPL would impact any outstanding refinancing.” She also noted that there was an interest in the property in play that justified granting a CPL. In the trial before me, the Plaintiffs are seeking specific performance as a remedy.

[26] The Order granting the CPL was not taken out until February of 2016. Then, the trial of an issue was originally scheduled before me in June of 2016. A timetable for the exchange of documents had been ordered by Tzimas J. However, the Plaintiffs did not adhere to that timetable.

[27] Ultimately, when the parties appeared before me for the trial of an issue in June of 2016, it was clear that the Plaintiffs were advancing a claim that Sikh Lehar indemnify them for any costs associated with Canadian Conference’s claim that the parking lot needed to be repaired. Counsel for Sikh Lehar was taken by surprise at this claim. After discussions with the parties, it was clear to me that it was appropriate to adjourn the matter so that further discoveries could be completed. In doing so, I noted that there was no clear evidence that this issue had ever been raised by the Plaintiffs prior to the beginning of the trial.

[28] The Plaintiffs argue that a significant part of the reason the trial was adjourned was because Sikh Lehar brought a motion at the outset of trial to strike particular paragraphs in the affidavit of Mr. Sandhu. I reject this argument. Had the motion to strike been the only issue I had to deal with at the outset of the trial, then the matter would have proceeded. It was the position of the Plaintiffs on the parking lot issue that necessitated the adjournment.

[29] When the trial was adjourned at the end of June, Sikh Lehar requested that I hear a motion to set aside the CPL, as the trial was not going to be heard until February of 2017. I acceded to that request, and the motion was scheduled for August 24th, 2016.

[30] As of June 28th, 2016, the CPL that was granted in November of 2015 had not been registered against the property. In the materials on this motion, Mr. Sandhu deposed that Mr. Laframboise (who was counsel, and responsible for registering the CPL) had inadvertently failed to have the CPL registered on the property because Mr. Laframboise understood that the Sherriff’s office registered the CPL’s. Ultimately, the CPL was registered on June 30th, 2016.

[31] However, since the CPL was granted, there has been some change in the status of the mortgages on the property. There are a number of mortgages registered against the property, in the sum of approximately $5,200,000.00. In addition, Sikh Lehar owes property taxes and GST/HST in the sum of approximately $370,000.00.

[32] The most significant of these mortgages is the first mortgage, with Reciprocal Opportunities Incorporated, for $3,200,000.00. This mortgage matures on November 2nd, 2016. In previous years it has simply been renegotiated. On July 4th, 2016, Sikh Lehar was advised that Reciprocal Opportunities Incorporated was winding up its lending portfolio and would not be renewing the mortgage.

[33] Sikh Lehar is seeking to either have the CPL removed from the property or to have it lifted so that they can refinance the property. In a supplementary Affidavit filed by Mr. Mangat, he deposes that Sikh Lehar has obtained financing for $6,500,000.00 if the CPL is lifted from the title.

[34] The Plaintiffs oppose the lifting of the CPL on the basis that the Court has already considered the test for granting a CPL, and that the risks of being unable to refinance the property were known to Sikh Lehar when it originally argued against the granting of the CPL in November of 2015. In other words, the Plaintiffs argue that none of the grounds on which Sikh Lehar seeks to discharge the CPL are either new or based on evidence of an overwhelming nature.

The Legal Issues

[35] The issues in this case are as follows:

a) Should the CPL be discharged? b) Whether the litigation conduct of the Plaintiffs, including their failure to register the CPL against the property, should result in the Court discharging the CPL? c) Do the equities in this case favour lifting or modifying the CPL on terms so that Sikh Lehar can refinance its mortgages?

[36] In considering all of these issues, it is important to remember that a CPL is an equitable remedy. In deciding whether to impose (or lift) a CPL, the Court must start by considering whether there is a reasonable claim to the interest in the land. Then the Court must consider the equities. The factors to be considered in assessing the equities are set out in a number of cases, including 572383 Ontario Inc. v. Dhunna ((1987) 24 C.P.C. (2D) 287 (Ont. H.C.J.)) and Re: Obsidian Group Inc. v Kingswhite Properties Inc. ([2007] O.J. No. 3827 (Master), aff’d [2008] O. J. No. 4723 (S.C.J.)).

[37] The governing test is that the Court must exercise its discretion in equity, and consider all of the relevant matters between the parties in deciding whether the CPL should be granted or removed (see Perruzza v. Spatone (2010 ONSC 841 at paragraph 20(v) (Master Glustein, as he then was))). This test flows, in large part, from the provisions of section 103 of the Courts of Justice Act, and particularly section 103(6).

[38] With those basic principles in mind, I turn to consider the legal issues that arise.

a) Should the CPL Be Completely Removed?

[39] I am of the view that the CPL should not be discharged in this case for a number of reasons as follows:

a) The Plaintiffs claim a reasonable interest in the property. b) At least one of the Plaintiff’s is not a shell corporation. c) Tzimas J. has already ruled that a CPL is appropriate in this case, and there are only limited changes to the factual matrix before me. d) If specific performance is an appropriate remedy, then the CPL is the only interim relief that protects the property from being sold. e) There are features of the property in terms of its facilities and location that may arguably make it unique.

[40] I also note that Sikh Lehar’s counsel has argued that the Plaintiffs are, in essence, seeking to enforce judgment before the trial. He argues that the CPL in this case is really a Mareva injunction, and that it should be removed on that basis.

[41] I reject this argument. In this case, the CPL was granted in part because the Plaintiffs have an interest in the land. They are asserting that they purchased the property at 79 Bramsteele Road, and that this property is sufficiently unique for the Court to Order specific performance at the end of the trial.

[42] If the CPL is vacated, then it is open to Sikh Lehar to dispose of the property, and the only remedy available to the Plaintiffs would be damages. This makes it different from a Mareva Order, where an Order against the assets of a party is made, even when the party seeking the order has no specific interest in any of the individual assets to which the Mareva Order applies.

[43] Finally, I note that the trial in this matter is scheduled for February of 2017, and this trial will resolve the question of who owns the property. While it is inconvenient for Sikh Lehar to have a CPL on its property, it is likely that the litigation will be resolved within six months.

[44] In these circumstances, I am not persuaded that the CPL should be discharged.

b) The Conduct of the Plaintiffs

[45] Sikh Lehar argues that the conduct of the Plaintiffs, in both delaying the litigation and in failing to register the CPL, is grounds for the Court to set aside the CPL. The Plaintiffs state that the litigation has been delayed by both sides, and that the failure to register the CPL was inadvertence, and should not result in the loss of the client’s rights.

[46] I have some sympathy for the Defendants’ position on this issue. The trial was delayed because of a new issue that arose at the outset of trial. In addition, the Plaintiffs did not follow the timetable that Tzimas J. set out.

[47] However, in support of its argument, counsel for Sikh Lehar cited Kentish v. Karasy et al. ((1977) 14 O.R. (2d) 519). In that case, a lis pendenis was vacated because the action had not been moved forward in any significant way for a number of years. In this case, the delay is substantially less. Indeed, there will be less than eighteen months in total between the CPL being granted and the trial in this case. This is not sufficient delay to set aside the CPL in my view, particularly since steps are actually being taken to move this litigation forward.

[48] Similarly, while the failure to register the CPL against the property in a timely way is troubling, it is not grounds for discharging the CPL. Solicitor’s inadvertence, without some evidence of prejudice to the other party, should not be grounds for denying the Plaintiffs a remedy that they have obtained or would otherwise be entitled to.

[49] As a result, I reject Sikh Lehar’s arguments on this issue, and find that the conduct of the Plaintiffs does not amount to grounds to vacate the CPL.

c) Do the Equities Favour Lifting or Modifying the CPL?

[50] Yes, at least to the extent that the CPL should be modified to permit refinancing up to a certain amount. In argument, I had both counsel address the prejudice their clients would suffer if they were unsuccessful on the motion. Counsel for Sikh Lehar points out, correctly, that it would be very difficult (if not impossible) for Sikh Lehar to refinance the property and satisfy the mortgages coming due in November if the CPL was not at least modified so that Sikh Lehar could arrange refinancing.

[51] If the mortgages were not satisfied when they came due, a distinctly possible outcome would be that the mortgagees would seek to foreclose. I asked counsel for the Plaintiffs what options would be open to Sikh Lehar at that point, and he candidly advised me that Sikh Lehar could always accept the Plaintiffs’ offer to purchase the property.

[52] This answer concerned me because it suggests that the CPL is being used by the Plaintiffs as a tool to force a favourable outcome to this litigation. In my view, if the CPL remains on title, it is quite possible that Sikh Lehar will have no choice but to sell the property to the Plaintiffs, which is the Plaintiffs’ desired outcome. This is a very significant prejudice.

[53] I also asked counsel for the Plaintiffs what prejudice the Plaintiffs would suffer if the CPL was lifted so that the property could be refinanced. I was advised that the Plaintiffs would be prejudiced because, if I permitted the property to be encumbered up to $6,500,000.00 then that, combined with additional liens, would mean that there would not be enough value in the property to satisfy a judgment.

[54] I reject this argument for two reasons. First, the evidence of the current valuation of the property was not before me. I do not know if the value of the property has increased in the last year. The only information I have on the value is the purchase price that the Plaintiffs offered for the property, which is $9,800,000.00. When I look at the encumbrances on the property, even if I were to accept that the entire value of the amount transferred to Mr. Laframboise’s trust account is a deposit, and that Sikh Lehar was responsible for paving the parking lot at a cost of $1,000,000, it appears to me that the total encumbrances are close to the suggested purchase price.

[55] Second, the purpose of the CPL is to protect the Plaintiffs interest in the property. It is not designed as a way of freezing assets. As discussed above, that would require a Mareva injunction, which was not considered by the Court.

[56] When the various prejudices are balanced, it is clear that Sikh Lehar would suffer significant prejudice if the CPL were not modified to permit refinancing of the property. It is unclear to me that the Plaintiffs would suffer any prejudice at all. Certainly, any prejudice they might suffer would be insignificant.

[57] Further, any prejudice that the Plaintiffs might suffer can be ameliorated by imposing terms on the modification of the CPL that will protect the interests of the Plaintiff.

[58] As a result, the CPL is to be modified to permit refinancing up to a total of $6,500,000.00 as described in the disposition section below.

Disposition and Costs

[59] Based on the foregoing, I make the following Orders:

a) The CPL on 79 Bramsteele Road is to be modified to permit refinancing up to a maximum of $6,500,000.00, inclusive of all interests, costs and charges, with the mortgage of this amount to take priority over the CPL as long as paragraph (b) is complied with. b) The proceeds from the refinancing are to be used to discharge all existing mortgages and other encumbrances on the property and to pay all property taxes and other taxes (such as HST) that Sikh Lehar owes. c) Sikh Lehar and the Defendants are prohibited from taking any other steps relating to the ownership of 79 Bramsteele Road. d) I retain jurisdiction to deal with any matters that may arise between these parties regarding the modification of the CPL and the refinancing of the property.

[60] I will receive costs submissions from the Defendants within fourteen days of the release of these reasons. Those submissions are not to exceed three (3) double-spaced pages, exclusive of bills of costs, offers to settle and case law.

[61] The Plaintiffs will have fourteen days from the date that they receive the Defendants submissions on costs to respond. Those responding submissions are not to exceed three (3) double-spaced pages, exclusive of bills of costs, offers to settle and case law.

[62] There shall be no reply submissions on costs without my leave.

LEMAY J

Released: September 27, 2016